taxInsight - ARTICLES

ARTICLES from taxInsight

Foreign resident or Australian overseas? Banks and governments automatically sharing your information around the world

Parliament has just passed legislation that requires local banks, on an annual basis, to provide detailed information to the Tax Office who will then automatically share that information with the relevant foreign tax authority where an Australian bank account is held by a foreigner or a company, trust or other entity that is controlled by a foreigner.  The purpose of the new legislation is a global crackdown on people holding funds offshore and not declaring income to their home country tax authority. It is a multi-way, reciprocal arrangement with many national governments planning on gathering and cross-sharing information under the […]

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New foreign investors beware: Co-operate with the Tax Office or be forced to sell-up

Foreign companies investing in Australia will have new obligations to co-operate with the Tax Office, and if they don’t keep the tax man happy they could face prosecution, fines and potentially be forced to divest the asset, according to Treasurer Morrison’s media release on 22 February. Significant foreign investment into Australia requires approval by the Foreign Investment Review Board (FIRB) and approvals can have conditions applied.  The investor is required to comply with those conditions or face sanctions.  The approval requirements depend on a number of factors including: Whether the investor is a foreign Government; The type of investment (agricultural, […]

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Foreign owners of agricultural land: Register now

Foreign agricultural land owners must notify the Tax Office if they hold agricultural land, acquire new agricultural land or dispose of agricultural land.  The new registration requirement came into force from July 2015 and all existing holdings must be registered by 29 February 2016. The requirement applies to all “foreign persons” and includes an Australian citizen living permanently overseas that may be considered a foreign person as they are not ordinarily residing in Australia.  Foreign persons also includes foreign companies and trustees. Where there are multiple owners of an agricultural land holding, each foreign owner has an obligation to register.  […]

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Initial Repairs

Question: I have just bought a house that I intend to rent out to a tenant.  Before I do that, there are repairs needed including carpentry repairs to the deck at the back of the house, painting, replacement of the carpet and replacement of the dishwasher.  Can I get a deduction for these repairs? Answer:  Unfortunately, no you can’t get an immediate deduction for those items. However, you can claim depreciation for the new carpet and new dishwasher and you can claim the capital works allowance for carpentry repairs to the deck and also the painting. Explanation:  As you have just bought the property, […]

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Renting former home out, repairs costs

Question:  Last year, we moved out of our home to relocate and signed an agency agreement and got the real estate agent to find tenants and set up a rental arrangement for the house.  There are some repairs that really should be done to the house including carpentry repairs to the deck at the back of the house, replacement of the dishwasher, replacement of the carpet and painting of the exterior of the house.  Can I get a deduction for the money spent on those items? Answer:  For the money spent on carpentry repairs to the back deck and painting, you can get an immediate […]

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Bank information shared with USA Internal Revenue Service

Under the US Foreign Account Tax Compliance Act (known as FATCA) Australian banks have provided details of over 30,000 customer accounts worth over $5 billion to the US Internal Revenue Service (IRS – the US equivalent of our Tax Office). These are accounts of US citizens and tax residents with Australian bank accounts.  There is a wave of transparency measures being implemented world-wide.  By 2017 close to 100 countries will be sharing non-resident data under the OECD Common Reporting Standard. The Australian Tax Office will receive data from the IRS about Australians with financial accounts in the US and will […]

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Australian Securities and Investments Commission – is it up to the task?

