Monthly Archives: August 2017

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UPDATE – GST on low-value imported goods

Update

The Treasury Laws Amendment (GST Low Value Goods) Bill 2017 has been passed with amendments and now awaits assent. The amendments delay the commencement of the Bill until 1 July 2018 and refer the Bill to the Productivity Commissioner for review.

Review by Productivity Commissioner Under the Senate amendments, the Bill is to be referred to the Productivity Commissioner for consideration of matters including:
• the effectiveness of the amendments proposed by the Bill
• whether models other than that adopted by the Bill might be more suitable for collecting goods and services tax on offshore supplies of low value goods, and
• any other matter relevant to the implementation of the Bill.

Previous article –
May 1 2017

A Bill introduced into Parliament in February proposes to make Australian goods and services tax (GST) payable on supplies of items worth less than A$1,000 (known as “low value goods”) that consumers import into Australia with the assistance of the vendor who sells the items. For example, GST would apply when you buy items worth less than $1,000 online from an overseas store and the seller arranges to post them to you in Australia.

Under the proposed measures, sellers, operators of electronic distribution platforms or redeliverers (such as parcel-forwarding services) would be responsible for paying GST on these types of transactions. The GST could also be imposed on the end consumer by reverse charge if they claim to be a business (so the overseas supplier charges no GST) but in fact use the goods for private purposes. If the Bill is passed, the measures would come into force on 1 July 2017.
TIP: The ATO has also released a Draft Law Companion Guideline that discusses how to calculate the GST payable on a supply of low-value goods, the rules to prevent double taxation of goods and how the rules interact with other rules for supplies connected with Australia.

Foreign property investors to pay more land tax and stamp duty

Starting with the Victorian Budget on 5 May 2015, the majority of states in Australia have implemented surcharges on foreign investors in the residential property markets. Below are tables that will assist you in understanding the new surcharge for each state that has changed in recent memory.

Most recently, Queensland will implement a land tax surcharge for absentee owners from 1 January 2018. Changes to the rates will apply in NSW from 1 July 2017.

South Australia is set to introduce a surcharge on conveyance duty for foreign owners and temporary residents.

 

Stamp Duty

Stamp duty surcharge applies for foreign purchasers of residential real estate. This table details the definition of a foreign purchaser for each state, as well as the new rules that apply to the transfer.

State Definition of foreign purchaser Surcharge/new rule
VIC Non-visa holder 3% stamp duty surcharge on regular rates (7% from 1 July 2016)
Temporary visa holder No exemptions are available (including off-the-plan deferral, deceased estates and relationship breakdowns)
Applies from 1 July 2015
NSW Non-visa holder 4% stamp duty surcharge on regular rates from 21 June 2016
Temporary visa holder From 1 July 2017 stamp duty surcharge of 8%
Permanent visa holders who have not resided in Australia for 200 days or more in the previous year No deferral for off-the-plan
QLD Non-visa holder 3% stamp duty surcharge on regular rates
Temporary visa holder No concession for first homes and family business
Applies from 1 October 2016
SA Non-visa holder 4% conveyance duty surcharge on regular rates from 1 January 2018
Temporary visa holder

Land tax

Absentee owners (and all foreign owners in NSW) will be subject to a surcharge on land tax at the taxing date. This table briefly describes the rules going forward.

In Queensland, an absentee owner will pay a 1.5% surcharge starting on land above $350,000. This surcharge is in addition to a higher land tax already payable for companies, trustees and absentee owners.

 

State Definition of absentee/foreign owner Surcharge/new rule
VIC Non-visa holders and temporary visa holders who do not ordinarily reside in Australia and are either absent from Australia on 31 December or absent for more than six of the previous 12 months 1.5% land tax surcharge on all land, starting at $250,000 (tax-free threshold). Applies from 1 January 2017
NSW Non-visa holders For 2017 tax year: 0.75% land tax surcharge on land that has a residential dwelling, starting at $0 (no tax-free threshold)
Temporary visa holders No principal place of residence exemption
Permanent visa holders who have not resided in Australia for 200 or more days in the past year For 2018 tax year: 2.0% land tax surcharge
QLD Anyone who does not ordinarily reside in Australia on 31 December, or has not ordinarily resided in Australia for more than six of the previous 12 months Land tax is imposed at company or trustee rates (reduced threshold). In place since 1 January 2011. From 1 January 2018, a 1.5% surcharge will apply.

For all states and taxes tabled above, a New Zealand citizen who holds a special category visa within s 32 of the Migration Act 1958 (Cth.) is taken to be a permanent visa holder. Any surcharges would generally not apply.

 

Companies and trusts

The above tables have defined foreign or absentee owners as if they were individuals. The definition of a foreign or absentee owner can also be extended to include companies where foreign persons hold a majority of ownership and/or control.

Also, in New South Wales the definition of a foreign trust has been clarified by the Office of State Revenue. From Revenue Ruling No G 010, a discretionary trust will be liable to the maximum that could be distributed to a foreign person or company. That is, if a foreign person or company is in the class of beneficiaries of a discretionary trust, the surcharge stamp duty and land tax may apply.

