Tasmania announces payroll tax changes

The Tasmanian Government has announced that it will introduce legislation to provide payroll tax relief for up to three years to businesses that relocate to Tasmania and establish their operations in a regional area. Details of the proposed legislative requirements are still to be released.

The Government has also announced that it proposes to extend its current payroll tax rebate scheme for apprentices and trainees to 2021, with a targeted focus on areas where there are identified skill shortages.

ATO focus on Fringe Benefits Tax compliance

The ATO has highlighted a number of areas where errors are commonly made by taxpayers as key FBT focus areas for the ATO this year:

  • failing to report an employee’s private use of a company car
  • claiming exempt food and accommodation in living-away-from-home allowance benefits
  • undervaluing employee car park benefits, and
  • incorrectly claiming employer exemptions and rebates.

It is important to be clear on your obligations and entitlements when reporting FBT to the ATO.

ATO data matching – motor vehicles

The ATO has advised that it will acquire information during the 2016-17, 2017-18 and 2018-19 financial years on vehicles that have been transferred or newly registered where the purchase price or market value is equal to or greater than AUD 10,000 as part of a data matching program. These records will used, in part, to identify taxpayers who have not met TaxTalk Monthly May 2018 their obligations with regards to Fringe Benefits Tax.

PAYG Withholding annual reporting exemption - Single Touch Payroll

The PAYG Withholding annual reporting exemptions: Single Touch Payroll optional year legislative instrument was released during the month. This instrument exempts an entity that entered the Single Touch Payroll system prior to 1 July 2018 from its obligations to provide payment summaries and annual reports under the PAYG Withholding system for all or part of the period between 1 July 2017 to 30 June 2018, to the extent that the relevant information has been reported under Single Touch Payroll.

Application of the Payroll Tax contractor provisions to financial planners (NSW)

The NSW Civil and Administrative Tribunal has found in favour of the Chief Commissioner in Novus Capital Ltd v Chief Commissioner of State Revenue [2018] NSWCATAD 72 in relation to the treatment of payments made to ‘Authorised Representatives’ who were not employees of Novus Capital but who provided financial services under Novus Capital’s Australian Financial Services License (AFSL).

Despite contentions made by Novus Capital that the agreements with the Authorised Representatives were not ‘relevant contracts’ on the basis that they were licensing agreements relating to the use of its AFSL with no services flowing between the Authorised Representatives and Novus Capital, the Tribunal was not satisfied that the Authorised Representatives did not act as agents of Novus Capital. The Tribunal found that the agreements between Novus Capital and the Authorised Representatives were relevant contracts and were prima facie subject to payroll tax.

The Tribunal was also asked to consider a number of other issues, including the application of certain contractor exemptions to payments made to Authorised Representatives (i.e. the 90 day exemption and services provided by two or more persons exemption), the availability of deductions for any non-labour components of agreements with the Authorised Representatives, as well as the payroll tax treatment of payments made to third parties in respect of services performed by the Managing Director. Ultimately, the Tribunal was not satisfied that sufficient evidence was maintained by Novus Capital to support the application of the contractor exemptions. In addition, the Tribunal found that Novus Capital did not provide sufficient evidence to support any variation in the five per cent non-labour deduction for contractor payments that had already been determined by the Chief Commissioner, and payments made to third parties were considered to fall within the definition of taxable wages for payroll tax purposes.

Employment termination payments determination

The Australian Taxation Office (ATO) has released ETP 2018/1: Income Tax Employment Termination Payments (12 month rule) Determination 2018. This determination replaces Employment Termination Payments (12 month rule) Determination 2007, and is substantially the same as the previous determination.

The new determination extends the definition of employment termination payment to include certain payments that are received more than 12 months after the termination of a person's employment if the delay in the payment was due to the commencement of legal action concerning the person's entitlement to the payment and/or the amount of the person's entitlement.

Treasury working paper on payroll tax

Federal Treasury has released a working paper which uses administrative business income tax data covering 2001-02 to 2014-15 to determine whether payroll tax affects the behaviour of businesses. The key observations to emerge were:

  • Businesses generally do not bunch below the payroll tax threshold.
  • The limited bunching in Victoria, which had one of the lowest thresholds and one of the lowest tax rates during the sample period, is unexpected as Victoria followed the policy prescription designed to mitigate the adverse effects of payroll tax.
  • Businesses, in general, do not attempt to avoid payroll tax by hiring contractors.

ATO issues FBT determinations for 2018-19 FBT year

The following Fringe Benefits Tax (FBT) determinations were issued during April 2018:

  • TD 2018/1: FBT. The Determination sets indexation factors for valuing non-remote housing for the fringe benefits tax year commencing on 1 April 2018.
  • TD 2018/2: FBT. The benchmark interest rate for the fringe benefits tax year commencing on 1 April 2018 is 5.20 per cent per annum.
  • TD 2018/3: FBT. The Determination sets out the reasonable amounts for food and drink expenses incurred by employees receiving a living away from home allowance (LAFHA) fringe benefit for the FBT year commencing 1 April 2018.
  • TD 2018/4: FBT. The Determination sets out the cents per kilometre rates that can be used for determining the taxable value of a motor vehicle (other than a car) for the FBT year commencing 1 April 2018.
  • TD 2018/5: FBT. The record keeping exemption threshold for the FBT year commencing 1 April 2018 is AUD 8,552.