Tax Bulletin - November 2019
Super guarantee opt-out for high income earners now law
From 1 January 2020, eligible individuals with multiple employers can apply to opt out of receiving super guarantee ('SG') from some of their employers, to help them avoid unintentionally going over the concessional contributions cap. If appropriate for them, they should submit the relevant ATO form to apply for an SG employer shortfall exemption certificate, which releases one or more of their employers from their SG obligations for up to four quarters in one financial year.
Reporting asset disposals for CGT
As the ATO's data-matching capabilities increase, they are paying close attention to capital gains made on shares, property and cryptocurrency. Therefore, it's important to let us know about any asset disposals (which can include an asset's sale, loss or destruction) and to keep records relating to CGT events, including asset disposals, for at least five years after the year in which the event occurred (and maybe longer if you make a capital loss). Good records will also help to work out a capital gain or loss correctly.
Government passes other superannuation legislation
The Government has recently passed legislation requiring insurance in superannuation for new members under 25, and members with low balance accounts, to only be offered on an opt-in basis from 1 April 2020. Importantly, low balance account holders and young members will still be able to opt in if they want to take out insurance. Additionally, a targeted exemption will allow trustees to elect to provide insurance on an opt-out basis to members employed in emergency services, such as police, ambulance officers or firefighters, or other workers employed in the top 20% riskiest occupations.
Taxpayer liable for excess transfer balance tax despite commutations
A taxpayer has unsuccessfully tried to challenge an excess transfer balance tax liability, despite following the ATO's instructions. The taxpayer was receiving three pensions in 2017, including two capped defined benefit income streams and one account-based pension.
Based on information reported by the super funds, the ATO became aware that the taxpayer had exceeded his $1.6 million transfer balance cap, and so it issued the taxpayer with an excess transfer balance determination of $376,646.72 on 3 January 2018.
The taxpayer then commuted $376,646.00 from his account based pension on 31 January 2018, but additional earnings continued to accrue due to the commutation being 72 cents short, so the ATO had to issue another excess transfer balance determination of $3,841.96 on 1 July 2018 (which the taxpayer acted on by making another commutation in August 2018).
Finally, in September 2018, the ATO issued an excess transfer balance tax notice of assessment, assessing the taxpayer for excess transfer balance tax of $2,867.85
The taxpayer challenged this before the AAT, contending that, despite doing what was required of him by the 3 January 2018 letter, he was still liable for the excess transfer balance tax, to which the AAT replied:
“That is true but the problem for the applicant is that the determination period on which the tax liability is based is not determined by reference to when the taxpayer is first informed of his excess transfer balance. Further, the applicant does not avoid a tax liability by complying with the request to commute funds out of his superannuation income streams. That is made clear by the letter from the Commissioner dated 3 January 2018 which requests the applicant to commute the necessary funds but goes on to say “when you are no longer in excess of your cap we will send you a separate ‘Excess transfer balance tax notice of assessment’ detailing the tax amount payable'.”
The AAT agreed with the ATO’s contention that the taxpayer was liable for the excess transfer balance tax, that it had been calculated in accordance with the tax legislation, and that there was no discretion for the tax to be waived.
CORPORATE AND INTERNATIONAL
Significant global entity definition: revised draft legislation released
Treasury has released revised draft legislation to implement the 2018-19 Budget announcement to extend the definition of a significant global entity ("SGE") beyond groups headed by listed companies and by private companies required to prepare general purpose financial statements.
The scope of significant global entity will be expanded by introducing the concept of a notional listed company group – a group of entities that would be required to consolidate for accounting purposes as a single group under the applicable accounting rules if:
any member of the group was a listed company; and
exceptions to requirements about when a group of entities would be required to consolidate, including materiality rules, were disregarded.
The ACNC has revoked the charity status of Aussie Farms Inc following an investigation. Revocation of charity status takes away the organisation’s Commonwealth charity tax concessions, including income tax exemption, fringe benefits tax rebates and goods and services tax concessions. The revocation will appear on the ACNC Charity Register record for Aussie Farms Inc. ACNC Commissioner, the Hon Dr Gary Johns, said revocation of charity status was reserved for the most serious of cases. “Charities must stick to their purpose, and maintain their obligations under the ACNC Act, Charities Act and adhere to Governance Standards.”