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2020 has been challenging and disruptive beyond all imagination. As the working year draws to a close, this article reflects on what has been achieved from a tax policy and administrative perspective and what remains outstanding.
Newsletter
2020: End of year wrap
08 December 2020
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The year began horrifically for many, as bushfires that started in September 2019 continued to sweep through large tracts of the country, destroying more than 3,000 homes and burning through more than 17 million hectares of land across New South Wales, Victoria, Queensland, the ACT, Western Australia and South Australia. Severe floods then deluged parts of Queensland and New South Wales in February, resulting in further damage to property and livelihoods.
Serious attention then turned to the global spread of COVID-19 which, according to the World Health Organisation at the time of writing, has infected nearly 66 million people and resulted in more than 1.5 million deaths. Although tragic, Australia has remarkably had fewer than 30,000 cases and fewer than 1,000 deaths since the start of the pandemic.
The federal government’s economic response was swift. The initial omnibus legislation was introduced, debated and passed by Parliament in just two days. The ATO was similarly rapid in responding to the new law, and provided a significant and continuous flow of necessary guidance throughout the year, relating (primarily) to JobKeeper, the cash flow boost and other stimulus measures. These measures dominated the legislative agenda in 2020.
Key stimulus measures
JobKeeper
According to the Treasurer’s media release issued on 30 November 2020:
- The first phase of JobKeeper (30 March 2020 to 27 September 2020) supported more than 3.6 million workers and around 1 million businesses, with payments totalling nearly $70 billion for the first 13 JobKeeper fortnights.
- Following a re-test of eligibility for the second phase of JobKeeper (28 September 2020 to 3 January 2021), around 500,000 entities have claimed JobKeeper for the two JobKeeper fortnights in October for more than 1.5 million employees/eligible business participants.
- Preliminary data indicates that around 450,000 fewer businesses and around 2 million fewer employees qualified for JobKeeper in October than in September.
- Around 86 per cent of workers qualified for the higher payment of $1,200 per fortnight, and around 14 per cent are on the lower payment of $750 per fortnight.
Businesses will need to re-test their eligibility again for the final phase of JobKeeper (4 January 2021 to 28 March 2021). Initial indications that the economic recovery is underway point to expectations of a further reduction in the number of JobKeeper registrations for the final phase.
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Cash flow boost
The cash flow boost has been similarly successful in supporting businesses through the economic downturn. According to the Minister for Employment, Skills, Small and Family Business, Senator Michaelia Cash (in a statement to the Senate on 30 November 2020), the cash flow boost has delivered over $32 billion to more than 800,000 small and medium business employers.
Temporary early access to superannuation
The temporary early access to superannuation measure has been widely utilised. According to the ATO, between 20 April 2020 and 30 June 2020, around 2.54 million applications were received, totalling $20.6 billion requested for early release. Of these applications, 2.45 million were approved, totalling $20.1 billion; 66,400 were rejected, totalling $420.7 million; and 19,000 were cancelled due to errors or because individuals withdrew them.
The overwhelming majority of applications were made to Australian Prudential Regulation Authority (APRA) regulated superannuation funds; just over 20,000 of applications were made to self-managed superannuation funds (SMSFs).
In July 2020, ABC News reported that “more than half a million Australians are estimated to have ‘completely cleaned out’ their superannuation savings during the COVID-19 crisis”. The measure closes at 11:59pm (AEDT) on 31 December 2020.
Outstanding key tax policy measures
Bills before Parliament
While there may be some further movement in bills before the conclusion of the parliamentary year on 10 December 2020, the following key measures remain before the Parliament:
- Bring forward of non-concessional contributions cap for those aged 65 and 66 — proposed to commence on 1 July 2020.
- Make tax-free certain small business grants relating to the coronavirus recovery — proposed to apply from the 2020–21 income year.
- Increase the maximum membership of SMSFs from four to six — proposed to apply from the start of the first quarter that commences after royal assent of the enabling legislation.
- Amendments to the existing backing business investment measure and the new full expensing of depreciating assets measure to allow a choice as to whether the provisions are applied, and to create a balancing adjustment event where the asset is later used or moved overseas — proposed to apply from the start of the first quarter that commences after royal assent of the enabling legislation.
A proposed measure to restrict the use of cash, by imposing a $10,000 cash payment limit, was discharged on 3 December 2020 and the bill is not proceeding. The measure was proposed to commence on 1 January 2020.
