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  • BASAAG minutes 7 December 2018

    Meeting details

    Venue

    Via telepresence in various ATO office locations

    Date

    7 December 2018

    Start

    9:30am AEDT

    Finish

    12.45pm AEDT

    Chair

    Colin Walker

    Secretariat

    Sue Hassiotis

    Contact Phone

    08 7422 2058

    Attendee List

    Colin Walker
    (Chairperson)

    Assistant Commissioner, Intermediaries and Lodgment

    Debbie Atwell

    Director, Intermediaries and Lodgment

    Chris McComb for Matthew Addison

    Institute of Certified Bookkeepers

    Rochelle Park

    Association of Accounting Technicians

    Keith Clissold

    Tax Professional, Metropolitan Taxation Services

    Martine Joly

    Chartered Accountants Australia and New Zealand

    Suzy Komuczki

    Tax Professional, Office Oracle

    Kerrie Jarius

    Australian Bookkeepers Association Ltd

    Ian Taylor

    Chairperson, Tax Practitioners Board

    Presenters and guests

    Angela Lehmann

    Small Business

    Marcus Chew

    Small Business

    George Holton

    Small Business

    Laurren Pamenter

    Tax Counsel Network

    Ian Ayrton

    Indirect Tax

    Apologies

    Matthew Addison

    Institute of Certified Bookkeepers

    Darren McMahon

    Tax Professional, Dardee Pty Ltd

    Cate Kemp

    Tax Professional, Small Business Financial Ops (SBFO)

    John Birse

    Tax Professional, Task Force Training

    Tony Greco

    Institute of Public Accountants

    Secretariat

    Sue Hassiotis

    Intermediaries and Lodgment

    Renee Bruce

    Intermediaries and Lodgment

    1. Welcome and introductions

    The Chairperson opened the meeting, welcomed members, noted apologies and welcomed new ATO and non-ATO members to the group.

    2. Single Touch Payroll

    The ATO provided an update on the start to Single Touch payroll reporting with over 27,000 employers with 20 or more employees reporting each pay day. There are over 17,000 smaller employers who have chosen to start reporting early. Over 3 million employees can now see their information updated each pay day in myGov and this is also visible to their agent through the portal.

    The ATO noted some common themes that have been identified in analysing the data that has been received:

    • Software identifiers have not been notified or not correctly linked.
    • Agents are not correctly linked to their client to report on their behalf.
    • Submission errors occurring due to mandatory information missing.
    • Incorrect contact details provided.
    • Single Touch Payroll reports submitted after pay date
    • Employee data set to ‘tax ready’ before the employer intended.

    The extension to employers with 19 or fewer is still subject to the passage of legislation; however, these smaller employers do not have to wait until then to report through Single Touch Payroll. They can choose to update their payroll solution and start reporting.

    Not all employers are expected to be able to fully meet their reporting obligations on 1 July 2019; therefore the key focus for the ATO leading up to the passage of the legislation is to develop a transition approach that supports smaller employers.

    Employers will have access to deferrals (for up to 6 months) and exemptions (for up to 12 months) where they need additional time to start reporting. To be eligible for deferrals small employers must have their lodgment obligations up to date any amounts owing to the ATO must be under an arrangement to pay. If an exemption is sought, in addition to the criteria above the employer must also meet one of the following criteria:

    • no/low digital capability
    • no/unreliable internet
    • irregular employment patterns
    • other extenuating circumstances.

    There is a group of small employers that don’t report regularly to the ATO using digital channels, or don’t currently use payroll software. This is the group that is expected to require the most help to transition. The ATO is working with various potential solution providers including the software community and financial institutions to support the development of a wider range of low cost payroll software, mobile phone apps or portals at or below $10 per month.

    Since October 2018 the ATO has received over 30 expressions of interest from software providers that would like to build low cost reporting solutions and make them available by July 2019. Details of the reporting solutions are available on the ATO website. Other potential providers are still able to contact the ATO to register their interest in building such reporting solutions.

    Employers with one to four employees will have an option to report quarterly if they use a registered tax or BAS agent. Employers will be able to request quarterly reporting via the Business Portal and tax practitioners via the Tax and BAS Agent Portals from April 2019.

    The approach to assist closely held to entities to meet their reporting obligations has been developed and co-designed with tax practitioners and professional associations and will be announced to the community shortly.

