The ATO has in place a ruling that can allow a superannuation contribution to an accumulation account made in one financial year to be deemed to “take effect” (that is, allocated to a particular year’s contribution total) in the financial year that follows.
Importantly, the ATO requires a form to be lodged, which serves to notify it that a member of a self-managed superannuation fund (SMSF) has made a concessional contribution in one financial year (year 1) but the SMSF did not allocate this to the member until the next financial year (year 2).
Most SMSFs use provisions in their trust deeds concerning contribution reserves to enable this strategy, commonly referred to as a “contribution reserving strategy”. Typically, SMSF members will have made these arrangements to allow contributions to be recognised for income tax deductibility and other purposes in year 1 while not being counted towards their concessional contributions cap until year 2. […]
High Court confirms Full Federal Court’s Harding tax residency ruling
The ATO’s application for special leave in the residency matter of Harding v Commissioner of Taxation has been refused by Australia’s High Court. This means the decision of the Full Federal Court (FFC) holds, which essentially provides a wider interpretation of the meaning of “permanent place of abode” than had previously been the case.
It also means it is going to make it easier for expatriates to prove that they are non-residents for tax purposes. The FFC concluded, and now appears to establish the principle, that a permanent place of abode need not be the same particular dwelling (that is, the same apartment, unit or house) in a foreign country.
To re-cap, in February the FFC overturned a Federal Court decision that had ruled a taxpayer was a resident. The Federal Court decision held that the taxpayer, who had lived and worked in the largely tax-free Arabian Peninsula, was a resident for tax purposes on the basis that the home he had established there (a rented fully-furnished apartment) was not sufficiently permanent. […]
Multinational tax avoidance is proving to be a sore point for Australians. You’ve heard about the big players – Facebook, Google, Apple – and there is speculation they might be engaging in dodgy transfer pricing practices.
What is transfer pricing?
When two companies that are part of the same group trade with each other, they need to establish a price for that transaction. That amount is the transfer price.
Say an Australian-based subsidiary of Facebook buys something from a France-based subsidiary of Facebook. The price Australia pays for its purchase is the transfer price.
Transfer pricing is necessary. The two parties being separate legal entities have to establish a commercial contract. It is not illegal, and does no harm by itself. Transfer MISpricing, however, may do harm for government revenues. […]
ATO takes aim at ‘you-scratch-my-back’ auditing arrangements
It has long been an accepted standard that the auditor of an SMSF needs to be independent of that fund, and be a third party entity to the SMSF. This requirement is written into the legislation.
There have of course been breaches of this requirement, and instances where auditors and/or fund trustees have suffered administrative penalties or even disqualification for non-compliance in this area.
The more blatant breaches of the requirement to use a third party auditor involve someone auditing their own SMSF, or the fund of close family members. But another concern for the ATO relates to auditors who enter into arrangements that reflect that old idiom “you scratch my back, I’ll scratch yours”. The ATO has labelled these as reciprocal auditing arrangements.
It says that such arrangements arise where two or more auditors, each with their own SMSF, agree to audit the other’s fund. The ATO likens the situation to the scenario of a two-partner practice where one partner takes on the work of auditing an SMSF of which the other partner is trustee. […]
The SMSF annual return for 2019 has a number of new questions and labels that SMSF trustees need to be aware of.
In previous years, the ATO advised trustees that the question in the annual return regarding whether Part B of the audit report was qualified could be answered with a “no” if the only reason the auditor qualified Part B was because they could not confirm the information provided to them (for example, opening account balances).
The ATO advice for this year is that this is no longer the case, and that trustees’ answers must correctly convey the auditor’s written opinion.
The 2019 SMSF annual return will also need confirmation that Part A of an audit report is qualified. Part B of the auditor’s report gives the auditor’s opinion on the fund’s compliance with super laws and Part A of the report gives the auditor’s opinion on whether the fund’s financial statements are fairly presented (that is, there are no material misstatements).
Trustees are now required to answer “yes” if the audit report was qualified at Part A and/or Part B, regardless of the auditor’s reasons for the qualification. […]
GST obligations to be included under the director penalty regime
The strengthening of the director penalty regime has seen director penalty notices (DPNs) extended to superannuation guarantee obligations from 1 March 2019.
Now it looks like DPNs for GST are set to take affect from 1 October 2019 on the back of recent legislation, Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019, which lapsed at the dissolution of Parliament in the lead up to the last federal election, but has just been revived.
Schedule 3 to the bill allows the Commissioner to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances. This also applies to LCT and WET as these taxes are jointly administered with the GST.
The estimates regime (Division 268 in Schedule 1 to the TAA 1953) enables the Commissioner to estimate unpaid amounts and to recover the amount of those estimates from taxpayers. The new legislation extends this regime to include GST. […]
You are allowed to take issue with the ATO if it disagrees with your self-assessment of your tax position.
If you believe the ATO’s assessment is incorrect, the first step is straight forward and fairly informal. You contact us and we start making inquiries. If it still seems the assessment is wrong, or if you can provide us with extra information that may change it, we can lodge an amendment with the ATO.
But if the ATO disagrees, we can lodge an objection on your behalf (in other words, we can disagree with the disagreement). We can also object if the ATO amends an assessment and has taken a different stance to us on particular things (for example, we thought you were eligible to claim a deduction but were allowed only part of it). […]
This tax time, the ATO, as usual, has nominated some tax claim hot spots that it will be paying attention to — and which you should approach with caution when claiming these deductions.
For example, the ATO has already flagged that it will be checking returns for taxpayers who take advantage of the exemption from keeping receipts when spending less than $150 on laundry expenses. The ATO believes that too many people are claiming this without actually incurring the expense.
In an announcement issued 4 June, the ATO said that for last financial year around six million taxpayers claimed work-related clothing and laundry expenses that totalled about $1.5 billion. It said that 25% of all laundry and clothing claims were exactly at the record-keeping limit. […]