Issue 88 – Additional Articles

Joshua Easton

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The Newsletter




As reported in the Fairfax Media, NSW Treasurer Dominic Perrottet recently pressured the federal government over GST reform, on the basis NSW is $1.5
billion worse off due to a distribution formula that rewards ‘lazy states’, such as Queensland.

In June, Mr Perrottet welcomed the federal government’s recent initiative to review the GST system, but stressed it ‘should be doing a lot more’.

According to Mr Perrottet

  • NSW has become the safety net for the lazy states.
  • Queensland is embarking on very little reform, if at all and NSW ends up picking up the tab.
  • Why should NSW taxpayers have to foot the bill for governments around the country who aren’t bold enough to embark on reform?
  • The NSW government argues has become a ‘victim of its own success’ with the GST.
  • The state’s half-yearly budget review, released in December 2016, said that in 2019-20 households in NSW will pay $23.7 billion in GST but the
    state will receive just $17.8 billion in return.
  • The NSW government wants the federal government to move to a per capita system of GST funding instead of the present model which seeks to ensure
    all states have a similar capacity to deliver social services.
  • Under a per capita system NSW would receive an extra $14.7 billion in GST over the four years to 2020-21.

This is a debate that will not go away and it is noted that W.A. was similarly peeved at the height of the mining boom where their revenues were strong.


It’s a tough old world when a W.A. farmer cannot decree himself a Prince, secede from Australia and pay no tax!

The Royal Family A.K.A ‘the Casleys’ were ordered to pay more than $3 million in unpaid taxes on 16.06.2017 after a W.A. Supreme Court judge described
their arguments as bizarre, irrelevant and gobbledygook.

Leonard Casley, 91 A.K.A Prince Leonard formed the Hutt River Province in 1969 after a dispute over wheat production quotas. Arthur Casley’s contention
was the court did not have jurisdiction as they had seceded from Australia in 1970.

Unsurprisingly has Justice Rene Le Miere ruled that their arguments have no legal merit or substance.

  • In his judgement Justice Le Miere said ‘Anyone can declare themselves a sovereign in their own home, but they cannot ignore the laws of Australia
    or not pay tax.’

The Casleys had advanced the ‘straw man’ argument. This posits an individual; has two personas, and their debts and legal responsibilities belong to
the ‘straw man’ not the physical person who incurred them, thus allowing them to avoid their obligations!

  • The Casley’s had made statements from the irrelevant to the bizarre including claims the A.T.O. used a form of torture known as ‘Old Hags Nagging’.
  • It is a waste of judicial resources to recite and analyse all of the defendants’ utterances masquerading as legal submissions.

Prince Leonard’s tax bill was just over $2.7 million, while Arthur Casley was ordered to pay $ 242,000.

The 75 square kilometre ‘principality’ is a privately-owned wheat property, in WA’s Mid West region, just north of Geraldton.

This W.A. born author recalls the ‘principality’ being something of a minor tourist attraction in the 1970s. This may account for 10,000 non-resident
citizens. There is also a treaty with indigenous land owners with its own currency and postage stamps.

Her Majesty the Queen was served with a notice of secession in 1970 by Prince Leonard and the Hutt River province has since committed other acts, indicative
of an independent foreign state including at one point declaring war on Australia.

It’s early days yet but we are yet to see how Prince Graeme fulfills his royal duties.

Over the years colourful barristers have accepted a brief and shuffled into the High Court of Australia proffering the argument that federal taxes
are unconstitutional. In similar fashion they have received short shrift. To end on a quote with Benjamin Franklin saying the only two inevitable
things in life are ‘death and taxes’ is a tad negative. In the digital age we include a third inevitability being rapid change, with this comes
many opportunities to make money and legitimately minimise taxes!


The Australian Taxation Office (A.T.O.) is warning taxpayers to avoid incorrect claims for work-related expenses at tax time this year.

Assistant Commissioner Kath Anderson said the A.T.O. is using real-time data to compare taxpayers with others in similar occupations and income brackets,
to identify higher-than-expected claims related to expenses including vehicle, travel, internet and mobile phone, and self-education.

“It is important to know what you’re eligible to claim before lodging your tax return and to make sure you don’t claim more than you’re entitled to,”
Ms Anderson said.

“Many taxpayers don’t have a good understanding of what deductions they can claim, and believe they can claim for items which they in fact can’t. Some
taxpayers even think that you can make a standard claim of $300 without having spent the money. You don’t need receipts for claims up to $300 but
you must have actually spent the money, and be able to show us how you worked out your deduction if asked.”

