ATO’s New Compliance Guidelines: What You Need to Know
The Australian Taxation Office (ATO) has rolled out several key updates that could affect both individuals and businesses. Here’s a simple breakdown of the latest changes and how they might impact you.
ATO Expands Data-Matching on Property and Lifestyle Assets
The ATO has launched a data-matching program to track property and lifestyle assets from 2018-19 to 2025-26. It collects detailed property owner and transaction information, focusing on rental income and capital gains reporting. The program also targets lifestyle assets like vehicles, boats, and fine art, valued above specific thresholds.
Data from insurance providers will help the ATO identify discrepancies in income reporting, undeclared asset sales, and incorrect claims of GST credits or FBT from business-owned assets.
Record-Keeping for Work-Related Expenses
The ATO emphasizes the importance of proper record-keeping for work-related expenses this financial year. Records must be kept for five years and can be in paper or electronic form, but bank statements alone are not enough.
Specific guidelines apply to working from home and car expenses. For home office claims, taxpayers need to document hours worked and expenses. For car deductions, a detailed logbook is essential for the logbook method, while records of work-related kilometers are required for the cents per kilometer method.
Non-Resident Withholding Tax Obligations
The ATO is increasing scrutiny on withholding tax for payments to non-residents, covering interest, dividends, and royalties. Taxpayers must register for PAYG withholding and submit the necessary annual reports.
It’s crucial to determine if withholding obligations apply, considering tax treaties and exemptions, such as non-applicable withholding tax on interest paid to unrelated foreign banks. The ATO has also issued several alerts warning about arrangements designed to avoid withholding tax.
ATO Releases Self-Review Guides for GST on Food and Health Products
The ATO has introduced self-review checklists to help businesses determine the correct GST classification for food and health products. While optional, these guides offer a step-by-step approach to reviewing GST classifications and assessing internal controls.
The ATO recommends annual reviews for small to medium businesses, particularly if product turnover or classifications change. Small food retailers with turnover below $2 million may also qualify for simplified GST accounting methods.
ATO Updates Thin Capitalisation Rules for 2023-24
The ATO has updated its guidance on the revised thin capitalisation regime, effective from 1 July 2023. The Treasury Laws Amendment (Making Multinationals Pay Their Fair Share-Integrity and Transparency) Act 2024 introduces three new earnings-based tests: the fixed ratio test, group ratio test, and third-party debt test. These changes limit debt deductions and apply to businesses with over $2 million in debt deductions. Additionally, a new integrity provision targeting debt creation schemes will take effect from 1 July 2024.
New Debt Deduction Creation Rules for Private Businesses
The ATO has clarified the application of the new debt deduction creation rules (DCCR) for private businesses and groups, including Division 7A loans. Notably, privately owned groups are not exempt from the DCCR, even under compliant Division 7A agreements. The DCCR targets debt deductions from certain related-party arrangements, including those with overseas connections, and applies to loans made before 1 July 2024. However, groups with less than $2 million in debt deductions or those operating solely in Australia are generally exempt.
Draft Guideline on Personal Services Businesses and Part IVA
The ATO has released a draft compliance guideline on how Part IVA anti-avoidance rules may apply to personal services income (PSI) generated through a personal services entity (PSE). While PSI tests may allow a business to be classified as a personal services business (PSB), the ATO emphasizes that net profits should typically be taxed at the individual’s marginal rate.
The guideline outlines low-risk scenarios, like when all profits are taxed in the individual’s hands, and higher-risk cases where profits are distributed to other entities for a lower tax rate. Higher-risk arrangements are more likely to be reviewed by the ATO but do not automatically trigger Part IVA.
Updates Guide to Employee Work Expenses
The ATO has revised its “Employees Guide for Work Expenses” to help employees understand deductible expenses, apportionment, and substantiation requirements. Key updates include information on the electric vehicle home charging rate (4.20 cents per kilometer) and new guidelines on self-education expense deductions. The guide also dispels common myths about work-related deductions, offering clarity on claims related to clothing, laundry, transport, gym fees, working from home, and subscriptions.
Draft Determination on GST and Sunscreen Products
The ATO’s draft determination GSTD 2024/D2 clarifies when sunscreen products can be GST-free. To qualify, products must meet four criteria: they must be for dermal application, have SPF 15 or higher, be listed in the Australian Register of Therapeutic Goods (ARTG), and be marketed primarily as sunscreen. The determination also addresses the challenges of applying GST rules to multi-use products like tinted sunscreens and moisturizers, emphasizing the importance of labeling, packaging, and marketing in determining a product’s primary use.
Update Promoter Penalty Laws
The ATO has refined its guidance on promoter penalty laws under PS LA 2021/1, which target the promotion of tax exploitation schemes. Recent updates include new indicators of promoter behavior, particularly in schemes related to early access to superannuation and those misrepresenting ATO rulings. These changes aim to help the ATO more effectively identify and penalize promoters of non-compliant schemes.
Drafts New Excise Determination for Spirits
The ATO has released the Excise (Concessional Spirits – Class of Persons) Determination 2024, allowing certain professionals and institutions to use specified quantities of spirits for industrial, medical, and educational purposes without paying excise duty. This will apply to health care practitioners, veterinarians, medical institutions, government entities, and educational institutions starting from 1 January 2025, reducing the need for individual approvals. It replaces the 2014 determination, streamlining compliance for eligible users.
No Remission of Penalties Despite No Refund in Family Trust Case
In Bootlis v FC of T [2024] AATA 2723, the AAT upheld the ATO’s decision to deny penalty remission for a taxpayer who falsely claimed deductions for a non-existent family trust. The taxpayer lodged amended returns without her tax agent’s knowledge, seeking over $136,000 in deductions for 2020 and 2021. Although no refund was issued, the AAT ruled the taxpayer’s actions were reckless, and a 50% base penalty was justified. The AAT emphasized that financial hardship or the lack of harm to the revenue were not valid reasons for penalty remission.
$1.8 Million Penalty for Unregistered Tax Agent
In Tax Practitioners Board v Van Dyke [2024] FCA 899, the Federal Court fined Mr. Van Dyke $1.8 million for providing tax agent services without being registered under the Tax Agent Services Act 2009. Despite receiving a cease-and-desist order, Van Dyke continued to lodge 3,359 tax returns between 2019 and 2023, earning $1.65 million. The Court highlighted the seriousness of his actions, as he falsely posed as a registered tax agent and failed to declare his income from these services.
Bill Introduced to Abolish the AAT and Establish New Tribunal
The Administrative Review Tribunal (Miscellaneous Measures) Bill 2024, introduced on 21 August, proposes abolishing the Administrative Appeals Tribunal (AAT) and replacing it with the Administrative Review Tribunal (ART). The bill aims to amend existing legislation to reflect the change, marking a significant shift in federal administrative review processes.
Bill Proposes Superannuation Contributions for Paid Parental Leave
The Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Bill 2024, introduced on 22 August, proposes adding superannuation contributions to the Commonwealth’s Paid Parental Leave Scheme for children born on or after 1 July 2025. Eligible recipients will receive a lump sum payment, including a core superannuation component based on the Paid Parental Leave Pay (PLP) amount and a nominal interest component to account for lost returns from delayed payments.
