2021 November - Essential Tax Summary

The Director ID regime starts on 1 November. While existing Directors have a year to register, newly appointed Directors have 28 days.

Also, of interest this month is the release of the four determinations from the ATO clarifying different applications of the concept of aggregated annual turnover.

And, legislation before Parliament brings together a number of the 2021-22 Budget measures covering the extension of the temporary full expensing measures and a series of superannuation reforms including the removal of the $450 SG threshold, a reduction in the eligibility age for the downsizer contribution, an increase the First Home Super Saver Scheme contribution cap, and a change to the work test contribution rules.

As always, we’re here if you there are any questions you have so please call John Kalachian or Henry Zhao at Fortis Accounting Partners.

From Government

Increased Child Care Subsidy brought forward

The start date for the additional subsidy for families with two or more children in care has been brought forward from 11 July 2022 to 7 March 2022.

Families with two or more children aged five years and under in care will have their CCS rate increased by 30% for their second child and any younger children, up to a maximum rate of 95%.

The $10,655 annual CCS cap will also be scrapped on 10 December 2021 and applied retrospectively for the whole 2021-22 financial year. Anyone who reaches the cap before this date will have any additional out-of-pocket costs for the 2021-22 financial year reimbursed.

The measures were part of the 2021-22 Budget and enacted by the Family Assistance Legislation Amendment (Child Care Subsidy) Bill 2021.

More information –   Increased child care support brought forward

From the Regulators

Preparing for the director ID regime

First mentioned in our May Newsletter, the Government have now moved forward with the announcement that all Company Directors must apply for a Director ID if they wish to continue as a director of each respective company the are appointed to.

Please refer to our dedicated story in the November Newsletter.

More information

STP changes for 2022

Tax practitioners would be aware that from 1 July 2021 small employers with closely held payees and micro employers reporting quarterly will need to commence reporting through single touch payroll (STP). The STP report is due at the same time as the employer’s activity statement.

Employers with closely held payees can choose to report:

  • Actual payments each pay day;
  • Actual payments quarterly; or
  • A reasonable estimate quarterly.

The STP quarterly reporting concession for micro employers is only available to micro employers who meet certain eligibility requirements. For applications for a period commencing after 1

July 2021 the employer needs to meet the guidelines for exceptional circumstances.

Further, the mandatory start date for STP Phase 2 reporting (which involves providing more detailed information to the ATO) is 1 January 2022. Having said that, the ATO is providing some flexibility in terms of meeting this deadline. The ATO has advised that:

  • If your Phase 2 reporting solution is ready for 1 January 2022, you should start Phase 2 reporting from 1 January 2022.
  • If you can start Phase 2 reporting before 1 March 2022, you will be considered to be reporting on time and you will not need to apply for more ti
  • If you need more time, you will be able to apply for a delayed transition from December 2021.
  • The ATO will not impose penalties for genuine mistakes for the first year of Phase 2 reporting, that is, until 31 December 2022.

More information

More cryptocurrency guidance

The ATO has released some additional (but brief) guidance on some of the key issues that tax payers should consider when they  are engaged in cryptocurrency investment or mining activities.

Please refer to our dedicated story in the November Newsletter.

More information –  Cryptocurrency –  investment or personal use asset

NSW commercial landlord hardship fund

The NSW government has introduced a hardship fund for smaller landlords whose main source of income is impacted by providing rental relief to retail or commercial tenants who have been financially impacted by the 2021 COVID-19 lockdown. Under the scheme, landlords can apply for a payment of up to $3,000 per month, per property affected by an impacted lease.

Landlords that have claimed land tax relief between 1 July 2021 and 31 December 2021 are ineligible for this hardship fund.

In order to be eligible for the payments, landlords must first satisfy the following criteria:

  • They have reached a rental abatement agreement to reduce rent payable with impacted tenants, per the Retail and Other Commercial Leases (COVID-19) Regulation 2021;
  • They obtain the tenant’s approval to disclose terms of the agreement for the purpose of applying for the Fund; and
  • They retain evidence that the agreed reduction in rent has been applied to the month for which the Fund is being clai

Where a landlord is eligible, grants will be paid monthly from the Fund, up to the value of any rental relief provided (to a maximum $3,000 per month per property affected by an impacted lease) and continue for the term of the current rental abatement agreement, or until the relevant provisions are terminated by the government.

More information –  Commercial Landlord Hardship Fund – Guidelines

Loss carry back offset and franking accounts

The ATO has released a reminder for companies intending to access the loss carry back measure that they should confirm the balance in their franking account as this can limit the amount of loss carry back tax offset that is claimable.

Issues that should be considered when reviewing a company’s franking account include:

  • Checking that all transactions have been correctly recorded and there are no missing entries;
  • Checking whether the company has any deferred franking debits that relate to R&D tax incentive refunds and that tax payments have been allocated correctly against these deferred debits;
  • Checking that the balance has been calculated correctly to see if it is in a credit or debit position at the end of the relevant income year;
  • Checking that the company has kept accurate and complete records about all transactions impacting on the franking account balance.

We have seen a number of examples of companies that meet the basic conditions for accessing the loss carry back tax offset, but have a relatively low franking account balance which limits the tax offset and cash refund that can be claimed by the company. Remember that you are focusing on the franking account balance at the end of the income year in which the company is claiming the tax offset.

More information –  Review your franking account for loss carry back

Reducing the need for an actuarial certificate

Self-managed super funds (SMSFs) no longer need to obtain an actuarial certificate for exempt current pension income (ECPI) in certain circumstances for the 2021-22 and later income years.

