The draft ruling provides further clarity on how existing principles apply to build-to-rent (‘BTR’) developments, determining the status of occupants, and the characteristics of hostels and boarding houses.

Supply of BTR leases & status of occupants

The draft ruling provides further clarity on determining if BTR developments are residential or commercial residential premises, namely if the accommodation supplied is similar to a hotel, motel, inn, hostel or boarding house for the purposes of s195-1 (a) of the GST Act.

Several findings of a new example (Example 12A) contained in the ruling outline key criteria to be considered in determining if a BTR development is residential accommodation:

• The apartments are self-contained with bedroom, bathroom, kitchen and living facilities.
• The building includes communal spaces and amenities available to all occupants, including dining area, gym, laundry facilities etc. No shared meals or communal kitchens are provided to occupants.
• Apartments are rented to occupants on a long-term basis. Occupants have the right to quiet enjoyment of the apartment with management having limited reasons and must give reasonable notice under the lease agreement to access occupants’ apartments.

Where the above characteristics are found in an accommodation, the accommodation will not be deemed to be commercial residential premises.

This is on the basis that the nature of the accommodation is permanent, the occupants obtain exclusive possession of their self-contained apartment in the same way as a tenant, and the accommodation does not provide additional services to the occupants that a hotel would, for example.

Paragraphs 188A – 188G of the ruling provide further detail on the rights and enjoyments of a tenant compared to a guest, namely the right of exclusive possession.

Hostels & boarding houses

While the draft ruling namely provides clarification relating to BTR developments and status of occupants, it also provides updates and further clarity on the characteristics of hostels and boarding houses.

In relation to hostels, the ruling provides that while a hostel may serve as an occupant’s principal place of residence for a period of time, the occupancy is generally non-permanent or transient in nature. The hostel is used for a limited time or limited purpose (e.g. student hostel provides temporary residence during period of education) and there is no right or expectation of permanent residence.

Furthermore, the ruling provides that hostels generally have shared facilities, however, the degree of shared facilities may vary. Some hostels may only provide shared kitchen and toilet facilities, while others may provide shared sleeping, toilet, and ablution facilities.

In relation to boarding houses, the ruling includes that even if premises may meet the definition of a boarding house under specific state or territory legislation, this alone does not determine whether the premises are, or are considered similar to, a boarding house.

As such, it is imperative that the premises is determined to meet the characteristics of a boarding house as per GSTR 2012/6, and the definition of a boarding house in state or territory legislation is not solely depended on.

How SW can help

While the ATO has provided further clarity on distinguishing accommodation as residential or commercial, the application of these principles is highly fact dependent. There is no ‘one size fits all’ approach, and each accommodation should be reviewed on a case-by-case basis.

SW’s indirect tax specialists have extensive experience in advising on accommodation. If you would like to explore how the draft ruling may affect your current or planned accommodation arrangements, or if you require tailored guidance on any aspect of the ruling, please reach out to your SW advisor. Our team is ready to help you navigate these changes with confidence.

Contributors

Dylan Kelly

Robert Parker

William Zhang

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The returns will be used to assess the confidence level of a taxpayer’s compliance with GST law, and their investments placed into GST governance.  

The Supplementary annual GST return will first apply to the 2024-25 financial year for those Top 100 and Top 1,000 taxpayers who received a GST assurance rating on or before 30 June 2024. The ATO will notify taxpayers if they are required to complete the return and provide the submission deadline. In the meantime, the ATO has published the form and detailed instructions so taxpayers can begin their preparation.

What information does the GST return contain?

The return contains several questions for impacted taxpayers and their advisors, including:

•  how the taxpayer has actioned ATO recommendations, areas of low assurance or red flags raised as part of the most recent review  
• how the taxpayer has maintained or increased its level of GST governance, and whether there have been any material business or systems changes that impact its GST control framework since the last review
• whether the taxpayer has undertaken any reconciliation between its audited financial statements and its annualised business activity statements
• whether the taxpayer has taken any material uncertain GST positions; and
• whether the taxpayer has identified any material GST errors in the period and how these have been rectified, and whether the taxpayer claimed any material amounts of credits in the period that were referrable to earlier periods.

Who needs to lodge?

