In this Sky Update, we bring you all the latest tax news along with some other items that may pique your interest.
Tax incentives to promote innovation
Innovative companies with an interest in getting involved in the “ideas boom” need to be aware of the Government’s proposed tax incentives to help promote innovation. The Government has released draft legislation to implement more of the proposed tax measures announced as part of its National Innovation & Science Agenda.
One of the tax measures will allow companies that have changed ownership to access past year tax losses if they satisfy a “similar business test”. Under the current law, companies that have changed ownership must satisfy the stricter “same business test” to deduct prior year tax losses.
This measure is designed to encourage entrepreneurship by allowing loss-making businesses to seek out new opportunities to return to profitability.
The other measure proposes to allow taxpayers the choice to self-assess the effective life of certain intangible depreciating assets (eg patents or copyrights).
The current law only provides for the use of the effective life set by the ATO. According to the Government, this change will make startups’ intellectual property and other intangible assets a more attractive investment option.
Note: The fate of these measures will not be known until after the upcoming Federal Election.
Holiday homes – tax considerations
Australians who let their holiday homes for only part of the year should be aware of the ATO’s compliance focus on excessive holiday home deductions.
The ATO has released guidance on claiming deductions in relation to holiday homes.
If a person rents out their holiday home, they can only claim expenses for the property based on the proportion of the income year when the property was rented out or was genuinely available for rent.
Notably, the new guidance indicates what is meant by “genuinely available for rent”.
Individuals caught in “Panama Papers” leak
The ATO has advised that it is investigating more than 800 individuals after a leak of taxpayer data in relation to a Panamanian law firm.
Deputy Commissioner Michael Cranston said that since the completion of the offshore disclosure initiative “Project DO IT”, the ATO has ramped up its compliance work to deal with people who have failed to disclose offshore income and assets.
Mr Cranston said the ATO has been analysing the latest data against information these taxpayers had reported and against the information the ATO already has.
The information the ATO received regards some taxpayers who it had previously investigated, as well as a small number of taxpayers who disclosed their arrangements to the ATO under Project DO IT. The information also regards a large number of taxpayers who have not previously come forward, including high-wealth individuals, and Mr Cranston said the ATO is already taking action on those cases.
ATO safe harbour for SMSF borrowings
The ATO has released guidelines that set out the “safe harbour” terms on which self managed superannuation funds (SMSFs) may structure related-party limited recourse borrowing arrangements (LRBAs).
Where related party LRBAs are not structured correctly, the ATO may seek to tax the relevant component of the SMSF’s income at 47%. If a LRBA is structured in accordance with the ATO’s guidelines, the usual 15% tax rate will apply.
ATO’s data-matching net widens
The ATO has announced details of its various data-matching programs. Most of the announcements regard extensions to existing data-matching programs.
Records obtained through the programs will be electronically matched with ATO data holdings to identify non-compliance with registration, lodgement, reporting and payment obligations under taxation laws. The following are key points:
- The ATO will acquire details of registered voters on the Commonwealth electoral roll from the Australian Electoral Commissioner. This data-matching program aims to identify taxpayers who are not registered with the ATO when they are required to be.
- The ATO will acquire data from businesses that it visits as part of its employer obligations compliance program during the 2017, 2018 and 2019 financial years. This program aims to obtain intelligence to identify risks and trends about contractors who may not be complying with their taxation obligations.
- The ATO will acquire data relating to electronic payments made to merchants through specialised payment systems for the 2015, 2016 and 2017 financial years. This data will be used to detect unreported income and to identify those operating a business but failing to meet their registration, lodgment and payment obligations.
New rules for selling property valued at $2m or more
New rules will soon apply to sales of Australian property with a value of $2 million or more. Vendor’s will incur a 10% withholding tax on all contracts entered into from 1 July 2016, unless they obtain a clearance certificate or variation certificate.
Conveyancers will receive a detailed education guide in the coming weeks. Clearance certificate and rate variation application instructions will also be released shortly.
For more information on the new rules, click here.
Are you involved with a sporting club?
You might like to investigate VicHealth’s Active Club Grants.
Clubs can apply for a $3,000 grant to purchase core equipment. They can also apply for a $10,000 grant for programs and activities aimed at increasing participation.
Applications open for round 1 on 1 August.
Did you know?
According to Tourism Victoria, in the year ending March 2016 international overnight expenditure in Victoria grew (+23.7%) to reach $6.7 billion, exceeding the national average growth (+17.6%).
Victoria’s international visitors, nights and expenditure are the highest on record with growth experienced both in Melbourne and regional Victoria.
The China market continues to underpin this growth with Chinese visitor expenditure accounting for a third of total international visitor expenditure in Victoria.
We all know that Victoria has allot to offer in tourism & hospitality, and these statistics confirm that our state is an attractive destination for international visitors. It also serves to remind us of the important role played by hospitality & tourism businesses in providing jobs and economic growth.
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