Prior to the amendments an SMSF that was 100% in pension phase but had disregarded small fund assets needed to obtain an actuarial certificate as the fund was required to calculate ECPI using the proportionate method. However, the amendments now allow a fund that is 100% in pension phase with disregarded small fund assets to use the segregated assets method to calculate ECPI.

A fund will have disregarded small fund assets when a member is in retirement phase and one of the members of the SMSF have a total superannuation balance above $1.6M on 30 June of the prior financial year.

More information –  Reducing actuarial certificate requirements – what auditors need to know

Rulings and Determinations

Determining when an employee is genuinely restricted from disposing of shares or options

TD 2021/D5

When a company provides shares or options relating to shares to an employee at a discount to market value then this can trigger tax implications for the employee under the employee share scheme (ESS) rules. While the default position is that the employee will be taxed upfront in relation to the shares or options that they have received, in some cases it is possible to defer the taxing point until certain events occur.

In some cases the deferred taxing point will be triggered when the employee is no longer genuinely restricted from immediately disposing of the shares or options. This draft determination sets out the principles for working out when shares or options are subject to genuine disposal restrictions and when an employee would no longer be subject to these restrictions.

In order to disposal restrictions to be ‘genuine’ they must be sufficiently identifiable (real and objectively demonstrable), certain and legally enforceable (not spurious or hypothetical). There must be serious and enforced consequences when a breach of a scheme’s disposal restrictions occurs.

Unfortunately, the determination is vague on what meets these criteria, beyond some brief examples concerning situations where the taxpayer needs to apply to the directors and where the directors routinely exercise their discretion to allow disposal of the ESS interests (which should not be considered a genuine restriction).

A scheme’s genuine disposal restrictions will no longer restrict the taxpayer on the first date on which they have an opportunity to dispose of the ESS interest. This will be the first time they can take some action to deal with or realise the ESS interest (for example, by way of sale, transfer or gift).

In these cases, it is generally necessary to consider the scheme rules documentation such as the offer document or other governing documents of the scheme, documented company policies, or the taxpayer’s employment contract in determining the nature of the disposal restrictions in place and whether they are genuine.

Shortcut method for home office deductions

PCG 2020/3 has been amended to extend the period that taxpayers can use the ‘shortcut’ 80 cents per hour method for calculating deductions for additional running expenses incurred while an individual is working from home due to COVID-19.

Taxpayers will now be able to use this method in relation to the period from 1 July 2021 to 30 June 2022.

Legislation

Extending temporary full expensing and superannuation amendments

Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021

This Bill contains a number of Federal Budget announcements including amendments to the operation of the superannuation system and extension of the temporary full expensing measures.

The Bill extends the temporary full expensing provisions by 12 months, allowing immediate deductions to be claimed for the cost of qualifying depreciating assets to be claimed up until 30 June 2023 without any limit on the cost of the asset (but subject to the luxury car limit rules).

Small business entities will also deduct the full balance of their general small business pool in the 2023 year and the ‘lock out’ rules that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out of the regime continue to be suspended for income years that include 30 June 2023. This means that clients will be able to opt- out for the 2022 year and opt back in for 2023.

The Bill also contains several amendments to the superannuation law. Broadly, these include:

  • Removing the $450 a month threshold before an employee’s salary or wages count towards the Superannuation Guarantee (SG). This will require employers to make SG contributions for eligible employees whose salary or wages are less than $450 per mont
  • Increasing the total limit on the maximum amount of voluntary concessional and non- concessional contributions made from 1 July 2017 that are eligible to be released and used under the First Home Super Saver Scheme from $30,000 to $50,000. The change does not alter the limit on the amount of voluntary contributions from any one financial year that are eligible to be released (being $15,000). Broadly, this allows first home buyers to withdraw greater amounts from super in connection with the purchase of their property.
  • Reducing the eligibility age for downsizer contributions to be made to super from 65 to 60 years of ag This also requires changes to the contribution acceptance rules, which requires amendments to regulations. Those are being progressed separately.
  • A technical change involving an amendment to the superannuation regulations requiring individuals aged between 67 and 75 years to meet the work test to claim a deduction for personal superannuation contributions. The rules previously prevented the fund from accepting such contributions (rather than imposing the restriction on the individual). However, following earlier changes which allowed funds to accept non- concessional contributions (including under the bring-forward rules) or salary sacrifice contributions without individuals meeting the work test, the legislation is being changed to allow funds to accept the personal contributions of taxpayers aged between 67 and 75, but these would be non-concessional contributions unless the taxpayer passes the work test.

The other change in this area allows individuals aged 67 to 74 years (inclusive) who were not previously able to bring forward non-concessional contributions due to their age (i.e., 66 was the upper limit) to do so, starting in the 2022-23 financial year.

These rules will allow a superannuation fund to choose the method to calculate exempt current pension income when the SMSF has both retirement phase and accumulation phase interests at one time but then only retirement phase interests at another time during the income year. Currently a SMSF is required to use the segregated assets method to calculate exempt current pension income when the fund is 100% in pension phase.

In practice a trustee will only be able to exercise this choice if all of the interests in the fund are in retirement phase for some, but not all of the income year and all of the income derived from the fund’s assets is supporting retirement phase income stream benefits.

Simplifying access to Covid related financial advice

ASIC Corporations (Amendment) Instrument 

2021/848

This instrument amends the ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2021/268 to give effect to a temporary relief measure that facilitates access to timely and affordable personal advice for existing clients of financial advisers, where the advice is in connection with the adverse economic effects of COVID-19.

The changes remove the obligation of the providing entity (i.e., a financial adviser) to give a client a Statement of Advice (SOA) any earlier than 20 business days after providing the COVID-19 advice. However, it is still necessary to ultimately provide the SOA. Further, in the interim, the providing entity must keep sufficient records of the COVID-19 advice.

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