Australian accountants and business left in limbo on tax

Chris Sheedy By Chris Sheedy, CA Today

21 August 2018

In June 2018, the Australian Senate adjourned for its six-week winter recess without passing several important, tax-related bills. Where did that leave accountants?

On 28 June 2018, just before the end of the 2017-18 financial year, Robyn Jacobson, a Senior Tax Trainer with TaxBanter Pty Ltd, posted on LinkedIn a list of key tax measures that she was “anxiously monitoring”.

It was the second last banking day of the financial year and the final Parliamentary sitting day before a six-week Parliamentary break. Robyn was concerned about the lack of clarity caused by the fact that so many important proposals for laws, or changes to laws, were not yet passed.

She listed seven bills that were important in terms of a decision being made before Parliament took a break. That evening, once Senators agreed to adjourn, none of these issues had been clarified. All of the bills were, and are, still outstanding. Parliament would not sit again until 13 August 2018.

This creates an uncertain environment for taxpayers and their agents... It’s not an ideal situation.

“Typically, on the last Parliamentary sitting day in December and June, the Senate sits through until three or four o’clock in the morning to clear the backlog,” explained Robyn. “This year they didn’t. When the Senate adjourned, some of these measures had been debated, but had not been passed.”

The seven main measures Jacobson identified have different start dates and some are retrospective. therefore, if an accountant was preparing a tax return for the 2017-18 financial year, they would prepare the return based on the law at the time. But those laws may have changed retrospectively.

“This creates an uncertain environment for taxpayers and their agents,” she said. “And these measures may not immediately pass on 13 August. They may remain before Parliament for another couple of months. It’s not an ideal situation.”

The seven major outstanding issues Robyn identified were:

1. Corporate tax cuts: Base rate entity passive income

Billy Meston, a Partner with PwC in Australia and ICAS Community Chair in Western Australia, has worked hand-in-hand with the mining industry for several decades. He says current evidence suggests mining will not suffer a serious problem attracting talent, but that in order to bring in Millennials it will have to develop a social conscience.

“Millennials seem to be more socially conscious than any generation before them,” said Billy. “So, the challenge for mining is whether or not it is acceptable to mine, in the eyes of Millennials.”

2. Corporate tax cuts: Companies with turnover of $50m or more

“This is where all the media attention has been. There has been so much coverage about whether big companies should get a tax cut. The start date for this one is still two years away (2019–20), and it’s not as time critical as the Base Rate Entities bill.”

“This is where all the media attention has been. There has been so much coverage about whether big companies should get a tax cut. The start date for this one is still two years away (2019–20), and it’s not as time critical as the Base Rate Entities bill.”

3. Integrity changes to small business CGT concessions

“This is about changing the eligibility criteria for access to the small business CGT concessions. The Bill originally proposed a start date of 1 July 2017. It is now proposed to be 8 February 2018, but we’re still waiting for the bill to be passed.

“If anyone has had a CGT event happen to shares in companies or interests in trusts from 8 February 2018 to 30 June 2018, they still don’t know whether or not they’re entitled to apply the concessions, because the law may change.”

4. Superannuation Guarantee Amnesty - from 24 May 2018 to 23 May 2019

“The Government has announced a 12-month Amnesty for employers to come forward and declare they have a shortfall from a previous quarter, where they haven’t paid their employees’ superannuation, all the way back to 1 July 1992. It’s 26 years’ worth of amnesty, which is extraordinary.

“What we’re not clear on is whether the amnesty itself will be legislated. Over 120 employers have already come forward, but the amnesty may never become law.

“The form is already available on the ATO website, but there’s actually no basis in law for that amnesty. My suggestion is not to come forward and make a disclosure to the ATO until this becomes law.”

5. Mandatory Single Touch Payroll reporting for small employers - from 1 July 2019

“Single Touch Payroll became mandatory on 1 July 2018 for an employer that has 20 or more employees. The bill currently before Parliament proposes to extend this to small employers from 1 July 2019. This is not as time critical, but the sooner we have certainty, the sooner small employers can begin preparing for it.”

6. Main Residence Exemption changes for non-residents - from 9 May 2017

“If you’re a non-resident for tax purposes, you won’t get access to the main residence exemption (MRE) on a dwelling that you sell in Australia. The Government’s policy is to deny the MRE to foreign residents.

“The problem is it’s also picking up Aussie ex-pats. If you’ve been an Australian resident all of your life and you bought a home and lived in it for 30 years, then you decide to move overseas to pursue a career opportunity, you’re now a non-resident for tax purposes.

"When you sell your property, the MRE won’t be available. The effect of this measure on Aussie ex-pats who become non-residents is to retrospectively deny the MRE as far back as the start of the CGT regime in September 1985.

“It has been reported that the Government has agreed to review the measure and delay passage of the bill, but we are still waiting for certainty.”

7. $20,000 asset write-off for small business entities - extended to 30 June 2019

“The bill proposes to extend the instant asset write-off for small business entities from 30 June 2018 to 30 June 2019, but it remains before Parliament. Under the current law, the threshold reverted to $1,000 from 1 July 2018. So, if a taxpayer today wanted to buy a $15,000 asset, they currently don’t know whether it is outright deductible or not.”

Be mindful, Robyn recommends to all accountants, that there may be amendments to these, and other, laws.

She provided this sage guidance: “A 2018 tax return should be prepared based on the current law, but keep your eyes and ears open for announcements, particularly from the ATO. Amendments could be retrospective.”

Image credit: JJ Harrison

About the author

Chris Sheedy is one of Australia’s busiest and most successful freelance writers. He has been published regularly in the Sydney Morning HeraldVirgin Australia VoyeurThe Australian MagazineGQIn The BlackCadillac, Management Today, Men’s Fitness and countless other big-brand publications. He is frequently commissioned to carry out copywriting and corporate writing projects for organisations, including banks, universities, television networks, restaurant chains and major charities, through his business The Hard Word.


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