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Following changes to the accounting standards, ASIC has given long-awaited clarity to Australian financial services (AFS) licensees, announcing new financial reporting requirements.

This announcement on Friday 3 June effectively removes annual special purpose financial statements as an option for AFSL holders.

Under the new reporting requirements, many AFS licensees’ annual financial reports must be prepared in accordance with the disclosure requirements of all Australian Accounting Standards as set by the Australian Accounting Standards Board (AASB). Some AFS licensees will be able to apply a simplified disclosure regime.

Some AFSL holders will also be able to choose to defer these changes by one year, if they meet the requirements described below.

Changes to AFSL reporting requirements

From financial years commencing 1 July 2021, entities preparing financial statements in accordance with the Corporations Act 2001 (the Act) can no longer prepare special purpose financial reports (SPFRs) that do not contain all disclosures required by the accounting standards set by the AASB.

All entities must apply the full recognition and measurement requirements for assets, liabilities, income and expenses. Accounting standards, however, allow entities that do not have public accountability to use a simplified disclosure regime.

Entities that have public accountability must comply with the disclosure requirements of the full standards.

An entity has public accountability where:

ASFL entities with Public Accountability

For the avoidance of doubt of ‘Public Accountability’, ASIC has also stated that the following entities will be required to comply with the disclosure requirements of all AASB standards:

All licensees will be required to prepare a cash flow statement. In addition to single entity financial statements, consolidated financial statements must be presented where the licensee has controlled entities.

Option to defer by 12 months

AFS licensees that prepared SPFRs last year, and that do not prepare reports under Chapter 2M, can choose to defer the new disclosure requirements to financial years commencing on or after 1 July 2022, i.e. until 30 June 2023.

In deciding whether to defer adoption of this standard, AFSL holders should consider the costs and benefits of adopting the new reporting framework from 1 July 2021 vs deferring to 1 July 2022.

Investors, lenders and other stakeholders may have an expectation of the entity to comply with disclosure requirements of Australian Accounting Standards and might have concerns about the quality of the entity’s financial reporting if the entity continues to prepare special purpose financial statements in FY22. However, adopting a new financial reporting framework is likely to incur additional compliance costs.

We recommend that AFSL holders reach out to their trusted SW advisor to discuss the most suitable approach for 30 June 2022.

Transitional relief

Comparative information need not contain the new disclosures in the first report prepared under the new requirements.

Update form FS70

We are expecting ASIC to release an amended version of form FS70 in late June

Action to Be Taken

Consider whether the entity would be required to comply with the full disclosure requirements of all AASB standards (Tier 1); or can apply simplified disclosures (Tier 2)

Reference

ASIC media release 3 June 2022: 22-128MR ASIC announces financial reporting changes for AFS licensees

Important Dates

Annual reporting periods beginning before 1 July 2021 i.e. financial year ending 30 June 2022

How SW can assist

Contact René, Rami or your trusted SW expert for assistance to:

Further to legislation passed in November 2021, current proposed amendments to Victoria’s Windfall Gains Tax expands exemption for universities.

Introduction of Bill includes a further exemption

State Taxation and Treasury Legislation Amendment Bill 2022 (part 8) provides an exemption from the Windfall Gains Tax for land owned by a university in certain circumstances. 

Background

The windfall gains tax (WGT) was announced in the 2021-22 Victorian Budget and the legislation received royal assent on 30 November 2021.  See our article on the Windfall Gains Tax and subsequent article on the charity land tax exemption for further detail.

The WGT will apply from 1 July 2023 and imposes a tax on land that receives an uplift in value as a result of rezoning at the following rates:

Taxable value upliftRate of WGT
Less than $100,000Nil
$100,000 > $500,00062.5%
$500,000 or more50%

The Government wrote to universities in October 2021 to advise that charities would be exempt from the WGT where they owned and used the land for 15 years after the rezoning.  This exemption was included in the legislation that was passed in November 2021. 

Proposed WGT exemption for universities

The current bill has now proposed to provide an even broader exemption for universities than the 15 year charity exemption.  This broadening of the exemption is positive news, but universities should still understand that the exemption remains subject to the Commissioner’s approval and conditions.

Conditions for exemption

The proposed WGT exemption for universities will apply where it meets all of the following:

To access the exemption the university must provide to the Commissioner with a declaration as to:

Land revenue means any revenue arising from the sale or use of the land, including any of the following:

How SW can assist

The SW Education team works closely with a large number of Victoria’s universities and has extensive experience in advising and assisting them to navigate financial complexities. Should your university be in the process of rezoning Victorian land and require any further advice on this issue please contact either Stephen O’Flynn or Steve Allan.

A civil case ruling involving Bitcoin in the Shanghai People’s Court this month has prompted speculation regarding China’s stance on the legality of cryptocurrency. The wider implications, however, remain to be seen.

China’s ban on crypto

In September 2021, the People’s Bank of China (PBOC), along with nine other authorities including the Supreme People’s Court (SPC), Supreme People’s Procuratorate (SPP), the Ministry of Public Security (MPS), and the State Administration of Foreign Exchange (SAFE), jointly announced that cryptocurrency is not legal tender in China. Further, the notice determined that all cryptocurrency transactions in China are illegal, including offshore exchanges to provide services to Chinese citizens. In this pronouncement it was made clear that China-based employees of offshore exchanges, and third parties supporting them by providing marketing and promotion, payment and settlement, technical support or other services, will be investigated and prosecuted.

