Fifty years of the Australian master tax guide.

2966 Pages·2020·19.01 MB·English

by  CCH Australia Limited,

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ISBN 978-1-922347-24-4
ISSN 0810-5596
Foreword
Practitioners working within the dynamic Australian tax landscape have had a reliable companion for five
decades in the CCH Australian Master Tax Guide. First published in 1970, the Guide was written as a tax
handbook for preparing tax returns and providing tax advice.
Over the course of 50 years, the Guide has become Australia’s best selling and most authoritative tax
handbook. Used widely by tax agents, accountants, lawyers, financial advisers, lecturers, students and
ATO officers alike, it is often the first port of call for those dealing with tax issues because of its clear and
concise approach.
During this period, the Guide has grown to many times its original size, reflecting the increasing
complexity of the tax environment. The Guide contains 45 chapters (including a chapter of detailed tax
checklists). It also contains extra features such as an individual tax return preparation guide, tax
calculators and a tax calendar. The Guide also uses shading on the side of select pages to help readers
locate the most commonly used chapters, ie the income, deductions and depreciation (effective life)
chapters.
Electronic versions of the Guide are available as a subscription product, updated at least three times a
year, with all pertinent changes integrated into the relevant chapters. The online version of the Guide, in
addition to having a superior searching capability via the CCH iKnow platform, provides useful links to the
rulings, cases and legislation discussed in the commentary. In keeping with its role as the first point of
reference in researching tax issues, the Guide contains extensive cross references to more detailed
commentary in CCH’s Australian Federal Tax Reporter, Australian Federal Income Tax Reporter,
Australian Superannuation Law & Practice and Australian GST Guide.
The production of this Guide would not be possible without the ongoing efforts of a team of dedicated
writers, subeditors and production editors who contribute in so many ways to making the Guide the Tax
Practitioner’s “Bible” — our grateful thanks go to them all.
Wolters Kluwer
July 2020
Wolters Kluwer Acknowledgments
Wolters Kluwer wishes to thank the following who contributed to and supported this publication:
Director, General Manager, Research & Learning, Wolters Kluwer Asia Pacific
Lauren Ma
Associate Director and Head of Content, Wolters Kluwer Asia Pacific
Diana Winfield
Books Coordinator, Wolters Kluwer Asia Pacific
Jackie White
Senior Production Specialist, Wolters Kluwer Asia Pacific
Alexandra Gonzalez
Writers
Karen Bang BCom, LLB has written for Wolters Kluwer’s accounting and GST services. She has also
worked as an auditor and GST consultant at a major international accounting firm.
Alan Burn BA, LLB contributes to a number of Wolters Kluwer tax publications, including the Australian
Federal Tax Reporter and the NSW Land Tax services. His background covers IT, publishing and
telecommunications, with technical roles at the ATO and in online tax software services.
Edwin Carr BA, LLM has worked for the ATO, and as a tax adviser in large accounting firms and financial
institutions. Since then he has been a writer and editor on Australian taxation for more than 20 years,
including for Wolters Kluwer.
Cindy Chan BCom, LLB, MTax is a senior content specialist at Wolters Kluwer. She also writes for
Wolters Kluwer’s Australian Federal Tax Reporter, Australian Capital Gains Tax Planner and Australian
Tax Week.
Gaibrielle Cleary BEc, LLM is a Taxation Partner at Mazars. Gaibrielle practises in all areas of direct and
indirect taxation. Previously, she was the in-house counsel for an ASX listed company and has practised
at leading international law and accounting firms. She is one of the authors of Wolters Kluwer’s Small
Business Tax Concessions Guide, and has also written for a number of taxation publications, including
Wolters Kluwer’s Australian Federal Tax Reporter.
Linda Daniele BCom, LLB is a senior tax writer, writing mainly for the Australian Federal Tax Reporter.
Before Wolters Kluwer, Linda worked as a legal editor at the Judicial Commission of New South Wales.
Enrico Enriquez BA, LLB writes for the Wolters Kluwer Australian Payroll Tax Manual and has previously
written for a number of other Wolters Kluwer tax publications.
John Gaal is a very experienced and well respected tax specialist who has written for a number of
Wolters Kluwer tax publications over many years. John works as a tax consultant and writer on his own
account.
Ian Ross-Gowan MTax, BCom, CPA, CTA is a Director with Michael Johnson Associates (MJA). MJA is
a specialised R&D tax agency and consultancy in government industry support programs. Ian is a former
group taxation manager of a top 100 company and has undertaken post graduate research in taxation
and accounting.
