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Posts Tagged ATO


Tax debts and relationship breakdowns: a warning

17th Feb, 2023

The ability of the Family Court to divide the assets owned personally by a couple – including superannuation – on a relationship breakdown is largely without question. A recent case has now shed further light on the ability of the Family Court to allocate responsibility for payment of the tax debts of either spouse.

A High Court decision in 2018, Commissioner of Taxation v Tomaras, confirmed that tax debts can be apportioned by the courts where a couple’s relationship has broken down. In that case, the wife had failed to pay her tax debts and was out of time to challenge the debt assessments. The husband had been declared bankrupt. As part of the property settlement proceedings, the wife asked the court to order that the husband should become the debtor who would have to pay the ATO.

The court found that one spouse could indeed be substituted for the other in relation to a tax debt like this, but it also confirmed this isn’t always appropriate. Given that the husband was bankrupt and there was no time left to challenge the debt assessments, the court did not exercise its powers to make him liable for the tax debts that had been assessed to the wife.

More recently, the case of Cao & Trong in 2022 further explored the Family Court’s powers in relation to tax debts. In this case, allocation of an amount in the region of $3.1 million was in dispute between the former spouses, the ATO and the Child Support Register.

The ATO was owed more than $7 million in unpaid tax, and in the end the court found that it was entitled to 100% of the disputed amount. In making this finding, the court said that the parties had enjoyed an opulent lifestyle while the debt was due to the ATO, and in fact this lifestyle was mainly possible because they avoided paying the large amounts they owed.

This recent finding is a timely reminder that the ATO can and will intervene in family law disputes to protect the revenue due to the Commonwealth, and that the courts will actively ensure the rights of the ATO are protected and enforced.

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Sharing economy reporting regime commences soon

17th Feb, 2023

As a part of the Federal Government’s strategy to combat the tax compliance risks posed by the sharing economy, it has passed into law new requirements for operators of electronic distribution platforms to provide information to the ATO on transactions made through their platforms.

An “electronic distribution platform” is one that delivers services through electronic communication (ie over the internet, including through applications, websites or other software) and allows entities to make supplies available to end-user consumers through the platform. A service isn’t considered an electronic distribution platform if it only advertises or creates awareness of possible supplies online, operates as a payment platform or serves a communication function.

Examples of sharing economy electronic platform operators include Uber, Airbnb, Car Next Door, Menulog, Airtasker and Freelancer.

TIP: The new reporting regime applies to platform operators rather than to individuals who use their sites or apps, but if you’re part of the sharing economy it’s still important to give the ATO the right information. If you rent out your home for short stay accommodation, work as a delivery driver or take on side jobs as a freelancer, we can help you keep your tax affairs in order.

Electronic platform operators will soon be required to regularly provide transaction information to the ATO through the Taxable Payments Reporting System (TPRS). The information obtained will be used in ATO data-matching to help identify entities that may not be meeting their tax obligations.

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SMSF changes and reminders for 2023

17th Feb, 2023

If you’re thinking of starting a self managed superannuation fund (an SMSF) in 2023, you need to be aware of the recent changes made by the ATO on fund registration, and the application of the Director ID regime to funds with corporate trustees.

Previously, after an SMSF was established and trustees were appointed, the trustees had 60 days to register the SMSF with the ATO by applying for an Australian Business Number through the Australian Business Register. That application included a section where bank account details of the SMSF could be added, along with other information such as the fund’s Tax File Number.

Due to the recent explosion in fraudulent schemes targeting SMSFs, this feature has been removed in a bid to protect the retirement savings of Australians. New SMSFs will now need to provide the ATO with their bank account details after the SMSF registration process, using the online portal for businesses, via phone, or through a registered tax agent.

If you’re contemplating starting an SMSF with a corporate trustee, you’ll also need to ensure the directors of the corporate trustee apply for Director IDs before their appointment is made through Australian Business Registry Services (ABRS). The Director ID is a unique 15-digit identifier that will follow each individual through their business life and was introduced as a part of a suite of measures to combat phoenixing and other illegal activities. The process is free, simple, online and only requires individuals to confirm their identity. Every individual must apply for their own Director ID, and no one else can apply on their behalf.