The Office of State Revenue is allowing discretionary trusts in this situation the ability to amend their deeds in order to avoid any unintended surcharges for stamp duty and land tax.

 

Risk mitigation steps

As stamp duty is generally levied during the process of conveyancing, as an accountant it is dutiful to be aware of the legislation as it relates to your clients who are not Australian citizens or permanent visa holders.

For land tax purposes, careful examination of entry and exit days for each year will be necessary going forward for affected land owners. Non-residents need to be aware in these instances, especially when a client is transitioning to permanent residency status. Of particular importance will be the examination of homes in New South Wales jointly held by non-residents, including any spouses that may not be citizens.

For discretionary trust clients in NSW, careful consideration needs to be given relating to the amendment of trust deeds. Removing the trustee’s power to make distributions to foreign persons may have income tax implications. It may also cause re-settlement difficulties in the future if the trust needs to add beneficiaries later on.

In South Australia, an opportunity exists for a foreign or temporary resident to purchase a property prior to commencement of this new duty on 1 January 2018. As no foreign land tax surcharge applies in South Australia, the once off conveyance duty may be avoided with no additional taxes in future years. However, caution is advised as other states have recently introduced land tax surcharges.

 

The source of this content is CCH‘s professional information services. Thompsons Australia has a professional subscription with CCH providing access to in-depth quality technical information and commentary used by Thompsons Australia in keeping staff and clients currently in formed.

Commissioner clarifies tax arrangements for working holiday makers

With a number of media reports circulating in relation to the tax treatment for working holiday makers and the tax that they pay, the ATO wants to make clear the tax arrangements in place.

 

Tax Commissioner Chris Jordan said “the amount of tax that a working holiday maker may pay will depend on their residency status for tax purposes, and we consider the individual circumstances that apply to each working holiday maker.

 

“The reality is, what we see is that most working holiday makers are transient – they move around and do not establish residency in Australia during their stay.

 

“Therefore, as a non-resident for tax purposes, they will be taxed only on their Australian-sourced income, such as money they earn working in Australia, and they will commence paying tax on the first dollar of income they earn – at 32.5c in the dollar”.

 

If the Bills currently before Parliament are not passed, the ATO will continue to apply the current law.

 

Answers to common questions

What is the ATO’s approach to working holiday makers if the Bill is not passed?

 

The ATO will apply the current law. Working holiday makers who are travelling and working in various locations around Australia will be non-residents for tax purposes, meaning they will commence paying 32.5% tax from the first dollar for income earned in Australia.

 

We consider that most working holiday makers are non-residents due to their pattern of working and holidaying while in Australia.

 

We will help working holiday makers understand Australia’s self-assessment tax system, so that they correctly advise their employers of their residency status and have correct tax withheld. We will also work to ensure that working holiday makers correctly prepare their tax returns. This will include working with tax agents so that their advice is consistent with the ATO view, as confirmed by recent Tribunal decisions. It will also include some checking of returns.

 

How will working holiday makers be treated?

 

Residency status turns on the circumstances applying to each individual working holiday maker.

 

If working holiday makers do establish residency for tax purposes, they will be taxed on their worldwide income from all sources, including wages from working in Australia. Residents are currently entitled to a tax free threshold of $18200, after which marginal rates of tax apply starting at 19c in the dollar.

 

Most working holiday makers will not establish residency. Non-residents are taxed only on their Australian-sourced income, such as money they earn working in Australia. Non-residents commence paying tax on the first dollar of income at 32.5c in the dollar.

 

Case study example – Working holiday maker who would be taxed as a non- resident

 

Lars lives in Munich and is granted a 12 month working holiday visa. He plans to return to Munich, and resume his career as a carpenter, after his 12 month working holiday in Australia.

 

Lars arrives in August 2015 and has five different jobs while he travels around Australia, visiting every capital city during his 12 month stay. He stays in no place for longer than two months.

 

Lars only works for seven of the 12 months he is in Australia as he is primarily here to see as much as he can, picking up carpentry work to supplement his funds as he travels.

 

Lars is not an Australian resident for tax purposes. Although he is in Australia for more than six months in the year ended 30 June 2016, he is considered a non-resident for tax purposes as his usual home is outside Australia.

Key super rates and thresholds for 2017-18

The ATO has released the key superannuation rates and thresholds that apply to contributions and benefits, employment termination payments (ETP), super guarantee and co-contributions.
For the 2017-18 income year, the:

  • concessional contribution cap is $25,000
  • non-concessional contribution cap is $100,000 (conditions apply)
  • CGT cap amount is $1,445,000
  • Div 293 tax threshold amount is $250,000
  • low rate cap amount is $200,000
  • ETP cap for life benefit termination payments is $200,000
  • ETP cap for death benefit termination payments is $200,00.

The full list of rates and thresholds can be found on the ATO website