ATO provides additional 7 years to repay unpaid present entitlement loans
The Australian Taxation Office ('ATO') has recently released Practical Compliance Guideline PCG 2017/13 ('PCG 2017/13'). This guideline will allow trusts an additional 7 years to repay certain unpaid present entitlement (‘UPE’) loans to corporate beneficiaries (i.e. private company beneficiaries of such trusts).
Avoid losing valuable franking credits
dVT Group, our fellow members of Walker Wayland Australasia, have considered an opportunity for small businesses to address the potential loss of franking credits that may otherwise remain unuseable following the reduction in the corporate tax rate to 27.5%.
Their solution considers liquidating the company and paying distributions to shareholders in a later year when the company has ceased to trade. As it will no longer be defined as a small business entity, it reverts to the corporate tax rate of 30%. All distributions can then be franked at a maximum rate of 30%, or to the extent of franking credits available.
The opportunity has specific applicability to companies nearing the end of their useful lives.
The full article can be found on their website at dVT Group: Avoid losing valuable franking credits.
Apportioning the income of professional sportspersons to their other entities
On 19 July 2017 the Australian Taxation Office (ATO) released Practical Compliance Guideline PCG 2017/D11 ('the Guideline').
The Guideline addresses the matter of the extent to which lump sum payments for the provision of a professional sportsperson's services and the use and exploitation of their 'public fame' or 'image' under licence can be apportioned. The Guideline sets out a 'Safe Harbour' for doing so.
This PCG can be relied upon in circumstances where:
- a professional sportsperson grants an "associated resident entity" (such as a trust) a non-exclusive licence to use and exploit the sportsperson's 'public fame' or 'image',
- that resident entity (and not the sportsperson) is contractually entitled to receive the income from the use and exploitation of the professional sportsperson's 'public fame' or 'image', and
- the payment is not referable to the use or exploitation of rights which are recognised and specifically protected under Australian law, such as copyright, trademarks or registered design rights.
GST on supplies of digital products and other services to consumers from 1 July 2017
With effect from 1 July 2017, GST applies to supplies of digital products and other services to Australian consumers by foreign entities. Such supplies will be subject to GST in a similar way to equivalent supplies made by Australian entities to domestic consumers. In particular:
- supplies of things other than goods or real property made to a recipient who is an “Australian consumer” (see below) are taken to be connected with Australia. This will generally bring the following into the GST net:
- supplies of digital products such as streaming or downloading of movies, music, apps, games and e-books
- other services such as consultancy and professional services supplied from overseas to an Australian consumer.
- where a supply of anything other than goods or real property supplied to an Australian consumer from offshore (an inbound intangible consumer supply) is made through an “electronic distribution platform”, the operator of the platform instead of the actual supplier is taxed. This represents a significant departure from the general rules that make the actual supplier liable, although there are some exceptions.
Changes to Higher Education Loan Program (HELP) and Trade Support Loan (TSL) repayment obligations
The Australian Government has recently introduced changes relating to Higher Education Loan Program (HELP) and Trade Support Loan (TSL) repayment obligations.
If you live and work overseas and earn worldwide income that exceeds the minimum HELP and TSL repayment thresholds, you are required to make repayments against your loan. The two main changes the Australian Government has introduced require you to do the following:
update your contact details and submit an overseas travel notification if you have an intention to reside, or already reside, overseas for 183 days or more in any 12-month period; and
lodge your worldwide income or a non-lodgment advice.
These changes apply to new and existing HELP and TSL debts.
ASIC increases fees from 1 July 2017
ASIC increases its fees each year based on the Consumer Price Index (CPI) for the previous March quarter. As such, from 1 July 2017 a new fee index will apply to company lodgement documents.
The increases in fees are not significant but it is important to understand what documents will be impacted and how this will affect your company. Please reference the schedule below for the headline fee increases that come in effect from 1 July 2017.
|Annual Review Fee|
|Special Purpose Company||$48.00|
|Within 1 month after due date||$78.00|
|More than 1 month after due date||$323.00|
For further information around the changes to ASIC fees please contact your Walker Wayland NSW representative.
Draft tax ruling on deductibility of employees’ travel expenses
Further to removing the deductibility of travel expenses in relation to rental properties in the 2017-18 Federal Budget, the Commissioner has issued Draft Tax Ruling TR 2017/D6 which addresses the deductibility of employee travel expenses.
Under the general tax principles, an employee’s travel expenses are deductible for income tax purposes if they are:
- incurred for the purpose(s) of gaining or producing assessable income, and
- not capital, private or domestic in nature.
A variety of travel claims have been examined in TR 2017/D6, outlining situations where employees are, or are not able to claim an income tax deduction for travel expenses.
Cars and tax
From 1 July 2017 the following car threshold amounts apply.
This is the upper limit on the motor vehice cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.
The car limit for 2017–18 is $57,581.
Luxury car tax
From 1 July 2017 the luxury car tax threshold for luxury cars increased to $65,094. The threshold for fuel efficient luxury cars for the 2017–18 financial year remains at $75,526.
In general, the value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.
Goods and services tax (GST)
Generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount.
However, you can't claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.