FBT RETRAINING AND RESKILLING EXEMPTION NOW LAW
Employers who provide training or education to redundant, or soon to be redundant, employees may now be exempt from fringe benefits tax (FBT).
Eligible employers can apply the exemption to retraining ad reskilling benefits provided on or after 2 October 2020.
There are no limits on the number of training or education courses your employees may undertake or the cost of the education or training.
You don’t need to include these exempt retraining and reskilling benefits in your FBT return or your employee’s reportable fringe benefits amount.
If you’ve already lodged and paid your 2021 FBT return, you’ll need to amend your return to reduce the FBT paid for any exempt retraining and reskilling benefits.
If you intend to claim the exemption, you must keep a record of all training and education provided to redundant, or soon to be redundant, employees.
Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 received royal assent on 22 June 2021. From 1 July 2021, self-managed super funds (SMSF) and small APRA funds (SAFs) will be able to have up to six members.
If you are considering expanding your fund, you will need to consider things such as what your fund’s trust deed allows, the structure of your fund and its reporting requirements.
Some State and Territory laws restrict the number of trustees a trust can have. Because an SMSF is a type of trust, your fund may be impacted by these restrictions. To avoid this issue, you can set up your SMSF with a corporate trustee and each member as a director of the corporate trustee.
It is important to seek professional advice and check State or Territory law restrictions before registering or expanding your fund.
The ATO has implemented the necessary system changes to enable SMSFs to add members five and six to their fund through the Australian Business Register (ABR).
The ATO urges taxpayers to make sure they have a record of any donation they are claiming this tax time. Last year nearly two-thirds of the charitable claims investigated were adjusted because the taxpayer could not prove they had made the donation.
ATO statistics indicate that around 4.2 million Australians claimed deductions for more than $3.9 billion in gifts and donations to charities and not-for-profits in 2018–19.
There are four main reasons your donation or gift may not be tax-deductible. The first is giving to an organisation that is not endorsed by the ATO as a deductible gift recipient (DGR).
A DGR is an organisation or fund that the ATO endorses to receive tax-deductible gifts or donations. Not all charities and not-for-profits are DGRs. Additionally, many crowdfunding campaigns that raise money for charitable causes and individuals in need are not run by DGRs. Taxpayers can confirm an organisation’s DGR status by checking the ABN Lookup on business.gov.au.
According to the ATO:
- The growth in online crowdfunding is proving that Australians are looking to be charitable online. Unfortunately, it will not be tax-deductible unless your donation or gift is made to an endorsed DGR.
- People are donating directly to foreign charities and not-for-profits. Unless the organisation is a registered Australian DGR, then those donations are not tax-deductible.
- The second reason your donation may not be tax-deductible is where you receive or expect to receive a monetary or personal benefit or advantage in return. Australians love raffles and fundraising chocolate. But if you buy chocolate, a raffle ticket or an item from an Op Shop, this isn’t considered a tax-deductible gift.
- Thirdly, taxpayers must keep good records. Most organisations will usually issue you with a receipt, but they don’t have to. The ATO will accept third-party receipts as evidence of a gift to a DGR if the receipt identifies the DGR and states the fact that the amount is a donation to the DGR. However, suppose you made one or more donations of $2or more to bucket collections conducted by an approved organisation for natural disasters. In that case, you can claim a tax deduction of up to $10 for the total of those contributions without a receipt.
- Charities and not-for-profits do good work all over Australia, so the ATO wants to make it easier for you to support the DGR of your choice. Suppose you use the myDeductions tool in the ATO app to store photos of receipts throughout the year. In that case, you can simply upload your donation information.
- Finally, some people incorrectly claim tax deductions for donations they intend to make in their will or claim for workplace giving that has already reduced the amount of tax paid in each pay period.
- While including a donation in your will is a great legacy to leave, testamentary gifts are generally not tax-deductible.
Workplace giving is reported to the ATO by employers. The workplace giving program does not affect how gross income, super guarantee payments or fringe benefits are calculated. Taxpayers report donations made under a workplace giving arrangement and donations made directly by you to charities in the same way on your tax return.
Where the ATO finds an issue, the taxpayer will have the opportunity to provide supporting documentation or amend their tax return to remove the claim. However, if the ATO believes there has been a deliberate attempt to defraud, then penalties may be applied.
It is important to get it right and only claim legitimate donations.
