Treasurer Scott Morrison labelled his first Budget a “new economic plan” for difficult times, reducing the economic growth forecast from 2.75 per cent to 2.5 per cent for next financial year. And then he set about positioning the Coalition as the Party for small business and the heavy lifters in the economy.
Voters are being offered $4bn in income tax cuts and $5.3bn in help for small and medium-sized businesses in a bid to unleash more economic growth. The tax relief is funded by a bigger-than-expected hit to superannuation, along with a saving from a retreat on its higher education reforms and a saving from a delay to the families’ package at the heart of the last budget.
Choosing the cuts and spending measures carefully ahead of the federal election, the government has added just $1.7bn to the budget bottom line over the next four years.
With the unemployment rate expected to improve, holding at 5.5 per cent over the four years rather than the projected increase to 6 per cent, the Treasurer is counting (somewhat optimistically economists may say) on a jump to 3 per cent in real economic growth from 2017/18 to help take the budget to surplus early next decade.
However, this may appear at odds with the Reserve Bank which in an unusual move for Budget day, cut the official interest rate to a historic low of 1.75 per cent. This may suggest they see the economy as needing more stimulus than this Budget would – or could – offer.
The major revenue measures announced in the Budget are set out below.
We encourage you to contact your Walker Wayland NSW advisor if you wish to discuss any aspects of the Budget further.
Quick Links
- Individuals and Families
- Small Business
- Large Companies and International Taxation
- Superannuation
- GST and Other Taxes
- Administration and Other Measures
Individuals and families
Personal income tax relief
From 1 July 2016 the threshold at which the 37% marginal tax rate for individuals commences will increase from $80,000 to $87,000 of taxable income.
This measure will reduce the marginal income tax rate of taxpayers who have taxable incomes between $80,000 and $87,000 from 37% to 32.5% from the 2016/17 income year. The change should assist approximately half a million taxpayers to avoid reaching the 37% marginal income tax rate in the 2016/17 income tax year. The average full-time wage earner should not reach the 37% tax bracket in the next three years as a result of the change.
Medicare levy — low-income threshold to increase
The low-income threshold for the Medicare levy will change from the 2015/16 income year under the Tax and Superannuation Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2016 and an amendment to A New Tax System (Medicare Levy Surcharge — Fringe Benefits) Act 1999.
Medicare levy
The increase to the low-income threshold for the Medicare levy has been made to allow for movements in the consumer price index (CPI). This change will ensure that low-income earners will continue to be exempted from the Medicare levy. The following outlines the increase to each of the thresholds:
- The threshold for singles will increase to $21,335 (up from $20,896 for the 2014/15 year);
- The threshold for couples with no children will increase to $36,001 (up from $35,261 for the 2014/15 year);
- The threshold for single seniors and pensioners will be increased to $33,738 (up from $33,044 for the 2014/15 year);
- The threshold for senior and pensioner couples with no children will be increased to $46,966 (up from $46,000 for the 2014/15 year); and
- The child-student component of the income threshold for all families will be increased to $3,306 (up from $3,238 for the 2014/15 year).
These thresholds have also increased for couples and singles with children. The threshold amount increases based on the number of children.
Pausing of Medicare levy surcharge and private health insurance rebate threshold
Indexation of the income thresholds for the Medicare levy surcharge and the private health insurance rebate will continue to be put on hold for a further three years.
Income tax exemptions for ADF personnel deployed overseas
Australian Defence Force (ADF) personnel deployed in Afghanistan as part of Operation PALATE II will be provided full income tax exemption from 1 January 2016 to 31 December 2016.
Coordinates for the following operations will be updated to ensure they reflect the actual areas covered by the operation:
- Operation MANITOU in international waters, with effect from 14 May 2015; and
- Operation OKRA in the Middle East, with effect from 9 September 2015.
