November 2021 – Practice Update

November 9, 2021

Varying PAYG instalments due to COVID-19

Taxpayers can vary their pay as you go (‘PAYG’) instalments throughout the year if they think they will pay too much, compared with their estimated tax for the year.

To assist taxpayers who continue to be affected by COVID-19, the ATO has stated that it will not apply penalties or interest on varied instalments for the 2021/22 income year for excessive variations when the taxpayer has taken reasonable care to estimate its end of year tax.

The ATO says this means making a reasonable and genuine attempt to determine the tax liability.  When considering if a genuine attempt has been made, the ATO takes into account what a reasonable person would have done in the same circumstances.

Note that variations do not carry over into the new income year.

Therefore, if a taxpayer made variations in the 2020/21 income year, they may need to vary again in 2021/22.  The varied amount or rate will apply for all of the remaining instalments for the income year, or until the taxpayer makes another variation.

The ATO encourages taxpayers to review their tax position regularly and vary their PAYG instalments as their situation changes.

If a taxpayer realises they have made a mistake working out their PAYG instalment, they can correct it by lodging a revised activity statement or varying a subsequent instalment.

If a taxpayer is unable to pay an instalment amount, they should still lodge their instalment notice and discuss a payment arrangement with the ATO to ensure they will not have a debt at the end of the year.

Contact our office if you need help with any PAYG (or any related) issues.

Permanent changes to AGMs and electronic communications

The Government has introduced into Parliament a Bill to permanently allow companies to use technology to meet their regulatory requirements, and ensure that companies can continue to meet their obligations amid the uncertainty of the COVID‑19 pandemic.

These reforms build on the recently renewed temporary relief, which we reported in September 2021, and which will remain in place until 31 March 2022.

Specifically, the new permanent reforms will:

• ensure that meetings can be held physically, as a hybrid, or (if expressly permitted by the entity’s constitution) virtually, provided that members, as a whole, are given reasonable opportunity to participate in the meeting;
• ensure that companies (and registered schemes) can meet their obligations to send documents in hardcopy or softcopy, and give members the flexibility to receive documents in their preferred format; and
• allow documents, including deeds, to be validly executed in technology neutral and flexible manners, including by company agents.

AUSTRAC transaction report information data-matching program

The ATO will acquire transaction report information data from AUSTRAC for the period of 17 June 2021 through to 30 June 2027.

AUSTRAC (the Australian Transaction Reports and Analysis Centre) is the Australian Government agency responsible for “detecting, deterring and disrupting criminal abuse of the financial system to protect the community from serious and organised crime”.

The data elements made available to the ATO will depend on what is captured in the reporting process and can include identifying information of customers and institutions facilitating transactions, identifiers such as ABNs, ACNs and Australian Financial Services Licence details, and transaction details (including transaction type, accounts, instruments, amounts and currency).

The ATO estimates that records relating to approximately nine million individuals will be obtained each financial year.

The data will be acquired and matched to ATO data to support the administration and enforcement of tax and superannuation laws, including registration, lodgment, reporting and payment responsibilities.

Government payments data-matching program

The ATO will acquire government payments data from government entities who administer government programs for 2017/18 to 2022/23 financial years.

The data items include:

• service provider identification details (names, addresses, phone numbers, email, dates of birth, service type, ABN, ACN); and
• payment details (service provider ID, name of service, type of service linked to program, value of payments received for the financial year, count and type of claim, withholding and re-credit amount).

The ATO estimates that records relating to approximately 36,000 service providers will be obtained each financial year (including approximately 11,000 individuals each financial year).

Preparing for the new Director ID regime

As part of its Digital Business Plan, the Government announced the full implementation of the ‘Modernising Business Registers’ program.

This included recently enacted legislation introducing the new director identification number (‘director ID’) regime.

The director ID is a unique identifier that a director will need to apply for once and will keep forever.

The introduction of director IDs is intended to create a fairer business environment by helping prevent the use of false and fraudulent director identities, which “will go a long way to better identifying and eliminating director involvement in unlawful activity”.