In July 2021, the ATO announced its intention to acquire lifestyle assets data from insurance policies for 2020-21 through to 2022-23 for the following assets where the value is equal to or exceeds nominated thresholds.
|Asset class||Minimum asset value threshold|
|Fine art||$100,000 per item|
The data items include:
- Client identification details (names, addresses, phone numbers, dates of birth, Australian business number, email addresses), and
- Policy details (policy number, policy inspection date, start date of current policy, end date of current policy, total value insured, purchase price of the property insured, registration or identification number of the property, insurance category, policy cost, description of the property insured, primary use type)
The objectives of the lifestyle assets data-matching program are to:
- promote voluntary compliance and increase community confidence in the integrity of the tax and superannuation systems
- assist with profiling to provide compliance staff with a holistic view of a taxpayer’s wealth
- identify possible compliance issues with income tax, CGT, FBT, GST and superannuation obligations
- determine avenues available to assist in debt management activities
- gain insights from the data to help to develop and implement treatment strategies to improve voluntary compliance, which may include educational or compliance activities as appropriate
- identify and educate those individuals and businesses who may be failing to meet their registration and/or lodgement obligations and assist them to comply
- help ensure that individuals and businesses are fulfilling their tax and superannuation reporting obligations.
Not all payments you receive are assessable income for income tax purposes and do not need to be included as assessable income.
List of non-assessable amounts
The following amounts are not assessable:
- betting and gambling wins (unless you operate a betting or gambling business)
- earnings from a hobby
- gifts or inheritance
- GST you have collected
- non-assessable non-exempt government grants for grant recipients
- prizes and awards not related to your business
- money you have borrowed
- money you contribute as the business owner.
Non-assessable non-exempt government grants for grant recipients
The Federal Government can declare eligible business support grants as non-assessable, non-exempt (NANE) income. This means you do not include NANE income in your income tax return, and you do not pay tax on it.
COVID-19 recovery payments
Some COVID-19 recovery payments from the Government to support small businesses will be NANE income for tax purposes.
To meet the eligibility requirements to treat support grants as NANE income on your income tax return, you will need to self-assess.
A payment will be NANE if it was received:
- under an eligible grant program
- in the 2020–21 or 2021-22 financial years
- by a small business with an aggregated turnover of less than $50 million in the income year the payment was received.
Example: receiving a grant eligible for NANE income
Fresh Brew is a small business operating a café in Victoria.
Fresh Brew received an eligible grant payment under the Outdoor Eating and Entertainment Package for the 2020-21 financial year.
This Package is part of the Victorian Government’s response to the economic impacts of Coronavirus.
The Minister has declared that the Outdoor Eating and Entertainment Package is a grant program eligible for NANE income.
In the 2020-21 financial year, Fresh Brew self-assessed and identified that they are a small business as their turnover was less than $50 million in the income year the payment was received.
As Fresh Brew received an eligible grant payment in the 2020-21 financial year and is a small business, they do not need to include the grant in their business income.
Some recovery grants from natural disasters are also NANE. The key takeout is to check out whether any government grant or non-business receipt qualifies as non-assessable non-exempt income (NANE).
To ensure it does not get lumped with your normal business, always include it as a separate income item in your accounting software. This will ensure all NANE gets properly identified.
This report looked at trends over the 2016 to 2020 financial years, finding that undisputed tax debt leapt from $19 billion to $34 billion—the reasons given being natural disasters and the Covid-19 pandemic.
- Overall, the Australian taxation system operates with a high level of voluntary compliance in relation to the payment of tax liabilities. This is perhaps unsurprising as, put another way, self-assessed taxes are voluntarily paid on time.
- The ATO’s data indicates that for all liabilities raised and due within a particular year, approximately 90% are paid by their respective due date, a further 6% paid within 90 days, and a further 1% is paid within 365 days of the due date. This leaves a remainder of 3% unpaid after a year. In FY20, the proportion unpaid after a year is 4.2%.
- Notwithstanding the high levels of voluntary compliance, collectable debt continues to increase. It is the largest component of the ATO’s debt book, alongside Disputed Debt and Insolvent Debt. Collectable debt includes those debts that are due and payable and are not subject to dispute, legal action, or other restrictions on recoverability. The Collectable Debt balance has continued to rise, year on year, over the past five years.
- In FY16, the amount of collectable debt was $19.2 billion, and it increased to $34.1 billion in FY20 (an increase of 77.6%). However, the circumstances in FY20 are unique and include the impacts of the Australian (2019) bushfires and COVID-19 pandemic. These impacts resulted in the ATO redeploying its officers to assist with COVID-19 recovery work, resulting in reduced active, outbound contact to recover outstanding amounts. The ATO also granted more than 12.9 million lodgement and payment deferrals in FY20. Deferred payments do not form a part of the reported collectable debt as the due date for payment was varied. Where the payment is made by the varied due date, it would not become a debt.
