Thinking | 11 November 2016

Talking Tax – Issue 57

Legislation and Government updates

Collective investment vehicles – Non-resident withholding taxes being considered

The Federal Treasury has released a consultation paper on the application of non-resident withholding taxes to collective investment vehicles (CIV).

As part of the 2016/17 Budget, the Government announced that it would introduce two new internationally recognised CIVs, to make Australian managed funds more attractive to foreign investors and enhance opportunities for the export of funds management services from Australia. Demand for funds management services in the Asia Pacific Region is expected to grow strongly over the coming decades.

The consultation paper seeks stakeholder view of policy proposals in relation to the withholding taxes and flags the key policy considerations, including compatibility with the international approach to taxing non-residents, fiscal considerations, simplicity and international competitiveness.

In particular the consultation paper sets out three proposals for consideration:

  • Proposal A: No policy change to the existing tax settings.
  • Proposal B: Single non-resident withholding tax rate of 5 percent for CIVs and managed investment trusts (MIT) under the Asian Region Funds Passport (ARFP).
  • Proposal C: Uniform non-resident withholding tax rate of 5 percent for all CIVs and MITs excluding property.

Submissions are due by Friday 2 December 2016.

Exposure draft – GST on low value imported goods

The Treasury has released exposure draft legislation and explanatory material for the 2016/17 Budget measure to levy GST on low value imported goods imported by consumers. The intention is for such legislation to have effect for tax periods on or after 1 July 2017

The legislation will require overseas vendors, electronic distribution platforms and good forwarders to account for GST on sales of low value goods (that is those less than $1,000) to consumers in Australia provided that the supplier of the goods has a GST turnover of $75,000 or more.

These changes will be welcomed by domestic suppliers of goods as a means of levelling the playing field when operating in competition with international suppliers. Unfortunately, they may signal higher prices for Australian consumers currently enjoying GST free prices.

Comments are welcomed until 2 December 2016.

Stamp duty concessions for businesses that move to Latrobe Valley

The Premier of Victoria has announced that the Government will establish a new Economic Growth Zone (EGZ) in the Latrobe Valley, in an effort to create local jobs and grow local businesses.

The new EGZ means that companies starting or expanding their businesses in the Latrobe Valley will be eligible for financial incentives, including reimbursement of fees and charges.

There is little doubt that this incentive will create opportunities for businesses to benefit from stamp duty concessions in setting up in the Latrobe Valley, and will help to contribute to the growth and stability of the area.

Eligibility for the funding will be considered on a case-by-case basis by the Latrobe Valley Authority, and businesses are advised to seek advice if they wish to take advantage of the incentives.

Anti-Money Laundering and Counter-Terrorism Financing Project Plan

The Attorney-General’s Department has released a draft project plan for implementing the 84 recommendations arising out of the review of Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), in order to streamline and strengthen Australia’s Anti-Money Laundering and Counter-Terrorism Financing regime.

The project plan sets out a roadmap regarding how it will go about implementing these recommendations and the timeframe for doing so.

The reforms proposed will have a significant impact on a number of reporting entities but also advisors such as lawyers, conveyancers, accountants and real estate agents going forward, however it is early in the consultation process.

Submissions can be made until 11 November 2016.

ATO updates

ATO advice under development update

The ATO has updated its advice under development list for income tax, GST and CGT issues. This is part of the ATO’s “Project Refresh” initiative which seeks to modernise the public rulings that are greater than five years old. The purpose of updating these public rulings is to ensure that this advice is current.

Income tax advice under development will include information relating to:

  • employee remuneration trust arrangements
  • promoter penalty laws
  • capital allowances – composite items
  • unpaid present entitlement – bad debt.

The CGT advice to be further developed includes:

  • trust capital gains
  • capital gain from a non-resident beneficiary on a non-fixed trust
  • capital gain or loss – residency assumption; capital gains – discount or capital loss offset.

The GST advice under development now includes:

  • second-hand goods definition
  • GST treatment of “home care” and “residential care” services.

ATO annual report

The ATO has released its 2015/16 Annual Report, which informs Parliament, stakeholders and the community about how the ATO has administered the tax system over the year in comparison to the objectives set.

In his review, the Commissioner flags the tax behaviour of large corporates as an ongoing issue in Australia as well as his desire that the ATO continue to lead international collaboration amongst the OECD members.

The report flags that the ATO continues to transform the way it manages disputes with taxpayers, through the use of alternative dispute resolution and the new settlement guidelines. This has resulted in a reduction of litigation cases.

The Annual Report also refers to a number of statistics regarding collections of tax over the period, such as those in the following table.

Revenue Collection
  • Net tax collections in 2015–16 were $342.6 billion, up $5.8 billion (1.7%) over the previous year. This was comprised of $440 billion in gross tax receipts and refunds of $97.4 billion.
  • The difference between 2015-16 Budget forecast and actual net collections for all tax collections was approximately -$14.5 billion.
Income tax

 

  • All income tax revenue measures were met, with cash collections from compliance activities of $8.6 billion in 2015–16 for both direct and indirect revenue outcomes. This was a 1.8% decrease from 2014–15.
Goods and services tax

 

  • All revenue measures were delivered to government and the states and territories, with $2.9 billion collected in GST, penalties and interest from compliance activities.
Tax Gap

 

  • The tax gap is an estimate of the difference between what the ATO collects and the amount that would have been collected if every taxpayer was fully compliant.
  • The gap was 4.1% below original budget forecast.

The report also covers the impact measures in the ATO corporate plan 2015-19, as well as key performance indicators for the ATO from the Portfolio Budget Statements 2015–16:

  • Community satisfaction was 74%; down from 76% in the previous year.
  • Perceptions of fairness in disputes was 55%; up from 50% in the previous year.
  • Professionalism was 54%; up from 53% in the previous year.
  • Ease of use and access to information was 78%; up from 70% in the previous year.
  • Operating within budget 0.8% deficit; compared to1.6% surplus in the previous year.
  • The cost to collect $100 was estimated to be $0.77 gross; with no change from the previous year.

The statistics suggest that there is greater confidence in the community regarding the ATO’s administration of the tax system

Key issues flagged for the next financial year are:

  • dealing with trends in use of technology that are difficult to predict but manifest in rapidly growing community demand for digital services that are accessible, secure, easy to use and always available
  • increasing cyber security threats
  • public concern with the impact of global economic forces on the integrity of the tax system
  • new tax measures, including the extension of GST to consumer imports or digital services and low-value goods, and a simpler BAS.

Contact

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Talking Tax – Issue 56

Legislation and Government updates