The long awaited superannuation guarantee amnesty passed Parliament late last month.
Employers who have fallen behind with their SG payments now have 6 months to ‘self-correct’ under the amnesty. But, with the amnesty comes additional penalties if employers fail to take advantage of this one-off opportunity.
Also of interest is a Bill before Parliament that extends the Director penalty notice regime to GST amounts.
If you have any questions about any of the information contained in this article, please contact John Kalachian on 02 9267 0108.
Legislation
Superannuation Guarantee Amnesty now law
The Bill containing the one-off superannuation guarantee (SG) amnesty has finally passed through Parliament and awaits Royal Assent.
The amnesty only relates to SG liabilities arising in relation to quarters up to the March 2018 quarter.
In broad terms, the SG amnesty allows:
- Tax deductibility – employers to claim tax deductions for payments of SG charge (SGC) amounts made during the amnesty period (from 24 May 2018 until 6 months after the Bill receives Royal Assent). Ordinarily no deductions can be claimed for payments relating to the SGC.
- No administration fees or penalties – employers will not be subject to the quarterly administration component of the SGC and penalty amounts will generally be reduced as well. However, the nominal interest component will still need to be paid as this represents compensation for the relevant employees.
If employers do not take advantage of the amnesty, the additional penalty that can be applied to unpaid SG amounts will be set at a minimum rate of 100% of the shortfall. That is, failing to take advantage of the amnesty means that if problems are detected
by the ATO later, then no deductions will be available for the amounts that end up being paid, the SGC amount will be higher, and an automatic minimum penalty amount will apply (the Commissioner could potentially increase the penalty amount).
Given the complexity of the SG system and the limited period of time to take advantage of the amnesty, it is important for practitioners to raise this with all clients who could potentially have historical SG issues. This would be particularly important for businesses who have used contractors as part of their workforce as distinguishing between employers and contractors can be difficult.
Extension of director penalty rules
The Bill extending the director penalty notice regime to GST amounts has received Royal Assent and is now law.
In broad terms, this legislation allows the Commissioner to make and collect estimates of anticipated GST liabilities and make company directors personally liable for a company’s GST, luxury car tax (LCT) and wine equalisation tax (WET) liabilities in certain circumstances. This means that the director penalty regime will cover unpaid PAYG withholding amounts, superannuation guarantee amounts as well as GST, LCT and WET liabilities and increases the level of personal risk associated with being a director of a company.
The Corporations Act 2001 has also been amended to introduce new criminal offences and civil penalty provisions for company officers who fail to prevent a company from making creditor-defeating disposals of property, as well as allowing liquidators to apply for a court order in relation to these disposals.
The amendments also prevent directors from improperly backdating resignations or ceasing to be a director when this would leave a company with no directors.
Clients who are directors of a company should be made aware of these changes and the need to ensure that companies are up to date with reporting indirect tax amounts to the ATO. For those considering taking on a role as director of a company it is important to undertake a due diligence process prior to being appointed as director to ensure that the company is up to date with its tax and other obligations as newly appointed directors can become personally liable for historical outstanding amounts.
Tax-free bushfire tax relief payments
A Bill granting tax relief to a number of individuals receiving payments in relation to the 2019-20 bushfires has received Royal Assent and is now law. The Bill provides that certain Government payments relating to the recent bushfires will be non-assessable non-exempt income for tax purposes. This specifically includes payments made to volunteer firefighters to compensate them for loss of income as a result of volunteering as well as payments of ‘Disaster Recovery Assistance’ to taxpayers impacted by the bushfires.
However, it is important to note that there are still a range of payments not covered by these changes. For example, payments relating to employment (i.e., payments made to government employees) and payments of workers compensation would normally still be taxable to the recipient.
From Government
2015 employee share scheme changes review
The House of Representatives Committee on Tax and Revenue has commenced an inquiry into the effectiveness of the 2015 employee share schemes changes.
The key issues to be addressed by the inquiry include whether the start-up concessions have been effective and whether they are still relevant for start-up companies and how the tax treatment of ESS’s impacts on how they are being structured. The committee will also consider whether the standard documents prepared by the ATO are actually being used by businesses or whether further improvements can be made.
Submissions are open until 19 March 2020.
From the ATO
STP exemption for WPN holders extended
The exemption for employers with a withholder payer number (WPN) reporting using STP has been extended to cover the 2020-21 financial year. This means that WPN holders won’t need to start using STP from 1 July 2020.
The ATO has indicated that it will be conducting additional consultation to determine the best way for WPN holders to report through STP.
Emergency assistance and FBT
Emergency assistance provided by employers to employees during the recent bushfires may potentially be exempt from FBT.
In broad terms, FBT concessions can apply in connection with the provision of first aid or other emergency health care, emergency meals, food supplies, clothing, accommodation, transport or use of household goods as well as temporary repairs. There are restrictions when it comes to accessing these concessions in relation to health care benefits. Also, the exemption does not apply to ongoing medical or hospital costs.
Cases
Foreign income tax offset and capital gains
The High Court has refused to grant the taxpayer special leave to appeal from the decision of the Full Federal Court in this case. This decision confirms the Federal Court’s position that taxpayers can only claim a foreign income tax offset for foreign tax paid on a capital to the extent that the capital gain is assessable in Australia.
At a practical level, as only net capital gains (not gross capital gains) are included in assessable income under Australian tax legislation it will be common for taxpayers to only be able to take a portion of the foreign tax they have paid on a capital gain into account in calculating their FITO under the Australian tax rules. This will often be due to the application of capital losses, the CGT discount and/or other concessions such as the main residence exemption which reduce the net capital gain that is included in assessable income.
In the Burton case the taxpayer had paid some tax in the US on a capital gain that qualified for the CGT discount under the Australian tax system. As a result, only approximately half of the foreign tax paid in relation to the capital gain was taken into account under the FITO rules. No tax offset could be claimed for the portion of the foreign tax that was paid on the 50% share of the capital gain that was excluded from the taxpayer’s assessable income due to the CGT discount.
