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With the transition to Single Touch Payroll almost complete for all employers within Australia, the ATO now has considerably more information to identify superannuation guarantee non-compliance in real time. Employers that do not make sufficient quarterly superannuation contributions for each employee by the due date will be liable to the superannuation guarantee charge (SGC), a penalty which is not deductible to the employer.

Generally, SGC equals the superannuation guarantee shortfall, which is made up of the total of the individual super guarantee shortfalls for all employees for the quarter, an interest component of 10% per annum and an administration component of $20 per employee per quarter. If an employer has a shortfall, they are required to lodge a superannuation guarantee (SG) statement by the 28th day of the second month following the end of the quarter.

Where the employer lodges their SG statement late or fails to provide information relevant to assessing liability to SGC for the quarter, they may be subject to an additional penalty of 200% of the amount of SGC. This additional penalty is automatically imposed on the employer by superannuation law.

While the ATO does not have discretion to remit or waive the interest and administration components of the SGC, it does have discretion to remit some of the additional 200% penalty provided the employer satisfy certain conditions. According to information released by the ATO, penalty relief will only be applied on limited circumstances where it is considered that education is a more effective option to positively influence behaviour (ie an employer with SG knowledge gaps that has led to non-compliance).

In addition to the above, an employer is only eligible for penalty relief where they have a turnover of less than $10m and they:

  • do not have a history of lodging SG statements late;
  • have lodged no more than 4 SG statements after the lodgement due date in the present case;
  • have no previous SG audits where they were found to have not met their SG obligations; and
  • have not previously been provided with penalty relief.

The percentage of penalty remission depends entirely on an employer's degree of compliance. For example, where there is severe/repeated disengagement or where the ATO is of an opinion that the employer has engaged in a phoenix arrangement, there will be no remission of additional penalty. On the other side of the spectrum, where an employer lodges an SG statement after the due date but before any ATO contact, the additional penalty may be reduced to 20% of SGC.

The ATO may also consider other relevant facts of circumstances to further increase penalty remission, including natural disasters, incorrect advice by the ATO, key system outage, ill health of key employees or the lack of business experience of principals.

More help for first home buyers

With the advent of the new year, a new measure is now in effect to give first home buyers a leg up on the property market. Starting 1 January 2020, couples that earn less than $200,000 combined, and singles that earn less than $125,000, who have never owned a property and are Australian citizens may apply for the First Home Loan Deposit Scheme (FHLDS).

The FHLDS provides a guarantee that will allow 7,000 lucky eligible first home buyers on low and middle incomes to purchase a residential property with a deposit of as little as 5%. Under the scheme, Australian permanent residents will not be eligible, and if you're applying as a couple, both will need to be Australian citizens.

To be eligible, you must meet the income criteria above, be over 18, and move into the property within 6 months from the date of settlement, or if later, the date an occupancy certificate is issued and continue to live in that property for so long as your home loan has a guarantee under the scheme. In other words, investment properties are not supported under the scheme and if you don't live in the purchased property, or if you move out of the property at a later time, your home loan will cease to be guaranteed by the scheme. At which time, you may be required to pay bank fees/charges/insurance that would've otherwise applied had you not been a part of the FHLDS.

The scheme also caps the maximum property purchase price to ensure that only modest homes are covered. For example, in an NSW capital city or a regional centre, the maximum value of property that is covered under the FHLDS is $700,000. For a Victorian capital city or regional centre the maximum is $600,000. That figure falls to $400,000 for WA, SA and Tasmanian capital cities. Queensland capital city and regional centre has a cap of $475,000.

Under the FHLDS, eligible singles or couples are able to purchase existing dwellings, house and land packages, land and separate contract to build a home, "off-the-plan" purchases, and eligible building contracts. However, each category has its own criteria which must be satisfied, for example, for "off-the-plan" purchases, the settlement date of your home loan must occur within 90 days of your home loan becoming guaranteed under the scheme.

Initially 10,000 places were released on 1 January, but 3,000 potential first home buyers have already been registered under the FHLDS by participating banks. If you miss out on the 7,000 that is currently available due to the need to gather the necessary financial information to support your application, don't fret, another 10,000 will be released from July 2020. 

