Changes to the GST treatment of Government charges
Editor: The GST treatment of government taxes and charges is changing. In the past, the Treasurer would specifically list, in an annual determination, each government tax and charge that is GST-free.
The tax laws regarding this system were amended in 2011, but a transitional period was allowed so that government charges listed on the Treasurer’s determination were still exempt until 30 June 2013.
The ATO has reminded taxpayers that the Treasurer’s current determination listing government charges that are exempt from GST will no longer apply from 1 July 2013.
This means that, from 1 July 2013, taxpayers must review all their government charges to self-assess whether GST is payable.
Tax Office “ups the ante” on
tax file number (TFN) reporting
The ATO has recently stated that it will review the 2011 Trust Tax Return ‘distribution statements’ to identify where a beneficiary has received a distribution and not quoted a TFN.
Editor: It would seem that the ATO is set to embark on a robust audit campaign targeting trusts and strictly applying the TFN withholding rules.
By way of background, a trustee of a trust is generally required to withhold 46.5% in tax from distributions where beneficiaries fail to provide their TFN. If the trustee does not withhold tax, it can face fines or penalties.
The simple message is that all trustees should ensure they have beneficiaries’ TFNs before making distributions.
Compliance action
Trustees will be selected by the ATO based on considerations such as:
? size of distribution; and
? whether the beneficiary appears to have returned the distribution as income.
The letter forwarded to trustees will:
? explain the measures;
? provide the ATO’s understanding of the facts;
? ask the trustee to confirm whether the ATO’s understanding is correct; and
? explain to the trustee how they can rectify the situation going forward, noting there may be penalties/remission.
When is a business a business?
Editor: We have recently seen a surge in the number of AAT cases involving the issue of whether a taxpayer is carrying on a business.
In this case, the taxpayer was unable to demonstrate that he carried on a primary production business.
Facts of the case
The taxpayer owned a 500-acre property located in Queensland. Between 2004 and 2009, he claimed deductions in relation to improvements to the property and other expenses on the basis he was carrying on a primary production business.
He had undertaken 14 different primary production-based activities over the years in question, including free-range pigs, timber growing, storing and breeding cattle, and growing an orchard.
Unfortunately, none of the activities actually generated any income and nor had they involved much more than planning for the commencement of the business.
It was not in dispute that the taxpayer had a genuine intent and belief that he was carrying on a business; evidenced by research associated with the various businesses and the preparation of various business plans.
In this case, the ATO argued that the activities of the taxpayer had not reached the point to be accurately characterised as a business and that the taxpayer was still in the process of preparing to carry on a business.
AAT decision
The AAT confirmed the ATO’s conclusion that the activities of the taxpayer did not amount to carrying on a business and concluded that although the taxpayer had a genuine intent and desire to carry on a business, at best it could be said that he was in the gestation stages of carrying on a business.
Scams, scams and more scams
The ATO has again warned taxpayers about scams including fake job advertisements, emails and bogus phone calls.
This year there have been over 6,000 reports from the community about bogus emails using the ATO brand, and over 4,000 reports of attempted phone scams.
Only certain people and organisations can ask for a taxpayer’s TFN, the most common being:
? the ATO;
? their employer, but only after they start work;
? their bank or other financial institutions;
? Centrelink; and
? their superannuation fund.
Editor: The key seems to be: Don’t click on emails purporting to be from the ATO – contact them separately by phone or by logging into the Portal.
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