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Indirect Tax News – June 2018

Payroll Tax – Review by NSW Treasury

The NSW Government has announced that it is reviewing the administration of payroll tax in NSW.

It has invited submissions from stakeholders to assist the review, with the deadline for such submissions being Friday 6 July 2018.

ITC Group will be making a submission to NSW Treasury on a range of issues.  If you or your clients wished to voice your feedback on the administration of payroll tax by Revenue NSW (previously NSW Office of State Revenue) you could do so directly or ITC Group can incorporate such feedback into its submission.

The review is considering the objectives for payroll tax administration and the effectiveness of Revenue NSW in administering payroll tax and meeting the objectives.  The review will also examine any administrative arrangements that are required to comply with the legislation, but payroll tax rates and thresholds are outside the scope of the review.

Further details are available at the following links:

https://www.treasury.nsw.gov.au/projects-initiatives/review-payroll-tax-administration

https://www.nsw.gov.au/improving-nsw/have-your-say/payroll-tax-administration-review/

GST on Low Value Imports

From 1 July 2018, GST will apply to low value imports.  Strangely, the new regime will not apply at import entry stage – GST and duty will continue not to be levied on most import entries of value less than A$1,000.  Rather, the GST will be imposed at sales contract or payment stage.  The importer will be required to report the import sales in an activity statement and pay GST to the ATO.

Businesses that import into Australia need to be ready for the new regime by 1 July 2018.  If they have not done so already, smaller or occasional importers into Australia need to, as a matter of urgency, determine the following:

  • Are they caught by the new regime or is their GST liability payable by an electronic distribution platform or re-deliverer?
  • Does their Australian turnover meet the threshold of A$75,000, requiring them to register for GST and report their liabilities?
  • How they can apply GST only on sales to Australian customers and not to businesses?
  • How they can identify whether the customer is in Australia?
  • The processes needed to increase prices, charge the tax, issue tax invoices and report and pay the GST liabilities to the ATO.

Contact Steve Baxter on 02 9221 2888 if your clients would like assistance to comply with the new regime.

Indirect Tax News – July 2017

Payroll Tax 2017 – Annual Reconciliation Due Date Fast Approaching

The due date for the payroll tax annual reconciliation for the year ended 30 June 2017 is fast approaching – 21 July 2017.

Below is a list of review points that may assist your clients in completing their payroll tax annual reconciliation.  The review points are designed to raise questions in areas where employers may overlook when determining their payroll tax liability.

Please contact Shane Peters or Anne Darmann at ITC Group if you would like to discuss these matters further.

Review points Suggested Action
Fringe Benefits: For NSW payroll tax purposes, the type 2 rate (currently 1.8868) is used to calculate the taxable value of fringe benefits of both types for the 2017 annual payroll tax reconciliation. Have you used the lower FBT gross up rate in your annual reconciliation? Revise your payroll tax liability for the entire 2017 year by using the lower FBT gross up rate.
If you have used the default proportionate approach to allocate payroll tax liability (between states) on fringe benefits, have you considered you may be better off using the actual method if you have more taxable benefits in low rate states? Review your fringe benefits allocation by state.
Exempt Payments: Are you aware of any deductions that may be available for workers compensation payments, paid parental leave payments, and for emergency services volunteer work? Review these payments and deduct any components that do not constitute wages for payroll tax purposes.
Have you deducted all exempt wages and claimed eligible rebates? Review wages and allowances for common exempt or rebate categories such as kilometre-based motor vehicle allowances, accommodation allowances (to prescribed amounts), maternity and adoption leave (paternity leave in NSW and some other states), trainees’ and apprentices’ wages, etc.
Are there any non-taxable elements in the Employment Termination Payments (ETPs)? Identify all payments made to terminated employees, whether or not they were paid through payroll. Contact ITC Group if there are payments related to restraints of trade, voluntary redundancies or settlements of disputes.
Have you deducted the non-labour component from your contactors’ payments? The OSR has listed a number of default non-labour percentages for common trades and professions. If you wish to deduct non-labour components that are outside of the OSR list you should seek a private ruling.
Employee Share Schemes: Have you properly determined the taxing points and taxable values of options and shares? Have you included any options or shares that issued in a prior year but vest during the current year? The taxation of Employee Share Schemes (ESS) is highly complex. If in doubt, please contact ITC Group to discuss.
Super Contributions: Have you included all salary-sacrifice superannuation contributions in your payroll tax calculations? Review all super contributions and include all salary-sacrifice contributions exceeding the 9.5% super guarantee
Directors Fees: Have you included all payments paid or payable by way of remuneration for the director’s appointment or services to the company? Ascertain whether there were any payments to directors in addition to their directors’ fees or salaries, including payments made to directors’ associated entities.
Grouping:  Have you considered whether your business is grouped with any other business for payroll tax purposes?
If you are currently grouped, have you considered whether you are eligible to be de-grouped under the grouping exclusion provisions (restrictions apply, including that the businesses must be carried on substantially independently of each other)?		 Businesses are commonly grouped due to having common shareholders, directors or trust beneficiaries; or having shared employees.  If in doubt, please contact ITC Group to discuss.
Contractors: If you engaged contractors in the 2017 year, have you considered whether any contractors’ payments are deemed to be wages for payroll tax purposes?  Have you considered whether any sole trader ‘contractors’ are actually common law employees (using common law tests) rather than contractors? Payments to independent contractors are subject to payroll tax unless they meet one of the exclusions applicable in the relevant state.  If sole trader ‘contractors’ are actually common law employees, the payments to them will be subject to payroll tax.
If you place contractors to work for your clients and are not currently paying payroll tax as an employment agent, have you sought payroll tax advice on the likelihood that you may be treated as an employment agent for payroll tax purposes in light of recent tribunal and court cases? Recent case decisions regarding employment agent provisions has created uncertainty in this area. If in doubt please contact ITC Group for a discussion.