The ATO has recently withdrawn Draft Miscellaneous Taxation Ruling MT 2018/D1 on the time limit for claiming input tax credits and fuel tax credits. Generally, under s 93-5 of the GST Act, the right to claim an input tax credit expires after 4 years and commences on the day on which the entity was required to lodge a return for the tax period to which the input tax credit would be attributable. Section 47-5 of the Fuel Tax Act has a similar provision which limits claims to 4 years after the date which taxpayers were required to give the Commissioner a return. 

The withdrawn draft ruling created much controversy for its strict stance on the four-year time limit rules for claiming the credits. The effect of the draft ruling was that if the Commissioner's decision on an objection or amendment request is made outside the 4-year period (but the request by the taxpayer is lodged within the 4-year period), the taxpayer would not have been entitled to the tax credits even if the decision is favourable to the taxpayer.

After the draft was issued however, the Federal Court in Coles Supermarkets Australia Pty Ltd v FCT [2019] FCA 1582 did not quite agree with the ATO stance. It accepted Coles' submissions that s 47-5 is only intended to prevent an ongoing entitlement to claim credits in a later return where a return has not been lodged or credits not claimed. The Court noted that once a return has been lodged and objected to, there is no scope for the operation of s 47-5 to disentitle a taxpayer to fuel tax credits as the right of the Commissioner and taxpayer are protected by various sections of the TAA. 

In a decision impact statement following the judgement, the ATO acknowledged that the Court's observations were contrary to its views and conceded that MT 2018/D1 was no longer current and was withdrawn. While the Coles decision only refers to fuel tax credits, given the similarity of the provisions between fuel tax credits and the GST Act, and the Court's observations regarding the right of the Commissioner and taxpayer being protected by TAA, it would stand to reason it would also apply to input tax credits. Thus, the ATO is planning to issue a new ruling that takes into account the Federal Court's observations in early 2020.

In the meantime, taxpayers will no longer be automatically denied input tax credits and/or fuel tax credits where the Commissioner makes a decision on an objection or requests for amendment outside the 4-year period. Any taxpayer that the draft ruling has affected may contact the ATO for further advice.

No cost strategies to increase your super

Now that we have finished another year our thoughts may turn to goals and resolutions achieved during the year. Career successes, reaching fitness goals and life milestones are all causes for celebration. While most of us wouldn't even think twice about our superannuation, now is the perfect time to put some resolutions in place to increase your super for the new year. Afterall, it is what we'll be relying on in retirement, and even small improvements now could mean extra luxuries later.

Building up super doesn't always have to mean making monetary sacrifices now, there are some simple solutions to making sure you're getting the most out of super at no cost. Strategies include finding your lost super, consolidating your super accounts, and making sure you're in a quality fund in terms of performance.

Currently, there are 5.8m individuals (36% of the population) with 2 or more super accounts. Every year, the ATO launches its postcode "lost super" campaign to help raise community awareness of lost super. As a consequence of the 2018 campaign, more than 66,000 people to find and consolidate over 105,000 accounts worth over $860m. If you think you've got lost super, you can then log into myGov to claim the lost super and have it consolidated with your active account.

Finding and consolidating your lost super with your active account means you'll pay less management fees and other costs, saving you in the long term. Between 1 July 2014 and 30 June 2019, 2.6 million accounts to the value of $15bn have been consolidated by fund members using ATO online services.

Another easy way to grow your super is to make sure the super fund that you're putting your money into is performing well. Recently, the regulator of super funds, APRA, released "heatmaps" that provide like-for-like comparisons of MySuper products across 3 key areas: investment performance, fees and costs, and sustainability of member outcomes. The heatmap uses a graduating colour scheme to provide clear and simple insights that unlike a sea of numbers on a spreadsheet, will send a clear and strong message to users.