    For more information visit www.ato.gov.au/singletouchpayroll

    3. Low value GST on overseas purchases

    The purchaser/vendor obligations under GST at Settlement were discussed, however more detailed information about how purchasers execute their obligations was not available at this time.

    GST on low value imported goods

    As of 1 July 2018, Australian goods and services tax (GST) now applies to most sales of low value goods from overseas businesses to consumers into Australia. All major international suppliers have registered. The changes also apply to Australian retailers that drop-ship through third party contracts from overseas.

    All major platforms (or electronic market places) are complying and we are continuing to engage and support them. Most overseas entities are quarterly remitters and have now lodged returns and paid GST.

    We are taking action to enforce the measure and have been following up with businesses that have are not complying with their obligations. We are also monitoring how overseas registered suppliers have implemented this change and the impact on Australian GST-registered business. We will act to support both groups as appropriate.

    GST at settlement

    Purchasers are now withholding and paying amounts representing GST directly to the ATO instead of to the supplier for certain property transactions. They are required to lodge two approved online forms with the ATO, one prior to settlement and one to confirm settlement. In most cases, conveyancers/solicitors practically assist purchasers to fulfil these obligations.

    The ‘GST property credits’ withholding account is now viewable via ATO online services for individuals and sole traders and the Business Portal. The account will be viewable via online services for agents during quarter 1 2019. Where a withholding applies suppliers are required to provide written notification to advise that a withholding obligation exists. Standard land contracts in all States and Territories (excluding NT) have been revised to include the new notification requirements.

    Webpages are being updated to incorporate feedback received from Let’s Talk, industry and common questions received via the call centre. An issue for some suppliers, involving credits not transferring from the supplier’s ‘GST property credit’ account into their integrated client account when their BAS is processed, has been resolved.

    4. Cryptocurrency

    Cryptocurrency is a rapidly evolving area and as interest in cryptocurrency has increased, the ATO has been working with partners to understand the tax implications, develop appropriate guidance and support to the community and tax practitioners. Cryptocurrency is not considered a new risk rather as an enabler of existing risks such as capital gains tax, employer obligations, undeclared income and tax crime for example.

    The ATO’s approach is focussing on:

    • providing clear and consistent advice and guidance to make it easy for taxpayers to comply
    • working with industry, advisers and taxpayers to support fair, transparent and well-designed client interactions
    • engaging with other government agencies to ensure consistency of regulatory approach and efficient application of resources.

    Bitcoin is not considered to be money or currency for tax purposes. It is considered to be property and a capital gains tax (CGT) asset. This view also applies to any cryptocurrency with the same characteristics as Bitcoin. For more information refer to Taxation Determination TD 2014/25 and Taxation Determination TD 2014/26. Cryptocurrency transactions are taxable; the specific tax treatment will depend on the facts circumstances and arrangements of the particular taxpayer.

    Cryptocurrency – income tax – ordinary income/deductions

    Transacting in cryptocurrency will result in ordinary income and/or deductible losses when done in the conduct of a business or as a commercial transaction with a profit-making intention. Some examples of a cryptocurrency trading business are mining businesses, digital exchange businesses. For more information on determining whether a business is being carried on, refer to Taxation Ruling TR 97/11. Where a business is made out by an individual, the potential application of the non-commercial loss provisions needs to be considered.

    Where a business accepts cryptocurrency for the provision of goods or services they will need to establish the market value of that cryptocurrency and include the value in Australian dollars as part of their income.

    Where cryptocurrency is held as trading stock the proceeds on disposal will be ordinary income, refer to Taxation Determination TD 2014/27 for more information.

    Proceeds from an isolated profit making transaction can be ordinary income, refer to Taxation Ruling TR 92/3 for more information.

    Cryptocurrency – income tax – capital gains and losses

    If the gain or loss from the disposal of cryptocurrency is not assessed as ordinary income then it will be assessed under the CGT provisions. This is because the anti-overlap provisions in the CGT regime give preference to receipts being taxed as ordinary income and ensure that amounts are not taxed as both ordinary income and capital gains.

    Each type of cryptocurrency is a separate CGT asset. This means that exchanging one cryptocurrency for another cryptocurrency will therefore be a CGT event.

