7 October 2019

Talking Tax – Issue 172

Superannuation guarantee amnesty back on the table

On 18 September 2019, the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 (Bill) was re-introduced, with an amnesty period starting from 24 May 2018 and ending six months after the legislation receives Royal Assent.

The amnesty provides one last chance for employers to address any outstanding superannuation guarantee (SG) obligations without being penalised.  All catch-up payments made during this 6-month period will be tax deductible.

The amnesty will apply to all SG shortfalls up to and including the quarter beginning 1 January 2018.  Importantly, SG shortfalls that have arisen in subsequent quarters will not be covered by the amnesty and penalties may apply.

We strongly encourage employers to review their previous SG compliance to determine whether they have any potential exposure here.  Although the Royal Assent date is not yet known, superannuation reviews should start immediately as the amnesty will cover SG contributions from 1992 (effectively 26 years).

The amnesty provides an opportunity for employers with workers who are on the borderline of being an independent contractor (where no superannuation is required to be paid) rather than an employee (where superannuation is required to be paid) to review their position and participate in the amnesty if appropriate.  Additionally, the new Bill will impose a much higher penalty for employers who fail to take part in the amnesty and are subsequently identified by the ATO as having outstanding SG obligations.

‘There’s no cash here. Here, there’s no cash’

The Currency (Restrictions on the Use of Cash) Bill 2019 (Bill) will make it a criminal offence for any entity to make or accept cash payments of $10,000 or more from 1 January 2020.  The measure applies to all entities including individuals, bodies corporate, partnerships, trusts and other structures and associations.

The Bill prohibits transactions between businesses and individuals where the total cash payment(s) relating to a single supply of goods or services equals or exceeds $10,000.  This will be a strict liability offence, meaning that entities and people who commit inadvertent or accidental offences may still be subject to penalties.

This is a ‘black economy’ measure intended to reduce the risk of tax evasion, money laundering, fraud, bribery, obtaining financial advantage by deception and terrorism financing.

Fines

Individuals will face fines of up to 120 penalty units ($25,200) or 2 years imprisonment for offences.  The penalties may vary according to their level of culpability.  Fines of up to 300 penalty units ($63,000) will apply to offences by corporations.

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Exceptions

Exposure Draft - Currency (Restrictions on the Use of Cash - Excepted Transactions) Instrument 2019 specifies a number of exempt transactions, including but not limited to:

  • all cash deposits and withdrawals from bank accounts;
  • payments that occur in situations where no alternative method of payment could reasonably be used;
  • exchanging foreign currency; and
  • all consumer-to-consumer transactions, such as selling a second-hand item (other than transactions involving real property).

Update on tax residency - Harding case

The High Court has refused to grant the Commissioner of Taxation special leave to appeal the Full Federal Court’s (Court) decision in Harding v Commissioner of Taxation [2019] FCAFC 29 (Harding).

Australians living overseas can now confidently rely on the decision in Harding when assessing whether they have established a permanent place of abode outside Australia.

In the Harding decision, the Court held that a taxpayer could establish a permanent place of abode outside Australia despite only residing in temporary accommodation in a foreign country.  In doing so, the Court adopted a broader interpretation of the word ‘place’ than the Commissioner’s interpretation, in which he sought to argue that this requires the taxpayer to maintain a permanent physical place of residence in that country.

The Court stated that in determining whether a taxpayer has established a permanent place of abode outside Australia, you must take into account the full circumstances of the taxpayer’s connection to the foreign country.

For more details on the final decision in Harding, please refer to Talking Tax Issue 151. The question of residency can be challenging to answer.  Every case will turn on its own facts - some of which carry more weight than others - and merely spending less than 183 days in Australia does not make an individual a non-resident by that factor alone.

New Private Ancillary Fund Guidelines

The Private Ancillary Fund Guidelines 2009 were repealed on 1 October 2019 and replaced by the Taxation Administration (Private Ancillary Fund) Guidelines 2019 (2019 Guidelines).

The 2019 Guidelines set out rules that funds must comply with to obtain and maintain their deductible gift recipient status.

The 2019 Guidelines do not alter the substantive meaning or operation of the old guidelines.  Minor technical changes have been made to reflect current drafting practice and alter the structure of the guidelines to improve clarity.

If you would like further information on Private Ancillary Funds, please contact Frank Hinoporos.

Transfer pricing risk framework

The Draft Practical Compliance Guideline PCG 2019/D5 (Draft PCG) sets out the ATO’s proposed transfer pricing compliance framework for projects involving the use of foreign-owned mobile offshore drilling units in Australian waters.

The Draft provides a risk framework for taxpayers to use when self-assessing their transfer pricing outcomes.  The framework has four risk zones - white (self-assessment not necessary), green (low risk), amber (moderate risk) and red (high risk).  The ATO uses this framework as a risk indicator to determine whether some additional form of compliance activity is necessary.

The ATO’s compliance approach will vary depending on the risk rating of a taxpayer’s offshore drilling and associated activities.  The Draft PCG provides principles and profit markers intended to assist taxpayers to self-assess their compliance risk as falling within the following four risk zones:

10.5% Green Low risk
5% - 10.5% Amber Moderate risk
5% or less and has less than A$20 million total contract or project revenue in the relevant year Amber Moderate risk
5% or less and has A$20 million or more total contract or project revenue in the relevant year Red High risk

A taxpayer’s risk rating has no bearing on whether their arrangements are compliant with the transfer pricing laws.  The ATO simply uses this framework as a risk indicator to determine whether some additional form of compliance activity is necessary.

If a taxpayer’s current arrangements fall outside the green zone and they wish to adjust the pricing of their arrangements going forward to come within this zone, they are encouraged to proactively engage with the ATO to resolve any past-year issues.

This article was written with the assistance of Anne Wong, Law Graduate.

Contact

Anthony is a highly regarded tax practitioner with over 20 years’ experience. He has particular expertise in taxation planning and structuring for corporate clients, including advising on capital raisings, business structuring, mergers and acquisitions, and disputes with Federal and state taxation authorities.

More about Anthony

Rachel has over 15 years of experience advising on tax law and specialises in stamp duties, land tax and other tax issues in all Australian states and territories.

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