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CLIENT ALERT Explanatory Memo Proposed Amendments to Tax Laws The Government has introduced a Bill into Parliament seeking to:
A brief discussion of the important changes follows. Employee share schemes Under the proposed amendments, any discount to the market value of an employee share scheme (ESS) interest will be taxed upfront. A $1,000 tax exemption will be available if an employee and the scheme satisfy the following conditions:
An employee can only defer the tax payable on the discount if:
The Bill proposes that employers will be able to deduct an amount for shares or rights they provide to employees under an ESS if the scheme meets the conditions for employees to receive the upfront concession. However, the income test of $180,000 is disregarded. The amendments will apply to ESS interests acquired on and after 1 July 2009. Non-commercial losses Currently, an individual who is carrying on a business either as a sole trader or a partner in a partnership can only apply losses arising from the business activity against their other income in an income year if the activity satisfies one of four objective tests. (Note special rules apply to taxpayers conducting a primary production or a professional arts business.) The Bill will amend the non-commercial losses rules to prevent individuals with an adjusted taxable income of $250,000 or more in an income year from offsetting losses from non-commercial activities against their salary, wages or other income. That is, individuals with an adjusted taxable income above the threshold cannot access the tests. However, an individual can apply to the Commissioner to exercise the discretion not to apply the non-commercial losses rules. The proposed amendments will apply to the 2009/10 and later income years. Collapsed MISs and Tax Consequences for Investors The Tax Office has released four draft taxation determinations which set out the Commissioner’s preliminary views on the tax consequences for investors with interests in collapsed managed investment schemes (MISs). Broadly, the tax consequences are:
The Government has announced that the tax laws will be amended to ensure the four-year holding period rule for forestry MISs cannot be failed for reasons genuinely outside investors’ control. GST Consequences and Partner Taking Goods for Private Use The Tax Office has also released a GST determination in which it states that when a partner takes goods held by the partnership as trading stock for private or domestic use, there is a supply by the partnership to the partner that is related to the partnership’s enterprise. The determination says a taxable supply by the partnership to the partner will arise if all the requirements for a taxable supply are satisfied. That is, the partnership will be required to remit GST on the supply to the Commissioner. Small Business Benchmarks The Tax Office has released a range of benchmarks, known as the small business benchmarks, to assist business owners in assessing their business performance. Two types of benchmarks for small businesses have been developed by the Tax Office:
The benchmarks are grouped into categories based on the business industry codes. These categories include:
The Tax Office says that where businesses do not report within the ranges of the benchmarks, it may be an indication a business is not recording and paying tax on all of their transactions. Superannuation Clearing House Service The Government has announced a superannuation clearing house service will be available to small businesses from July 2010, at no cost. Small businesses can forward their employees’ superannuation contributions to the clearing house for processing. In addition, employers will fulfil their superannuation guarantee obligations when payments of the correct amounts are made to the clearing house. Registration for the service will commence from May 2010.
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AUSTRALIAN
GOVERNMENT FINANCIAL REFERENCE
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