    Personal use asset exemption

    To qualify for the personal use asset exemption under the CGT rules, the cryptocurrency must be acquired and kept mainly for personal use or enjoyment, not for investment purposes. For example, cryptocurrency that is acquired for the purpose of purchasing goods or services online for personal consumption (eg tickets, clothes) and actually used for that purpose. Whether a cryptocurrency is a personal use asset will depend on the particular facts and circumstances of each case and involves considering the purpose for which the cryptocurrency was acquired and kept as wel as what the cryptocurrency is ultimately used for. Therefore, whether the exemption applies can only be determined on disposal of the cryptocurrency asset as the purpose may change over time.

    A capital gain made from cryptocurrency that is a personal use asset is only disregarded if the cost incurred to acquire the cryptocurrency is less than $10,000 However all capital losses made on personal use assets are disregarded, regardless of the cost.

    New cryptocurrency received from chain splits

    If cryptocurrency is held as an investment, and the holder receives a new cryptocurrency as a result of a chain split (such as Bitcoin Cash being received by Bitcoin holders in August 2017), they do not derive ordinary income or make a capital gain at that time as a result of receiving the new cryptocurrency. They will make a capital gain when they dispose of it. For the purposes of working out their capital gain, the cost base of the new cryptocurrency received is zero. If they hold the new cryptocurrency as an investment for 12 months or more, they may be entitled to the CGT discount.

    A new cryptocurrency received as a result of a chain split in relation to cryptocurrency held in a business carried on will be treated as trading stock where it is held for sale or exchange in the ordinary course of the business, and must be brought to account at the end of the income year.

    Record-keeping

    Normal record-keeping rules apply for cryptocurrency. The following records in relation to cryptocurrency transactions are required to be kept:

    • date of the cryptocurrency transaction
    • value of the cryptocurrency in Australian dollars (which can be taken from a reputable online exchange)
    • what the transaction was for
    • who the other party was (even if it is just their wallet address).

    These records can be in the form of receipts for purchases or transfers of cryptocurrency, digital exchange records, digital wallet records and keys, software reports or manual spreadsheets.

    Considerations when record keeping is seemingly a problem

    • Can you retrieve records from the digital currency exchange?
    • What was the wallet address (or addresses) used?
    • What was the wallet address of the customers?
    • What type of wallet did you use?
    • Do you have any transaction IDs?
    • Can you show the deposits to the digital currency exchange from Australian bank accounts/credit cards/debit cards and vice versa?

    Cryptocurrency – goods and services tax (GST)

    Prior to 1 July 2017 a transfer of Bitcoin was a supply for GST purposes. In addition, a supply of Bitcoin in exchange for goods or services was treated as a barter transaction for GST purposes. This had the potential to create a double GST liability - on the purchase of the Bitcoin and again on its use in exchange for other goods and services subject to GST.

    From 1 July 2017 the law was amended to align the GST treatment of ‘digital currency’ with money. Note that this did not change the income tax treatment. Supplies and acquisitions of digital currency are no longer subject to GST. There are no GST consequences of using digital currency as payment for goods and services in business. Where digital currency is received as payment for taxable goods and services, GST must be remitted in Australian dollars.

    Pay as you go (PAYG) withholding and fringe benefits tax (FBT)

    Cryptocurrency is considered property, not money, and falls within the definition of a ‘non-cash benefit’ for the PAYG withholding rules. It is a property fringe benefit, see Taxation Determination TD 2014/28.

    Where an employee receives cryptocurrency as part of their remuneration package in addition to their salary and wages (like they may receive a car as well as salary and wages), payment of the cryptocurrency is a fringe benefit. That will also be the case if the employee has a valid salary sacrifice arrangement with their employer to receive cryptocurrency as remuneration instead of Australian dollars. See Taxation Ruling TR 2001/10.

    However, where the employee requests that salary and wages that have already been earned be paid as cryptocurrency instead, the employee is considered to have derived their normal salary and wages and the employer will need to meet their PAYG withholding obligations on the Australian dollar value of the cryptocurrency it pays to the employee.

    Cryptocurrency – self-managed superannuation funds (SMSFs)

    There are no rules that specifically prohibit SMSFs from investing in cryptocurrency. However, the investment must:

    • be allowed for under the fund’s trust deed
    • be in accordance with the fund’s investment strategy
    • comply with the regulatory requirements that apply to investments in other assets

    Refer to the ATO website: SMSF investing in cryptocurrencies for more information.

