With more lockdowns in July, there have been further stimulus measures introduced. On the ATO front, it has now finalised the Law Companion Ruling in regard to the application of the NALE rules to superannuation funds, which requires trustees to ensure all expenditure is occurring on arm’s length terms.
The Victorian Government has announced further business grants due to the most recent lockdown.
– Those eligible for Licensed Hospitality Venue Fund 2021 and Business Costs Assistance Program 2 will receive automatic top-ups under assistance announced on 21 July 2021. Eligible businesses that did not previously apply can also apply for these grants. Further assistance will then be provided under the Business Continuity Fund jointly funded with the Federal Government.
– Alpine support packages and a Commercial Tenancy Relief Scheme & Landlord Hardship Fund will also be opening soon.
– Small Business Covid Hardship Fund to support small businesses with payroll up to $10m, who have not been eligible under existing funds and who have experienced a 70% or greater reduction in revenue. Businesses will receive grants of up to $5,000.
The NSW Government has also introduced a range of business grants for businesses that have suffered a decline in revenue of 30% or more, including an expanded Jobsaver program. This program will provide fortnightly payments to help maintain employee headcount and provide cashflow support to businesses.
The Treasurer has made a declaration that certain Victorian government grants relating to the May/June 2021 lockdown will be non-assessable non-exempt income for businesses with an aggregated turnover of up to $50m. This includes the Alpine Support Fund, Business Costs Assistance Program Round 2 and the Licensed Hospitality Venue Fund 2021.
This is in addition to the September 2020 grants that were previously declared as non-assessable. These included Business Support Fund 3, Sole Trader Fund, Licensed Hospitality Venue Fund, Alpine Business Fund, Melbourne City Recovery Fund and the Outdoor Eating and Entertainment Package. It is noted that the February 2021 grants have not been declared non-assessable.
The Prime Minister has announced that the Federally funded Covid-19 disaster payments, which are made to individual taxpayers, will also be non-assessable.
Treasury Law Amendment (Measures for Consultation) Bill 2021 has been issued as draft legislation for consultation to introduce a sharing economy third party reporting regime:
– From 1 July 2022—ride-sharing and short term accommodation online platform operators will be required to report transactions they facilitate.
– From 1 July 2023 – the measure will extend to asset sharing, food delivery, tasking-based services and other services.
The identity of participating sellers and the payments they receive will be reported to the ATO for data matching purposes to identify entities that may not be meeting their tax obligations. Reporting will be required twice a year, on 31 July and 31 January. Comments are due by 2 August 2021.
Treasury has released a position paper on the introduction of a retirement income covenant in the SIS Act, for superannuation trustees to codify their obligations to improve retirement outcomes for individuals. Trustees will be required to implement a retirement income strategy for the retired members and those approaching retirement to assist them to achieve the objectives of:
– maximising their retirement income;
– managing risks to the sustainability and stability of their income;
– having some flexible access to savings during retirement.
Trustees must review fund performance against the strategy annually and review their strategy every three years. The strategy will be required to be in place from 1 July 2022.
The ATO has issued its final law companion ruling on the NALE provisions. If a super fund has expenses in producing its income that are charged for less than the arm’s length expense amount, then that income is non-arm’s length income (NALI). The LCR includes additional examples from the draft, but otherwise
remains unchanged. As such, the ATO view is that:
– If NALE has sufficient nexus to all the income derived by a fund (e.g. an accounting firm provides accounting services at no cost) all income for the relevant year is NALI. From 1 July 2022, the ATO will only direct compliance resources to general expenses to ascertain if a reasonable attempt has been made to determine an arm’s length amount. Prior to this date the ATO will not direct any compliance resources to this issue.
– If an asset is purchased for less than market value all the income derived from the asset will be NALI (including investment income and any resulting capital gain). The difference is not considered to be an in-specie contribution (noting for an in-specie contribution to occur, the contract would instead need to make it clear the fund is acquiring part of an asset).
– If an individual’s business/employment means they have skills that assist them perform trustee duties it is necessary to determine in which capacity they are acting when providing services. If they use assets of their business/employment or perform activities pursuant to a licence or qualification this may indicate they are acting in their individual capacity and the NALI provisions can apply.
Key Takeaway: The LCR is effective from 1 July 2018 so all trustees should be ensuring their SMSF is paying an arm’s length amount for any property or services they obtain. From 1 July 2022, accountants who use their practices to provide services to their SMSFs will need to charge an arm’s length amount.
In Clark and CofT the taxpayer sought to amend assessments for 11 income years to include travel allowance deductions, which required the Commissioner to allow additional time to object to those years that were out of time. As the taxpayer had prepared his own tax returns he had not been aware of the ability to disclose travel allowance income and claim deductions for expenses until he appointed a tax agent.
The AAT held that the long delay in lodging objections weighed against granting the extensions, whilst a significant financial benefit to the taxpayer would weigh towards the extension. However, the tax agent had assumed the reasonable travel amounts could be claimed in full each year but was unable to provide evidence that expenses of this amount had been incurred, and in many cases whether they exceeded the allowance received. On the basis that the objections were unlikely to actually lead to a reduction in tax liability the extension requests were denied.
Key Takeaway: The decision provides an example of how the Tribunal approaches the issue of granting an extension to object. However, it is also a reminder that when seeking to rely on the reasonable travel amounts to claim travel expenses a taxpayer still needs to have actually incurred these expenses and may need to provide some evidence of these if requested by the ATO.
In Bozzo Family Trust v CofSR the Victorian Supreme Court upheld land tax assessments for land used by a family trust for a primary production business, on the basis it did not meet the exemption conditions:
– Where land is located in an urban zone in greater Melbourne the primary production type being carried on must be the principal business of the trust – although primary production on the land was significant, residential property development was the most profitable business conducted on the land.
– A natural person specified as a beneficiary of the trust must be normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land – the relevant individual regularly participated in the business, but the extent of his other duties meant that he could not establish that this was “for a considerable part” of his time.
The ATO will acquire lifestyle assets data from insurance policies for the 2021 – 2023 income years. The data matching program will focus on the following assets valued above specified thresholds:
– Marine vessels – $100,000
– Motor vehicles & Caravans – $65,000
– Thoroughbred horses – $65,000
– Fine art – $100,000 per item
– Aircraft – $150,000
The data will be matched to improve the ATO’s compliance risk profiling of taxpayers and provide a holistic view of their assets and accumulated wealth.
The ATO has reminded taxpayers to have good records of donations to claim tax deductions. Last year, nearly 2/3rds of claims adjusted were because taxpayers could not prove they had made the donation.
The main reasons that make a donation or gift not tax-deductible are:
– Giving to an organisation that the ATO does not endorse as a deductible gift recipient.
– Receiving a monetary or personal benefit or advantage in return for the donation
– Not keeping good records of the donations and gifts.
– Incorrectly claiming tax deductions for donations taxpayers intend to make in their will or claiming for workplace giving that has already reduced the amount of tax paid in each pay period.
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.