Talking Tax – Issue 145

Time limits for claiming input tax or fuel tax credit: open for consultation

In brief

The ATO’s new Draft Miscellaneous Taxation Ruling MT 2018/D1 (Draft Ruling) outlines the Commissioner of Taxation’s (Commissioner) view on time limits applying to the entitlement to claim an input tax or fuel tax credit. The Draft Ruling is open for consultation until 25 January 2019.

Although this is a draft ruling, it serves as a warning for taxpayers to review their entitlements to tax credits and ensure that any outstanding credits are claimed within the four year entitlement period.

The time limits applying to the entitlement to claim input tax or fuel tax credits are contained in A New Tax System (Goods and Services Tax) Act 1999 and the Fuel Tax Act 2006 respectively.

In the Draft Ruling, the Commissioner takes the view that any entitlement to a tax credit will cease to the extent that the tax credit was not taken into account in any assessment made within the four year entitlement period.

A tax credit is ‘taken into account’ in an assessment to the extent the credit is included in the calculation of the assessment of a net amount (for GST purposes) or net fuel amount (for fuel tax purposes), within the ‘four year entitlement period’.

Unlike with income tax amendments, lodging an objection, requesting an amendment, or applying for a private ruling will not result in tax credits as having being taken as being included in an assessment. Including the tax credit in the calculations of your assessment within the four year entitlement period is the only way the credit may be taken into account.

Further, the four year entitlement period limit will not apply:

• for input tax credits - where credits would have been obtained but for the incorrect categorisation of the supply in the original assessment; or
• where, after the entitlement period expires, the Commissioner approves a request (made before the end of the entitlement period) that a certain document be treated as a tax invoice.

If only part of a tax credit has been included in an assessment before the entitlement period expires, any entitlement to a tax credit for the remaining part will cease.

Comments on the Draft Ruling are due by 25 January 2019. If you wish to engage in the consultation process, please contact Jim Koutsokostas.

New conduct standards for charities operating outside of Australia

In brief

New standards for charities operating outside of Australia will come into effect on 1 July 2019. The Australian Charities and Not-for-profits Commission Amendment (2018 Measures No. 2) Regulations 2018 creates External Conduct Standards (Standards) for Australian charities operating outside of Australia. The standards set minimum benchmarks in relation to control and use of funds, record-keeping, anti-fraud and corruption, and protection of vulnerable people.

It is expected that the Standards may have significant practical implications and charities that operate outside of Australia should carefully consider the Standards and ensure that their activities are compliant.

The Standards will apply to Australian charities operating (in whole or in part) outside of Australia, including charities working with third parties that operate outside of Australia. Charities whose overseas activity is merely incidental to their Australian-based operations are excluded.

The Standards require charities operating overseas to:

• take reasonable steps to ensure activities and funds applied outside of Australia (including via third parties) align with the purpose and character of the charity, using reasonable controls and risk management processes;
• implement internal controls to ensure resources are used for the appropriate purpose;
• implement internal controls to ensure compliance with Australian law;
• report annually on overseas expenditure and activities, with an explanation of how these are aligned to the charity’s purpose, the processes used to monitor its overseas activities, and details of claims of inappropriate behaviour by employees outside Australia and actions taken by the charity in response;
• prepare a list of all the third parties the charity has worked with overseas;
• in relation to employees, volunteers, third parties and responsible entities outside Australia, take reasonable steps to minimise any risk of corruption, fraud, bribery or other financial impropriety, and document any perceived or actual material conflicts of interest; and
• take reasonable steps to ensure the safety of vulnerable individuals outside Australia who receive services or benefits from the charity or third party partners, or who are engaged to provide services on behalf of the charity or third party.

For assistance in navigating the new Standards, please contact Frank Hinoporos.

ATO begins issuing excess super contributions determinations

The ATO has started issuing determinations for excess concessional contributions (ECCs). With the concessional contributions cap reduced to $25,000 per annum from 1 July 2017, the ATO anticipates that ECC determinations will be higher for the 2018 financial year compared to previous years.

Individuals should be aware that an amended assessment will likely follow an ECC determination, as ECCs constitute assessable income (subject to a 15% tax offset). Individuals should also ensure that they keep the contributions cap in mind when making super contributions. If you require assistance in dealing with an amended assessment, please contact Michael Parker.

Burton v FC of T [2018] FCA 1857

In brief

The Federal Court of Australia recently held that a capital gain made in the US will not be considered ‘doubly taxed’ if that gain is not included in assessable income.

For Australian taxpayers that are also subject to foreign taxation, this case emphasises the importance of ensuring that foreign income tax offset (FITO) claims are valid.

Mr Burton was an Australian tax resident, who in 2011 and 2012 also earned US-derived income from capital gains on US assets held for at least one year. Under both US and Australian law, the income from these gains was taxable and subject to concessions.

Mr Burton objected to the Commissioner’s decision to partially deny him a FITO against his Australian tax liability on the gains, to the extent of half of the US tax paid by Mr Burton.

The Court upheld the Commissioner’s submission that although Australian residents deriving foreign income should not be doubly taxed, double taxation had not occurred here because the portion of Mr Burton’s capital gains to which the 50% capital gains discount was applied was not included in his assessable income. It held that such a construction of s 770-10(1) of the Income Tax Assessment Act 1997 was consistent with the double tax agreement between the US and Australia.

For advice and information on double taxation, speak with Anthony Bradica.

SA 2018 Budget Bill receives assent

In brief

The South Australian Statutes Amendment and Repeal (Budget Measures) Act 2018 (SA) has received assent, bringing changes to payroll tax, land tax, stamp duty and third party reporting in South Australia.

The Act:

• implements changes to determining the payroll tax exempt component of a motor vehicle allowance paid to an employee;
• reduces the marginal land tax rate from 3.7% to 2.9% for ownerships valued between $1.231m and $5m;
• expands the stamp duty exemption for family farm transfers, to include transfers involving companies limited to the family group; and
• enables RevenueSA to collect more data on real property transfers for foreign ownership and taxation reporting purposes.