    The ATO encourages professional advice be sought before undertaking any new investments, including investment in cryptocurrencies.

    Initial coin offerings (ICOs)

    There are specific tax issues to be considered for ICOs. An ICO issuer will need to consider:

    • the type of token, products and/or services being offered under the ICO
    • what rights, if any, are being offered to investors under the ICO, and what obligations do investors have
    • the character of the funds it receives under the ICO.

    Specific tax issues an ICO investor will need to consider:

    • the products and/or services being offered under the ICO and any rights or obligations provided
    • the characteristics of the token or new cryptocurrency they receive under the ICO
    • the character of any returns received from the ICO or the resulting token/cryptocurrency, for example income, interest, dividends.

    For more information, resources and channels for advice refer to:

    Tax treatment of cryptocurrencies

    ATO Community – Cryptocurrency boardExternal Link,

    Early engagement

    Private ruling

    5. Taxable Payments Reporting System

    The Taxable Payments Reporting System (TPRS) was first introduced into the building and construction industry from 1 July 2012. The introduction of the system aimed to address non-lodgment of tax returns, omitted contractor income and non-compliance with GST obligations.

    In 2015, the ATO reported the first full year set of data to provide observations of the impact of TPRS has had on voluntary compliance on the tax system. Since the release of that analysis, the ATO has continued to develop broader indicators and methods to determine the revenue impact on the building and construction industry that is attributable to the introduction of this law.

    Over the first four years of its introduction, TPRS has been effective in bringing participants back into the tax system, increasing lodgment of income tax returns by contractors, and substantial overall improvement in the amount of tax reported by the industry.

    Based on findings of the Black Economy Taskforce, the taxable payments reporting system has been expanded in successive federal budgets, starting with the courier and cleaning industries in 2018-19, and the Information Technology, road freight and security and investigative services industries in 2019-20.

    On 3 October 2018, legislation to extend the taxable payments reporting system to cleaners and couriers received Royal Assent. This legislation is retrospective beginning 1 July 2018, and covers the provision of these services by businesses using contractors; even if businesses do not identify themselves as industry participants.

    If businesses or individual contractors provide cleaning or courier services, even if it's only part of the services provided, they now need to lodge a taxable payments annual report each year and include payments to contractors and subcontractors that provide cleaning or courier services on their behalf. The annual report is due on 28 August 2019 for payments made to contractors between 1 July 2018 and 30 June 2019.

    On 29 November 2018 legislation to extend the taxable payments reporting system to Information Technology, road freight and security industries received Royal Assent. As part of the 2018 Federal Budget announcement expanding the reporting system, an online taxable payments annual report form was also announced to make it easier for businesses to lodge. The form will provide further functionality expanding the service offering, for example the ability for tax and BAS agents to see client taxable payments annual report lodgment history. This form will be made available to individuals in business via MyTax initially, with the enhanced features progressively being made available in the Business Portal, Online Services for agents, and third party software.

    To find out more and to access resources to help your clients understand the new reporting requirement, visit ato.gov.au/TPAR

    6. Tax Practitioners Board update

    Tax practitioner registration update as of 31 October 2018, There is a total of 78,362 registered tax practitioners, of which 15,814 (20%) were BAS agents. Of the 15,814 BAS agents, 12,419 are registered as individuals, 325 partnerships, and 3,070 companies.

    The Tax Practitioners Board received a total of 1,945 new registration applications and 5,079 renewal applications. This included 510 new BAS applications and 1,599 BAS renewal applications.

    The average processing time for new BAS agent registration applications, as at 31 October 2018, is 21 days. For BAS agent renewals, it is 6 days. This is well below the service standard of 30 days for new applications.

    Of the individual BAS agent population of 12,419, a total of 7,301 (59%) identify as members of a TPB accredited recognised professional association. This figure is slightly lower than the same period the previous year when it was 63%.

    The majority of tax practitioners required to lodge an annual declaration each month do so by the due date. The Tax Practitioners Board has taken action against a small number of tax practitioners for not submitting their annual declaration or for late submission. This has resulted in 110 written cautions, 33 orders and 5 registration terminations from 1 July to 31 October 2018.

