Monthly Tax Update February 2022 |
Posted: May 29, 2023 |
Legislation UpdateSince our last update, the following legislations have received assent: The Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022The Federal Government has introduced legislation which would, among other measures, provide taxpayers with the choice to self-assess the effective life of certain intangible depreciating assets. The Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022, which was introduced in the House of Representatives on Wednesday 9 February, proposes to:
Legislative instrument registered – STP reporting exemption for WPN holdersA legislative instrument has been issued to exempt certain entities that do not have an Australian business number (ABN) but instead have a withholding payer number (WPN) from reporting under Single Touch Payroll (STP) for the 2021–22 and 2022–23 financial years. In particular, the Taxation Administration — Single Touch Payroll — 2021–22 and 2022–23 years Withholding Payer Number Exemption 2021 provides an exemption to any entity that:
Entities within this class will continue to be fully exempt from the reporting obligations under s 389-5 of sch 1 to the TAA for the 2021–22 and 2022–23 financial years. The instrument repeals and replaces the legislative instruments that provided a class exemption to relevant entities for 2018–19 to 2020–21. This instrument applies retrospectively from 1 July 2021 and will be repealed on 1 October 2023. For more details, please refer here. COVID-19 Stimulus Packages UpdatesTax deductibility of COVID-19 test expenses – PCRs and RATs paid for by businesses for employeesThe Federal Government has announced that work-related COVID-19 tests (including Polymerase Chain Reaction and Rapid Antigen Tests) will be tax deductible for taxpayers and exempt from fringe benefit tax (FBT) for businesses. Legislation will be introduced to make clear that COVID-19 test costs are tax deductible when incurred for work-related purposes. This will apply both when an individual is required to attend a physical workplace or has the option to work remotely. Employers will also be exempt from fringe benefits tax for the cost of COVID-19 testing provided to employees for work-related purposes. This change will take effect from the beginning of the 2021-22 tax year. For more details, please refer here. OECD and Other UpdatesOECD Transfer Pricing Guidelines updatedThe Organisation for Economic Cooperation and Development (OECD) has updated the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The latest edition was approved by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on 7 January 2022. It updates the 2017 edition and includes the following:
To find out more information, please refer here. OECD public consultation on Pillar One revenue sourcing rulesThe OECD has released a public consultation document on Pillar One draft rules for nexus and revenue sourcing. In October 2021, over 135 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting agreed to a Two-Pillar Solution to address tax challenges arising from digitalisation and globalisation of the economy. Pillar One will reallocate some taxing rights over large multinational enterprises from their home countries to markets where they have businesses and earn profits, regardless of their physical presence. The Draft Rules for Nexus and Revenue Sourcing illustrate the framework for identifying the relevant market jurisdictions from which revenue is derived for the purposes of Pillar One. The draft rules have been released to obtain public comments and do not necessarily reflect consensus regarding the substance of the document. Interested parties are invited to send their written comments by 18 February 2022. For more details, please refer here. Other Updates2021 tax benchmarks and variations statementTreasury has published its 2021 Tax Benchmarks and Variations Statement which provides annual information on Australian Government tax benchmarks and variations. The 2021 Statement reflects Australian Government policy up to and including the 2021-22 Mid-Year Economic and Fiscal Outlook. It lists provisions in the tax system that apply an alternative treatment of particular taxpayers or forms of economic activity and, where possible, estimates the difference in revenue as a result. For more details, please refer here. Reform of Australia’s electronic surveillance framework Discussion PaperThe government has released a discussion paper which includes a proposal to provide the ATO with power to access telecommunications data. The Reform of Australia’s Electronic Surveillance Framework Discussion Paper contains background information and 37 questions seeking feedback on the principles that will guide the development of a new legislative framework to govern electronic surveillance in Australia. The discussion paper advises that under the framework, the government is considering providing the ATO with the power to access telecommunications data for the purpose of protecting public revenue from serious financial crimes. The closing date for submissions to the discussion paper is 11 February 2022. For more details, please refer here. Draft R&D Tax Incentive Determination on clinical trials (Phase 0-III) for an unapproved therapeutic goodA draft determination proposes to allow clinical trials to be eligible for the Research and Development Tax Incentive (R&D Tax Incentive). The draft Industry Research and Development (clinical trials, Phase 0, I, II, III for an unapproved therapeutic good) Determination 2021 would make it clear that Phase 0–III clinical trials would be eligible activities for the purpose of the R&D Tax Incentive and would provide a simplified registration process for businesses to invest in clinical trials. The draft determination is the first of its kind to be made under the R&D Tax Incentive reforms announced in the 2020–21 Federal Budget. For more details, please refer here. TPB guidance on verifying client identitiesThe Tax Practitioners Board (TPB) has finalised its practical guidance on verifying client identities. Practice Note TPB(PN) 5/2022 sets out the TPB’s proposed proof of identity requirements for registered tax practitioners and provides information on:
The practice note was released earlier as draft guidance TPB(PN) D45/2021 ATO Rulings and ActivityDraft notices for lodgment of 2021–22 tax returnsThe ATO has released the following draft legislative instruments setting out the proposed requirements to lodge income tax returns for the 2021–22 income year:
Comments on both draft legislative instruments are due by 4 March 2022. Draft effective life determinations releasedThe ATO has released draft effective life determinations for assets used in the casino operation industry and electric bicycles and scooters and is seeking comments on these drafts:
Guidance for Top 1000 taxpayers preparing for a combined assurance reviewThe ATO has released a guidance to assist Top 1000 taxpayers review their income tax risk management and governance frameworks and prepare for a combined assurance review. The ATO is providing examples of better practices in relation to income tax governance for different types of Top 1000 corporate entities which can then be extrapolated. Tax governance is a key focus area under the justified trust methodology for large public and multinational businesses. Demonstrating how good income tax governance is embedded in positions taken, disclosures in returns and tax calculations provides the ATO with evidence it can rely upon which can reduce the intensity of enquiries. For more information, please refer here. TD2022/1 – Income tax: commercial debt forgivenessThe ATO has finalised guidance on the exclusion for debts forgiven for reasons of natural love and affection from the commercial debt forgiveness provisions under s 245-40(e) of ITAA 1997. Taxation Determination TD 2022/1 clarifies that the exclusion for debts forgiven for reasons of natural love and affection requires the creditor to be a natural person. The context of s 245-40(e) requires a direct causal nexus between the forgiveness and the natural love and affection, such that the natural love and affection must arise from ordinary human interaction. This can only occur where the creditor and the object of the creditor’s love and affection are natural persons. The determination also provides that there is no requirement for the debtor to be a natural person where the conditions of the exclusion are otherwise satisfied. TD 2022/1 applies to income years commencing both before and after its date of issue. As the determination takes a different view to ATO Interpretative Decision ATO ID 2003/589 (withdrawn), the Commissioner will not devote compliance resources in relation to debts forgiven prior to the decision’s withdrawal on 6 February 2019. The determination was previously issued as draft TD 2019/D9. The ATO has published a compendium of the feedback it received. GST administration annual performance report 2020-21According to the ATO’s annual GST administration annual performance report., the net GST gap calculated for 2019-20 is estimated to be 7.8 percent. According to the report, the ATO raised $73.1 billion in GST cash collections in 2020–21 which was 4.7 percent (or $3.3 billion) above the revised budget estimate and 21.3 percent higher than in 2019–20. GST cash collections included:
For more information, please refer here. Class rulings issued:
Latest Australian Tax Cases
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