The general consensus ahead of this budget was that, strategically, it had been calibrated for an election, expected later this year or early next. Indeed, the election timing may in some part be dictated by how this budget is received. And, having lost 30 Newspolls in a row, there is a view the government doesn’t have a great deal else with which to bargain, other than Opposition Leader Bill Shorten having still managed to lose 30 Newspolls in a row as preferred Prime Minister to Malcolm Turnbull.
So, with an election looming and a budget situation – long portrayed as a disaster – suddenly on the mend, would the government set about repairing the finances in case the global economics winds take a turn for the worse? Or, as pundits were instead suggesting, was the government more likely to “give way to temptation and indulge the punters” in a “cash splash”?
Despite the Treasurer’s insistence on the ABC later in the evening that “these things don’t happen by accident” and taking credit for “investing in a growing economy…taking advantage of opportunities”, several forces largely outside the government’s control have shifted the budget balance. After all, with wages growth remaining painfully slow, inflation below trend and tepid (at best) economic growth, interest rates have been kept at record low for a long time with no plans to raise them any time soon.
However, against this, commodity prices have been stronger than forecast and employment growth has been good, two factors which have combined to deliver much stronger revenue flows. And, a decade down the line from the global financial crisis, the heavy losses incurred by our big corporations in its aftermath have finally washed through the tax system, with credits from tax losses pretty much all used up. This has resulted in a budget bottom line that is much better than forecast, with Commonwealth Bank analysis indicating a $10 billion improvement with a further $27 billion over the next three years even without any government initiatives.
So, having money to play with for the first time in some years, the centrepiece on the revenue front is a major 7-year 3-step plan to reform personal income tax:
- Step 1: a new non-refundable low and middle income tax offset from 2018-19 to 2021-22
- Step 2: an increase in the top threshold of the 32.5% tax bracket from $87,000 to $90,000 from 1 July 2018. In 2022-23 the top threshold of the 19% bracket will increase from $37,000 to $41,000. The top threshold of the 32.5% bracket will increase from $90,000 to $120,000 from 1 July 2022
- Step 3: from 1 July 2024 the top threshold of the 32.5% bracket will increase from $120,000 to $200,000, removing the 37% tax bracket completely
The government also remains committed to pursuing both its Ten-Year Enterprise Tax Plan of company tax cuts and the Government’s Enterprise Tax Plan announced in the 2016-17 Budget. The Treasurer said the Government continues to prosecute the legislation through the Parliament.
With a promise of no unexpected surprises to pay for those tax cuts, the government is intending to pay for it in part by going after illicit tobacco sales in a bid to reclaim $3.6 billion over four years. The so-called Black Economy Taskforce will target sectors known to avoid paying tax, which should reclaim about $5.3 billion over four years. It’ll also crack down on money laundering, so cash payments of more than $10,000 will now become illegal.
But, beyond tax cuts, what else was there? Other takeaways from this budget include:
- It is a carrot and stick budget for businesses. They are set to benefit from extended instant tax deductions, and new infrastructure and public investment funds, although some will face tighter tax rules, tougher enforcement and a cut to research and development incentives.
- Superannuation will give fewer headaches. The Australian Tax Office will be given powers to find superannuation payments sitting in multiple accounts for you and send it to your active account. Exit fees will be banned to reduce the cost of moving to a better provider. Further, if you are young or not earning a lot of money, superannuation companies won’t be able to force you to pay life insurance policies if you don’t want them.
- A significant focus on Aged care, including:
- giving more older Australians care at home: about 14,000 more people will get home care packages at a cost of $1.6 billion over four years;
- a new commissioner responsible for safety and quality care will be appointed and mental health services in aged care homes will also be bolstered; and
- more than $30 million will go towards improving palliative care, provided state governments also contribute a similar amount of money.
- Planned roadworks – and lots of them. As was widely expected, the government is intending to spend big on roads and rail, with $24.5 billion for new projects to ease congestion. Most money is going to Victoria including the biggest item, some $5 billion for a rail line to Melbourne airport. However, for many of the bigger projects, the Commonwealth wants the states to pitch in half the money. If they don’t, those projects won’t go ahead without a battle. So, we can expect a political stoush or two, hopefully to be settled before the roadworks begin.