For example, MySuper products delivering outcomes below the relevant benchmarks in relation to investment performance and fees and costs will be depicted from pale yellow to dark red. The sustainability measures provide an indication of a trustee's ability to provide quality member outcomes and address areas of underperformance. While the ultimate purpose of the heatmap is to have trustees with areas of underperformance take action to address it, they can also be an invaluable resource in choosing the right super fund.

While the Banking and Financial Services Royal Commission seems long ago in the minds of many, the people that have been financially affected by dubious practitioners will no doubt carry the scar of mistrust for life. This then, is precisely why the government has introduced new laws which will give ASIC new enforcement and supervision powers in relation to the financial services sector to weed out the "bad apples" and restore consumer confidence.

The new measures seek to strengthen ASIC's licencing powers by replacing the AFS licence requirement that a person be of "good fame and character" with an ongoing requirement that they be a "fit and proper person" at both the time of application and subsequently. This applies to all officers, partners, trustees and controllers of the applicant applying for the AFS licence. The "fit and proper person" requirement will also apply to existing AFS licensees to ensure that ASIC is able to monitor the controllers of existing AFS licensees, request relevant information, and carry out enforcement action as required.

In working out whether a person is a "fit and proper person" ASIC will consider matters including whether the person has been convicted of an offence in the last 10 years, whether they've had an AFS licence or Australian credit licence suspended or cancelled, and whether a banning or disqualification order has previously been made.

ASIC's banning powers will also be expanded to situations where they have reason to believe that a person is "not a fit and proper person" or is "not adequately trained or is not competent" to:

  • provide financial services;
  • perform functions as an officer of an entity that carries on a financial services business; or
  • control an entity that carries on a financial services business.

In addition, under these new powers, ASIC may also make a banning order against a person that is insolvent under administration, has, at least twice, been an officer of a corporation that was unable to pay its debts, or has, at least twice, been linked to a refusal or failure to give effect to an AFCA determination.

To support these enforcement functions, ASIC's warrant and phone tap powers have been beefed up. It is no longer required to forewarn those under investigation that it may apply for a search warrant. It is also no longer required to specify the exact books or evidential material that can be searched and seized. Interception agencies (ie police, ASIO, and anti-corruption bodies) will be able to provide ASIC with lawfully intercepted telecommunications information in some instances. If these measures become law, ASIC's ability to launch and progress investigations to protect consumers from dodgy practitioners will be greatly enhanced.

No cost strategies to increase your super

It's coming up to the end of another year, among all the chaotic festivities, our thoughts may turn to goals and resolutions achieved during the year. Career successes, reaching fitness goals and life milestones are all causes for celebration. While most of us wouldn't even think twice about our superannuation, now is the perfect time to put some resolutions in place to increase your super for the new year. Afterall, it is what we'll be relying on in retirement, and even small improvements now could mean extra luxuries later.

Building up super doesn't always have to mean making monetary sacrifices now, there are some simple solutions to making sure you're getting the most out of super at no cost. Strategies include finding your lost super, consolidating your super accounts, and making sure you're in a quality fund in terms of performance.

Currently, there are 5.8m individuals (36% of the population) with 2 or more super accounts. Every year, the ATO launches its postcode "lost super" campaign to help raise community awareness of lost super. As a consequence of the 2018 campaign, more than 66,000 people to find and consolidate over 105,000 accounts worth over $860m. If you think you've got lost super, you can then log into myGov to claim the lost super and have it consolidated with your active account.

Finding and consolidating your lost super with your active account means you'll pay less management fees and other costs, saving you in the long term. Between 1 July 2014 and 30 June 2019, 2.6 million accounts to the value of $15bn have been consolidated by fund members using ATO online services.

Another easy way to grow your super is to make sure the super fund that you're putting your money into is performing well. Recently, the regulator of super funds, APRA, released "heatmaps" that provide like-for-like comparisons of MySuper products across 3 key areas: investment performance, fees and costs, and sustainability of member outcomes. The heatmap uses a graduating colour scheme to provide clear and simple insights that unlike a sea of numbers on a spreadsheet, will send a clear and strong message to users.