List of deductible gift recipients updated
The following organisations have been approved as specifically-listed deductible gift recipients (DGRs) from the following dates:
- Australian Science Innovations Incorporated (from 1 January 2016);
- The Ethics Centre Incorporated (from 24 February 2016); and
- Cambridge Australia Scholarships Limited (from 1 July 2016 to 30 June 2021).
The following organisations have also been approved as specifically-listed DGRs provided the gifts are made for education or research in medical knowledge or science:
- The Australasian College of Dermatologists;
- College of Intensive Care Medicine of Australia and New Zealand; and
- The Royal Australian and New Zealand College of Ophthalmologists.
Taxpayers may claim an income tax deduction for gifts of $2 or more to these organisations.
Small business
The small business entity turnover threshold to be increased
From 1 July 2016 the small business entity turnover threshold will be increased from $2m to $10m. The increased threshold means businesses with an annual turnover of less than $10m will be able to access existing small business income tax concessions. These include:
- a lower small business corporate tax rate. The small business corporate tax rate is currently 28.5%, however, it was announced that the rate will be further reduced to 27.5% from the 2016/17 income year;
- simplified depreciation rules, including the instant asset write off threshold of $20,000 and the write off of the small business pool if the balance is less than $20,000 (available until 30 June 2017);
- simplified trading stock rules;
- option to account for GST on a cash basis and pay GST instalments as calculated by the ATO;
- simplified method of paying PAYG instalments calculated by the ATO; and
- the extension of the FBT exemption for all work-related portable electronic devices
The increased $10m threshold does not apply to the small business capital gains tax concessions. These concessions will remain available only for small businesses with a turnover of less than $2m or that satisfy the $6m maximum net asset value test.
Unincorporated small business tax discount increased
Currently, individual taxpayers with business income from an unincorporated business (e.g. sole trader, partnership or trust) that has an aggregated annual turnover of less than $2m receive a small business tax discount (known as the unincorporated small business tax discount). From 1 July 2016 the turnover threshold will increase to $5m. The tax discount will be increased in phases over 10 years from the current 5% to 16%, first increasing to 8% on 1 July 2016. However, the existing cap of $1,000 per individual for each income year will be retained, therefore the maximum tax saving for this measure is $1,000 per taxpayer.
The tax discount will be increased in phases as follows:
| Income year | Discount rate |
| 2016/17 to 2023/24 | 8% |
| 2024/25 | 10% |
| 2025/26 | 13% |
| 2026/27 and later | 16% |
The gradual increase is intended to coincide with the staggered cuts in the corporate tax rate to 25% over 10 years.
GST reporting requirements simplified for small businesses
From 1 July 2017 all small businesses with turnover of less than $10m will (according to the Government) more easily be able to classify transactions, and prepare and lodge their business activity statements (“BAS”). This measure is very light on detail and a trial of the new simpler reporting arrangements is due to commence on 1 July 2016.
Large companies and International Taxation
Staggered cuts to the company tax rate
From the 2016/17 income year, the company tax rate for businesses with an annual aggregated turnover of less than $10m will be reduced to 27.5%. The threshold to access the 27.5% tax rate will be progressively increased such that all companies will be taxed at that rate from the 2023/24 income year. The company tax rate will be progressively reduced to 25% thereafter.
These changes are summarised in the following table:
| Income year | Annual aggregated turnover threshold |
Company tax rate |
| 2016/17 | $10m | 27.5% |
| 2017/18 | $25m | 27.5% |
| 2018/19 | $50m | 27.5% |
| 2019/20 | $100m | 27.5% |
| 2020/21 | $250m | 27.5% |
| 2021/22 | $500m | 27.5% |
| 2022/23 | $1b | 27.5% |
| 2023/24 | n/a | 27.5% |
| 2024/25 | n/a | 27.0% |
| 2025/26 | n/a | 26.0% |
| 2026/27 | n/a | 25.0% |
Franking credits will be able to be distributed in line with the rate of tax paid by the company making the distribution.
Targeted amendments to Division 7A
Amendments will be made to improve the operation and administration of integrity rules for closely-held, private groups (the shareholder loans rules in Division 7A of the Income Tax Assessment Act 1936) from 1 July 2018.