- The Renewable Energy Target (RET) scheme, which incentivises renewable energy, will, as planned, be phased out by 2020.
- Housing affordability measures, which were such a significant part of the 2017-18 federal budget, were not mentioned.
So, a pre-election budget? Pretty much. Or, at the very least, it could perhaps qualify as a reasonably successful soft-launch of a prolonged election campaign.
The taxation and superannuation highlights are set out in further detail 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
- Business
- Large Companies and International Taxation
- Superannuation
- GST and Other Taxes
- Black Economy Measures
Individuals and families
Seven-year Personal Income Tax Plan
The government will introduce a Personal Income Tax (PIT) plan over seven years and in three steps to provide further low and middle income tax offsets, with the aim of ultimately wiping out the 37% tax bracket for individuals.
Step 1: implementation of the low and middle income tax offsets (LMITO)
The offset will be provided as a non-refundable tax offset (in addition to the current low income tax offsets available) of up to $530 per tax year to resident low and middle income individual taxpayers from 2018/19 until 2021/22. The offset will be paid upon assessment of an individual’s income tax return.
Low income tax payers with income up to $37,000 will receive up to $200, taxpayers with incomes between $37,000 and $48,000 will receive from $200 to a maximum benefit of $530, while those with taxable incomes from $48,000 to $90,000 will receive the maximum benefit of $530. The offset will then be phased out at a rate of 1.5 cents per dollar for taxpayers with taxable incomes between $90,001 and $125,333.
Step 2: “relief from bracket creep for middle income taxpayers”
This relief will be provided in phases:
- the top threshold of the 32.5% PIT is increased from $87,000 to $90,000 from 1 July 2018
- the low income tax offset is increased from $445 to $645 from 1 July 2022
- the 19% PIT bracket is increased from $37,000 to $41,000 from 1 July 2022
- the increased low income tax offset is reduced by 6.5 cents per dollar for those with taxable incomes between $37,000 and $41,000, and by 1.5 cents per dollar for those with incomes between $41,000 and $66,667, and
- the 32.5% PIT bracket will see an additional increase from $90,000 to $120,000
Step 3: 37% personal income tax bracket eradicated from 1 July 2024
As a result, the upper limit of the 32.5% PIT bracket will be changed from $120,000 to $200,000. Those with a taxable income over $200,000 will be liable for the top marginal tax rate of 45%. While the 32.5% PIT bracket will be applied to incomes of $41,001 to $200,000. As per the table below:
| Rate | Thresholds in 2017/18 | New thresholds in 2024/25 |
| Nil | Up to $18,200 | Up to $18,200 |
| 19% | $18,201 – $37,000 | $18,201 – $41,000 |
| 32.5% | $37,001 – $87,000 | $41,001 – $200,000 |
| 37% | $87,001 – $180,000 | – |
| 45% | Above $180,000 | Above $200,000 |
Medicare levy – low income thresholds set to increase
The Medicare levy low income thresholds for singles, families, seniors and pensioners will be increased from the 2017/18 income year:
- the singles threshold will increase to $21,980 from $21,655
- the family threshold will increase to $37,089 from $36,541
- The threshold for single seniors and pensioners will increase to $34,758 from $34,244
- the family threshold for seniors and pensioners will increase to $48,385 from $47,670
- for every dependent child or student, the income threshold for families will be increased by an additional $3,406, up from $3,356
Medicare levy continuing at 2%
The 2017/18 Federal Budget measure to increase the Medicare levy from 2% to 2.5% of taxable income from 1 July 2019 will not proceed. In addition, adjustments to other tax rates linked to the highest individual income tax rates, such as the fringe benefits tax rate, will also not proceed.
Income tax exemption for specified veteran payments
Supplementary payments to a veteran (e.g. pension supplement, rent assistance and remote area allowances), and full payments (including the supplementary component) made to the spouse or partner of a veteran who dies, are exempt from income tax from 1 May 2018.
