TAX UPDATES

2021 TAX UPDATES

Active asset test passed for "vacant" land used as storage

SA COVID-19 stimulus and relief package

FBT car parking ruling confirms commerciality principle includes shopping centre car parks

Appeals note: The decision in the Administrative Appeals Tribunal was in favour of the taxpayer, allowing the use of the small business CGT concessions. The event was subsequently updated in January 2020 when the original decision was overturned by the Federal Court. In September 2020, the Full Federal Court then overturned the single judge decision, meaning the taxpayer once again may use the small business CGT concessions. The Full Federal Court advised that small business relief should be applied beneficially rather than restrictively for a taxpayer. The Commissioner of Taxation has not appealed to the High Court of Australia. The ATO issued a decision impact statement on 29 July 2021 where it will continue to review the impact of the decision on its advice and related products.

Current decision in case: Land adjacent to taxpayer's main residence was used in the taxpayer's small business, and therefore passes the active asset test. Editor's note: The overview below and client impact statement were originally preserved as written for the January 2020 update. This allowed users to have full visibility of the arguments and opportunities which were subsequently overturned. In this instance, the overview and client impact statement have been amended to take into consideration various issues identified by the Full Federal Court, and how they may apply to future private binding ruling applications for your clients.Residential land has been determined to be an active asset as it stored materials and tools for a taxpayer's business. The ruling from the Full Federal Court is in line with an earlier decision by the Administrative Appeals Tribunal, and has overturned the decision from a single judge appeal.This case is one of many which straddles the fence on whether unimproved land qualifies for as an active asset. In this case, the Full Federal Court concluded that the small business CGT concessions should be looked at beneficially for taxpayers, as is intended from the original legislation. The outcome of this case relies on the interpretation of "used in the course of carrying on a business" which is necessary for determining an active asset. The Full Federal Court has interpreted that this sentence does not use or imply restrictive language such as "ordinary course of a business" or "day to day running of a business".

Throughout the COVID-19 pandemic, the South Australian Government has implemented a range of stimulus payments for residents and businesses, as well as relief from state taxes. In response to the July 2021 South Australian lockdown:

• businesses with a reduction in turnover are eligible for emergency cash grants of up to $3,000 • a second round of business support grants of up to $3,000 available for businesses in eligible industries • eligible events suffering significant losses from being cancelled or postponed can access funding of up to $25,000, and • individuals outside the federal government's declared hotspot areas who lose work hours will be entitled to the COVID-19 Disaster Payment. In addition to these grant payments to affected businesses, in the past relief from payroll tax and land tax has been available. In particular, smaller employing businesses have been given a waiver of payroll tax from March 2020 to May 2021. Land tax deferrals were available to landlords during the 2020 land tax year. Also, landlords who provided rent relief, or commercial property owner-occupiers who were eligible for JobKeeper, were eligible for reduction in land tax liabilities up to 30 April 2021.

The principles of car parking fringe benefits and commercial parking stations have been confirmed by the ATO via public ruling. The ruling, which has now been finalised after a long consultation process, replaces a now withdrawn tax ruling from 1996. The ruling details the concept of a commercial parking facility, which is necessary for businesses with over $10 million turnover that provide car parking for free to staff. Specifically, a major change in the ATO's interpretation of a commercial parking station exists where a shopping centre car park comes within its definition. As there is a major change in interpretation, the ATO has advised that the new ruling will not apply to car parking benefits until 1 April 2022. Note: When the new rule comes into effect for shopping centres, the small business turnover threshold for car parking benefits will have increased from $10 million to $50 million.