The amendments will include:
- a self-correction mechanism for inadvertent breaches of Division 7A;
- appropriate safe-harbour rules to provide certainty;
- simplified Division 7A loan arrangements; and
- a number of technical adjustments to improve the operation of Division 7A and provide greater certainty.
Expanding tax incentives for early-stage investors
In the Mid-Year Economic and Fiscal Outlook 2015/16 the government announced tax incentives applying for the 2016/17 and later income years to promote investment in early stage innovative companies, including:
- a 20% non-refundable tax offset capped at $200,000 per investor per year; and
- a capital gains tax exemption, provided investments are held for at least three years and less than 10 years.
Following consultation with stakeholders, the government has announced that these measures will be amended. These amendments include:
- reducing the holding period from three years to 12 months for investors to access the CGT exemption;
- a time limit on incorporation and criteria for determining if a company is an innovation company under the definition of “eligible business”;
- requiring that the investor and innovation company are non-affiliates; and
- limiting the investment amount for non-sophisticated investors to qualify for the tax offset to $50,000 or less per income year.
Funding arrangements for venture capital investment expanded
The government has amended the Mid-Year Economic and Fiscal Outlook 2015/16 measure “National Innovation and Science Agenda — new arrangement for venture capital investment” to:
- add a transitional arrangement that allows conditionally registered funds that become unconditionally registered after 7 December 2015 to access the tax offset if the criteria are met;
- relax the requirement for very small entities to provide an auditor’s statement of assets;
- extend the increase in fund size from $100m to $200m for new early-stage venture capital limited partnerships (ESVCLPs) to also apply to existing ESVCLPs; and
- ensure that the venture capital tax concessions are available for FinTech, banking and insurance related activities.
New collective investment vehicles introduced
A new tax and regulatory framework will be introduced for two new types of collective investment vehicles (CIVs):
- A corporate CIV for income years starting on or after 1 July 2017; and
- A limited partnership CIV for income years starting on or after 1 July 2018.
The new CIVs will be required to meet similar eligibility criteria as managed investment trusts, such as being widely held and engaging in primarily passive investment. Investors in these new CIVs will generally be taxed as if they had invested directly.
This measure is intended to allow fund managers to offer investment products using vehicles that are commonly in use overseas.
Modified deductible liabilities measure for consolidated groups
A consolidated group that acquires a subsidiary with deductible liabilities will no longer include those liabilities in the consolidation entry tax cost setting process, thus removing a double tax benefit. The start date for this measure will be deferred from 14 May 2013 to 1 July 2016.
Treatment of deferred tax liabilities in consolidation regime
The treatment of deferred tax liabilities under the tax consolidation regime will be amended by removing adjustments relating to deferred tax liabilities from the consolidation entry and exit tax cost-setting rules. The measure will apply to joining and leaving events under transactions that commence after the date the amending legislation is introduced into parliament.
Broader integrity measure for liabilities from securitised assets
An integrity measure concerning liabilities arising from securitisation arrangements announced in the 2014/15 Federal Budget will be extended to also apply to non-financial institutions with securitisation arrangements, ensuring the same treatment for both financial and non-financial institutions. These liabilities will be disregarded if the relevant securitised asset is not recognised for tax purposes.
This broadened measure will apply to transactions that commence on or after 7:30pm AEST on 3 May 2016. Transitional rules will apply to arrangements that commence before this time.
TOFA rules to be simplified
The taxation of financial arrangements (TOFA) rules will be reformed to reduce their scope, decrease compliance costs and increase certainty. The measure contains the following components:
- a “closer link to accounting” to strengthen and simplify the existing link between tax and accounting in the TOFA rules;
- simplified accruals and realisation rules (which will reduce the number of taxpayers that come within the TOFA rules), to reduce the arrangements where spreading of gains and losses is required under TOFA and simplify the required calculations;
- a new tax hedging regime which is easier to access, encompasses more types of risk management arrangements (including risk management of a portfolio of assets), and removes the direct link to financial accounting; and
- simplified rules for the taxation of gains and losses on foreign currency to preserve the current tax outcomes but streamline the legislation.