Tax Integrity — schemes to license an individual’s fame or image targeted
From 1 July 2019 any and all payments and non-cash benefits received in relation to the commercial exploitation of an individual’s fame or image must be included in the individual’s assessable income. This is intended to ensure high profile individuals are not able to access lower tax rates by licensing their fame or image to another entity.
Under current rules high profile individuals, such as sportspeople and actors, can license their fame or image to other entities, e.g. a company or trust, which results in the income from their fame being received and taxed in the entity that holds the licence.
Funding to ATO for compliance activities targeting individual taxpayers
The ATO is increasing compliance activities targeting individual taxpayers to allow four income matching programs that would have otherwise terminated from 1 July 2018 to continue. The measure also provides funding for new compliance activities, including additional audits and prosecutions, improving education and guidance materials, pre-filling of income tax returns and improving real time messaging to tax agents and individual taxpayers. This is intended to deter over-claiming of entitlements, such as deductions, by higher risk taxpayers and their agents.
Business
$20,000 immediate asset write-off extended
Businesses with an aggregated turnover of less than $10 million will continue to have access to the $20,000 instant asset write-off for another 12 months, i.e. for assets that are installed and ready for use by 30 June 2019. Assets costing more than $20,000 will need to be pooled and written off at 15% in the first year. Businesses cannot re-enter the pooling rules for five years if they opt out in year 1.
Non-compliant payments to employees and contractors no longer deductible
From 1 July 2019 businesses that have not met their PAYG obligations they will no longer be able to claim deductions for payments to employees or certain payments to contractors. This includes not reporting or remitting PAYG withheld from gross payments.
Additionally, failure to withhold an amount at the top marginal tax rate from a contractor who does not quote an ABN will result in the entire payment being made non-deductible.
Research & Development (R&D) tax incentive changes
From 1 July 2018 the maximum cash refund for R&D claimants with an aggregated annual turnover below $20 million will be capped at $4 million per financial year.
The calculation of the R&D tax incentive will be based on an R&D intensity percentage which will be based on the amount of R&D related expenditure as a percentage of total company expenditure. The lower the percentage, the lower the maximum available tax offset.
It is proposed in the budget that the maximum eligible expenditure to get the concessional rates will rise from $100 million per entity per year to $150 million
Companies with annual turnover above $20 million
Currently: A 38.5% non-refundable tax offset is available with a minimum eligible R&D expenditure of $20,000 pa.
Proposed: Four levels of non-refundable tax offset based on an R&D intensity percentage and the entity’s corporate tax rate:
- 40% or 42.5% offset if more than 10% of total expenditure relates to R&D
- 36.5% or 39% offset if R&D intensity percentage is between 5% and 10%
- 34% or 36.5% offset if R&D intensity percentage is between 2% and 5%
- 31.5% or 34% offset if R&D intensity percentage is between 0% and 2%.
Companies with annual turnover of less than $20 million
Currently: A 43.5% refundable tax offset is available with a minimum eligible R&D expenditure of $20,000 pa.
Proposed: A refundable tax offset of 13.5% percentage points above the entity’s corporate tax rate. This will affect “base rate entities” which have a lower corporate tax rate of 27.5% as they will now have a maximum refundable tax offset of 41%. Also, it is proposed that the maximum cash refund available will be $4 million. Any additional refunds past this amount can be carried forward to later income years.
Div 7A UPE rule strengthened: major reform delayed
From 1 July 2019 Division 7A of ITAA 1936 (the deemed dividend provisions) will be amended to clarify the circumstances in which they apply to unpaid present entitlements (UPEs). UPEs arise where a related private company becomes entitled to a share of trust income as a beneficiary, but the distribution has not been paid.
The Division 7A rules require benefits provided by private companies to related taxpayers to be treated as dividends unless they are structured as Division 7A loans or another exemption applies. The measure enabling all Division 7A amendments to be progressed as part of a consolidated package has been deferred to 1 July 2019.
