ASG News - Tax / View / Clue
ASG News -
Tax / View / Clue
Company loans to shareholders under review
The Government has released a consultation paper outlining proposed reforms to ‘simplify’ the loan agreements that are generally required when a shareholder (or their associate) borrows funds (or receives a payment) from a related company.
Note: Broadly, where a private company makes a payment or loans funds to a shareholder and/or their associate, the amount will be treated as a taxable unfranked dividend paid to the recipient.
To avoid this, many shareholders enter into complying 'Division 7A loan agreements' (basically agreeing to repay the relevant amount within 7 years, or 25 years if the loan is secured).
With this in mind, Treasury is currently looking at (amongst other things):
simplifying the Division 7A loan rules by converting to a new 10-year model; and
clarifying that distributions from a trust to a ‘bucket’ company that remain 'unpaid present entitlements' come within the scope of Division 7A.
Note: The proposed amendments are intended to apply from 1 July 2019 and will arguably be the most significant tax reforms impacting business and investment clients over the next two years.
At this stage of the consultation process, the Government is currently considering submissions made with respect to these proposals and it is expected that draft legislation, and further clarity, will be available early in the 2019 calendar year.
ATO to send text messages if bank account details incorrect
The ATO has advised that it will send SMS text messages directly to taxpayers where incorrect bank account details were included in their tax returns and they were entitled to a refund.
The SMS will advise impacted taxpayers that:
their refund cannot be processed due to incorrect bank account details; and
they should phone the ATO on 13 28 61 to correct their details.
If impacted taxpayers contact the ATO with their correct details within seven days, any refund due will be issued electronically.
Note: In the wake of an increase in recent tax fraud attempts, it is clear that taxpayers need to exercise additional caution when dealing with electronic messaging from (or purportedly from) the ATO.
The authenticity of ATO correspondence can be verified by calling the ATO on 1800 008 540; however, if you are ever unsure about any correspondence received, please contact our office.
ATO contact regarding business cars and Fringe Benefits Tax (‘FBT’)
The ATO has recently advised that it will be contacting taxpayers (and tax agents on behalf of their clients) that have been identified as having cars registered in their business name who have not lodged an FBT return.
The ATO has reminded businesses that:
a car fringe benefit will occur when a business owns or leases a car and makes it available for an employee's private travel or use (including garaging the car at or near an employee's home and making it available for private use); and that
business directors are also 'employees' for FBT purposes.
External collection agencies to enforce ATO lodgement obligations
The ATO has finalised a trial relating to sending overdue taxpayer lodgement obligations to external collection agencies.
As a result, it may now refer taxpayers to an external collection agency to secure tax return lodgement.
The ATO has stated that it will only refer a taxpayer to an external collection agency where the taxpayer takes no action in response to its initial correspondence letters.
ATO data matching and share transactions
The ATO has extended its data matching program, this time focusing on share data.
The ATO will continue to receive share data from ASIC, including details of the price, quantity and time of individual trades dating back to 2014, with more than 500 million records obtained.
The ATO will use the information to identify taxpayers who have not properly reported the sale or transfer of shares as income or capital gains in their income tax returns.
It seems share transactions are high on the ATO's priority list, given more than 5 million Australian adults (almost one-third) now own shares.
Improvements to employee share schemes announced
The Government has announced it intends to introduce legislation to improve the ability of small businesses to offer employee share schemes by simplifying the current regulatory framework, and reducing the time and cost burden for businesses by (amongst other things):
increasing the value limit of eligible financial products that can be offered in a 12-month period from $5,000 per employee to $10,000 per employee;
creating an exemption for disclosure, licensing, advertising and on-sale obligations in the Corporations Act; and
allowing small businesses to offer (in most instances) employee share schemes without publicly disclosing commercially sensitive financial information.
ATO guidance regarding ‘downsizer contributions’
The ability to make 'downsizer contributions' effectively commenced on 1 July 2018, prompting the ATO to release further guidance with respect to this new superannuation contribution classification.
Note: This new measure will be of most assistance for individuals approaching retirement, where they dispose of their family home in an effort to ‘downsize’ and they want to contribute part or all of the proceeds to superannuation.
Basically, these measures allow older Australians to make a downsizer contribution where:
they are aged at least 65;
there was consideration received for the disposal of an eligible Australian dwelling;
the contract of sale for the property was entered into on or after 1 July 2018;
a superannuation contribution is generally made within 90 days of settlement;
the contribution does not exceed the lesser of $300,000 and the proceeds received from the sale of the dwelling;
an ownership interest in the dwelling had been held for at least 10 years (usually by the individual making the contribution or their spouse);
either a full or partial CGT main residence exemption applies to the disposal of the dwelling;
a choice to treat the contribution as a downsizer contribution is made in the approved form; and
broadly speaking, it is the first downsizer contribution the taxpayer has made.
ATO issues high alert after spike in November tax scams
The Tax Office has issued a high alert after more than $800,00 was reportedly lost during November due to a spike in scam phone calls.
ATO assistant commissioner Kath Anderson said the ATO has received more than 37,000 reports of scam attempts in November alone, with scammers using software that resembles a legitimate phone number to disguise the caller’s true identity.
“The ATO does not project our numbers using caller ID. You can be confident that if there is a number displayed in your caller ID, it isn’t the ATO,” Ms Anderson said.
“Taxpayers should be wary of any phone call, text message, email or letter about a tax refund or debt, especially if you weren’t expecting it.”
While the ATO regularly contacts taxpayers by phone, email and SMS, there are some tell-tale signs that it could be a scammer on the other end.
According to Ms Anderson, the ATO will not use aggressive or rude behaviour, or threaten you with arrest, jail or deportation; request payment of a debt via iTunes, pre-paid visa cards, cryptocurrency or direct credit to a bank account with a BSB that isn’t either 092-009 or 093-003; request a fee in order to release a refund owed to you; or send you an email or SMS asking you to click on a link to provide login, personal or financial information, or to download a file or open an attachment.
“If you suspect that you have been contacted by a scammer, you should contact our call centre. It's OK to hang up and phone us on 1800 008 540 to check if the call was legitimate or to report a scam,” Ms Anderson said.
“While phone scams are the most common at the moment, scammers are constantly changing tactics. Taxpayers should still beware of unsolicited emails and SMS, with more than 6,000 people handing over their personal or financial information to scammers since July this year.
“Taxpayers play an important role in stopping scammer activity by reporting them to our scam line. Your reports help us to get an accurate picture of what is happening with the current scams, which ultimately helps protect the Australian community.”
Tax scams have been an ongoing issue for the community this year, with the Tax Office earlier advising of a new scam involving .
During tax time this year, a high alert was issued following a proposing taxpayers a tax refund, but instead is designed to steal personal and financial information.
Latest figures from the Australian Competition and Consumer Commission show that the ATO received 81,250 scam reports with $2,396,178 of reported losses in 2017.
Important: Clients should not act solely on the basis of the material contained in Cents & Sensibility. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Cents & Sensibility is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
Please contact us if you wish to discuss how the points raised in this edition specifically affect you.