During April, the TPB has released guidance on the new breach reporting requirements for tax agents. Further, the AAT has heard a case on self-education expenses, and the ATO have released information regarding reporting changes for trust distributions in 2024 tax returns.
LEGISLATION UPDATE
Targeted Superannuation Concessions Measure
The date for the Senate Economic Legislation Committee report on the Treasury Laws Amendment (Better Targeted Superannuation Concessions & Other measures) Bill 2023 has been extended to 10 May 2024. The Bill will introduce the additional 15% tax to apply on a proportion of the earnings of superannuation balances which exceed $3m. A large number of submissions have been received, with recommended changes including:
- indexing the proposed threshold of $3 million;
- introducing a loss carry-back mechanism to allow individuals to recognise unrealised losses;
- amending the adjusted total superannuation balance to account for the disproportionate impact on SMSFs; and
- allowing for payment of the Division 296 tax on unrealised gains to be deferred until the gain is realised by the superannuation fund.
Exposure Draft Legislation
The Government released exposure draft legislation to introduce the following 2023-24 Budget measures (refer to May 2023 Tax Bulletin):
- Build-to-rent projects: A higher rate of capital works tax deduction of 4% and reduced final withholding tax rate on eligible fund payments from managed investment trust investments of 15% for eligible projects.
- Ensuring that low-income taxpayers do not pay higher amounts of Medicare levy as a result of receiving an eligible lump sum payment, such as compensation for underpaid wages.
Tax Agents —Breach Reporting
The Tax Practitioners Board has issued draft guidance on the breach reporting obligations applicable to tax practitioners from 1 July 2024 (refer Tax Update - November 2023). The guidance documents explain:
- the additional breach reporting obligations, supported by practical case studies;
- when the obligations apply;
- what constitutes a significant breach and the timeframe for reporting; and
- what happens if a significant breach is not reported.
The closing date for comments and submissions is 28 May 2024.
RULINGS & COMPLIANCE GUIDELINES
PSLA 2008/6—Fraud and Evasion
The ATO has updated guidance on its approach to fraud and evasion to provide more detail of its work practices in taxpayer audits:
- Officers to consider if there is behaviour that may indicate fraud or evasion at the earliest practicable opportunity in an audit, and in ordinary circumstances, communicate the issue to the taxpayer.
- In ordinary circumstances, the officer should advise the taxpayer of the preliminary ATO view in a position paper and invite their comment before forming any opinion about fraud or evasion.
- An officer must obtain advice from the National Fraud or Evasion Advisory Panel before recommending or forming an opinion that there has been fraud or evasion.
CASE LAW UPDATE
Ionita and FCT — Self-education expenses
The taxpayer was an overseas qualified dentist who worked as a dental technician in Australia. In order to qualify as a dentist in Australia, she undertook assessments and examinations. The taxpayer claimed deductions for the cost of the assessments, exams and associated costs (meals, accommodation and flights). The Commissioner’s view was that these expenses were non-deductible.
The AAT held that neither the assessment nor the exams were required to maintain or improve the taxpayer’s skills as a dental technician, which has distinct skills from the roles of dentist. The "essential character" of the expenses was to obtain registration as a dentist, which meant the expenses were incurred at a point too soon to be regarded as incurred in gaining or producing the taxpayer's assessable income. Further, there was no clear evidence that the assessments and exams led to the taxpayer's pay increases as a dental technician.
Appeal Update - Part IVA
The ATO will not seek special leave to the High Court to appeal the Full Federal Court decision in Minerva Financial Group Pty Ltd v FCT (refer Tax Update— March 2024). The ATO was unsuccessful in applying Part IVA to the arrangement entered into by the taxpayer.
ATO UPDATES
Modernisation of Trust Administration System
The ATO has published trust administration changes (originally announced in the March 2022 Budget measure) on its website. Changes affecting trustees, beneficiaries and tax agents from the 2024 income year and onwards include:
- For trust tax returns, adding 4 capital gains tax (CGT) labels into the statement of distribution. This aims to aid trustees in effectively informing beneficiaries of their rights to income and support calculation of CGT amounts for their tax return. The ATO recommends trustees to provide beneficiaries the trust statement of distribution that specifically outlines their entitlements, assisting beneficiaries in accurately completing their trust income schedule.
- Introducing a new ‘trust income schedule’ that all trust beneficiary types who receive trust income will need to lodge with their tax return.
- Adding new data validation to the trust tax return form in the practitioner lodgment service.
Data Collection—Cryptocurrency
The ATO has issued a notice on its intention to acquire account identification and transaction data from crypto designated service providers for the 2024 to the 2026 financial years. Data items include:
- Client identification details
- Transaction details (bank account, wallet addresses, deposits, withdrawals and coin type).
The data will be matched to ATO systems to identify taxpayers who failed to report a disposal of crypto assets in their income tax return.
CONTACT US
If you have any questions on issues in this bulletin, or any other tax issues, please contact us. .
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.
