Commissioner's address to the Tax Institute National Convention 2017

The Commissioner of Taxation, Chris Jordan, has delivered the keynote address to the Tax Institute's 32nd National Convention at the Adelaide Convention Centre, highlighting the Australian Taxation Office's (ATO) achievements in 2016 and new initiatives including:

  • a new process in the Review and Dispute Resolution area called Fast Intensive Triage (FIT), which will triage all incoming objections,
  • an update on progress of the Tax Avoidance Taskforce, and
  • how the ATO is supporting clients to voluntarily get it right through its guidance products.

Commissioner's statutory remedial power now in effect

With the enactment of Tax and Superannuation Laws Amendment (2016 Measures No 2) Act 2016, the Commissioner's remedial powers have come into effect to allow the Commissioner of Taxation to modify the operation of existing tax law in limited circumstances. This includes when the current law produces unintended, negative impacts for taxpayers or creates excessive compliance costs. Any modifications made using the power must:

  • not be inconsistent with the intended purpose or object of the law,
  • have a negligible budget impact, and
  • only apply where outcomes for an entity will be no less favourable than the existing law.

The ATO has developed a consultative process to submit potential issues that may be dealt with by the Commissioner's remedial power.

Board of Taxation's CEO update

The CEO of the Board of Taxation has provided an update following the first Board meeting of 2017, held on 16 February 2017 and hosted by PwC. The Board provided an update on the tax transparency code, noting that 72 organisations (including private and foreign companies) that represent more than 60 per cent of tax payable by corporate taxpayers have now indicated their intention to adopt the Code.

The Board continues to be involved with the Government's Black Economy Taskforce, as well as progressing several projects towards completion including:

  • asset merger roll-over relief (the Board is in a position to finalise the report),
  • residency tests for high wealth individuals,
  • alignment of tax and accounting concepts,
  • tax and the sharing economy,
  • the consistency of core concepts applied under State and Federal tax laws, and
  • targeted trust simplification.

ATO concern over lump sum payments received by healthcare practitioners

The ATO is concerned with the tax treatment of lump sum payments made by third parties that run healthcare centres to practitioners (which operate from these centres).

The ATO has seen some practitioners mistakenly treat the lump sum receipts as a capital gain, and apply the small business Capital Gains Tax (CGT) concessions. The ATO is of the view that generally these lump sum amounts are typically ordinary income for the practitioner's provision of services to their patients from the healthcare centre, and accordingly assessable income.

The ATO has started targeted activities and examinations of healthcare practitioners who may have incorrectly treated these lump sum payments as capital gains. It will provide advice and guidance to health practitioners to help them either selfidentify these and emerging arrangements that are of concern, or as an early warning for those who may be considering them.

ATO's new draft effective life determinations

The ATO has released the following draft effective life determinations for depreciating assets used in the following industries:

  • pulse and seed processing industry
  • grain mill product manufacturing industry
  • photographic film processing industry
  • poultry processing industry
  • textile floor covering industry
  • cheese and other dairy product manufacturing.

The determinations are proposed to apply to assets purchased (or otherwise first used or installed ready-to-use) on or after 1 July 2017.

One-chance approach to penalties for small business and individuals

The ATO has released its Community Findings Report on its proposed changes to imposing penalties for small business and individuals where the ATO propose to offer one chance before applying a penalty for false and misleading statements for failure to take reasonable care and failure to lodge on time. The report indicates that there was majority support for the one chance approach, however some are concerned about how it would work in practice. The ATO will consider the feedback and share more information in the future.

'Sir Ivan Fire' bushfires declared a disaster for tax purposes

The Minister for Revenue and Financial Services has declared the February 2017 'Sir Ivan Fires' bushfires (Warrumbungle Shire of NSW) a disaster for the purposes of establishing Australian disaster relief funds. Donations to Australian disaster relief funds, established to provide relief in the aftermath of the bushfires, will be tax deductible for a period of two years from 13 March 2017.

Australian Small Business and Family Enterprise Ombudsman

The Minister for Small Business has announced a review into the operation of the Australian Small Business and Family Enterprise Ombudsman. The Review is to examine how efficiently and effectively the Ombudsman has undertaken the assistance and advocacy functions set out under the Australian Small Business and Family Enterprise Ombudsman Act 2015 and to make recommendations for any improvements to these functions. Treasury is seeking comments on a short discussion paper covering key issues to guide stakeholder feedback. Submissions can be made until 12 April 2017.

Model of Australian Retirement Incomes and Assets

Currently, Treasury has a project underway to significantly enhance its capability to produce detailed modelling of retirement incomes in Australia. It has released a working paper which provides high-level details of the new Model of Australian Retirement Incomes and Assets and outlines a number of challenges and research questions for further consideration by Treasury and interested researchers.

Foreign Investment Framework 2017 Legislative Package

The Government has released a consultation paper on amendments to the Foreign Investment Framework, including proposed changes in the areas of residential land, non-vacant commercial land, low sensitivity business investment and fees. The paper also provides an opportunity for stakeholders to present examples on how technical issues in the legislation could be addressed. Submission were due to be made by 29 March 2017.

WTO's Trade Facilitation Agreement enters into force

The World trade Organisations (WTO's) Trade Facilitation Agreement entered into force on 22 February 2017. The agreement seeks to expedite the movement, release and clearance of goods across borders, launches a new phase for trade facilitation reforms all over the world, and creates a significant boost for commerce and the multilateral trading system as a whole.