Kevin Johnson BEc, LLB, CA, CTA is a software engineer for APS developing programs for taxation and
accounting professionals. Previously, he was a tax manager at a major international accounting firm. He
is a registered tax agent.
Marcus Lai BA, DipLaw is a senior editor and tax writer. He has worked as the managing editor of
various Wolters Kluwer tax books and is now the editor of the Australian Master Tax Guide. He is also a
contributing writer to the Guide and a number of other Wolters Kluwer tax publications.
James Leow LLB (Hons), MTax is a superannuation and taxation consultant. He is co-author of the
Australian Master Superannuation Guide and writes for a number of other Wolters Kluwer publications.
Amrit MacIntyre BA, LLB, CTA is a partner at Baker McKenzie.
Heidi Maguire BA, LLB (Hons), MRes is a senior tax writer at Wolters Kluwer, writing mainly for the
Australian Tax Cases service, the Australian Federal Tax Reporter and Tax Navigator for Business
Activities.
Ben Miller BCom, CA, SSA is a senior tax writer, writing and curating mainly for the online product CCH
iQ. Ben previously worked in small and medium accounting firms as a tax, superannuation and business
services manager.
Denise Mulder MCom, LLB, CA is a senior tax writer, regularly contributing to the Australian Federal Tax
Reporter and Australian Tax Navigator for Business Activities. Before joining Wolters Kluwer, Denise
worked for an ASX100 listed company, and a major international accounting firm.
Mary Zachariah BBus, MTax is a senior tax writer, writing mainly for the Australian Federal Tax Reporter.
Mary has practised in both direct and indirect taxation areas and was previously a tax manager in a major
international accounting firm.
List of Abbreviations
The following abbreviations are used extensively in this publication.
AAPM Australian Accounts Preparation Manual (Wolters Kluwer)
AAT Administrative Appeals Tribunal
ABN Australian Business Number
ADF Approved deposit fund
AMGST Australian Master GST Guide (Wolters Kluwer)
AMSG Australian Master Superannuation Guide (Wolters Kluwer)
APRA Australian Prudential Regulation Authority
ASIC Australian Securities and Investments Commission
ATC Australian Tax Cases (Wolters Kluwer)
ATO Australian Taxation Office
AWOTE Average weekly ordinary time earnings
BAS Business Activity Statement
CFC Controlled foreign company
CGT Capital gains tax
DTA Double taxation agreement
EST (Australian) Eastern Standard Time
ETP Employment termination payment
FBT Fringe benefits tax
FBTAA Fringe Benefits Tax Assessment Act 1986
FBTAR Fringe Benefits Tax Assessment Regulations 2018
FC of T Federal Commissioner of Taxation
FIF Foreign investment fund
FITR Australian Federal Income Tax Reporter (Wolters Kluwer)
FSR Financial Services Reform
FTA Fuel Tax Act 2006
FTD Fuel Tax Determination
FTR Australian Federal Tax Reporter (Wolters Kluwer)
FTR (ch 40) Fuel Tax Ruling
GIC General interest charge
GST Goods and services tax
GSTD GST Determination
GSTG Australian GST Guide (Wolters Kluwer)
GSTR GST Ruling
HECS Higher Education Contributions Scheme
HELP Higher Education Loan Programme
IAS Instalment Activity Statement
ID ATO Interpretative Decision
IGTO Inspector-General of Taxation and Taxation Ombudsman
IR&D Act Industry Research and Development Act 1986
ITA Australian International Tax Agreements (Wolters Kluwer)
ITA Act International Tax Agreements Act 1953
ITAA36 Income Tax Assessment Act 1936
ITAA97 Income Tax Assessment Act 1997
ITR15 Income Tax Assessment (1936 Act) Regulation 2015
ITR97 Income Tax Assessment Regulations 1997
ITTPA Income Tax (Transitional Provisions) Act 1997
LCG Law Companion Guideline
MLA Medicare Levy Act 1986
MPR Monthly payer requirement
MRRT Mineral Resource Rent Tax
MT Miscellaneous Tax Ruling
NRAS National Rental Affordability Scheme
OBU Offshore banking unit
PAYG Pay As You Go
PCG Practical Compliance Guideline
PDF Pooled development fund
PSI Personal Services Income
PS LA Practice Statement Law Administration
PST Pooled superannuation trust
R&D Research and development
RBA Running balance account
RBL Reasonable benefit limit
RSA Retirement savings account
SGAA Superannuation Guarantee (Administration) Act 1992
SGAR Superannuation Guarantee (Administration) Regulations 2018
SGC Superannuation Guarantee Charge
SISA Superannuation Industry (Supervision) Act 1993
SISR Superannuation Industry (Supervision) Regulations 1994
SLP Australian Superannuation Law and Practice (Wolters Kluwer)
SME Small or medium enterprise
SMSF Self managed superannuation fund
STP Single Touch Payroll
STS Simplified Tax System
SUMLMA Superannuation (Unclaimed Money and Lost Members) Act
1999
TAA Taxation Administration Act 1953
TAR Taxation Administration Regulations 2017
TASA Tax Agent Services Act 2009
TD Taxation Determination
TFN Tax file number
TOFA Taxation of Financial Arrangements
TR Taxation Ruling
TSAs Tax sharing agreements
Highlights of 2020 Tax Changes
¶1 HIGHLIGHTS
This edition has been fully updated to reflect developments that occurred (or remain proposed) up to 30
June 2020.