The new simplified TOFA rules will apply to income years on or after 1 January 2018.
Changes to tax treatment for asset backed financing
The tax treatment of asset backed financing arrangements such as deferred payment arrangements and hire purchase arrangements will be clarified to ensure they are treated in the same way as financing arrangements based on interest bearing loans or investments.
Diverted profits tax to be introduced
A 40% diverted profits tax (DPT) on the profits of multinational corporations that are artificially diverted from Australia will be introduced for income years commencing on or after 1 July 2017.
The DPT will apply to significant global entities (i.e. entities which, together with any related entities, have global annual revenue of $1bn or more) that are Australian residents or that have a permanent establishment in Australia. It will target companies that shift profits offshore through arrangements involving related parties:
- that result in an amount of tax being paid overseas that is less than 80% of the amount of tax that would otherwise have been paid in Australia;
- where it is reasonable to conclude that the arrangement is designed to secure a tax reduction; and
- that do not have sufficient economic substance.
Significant global entities with Australian annual turnover of less than $25m are exempted from the tax, unless income is artificially booked offshore.
The DPT is intended to cover certain situations where the existing integrity rules and the multinational anti-avoidance law (“MAAL”) introduced in December 2015 are difficult to apply and enforce, such as where the taxpayer does not cooperate with the Commissioner during the audit process.
Transactions subject to DPT
For taxpayers satisfying the threshold turnover conditions, an arrangement with a related party may be subject to the DPT if:
- the transaction gives rise to an effective tax mismatch; and
- the transaction has insufficient economic substance.
Effective tax mismatch
An effective tax mismatch will arise if a transaction, or a series of transactions, between an Australian taxpayer and a related party result(s) in a reduced Australian tax liability for the Australian taxpayer and an increased overseas tax liability for the related party, such that the amount of the increased liability for the related party is less than 80% of the reduction in Australian tax liability for the Australian taxpayer.
Only Australian and foreign income taxes will be taken into account. Other taxes such as goods and services tax will be disregarded. Prior tax losses which may be available to the related party will not be included in the comparison.
Insufficient economic substance
An arrangement will be determined to have insufficient economic substance if, based on information available to the Commissioner at the time of the determination, it is reasonable to conclude that the transaction (or series of transactions) was designed to secure the tax mismatch. An arrangement will be taken to have sufficient economic substance (so that the DPT will not apply) where the non-tax financial benefits of the arrangement exceed the financial benefit of the tax reduction.
Administration
The DPT is not imposed on a self-assessment basis and liability to the tax will only arise if the Commissioner issues a DPT assessment. The Commissioner will have a broad discretion to not apply the tax where he considered the transaction or arrangement to be low risk.
Where a DPT assessment is issued, liability is imposed at a rate of 40% of the “diverted profits amount”, which is an amount assessed by the Commissioner on the following basis:
- where the deduction claimed by the Australian taxpayer is considered to exceed an arm’s length amount, the provisional diverted profits amount will be 30% of the transaction expense;
- for all other cases, the provisional diverted profits amount will be based on the best estimate of the diverted taxable profit that can reasonably be made by the Commissioner at the time of the assessment; and
- where the debt levels of a significant global entity fall within the thin capitalisation safe harbour, only the pricing of the debt and not the amount of the debt will be taken into account in determining any DPT liability.
An offset will be allowed for any Australian taxes paid on the diverted profits (e.g. withholding taxes) but will not be reduced by any amount of tax paid in a foreign jurisdiction on the diverted profits. A DPT assessment will also include an interest charge calculated by reference to the period from the date any amount would have been payable on the relevant income tax assessment.