Superannuation Guarantee Charge and Other taxes
Given the Superannuation Guarantee Charge (SGC) amnesty, we were particularly interested in SGC collections and debt.
- Unsurprisingly, in terms of collection efficiency (when compared with net tax collections), excise is the most efficiently collected tax (for every dollar of net excise collected, there is 0.2c of total collectable debt outstanding at the end of the FY).
- SGC is the least efficient collectable tax debt – for every dollar of net SGC collected, $1.95 remains collectable at the end of the FY. It is also important to note that unpaid SGC is different from other collectable tax debts. Namely, unpaid SGC adversely impacts the employee (in the form of lower superannuation account balances and therefore earnings on these balances) rather than lower consolidated revenue collections.
- The underlying reasons for the efficiency variance may be due to the different implications of non-payment of the taxes. For example, non-payment of excise may result in a loss of excise licence or retention of dutiable goods.
The Australian Taxation Office (ATO) reminds property investors to beware of common tax traps that can delay refunds or lead to an audit costing taxpayers time and money.
In 2019–20, over 1.8 million Australians owned rental properties and claimed $38 billion in deductions.
According to Assistant Commissioner Tim Loh
- The most common mistake rental property and holiday homeowners make is neglecting to declare all their income. This includes failing to declare any capital gains from selling an investment property.
- To put it simply, you should expect tax consequences for any property that you earn income from that isn’t your main residence.
- The ATO is expanding the rental income data we receive directly from third-party sources such as sharing economy platforms, rental bond authorities, and property managers.
- Taxpayers will be contacted about the income they’ve received but haven’t included in their tax return. This will mean they need to repay some of their refund.
- The ATO often allows taxpayers who have made genuine errors to amend their returns without penalty. But deliberate attempts to avoid tax on rental income will see the ATO take action.
- People should remember that there’s no such thing as free real estate when it comes to their tax returns. Data analytics scrutinise returns for rental deductions that seem unusually high, and the ATO will ask questions, leading to a delay in processing your return.
- So far, the ATO has adjusted more than 70% of the 2019–20 returns selected for a review of rental information.
- Most people contacted about their rental deductions are able to justify their claims. However, there are instances where claims were rejected as taxpayers didn’t keep receipts, claimed for personal use, or claimed for ineligible deductions.
- The ATO often reject claims for interest charges on personal loan amounts and immediate claims for the full amount for capital works (for example, a kitchen renovation), so you must have good records.
- If you take out a loan to buy a rental property and rent it out at market rates, the interest on that loan is deductible. However, suppose you redraw money from that mortgage for personal use, such as buying a boat or going on a holiday. In that case, you can’t claim the interest on that part of the loan.
- The ATO also sees taxpayers claiming capital works as a lump sum rather than spreading the cost over a number of years. Capital works include a new building or an extension, renovations or structural improvements.
The cost of repairs for wear and tear to the property are deductible immediately if they are to replace or fix existing items, such as curtains, without upgrading them. However, improvements or capital expenses, such as a kitchen renovation, are not deductible immediately. The ATO has advice, guidance, and an online tool on our website to help taxpayers make these calculations. Taxpayers can also speak to a registered tax agent.
Reduced rent during COVID-19
Residential rental property owners may be unsure about how COVID-19 has impacted their tax return. For example, you may have negotiated (at arm’s length) reduced or deferred rent.
You only need to declare the rent you have received as income. If payments by your tenants are deferred until the next financial year, you do not need to include these payments until you receive them.
Back payments for deferred rent or insurance for lost rent should be declared as income in the financial year you receive the amounts.
While your rental income may be reduced, as long as the reduced rent is determined at arms’ length and considers current market conditions, you can still claim normal expenses made on your property.
Travel restrictions may have also affected demand for short-term rental properties. Generally, suppose your plans to rent a property in 2020–21 were the same as previous years but were disrupted by COVID-19. In that case, you will still be able to claim the same proportion of expenses.
This only applies where the property was not used privately. Suppose you, your family or friends stayed at the property for free or at a reduced rate. In that case, you won’t be able to claim or will only be able to claim a portion of these expenses.
The ATO has advised the JobMaker Hiring Credit scheme’s third claim period is now open. Suppose you’ve taken on additional eligible employees since 7 October 2020. In that case, you may be able to claim JobMaker Hiring Credit payments for your business.
To claim, you need to:
- Register at any time before 6 October 2021 through ATO online services, Online business services, or through your registered tax or BAS agent.
