Government announces
changes to proposed 'Stage 3' tax cuts
Despite previous assurances, and after much
speculation, the Government has announced tweaks to the 'Stage 3' tax cuts that
will apply from 1 July 2024.
More particularly, the Government proposes to:
- reduce
the 19% tax rate to 16%;
- reduce
the 32.5% tax rate to 30% for incomes between $45,000 and a new $135,000
threshold;
- increase
the threshold at which the 37% tax rate applies from $120,000 to $135,000; and
- increase
the threshold at which the 45% tax rate applies from $180,000 to $190,000.
- The Medicare levy low-income thresholds for the 2024
income year will also be increased.
Changes in reporting
requirements for sporting clubs
Not-for-profits ('NFPs'), including sporting clubs,
societies and associations with an active ABN, need to lodge an annual NFP self-review return to continue accessing their income tax exemption.
The main purpose of a sporting organisation
must be the encouragement of a game, sport or animal racing. Any other purpose of the organisation must
be incidental, ancillary or secondary.
The organisation's governing documents will help
identify the purpose for which it was set up, and the organisation's activities
in the year of income must then demonstrate that the main purpose is the
encouragement of its game, sport or animal racing.
NFP organisations need to lodge their first NFP self-review return for the 2024 income year between 1 July and 31 October
2024.
NFP organisations with their own ABN need to complete
their own NFP self-review return even if they are affiliated with a
broader sporting group.
If an NFP organisation does not lodge the return, they
may become ineligible for an income tax exemption and penalties may apply.
Editor: if you need more information about this recent development, please contact our office.
Deductions denied for
work-related expenses
The Administrative Appeals Tribunal ('AAT') recently
held that a taxpayer should not be allowed deductions for various work-related
expenses, largely because the substantiation requirements had not been
satisfied.
The taxpayer, a real estate salesperson, claimed tax
deductions for the 2018 to 2020 income years, during which time he derived
income from his employment with a real estate company.
However, the ATO disallowed the taxpayer's claims for
various work-related expenses, including car expenses, and gifts and donations.
The AAT agreed with the ATO, and held that the
expenses claimed were not deductible and that the taxpayer had failed to
substantiate his claims.
The taxpayer had claimed deductions for car expenses
using the logbook method, but the AAT noted that the car was owned by a company
and was not leased to the taxpayer.
Therefore, the car was not 'held' by the taxpayer, as required by the
logbook method. The taxpayer's logbook
also lacked "sufficient specificity" for this method.
While the taxpayer produced credit card statements and
telephone tax invoices (in relation to credit card interest and telephone
expenses), it was not clear from these documents whether the costs claimed
related to work expenses.
The taxpayer sought to rely on bank transaction
statements in relation to other expenses, but they were considered to be
insufficient, as it was unclear from these statements what the relevant expense
was, how the expense was incurred in earning the taxpayer's assessable income,
and any apportionment between business and personal use.
There were also no receipts or tax invoices for any of the claimed donations.
Sale of land subject
to GST
The AAT recently held that the sale of land by a
taxpayer was subject to GST, as it was a supply made in the course of an
enterprise being carried on by the taxpayer.
The taxpayer purchased a single parcel of land in 2013
for $1.6 million, and he subsequently took steps for the land to be subdivided
and rezoned. He then sold the land in
2021 for $4.25 million before the subdivision was completed.
The ATO advised the taxpayer that the sale of the land
was subject to GST as a taxable supply under the GST Act.
The taxpayer objected to the GST assessment on the
following grounds:
- the sale of the property was not made by
him in the course of his enterprise; and
- as
the property was the taxpayer's residential premises, it was an input taxed
supply, so no GST should apply anyway.
However, the AAT agreed with the ATO that the sale of
the property was subject to GST as a supply made in the course of the
taxpayer's enterprise.
The AAT first noted that the sale of the property was
not an input taxed supply of residential premises because the buildings on the
property were uninhabitable, and so the property did not meet the definition of
'residential premises' in the GST Act.
The AAT also held that the taxpayer's development
works were in "the form of a business", even if he was not in the
business of being a property developer.
Relevant factors included the scale of the operations that the taxpayer
was involved in (including rezoning and subdividing the property), as well as
the amount of capital invested by him in the purchase of the property and
development works.
The taxpayer's "series of activities" throughout his ownership of the property therefore amounted to the carrying on of an enterprise, and the taxpayer was liable to pay GST on the sale of the property.
A Wheelers Hill man was recently sentenced to three
years and six months imprisonment for defrauding the ATO of nearly $35,000 and
attempting to defraud the ATO of a further $458,000, following a joint
investigation by the Australian Federal Police ('AFP') and ATO's serious
financial crime taskforce.
The investigation began in June 2020, after the ATO
linked the man to a number of suspicious claims, including 40 fraudulent
applications for JobKeeper.
The sentence is "a warning to criminals who seek to exploit and steal from the Commonwealth and by extension, Australian taxpayers".
New ATO guidance on
"who is an employee?"
The ATO recently issued a ruling which explains when
an individual is an 'employee' of an entity for pay as you go ('PAYG')
withholding purposes.
A useful approach for establishing whether or not a
worker is an employee of an engaging entity is to consider whether the worker
is working in the business of the engaging entity, based on the construction of
the terms of the relevant contract. Importantly, the fact that a worker may be
conducting their own business, including having an ABN, is not determinative.
Editor: if you need help with this important issue, please contact our office.
Please note: Many of the comments in this publication are general in
nature and anyone intending to apply the information to practical circumstances
should seek professional advice to independently verify their interpretation
and the information's applicability to their particular circumstances.