Note that all directors will need to apply for a director ID, including directors of corporate trustees of self-managed super funds (‘SMSFs’) and of family trusts.

Individuals will be able to apply for a director ID from 1 November 2021 on the new Australian Business Registry Services (‘ABRS’) website (at abrs.gov.au) and will need to log in using the myGovID app (set to a ‘Standard’ or ‘Strong’ identity strength).

When an individual must apply for a director ID depends on the date they became a director.  For directors under the Corporations Act:

• who became a director on or before 31 October 2021, they must apply for a director ID by 30 November 2022;
• who become a director between 1 November 2021 and 4 April 2022, they must apply for a director ID within 28 days of appointment; and
• who become a director from 5 April 2022, they must apply for a director ID before their appointment.

Individuals will need to apply for their director ID themselves to verify their identity (i.e., no one can apply for it on their behalf, including agents).

Downsizing your home? Understanding the ‘Downsizer Contribution’

Downsizing the family home is often part of the longer-term financial plans for many older Australians. But did you know that you could consider investing the proceeds of the sale of your family home to your superannuation – depending on your age and circumstances – as a ‘Downsizer Contribution’?

What is a ‘Downsizer Contribution’?

If you are aged 65 years or older, you may be eligible to make a ‘Downsizer Contribution’ of up to $300,000 to a complying superannuation fund from the proceeds of the sale of your primary residence, which is owned for 10 years or more.

A ‘Downsizer Contribution’ does not count towards any of the contribution caps – and can still be made even if you have an individual superannuation balance that is greater than $1.7 million, or if you do not meet the ‘Work Test’ requirements.

Your spouse, provided they are also aged 65 years or older, can also make ‘Downsizer Contributions’ to their own superannuation fund, of up to $300,000 from the same proceeds, even if they are not an owner of the property. To do this, the sale price is key, as your couple contributions cannot be more than the total sale price of the property.

The Benefits of the ‘Downsizer Contribution’

No ‘Work Test’ requirements:

There is no requirement to meet a work test or work test exemption for this contribution, which makes it ideal if you are aged between 67 and 74. It is even more appealing if you are aged 75 or over, as outside of this opportunity, you can no longer make voluntary contributions.

Contribution caps do not apply:

It does not matter how much you already have in your individual superannuation fund – the total superannuation savings test (must be $1.7 million or less to make after-tax contributions) does not apply for ‘Downsizer Contributions’.

May be more tax-efficient:

The ‘Downsizer Contribution’ is an after-tax contribution, so no tax is paid on the way in. Also, because you are over 65, it is returned tax free when you withdraw the funds in the future.

You do not have to buy a new home:

The money you make from the sale does not have to be used to purchase a new home, and there is no need to move to something smaller or cheaper. If it involves the sale of a previous primary residence (that is now an investment property), there is actually no need to move at all.

Who is eligible?

In addition to the age 65 threshold, there are a number of other important criteria to be met.

You must sell a property that is located in Australia, and you must have owned the property for at least 10 years.

When you sell that property, you need to be eligible for some form of exemption from Capital Gains Tax (CGT) on the sale of the property under the ‘Main Residence’ provision. Basically, this means the property needs to be your principal place of residence for at least some time during its ownership.

If you purchased the property before 20 September 1985 (so that CGT does not even apply), you still need it to have been your principal place of residence at some stage during ownership.

Keep in mind, it also does not matter if the exemption from CGT is a full or partial exemption, which means the property could have been an investment at some stage during your ownership of it.

Does it impact the Aged Pension?

If you qualify or are hoping to qualify for the Age Pension, the impact of selling an asset needs to be considered. The value of your primary residence is excluded from the assets test, however if it is sold, and some of the proceeds are added to your superannuation, that value will then be assessed and may reduce your Age Pension benefits.

If you wish to learn more about the ‘Downsizer Contribution’ and how it can apply to your individual circumstances, please contact your HOC representative to discuss.

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

 

Tags: ATO, Coronavirus, COVID-19, GST, JobKeeper, JobKeeper Payment, JobKeeper Payment Extension, self-managed super, superannuaction, superannuation guarantee amnesty

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