Budget 2021–22
The government announced it will:
- extend the temporary full expensing and temporary loss carry back tax incentives that were announced in the 2020–21 Budget by one year. We have begun preparing for this extension and will update our systems and public advice and guidance in due time – noting that the proposed extension and the detail of the extension has not yet been enacted in legislation.
- increase the excise refund cap for distillers and brewers. From 1 July 2021, all eligible brewers and distillers will receive full remission (up from 60%) of any excise they pay on the alcohol they produce up to a cap of $350,000 each financial year (increased from $100,000).
The ATO will receive funding in the 2022–23 income year to build an online system for non-for-profits to submit annual self-assessment forms to confirm their ongoing eligibility for income tax exemption. From 1 July 2023, not-for-profits will be required to complete an annual self-review to confirm their income tax exempt status.
The government will relax residency requirements for self-managed superannuation funds (SMSFs) and small APRA-regulated funds by extending the central control and management test safe harbour from two to five years for SMSFs and removing the active member test for both fund types. The measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which is expected prior to 1 July 2022.
Members’ comments
Stewardship Group members agree the test is simpler, however are interested in participating in the Treasury consultation.
Action item |
0906-1 |
Status |
In progress |
Responsibility |
ATO |
Action item details |
Relaxed residency requirements
ATO to provide an update to members on Treasury consultation activities. |
Top 500 tax performance program
Over the last 18 months, the Top 500 private groups tax performance program expanded from the Top 320 program. The client experience roadmap (PDF 508KB)This link will download a file which outlines each of the steps of engagement under the program has been published on ato.gov.au
The program seeks to provide the community confidence that Australia’s largest private groups are paying the correct amount of tax. Our aim is to provide assurance based on the principles of justified trust that the client’s tax outcomes are correct. This gives the client greater certainty and makes it easier for them to maintain ongoing compliance.
Members’ comments
Some members advised that they do not feel that the experience is always tailored and that they would like to have a better understanding of the benefits of reaching a position of Justified Trust, including what we mean when we refer to ‘lower intensity engagement’ for those in a position of Justified Trust.
Other members commented about the positive aspects of the program and the positive experience that they and their clients have had with the program to date.
It was suggested that an independent process for obtaining feedback from a client perspective at the end of an engagement be considered part of the program.
It was agreed that the ATO will continue to enhance and improve the experience through continued and clear communication. Feedback will be sought regularly from members, advisers and clients. Members are encouraged to reach out with particular examples to assist in improving engagements and processes under the program.
Members also shared that they feel that communication does not always reach smaller advisory firms and that targeted communications are required to support these advisers with clients who form part of the Top 500 program. The ATO will look to ensure that communications are appropriately tailored and targeted.
The ATO welcomed the feedback and comments provided by members as it supports the ATO to improve processes and procedures and the client experience.
Next 5,000 tax performance program
The streamlined assurance reviews (SARs) under the program were paused during COVID-19 with many of these SARs only beginning to recommence in late 2020 and due to be finalised in the coming months.
It is too early to share insights at this stage. The ATO notes that there are a number of businesses that do not have a documented tax governance framework, however, is seeing businesses showing either interest in or in the process of putting a framework in place.
Outsourcing risk functions commonly occurs in the Next 5,000 population. Members are to note that clients remain responsible for tax risks that remain with the responsible parties – that is, this cannot be ‘outsourced’.
For 2021–22, the ATO plans to continue to engage through the SAR process with a planned notification schedule through several tranches. An initial notification process schedule commenced in June 2021, and tranche two is planned to issue at the end of this month or early July. A third tranche will issue later in the year.
The ATO will be expanding the activities under this program, undertaking specific reviews and leveraged strategies with Next 5,000 clients that are currently not engaged under a SAR. These will review a focussed issue, transaction or event and will generally be limited to one or two issues. The three-monthly notification period adopted for the SARs will not apply to these products.
Significant temporary full expensing and loss carry back claims will be included in the scope of the SAR and other products. This will include:
- discussion on how the measures may impact on the client’s future lodgments which will assist in ensuring the correct treatment
- specific reviews of claims already made where the client is currently not engaged with ATO under a SAR
- letter campaigns to clients where ATO has identified they have made a claim but may not be eligible.