Announced: 21-Feb-2019 Updated: 4-Aug-2021

Announced: 26-Mar-2020 Updated: 13-Aug-2021

Announcement(22-Nov-2019) Consultation period Released(13-Nov-2019)

2021 TAX UPDATES

First home super saver scheme maximum set to increase

The maximum amount of contributions that can be released from superannuation under the first home super saver (FHSS) scheme will be increased from $30,000 to $50,000. The increase is expected to apply from 1 July 2022 subject to royal assent of amending legislation. Individuals can withdraw funds out of their superannuation account to be used for a first home deposit. From 1 July 2018, any voluntary contributions up to $15,000 per year and $30,000 in total can be used for the deposit withdrawal. The withdrawal also includes deemed earnings on the voluntary contributions. The scheme is intended to provide an incentive to enable first home buyers to build savings faster for a home deposit, by accessing the tax advantages of superannuation. The scheme also is available for non-first home buyers in limited circumstances. Other proposed changes to the scheme look to improve its administration, including allowing individuals to withdraw or amend their application for release prior to receiving payment without losing the ability to reapply for a FHSS release in future. These administrative changes will apply retrospectively from 1 July 2018.

Announcement(10-May-2017) Consultation(4-Aug-2017) Introduced(7-Sep-2017) Passed(7-Dec-2017) Royal Assent(13-Dec-2017) Date of effect(1-Jul-2018)

Self-managed superannuation funds residency safe harbour to extend

Planned amendments to the residency requirements for superannuation funds have been announced in the 2021 Federal Budget. The central control and management test safe harbour will move from 2 to 5 years. Another planned change impacting self-managed superannuation funds (SMSFs) is the removal of the active member test. The measures are expected to have effect from 1 July 2022, subject to the passing of legislation. The proposed changes will allow SMSF members to continue to contribute to their preferred superannuation fund while temporarily overseas. This mirrors the treatment for members of larger Australian Prudential Regulation Authority (APRA) regulated funds. The changes would likely also reduce the compliance cost and burden for expatriate SMSF members or trustees. Specifically, the change will remove the need for them to set up a new account, add new members to the fund, convert or transfer their super into an APRA-regulated fund prior to going overseas. The Australian Taxation Office has also issued temporary relief relating to super fund residency requirements to individual SMSF trustees or directors of its corporate trustees if they are stranded overseas due to COVID-19.

Announcement(11-May-2021) Consultation Introduced Passed Royal Assent Date of effect

COVID-19 Disaster Payment now tax free

he support payment for individuals who are unable to work during a COVID-19 lockdown are now tax-free, with the Treasury Laws Amendment (COVID-19 Economic Response No 2) Bill 2021 passing into law on 10 August 2021. The COVID-19 Disaster Payment was initially a payment of $325-500 a week for people who reside or work in a Commonwealth declared hot spot, depending on the hours of work a week lost by a person. The payment rate then was increased to $450-750 for residents of a Commonwealth declared hot spot during extended periods. As of 29 July 2021 the payment was announced as non-taxable.

The payment is also available to: impacted individuals who are still working at reduced hours, and individuals outside Commonwealth declared hotspots,

Announced: 3-Jun-2021 Updated: 24-Aug-2021

provided they meet the criteria for the payment.

Individuals already receiving other Government support payments will see a non-assessable temporary supplement of $200 a week if they can demonstrate they have lost more than 8 hours of work and meet the other eligibility requirements for the COVID-19 Disaster Payment.

Queensland COVID-19 business grants and assistance

In its response to the current COVID-19 lockdowns across July-August 2021, the Queensland Government has implemented support grants for businesses across the state. The support package is jointly funded by the Commonwealth and Queensland governments. Grants of up to $15,000 will be available to eligible small and medium businesses across all industries. Support payments of up to $30,000 will also be provided to eligible impacted large hospitality and tourism businesses. Applications for grants opened on 16 August 2021. Non-employing sole traders may also be eligible for a one-off $1,000 grant, with more information to be released soon. A COVID-19 cleaning rebate of up to $10,000 has also been introduced for eligible small and medium businesses and not for profit organisations. Tourism and hospitality businesses have also been given the option to defer payment of their July or August 2021 monthly payroll tax liability for 6 months.

Announced: 8-Apr-2020 Updated: 25-Aug-2021

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