Deductions for vacant land to be denied
From 1 July 2019 the government will deny deductions for expenses associated with holding land where the land is not genuinely held for the purpose of earning assessable income. It will also reduce tax incentives for land banking, which denies the use of land for housing or other development. The measure will apply to land held for residential or commercial purposes. However, the “carrying on a business” test will generally exclude land held for commercial development.
Denied deductions may be included in the cost base of the asset for CGT purposes if these expenses would ordinarily be a cost base element, e.g. borrowing expenses and council rates. The measure will not apply to expenses associated with holding land that are incurred after:
- a property has been constructed on the land, it has received approval to be occupied and is available for rent, or
- the land is being used by the owner to carry on a business, including a business of primary production.
No small business CGT concessions for assignment of partnership rights
From 8 May 2018 partners who alienate their income by dealing in rights to the future income of the partnership will no longer have access to small business CGT concessions which provide relief from CGT on the disposal of assets relating to their business. This measure is intended to prevent large partnerships inappropriately accessing such concessions in relation to their assignment of a right to the future income of a partnership to an entity, without giving that entity any role in the partnership.
The concessions will continue to be available to eligible small businesses with an aggregated annual turnover of less than $2 million or net assets of less than $6 million.
Removal of 50% CGT discount for MITs and attribution MITs at the trust level
For payments made from 1 July 2019, the 50% CGT discount will cease applying to Managed Investment Trusts (MITs) and Attribution MITs (AMITs) at the trust level. Beneficiaries that are not entitled to the CGT discount in their own right will be prevented from receiving a benefit from the CGT discount being applied at the trust level. This measure is intended to ensure that MITs and AMITS operate as genuine flow-through tax vehicles, so that the tax effect is identical in the hands of investors, as if they had invested directly.
Tax integrity – Tax exempt entity loans
The repayment of the principal of a concessional loan will no longer be tax deductible for tax exempt entities that become taxable after 8 May 2018. Such entities will be required to have their concessional loans valued as if they were originally entered into on commercial terms.
Extending anti-avoidance rules for circular trust distributions to family trusts
From 1 July 2019 family trusts will be included in the anti-avoidance rule that applies to closely held trusts engaging in circular trust distributions. Currently, under a “round robin” arrangement, where family trusts act as beneficiaries of each other, a distribution can be returned to the original trustee tax-free. By extending the anti-avoidance rule to family trusts, the ATO will be able to impose tax on such distributions at the top marginal tax rate plus Medicare levy.
Tax integrity – testamentary trust and injected assets
From 1 July 2019 the concessional tax rate for minors receiving income from testamentary trusts will be limited to income derived from assets transferred from a deceased estate or proceeds of the disposal or investment of those assets. Currently, income from testamentary trusts is taxed at normal adult rates in the hands of minors.
This measure will ensure that minors will be taxed at the concessional rates only in respect of the income derived from assets of the deceased estate via a testamentary trust and not on income on assets injected into the testamentary trusts that are unrelated to the deceased estate.
Updated list of deductible gift recipients
The following organisations have been approved as specifically-listed deductible gift recipients:
- Paul Ramsay Foundation Ltd from 1 July 2018 to 30 June 2020
- Australian Women Donors Network from 9 March 2018 to 8 March 2023
- Victorian Pride Centre Ltd from 9 March 2018 to 8 March 2023
- Smile Like Drake Foundation Ltd from 9 March 2018 to 8 March 2023
- Australian Sports Foundation Charitable Fund from 1 July 2018 to 30 June 2023, and
- Q Foundation Trust from 1 January 2018 to 31 December 2022.
Large companies and International Taxation
Company tax — significant global entity definition broadened
The significant global entity (SGE) definition identifies entities which are required to prepare country-by-country (CbC) reports and is used to determine entities which may be subject to Australia’s multinational tax integrity rules, such as the multinational anti-avoidance law (MAAL) and the diverted profits tax (DPT).