- Nominate your additional eligible employees by running payroll events through your Single Touch Payroll (STP)-enabled software.
- Claim your payments – enter your headcount and payroll information for the JobMaker period. The ATO will calculate your claim amount based on the information you provide.
Eligible businesses can receive up to:
- $10,400 over a year for each additional eligible employee hired aged 16 to 29 years
- $5,200 over a year for each additional eligible employee hired aged 30 to 35 years.
The JobMaker Hiring Credit is available to businesses for each additional eligible employee hired before 6 October 2021.
If you’re thinking about taking on extra staff, check if you’re eligible to participate in the scheme. The ATO has the resources available to help you, including a guide, key dates and a tool for estimating payments.
Remember, registered tax agents and BAS agents can help you with your tax.
On 5.8.2021, the Federal Government noted the registration of regulations to support the Your Future, Your Super reforms, which passed the Parliament on 17 June 2021.
The Your Future, Your Super reforms will ensure the superannuation system works harder for all Australians. Saving workers $17.9 billion over ten years by putting strong downward pressure on fees, removing unnecessary waste, and increasing accountability and transparency.
- Ensure the final methodology applied for the annual performance test is further strengthened to incentivise underperforming products to reduce fees as soon as possible.
- Prescribe a ‘stapled fund’ definition, including tie-breaker rules for determining which fund is an employee’s stapled fund with multiple existing funds.
- Specify how products will be ranked on the online YourSuper comparison tool.
- Prescribe the information that must be included with the notice of an Annual Members’ Meeting.
- Further, strengthen the prohibition on funds offering inducements to employers.
The final performance test methodology will see the administration fee component of the test based on the administration fee charged by the product over the most recent financial year, benchmarked against peers.
This approach addresses historical anomalies, including with respect to millions of multiple unintended and inactive accounts. It will create a strong incentive for superannuation funds to reduce fees in order to avoid failing the test. This change will enable the reforms to deliver immediate benefits to consumers in the form of lower fees.
This builds on previous changes to strengthen the performance test, including ensuring that administration fees are part of the performance test and adding Australian unlisted infrastructure and unlisted property as specific asset classes covered by the performance test.
The annual performance test will protect members from poor outcomes. If they fail the test, funds will be required to notify members, and persistently underperforming products will be prevented from taking on new members. Members will be notified by 1 October 2021 if their fund fails this test.
Portfolio Holdings Disclosure regulations will be finalised in the coming weeks following further consultation.
The newly registered regulations can be accessed on the Federal Register of Legislation.
The Your Future, Your Super reforms are the most significant since the introduction of compulsory superannuation in 1992, building on the Government’s prior reforms, which have included:
- consolidating 3.5million unintended multiple accounts worth almost $4.7 billion
- capping fees on low balance accounts
- banning exit fees, and
- ensuring younger Australians do not pay unnecessary insurance premiums.
These are the highlights from the four most frequent claim types amongst accounting firms offering Audit Shield in Australia:
- BAS Audits and Reviews (Pre & Post Assessment)
The Accountancy Insurance Claims team noted a more than 10% increase in BAS Audits and Reviews (Pre & Post Assessment) over the 2020-2021 financial year. This has placed BAS Audits and Reviews into the number one position of all audit categories over the last 12 months.
The spike was attributed to cash flow boost payment activity statement audits and reviews.
The cash flow boost program ended with the lodgement of 30 September 2020 activity statements. It is anticipated audit activity throughout 2021, especially where employers declare unusual variations in W1 and W2 amounts in 2021 vs 2020 activity statements.
- Employer Obligations Audits and Reviews (PAYG/SG/FBT)
Throughout 2020 and into 2021, many Australian businesses will not have kept up to date with their superannuation guarantee (SG) obligations because of COVID-19 business cash flow pressures. This has been receiving a lot of attention from the ATO.
With Single Touch Payroll (STP), the ATO can easily identify and flag underpayments of SG. STP reporting has been a big driver of ATO SG audit activity in 2021.
Claim proportion (frequency) 2020-2021: Employer Obligations Audits and Reviews (PAYG/SG/FBT) accounted for 14.87% of all Accountancy Insurance claims.
- Payroll Tax Investigations (All States)
Payroll Tax Investigations (All States) continues to be a major focus area by all State Revenue Offices around the country.
- Income Tax (Full/General/Combined) Audits and Reviews
Income Tax covers a vast array of different types of ATO audit activity that can be linked back to taxpayers’ lodged income tax returns.