Ms Anderson said that deductions for work uniforms are also a common trap for employees at tax time.

“It’s a myth that you can claim everyday clothes, for example, black pants and a plain white shirt, even if you only wear them to work, and your employer
says you have to. To legitimately claim your uniform, it needs be unique and distinctive, such as a uniform with your employer’s logo, or be specific
to your occupation and not for everyday use, like chef’s pants or coloured safety vests.”

“It sounds like a small thing, but we aren’t talking about small sums of money here. There are 13 million taxpayers, so if everyone over claims even
$100 that adds up to a lot.”

Ms Anderson said the A.T.O.’s focus is on helping taxpayers get it right in the first instance, but the A.T.O. is also on the lookout for red flags
to find people who are doing the wrong thing.

“The A.T.O. scrutinises every return. We have the technology and experience to detect non-compliance and we are continuing to catch taxpayers who are
deliberately doing the wrong thing.”

Ms Anderson says there are three golden rules for taxpayers to remember to get it right.

“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and
three – you need a record to prove it.”

The myDeductions tool in the A.T.O. app can help make keeping records easier, and at tax time you can send your deductions to your tax agent or upload
them directly to myTax. This year myDeductions is available to sole traders as well as individuals.

“If you are using an agent, you can also talk to them to make sure the work-related expenses that you claim are right,” said Ms Anderson.


Here’s a list of things you probably can’t claim on your tax return:

1.Trips between home and work. Generally you can’t claim a deduction for these because they’re considered private travel.

2.Car expenses for transporting bulky tools or equipment, unless:

you need to use your bulky tools to do your job

your employer requires you to transport this equipment

there is no secure area to store the equipment at work.

3.Car expenses that have been salary sacrificed.

4.Meal expenses for travel, unless you were required to work away from home overnight.

5.Private travel, so if you take a work trip that includes personal travel you can only claim the work-related portion.

6.Everyday clothes you bought to wear to work (e.g., a suit or black pants), even if your employer requires you to wear them.

7.A flat rate for cleaning eligible work clothes without being able to show how you calculated the cost.

8.Higher education contributions charged through the HELP scheme.

9.Self-education expenses when the study doesn’t have a direct connection to your current employment – your future or dream jobs don’t count.

10.Private use of phone or internet expenses – only the work-related portion counts.

11.Up-front deductions for tools and equipment that cost more than $300. However, you can spread your deduction claim over a number of years. That’s
called depreciation.

TD 2017/8 ……………This poses the question  

Income tax: is the cost of travelling to have a tax return prepared by a ‘recognised tax adviser’ deductible under section 25-5 of the Income Tax Assessment ACT 1997 (ITAA


Yes, however, to the extent that the travel related to another non-incidental purpose the expenditure must be apportioned.

The following examples contained in TD 2017/8 may be useful.

Example 1: sole purpose of travel

Maisie and John are partners who carry on a business of sheep farming on a station near Broken Hill. Every year they travel to Adelaide for the sole
purpose of meeting with their tax agent to finalise preparation of their partnership return. They stay overnight at a hotel, meet with their tax
agent the next day and fly back to Broken Hill that night. The full cost of their trip, including taxi fares, meals, accommodation and travel insurance,
is deductible.

Example 2: apportionment when travel is equally for managing tax affairs and private purposes

  • Julian is a sole trader who carries on an art gallery business in Oatlands. He travels to Hobart for two days to attend a friend’s birthday party
    and to meet his tax agent to prepare his tax return. He stays one night at a hotel.
  • Because the travel was undertaken equally for the preparation of his tax return and a private purpose, Julian must reasonably apportion these costs.
    In the circumstances, it is reasonable that half of the total costs of travelling to Hobart, accommodation, meals, and any other incidental
    costs are deductible.



Example 3: apportionment when travel is incidental to main private purpose

  • Erin is an employee working in Warragul. She has her tax return prepared by a tax agent in Melbourne. When travelling to Melbourne for a week long
    football training camp, she decides to stay an extra night in a hotel to visit her tax agent the following day. She travels back to Warragul
    after the meeting.
  • As Erin’s trip is mainly for private purposes, and visiting the tax agent is incidental to that main purpose, she must reasonably apportion the
  • In the circumstances, it is reasonable that only the direct costs of her accommodation for the extra night, incidental costs associated with this
    time, and the taxi fares from the hotel to her tax agent’s premises and back to the hotel are deductible.


According to the Federal government, SIMPLER Business Activity Statements (BAS) and an extension to the instant asset write-off programme will underscore
the simple and positive changes for small business which apply from 1.7.2017.