 

You may also wish to read our July 2016 newsletter on our website for more general discussion about payroll tax.

DISCLAIMER: This newsletter is issued as a helpful guide. It is not intended to, and does not cover all aspects of the topics discussed.  Professional advice should be sought before any action upon these topics is taken.

 

Indirect Tax News – February 2015

Land Tax Free Threshold at Risk

Some landowners face the prospect of loss of their NSW land tax free threshold resulting in ongoing liabilities exceeding $6,900 per year.  The relevant scenario involves individuals or companies owning land as trustees but the OSR is not aware of the trust’s existence.  The OSR mistakenly thinks that the individual or company owns full legal and equitable title. It may not have issued a land tax assessment as a result of the land value being below the threshold (currently $432,000) and it certainly will not have sought to review the trust deed.  The risk is where, on closer scrutiny, the deed does not allow the underlying trust to qualify as a “fixed trust”.  Hence, the trust gains the land tax free threshold which it is not entitled to.

While exposures of up to five years could apply, it is doubtful that anything can be done about them.  What can be done is the execution of suitable variations to the trust deed to enable the trust to qualify as a fixed trust prospectively and the land tax free threshold to be secured for the future.

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Indirect Tax News – May 2014

Royalty Withholding Tax (RWT)

The recent Federal Court decision on whether payments made by the Australian distributor to a Canadian resident entity were “royalties” relied on the distribution agreement and the definition in the Double Tax  Agreement (“the DTA”).

The Court found that the payments were not excluded from the definition of “royalties” in the DTA because the nature of the rights acquired under the distribution agreement, as it related to the use of the software, were not limited to such rights as were necessary for the effective use or operation of the software by the distributor itself. Rather the rights were for the commercial exploitation of the software through the rights to copy the software for sale to end users and the right to use the copyright for the purposes of developing its own templates to sell in conjunction with the software.

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Indirect Tax News – November 2013

Landlords are not paying GST on commercial leases

Following a recent Federal Court case, we are aware that some lessors have stopped remitting GST on commercial and retail lease rentals. As you may have heard rumours of this practice, this edition of Indirect Tax News primarily focuses on the issue.

The Federal Court case involved a sale of a residential apartment under lease. The supply was treated as a GST-free going concern by the parties which was not disputed by the ATO. The ATO did, however, assess the apartment purchaser, imposing a Div 135 increasing adjustment equivalent to 10% of the purchase price. The ATO’s argument was that the purchaser intended that the supplies made through its enterprise (being the leased apartment) will be input taxed residential rentals.

The Federal Court decided unanimously that the grant of the original lease by the apartment vendor wasthe supply by way of lease. It held that the purchaser made neither a supply of the grant of a lease nor a continuing supply of the leased apartment to the tenant. As such, it held that the purchaser itself did not make input taxed supplies through its enterprise hence a Div 135 adjustment did not apply.

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