Following the issue of a DPT assessment, a 12-month review period applies during which the Commissioner may consider any further information, including information provided by the taxpayer. If the Commissioner considers the initial assessment to be insufficient he may issue a supplementary assessment up to 30 days before the end of the review period.
Transfer pricing rules to be strengthened
Australia’s current transfer pricing legislation specifies that it is to be interpreted so as best to achieve consistency with the OECD’s Transfer Pricing Guidelines.
On 5 October 2015, the OECD released the report “Aligning Transfer Pricing Outcomes with Value Creation” to update the guidelines. The changes to the guidelines include:
- enhanced guidance on intellectual property and other intangibles; and
- changes to ensure that transfer pricing analysis reflects the economic substance of the transaction.
As part of the government’s Tax Integrity Package, the transfer pricing rules in Division 815 of the Income Tax Assessment Act 1997 will be amended to incorporate the changes to the OECD’s guidelines with effect from 1 July 2016.
The strengthening of transfer pricing rules is covered by Actions 8 to 10 of the OECD’s Action Plan on Base Erosion and Profit Shifting. Action 8 focuses on the transfer pricing issues relating to controlled transactions involving intangibles. Under Action 9, contractual allocations of risk are respected only when they are supported by actual decisions, thus exercising control over these risks. Action 10 focused on other high-risk areas, including the scope for addressing profit allocations resulting from controlled transactions which are not commercially rational.
OECD hybrid mismatch arrangement rules to be implemented
The implementation of rules to eliminate hybrid mismatch arrangements is Action 2 of the OECD’s Action Plan on Base Erosion and Profit Shifting. Under Action 2, the OECD recommended that governments implement domestic rules (e.g. double non-taxation, double deduction, long-term deferral) to neutralise the effect of hybrid instruments and entities. These may include provisions:
- that prevent exemption or non-recognition for payments that are deductible by the payer;
- that deny a deduction for a payment that is not included in income by the recipient and is not subject to taxation under controlled foreign company (CFC) or similar rules; and
- that deny a deduction for a payment that is also deductible in another jurisdiction.
When implemented, the rules will apply from the later of 1 January 2018 or six months after the enabling legislation receives Royal Assent.
Increased administrative penalties for significant global entities
A range of administrative penalties will be increased for significant global entities (i.e. entities which, together with any related entities, have global annual revenue of $1b or more) from 1 July 2017, including:
- penalties relating to the lodgment of tax documents to the ATO will be increased by a factor of 100 when imposed on significant global entities (the maximum penalty will increase from $4,500 to $450,000; and
- penalties relating to making statements to the ATO will be doubled when imposed on significant global entities.
Superannuation
Lowering of the concessional contributions cap
With effect from 1 July 2017 the annual cap on concessional contributions will be reduced to $25,000 per annum for all individuals (currently $30,000 for those under the age of 50 and $35,000 for those above 50). Contributions caps at these levels will still enable individuals to be self-sufficient in retirement.
Reduction in the Division 293 threshold
The government has announced that from 1 July 2017 the Division 293 threshold (being the point at which high income earners are required to pay additional contributions tax) will be reduced to an adjusted taxable income of $250,000 (previously $300,000) above which there will be a requirement to pay 30 per cent tax on concessional superannuation contributions.
This threshold will also apply to members of defined benefits schemes and constitutionally protected funds.
Lifetime cap on non-concessional superannuation contributions
Commencing 7:30pm (AEST) 3 May 2016, a lifetime non-concessional contributions cap of $500,000 will be introduced. This lifetime cap will apply to all non-concessional contributions made on or after 1 July 2007, from which time the ATO has reliable records.
Contributions made before commencement will not result in an excess, however contributions thereafter will need to be removed or will be subject to penalty tax. The lifetime non-concessional cap replaces the currently existing non-concessional contributions caps of $180,000 per annum (or $540,000 every three years for those aged under 65).
Non-concessional contributions made into defined benefit accounts and constitutionally protected funds will be included in an individual’s lifetime cap.
This measure is available to all Australians up to the age of 74 in line with the harmonisation of contribution rules discussed below.