The ATO will be seeking feedback and consultation with a range of advisers to improve the overall process and awareness of the program.
2021–22 Reportable Tax Position Schedule for large private companies
Private companies are only required to lodge the Reportable Tax Position (RTP) schedule for the 2020–21 income year if they have been notified by the ATO. For income years beginning on or after 1 July 2021 (that is the 2022 income year), private companies will be required to self-assess their requirement to lodge an RTP schedule in the 2021–22 income year in accordance with relevant total business income thresholds.
The ATO will continue to support private companies in understanding their RTP schedule lodgment obligations by issuing prompt letters based on ATO held information held to advise they may need to lodge in 2021–22.
As Category C disclosures have a direct relationship with published Taxpayer Alerts and Practical Compliance Guidelines, the ATO expects new Category C questions may be developed throughout 2021–22. For transparency purposes, it was agreed to present potential new Category C questions quarterly to the Private Groups Stewardship Group (PGSG) during 2021–22.
In relation to Category C questions, members requested associated compliance costs for preparing the RTP schedule be taken into consideration. The ATO will note this and reiterated consultation will continue to occur annually on Category C questions prior to finalisation and publication of the 2022 RTP schedule instructions.
For more updated information, refer to:
Economic Stimulus measures update
Temporary full expensing
There has been a strong demand for guidance about temporary full expensing (TFE) and updates to the ATO’s web guidance have been ongoing in response to issues and queries raised.
The ATO web content now includes an infographic (PDF 1.19MB)This link will download a file that provides practical information about the interaction of temporary full expensing with other depreciation incentives including Instant asset write-off and Backing business investment.
ATO web content has also been updated to include what attracts the ATO’s attention from a compliance and integrity perspective. See:
More detailed guidance about temporary full expensing is set out in Draft Law Companion Ruling LCR 2021/D1 Temporary full expensing. The draft LCR covers, in detail, a range of topics and concepts about the basic rules, eligibility, interaction with the consolidation rules, small business entities using simplified depreciation, and also touches on some key integrity issues.
Draft Taxation Determination TD 2021/D1 Income tax: when working out your aggregated turnover, are the relevant annual turnovers of entities connected with you, or entities that are affiliates of yours, determined by reference to your income year? has been published specifically about the calculation of aggregated turnover in circumstances where affiliated entities have different reporting periods.
The SAP Temporary full expensing / Backing business investment form will be decommissioned from the 1 July 2021 as the 2021 income tax return forms that are now available comprise the labels required to claim a temporary full expensing deduction and/or to opt out of temporary full expensing or backing business investment.
A Miscellaneous Tax Bill, Miscellaneous amendments to Treasury portfolio laws 2021External Link was published on a proposed amendment to the income test. If this is to be enacted, it will allow capital works that are deductable under division 43 to count toward the $100 million capital expenditure threshold under the second condition of the alternative income test that corporate tax entities can apply, to determine eligibility.
Loss carry back
In May 2021 key guidance on common errors were published for the Loss carry back budget measure in line with the feedback received through the consultation that occurred. There is a focus on franking account errors with guidance on how to review franking accounts if planning to claim. See:
- Loss carry back tax offset – Common errors
- Loss carry back tax offset – Information needed to claim
- Economic stimulus measures – compliance and integrity.
Similar to temporary full expensing, guidance on what might attract the ATO’s attention has been included from a compliance and integrity perspective. This is being provided early to help and support clients to understand what to be aware of prior to making a claim.
The early SAP Loss carry back form will be decommissioned from 1 July as this is now included in the 2021 company income tax return forms.
Members are to note that in addition to the additional Loss carry back labels, they also need to complete label E in the tax calculation. A note has been included in the company tax return form as a reminder.
The Loss Carry Back compliance approach:
- includes high risk refunds (focus on eligibility, incorrect claims and franking account balance
- is incorporated into existing Private Wealth programs of work including Top 500, Next 5,000 and Medium and Emerging.