“The start of a new financial from 1.7.2017 means paperwork will be simpler for small business and the popular instant asset write-off programme will
continue for another year,” Small Business Minister Mr McCormack said.

“I remember how onerous paperwork can be after running my own small business, so I am pleased the BAS will now only have three reporting requirements,
rather than seven.

A limited release of Single Touch Payroll is about to begin for a small number of employers, who will report their wages, Pay-As-You-Go (PAYG) withholding
amounts and superannuation information to the Australian Taxation Office when they pay their employees.

“Single Touch Payroll will become progressively available to employers as payroll software solutions are updated. All employers with 20 or more employees
must report from 1 July 2018. However, any employer can choose to report earlier if they have a Single Touch Payroll-enabled solution,” Mr McCormack

Mr McCormack said the popular $20,000 instant asset write-off programme will run for another year thanks to an extension in the recent Federal Budget.

“Around the country, I heard from small business how helpful the instant asset write-off is to purchase the new equipment they need to grow, and how
it creates what small business calls a ‘chain reaction’ for staff and customers,” Mr McCormack said.

“I listened to that feedback and the Government extended the programme in the 2017-18 Budget. As a result, small businesses with a turnover up to $10
million can continue to purchase the equipment they need to grow up to $20,000 and write it off immediately.

“Our small business tax cuts – which were back-dated to 1 July 2016 so small business reaped the reward immediately – also made more small businesses
eligible for the programme.

“We know turnover above $2 million doesn’t mean you’re a big business, so we have changed the definition to up to $10 million to help even more genuine
small businesses grow.”

1 July 2017 also saw a tax cut for the large-employing medium-sized businesses with an annual turnover up to $25 million.

“Small businesses employ almost one in every two Australians in the workforce. Our changes back them to create even more jobs and keep our economy


Taxation Determination

TD 2017/16: Income tax: capital gains: what is the improvement threshold for the 2017-18 income year under section 108-85 of the Income Tax Assessment
Act 1997?

In this case…$147,582

Class Rulings

CR 2017/33: Fringe benefits tax: employer clients of PBI Benefit Solutions Pty Ltd who are subject to the provisions of section 57A or 65J of the Fringe
Benefits Tax Assessment Act 1986 that make use of the PBI Solutions Meals and Entertainment Card facility

CR 2017/34: Fringe benefits tax: employer clients of Smartgroup Corporation Ltd who are subject to the provisions of section 57A or 65J of the Fringe
Benefits Tax Assessment Act 1986 that make use of the Smartgroup Meals and Entertainment Card facility


At a Federal government level, the House of Reps Standing Committee on Economics tabled its ‘Report on the inquiry into tax deductibility’. This inquiry
was instigated by the Treasurer on 15.6.2017 to examine options to simplify the personal and company income tax systems, to consider options to
broaden the base of these taxes seeking to fund reductions in marginal rates. Key recommendations include Government maintaining the current company
income tax framework allowing the deductibility of interest incurred by businesses in deriving their income and continuing to make progress on
implementing the G20/OECD’s BEPS recommendations.


APRA has released a draft Reporting Standard for the collection by APRA on behalf of the Commissioner of information relevant to the calculation of
the proposed major bank levy.


On 24.5.2017, the Inspector-General of Taxation (IGT), Ali Noroozi, has released his report into the A.T.O.’s employer obligations compliance activities.
Initially the process arose from the uncertainty surrounding the employee/contractor distinction. But the IGT ultimately treated the Report as
an opportunity to conduct a comprehensive review of A.T.O. compliance activities in respect of employer obligations.

The report which the government had six months to consider, also reviews changes implemented by the A.T.O. following the Commonwealth Government’s
policy on reducing red tape for small businesses and identifies further opportunities for reducing compliance burden and costs of employers.

Eleven recommendations were made of which two were directed to the Government, and 9 to the A.T.O., which responded by agreeing in full or in part
to 7 of the 9 recommendations.