- Covid-19 JobKeeper Payment Audits and Reviews
Despite Covid-19 JobKeeper Payment Audits and Reviews being a new category, it became one of the top five most frequent claim types in the 2020-2021 financial year.
The taxpayer, a social worker, worked as support staff for an organisation providing services for adults and children with disabilities. In his 2018 tax return, prepared by his tax agent, the taxpayer claimed work-related deductions (laundry, non-slip shoes, mobile phone charges and hand cream) totalling $670. He also claimed self-education expenses consisting of fees for a child protection course ($9,435), a HELP debt ($4,000), travel expenses from work to Geelong for training ($1,500) and depreciation of a computer ($137). When the return was lodged, the taxpayer was yet to pay the course fees and was unsure whether he was obliged to, as it turns out he didn’t. The ATO disallowed the work-related deductions and the self-education expenses and imposed a 50% shortfall penalty.
The Administrative Appeals Tribunal (AAT) held that:
- the course fees were not deductible as the taxpayer had not paid them;
- the HELP debt was not deductible by virtue of s 26-20 of the ITAA 1997;
- there was no evidence to support the travel expenses; and
- the taxpayer could not substantiate the various work-related deductions (for example, there were no receipts).
In dealing with the shortfall penalty, even though the AAT held that reasonable care had not been taken in preparing the 2018 tax return, and the “safe harbour” exception did not apply, they were willing to remit the shortfall penalty by 85%. This was largely because the tax agent had made a mistake in claiming the course fees and provided incorrect advice to the taxpayer in relation to the deductibility of HELP loan repayments and the travel expenses.
The passage of the Treasury Laws Amendment (COVID‑19 Economic Response No. 2) Bill 2021 on 10.8.2021 will provide additional support to individuals and businesses that continue to be affected by the COVID‑19 pandemic.
The Bill will ensure that COVID‑19 disaster payments received by individuals from the 2020‑21 income year are tax-free, providing additional relief for individuals who are doing it tough.
The Bill also gives effect to the Morrison Government’s commitment to assist any state and territory that is unable to administer its own business support payments in the event of a significant lockdown imposed by a state or territory.
The Treasurer will also determine the tax treatment of eligible COVID‑19 business support payments administered by the Commonwealth.
Under the Bill, the ATO will share data with Australian government agencies to administer a COVID‑19 business support program that the Treasurer has declared is eligible for data sharing.
Importantly, the Bill will also provide flexibility to enable necessary temporary adjustments for complying with information and documentary requirements under Commonwealth legislation.
On 13.8.2021, the Australian Business Register (ABR) was updated. And you are now able to add a fifth or sixth member to your self-managed superannuation fund (SMSF) instead of using the ATO interim process.
This follows legislation that came into effect on 1 July that allows you to have up to six members in your SMSF.
Before you create a fund or add additional members, it is important to remember that some State and Territory laws restrict the number of trustees a trust can have to less than six. As an SMSF is a type of trust, it is important that you seek professional advice to help understand if these restrictions impact your SMSF.
The increase in the maximum number of members in a SMSF also has flow-on effects for other requirements, such as signing financial statements. The accounts and statements (an operating statement and a statement of financial position) of an SMSF must be signed by the required number of trustees or directors of the corporate trustee. This number will depend on the number of trustees or directors of the corporate trustee that your SMSF has. For the 2021–22 and later financial years, if there are:
- One or two directors or individual trustees, then all of them must sign the documents
- Three or more directors or individual trustees, then at least half of them must sign the documents.
TAXATION RULING TR 2021/4 INCOME TAX AND FRINGE BENEFITS TAX: EMPLOYEES: ACCOMMODATION AND FOOD AND DRINK EXPENSES, TRAVEL ALLOWANCES, AND LIVING-AWAY-FROM-HOME ALLOWANCES
This Ruling which was released on 11.8.2021, explains:
- When an employee can deduct accommodation and food and drink expenses under section 8-1 of the ITAA 1997 when travelling on work, including where it is necessary to apportion.
- The fringe benefits tax (FBT) implications, including the application of the otherwise deductible rule, where an employee is reimbursed for accommodation and food and drink expenses or where the employer provides or pays for these expenses.
- The criteria for determining whether an allowance is a travel allowance (as defined in subsection 900-30(3)) or a living-away-from-home allowance (LAFHA) benefit (see section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)) and the differences between them.
- Whether accommodation and food and drink expenses are deductible depends on the facts and circumstances of each case. This Ruling uses examples to show how to determine the deductibility of these expenses in a range of situations.
TR 2021/4 Contains 14 worked examples that are relevant to everyday situations.
Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.