LEGISLATION UPDATE

Tax Agents Code of Professional Conduct

Treasury has registered amendments to the Tax Agent Services (Code of Professional Conduct) Determination 2024 and provided updated explanatory material to clarify two of the new obligations.  The TPB has also released draft guidance on the new rules for public consultation.

Keeping clients informed 

• Lists the matters, events and circumstances which tax practitioners need to disclose to current and prospective clients.
• This includes events that occur within the last 5 years, including breaches of the Tax Agents Services Act that have led to penalties; matters relating to solvency; fraud or dishonesty conviction; sanction or order in relation to promoting or engaging in a tax avoidance or evasion scheme; conviction relating to serious tax offences, or any current conditions applying to registration. 

False or misleading statements

• Clarifies a tax practitioner's obligations when they become aware that a statement they prepared, directly or indirectly, to the Commissioner or TPB was materially false or misleading due to a failure to take reasonable care, intentional disregard, or recklessness to the operation of a taxation law.
• Where a client does not correct the statement within a reasonable period, the practitioner’s obligation, depending on the circumstances and likely harm caused, is to take reasonable steps.

Superannuation

Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 has been introduced to the Senate. The Bill introduces the proposed 15% additional tax on superannuation earnings, based on the percentage of an individual's superannuation balance in excess of $3 million. The regime is proposed to apply from 1 July 2025.

Penalty regime for tax exploitation scheme promoters

Treasury has released a consultation paper seeking feedback on the tax promoter penalty laws as part of the reforms to address tax adviser misconduct in response to the PwC tax leaks.

Other measures

Treasury Laws Amendment (2024 Tax and Other Measures No 1) Bill 2024 has been introduced into the Senate. It contains measures relating to the foreign resident capital gains withholding regime and self-amendment period for small and medium businesses (refer August & September 2024 Tax Bulletins).

TAX RULINGS, DETERMINATIONS & COMPLIANCE GUIDELINES

PCG 2024/D3—Restructures & New Thin Capitalisation Rules

The ATO has issued a draft guideline on its compliance approach to restructures in response to the new thin capitalisation rules and the debt deduction creation rules introduced in the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Act 2024 (the Act).

Restructuring refers to any restructure or refinance, including any change or reorganisation of group structures, business affairs or financial arrangements. The final PCG will apply to restructures entered into on or after 22 June 2023.

 CASE LAW UPDATE

Trustee for Peter Hatfield Trust v FCofT—Superannuation Guarantee Charge (SGC)

The applicant operated a plumbing business and had entered into a verbal agreement with H to work for the business. H was registered for GST and held an ABN. He submitted invoices based on hours worked and paid GST; owned his own work vehicle and tools; worked independently and fixed mistakes in his work. He also had his own business which he advertised. H made a complaint to the ATO regarding entitlement to superannuation, and it commenced an audit. The ATO view was that the business had an obligation to pay SGC as H was an employee for SGAA purposes.

The AAT held that the contracts were for the provision of services to complete specified jobs rather than for the labour of H. Crucial factors were that that H was engaged to produce a result, could refuse a job, operated without supervision, and performed services for others outside of this relationship. The Commissioner has appealed against the decision.

Key point: Payment at an hourly rate is not sufficient on its own to evidence an employment relationship.

Hudson v CofT—Work-related expense

The taxpayer was a business analyst for Sydney Trains who sought to claim work related travel expenses on the basis that his work circumstances required him to carry bulky equipment (including various computer equipment and tools) between his workplace and home every day. He also stated he was required to transport other employees between sites. The taxpayer provided a letter from his manager to support his claim, but the ATO had requested further information from the employer and denied the deductions.

The AAT accepted the statement of the manager, which did not provide sufficient support for the extent he carried essential equipment between work and home. It was therefore considered to be a personal choice. The manager also stated that he was not required to transport other employees. The car expenses were therefore not deductible.

Key point: The ATO may seek further information from an employer to confirm the basis of deductibility of work expense claims.

OTHER UPDATES

Unpaid Tax and Super

The ATO has announced that it will take a deliberate and targeted approach, taking into account compliance history, in regard to unpaid tax and super.

• For businesses that do not engage in setting up payment plan, the ATO will move more quickly to firmer actions such as Director Penalty Notices (DPNs) and garnishees; and
• Directors of multiple companies can expect to receive DPNs capturing the total value of these amounts across all related entities.

To prevent firmer ATO actions, businesses should take action now to pay or to set up a payment plan.

Key point: Tax professionals should be encouraging your clients to prioritise their tax and super obligations. If your client receives a DPN, prompt action should be taken, and expert advice obtained if required

The information contained in this bulletin is intended to provide general information only and is not intended to serve as tax advice. Specific advice should always be sought regarding a taxpayers’ particular circumstances. Please contact MC Tax
Advisors if you would like assistance with the issues identified in this bulletin.