  • Uncertainty associated with the employee/contractor distinction: The Report acknowledges the challenges facing employers face
    in determining whether a worker is an employee or a contractor. There are real difficulties in applying the “inherently ambiguous” common law
    definition of ‘employee’, which can be altered by tax and superannuation legislation. There may be high costs involved; high costs meaning
    businesses may seek limited or no professional advice, while there are risks that significant liabilities may be applied where the A.T.O. retrospectively
    reclassifies the worker’s status.
  • The IGT recommends that the A.T.O. clarify the protection from penalties afforded to employers who use and rely on the Employee/Contractor Decision
    tool (ECD tool) in good faith to determine the status of workers. It was also recommended that the ECD tool be extended for use by workers
    and information outlining employer/employee rights and obligations be provided when using the ECD tool. However the A.T.O. did not accept further
    recommendation that a voluntary certification service be implemented, which would offer binding advice on the status of workers to both employers
    and workers. Private binding rulings are currently only available to employers.
  • Cost of complying with employer obligations:The effectiveness of recent government initiatives that are intended to reduce compliance
    burden on businesses was queried in the report. These include the Small Business Superannuation Clearing House, Taxable Payments Reporting
    System and the Single Touch Payroll (STP) system (adoption is mandatory for large employers and voluntary for small employers).
    Several changes were proposed to ensure that these initiatives operate as intended in view of issues raised by stakeholders.

    The Report recommended that the Government conduct a review of the Fringe Benefits Tax (FBT) regime, in view of high compliance
    costs on employers.It was suggested that this could only be addressed by a wholesale review of the system and legislative change. The Government
    says it will consider this recommendation, but did not commit to any specific review process.

A.T.O.’s approach to monitoring non-compliance: There were a number of recommendations intended to enhance the A.T.O.’s compliance
capabilities. Currently it would appear the A.T.O. relies on affected employees to identify cases of non-compliance with regard to superannuation
guarantee (SG) payments. The A.T.O. was urged to take a more proactive compliance approach, given affected employees are often
unaware when underpayment has occurred.

The IGT has proposed increasing the use of data from third party sources, such as superannuation funds, State Revenue Offices and the Fair Work Ombudsman. The A.T.O. also plans to weed out non-compliance (PAYG and SG) by the extensive use of real time data collected from the STP system.

It is significant that recently the Senate Economics References Committee shared these concerns.


Its early days but the timeline for these interesting developments is as follows:

May 2015 -In the federal budget cuts to the company tax rate for small business are announced. This is largely interpreted as only applying to active
trading companies carrying on a business and not to passive investment companies.

March 2017 -A draft ruling is issued by the A.T.O on offshore oil companies. A footnote includes the comment that active investment companies are deemed
to ‘carry on a business’.

June 2017- The A.T.O informs the National Tax Agent Liaison group meeting that it will issue more detailed guidance near in the future.


Leaving aside the political attacks that erupted on 6.7.2017, the recent release of Parliamentary Budget Office (PBO) figures made for some interesting

Despite on-going concerns with deficits, it would appear that the Government’s income tax windfall would arise largely as a result of wage increases
driving income tax earners into higher marginal tax brackets according to the PBO’s 10 year budget projects released on 5.7.2017.

  • The Government’s personal income tax collections would almost double to $378B by 2028 compared with 2016
  • The average income tax rate on incomes will rise from 22.7% (2016) to 25.9% (projected 2028)

The centre for independent studies after analysing the numbers predicted:

  • The share of individuals on the top marginal tax rate (47%) would rise from 3% to 7.3% in a decade
  • The share paid by individuals earning between $18,200 and $80,000 would fall from 31% to 18%.
  • The number of people on the top marginal rate would increase from around 400,000 to almost 1.2 million.


In the meantime… over in the Golden West, mining giant Rio Tinto has made a submission to the productivity commission’s review of the G.S.T.
carve up, blasting a ‘perverse’ system. It would appear the W.A. shares N.S.W’s grievances.

Changes to Australian GST for cross-border supplies apply from 1.7.2017

Since 1 July 2017, ‘inbound intangible supplies’ have attracted GST where made by non-resident suppliers to Australian consumers.

GST on inbound intangible supplies (including digital products and services)

Below are the key features for the new provisions:

  • From 1.7.2017 the supplies of things other than goods or real property made to an ‘Australian consumer’ will be connected with Australia and subject
    to GST.
  • The Australian provisions are broader than some other jurisdictions and catch anything other than goods or real property.
  • An ‘Australian consumer’ is defined as an Australian resident that is not registered for GST in Australia.
  • If the entity’s GST turnover exceeds the registration turnover threshold of AUD 75,000, it should register for GST in Australia.
  • Where supplies of inbound intangibles are made through an Electronic Distribution Platform (EDP), the GST liability on these supplies will shift
    to the operator of the EDP (i.e. generally, online marketplaces that act as intermediaries). The A.T.O. has released a draft Law Companion
    Guideline (LCG 2017/D4) dealing with the EDP provisions.
  • Where there are multiple EDPs for a supply, tie-breaker provisions may be applied.
  • Suppliers of inbound intangible supplies are not required to issue tax invoices.
  • The GST law contains rules in relation to contracts/supplies that straddle 1.7.2017. Supplies that are made for a period or progressively over
    a period of time are treated as being supplied continuously over that period. To the extent a supply is taken to be made on or after 1.7.2017
    then there is GST payable on the portion that is made on or after that date.