Court rules Bitcoin as property rights

Nevertheless, on 5 May 2022, the Shanghai High People’s Court issued a statement on their official WeChat channel regarding a civil case involving Bitcoin. In commentary, the court held that Bitcoin has virtual property attributes and is therefore regulated by the legal norms of property rights, sparking a new debate over its legal status in China. While not the first court in China to characterise Bitcoin as virtual property (a previous dispute in 2019 at the Hangzhou Internet Court reached a similar determination), it is worth noting this is the first case involving Bitcoin to reach the level of the Shanghai People’s High Court.

In China, the judicial authority of the Shanghai High People’s Court is second only to the Supreme People’s Court.

Will China move to legalise crypto?

Some observers see the Shanghai High Court’s ruling as indicating an increasing trend to recognise Bitcoin as virtual property which may influence future civil disputes involving cryptocurrency. Others, however, point out that under the sweeping prohibition announced late last year, Bitcoin cannot be considered legalised by identifying it as virtual property.

In China’s civil law system, the law means statutes and excludes case law. In other words, because only rules codified by the legislature, the executive, and the judiciary are laws, and except for “Guiding Cases” (指导性案例) selected by the Supreme People’s Court, rulings from lower courts do not often serve as a precedent. For that reason, it remains to be seen what impact the Shanghai High Court’s determination will have on the status of Bitcoin in China.

Contributor:

Toby Graham


New applications of blockchain-based technologies are continuously evolving, leaving many governments racing to implement suitable frameworks for the interactions of these technologies on their economies and domestic payment systems.

The increased accessibility and uptake of digital assets by personal, retail, wholesale and institutional investors throughout 2021 has had global regulators playing catch up and in Australia, crypto assets and associated platforms have become increasingly mainstream.

Driven predominantly by evolutions in global payment technologies, several domestic industry reviews have culminated in the final report and recommendations from the Senate Select Committee on Financial Technology and Regulatory Technology in 2021.

The Australian Government announced on 21 March 2022 that the next stage of the reforms to Australia’s payment systems are now being progressed. Industry feedback is being sought for crypto asset licensing and custody requirements by the end of May, including terms of reference for the taxation of digital transactions and assets.

There has been some legislative reform related to digital currencies with regard to GST, and whilst the Australian Taxation Office (ATO) has provided some guidance on the income tax treatment of crypto and digital assets, this has been particularly limited given the prevalence of crypto ownership in Australia.

The inability of the ATO to provide comprehensive binding guidance is due, in part, to the fact that crypto includes a broad range of tokens and other ‘things’ with different rights, entitlement and obligations. Therefore without a specific crypto regime it is difficult for the ATO to administer the law in a consistent and sensible way.

ASIC has also provided some guidance from an investment asset and corporations law point of view. For the most part, however, crypto investments will tend to fall outside of the ambit of the Corporations Act, and therefore effectively outside ASIC and the government’s control. 

In terms of financial reporting, the Australian Accounting and Standards Board (AASB) has not provided any interpretive view on the classification of crypto assets in Australia. The International Financial Reporting Interpretations Committee (IFRIC) has considered this issue and has provided an interpretation that crypto will either be regarded as an intangible asset or trading stock, subject to its use. Importantly it will not be classified as a financial asset in any circumstance.

The AASB is relying upon the IASB to set the standards in this area and is following their interpretation. Such an interpretation does itself cause challenges for crypto as an investment class for its tax treatment where it is held as an investment asset in an Australian managed fund.

On the whole, tax and other regulatory reform for crypto/digital assets is now a necessity.

Board of Taxation review

A review by the Board of Taxation into the appropriate policy framework for the taxation of digital transactions and digital assets, including cryptocurrency and non-fungible tokens (NFTs), is due for completion by 31 December 2022. Considering the pace of innovation in the sector, the landscape may look quite different by this time again.

The review is being conducted on the basis that it will not increase the overall tax burden.

The terms of reference for this review have been released by the Government. Specifically, the Board is asked to:

We expect the Board to consult with taxpayers, tax representative bodies, industry stakeholders, and academics both domestically and abroad, and carefully consider experiences from other governments in regulating and enforcing the taxation of these forms of transactions and assets.

Looking forward

This move by the Government signals an increasing desire for Australia to be at the forefront of technology and innovation, and we are excited to see what the Board of Taxation releases following this review.

In the meantime, the range of guidance provided by the ATO and other regulatory authorities attempts to apply existing principles to the tax and accounting process of these assets.

SW experts are fully across these principles and continue to advise and work with a range of clients working with digital assets of all kinds. Reach out to your SW contact or the SW Digital Assets team for a complimentary consultation to see how we can assist you.

Contributors

Jae Debrincat

在我们近期的全中文财税更新讲座上,本所专家团队解读了近期主要财税变化,以及这些变化为企业与个人带来的影响与机遇。

At our recent Mandarin Tax and Accounting update, our team of experts discussed the recent key accounting and tax changes, the impact and opportunities that these changes would bring to individuals and businesses.

税务与会计主题汇总 | Summary of tax & accounting topics

专家团队 | Our experts

张洋 Bessie Zhang
合伙人 Partner

栾万博 Leo Luan
合伙人 Partner

时炜淞 Vincent Shi
合伙人 Partner

叶嘉 James Ye
合伙人 Partner

施洋 Yang Shi
总监 Associate Director

林长春 Neville Lin
总监 Associate Director

联系我们 | Contact us

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