For example, MySuper products delivering outcomes below the relevant benchmarks in relation to investment performance and fees and costs will be depicted from pale yellow to dark red. The sustainability measures provide an indication of a trustee's ability to provide quality member outcomes and address areas of underperformance. While the ultimate purpose of the heatmap is to have trustees with areas of underperformance take action to address it, they can also be an invaluable resource in choosing the right super fund.

ATO debts to affect your credit rating

The ATO now has another "stick" in its arsenal to get businesses to engage with it and manage outstanding tax debts. Laws have recently been passed that allow the Tax Office to disclose tax debt information of businesses to registered credit reporting bureaus (CRBs). The aim of the laws, according to the government, is to encourage more informed decision making within the business community by making large overdue tax debts more visible, and reduce the unfair advantage obtained by businesses that do not pay their tax on time.

The disclosure of these debts have the potential to affect the credit ratings of businesses and their ability to refinance existing debt, so only those businesses that meet certain criteria will be subject to this new disclosure rule. These criteria include having an ABN, debts of at least $100,000 overdue for more than 90 days, not effectively engaged to manage the debt, and do not have an ongoing complaint with the Inspector-General of Taxation.

When a business meets the above criteria, the ATO is required to notify the business in writing and give them 28 days to engage and take action before any debt is disclosed. In addition, tax debt information will only be provided to CRBs where they are registered with the ATO and have entered into an agreement detailing the terms of reporting.

According to the ATO, an entity's tax debts for the purposes of the disclosure rule includes income tax debts, activity statement debts (eg GST, PAYGW), superannuation debts, FBT debts and penalties and interest charges. An entity is generally considered to be effectively engaged with the ATO in respect of a tax debt if it has a payment plan in place and is meeting the terms of the plan, or has an active review, objection or compliant lodged with the relevant authorities.

The practical approach to disclosure of tax debts were outlined by the ATO previously. It consists of a phased implementation approach, with the initial phase focusing on raising community awareness of the measure through newsletters, articles, forums and speeches. After the initial phase, it will begin firstly with companies that meet the disclosure requirements before moving onto other entities such as partnerships, trusts, and sole traders with ABNs.

$10,000 cash payment limit: the facts

To combat the use of cash in black economy activities, the government has introduced a law which will implement an economy-wide cash payment limit of $10,000. If enacted, the law will make it a criminal offence for certain entities to make or accept cash payments of $10,000 or more. Understandably this limit has created some confusion about what transactions may be captured and what it applies to.

Among other categories, payments that will not be subject to the $10,000 limit include those relating to personal or private transactions (excluding transactions involving real property). The exemption only includes payments that are generally not made in the course of an enterprise.

The term "enterprise" in this context has the same broad meaning as the GST Act, meaning that an entity will be undertaking an enterprise if, for example, it carries on a business (or in the form of a business), offers real property for rent, is a charity, political party (or candidate) or other recipient of gifts that are deductible for income tax, operates a super fund, or is the Commonwealth, a State or a Territory or an entity established for public purposes under an Australian law. In essence, the only circumstance in which an entity will not be carrying on an enterprise is where the entity is acting in a wholly private or personal capacity.

Therefore, cash gifts to family members (as long as they are not donations to regulated entities such as charities) and inheritances are likely to be exempt. In other words, it is unlikely that you will be prosecuted for a criminal offence if you give your family members a lavish cash wedding gift or help your kids with a house deposit that happens to be over $10,000.

However, if you occasionally sell private assets (eg a used car) you may need to be careful and take reasonable steps to ascertain whether the other party is acting in the course of an enterprise. For example, if you sell your car to another individual and you believe the car will be acquired for private use after undertaking reasonable inquiries such as searching the Australian Business Register, then the exemption for personal/private transactions will apply.

On the other hand, if you did not undertake "reasonable inquiries", and incorrectly believe that the other party is not acting in the course of an enterprise, then it is possible you may be prosecuted for a criminal offence. In general, whether a belief is reasonable will depend on the circumstances of the transaction and the parties. However, a reasonable belief must be a belief about the facts and does not protect those ignorant of the law or the legal implications of the facts.

