Monthly Tax Update July 2022 |
Posted: May 29, 2023 |
Legislation UpdateFederal Parliament has not yet reconvened following the formation of the new Government and accordingly there have been no new tax or superannuation Bills introduced. The new Parliament is scheduled to resume sittings on 26 July 2022. OECD UpdatesOECD International Compliance Assurance Programme (ICAP)ICAP is a voluntary risk assessment and assurance programmme to facilitate open and co-operative multilateral engagements between MNE groups willing to engage actively and transparently and tax administrations in jurisdictions where they have activities. By coordinating conversations between an MNE group and multiple tax administrations, ICAP supports the effective use of transfer pricing documentation, including the MNE group’s Country-by-Country report, providing a faster, clearer and more efficient route to improved multilateral tax certainty. ICAP should reduce the resource burden on both MNE groups and tax administrations and mean fewer disputes requiring resolution through mutual agreement proceedings. Where an area is identified as needing further attention, work conducted in ICAP can improve the efficiency of compliance action taken outside the program, if needed. The International Compliance Assurance Programme: Handbook for tax administrations and MNE groups contains information on the process for ICAP reflecting the experience and feedback of tax administrations and MNE groups that participated in two pilots for the program, commencing in 2018 and 2019. The handbook includes a detailed description of each stage of the ICAP process, the documentation and information an MNE group participating in ICAP will provide, the level of comfort they may achieve as a result of participation in the program, and a comparison of ICAP with other possible routes to greater tax certainty. To access a copy of the ICAP handbook, please click here. OECD updated transfer pricing country profilesThe OECD has released new transfer pricing profiles for Egypt, Liberia, Saudi Arabia and Sri Lanka, bringing the total number of countries covered to 73. These country profiles focus on countries’ domestic legislation regarding key transfer pricing principles, including the arm’s length principle, transfer pricing methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, transfer pricing documentation, administrative approaches to avoiding and resolving disputes, safe harbours and other implementation measures. The information contained in these profiles is intended to clearly reflect the current state of countries’ legislation and to indicate to what extent their rules follow the OECD Transfer Pricing Guidelines. For more information, please refer here. Other UpdatesABS – Lending indicatorsThe Australian Bureau of Statistics (ABS) has released the new borrower-accepted finance commitments for housing, personal and business loans. According to the ABS key statistics, in May 2022 in seasonally adjusted terms, the value of new loan commitments are:
According to the ABS, the value of new housing loan commitments in May totalled $32.4 billion, with new owner-occupier housing loan commitments rising 2.1 percent and comprised 82 percent of the rise in total lending. Over the month, Victoria recorded the largest rise in new owner-occupier loan commitments (up 6.1%), followed by Queensland (up 2.5%), and South Australia (up 2.8%). While Western Australia and the Northern Territory recorded falls of 3.3% and 7.3% respectively. New investor loan commitments crept up by 0.9% in May, which was driven by New South Wales (up 3.1%) and Victoria (up 2.8%), with Queensland recording the largest decline of 4%. The rise in new commitments for fixed-term personal finance in May was driven by a 10.2% rise in lending for personal investment, as well as a 3.2% rise in lending for road vehicle purchases. Though lending for travel rose 11.4%, it remained 20.4% below pre-pandemic levels. For more information, please refer here. ATO Rulings and ActivityATO update: How to lodge a TPAR for the engagement of contractor servicesThe ATO has released a guide to assist taxpayers lodge a Taxable payments annual report (TPAR) if they provide or pay contractors for services. Due to COVID-19, many taxpayers may have engaged more contractors in the past year, for services such as cleaning or delivery. They may now need to lodge a TPAR for the first time. What the taxpayers need to report in their TPAR depends on the services their organisation provides. Taxpayers may need to lodge a TPAR by 28 August 2022 if their organisation provides, or pays contractors for, the following services:
To lodge a TPAR report involves three steps:
