Family trust rules and new guidance on contractors

The Australian Taxation Office (ATO) has confirmed its position on family trust distributions, while also providing employers with new information to simplify completion of Single Touch Payroll (STP) activity statements. Here are some of the latest developments in the world of tax.

Prefilling of PAYGW

Completion of PAYG withholding via STP will become easier for employers when the ATO begins prefilling some of the required activity statement data.

From the July 2023 statement, PAYG withholding labels W1 and W2 will be prefilled for all monthly PAYG employers. Quarterly withholders will find the information on their September 2023 statement.

The ATO is also piloting an employer reminder system for businesses with a late activity statement and STP-reported PAYG withholding. If you fail to lodge by the reminder date, the ATO will consider there are no corrections to report and the recorded amounts will be added to your client account.

Final rules on family trusts

Taxpayers with family trusts should check the implications of the ATO’s final guidance on the taxation of family trust payments, as the new rules may reduce the attractiveness of these tax structures.

Under the ATO’s new approach, common tax planning strategies relying on the section 100A exemption covering trust distributions to companies and family members may no longer be available in some situations.

Taxpayers with a discretionary trust should discuss the implications with us, particularly where there are parent controllers of the trust and adult-aged child beneficiaries. The ATO website provides a number of case studies outlining common situations.

Employees vs. independent contractors

The ATO is consulting on its new draft guidance covering both classification of employees and independent contractors, and its proposed compliance approach in this area.

The draft guidance outlines the regulator’s priority areas, which include situations where particular risk factors are present and where an unpaid superannuation query has been received from a worker.

The guidance also indicates employers must have specific advice from an appropriately qualified third-party confirming their classification of a worker as a contractor is correct.

Recordkeeping for self-education expenses eased

Taxpayers claiming self-education expenses will find things a little easier this tax time, as new legislation has removed the requirement to exclude the first $250 of deductions for education courses.

The new rules can be used when completing your 2022-23 tax return, while for employers, the change applies to the Fringe Benefits Tax year starting 1 April 2023.

Sharing economy reporting extended

Providers of ride-sourcing and short-term accommodation services will find themselves swept into the compulsory Taxable Payments Reporting System (TPRS) from 1 July 2023.

Electronic platform operators for these services (such as Uber and Airbnb) are required to report all transactions involving Australian purchasers under new legislation passed in December 2022.

Annual TPRS reporting is already compulsory in industries such as building and construction, cleaning, courier and security services.

Plug-in hybrid electric vehicles to face FBT

Under rules applying from 1 April 2025, plug-in hybrid electric vehicles will no longer be considered zero or low emissions vehicles and will not be eligible for the fringe benefits tax exemption applying to these vehicles.

You can apply for the exemption if the hybrid vehicle was exempt before 1 April 2025 and there is a financially binding commitment to continue providing private use of the vehicle after this date.

No business activity could mean no ABN

The ATO is again reminding small businesses their Australian Business Number (ABN) may be flagged for cancellation if there is no reported business activity in their tax return, or no signs of business activity in other lodgements or third-party information.

If an ABN is identified as inactive, the ATO will contact the holder by email, SMS or mail to check if the ABN is still required and explain the action required to keep it. Where the business is no longer operating, the ABN will be cancelled.

 

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