 The A.T.O. has already written to impacted taxpayers.

The definition of ‘Australian consumer’ is contained in Goods and Services Tax Ruling GSTR 2017/1, having taken a practical approach, the A.T.O. has
outlined that when determining whether a recipient is an Australian consumer, it is sufficient to satisfy evidentiary requirements from jurisdictions
determined by the A.T.O. to have comparable residency elements. For example the A.T.O. considers countries within the European Union, New Zealand
and Norway as examples of jurisdictions with comparable residency elements.

In order to treat a recipient as not an Australian consumer, it is necessary to collect the Australian Business Number (ABN) and information/declaration
for the entity that it is registered for GST. The A.T.O. expects some level of verification of the ABN.

The A.T.O. has also released details of:

  • Limited registration for GST
  • The steps that affected suppliers need to take


Important changes to the Foreign Resident CGT Withholding Tax Regime (FRWT Regime) came into effect on 1.7.2017

The Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017 (Cth) has:

  • increased of the rate of withholding from 10% to 12.5%; and
  • reducedthe “property value exclusion” threshold for direct acquisitions in Australian land from $2m to $750k.

In past issues we have covered the FRWT Regime, which commenced on 1.7.2016, and imposes broad obligations on parties to transactions involving direct
and indirect (i.e. though acquisitions in majority Australian landholding companies and trusts). This may even apply for acquisitions in Australian
land where all the parties are Australian residents. The granting of options in respect of Australian land can also be caught.

The ‘property value exclusion’ only applies to direct acquisitions in Australian land, not to granting of options. However if there is a subsequent
transfer of the subject land on exercise of an option the ‘property value exclusion’ may then apply. As a result you may still have obligations
under the FRWT regime on:

  • the indirect acquisition of an interest in a majority Australian landholding company or trust, even where the underlying Australian landholdings
    are less than the ‘property value exclusion’ threshold; or
  • the granting of an option in respect of Australian land even if the subsequent acquisition on exercise of the option would fall within the ‘property
    value exclusion’.

When these changes were announced in the May Budget, the Federal Government also made it clear the test for determining indirect interests in Australian
real property would be modified. This has the potential to broaden the transactions involving indirect acquisitions in Australian land which could
be affected by the FRWT Regime, but we are yet to see legislation dealing with this proposed measure.

These changes are complex and specialist advice should be sought.


Question 1

Dear Sir, in Brisbane, a graduate dentist had a contract with employer on a commission (%) basis. He made the ABN as a sole trader. In this case, is
he contractor or employee? Could you additionally explain it with the superannuation responsibility?


This is not an uncommon arrangement and it can have complications.

It depends on the arrangements in the workplace but if the contractor works set hours under the control and direction of the business owner(s) then
in essence the person is an employee and not an independent contractor.

Having said this, the A.T.O. generally accepts the ABN arrangements as long as all relevant tax is properly paid.

Certainly the arrangement should be included on the Work Cover contract because Work Cover QLD takes the view that such a person should be covered
by the business owner.

An individual on an ABN who has a labour component in their invoices exceeding 50% (clearly the case here) is entitled to statutory superannuation
(9.5%). So the fact that super needs to be paid must be incorporated into the arrangements. Another issue is P.I. insurance – what arrangements
has the business owner made and what does his policy say?

Question 2

The new dentist has no set hours during the 5 days at an office (pay rate 40:60 incl super & etc.), so he works only if there is a patient. The
employer is managing the dental assistants and receptionists. He also has P.I and works no other place.

I think that he can be an employee any time. But he wants to save the superannuation payment. Is it possible for him to choose the contractor as a
sole trader? Does he need to get the permission under employer?


Your client is obligated to attend the practice when there are patients – which would broadly confirm to set hours. Furthermore he cannot delegate
his work and is paid an hourly rate. He would not appear to be an independent contractor and as an individual with a greater than 50% labour component
in the contract, statutory superannuation will be payable.

Question 3

My client is 61 years of age (male), works part time (20 hours/week) and earns $30k per year. Is he able to access some of his super and if so, how



Yes. He should be able to access a transition to retirement pension. Broadly this pension could be paid at 4 to 10 % of his super fund balance.

Question 4

GST claim problem (company or individual) I setup the private company (CGT registration) and I am only director. But I bought a business car (Ute)
in my name for the business. Can I claim the GST through the Company BAS? (I have no GST registration for myself).


The answer is