    On Tuesday 11 December 2018 the Tax Practitioners Board announcedExternal Link a new compliance strategy, calling on registered tax practitioners to settle their outstanding tax obligations including those who may have failed to lodge income tax returns and activity statements and those who may have outstanding debts with the ATO of their obligations.

    The Tax Practitioners Board encourages voluntary compliance by tax practitioners who may have failed to lodge income tax returns and activity statements and those who may have outstanding debts with the ATO. Tax practitioners with outstanding income tax returns or activity statements and ATO debt need to address these obligations urgently as they may be in breach of the Tax Agent Services Act 2009.External Link

    The data shows that over 2,500 tax practitioners have not lodged one or more of their personal income tax returns or for those of their associated entities and over 1,000 have more than one outstanding Business Activity Statements (BAS) or for their associated entities. Of these numbers, nearly 500 tax practitioners have a combination of both.

    The Tax Practitioners Board will initially work closely with practitioners to give them an opportunity to remedy any outstanding tax obligations. After six weeks, firmer action will be taken to enforce the laws, including investigations, prosecutions and proactive collection action where appropriate.

    Improved tax compliance by these practitioners is expected to have a flow on benefit of increasing compliance for their clients and for the community.

    The Tax Practitioners Board is currently undertaking a review of the continuing professional education (CPE) records of individual tax practitioners in 2018-19. The reviews assess tax practitioners compliance with the Tax Practitioners Board policy to ensure the knowledge and skills relevant to the service they are registered to provide is maintained. The initial focus will be on those who are not subjected to other regulatory oversight, such as another Government regulator or Tax Practitioners Board recognised professional association. You should maintain a record and evidence of the CPE activitiesExternal Link that you have completed, including the details of the activities and the hours completed. The Tax Practitioners Board has developed a CPE logExternal Link that you may like to use to assist with your record keeping requirements.

    A Registered tax practitioner symbol has been developed by the Tax Practitioners Board for use by registered tax practitioners. Tax practitioners who meet the eligibility criteriaExternal Link can use the symbol in advertising their services. The symbol is designed to provide registered tax practitioners with public recognition that they are registered, have met the eligibility requirements and are obliged to meet appropriate standards of professional and ethical conduct. For more information refer to the Registered tax practitioner symbol guidelinesExternal Link and to how to download the symbolExternal Link.

    Tax practitioners are required to lodge an annual declaration, over 99 per cent of all tax practitioners required to lodge their annual declaration each month do so by the due date. The Tax Practitioners Board has had to act against a small number of tax practitioners for not submitting their annual declaration or for late submission. This has resulted in 110 written cautions, 33 orders and 5 registration terminations from 1 July to 31 October 2018.

    In 2018, The Tax Practitioners Board hosted a total of 31 webinars, with over 10,000 attendees. Between September to December, six webinars of interest to BAS agents were delivered with ten new topics added to the webinar schedule in 2018. The webinarsExternal Link covered the following issues of interest to BAS agents: engagement letters, work-related expenses, reasonable care, cloud computing, confidentiality, CPE and cyber-security. More new topics are scheduled for the first half of 2019. Webinars contribute to continuing professional education (CPE) requirements.

    Since September The Tax Practitioners Board participated in 16 ATO Open Forums and the following speaking engagements for BAS agents:

    • Bookkeeper Radio panel discussion and Bookkeeper Event about CPE and Code obligations
    • BDO 2018 PPN Business and Taxation Forum.

    News articles and media releases published since the last BASAAG meeting:

    The Tax Practitioners Board is working with Airtasker to ensure that their audiences understand the need to check that tax practitioners advertising their services on this and similar platforms are registered. In September a series of Twitter and LinkedIn messages were posted on this topic.

    The Tax Practitioners Board offices will be closed for the Christmas break from the close of business on Friday 21 December and re-open on Wednesday 2 January.

    7. Other business, forward agenda items and meeting close

    Other business

    Membership to be reviewed in 2019

    Proposed meeting schedule for 2019

    • Wednesday 27 March
    • Thursday 27 June
    • Wednesday 16 October

    Agenda items can be forwarded to BASAAG@ato.gov.au at any time.

      Last modified: 01 Mar 2019QC 58109