The highlights of the main changes included in this edition are set out below (with cross-references to
where they are discussed).
DEVELOPMENTS IN RESPONSE TO COVID-19
Individuals
▪ Social security, veteran and other income support recipients (including Family Tax Benefit Part A and
Family Tax Benefit Part B recipients) and eligible concession cardholders to receive two separate
payments of $750 ¶2-133
▪ Government funding arrangements for the early childhood education and care sector making child care
services fee-free for families between 6 April and 12 July 2020 ¶2-133
▪ Families receiving the Child Care Subsidy will have until 31 March 2021 to submit their 2018/19 tax
return for Child Care Subsidy purposes ¶2-133
▪ Rules have been made to assist people to be eligible for government-funded Paid Parental Leave (PPL)
¶2-133
Business tax and income support
▪ Cash flow boost payments for eligible businesses and not-for-profit organisations that employ staff are
not subject to income tax ¶10-040
▪ Economic Support Payments are exempt from income tax ¶10-040
▪ JobKeeper payments to employers and sole traders are included in assessable income ¶10-040
▪ JobSeeker and the JobSeeker Coronavirus Supplement are taxable social security payments ¶10-040
▪ Under the JobTrainer Skills Package, eligible businesses can apply for the Supporting Apprentices and
Trainees wage subsidy ¶10-040
▪ Simplified alternative method introduced to calculate home office expenses incurred during COVID-19 at
80 cents per hour (PCG 2020/3) ¶16-480
▪ Wages paid to employees subsidised by JobKeeper payments are deductible ¶16-520
▪ Private and public ancillary funds incentivised to maintain annual distributions with lower minimum rates
in later years ¶16-962
▪ For a limited period, accelerated depreciation is available for new assets used by a medium-sized
business ¶17-430
▪ The government has reset the monetary value thresholds for notifiable foreign investment proposals to
nil ¶22-002
Superannuation
▪ Summary of COVID-19 superannuation, regulatory and related tax relief measures and Regulators’
guidelines ¶13-810
▪ The 30 April 2020 reporting and payment date for unclaimed superannuation money has been deferred
to 31 October 2020 ¶13-850
▪ The minimum annual pension amount for account-based pensions and annuities, allocated pensions
and annuities and market-linked pensions and annuities is reduced by 50% in the 2019/20 and 2020/21
financial years ¶14-125
▪ The proportioning rule applies to a superannuation fund payment under the COVID-19 early release of
superannuation measure; the payment is non-assessable non-exempt income ¶14-130
▪ Salary or wages paid to an employee that do not relate to the performance of work and are only paid to
satisfy the wage condition for receiving JobKeeper payments are excluded salary or wages for SG
purposes ¶39-030
State taxes and duties
▪ Tas: a one-year rebate is available for youth employees employed between 1 April and 31 December
2020 ¶36-060
▪ All states and territories have provided payroll tax relief for employers affected by COVID-19 ¶36-060
▪ All states and territories have determined that no payroll tax is payable for JobKeeper payments ¶36-
140
▪ Land tax is reduced by up to 25% of the tax payable in respect of land leased to residential or business
tenants where the landlord passes on the saving to a tenant suffering as a result of COVID-19NSW ¶38-
010; Vic ¶38-020; Qld ¶38-030; SA ¶38-040; WA ¶38-050; Tas ¶38-060; ACT ¶38-070
Tax agents
▪ BAS services extended to advising about entitlements under the JobKeeper Payment scheme and cash
flow support for business initiatives ¶32-065
Proposed measures
▪ HomeBuilder grant to assist the residential construction market will not be subject to income tax ¶10-040
▪ NSW: for a 12-month period commencing 1 August 2020, stamp duty will be eliminated for newly built
homes below $800,000 with the concession reducing on higher values before phasing out at $1m ¶37-
020
▪ NSW: property developers who commence construction of medium to large build-to-rent projects on
after 1 July 2020 may be eligible for a 50% reduction in land tax on the land ¶38-010
CHAPTER 1 — INTRODUCTION TO AUSTRALIAN TAX SYSTEM
New laws
