In this Sky Update, we bring you all the latest tax news along with some other items that may pique your interest.
Research & Development Tax Incentive
The R&D Tax Incentive is a program jointly administered by AusIndustry and the ATO. The objective of the program is to foster Australian innovation by providing a tax incentive to firms that undertake eligible R&D activities.
Under the R&D Tax Incentive, eligible companies receive a tax offset for R&D expenditure on qualifying activities.
The 30 April due date for registering R&D activities for the 2019/2020 year is now fast approaching.
Companies intending to claim the R&D Tax Incentive for the 2019/2020 year should now be prioritising the preparation of their R&D application to ensure that they can meet the deadline.
If you need assistance to determine your eligibility and to assess the likely benefits for your business, please get in touch. Likewise, if you need assistance to submit your R&D application, we are here to help.
Fair Work Act Amendments
On the 9th of December, the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 was introduced to Parliament.
One of the most notable items in the Bill is a statutory definition of a casual employee. The intention is to provide greater clarity for employers as to when an employee will be considered casual in order to avoid unintended outcomes.
This will be welcome news for many employers, particularly those in the retail, tourism and hospitality industries who have traditionally had higher levels of casual employment.
The Bill was passed by both Houses on the 22nd of March and now awaits Royal Assent. The passing of the Bill goes a long way to eliminating the uncertainty created by the decision in WorkPac Pty Ltd v Rossato  FCAFC 84 earlier on in the 2020 year.
If you have any questions about the use of casual employees in your business and/or the implications of the new law, please get in touch.
Superannuation Contribution Caps Increasing
The concessional contribution cap is required to be indexed by Average Weekly Ordinary Time Earnings (AWOTE) in increments of $2,500.
With the announcement of the December 2020 quarter AWOTE figure, the concessional contribution cap will increase from $25,000 to $27,500 from the 1st of July 2021.
This means that from the 2022 financial year contributions of up to $27,500 can be made as:
- Deductible employer contributions; or
- Deductible personal contributions; or
- A combination of the two.
Additionally, the non-concessional (non-deductible personal) contributions cap will increase from $100,000 to $110,000.
If you need advice regarding the implications for any salary sacrifice arrangements and/or other strategies to maximise superannuation contributions, please get in touch.
Director ID Regime
As part of the 2020 Budget, the Federal Government announced the Modernising Business Registers (MBR) Program. This program includes the introduction of a director identification number (director ID), being a unique identifier that will be assigned to company directors.
The purpose of the Director ID regime is to prevent the appointment of fictitious directors and deal with illegal phoenixing activity.
On the 12th of March, Treasury released a draft Data Standard & Disclosure Framework for consultation. Submissions are due by the 1st of April.
The draft director ID data standard prescribes the information required to apply for a director ID under the Corporations Act including how the information is to be provided, used and stored. Additionally, the draft director ID disclosure framework sets out the circumstances in which the Commonwealth Registrar may disclose director ID information to government entities as well as some Public Governance, Performance and Accountability (PGPA) bodies, courts and tribunals.
At this stage, no action is required by company directors. We will continue to monitor the progress of the program and will update you as additional information comes to light.
Personal Services Income Draft Ruling
The ATO have recently published a Draft Taxation Ruling TR 2021/D2 dealing with the Personal Services Income (PSI) rules.
The PSI rules are aimed at preventing individuals inappropriately splitting income generated from their personal exertion through the use of structures such as company’s, trusts and partnerships.
The rules involve a series of tests that are aimed at identifying when the income is attributable to a genuine business structure or assets versus when it is mainly the reward for an individual’s personal effort or skills.
If the PSI rules are found to apply, the income generated through the structure must be attributed to the relevant individual such that any taxation advantages of that structure are eliminated.
The draft ruling provides a detailed explanation of the key concepts and application of the tests, etc. These explanations take into account the outcomes of a number of tax cases that have played out in the courts in recent times such as the Fortunatow case.
The PSI rules are complex and there has been a lack of awareness of their application. The release of this draft ruling signals the ATO’s intention to ramp-up efforts to improve compliance with the PSI rules.
- operate through a company, trust or partnership structure; and
- derive the majority of your income from the provision of services
We recommend obtaining assistance to review the application of the PSI rules to ensure that your tax structuring is both effective and compliant.
Quote of the Month
“What is not started today is never finished tomorrow”
Johann Wolfgang von Goethe
Pretty logical really. But it does get you thinking.
Is there something important that you want to have finished tomorrow? Are you giving it the attention it deserves?
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