A quarterly tax update
Cooper Partners summary of the top 5 hot-button issues during the last quarter — a super quick way to stay current on the “need to know” tax developments that are relevant to you.
In this quarter’s “In the Xpress Lane” we have something of interest for everyone:
- Single Touch Payroll
- GST on sale of new residential dwellings or newly subdivided land
- Junior Exploration Incentive Bill passes
- Coalition v Labor on tax policy
- CGT changes for non-residents main residence
Single Touch Payroll
Single Touch Payroll (‘STP’) takes effect 1 July 2018 – this is a new way of interacting with the ATO.
STP aligns employer reporting obligations with payroll processes – as an employer, you will now report automatically through your payroll software, PAYG withholding and superannuation contribution details, to the ATO each time you pay employees.
1 April 2018 is a key date where all employers need to undertake a headcount. If you have 20 or more employees as at 1 April 2018, you must use STP from 1 July 2018.
Headcount is not on a FTE basis. It includes full time, part time, casuals, paid or unpaid leave, workers in Australia or overseas.
If you have 20 or more employees you are considered a ‘substantial employer’ and therefore must use STP from 1 July 2018, even if headcount falls below 20. If this was to occur, you can apply to the ATO for an exemption from the system.
However note, that there is a Bill currently before Parliament to include all employers from 1 July 2019, in any event.
Take away points:
- Check your payroll systems to ensure they are STP compliant
- Stocktake the number of employees at 1 April 2018 and keep this record
- The ATO will now know in real time whether you are paying PAYG withholding and superannuation on time.
GST on sale of new residential dwellings
Integrity reforms will apply from 1 July 2018 to purchasers of new residential dwellings (being dwellings not previously sold as residential premises) or newly subdivided land, where the purchaser will now be obliged to pay GST directly to the ATO as part of the settlement process.
New rules will apply even where the purchaser buys under the margin scheme. Although the vendor only has a GST obligation on the margin, the purchaser is required to pay the GST amount on the full purchase price to the ATO. Where the Margin Scheme applies the amount to pay to the ATO will be 7% of the purchase price rather than 1/11th.
Vendors and suppliers will be required to provide written notice to the purchaser, prior to settlement, advising them whether the sale is subject to GST withholding and whether the margin scheme applies.
Where GST withholding is applicable, the notice must include the developer’s name and ABN as well as the GST amount to pay to the ATO. Where GST is not applicable, such as the sale of existing residential premises, the notice will only need to state that withholding is not required.
The vendor under these circumstances would apply to the ATO to obtain a refund of any excess GST remitted by the purchaser on settlement.
As is apparent, the obligations have now been pushed on to the purchaser under these circumstances.
Take away points:
- Purchasers of new residential property and newly subdivided land be aware on any new acquisitions post 1 July 2018 and your obligations whilst the industry gets across these new measures.
- Land developers be aware of the cashflow impact to you particularly if you were relying on the margin scheme to determine your GST obligations.
Junior Exploration Incentive Bill Passes
On 28 March 2018 the Junior Minerals Exploration Incentive Bill 2017 was legislated.
This Bill replaces the Exploration Development Incentive (EDI) and enables junior exploration companies undertaking Greenfield minerals exploration to distribute their tax losses as a refundable tax offset to private investors who have purchased newly issued shares. Additional franking credits apply to corporate investors.
This measure will no doubt increase the attraction for potential investors in greenfield mineral exploration projects and go towards increasing greenfield exploration in Australia.
What is different:
- Limited to investors that purchase newly issued shares;
- Tax offsets can be claimed a year earlier;
- The incentive is allocated between eligible exploration cpmpanies on a first come first served basis, but subject to a 5% cap of the total credits per applicant;
- The number of credits issued are capped at a lower level than under EDI;
- Unused credits in the first three years of the project can now be rolled over by the explorer; and
- An application is required before any funds are raised.
It is envisaged that the new incentive will involve more administration and complexity for junior explorers. Time will tell whether the new approach will present an improvement on the previous EDI scheme.
Coalition v Labor on tax policy
The next Federal election is looming to be one of the most important elections when it comes to alternative tax policies.
The following summarises the current state of play:
No doubt we will see further differences in tax policy being announced over the coming months making for some interesting discussion and planning in the run up to the next Federal election.
CGT changes for non-residents main residences
There is currently a Bill before the senate that if passed through the full passage of Parliament will remove the CGT exemption for foreign residents on their main residencies.
Currently foreign residents enjoy the same concession on their main residence as do individuals who are residents of Australia for taxation purposes.
However, it is likely this exclusion will be removed for foreign residents who enter into sale contracts after 9 May 2017. The exemption will continue to apply if the main residence was held before 9 May 2017 and sold before 30 June 2019.
Expats can still benefit from the main residence exemption provided they sell their home before becoming a non-resident or wait until they re-establish Australian residency.
Under current drafting there is no obligation to appropriate the capital gain between resident and non-resident periods.
If an owner is a non-resident at date of sale the entire exemption is removed. The 50% discount may be available on gains accruing pre non-residency in these circumstances.
Take away points:
- If you are planning to be a non-resident due to a change in circumstances including overseas employment you need to carefully consider these new rules as to whether you keep your investment or sell before becoming a non-resident.
- The main residence exemption is already complex, now compounded by throwing a change in residency into the mix with no regard to the owner’s previous residency status.
- We envisage the largest group impacted is Australians moving overseas for which their tax residency for Australian tax purposes may change.
This information is general advice only and neither purports, nor is intended to be advice on any particular matter.
No responsibility can be accepted for those who act on the contents of this publication without first contacting us and obtaining specific advice.
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