Log on to ASIC’s website – and you can obtain information about how to make a complaint or report misconduct.  This is divided into different categories, many of which must be dealt with by other organisations.  But those matters which are within its responsibilities include troubles with investments, companies which have gone into liquidation or administration, shares, insider trading and operation of companies.  It also carries regulatory responsibility for company auditors and financial planners.  It has a very broad set of responsibilities. Will your complaint or problem be dealt with expeditiously?  Probably not.  The word around the traps is that ASIC doesn’t have the manpower to […]

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Allocation of Franking Credits by Trustees

A recent Federal Court decision has made it abundantly clear that franking credits must be allocated to beneficiaries in the same proportion as the relevant dividends. The trustee of the Thomas Investment Trust had resolved to distribute the net income in proportions to an individual and a company. In a second resolution it resolved to distribute the franking credits in different proportions. The trustee then sought and obtained directions from the Supreme Court of Queensland that franking credits were to be dealt with by the trustee and could be distributed to beneficiaries in accord with those trustee resolutions. However in a later hearing the superior […]

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Can’t claim $20k loss: Share trading not a business

In a tough decision, the Tribunal has refused a $20k deduction for losses in share trading activities for a casual childcare educator in the 2011 tax year (Devi v FCT [2016 AATA 67]). In that year, the taxpayer earned $40k in childcare wages working between 25 and 30 hours per week and commenced trading shares using $60k of savings and a $40k margin loan. 71 purchases of bank, mining and smaller company shares were made to a value of $380k.  37 sales to a value of $315k were made.  Most transactions took place in the first half of the year. […]

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Netflix tax before Parliament

At the moment, internet supplies of movies, music, apps, games, eBooks, other digital products and services such as consultancy and professional services made by a foreign supplier are generally exempt from GST. In line with previous Government Budget announcements, legislation has been introduced to Parliament to apply GST to these digital supplies when they are made to an Australian consumer. Under the new law, the supplier or the digital platform, will have a limited and simplified GST registration and will remit GST on a quarterly basis but not be able to claim any input tax credits. The new law will […]

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Appeal lost: Foreign companies were tax residents of Australia

The Full Bench of the Federal Court declined an appeal by multiple foreign companies against an assessment based on them being Australian tax residents. The foreign companies included: Hua Wang Bank Berhad (offshore bank incorporated in Samoa); Bywater Investments Limited (incorporated in the Bahamas); Chemical Trustee Limited (incorporated in the UK); and Derrin Brothers Property Limited (incorporated in the UK). Documents provided in evidence indicated that all of the companies were ultimately owned and controlled by an accountant based in Sydney.  Each company made profits buying and selling ASX listed shares.  If they were non-resident and the shares were held […]

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Sale of land for $2m or more? Buyer beware (and seller)!

Foreign resident capital gains withholding payments will apply where a foreign owner sells land or land interests with a market value of $2m or more requiring the purchaser to withhold and pay 10% of the purchase price to the Tax Office.  At the time of writing, the legislation is before the Senate and expected to become law.  The new law will apply to contracts signed from July 2016. This is another step in the Government becoming tougher on capital gains for non-residents.  It follows the removal of the 50% CGT discount for non-residents from the budget night in May 2012. […]

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Fringe benefits tax rules tightened for not-for-profits

Currently, employees of certain not-for-profits can salary sacrifice entertainment benefits.  If they do so, no FBT is payable by the employer nor does it have to be reported.  Those not-for-profits which are not exempt, but rebateable, would receive a partial FBT rebate. The 2015/16 Budget included a provision for this benefit to be substantially reduced.  From 1 April 2016, there will be a separate, single, grossed-up cap of $5,000 for salary packaged meal entertainment and entertainment facility leasing expenses provided to employees of public benevolent institutions, health promotion charities, public and not-for-profit hospitals and public ambulance services. The charges are […]

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Personal services business and the results test

You will avoid attributed personal services income and be operating a personal services business if you can satisfy the results test.  This is set out in Section 87-18 of the Income Tax Assessment Act 1997. In a recent case (Prasad Business Centres Pty Ltd v FC of T AAT (2015) AATA 411) the Administrative Appeals Tribunal confirmed the Tax Office’s decision not to provide a personal services business determination as requested. The Tribunal held that the results test was not satisfied because: The relevant contract remunerated the principal only for time he spent working on certain projects; Whilst the contract […]

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