As a testament to the far-reaching consequences of recent residential building defects crisis, the government has recently decided to change the legislation on vacant land deductions to exclude structures affected by natural disasters or other exceptional circumstances such as substantial building defects.

Previously, the government had sought to crack down on "land banking" by disallowing expenses, such as interest costs incurred in holding vacant land from 1 July 2019. Basically, any land that did not have a substantial permanent structure on it would be captured. The term substantial permanent structure does not include any premises that is being constructed or substantially renovated unless the premises are able to be lawfully occupied.

Therefore, under the legislation as it was originally written, investors who held defective units in buildings all around Australia would've had their expenses disallowed. These expenses could not be carried forward for use in later income years, with only some expenses allowed to be included in the cost base of the land for CGT purposes.

After the scale of the building defects debacle became known, the government decided to provide an exception to disallowing deductions for holding vacant land for those affected. For the exception to apply, there must've been a substantial and permanent structure on the land prior to the time the exceptional circumstance occurs, and the circumstance must be exceptional and beyond the reasonable control of the taxpayer.

Under the exception, investors holding structures affected by natural disasters or other exceptional circumstances (ie substantial building defects) are allowed deductions for three years from the date the event occurred. The Commissioner may also extend the three-year period if the failure to replace the structure is beyond the control of the taxpayer or due to the size of the structure, it is unable to be realistically completed on time.

The exceptional circumstances exception can apply to any unusual events or occurrences (ie major building fires, floods and discovery of asbestos) not just substantial building defects. However, the exceptional circumstance must not be caused by the investor/investors and there must've been nothing a reasonable person in that position should have reasonably done to prevent the circumstance (ie outside the reasonable control of the investor/investors).

Therefore, this exception would not apply to investors suffering financial hardship due to renovations that do not affect the structure, and those investors may not be able to deduct any costs associated with holding what is considered to be "vacant land". If you're unlucky enough to have to use this exception, you must keep written records of the exceptional circumstance (and their effect on the structure) until the fifth anniversary of the end of the income year in in which you first deducted the loss.

Under the superannuation guarantee framework, employers are required to contribute a minimum percentage (currently 9.5%) of their employee's ordinary time earnings into superannuation. Employers that fail to do so will be liable to a penalty called the superannuation guarantee charge, payable to the ATO. If you're a high-income earner with multiple employers, this requirement has the very real chance of inadvertently pushing you over the concessional contributions cap of $25,000.

To avoid this unintended consequence, laws have recently been passed so that eligible high-income earners with multiple employers can opt-out of the super guarantee regime. From 1 January 2020, employees with more than one employer and expect their combined employers' contributions to exceed the concessional contributions cap can apply for an "employer shortfall exemption certificate" with the ATO.

The certificate will release one or more of your employers from their super guarantee obligations for up to four quarters in one financial year. However, you must still receive super guarantee contributions from at least one of your employers for the year. From the employer's perspective, the certificate means that it will not be liable for the super guarantee charge or other consequences if they don't make super guarantee contributions for the time period covered.

Applications for the certificate must be lodged with the ATO at least 60 days before the first day of the first quarter the application relates to. That is, you will need to lodge a form with the ATO on or before 18 November 2019 if you want the certificate to apply the quarter starting 1 January 2020. For the certificate to apply for the quarter beginning 1 April 2020, the last day to lodge the form is 31 January 2020.

If you're a high-income earner and are considering apply for the certificate, one of the first things to do is to discuss it with your employers, as they can choose to disregard the certificate and continue making contributions. Before having discussions with your employer, it may also be prudent to consider whether applying for the certificate may affect relevant awards or workplace agreements that you have in place. Another thing to you may wish to consider is whether you'd like to receive additional cash or non-cash remuneration in place of the foregone super guarantee contributions.

Once you've come to an agreement with your employers, it is important to get the details right as the certificate cannot be varied or revoked once its issued. Whilst this provides certainly to the employer that the exemption cannot later be withdrawn to their disadvantage. This also means that if you make a mistake, the employer and/or the period that it applies to cannot be changed.

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