▪ Whistleblowers who disclose information to the ATO relating to tax avoidance behaviour are provided
with protection from 1 July 2019 ¶1-220
▪ Legislation has been enacted to allow the ATO to disclose to Credit Reporting Bureaus the tax debt
information of businesses ¶1-220
▪ A legislative instrument has been issued to allow taxation officers to disclose protected information of a
deceased person to the registered tax agent, BAS agent or legal practitioner of an executor or
administrator of the deceased estate ¶1-220
Proposed measures
▪ The government has issued its response to a parliamentary report on taxpayer engagement, agreeing to
eight of the 13 recommendations aimed at making tax obligations in Australia easier to administer and
comply with ¶1-200, ¶1-700
Cases
▪ Recent decisions handed down in regard to the disclosure of “protected information” for the purposes of
the TAA include Jordan, FC of T v Second Commissioner of Taxation & Anor 2019 ATC ¶20-712, Binqld
Finances Pty Ltd (in liq) & Ors v Israel Discount Bank Ltd 2019 ATC ¶20-701 (Federal Court), and DPP &
Ors v Kinghorn 2020 ATC ¶20-737 (NSW Court of Appeal) ¶1-220
Rulings and guidelines
▪ Operational guidelines between the Inspector-General of Taxation and Taxation Ombudsman (IGTO)
and the ATO for handling tax complaints lodged with the IGTO and the conduct of IGTO reviews have
been published ¶1-200
CHAPTER 2 — INDIVIDUALS
New laws
▪ A seven-year Personal Income Tax Plan introduces a low and middle income tax offset (LMITO) and to
provide relief from bracket creep by progressively increasing the income tax rate thresholds from 2018/19.
Plan amended to further lower income taxes for individuals, including changes to tax rate thresholds from
1 July 2022 and marginal tax rates from 1 July 2024 ¶2-120
▪ From 1 July 2020, changes to the government-funded Paid Parental Leave (PPL) scheme allow primary
carers to access parental leave pay more flexibly, particularly birth mothers and adoptive parents who are
self-employed or small business owners ¶2-133
▪ Medicare levy low income thresholds and phase-in limits for 2019/20 ¶2-330
▪ Medicare levy thresholds and phase-in limits for Senior Australians and eligible pensioners for 2019/20
¶2-330
▪ Study and training repayment thresholds and rates for 2020/21 ¶2-380, ¶2-385
CHAPTER 3 — COMPANIES
Rulings and guidelines
▪ The Commissioner has issued a final Law Companion Ruling which deals with the base rate entity
concept and the base rate entity passive income concept (LCR 2019/5) ¶3-055
CHAPTER 4 — DIVIDENDS • IMPUTATION SYSTEM
Proposed measures
▪ A revised commencement date for the proposed Div 7A amendments has been announced ¶4-200
Rulings and guidelines
▪ For private companies with a regular 30 June balance date, the Div 7A benchmark interest rate for
2020/21 is 4.52% ¶4-230
CHAPTER 5 — PARTNERS AND PARTNERSHIPS
Proposed measures
▪ A new regime for limited partnership collective investment vehicles is proposed from 1 July 2018 ¶5-030
CHAPTER 6 — TRUSTEES • BENEFICIARIES • DECEASED ESTATES
New laws
▪ From 1 July 2019, the concessional tax rates available for minors receiving income from testamentary
trusts are limited to income derived from assets that are transferred from the deceased estate or the
proceeds of the disposal or investment of those assets ¶6-105
▪ The specific anti-avoidance rule that applies to closely held trusts that engage in circular trust
distributions has been extended to family trusts from 1 July 2019 ¶6-275
Proposed measures
▪ Two new categories of collective investment vehicles are proposed, a corporate collective investment
vehicle to start from 1 July 2017 (and for which draft legislation dealing with the tax law issues and the
Corporations Law issues has been released) and a limited partnership collective investment vehicle to
start from 1 July 2018 ¶6-410, ¶41-900
Rulings and guidelines
▪ The Commissioner has issued a final determination in relation to trust split arrangements where the
parties to an existing trust functionally split the operation of the trust so that some trust assets are
controlled by and held for the benefit of a subset of beneficiaries, and other trust assets are controlled and
held for the benefit of others (TD 2019/14) ¶6-015
CHAPTER 7 — SMALL BUSINESS ENTITIES