Harmonisation of contribution rules for those aged 65 to 74
From 1 July 2017 the current contribution restrictions on people aged 65 to 74 will be removed. There will no longer be a requirement to satisfy a work test and there will be the ability to receive contributions from a spouse.
The removal of such restrictions will allow for the application of similar acceptance rules for all individuals under the age of 75 effective 1 July 2017.
Removal of the tax exemption on earnings supporting transitional income streams
With effect from 1 July 2017, the tax exemption on earnings of assets supporting Transition to Retirement Income Streams (TRISs) will be removed. Further, the ability to treat certain superannuation income stream payments as lump sums for tax purposes will be removed.
These changes remove the accessibility purely for tax purposes with the objective of supporting people whom are remaining in the workforce in some capacity.
Concessional superannuation contributions catch-up
The government has announced that individuals with a superannuation balance of less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contribution caps in prior years. These amounts are carried forward on a consecutive five-year basis effective 1 July 2017.
Personal superannuation contribution restrictions eased
As of 1 July 2017 all individuals up to the age of 75 will have the ability to claim an income tax deduction for personal superannuation contributions regardless of their employment circumstances.
This effectively gives any individual the ability to make additional concessional contributions (up to the contributions limit) and receive a tax deduction regardless of their employment status.
Low income superannuation tax offset
From 1 July 2017 a superannuation tax offset will be introduced as a means of reducing tax on superannuation contributions for low income earners. This offset will be non-refundable, based on the tax paid on concessional contributions of low income earners up to a cap of $500.
To be eligible for this offset members will have to have an adjusted taxable income of less than $37,000 and have had a concessional contribution made on their behalf.
Increased threshold of low income spouse tax offset
The eligibility threshold for the low income spouse tax offset will be increased from $10,800 to $37,000 for the receiving spouse from 1 July 2017. This offset will provide up to $540 per annum with the expectation of improving the superannuation balances of these low income spouses.
Introduction of superannuation transfer balance cap
With effect from 1 July 2017 a cap of $1.6 million will be applied to the total amount of superannuation an individual can transfer into a tax-free retirement phase with subsequent earnings on these balances not being restricted.
Where an individual possesses superannuation balances in excess of the $1.6 million cap they will be able to maintain this in an accumulation phase (concessionally taxed at 15%). Any member already in a retirement phase with balances exceeding the cap will be required to reduce this balance prior to 1 July 2017.
Any amounts in the retirement phase in excess of the cap will be subject to a tax treatment similar to that which applies to excess non-concessional contributions (i.e. an additional 31.5%).
Removal of anti-detriment death benefit provision
With effect from 1 July 2017 the anti-detriment provision in respect of death benefits from superannuation will be removed. This provision effectively results in a refund of the member’s lifetime superannuation contributions tax payments into an estate with the beneficiary being the dependent of the member.
Removal of this provision will better align the treatment of lump sum death benefits across the superannuation industry and the treatment of bequests outside superannuation. Lump sum death benefits to dependents remain tax free.
GST and other taxes
GST extended to consumer purchases regardless of value
The government has announced that it will subject all imported consumer purchases to GST regardless of their value with effect 1 July 2017. Currently any low-value imported goods, that is those with a value of less than $1,000, are exempt from GST.
The government has also indicated that, as an alternative to collecting the GST as the goods enter Australia, the tax will be collected at the point of sale. Overseas suppliers that have an Australian turnover of $75,000 or more as a result of making sales connected to Australia will be required to register for, collect and remit GST for low-value goods, using a vendor registration model.
Double taxation of digital currencies under the GST regime
The government announced the release of a discussion paper that will seek submissions on options to address “double taxation” under the current GST regime of digital currencies, in particular Bitcoin.
Under current legislation digital currencies have been regarded as intangible property by the ATO. This treatment therefore results in GST being applied when exchanging fiat currency for digital currency, and then again when the digital currency is used by way of payment by the end user.