The current definition of SGE applies only to entities where the group head is a public company or a private company required to provide consolidated financial statements. The SGE definition will be widened to include members of large multinational groups headed by private companies, trusts, partnerships and investment entities.
The measure will apply to income years commencing on or after 1 July 2018.
Tightening the thin capitalisation rules
Consolidated groups and multiple entry consolidated groups that are foreign controlled, which in turn control a foreign entity themselves, will be treated as both outward and inward investment vehicles for thin capitalisation purposes. This measure will apply to income years commencing on or after 1 July 2019. This change is intended to ensure that inbound investors cannot access tests that are only intended for outward investors.
The thin capitalisation rules will also be amended to require entities to align the value of their assets for thin capitalisation purposes with the value included in their financial statements.
This measure will also apply to income years commencing on or after 1 July 2019 and all entities must rely on the asset values contained in their financial statements for thin capitalisation purposes. Valuations made before 7.30pm (AEST) on 8 May 2018 may be relied on until the beginning of an entity’s first income year commencing on or after 1 July 2019.
International tax — list of information exchange countries to be updated
Effective 1 January 2019, the government will update the list of countries whose residents are eligible to access a reduced withholding tax rate of 15% on certain distributions from Australian managed investment trusts (MITs). The default rate is 30%.
Listed countries are those that have established the legal relationship enabling them to share taxpayer information with Australia. This measure supports the operation of the MIT withholding tax system by providing the reduced withholding tax rate only to residents of countries that enter into effective information sharing agreements with Australia.
The update will add 56 jurisdictions that have entered into information sharing agreements since 2012.
Income tax exemption for International Cricket Council
The ICC World Twenty20 is to be held in Australia in 2020. In connection with this, a five-year income tax exemption will be provided to a subsidiary of the International Cricket Council (ICC). The exemption will apply from 1 July 2018 to 30 June 2023. The subsidiary will also be provided with an exemption from interest, dividend and royalty withholding tax liabilities for the same period.
Superannuation
While most recent legislation changes have had a strong focus on limiting the funds that can be kept in pension phase and, as such, tax-free, and have been aimed at members with relatively high superannuation balances, the main proposed budget items in relation to superannuation seem to offer some protection measures for smaller superannuation balances. These, along with some integrity measures which have been introduced with no impact on revenue forecasts, leave the superannuation legislation largely unchallenged by the 2018/19 budget.
Increased membership of SMSFs and small APRA funds
New and existing self-managed superannuation funds (SMSFs) and small APRA funds will be allowed to have a maximum of six members from 1 July 2019. Currently, the maximum allowable number of members in an SMSF and a small APRA fund is four. This has been introduced with the view that it will provide greater flexibility for joint management of retirement savings, in particular, for large families.
Three-yearly audit cycle for some SMSFs
The annual audit requirement for self-managed superannuation funds (SMSFs) will be changed to a three-yearly requirement for SMSFs with a history of good record keeping and compliance, being SMSF trustees that have a history of three consecutive years of clear audit reports and timely lodgements of the fund’s annual returns.
This measure will commence on 1 July 2019. The government will consult with stakeholders to ensure a smooth implementation of this measure.
Preventing inadvertent concessional cap breaches
Individuals with income exceeding $263,157 and/or have multiple employers, will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July 2018.
The measure is intended to ensure eligible individuals can avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory SG contributions. Breaching the cap results in individuals being liable to pay excess contributions tax and a shortfall interest charge. Employees using this measure may receive additional income which will be taxed at marginal tax rates.
Improving integrity of personal contributions deductions
From 1 July 2018, individual income tax returns will be modified to include a tick box for individuals with personal superannuation contributions to acknowledge that they have complied with the requirements to submit a “notice of intent” (NOI) where they intend to claim a tax deduction for the contributions.
The change is intended to improve the integrity of the NOI processes for claiming personal superannuation contribution tax deductions. Currently, some individuals receive deductions on their personal superannuation contributions but do not submit a NOI, despite being required to do so. This results in their superannuation fund not applying the appropriate 15 per cent tax to their contribution. As the contribution has been deducted from the individual’s income, no tax is paid on it at all.