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Proposed new method for calculating work from home expenses

19th Dec, 2022

Taxpayers could soon be dealing with more paperwork at tax time, or facing the prospect of a lower tax deduction for work from home (WFH) expenses. The ATO has recently proposed a new revised fixed rate method of calculating WFH expenses for the purposes of claiming a tax deduction from 1 July 2022.

The proposed new rate of 67c per hour would replace the previous shortcut method of 80c per hour (which many people have been using during the COVID-19 pandemic) as well as the previous fixed rate method.

TIP: It’s important to note that this proposal comes from the ATO (which does not itself create the tax law) and is still at the draft stage. The ATO is asking for submissions from interested parties.

Before 1 July 2022, people working from home could use one of three methods for calculating a tax deduction for the expenses incurred:

  • the actual costs method, which involved calculating the actual expenses incurred as a result of working from home;
  • the fixed rate method, which allowed 52c per hour to cover their electricity and gas expenses, home office cleaning expenses, and the decline in value of furniture and furnishings, with a separate deduction claimable for work-related internet expenses, telephone expenses, stationery and computer consumables and the decline in value of a computer/laptop; and
  • the shortcut method, which was introduced during the COVID-19 pandemic to make it easier for the large proportion of employees suddenly working from home. This method allowed claiming 80c per hour to cover all WFH expenses, with no separation of deductions.

Given the continual increase in energy bills and other inflationary pressures, this new proposed fixed rate method is likely to yield consistently lower deductions than if the actual cost method was used. Coupled with the abolition of the shortcut method, this seems to mean that taxpayers would either have to accept a lower WFH deduction in the coming years or deal with increased paperwork to be able to claim WFH deductions under the actual costs method.

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FBT car parking benefits: new draft ruling

19th Dec, 2022

Businesses that provide FBT car parking benefits should be aware that the ATO has recently released an updated consolidated draft taxation ruling that incorporates proposed changes to FBT car parking benefits. Broadly, the ATO is saying that for FBT purposes from 1 April 2022, it will consider the “primary place of employment” as a broad test that isn’t limited to the specific place at which an employee’s duties are performed on any one day.
Relevant considerations will include the employee’s conditions of employment, such as rostering, allowances and car parking, as contained in their employment contract or industrial instrument.

This follows the decision in Commissioner of Taxation v Virgin Australia Regional Airlines Pty Ltd, where the Full Federal Court looked at the concept of “primary place of employment” and ultimately found that Virgin Airlines provided FBT car parking benefits to its flight and cabin crew in various airports.

The Virgin employees parked at (or near) a “home base” airport and undertook travel as part of their work, including staying overnight at other locations, while their home base car parking continued.

Virgin originally argued successfully in the Federal Court that the employees were carrying out their duties in many different places (on planes and in other airports) from where the parking occurred, so the parking location shouldn’t be considered the “primary place of employment” and the car parking shouldn’t be considered a Virgin-provided benefit subject to FBT.

The ATO appealed to the Full Federal Court, which in the end concluded that a Virgin employee’s relevant home base airport was their “primary place of employment”, even on days when the employee didn’t attend or work at the home base airport at all, for example because they were working on flights or had a rest period in another location. The car parking was therefore an employer-provided FBT benefit because the employees’ cars were parked at, or in the vicinity of, their primary place of employment.

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Employees vs contractors: more clarity coming

01st May, 2022

For many businesses, the line between employees and contractors is becoming increasingly blurred, partly due to the rise of the gig economy. However, businesses should be careful, as incorrectly classifying employees as contractors may be illegal and expose the business to various penalties and charges.

Recently, the High Court handed down a significant decision in a case involving the distinction between employees and contractors. In the case, a labourer had signed an Administrative Services Agreement(ASA) with a labour hire company to work as a “selfemployed contractor” on various construction sites.
The Full Federal Court had initially held that the labourer was an independent contractor after applying a “multifactorial” approach by reference to the terms of the ASA, among other things. The High Court, however, overturned that decision and held that the labourer was an employee of the labour hire company.

The High Court held that the critical question was whether the supposed employee performed work while working in the business of the engaging entity. That is, whether the worker performed their work in the labour hire firm’s business or in an enterprise or business of their own.

As a result of the decision, the ATO has said it will review relevant rulings, including super guarantee rulings on work arranged by intermediaries and who is an employee, as well as income tax rulings in the areas of PAYG withholding and the identification of employer for tax treaties.

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