TAX UPDATES

2022 TAX UPDATES

Temporary fuel excise cut and fuel tax credits

50% minimum pension drawdowns extended for another 12 months

Non-commercial losses and the Commissioner’s safe harbour

ATO scrutiny of s 100A family trust arrangements

Excise and excise-equivalent customs duty that applies to petrol and diesel will be temporarily reduced by 50%.

The reduction of the fuel excise will be in place for 6 months, beginning at 12:01am on 30 March 2022 and ending at 11:59pm on 28 September 2022.

The new temporary excise rate of 22.1 cents per litre will bring excise below the road user charge for businesses who claim fuel tax credits.

Minimum drawdowns for superannuation pensions have been halved again for the 2022–23 income year. This extension means that the reduction of minimum drawdowns will be available for self-funded retirees from 1 July 2019 through 30 June 2023.

This measure is intended to support retirees in managing the impact of the:

recent volatility in financial markets, and

prevailing low interest rates on their retirement savings.

Sole traders and partners in a partnership may be able to utilise a safe harbour to deduct non-commercial losses against other assessable income.

The draft PCG bypasses the Commissioner’s discretion under the non-commercial loss rules, where a business has been directly affected by floods, bushfires or the COVID-19 pandemic.

The business will be required to show necessary evidence to support using the safe harbour.

Once finalised, the draft guideline will apply to the 2019–20, 2020–21 and 2021–22 income years.

On 23 February 2022, the ATO released TR 2022/D1 and PCG 2022/D1 in relation to distributions made by trustees of discretionary trusts. This was complemented by TA 2022/1, which discusses parents benefitting from the trust entitlements of the adult children.

All 3 documents focus on schemes where income is diverted from an intended beneficiary in order to reduce tax liabilities. The rulings discuss these at detail and include significant attention to an important carve out for dealings that are “ordinary family or commercial” dealings. These dealings are excluded from the anti-avoidance provisions.

Following on from the release of the draft guidance, the ATO has reiterated its stance in many areas relating to s 100A. In particular, where situations would generally come under an ordinary family or commercial dealing.Trustees need to make sure that their distributions are in accordance with the expectations of the ATO, otherwise they may be subject to an audit. Helping them understand their obligations is paramount coming up to the end of the current income year.

Announcement(29-Mar-2022) Consultation Introduced(30-Mar-2022) Passed(30-Mar-2022) Royal Assent(31-Mar-2022) Date of effect(30-Mar-2022)

Announced: 22-Mar-2020 Updated: 12-Apr-2022

Announcement(11-May-2022) Consultation period(21-Jun-2022) Released

Announcement(23-Feb-2022) Consultation period(29-Apr-2022) Released

2022 TAX UPDATES

A new Property Tax coming for NSW

Unpaid present entitlements and extension of repayments

Changes to Div 7A that practically end sub-trust arrangements

The NSW state government has released details of its much anticipated revamping of NSW state taxes in the 2022–23 state budget.

From 16 January 2023, the First home buyer property tax option will enable first home buyers to choose between:

• paying an upfront stamp duty, or

• an annual property tax.

Originally, the option was to replace stamp duty with the annual property tax in New South Wales. This announcement came as part of the 2020–21 NSW state budget.

The property tax option will be available to first home buyers on purchases of land worth up to $1.5 million. Also, if the first home buyer chooses to pay the stamp duty instead of the annual property tax, other stamp duty concessions may become available.

Transitional arrangements are also available.

The ATO is allowing an extension for unpaid present entitlements (UPE) to private companies initially under an interest-only loan on the final repayment date. The practical compliance guideline deals with UPEs that were put on commercial investment terms in accordance with PS LA 2010/4. If there is a balance to be repaid at the end of the investment period, it may become a new Div 7A loan.

30 June 2018 is the first year in which an interest-only loan at benchmark rates is due to be repaid after the issuing of PS LA 2010/4. That is, 7 years after the initial UPE was put on a sub-trust from the 30 June 2010 year.

The PCG has recently been updated to relate to arrangements ending in the 2017, 2018, 2019, 2020, 2021 and 2022 income years. However, as TR 2010/3 and PS LA 2010/4 have now been withdrawn, only UPEs that arose on or before 30 June 2022 are allowed.

Family groups using this strategy may benefit from utilising this extension of time to repay the initial unpaid present entitlement from the 2009–10 income year.

A finalised tax determination has changed the ATO’s position on how sub-trust arrangements apply within the context of Div 7A.

Effectively, when a corporate beneficiary and trustee of the trust are ultimately the same people, Div 7A will apply directly to unpaid present entitlements (UPEs).

In this instance, the provision of financial accommodation will now be assumed. In practice, this means that sub-trust arrangements will have no additional benefits either in deferral of tax or repayment of loans.

The tax determination applies to trust entitlements arising on or after 1 July 2022.

Announcement(17-Nov-2020) Consultation(21-Jun-2022) Introduced Passed Royal Assent Date of effect

Announcement(19-Jul-2017) Consultation period(19-Jul-2017) Released(19-Jul-2017)

Announcement(23-Feb-2022) Consultation period(29-Apr-2022) Released(13-Jul-2022)

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