The ATO will develop a new compliance model and undertake additional compliance and debt collection activities, including denying deductions to individuals who do not comply with the NOI requirements.
Super work test exemption for recent retirees
Currently, the work test restricts the ability of members aged 65-74 to make voluntary superannuation contributions to individuals who can declare that they have satisfied working a minimum of 40 hours in any 30-day period in the financial year.
From 1 July 2019 an exemption from this work test for voluntary contributions to superannuation will be introduced for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.
Changes to superannuation insurance arrangements
On 1 July 2019 insurance within superannuation will move from being a default framework to being offered on an opt-in basis for:
- members with low balances – less than $6,000
- members under the age of 25 years, and
- members whose accounts have not received a contribution in 13 months and are inactive.
Affected individuals will have a period of 14 months to decide whether they will opt-in to their existing cover or allow it to switch off. These changes are intended to protect the retirement savings of young people and those with low balances by ensuring their superannuation is not unnecessarily eroded by premiums on insurance policies they do not need or are not aware of. The changes will also reduce the incidence of duplicated cover.
Importantly, these changes will not prevent anyone who wants insurance from being able to obtain it and low balance, young, and inactive members will still be able to opt-in to insurance cover within super.
Superannuation fee protection measures to be introduced
A 3% annual cap will be introduced on passive fees charged by superannuation funds on accounts with balances below $6,000 and exit fees on all superannuation accounts will be banned.
The government will also strengthen the ATO’s account consolidation regime by requiring the transfer of all inactive superannuation accounts to the ATO where the balances are below $6,000. The ATO will expand its data matching processes to proactively reunite these inactive superannuation accounts with the member’s active account, where possible. This measure will also include the proactive payment of funds currently held by the ATO. It is intended that the majority of accounts transferred to the ATO will be reunited in the year they are received.
These changes will take effect from 1 July 2019.
Financial institutions supervisory levies to be increased
The financial institutions supervisory levies will be increased from 2018/19 to raise additional revenue of $31.9m over four years. This increase will allow the ATO to fully recover the cost of superannuation activities undertaken, consistent with the Australian Government Cost Recovery Guidelines.
GST and other taxes
Offshore hotel accommodation – new GST impact
From 1 July 2019 offshore sellers of hotel accommodation in Australia will be required to calculate their GST turnover in the same way as local sellers. The measure will apply to sales made after 1 July 2019. Sales prior to 1 July 2019 are excluded from the measure regardless of the date of hotel stays.
This measure removes the existing exemption applying to offshore sellers of Australian accommodation who, from the above date, will include these sales as part of their GST turnover. When the “Australian accommodation” sales of an offshore entity exceed the turnover threshold of $75,000, it will be required to register for GST and meet the corresponding obligations.
Removal of luxury car tax on re-imported cars following refurbishment overseas
From 1 January 2019 luxury car tax will no longer be charged on cars re-imported into Australia after overseas refurbishment.
Alcohol excise refund to be increased
From 1 July 2019 the alcohol excise refund is to be increased from $30,000 to $100,000 per annum for domestic brewers, distillers and producers of draught beer and other fermented beverages. Additional relief is to be provided to domestic brewers in the form of a lower excise rate for smaller kegs.
Removal of customs duty on imported placebos and clinical trial kits
From 1 July 2018 customs tariffs will be removed from imported placebos and clinical trial kits.
Access to Indirect Tax Concession Scheme
Access to refunds under the Indirect Tax Concession Scheme has been extended to include diplomatic and consular representation of Cote d’lvoire, Guatemala, Costa Rica and Kazakhstan in Australia. The refund of indirect tax includes: GST, fuel and alcohol taxes.
Black economy measures
Illegal Phoenix Activity
Corporations and tax laws will be reformed to provide regulators more resources to help prevent and discourage illegal phoenix activity. Illegal phoenix activity involves a new company being created to continue the business of a company that has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements.
