Birchstone Brief for the week ended 28 October 2022

News and Events


If superannuation law makes your head spin, then our third session will help set you straight.
If you have ever wondered:

  • do my clients with an SMSF need to plan for death and incapacity separately?
  • what’s an ‘SMSF Will’?
  • could we pass the SMSF on to the next generation?
  • can a superannuation proceeds trust be set up after death if it’s not already written in the Will?

then this session is definitely for you.

 

2022-23 Federal Budget Highlights

Dr Jim Chalmers, Treasurer, handed down the Albanese Government’s 2022-23 Federal Budget on 25 October. The Budget projects an anticipated deficit of $36.9 billion (lower than $78 billion predicted earlier this year), and has been described as ‘responsible, sensible and suited to the times we are in’. It contained several tax and superannuation measures, some of which had been previously announced and therefore covered in previous editions of the Birchstone Brief. We have summarised what we consider to be the key tax and superannuation measures below.  

Business

  • From 1 July 2022, electric vehicles with a first retail price below the luxury car tax threshold for fuel-efficient cars will be exempt from fringe benefits tax and import tariffs.  
  • The Pacific Australia Labour Mobility (PALM) scheme will be expanded and enhanced.
  • The government will provide $62.6 million in grants to small and medium-sized businesses (SMEs) to fund energy efficient equipment upgrades over 3 years from 2022-23.
  • The tax treatment of off-market share buy-backs undertaken by listed public companies will be aligned with the tax treatment of on-market share buy-backs, with effect from 7.30PM AEDT on 25 October 2022.
  • Additional tariffs on goods imported from Russia and Belarus will be extended until 24 October 2023.
  • Ukrainian goods (other than excise-equivalent goods) will be exempted from import duties for a period of 12 months from 4 July 2022.
  • A number of measures announced, but not legislated, by the previous government will not proceed, namely:
    • the 2013-14 Mid-Year Economic and Fiscal Outlook (MYEFO) measure that proposed to amend the debt/equity tax rules;
    • the following 2016-17 Federal Budget measures:
      • proposed changes to the TOFA rules;
      • proposed changes to the taxation of asset-backed financing arrangements; and
      • the proposed introduction of a new tax and regulatory framework for limited partnership collective investment vehicles; and
    • the following 2018-19 Federal Budget measures:
      • the proposed introduction of a $10,000 limit for cash payments made to businesses for goods and services; and
      • the proposed introduction of a requirement for retirement income product providers to report standardized metrics in product disclosure statements.

Multinational Tax Integrity Package

  • The government will amend the thin capitalisation rules for non-ADI entities with effect from 1 July 2023 by replacing the safe harbour (debt to asset ratio) and worldwide gearing (debt to equity ratio) tests with earnings-based tests to limit debt deductions in line with an entity’s profits.
  • The government will introduce an anti-avoidance rule to prevent significant global entities (SGEs) from claiming tax deductions for payments made directly or indirectly to related parties in relation to intangibles held in low or no-tax jurisdictions. The Budget papers state that for the purposes of this measure, a low or no-tax jurisdiction is a jurisdiction with a tax rate of less than 15% or a tax preferential patent box regime without sufficient economic substance. This measure will apply to payments made on or after 1 July 2023.
  • The government will introduce additional reporting requirements for SGEs and public companies for income years commencing from 1 July 2023.

Superannuation

  • The minimum eligibility age to make a downsizer contribution will be reduced from 60 to 55 years.
  • The 2018-19 Federal Budget measure proposing changes to the annual audit requirement for certain SMSFs will not proceed.
  • The 2021-22 Federal Budget measure that proposed relaxing the residency requirements for SMSFs and small APRA-regulated funds has been deferred.

Miscellaneous

  • No changes have been proposed to the previous government’s stage three tax cuts for individuals (which have already been legislated).
  • The government will introduce legislation to clarify that digital currencies (such as Bitcoin) should not be treated as foreign currency for Australian income tax purposes.
  • The government will provide the ATO tax avoidance taskforce with additional funding and extend its operations to 30 June 2026.
  • The proposed extension of reporting obligations to reportable transactions relating to the sharing economy has been deferred by 12 months to 1 July 2024.
  • The government will amend the tax law to make updates to specifically listed deductible gift recipients.  
  • The 2021-22 MYEFO measure that proposed establishing a deductible gift recipient category for providers of pastoral care and analogous well-being services in schools will not proceed.
  • Funding will be given to the Tax Practitioners Board to increase their compliance activities.

 

ATO Updates

Class rulings issued

The ATO has issued the following class rulings:

  • CR 2022/94 – Atlassian Corporation Plc – Restructure;
  • CR 2022/95 – Atlassian Corporation Plc – Employee share scheme – Treatment of restricted stock units under the restructure;
  • CR 2022/96 – Domaine Chandon Australia Pty Ltd – Early retirement scheme 2022-2023; and
  • CR 2022/97 – Moneytech Group Limited – Demerger of Monoova Limited.

 

Other News

ACNC 2021-22 annual report

The ACNC’s 2021-2022 annual report has been tabled in Parliament. The report highlights the Commission’s work throughout the year to reduce red tape, enhance its Charity Register, ensure compliance and consult with relevant stakeholders.

Government plans to introduce digital games tax offset

The Albanese Government has announced plans to introduce legislation to establish a 30% refundable digital games tax offset for eligible games developers in the coming months, following the previous government’s announcement of such a measure in the 2021-2022 Federal Budget.

 

Cases

TDS Biz Pty Ltd v FCT [2022] AATA 3543 – No R&D tax incentive for supporting activities undertaken in China

The AAT has ruled that a taxpayer who undertook supporting R&D activities in China was not entitled to the R&D tax incentive as there was no overseas finding pursuant to section 28C(1)(a) of the Industry Research and Development Act 1986 (Cth) in force in relation to those activities. The Tribunal also held that there were no circumstances justifying any remission in the shortfall penalty imposed.  

 

Legislation

WA Parliament passes Duties Bill on farm-in agreements

The Duties Amendment (Farm-in Agreements) Bill 2022 (WA) (first covered in the Birchstone Brief for the week ended 19 August 2022) has been passed by both Houses of the West Australian Parliament and is currently awaiting royal assent. The amendments in the Bill will commence from the day after assent is received.

Treasury Laws Amendment (2022 Measures No 3) Bill 2022 (Cth) & Income Tax Amendment (Labour Mobility Program) Bill 2022 (Cth) – Bills passed by House of Representatives

The Bills (first covered in the Birchstone Brief for the week ended 9 September 2022) have both been passed by the House of Representatives with no amendments. They are currently before the Senate. The Senate Economics Legislation Committee’s report on the Bills is due by 17 November 2022.

 

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