The ATO has released further guidance on the types of tax records that would be expected when an employee is seeking to rely on the ATO reasonable rates for travel allowance and overtime meal allowance deductions.
The ATO has also reverted back to its previous approach of providing specific reasonable amounts per meal for employee truck drivers.
Treasury has also released some draft legislation relating to the Government’s Budget announcement regarding GST liabilities on certain property transactions. From 1 July 2018 the purchaser will be responsible for paying GST amounts to the ATO when they buy new residential premises or vacant land from a property developer.
If you have any questions about any of the information contained in the Essential Tax Summary, please don’t hesitate to get in touch with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
From Government
Change to how GST applied to certain property transactions
In the 2017-18 Federal Budget the Government announced that changes would be made to the way that GST liabilities are collected on certain property transactions from 1 July 2018. Treasury has released exposure draft legislation relating to the proposed changes which provides some further detail on how the new rules might operate.
When an entity makes a taxable supply of new residential premises or vacant land that entity needs to remit the appropriate GST amount to the ATO on its next activity statement. However, the Government is concerned about the level of non-compliance in the property industry, especially as some developers wind up their business before the relevant BAS lodgement to avoid paying the GST amount to the ATO.
Under the new rules, the purchaser would be responsible for paying 1/11th of the purchase price to the ATO when acquiring new residential premises or new subdivisions of potential residential land. The purchaser would often need to pay this amount to the ATO on or before settlement occurs.
The developer would then be entitled to a credit for the GST amount that has been paid to the ATO under these provisions. If the developer is able to apply the margin scheme to the transaction then they would generally receive a refund from the ATO of the excess GST amount that has been paid.
One of the other features of the proposed new rules is that the developer will be responsible for notifying the purchaser of the application of the provisions and the requirement to withhold some of the purchase price and pay it to the ATO. Penalties will apply if the notification is not provided by the applicable deadline.
As with the relatively new CGT foreign resident withholding rules, this measure makes the purchaser responsible for paying certain amounts to the ATO at the time the transaction occurs. It also means that lawyers, conveyancers, accountants and real estate agents will need to work closely with their clients on both sides of the transaction to ensure that the new obligations are being met.
More information
From the ATO
New ATO flyers for accountant’s rental property owners
The ATO has published two new flyers which are aimed at property investors. The is suggesting that tax agents provide copies of these documents to clients who own investment properties.
The first document sets out the most common mistakes that are made by property investors and steps that investors can take to ensure they end up with the correct tax treatment.
The second document focuses on records that should be kept by rental property owners. It sets out the documents that should be gathered and retained in relation to buying a property, while it is owned and when it is sold.
The information in both guides is quite basic and is largely presented in a plain English manner, making them appropriate for clients who may not have a strong understanding of the tax system.
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Ride-sourcing & the GST sting in the tail
The ATO has issued another reminder regarding the application of the GST rules to ride-sourcing drivers.
The ATO confirms that when someone is earning income from ride-sourcing services this is classified as taxi travel for GST purposes, which means that the taxpayer must be registered for GST regardless of their turnover level.
This means that not only is the taxpayer liable for GST from the first time they provide ride-sourcing services, but this also means that GST will generally apply from that date to any other supplies made by the taxpayer in connection with other enterprises that they carry on (subject to the normal exclusions for residential rental income, exports etc). Again, this applies regardless of the turnover generated from that enterprise.
The ATO has indicated that it is receiving data from ride-sourcing platform operators and financial institutions and has already made contact with a large number of drivers to point out their tax obligations.
Other key messages for ride-sourcing drivers are:
- Ride-sourcing income is also subject to income tax;
- Deductions and GST credits can generally be claimed for expenses incurred in undertaking this activity, but records need to be kept to support claims that are made;
- Fuel tax credits cannot generally be claimed when driving a car on a public road; and
- GST credits and depreciation deductions are generally limited when the vehicle is a luxury car.
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From the OECD
Transfer pricing profiles
When clients have dealings with related parties overseas it is generally necessary to consider the potential application of the Australian transfer pricing rules. The rules seek to ensure that appropriate tax adjustments are made if parties are not dealing with each other on arm’s length terms.
Many other countries also have their own specific transfer pricing provisions. This means that it is necessary to consider not only the Australian provisions but also the provisions that apply in the relevant foreign countries. In many cases these rules are similar to the Australian rules and are often based on OECD principles. However, this doesn’t mean that the rules are identical.
To assist in comparing the key features of various transfer pricing systems the OECD publishes profiles for a number of countries. These profiles provide a summary of the key transfer pricing principles, safe harbour guidelines and methodologies used by each country and can be a good starting point in determining the key similarities and differences between the Australian rules and the provisions that apply in the other relevant country.
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Rulings
Revised reasonable food amounts for truck drivers
TD 2017/19
When an employee is travelling overnight in the course of work and they receive a bona fide travel allowance they can potentially access relaxed substantiation rules by relying on the ATO’s reasonable rates. Similar rules can apply when employee receives an overtime meal allowance.
In very broad terms, someone in receipt of a bona fide travel or overtime meal allowance does not need to comply with the normal record keeping rules as long as their deductions do not exceed the ATO’s reasonable rates for that year.
Many taxpayers would be aware that for the 2018 income year the ATO changed its approach for truck drivers by replacing specific reasonable amounts per meal with a combined daily reasonable amount. The ATO has now changed its approach again, moving back to an amount per meal. For the 2018 income year this is $24.25 for breakfast, $27.65 for lunch and $47.70 for dinner.
The ATO has also confirmed that even though someone might qualify for the relaxed substantiation rules, there is still a requirement for them to gather and retain evidence to support the deductions being claimed, including the fact that they incurred the expenses personally, they have not been reimbursed, the fact the expenses were incurred while travelling overnight and the amount incurred.
While the ATO does not expect these employees to have receipts or invoices for every expense, the ATO has indicated that employees should maintain at least some receipts as part of their records. For truck drivers travelling a similar route on a regular basis, the ATO suggests keeping receipts for a representative period of 3 months.
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Benefits provided by family trusts
TD 2017/20
The ATO has confirmed in this final tax determination that the family trust distribution tax rules can apply when benefits are provided to those outside the family group, even if the recipient is not actually an eligible beneficiary of the trust.
A number of tax concessions are available to trusts that have made a family trust election (FTE). However, the main disadvantage of making a FTE is that any distributions of income or capital made outside the family group of the individual specified in the FTE will trigger family trust distribution tax (FTDT) at penalty rates.
The TD confirms that the term ‘distribution’ has a very wide meaning in the context of the FTDT provisions. This means that the rules can be triggered even when benefits are provided to someone other than in their capacity as beneficiary of the trust.
The TD indicates that the FTDT rules would not generally apply to situations where benefits are provided by the trust in the ordinary course of a business carried on by the trust and where this occurs on arm’s length terms. However, the rules could apply in situations where benefits are provided to friends of the specified individual who are outside the family group (e.g., trust owns a holiday house which is used rent-free by non-family members).
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Legislation
Changes for property owners now law
Treasury Laws Amendment (Housing Tax Integrity) Bill 2017
This Bill has passed through both Houses of Parliament and is now just awaiting Royal Assent.
This is the Bill which contains the measures announced in the 2017-18 Federal Budget that seek to limit the deductions that can be claimed by rental property owners for travel expenses and also depreciation on certain assets from 1 July 2017.
The Bill also introduces a new vacancy fee that can apply to foreign individuals and entities who own residential property in Australia that is not occupied or genuinely made available for rent for at least 183 days in a particular 12 month period.