The package introduces the following:
- Restrictions on the ability of a related creditor to vote on the appointment, removal or replacement of an external administrator
- Prevention of the backdating of resignations by directors, which can often be undertaken to avoid liability or prosecution
- Additional phoenix offences to assist in the prosecution of taxpayers who conduct or enable illegal phoenixing
- Curbing the ability of directors to resign when doing so would result in no directors in the company
- Extension of the Director Penalty Regime to GST, luxury car tax and wine equalisation tax, which would make directors personally liable for debts arising;
- Expansion of the ATO’s power to withhold and retain refunds where the taxpayer has outstanding tax lodgements.
The government intends to provide $318.5 million over the next four years to implement strategies to “combat the black economy”. This includes the implementation of a new multi-agency Black Economy Standing Task Force. There will also be a black economy hotline that will enable the community to report black economy and illegal phoenix activities. The new initiatives promise a more coordinated approach to combatting black economy behaviours.
An overhaul of the Australian Business Number (ABN) system may also occur with the government suggesting it will consult on and design a new regulatory framework for the system. This comes from a recommendation of the Black Economy Taskforce that the ABN system be strengthened to provide improved confidence.
Taxable Payments Reporting System
From 1 July 2019 the taxable payments reporting system (TPRS) will be expanded to the following industries:
- security providers and investigation services
- road freight transport, and
- computer system design and related services.
The TPRS already operates in the building and construction industry as an integrity measure. Through the TPRS, businesses are required to report payments to contractors to the ATO. The taxable payments report is an annual report which brings payments to contractors in line with payments made for salaries and wages to employees. The listed businesses will be required to collect the information from 1 July 2019, with the first annual report required in August 2020.
Large Government Contract Tenders
Under new arrangements from 1 July 2019, businesses seeking to tender for Australian government procurement contracts over $4 million will be required to provide a statement from the ATO indicating they are generally compliant with their tax obligations. The government will provide the ATO with $9.2 million over four years from 2018-19 to assist with this.
Cash Receipt Limit
The government will introduce a Black Economy Taskforce recommendation to limit cash receipts for a business to under $10,000 from 1 July 2019. This is intended to prevent large undocumented cash payments that can be used to avoid tax or to launder money from criminal activity.
Combatting illicit tobacco
Acknowledging that a significant amount of illicit tobacco escapes taxation either by being undetected, illegally produced, or stolen, the Government has boosted its efforts to tackle the issue. This involves the introduction of initiatives to hone in on the three main sources of illicit tobacco in Australia, being:
- smuggling
- leakage from licensed warehouses; and
- domestic production
Illicit Tobacco Task Force
From 1 July 2018, a Tobacco Task Force will be established which will be led by the Australian Border Force, and members of other law enforcement agencies. Its aim will be to dismantle illicit tobacco supply chains. The new task force will have additional powers and capabilities to enhance intelligence gathering and target, disrupt and prosecute serious and organised crime groups at the centre of the illicit tobacco trade.
From 1 July 2018, extra resources will be allocated to the ATO such that they can increase their efforts to locate and destroy illicit tobacco crops.
Duties and taxes to be collected at the border
From 1 July 2019, tobacco importers will be required to pay all duties and tax liabilities upon importation. This is a move from the existing system, where tobacco can be imported and stored in licensed warehouses prior to tax being paid. However, tobacco products which are already held in licensed warehouses at the commencement of these measures will have some relief under transitional arrangements, which will allow the eligible affected entity to pay the liability on the warehoused stock within a 12-month period.
This will mean the current system of weekly settlement arrangements will no longer apply for tobacco importations. Additionally, the taxing point for any future domestic manufacture of tobacco will also be changed to be consistent with the new taxing point for tobacco imports. Currently, no domestic manufacturing of tobacco takes place in Australia.
Prohibited import control for tobacco
From 1 July 2019, permits will be mandatory for the importation of all tobacco products (except for duty free tobacco imported by travellers within the prescribed limits).
ATO excise systems upgrade
The ATO will upgrade its excise and “excise equivalent goods” payment systems from 2020/21. This will replace the paper lodgement system.