For further information, please refer here. ATO benchmark interest rate for Div 7A loansThe ATO has released the current benchmark interest rate for Div 7A loans purposes. The benchmark interest rate for the 2022–23 income year is 4.77% pa. This benchmark interest rate is relevant to private company loans made or deemed to have been made after 3 December 1997 and before 1 July 2022 and to trustee loans made after 11 December 2002 and before 1 July 2022. It is used to:
For further information, please refer here. ATO withdrawals of taxation ruling and practice statement relating to Division 7A, trust entitlements.TR 2010/3 – Income tax: Division 7A loans: trust entitlements and PS LA 2010/4 Division 7A: trust entitlements are being withdrawn with effect from 1 July 2022. The updated guidance in Draft Taxation Determination TD 2022/D1 had provided guidance on the administrative aspects of TR 2010/3. That ruling dealt with the ATO position that unpaid present entitlements could give rise to a Div 7A loan. When finalised, TD 2022/D1 will apply to trust entitlements created on or after 1 July 2022. An entity may continue to rely on TR 2010/3 and PS LA 2010/4 in respect of trust entitlements conferred on or before 30 June 2022. The ATO will not devote compliance resources to arrangements conducted in accordance with TR 2010/3 in respect of trust entitlements arising on or before 30 June 2022. In addition, the ATO will not devote compliance resources to sub-trust arrangements conducted in accordance with PS LA 2010/4 in respect of trust entitlements arising on or before 30 June 2022, even though those sub-trust arrangements may commence after 30 June 2022. For further information, please refer to the below:
ATO employees guide for work expensesThe ATO has updated the ‘Employees guide for work expenses’ to reflect the new work-related expenses that can be claimed for the first time in the 2021-22 income year. These include the cost of COVID-19 tests incurred after 1 July 2021 where these are work-related. The ATO guidance on travel and accommodation expenses issued in TR 2021/4 The ATO has also been updated to include electric cars expenses. when discussing car expenses. The information on deducting the cost of protective items during the pandemic has also been updated. For further information, please refer here. TD 2022/10 – Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2022-23 income year?The ATO has issued TD 2022/10 and set out its view of the amounts considered to be reasonable in relation to claims made by employees for the 2022–23 income year in respect of:
For further information, please refer here. Crypto not taxed as foreign currencyThe Government has announced that Crypto currencies will continue to be excluded from foreign currency tax arrangements. Following the government of El Salvador allowing Bitcoin as legal tender, the Albanese Government will clarify the current arrangements in legislation that will mean crypto assets will be excluded from foreign currency for tax purposes. Capital gains tax will continue to apply to crypto assets that are held as investments. The clarification will be backdated to 1 July 2021 to avoid ambiguity following the decision by the government of El Salvador. For further information, please refer here. ATO update: New offshore hybrid mismatch questions in 2022 International Dealings ScheduleThe ATO has released a guide on the new questions included in the recently released 2022 International Dealings Schedule (IDS). The ATO indicated that the new inclusions, Q47, Q47a and Q47b, will help them to assess tax risks associated with offshore hybrid structures and arrangements. Taxpayers would need to indicate ‘Yes’ at Q45 of the IDS if during the 2021-22 financial year, they had an arrangement that has the potential to give rise to a hybrid mismatch under Division 832 of the Income Tax Assessment Act 1997 (ITAA 1997). If ‘Yes’ is answered at Q45, taxpayers need to answer the three new offshore hybrid mismatch questions, which covers:
For further information, please refer here. PCG 2018/9 – Central management and control test of residency: identifying where a company’s central management and control is locatedThe ATO has issued PCG 2018/9 with an update to extend the transitional compliance approach period for foreign incorporated companies for a further 6 months (until 31 December 2022) to bring them in line with the ATO’s view on “central management and control” for the purposes of determining their Australian tax residency status. The extension is reflected in paragraph 104AA of the PCG.. Technical amendments announced by the previous Coalition government to clarify the corporate residency test rules are also still pending and subject to consideration by the new Labor government. These amendments would give effect to a 2020 Budget announcement that foreign incorporated companies will be treated as Australian tax residents where there is a “significant economic connection to Australia”. For further information, please refer here. Class Rulings issued:
Other rulings issued:
Latest Australian Tax Cases
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