Tax Bulletin – December 2020 and What to Expect in 2021

Tax Bulletin – November 2020
November 30, 2020

The end of 2020 provided the first AAT decision in regard to eligibility for JobKeeper, ruling in favour of the taxpayer. As we move into 2021, we expect further decisions in this area, together with long-awaited guidance from the ATO on reimbursement agreements and profit-splitting for professional firms.

DECEMBER 2020 TAX UPDATE
Apted v CofT —Late ABN application accepted for JobKeeper eligibility

The AAT has found that a sole trader held an ABN on 12 March 2020, for the purpose of being an ‘eligible business participant’ despite not applying until after this date. He had successfully had his ABN backdated to July 2019, which meant the Registrar had been satisfied as part of the registration process that he was entitled to an ABN from that date and he was not required to rely on the Commissioner’s discretion. The ATO has not yet responded to the decision and it is advised to wait for the ATO position before making contact on behalf of potentially affected clients. (Note: Sole traders also needed to satisfy requirements regarding the reporting of sales income in a tax return or activity statement to qualify for JobKeeper).

$10,000 Cash Bill abandoned

The Currency (Restrictions on the Use of Cash) Bill has been unanimously discharged by the Senate.

The Bill was intended to tackle the Black Economy, and would have made cash payments above $10,000 (subject to  certain exceptions) a criminal offence. The Government stated that it did not want to impose an additional burden on small business in light of the impact of COVID-19.

Extension of Homebuilder program

The Federal Government has extended the HomeBuilder program to 31 March 2021, with the following changes to apply for new build contracts signed between 1 January 2021 and 31 March 2021:
– Eligible owner-occupier purchasers will receive a $15,000 tax-free amount (down from $25,000)
– Property price caps for new builds in NSW and Victoria will be increased to $950,000 and $850,000 respectively (unchanged for the other States and Territories at $750,000).

A 6 month construction commencement deadline applies to all contracts signed on or after 4 June 2020.

Consultation – Education & training expense deductions for individuals

The Government has issued a discussion paper seeking comments on allowing deductions for education and training expenses not associated with current employment activities. This consultation process was first raised in the recent Federal Budget. The closing date for submissions is 22 January 2021 and is likely to be of particular interest to education and training providers.

Lambourne and CofT—Update

The ATO has responded to concerns arising from the denial of deductions for work-related expenses     incurred by a Navy officer on the basis that they did not benefit his own derivation of assessable income as he would have still been paid if he had not incurred the expenses. (Refer Tax Bulletin—November).

The ATO does not consider that this was a new test for deductibility of work-related expenses, and the decision is restricted to the facts and circumstances of the case. The ATO states that its position is still as set out in TR 2020/1: Income tax: employees: deductions for work expenses under section 8-1.

ATO data-matching activities

The ATO continues to expand its data matching capabilities to identify potential unreported income:
– Data on Australian sales made through online selling platforms for the 2019 – 2023 income years will be used to identify non-compliance with registration, reporting and payment obligations.
– The ATO may be contacting taxpayers to provide the opportunity to self-amend potential income discrepancies identified between lodged 2019 year income tax returns and the corresponding Taxable Payments Reporting System data it has received.

WHAT TO EXPECT IN 2021
Tax Cases  – Appeals and JobKeeper / Cashflow Boost Eligibility  

A number of applications have been made to appeal Full Federal Court decisions to the High Court:
– FCofT v Healius Ltd: The taxpayer is appealing the decision that lump sum payments made to doctors to conduct their practice at its medical centres were on capital account.
– FCofT v Fortunatow & Anor: The taxpayer is appealing the decision that he did not satisfy the “unrelated clients test” under the personal services income provisions.
– FCofT v Addy: The taxpayer is appealing the decision that a resident working holiday maker is required to pay the “backpacker tax” and is not entitled to benefit from the tax-free threshold.
– Carter v CofT: The ATO is appealing the decision that default beneficiaries had effectively disclaimed the income of a trust.

We are also expecting further AAT decisions in regard to JobKeeper and Cashflow Boost eligibility, which may impact clients that have previously been denied access.

CGT Rollovers

The Board of Tax has released a second consultation paper which proposes incorporating a number of CGT roll‐overs into a single general business restructure roll‐over. The rollovers include all of the
corporate and unit trust rollovers and demerger relief.

Potential policy changes supported by the Board include:
– Removing the ‘like‐for‐like’ requirement and allowing the general roll‐over to apply where units are being swapped for shares (or vice‐versa).
– Converting rolled over pre-CGT interests into post-CGT interests with a market value cost base.
– Reducing the constraints on post-demerger transactions, in particular equity raising.

The closing date for submissions is 5 February 2021.

The adoption of a general business roll‐over is intended to be the first step in a broader reform process. The Board states that it will use this roll‐over framework to assess the merits of extending the general business restructure roll-over in application to transactions not covered by existing reliefs.

Current ATO matters under development

We hope to see the issue of the following long-awaited guidance by the ATO early in 2021:
– Draft income tax ruling on the tax benefit purpose and the ordinary family dealings exclusion under the section 100A reimbursement agreement provisions.
– Draft practical compliance guidelines on the ATO compliance approach to the allocation of professional firm profits.

Division 7A

The proposed targeted amendments to Division 7A will not take effect until income years commencing on or after the date of Royal Assent of the enabling legislation.

There is no expected date for legislation release as yet, and no indication that this will happen before 1 July 2021.

CONTACT US

For further information on any of these updates, or for general assistance, please contact Our Directors, Jacci Mandersloot or Natalie Claughton.

 

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.