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FEB 2019

Federal Labor leader Bill Shorten has announced the Labor Party's (ALP) plan to introduce changes to both negative gearing and the Capital Gains Tax (CGT) discount to all investment assets. If introduced, these changes will have potentially far reaching implications for the Australian property market. The proposed changes are summarised below:

1. Negative gearing - Labor has proposed to limit negative gearing to newly constructed property investments from a yet-to-be-determined date following the next election. All investments made before this date will be fully 'grandfathered', ensuring that taxpayers will continue to be able to deduct the full net rental losses against their taxable income.

Losses from new investments in existing properties can still be used to offset other investment income tax liabilities. These losses can also continue to be carried forward to offset future investment income and any capital gains on the investments.

2. Capital gains tax - Labor has also proposed to halve the capital gains discount for all assets purchased after a yet-to-be-determined date following the next election. This will reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50% to 25%.

All investments made before this date will not be affected by this change and will be fully 'grandfathered'. This policy change will also not affect investments made by superannuation funds. The CGT discount will not change for small business assets.

We must note that this Tax Alert has been prepared based on the information which has been released by the ALP to date, however, it will be critical to see the final detail of any legislation (if Labor was to win the next election) before any investment decisions are made.
FEB 2019
TAX ALERT - Single Touch Payroll Reporting Rules Extended to Small Business

The extension of Single Touch Payroll (STP) to small business entities, which are employers with 19 or fewer employees, has finally passed both houses this week, after amendments were tabled late last year.

This means that employers with 19 or fewer employees will have to report under STP rules from 1 July 2019. Business with 20 or more employees began reporting from 1 July 2018.

The ATO has published a list of 24 companies intending to provide STP solutions, with the list to be updated over time to include information about the products these companies will offer. Suppliers such as MYOB, Xero and Reckon have each put forward STP product proposals.
TAX ALERT - Proposed budget changes to the instant asset write-off were passed by both Houses of Parliament today
The Treasury Laws Amendment (increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019 was passed by the Senate and the House of Representatives this morning, to increase the threshold to $30,000 and expand the eligibility to medium sized businesses with a turnover of less than $50 million.

However, the Bill does not become law until it receives Royal Assent.
TAX ALERT - ATO'S Discretion to Extend the Two-Year Period to Dispose of Dwellings Acquired from a Deceased Estate

As a general rule, the trustees and beneficiaries of a deceased estate are able to disregard any CGT implications from the sale of a deceased person's principal residence, provided the sale of that property settles within two years of the deceased's death.

However, given that unforeseen circumstances (such as complex estate administration or challenges to the estate) may make it difficult to finalise a sale within this two year period, the Commissioner of Taxation has a discretion to extend the period where trustees or beneficiaries meet the conditions to apply for a longer period to complete the sale of the property.

During august 2018, the ATO issued a draft Practical Compliance Guidelines (PCG) in relation to the ATO's discretion to extend the two year period to dispose of dwellings acquired from a deceased estate.
TAX ALERT - Important Decision on Leave Entitlements to be Appealed to the High Court

The recent Full Federal Court decision in Mondelez v AMWU [2019] has held that employees are entitled to 10 days of personal/carer's leave irrespective of their pattern of work hours, regardless of whether they are full time or part time employees.
TAX ALERT - Vacant Land Tax Bill Passed with Amendments

Following a review by the Senate Economics Legislation Committee in August 2019, the Treasury Laws Amendments (2019 Tax Integrity and Other Measures No 1) Bill 2019 was recently passed into law, denying tax deductions claimed for holding costs incurred when owning vacant land in a number of scenarios from 1 July 2019.

The final version of the legislation passed Parliament only after a number of amendments were made.
TAX ALERT - Double Tax Agreement with Israel now in force

On 28 March 2019, Australia and Israel signed the first ever Double Tax Agreement (DTA) between the two countries. The Australian Government stated that the treaty will strengthen friendships and commercial relationships, create further opportunities for bilateral trade and investment between the two countries.

The DTA will also provide a legal basis for the exchange of taxpayer information between tax officials in respect of taxes covered by the treaty.

On 14 November 2019, the Australian Parliament passed legislation to give effect to the new DTA and introduce it into our tax law system.
TAX ALERT - Superannuation Guarantee Amnesty

During September 2019, the Government re-introduced the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 into Parliament, which proposes to introduce a one-off superannuation guarantee (SG) amnesty for employers who have not always complied with their SG obligations.

Those employers who voluntarily disclose their non-compliance to the ATO during the amnesty period would be; able to claim income tax deductions for the SG amounts disclosed, will not be charged the administration fee, and will not be subject to any further penalties.
Last December we released a Tax Alert confirming that the Federal Government had revived its plan to remove access to the Capital Gains Tax (CGT) main residence exemption for non-residents, which will directly impact both expat Australians (living overseas for an extended period) and foreign tax residents.

However, it is very important to note that where an Australian resident taxpayer who owns a main residence in Australia, purchased before 9 May 2017 and then becomes a foreign tax resident on (say) 1 March 2020, the taxpayer must dispose of the property by 30 June 2020 in order to utilise the full benefit of the CGT main residence exemption.

In this example, if the taxpayer waits until after 30 June 2020 to dispose of their Australian main residence, no CGT exemption will be available.

While this outcome for tax purposes seems very unfair, and we agree, it is now the law.

The option currently available for taxpayers to utilise the full benefit of the CGT main residence exemption include:

Dispose of the main residence before 30 June 2020;
Wait until you re-establish Australian residence sometime later; or
Do not dispose of the main residence.