Accordingly, the purpose of the discussion paper will be to ensure that the correct GST treatment is taken so as to ensure consumers are not “double taxed” when using digital currencies to buy goods and services that are already subject to GST.
Tobacco excise hike
The tobacco excise will be increased annually by 12.5 per cent per year from 2017 until 2020. The increases will occur on 1 September each year and will be in addition to existing indexation to average weekly ordinary time earnings. The four annual increases will take Australia’s excise on tobacco to approximately 69% of the average price of a cigarette, in line with the 70% recommendation by the World Health Organisation.
Reduction in wine equalization tax (WET) rebate cap
The wine equalisation tax (WET) rebate cap, which is currently set at $500,000, will be reduced to $350,000 on 1 July 2017 and to $290,000 on 1 July 2018. From 2019 the eligibility criteria to access the rebate will be also be tightened. Under the amended eligibility criteria wine producers will have to either own a winery or have a long-term lease over a winery to qualify for the rebate. Further, the recipients of the rebate will also be required to sell packaged, branded wine domestically.
Excise refund scheme extended to distillers
The excise refund scheme will be extended to domestic spirit producers from 1 July 2017. Under the current rules, eligible breweries receive a refund of 60% of excise up to a $30,000 cap each financial year. From 1 July 2017 producers of low strength fermented beverages such as non-traditional cider and produces of whisky, vodka, gin, liqueur will be eligible to access the excise refund scheme.
Administration and other measures
Tax Avoidance Taskforce
The government will fund the ATO to the tune of $679m over four years to establish a Tax Avoidance Taskforce. This is intended to enhance the ATO’s current compliance activities targeting large multinationals, private groups and high-wealth individuals, and extend them to 30 June 2020. The Taskforce will work closely with partner agencies including the Australian Crime Commission, the Australian Federal Police and AUSTRAC.
Further legislation will be introduced to allow the ATO to improve information sharing and analysis with the Australian Securities and Investments Commission, and the Taskforce will also test the law through litigation where there is deliberate tax avoidance.
Protection for tax whistleblowers
Under the new arrangements, individuals who disclose information to the ATO relating to tax avoidance behaviour and other tax issues will received increased protection. This is aimed at protecting employees and former employees of taxpayers and advisers to taxpayers.
The measure will apply from 1 July 2018 and whistleblowers will have their identities protected and will be protected from victimisation, criminal prosecution and civil action for disclosing information to the ATO.
Companies encouraged to adopt Tax Transparency Code
In the 2015/16 Federal Budget, the government announced a voluntary Tax Transparency Code, and the Board of Taxation released a discussion paper on the Code in December 2015. It recommended that businesses with aggregated TTC Australian turnover of at least $100m but less than $500m should adopt Part A of the Code and that large businesses (i.e. businesses with aggregated TTC Australian turnover of $500m or more) adopt Parts A and B of the TTC.
In this 2016-17 Budget the Government announced that it encourages ALL companies to adopt the TTC from the 2016 financial year onwards, covering:
- a reconciliation of accounting profit to tax expense and to income tax paid or income tax payable;
- identification of material temporary and non-temporary differences; and
- accounting effective company tax rates for Australian and global operations (pursuant to the Australian Accounting Standards Board (AASB) guidance);
- the business’ approach to tax strategy and governance;
- a tax contribution summary for corporate taxes paid; and
- information about international related party dealings, financing and tax concessions.
Public sector efficiency review
The standard annual efficiency dividend will be increased by 1.5% in 2017/18, 1.0% in 2018/19 and 0.5% in 2019/20 to achieve efficiencies in the operation of the Australian Public Service. Further, the government will reinvest $500m for specific initiatives to assist agencies to manage their transformation to a more modern public sector. In relation to the ATO, the government will:
- reduce stand alone and co-located ATO shopfronts in favour of myGov shopfronts;
- actively promoting digital service delivery;
- expand ATO external compliance assurance processes; and
- implement more efficient processes for external scrutiny of the ATO.