In this Sky Update, we bring you all the latest tax news along with some other items that may pique your interest.
Changes to deductibility of holdings costs for vacant land
On the 22nd of October legislation to limit deductions relating to vacant land passed both houses of Parliament and is now awaiting royal assent.
Under the new rules, taxpayers will not be entitled to claim a tax deduction for costs associated with holding vacant land such as council rates, land tax, interest on loans, etc. Whilst a deduction will not be available, the holding costs will typically be included in the “cost base” of the land and will reduce any Capital Gains Tax that may be payable when the property is subsequently sold.
The new rules apply to individuals, partnerships, trusts and self-managed superannuation funds. There are a number of entity types that are excluded from the application of the new rules, most notably companies.
There is also an exclusion where the vacant land is used in a business carried on by the taxpayer or in a business carried on by an affiliate, spouse or child of the taxpayer. This exclusion applies to ongoing businesses as well as to land held for future use in a property development business.
Unfortunately, the exclusion does not extend to land that is being used in a business carried on by an unrelated party. As such, agistment and rental arrangements for land that does not contain any substantial and permanent building/structure will be adversely affected by the new rules.
Government grants and funding
Did you know that the Federal Government has a GrantConnect website where they publish all forecast and current grant opportunities? You can also search for grants, funding and support programs on the Business.gov.au website.
There are a myriad of grants and funding out there to help community organisations and businesses. It is well worth taking the time to find out if there are any programs that may be appropriate for you.
October interest rate decision
At the meeting on the 1st of October, the RBA Board lowered the cash rate by 25 basis points to 0.75%. In a media release, Governor Philip Lowe noted that the decision to lower rates was taken to support employment and income growth. Governor Lowe also noted that “it is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target”.
With 3 rate cuts since June, rates are currently very low with indications that they may remain that way for quite some time to come.
With the banks passing on the rate cuts to varying degrees, it is important for borrowers to check to ensure that their interest rate remains competitive.
Single Touch Payroll (STP) & superannuation obligations
The introduction of the Single Touch Payroll system has given the ATO unprecedented visibility of payroll information including superannuation obligations. When combined with reporting the ATO receives from superannuation funds, the ATO is now better equipped than ever to identify employers that are not meeting the superannuation obligations.
In fact, in a recent presentation to the Australian Institute of Superannuation Trustees, Deputy Commissioner James O’Halloran advised that the ATO would contact 2,500 employers who have been identified as having paid superannuation contributions late.
Now more than ever, employers need to ensure that they make payment of employee superannuation contributions on time.
Failure to make contribution payments on time gives rise to an obligation to lodge a Superannuation Guarantee Charge (SGC) Statement which involves:
- Additional contributions relating to earnings that are not Ordinary Time Earnings (eg overtime);
- Payment of interest at 10%;
- Payment of an administration fee of $20 per employee per quarter; and
- Loss of tax deductibility for the late superannuation contributions.
Fair Work Ombudsman (FWO) annual report
- Recovering over $40m in underpaid wages for 18,000 employees – the highest ever;
- Securing more than $4.4m in court ordered penalties; and
- Issuing $479,900 in on the spot fines for payslip and record keeping breaches.
The FWO is increasingly active in enforcing compliance with workplace laws and regulations. In particular, the FWO is focussing on the hospitality and tourism industries which are considered to be high risk for non-compliance. In particular, it has been noted that over 50% of litigations filed involved businesses in the fast food, restaurants and café sector with $1.6m of court penalties imposed.
Businesses that employ staff are encouraged to take their obligations seriously. Failure to do so can result in very serious consequences that extend beyond monetary penalties to public naming and shaming.
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