ATO compliance strategy
On 12 March 2015, the Australian Taxation Office (ATO) released its latest Compliance Program Building Confidence - which gives an outline of the key areas of compliance focus and statistical results that the ATO has achieved in respect of its targeted compliance action. The ATO's compliance focus for the year ahead describes the compliance issues that the ATO will focus on for each market segment, including individuals, small business, privately owned and wealthy groups, public groups and international taxpayers, goods and services tax (GST), superannuation, employers and tax practitioners.
For further details, see our TaxTalk Alert.
Data matching of contractor payments
A Commonwealth Gazette Notice details a new data matching program by the Commissioner of Taxation where he will seek to acquire details of entities that receive contractor payments from other businesses for the 2013-14, 2014-15 and 2015-16 financial years. The data collected is to be used to identify contractors that may not be meeting their taxation obligations by registering correctly with the ATO or reporting the payments they are receiving. The data is also to be analysed to detect trends and compliance issues enabling the ATO to develop and deliver educational products and tailored services.
Infrastructure and privatisation
The ATO is seeking feedback on the issue of when a power of veto can constitute ‘negative control’ for the purposes of section 102N of Division 6C of the Income Tax Assessment Act 1936 (public trading trusts) as this is commonly raised as an area of uncertainty. Where a ‘public unit trust’ either carries on a ‘trading business’ or ‘controls’ another entity that carries on a trading business, the trust will be a ‘public trading trust’, and one of the implications is that the trustee will be taxed on the trust’s ‘net income’ at the corporate tax rate. Submissions can be made until 17 April 2015.
On 19 February 2015, the ATO issued Practice Statement Law Administration PS LA 2015/ 2 Trustee Assessments which outlines the ATO's practice in issuing an original tax assessment to a trustee. Generally, the ATO will not issue an original tax assessment to a trustee more than four years after the relevant trust tax return was lodged. Where the trust is a ‘small business entity’, a two year time limit may apply. There are some exceptions to these time limits, for example, where the trustee has not lodged a trust tax return, or there has been fraud or evasion.
On 5 March 2015, the Federal Government released the 2015 Intergenerational Report which projects what the Australian population, economy, and budget could look like in 40 years. The report forecasts increasing strain on a range of public services as the demographic and life expectancy of Australians continues to change, as well as a need to curb spending and the level of Government debt. The report indicates that continued steps to boost productivity and encourage higher workforce participation will be critical to driving economic growth and in this respect sets the scene for reforms to the tax system with the forthcoming review of the tax system expected to consider the competitiveness of Australia’s tax system, consistent with the Government’s aim for a better tax system that delivers taxes that are lower, simpler and fairer.
For further details, see our TaxTalk Alert.
Productivity Commission report on childcare
On 20 February 2015, the Productivity Commission released its report on Childcare and Early Childhood Learning. The report makes a number of recommendations that aim to make childcare more affordable, flexible and accessible.
From a tax perspective, the Commission recommends that the current funding for Child Care Rebate, Child Care Benefit and the Jobs Education and Training Child Care Fee Assistance be combined to support a single child-based subsidy known as the Early Care and Learning Subsidy (ECLS) Broadly, this would be means tested and subject to an activity test. The Commission also recommends the removal of fringe benefits tax (FBT) concessions for not-for- profit childcare services, and removal of the FBT exemption for employer provided childcare, while retaining the priority of child care access FBT exemption.
It further recommends that State and Territory governments remove eligibility of all not-for-profit childcare providers from payroll tax exemptions and also recommends that the proposed White Paper on Tax Reform include consideration of how taxation and the design of family income support and transfer payments impact on effective marginal tax rates.
Asian Region Fund Passport
On 27 February 2015, the Government released for public consultation, the internationally negotiated rules for the Asia Region Funds Passport which will create a regional market for managed investment funds by facilitating cross-border participation. The Passport is also expected to reduce red tape for fund managers through a standardised set of rules that will apply across Passport participants while providing Australian investors with a greater choice of investment products.
The release of the rules for public consultation follows the signing of a statement of intent on the Passport by finance ministers from Australia, Korea, New Zealand and Singapore at the APEC Finance Ministers’ Meeting in September 2013.
Specifically, a draft Memorandum of Understanding has been released which contains, among other things:
- the impetus to participate in the Passport, the governing framework, and sets out the eligibility for economies wanting to participate in the arrangement
- regulatory arrangements, Passport rules, and arrangements for cooperation between regulators.
Submissions close on 10 April 2015.
Investment Manager Regime
On 12 March 2015, the Commonwealth Treasury released exposure draft legislation and explanatory materials for Element 3 of the Investment Manager Regime (IMR). The proposed amendments will, broadly, extend the existing IMR concession to cover investments in Australian assets (excluding real property) that are of a portfolio nature, and broaden the 'widely held' test. The proposed amendments will also simplify the existing regime and make minor technical changes.
Submissions on the exposure draft legislation close on 9 April 2015.
Review into the management of tax disputes
On 27 February 2015, the Assistant Treasurer released the report of the Inspector-General of Taxation's (IGOT) Review into the Management of Tax Disputes. The IGOT recommends the Government consider creating a separate Appeals Group within the ATO, headed by a new Second Commissioner, responsible for managing tax disputes for all taxpayers, and establishing a framework for the development of communication protocols between the Appeals Group and other areas of the ATO to ensure that the Appeals Group is independent in its dispute resolution function.
The House of Representatives Standing Committee on Tax and Revenue subsequently released on 26 March 2015 its report on its Inquiry into Tax Disputes. A key recommendation made by the Committee was that the Government should create a new Second Commissioner to manage objections and litigation independently from the compliance and legal areas of the ATO. Other recommendations include the ATO being more reasonable in terms of deadlines and volumes when making taxpayer information requests and consider having a direct discussion with taxpayers at the various stages of a dispute. The ATO's initial response noted that many recommendations are already being implemented by the ATO and that it will make a formal response to the report after examining it in detail.