A Miscellaneous Tax Bill, Miscellaneous amendments to Treasury portfolio laws 2021External Link was published on a proposed amendment to the mechanics of how making a loss carry back choice would apply.
Access to small business entity turnover threshold
The ATO will continue is to provide information and guidance about the concessions now available to eligible businesses within the $10-50 million aggregated turnover bracket from 1 July 2021.
Activity Statement Financial Processing Offsetting
Members were updated about the future debt offsetting experience for branched entities.
The automatic offsetting systems change will impact a niche group of clients; taxpayers that are registered as branch entities for GST, pay as you go withholding, GST joint ventures and GST Groups.
The ATO is focussed on supporting this niche market in transitioning to understand the change. The release date has not yet been set. Consultation is planned to understand impacts that may occur, and a communication strategy will be developed and shared with the group for review and comment.
While automatic offsetting commenced prior to 2020, the ATO system was not enabled for these complex structures. Due to COVID-19, the release of the change was paused. Although offsetting is required by law, the ATO understands this is an important change that needs to be communicated.
Three ASFP scenarios presented to members will be shared out of session:
- GST Branches – treated separately and legally responsible. If credit arises on one account, debt will be covered in another account.
- GST Joint Ventures – all accounts that the operator is legally responsible for are considered and offsetting within and between accounts will occur where a credit in an account is available to offset a liability in another account where the entity is the registered joint venture operator.
- GST Groups – indirect tax credit available to the group representative can be used to pay any liability of any member in the group.
Members were encouraged to provide feedback on the scenarios.
Superannuation and Employer Obligations
The ATO continues work on preparing for the slated 1 July start date for Your Future, Your Super. The comparison tool and stapling tool for the choice options are ready, however this measure is still pending legislation being passed by Parliament, which could be as late as 24 June – the final day of sitting.
The ATO recognises the impacts employers may face due to the limited time and will be taking an education and assist approach for the first 12 months. Treasury has completed consultation with groups from small and large businesses. Once the measure has passed, the communication campaign will commence and employers will be notified of their obligation.
To reduce confusion, the ATO website will not display the new indexation of the transfer balance cap figures until 5 July. The integrity of the number is dependent on events that affect the cap being reported to the ATO in a real-time manner, which presents issues for members of SMSFs that often only report annually.
The Electronic roll over of SMSFs with the super stream system is on track and will go live 30 September 2021. As a fraud control measure, alerts will be issued to individuals, via SMS or email, to advise when a fund attempts to verify their details in our SMSF Verification Service prior to a rollover to an SMSF occurring. Over the next 6 months, communications will be increased in preparation for Single Touch Payroll Phase 2 which has a start date of 1 January 2022.
The ATO is looking to revise the policy framework for Part 7 Penalty remission to ensure our settings are pragmatic, fair and take into account all positive behaviour that an employer may make towards meeting their super guarantee obligations. Draft principles will be circulated to PGSG members post meeting for feedback.
Income Tax
Professional Firms Practical Compliance Guideline
Public consultation ended on 16 April for the Professional Firms Practical Compliance Guideline (PCG) after a two-week extension. The ATO received 22 submissions which are still being worked through. A large amount of feedback has been taken on board from the submissions and we are looking to finalise the PCG with those updates. Teams are working to 30 June, however there is no firm date. Changes, in line with feedback received, include:
- clear alignment in the PCG and application to Part 4A
- softer language
- comprehensive examples of current individual professional practitioner (IPP) arrangements
- examples of inclusion of impacts of IPP arrangements
- where superannuation has been received
- where there are reportable fridge benefits
- including a company with franking credits.
There has been a slight change to risk assessment factors including the proportion of profit entitlement for the whole of firm group returned to the hands of the IPP; previously that was greater than 30% and is now 50%.
Research and development
In response to a letter issued to the Commissioner on 5 March 2021, a workshop was held at the end of April regarding software industry claims under research and development. Attendees included the ATO, the Department of Industry, Science, Energy and Resources, Aus Industry, Treasury and members of the software industry. This was a valuable workshop; providing the software industry the ability to walk the government agencies through software development.