Discussion papers and announcements
The following key measures have been announced but have not progressed to a bill before Parliament:
- Three-yearly audit cycle for certain SMSFs — proposed to apply from 1 July 2019.
- Licensing an individual’s fame or image — proposed to apply from 1 July 2019.
- Reforms to the ABN system — proposed to apply from 1 July 2021 and 1 July 2022.
- Sharing economy reporting regime — proposed to apply from 1 July 2022 and 1 July 2023.
- Reforms to Division 7A — proposed to apply from the first income year commencing on or after royal assent of enabling legislation.
- Early release of superannuation (for various reasons including compassionate grounds, severe financial hardship, crime victims and domestic violence victims) — no start date advised.
Reviews
- The Board of Taxation is currently reviewing CGT rollovers, and intends to publish a second consultation paper for stakeholder review in December 2020.
- The Inspector-General of Taxation and Taxation Ombudsman (IGTO) is currently investigating the effectiveness of ATO communications of taxpayers’ rights to complain, review and appeal.
- The IGTO is also continuing to investigate undisputed tax debts in Australia.
ATO guidance
Guidance on the following key matters remains under development:
- Allocation of professional practice profits and Everett assignments — expected completion in December 2020.
- Deductions for employees’ work-related transport expenses — expected completion in December 2020.
- Proposed draft ruling to consolidate TR 2001/7 Income tax: the meaning of personal services income and TR 2001/8 Income tax: what is a personal services business — expected completion in December 2020.
- Proposed draft ruling to consolidate TR 2003/6 Income tax: deductions that relate to personal services and TR 2003/10 Income tax: attribution of personal services income — completion date to be advised.
- Proposed draft ruling to provide guidance in relation to the application of s 26-102 of the ITAA 1997 (about expenses associated with holding vacant land) — expected completion in December 2020.
- Final determinations (will finalise TD 2019/D6 and TD 2019/D7) to set out the Tax Commissioner’s view on the taxation treatment of capital gains for a non-resident beneficiary or trustee of a resident trust, and from non-taxable Australian property assets of a non-fixed trust — completion date to be advised.
- Draft ruling on the operation of s 100A of the ITAA 1936 to set out the Tax Commissioner’s preliminary views on the exclusions from a “reimbursement agreement” for:
- agreements not entered into with a purpose of eliminating or reducing someone’s income tax; and
- agreements entered into in the course of ordinary family or commercial dealings.
Completion date to be advised, and targeted consultation on this issue has commenced.
- Final ruling (will finalise TR 2019/D5) to update TR 96/26 Fringe benefits tax: car parking fringe benefits (now withdrawn) to reflect contemporary commercial car parking arrangements and legal developments arising from the Full Federal Court decisions in FCT v Qantas Airways Ltd [2014] FCAFC 168 and Virgin Blue Airlines Pty Ltd v FCT [2010] FCAFC 137 — expected completion in late 2020 (changes proposed to apply from 1 April 2021).
- Final ruling (will finalise LCR 2019/D3) to provide the Tax Commissioner’s view of amendments contained in the Treasury Laws Amendment (2018 Superannuation Measures No 1) Act 2019, concerning the application of the non-arm’s length income provisions where a trustee incurs “non-arm’s length expenditure” under a scheme — completion date to be advised.
Tax reform
During 2020, The Tax Institute brought to fruition its ambitious endeavour, The Tax Summit: Project Reform. The project included a lead-in event series of focus sessions, keynote addresses and roundtable discussions, and a two-day Virtual Summit in November. In total, more than 30 sessions were delivered by nearly 100 speakers.
Attention now turns to the development of the core document, as we prosecute the Case for Change and undertake further stakeholder engagement. These efforts will culminate in the submission of the Case for Change to Treasury on behalf of the tax profession. This will position The Tax Institute as the thought leader when it comes to tax, and that ongoing thought leadership activity will continue throughout 2021. To be effective, the tax reform process needs to start mid-electoral cycle in order that the federal government can commit to tax reform in 2021 and take a package to the 2022 election. The package would ideally be implemented in the next term of government.
Final comment
As this remarkable and challenging year draws to a close, I would like to take this opportunity to acknowledge the Herculean effort of the profession as it has rallied and risen to the occasion to support clients and the Australian community in unprecedented ways. I wish all our members, the profession and the readers of this column a safe and relaxing festive season, as we all take a rightful break, recharge and look to 2021 with a warranted sense of hope and confidence.
Robyn Jacobson, senior advocate, The Tax Institute
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