Follow-up meetings have occurred with industry and will continue to be carried out with the intended outcome to publish web guidance on appropriate expenditure and substantiation for the software industry.
A first draft of the Australian National Audit Office's (ANAO) Administration of the Research and Development Tax IncentiveExternal Link audit is expected in September. The scope of the audit is effective registration, eligibility review of client arrangements and effective performance measurement and performance arrangements. Field work process continues.
The Board of Taxation will also be undertaking a review of the Research and Development Tax Incentive. The terms of reference will be looking at evaluating the dual agency administration model to reduce duplication, opportunities to simplify processes and reduction of compliance cost for applicants. The government has requested the ANAO report back by November 2021.
100A consultation
Public advice and guidance is currently being prepared, for which confidential consultation was undertaken with a small group of practitioners. Written feedback has been received including feedback from the sessions which are being worked through and guidance is being updated where appropriate. This work continues with the expectation to be released in the new financial year.
Disclosure of business tax debt measure
The Disclosure of business tax debts measure received Royal Assent on 28 October 2019 and the legislative instrument was registered on 23 December 2019 with the measure taking effect 21 February 2020. The ATO has yet to disclose tax debts to credit reporting bureaus (CRBs). This aligns with the pausing of intervention activities across the ATO in March 2020 in response to the impact of COVID-19.
The implementation of the Disclosure of business tax debts measure will be aligned to the ATO’s resumption of Debt and Lodgment firmer action for taxpayers non-compliant with lodgment and payment obligations.
Businesses that meet the reporting criteria will be notified in writing and given 28 days to take action to pay their debt or set up a payment plan to avoid having their tax debt reported. Businesses that are actively working with the ATO to manage their tax debt will not be reported to CRBs.
The measure is initially being implemented in a small-scale, controlled interim solution from June 2021.
Attendees
Organisation |
Member |
|
|---|---|---|
ATO |
Tim Dyce (Co-chair), Private Wealth |
|
ATO |
Dana Fleming, Superannuation and Employer Obligations |
|
ATO |
Jade Hawkins, Private Wealth |
|
ATO |
Kasey Macfarlane, Private Wealth |
|
Chartered Accountants Australia and New Zealand |
Michael Crocker |
|
CPA Australia |
Elinor Kasapidis |
|
Deloitte Private |
Michael Gastevich |
|
Fox Private Group |
Garry Voigt |
|
Greenwoods & Herbert Smith Freehills |
Andrew White |
|
Independent Member |
Paul Brassil (Co-chair) |
|
KPMG Australia |
Bernadeene Cangelois |
|
Law Council of Australia |
Angela Lee |
|
Lowy Family Group |
John Fanning |
|
Oatley Family Group |
Peter Gillett |
|
Oatley Family Group |
Sharon Clark |
|
PFD Foods |
Peter Cartsidimas |
|
PwC |
Michael Dean |
|
Tax Bar Association |
Terry Murphy QC |
|
The Tax Institute |
Chris Wookey |
|
7-Eleven Group |
Kenny Cheong |
|
Guest attendees
Organisation |
Attendee |
|---|---|
ATO |
Aaron Ashboth, Private Wealth |
ATO |
Amy James-Velagic, Private Wealth |
ATO |
Amanda Keeble, Client Account Services |
ATO |
Andrea Wood, Small Business |
ATO |
Angela Hucker, Private Wealth |
ATO |
Ash Khera, Private Wealth |
ATO |
Ashleigh Larner, Private Wealth |
ATO |
Christopher Ryan, Private Wealth |
ATO |
Claire O’Neill, Debt and Lodgment |
ATO |
David Hall, Private Wealth |
ATO |
Deniz Antonis, Debt and Lodgment |
ATO |
Johnathon Melke, Client Account Services |
ATO |
Les De Wind, Debt and Lodgment |
ATO |
Michelle Wylie, Strategy and Support |
ATO |
Roman Raskine, Private Wealth |
ATO |
Scott Parkinson, Private Wealth |
ATO |
Vince Lagana, Private Wealth |
Apologies
Organisation |
Member |
|---|---|
Arnold Bloch Leibler |
Paul Sokolowski |