Taxpayers who received one of the following on or prior to 30 June 2024 must lodge the annual return:

• Top 100 GST Assurance Report
• Top 1,000 Combined Assurance Review Report with a GST assurance rating
• Top 1,000 GST Streamlined Assurance Review

Due dates

Taxpayers who received a GST assurance report on or prior to 30 June 2024 must lodge the return annually from the 2024-25 financial year. The following table sets out the relevant due dates:

How SW can help

Reach out to our GST experts for help reviewing your GST governance and ensure your annual GST return is completed accurately.

Taxpayers should also review their progress on implementing action items from their last ATO assurance review as part of the process of completing the return. By executing action items, this will reinforces the ATO’s confidence in their compliance and reduces the risk of future challenges for your business.

Contributors

William Zhang

Michael Chen

Blake Trad

The post ATO increases GST engagement with Top 100 and Top 1,000 taxpayers appeared first on SW Accountants & Advisors.

Janelle’s clients have included those that operate in the following sectors: IT, professional services, wholesale importing, property development and investment, and not-for-profit.

Janelle has demonstrated capability in delivering outstanding outsourcing services for start-up companies, SME and publicly listed companies and Australian subsidiary entities of large multinational groups.

Janelle provides specialist advice on all employment related taxes including: GST, FBT and salary packaging. She advises clients on the following areas:

• Audit risk for indirect tax compliance
• Payroll tax
• WorkCover for employees and contractor arrangements
• Financial analysis and management reporting
• Financial modelling
• Business structuring.

Janelle is a member of the Institute of Chartered Accountants.

The post Janelle McPhee, Partner appeared first on SW Accountants & Advisors.

The Draft is intended to replace 51 separate Legislative Instruments that currently specify recipients, circumstances and requirements that enable RCTIs to be issued.  This consolidation into a single Legislative Instrument is a positive simplification and aims to enable recipients to self-assess their eligibility more easily.

Who can issue Recipient Created Tax Invoices (RCTI)?

Holding a valid tax invoice (including a RCTI) is a prerequisite to claiming input tax credits, so ensuring compliance with these requirements is fundamental to meeting GST obligations for affected taxpayers.  Usually, it is the supplier of a taxable supply (e.g. the service provider) who will issue a tax invoice to the recipient (e.g. the customer). 

However, the Commissioner has the power to specify a class of tax invoices that may be issued by the recipient of the taxable supply, rather than by the supplier. This is relevant particularly in circumstances where the value of the supply is established by the recipient rather than the supplier, including where analysis of goods must be undertaken before their value can be ascertained.

The Draft is expected to have impact on GSTR 2000/10 which sets out generic rules which allow the use of RCTIs, without the need to apply to or notify the Commissioner.  Under the Draft, recipients that may issue RCTIs, subject to satisfying the relevant requirements as set out in the Draft, are:

• a government related entity
• a large business entity
• a business entity.

The requirements that must be satisfied by a recipient depend in part on the category of entity.  Where a recipient falls into more than one category, it only needs to satisfy the requirements applicable to at least one category.

Verification of GST registration

Section 7 of the Draft sets out the relevant requirements.  In broad terms these are largely consistent with current administrative practice. However, one critical change is the requirement for a recipient to take positive action to verify that the supplier is registered for GST. This verification needs to be done each and every time a RCTI is issued. This change is significantly more onerous than the current requirement to be reasonably satisfied of the GST registration of the supplier.

Should the Draft be implemented in its current form, many businesses issuing RCTIs will need to ensure that processes are in place to satisfy this verification requirement and retain evidence to substantiate that this requirement was satisfied. 

How we can help

Submissions in relation to the Draft are required by 16 December 2022 and SW would be happy to take into consideration your comments.

The Draft will take effect the day after the final instrument is registered, which is expected in early 2023. A submission point will be to request a transition period.

However, if you currently rely on one of the existing 51 Legislative Instruments when issuing RCTIs, we advise you to revisit your existing current RCTI arrangements to confirm compliance with the Draft before it takes effect.

If you would like to discuss the Draft, or your current RCTI arrangements, please contact any of the SW tax Directors listed or your primary SW contact.

The post RCTI changes include GST verification for every issue appeared first on SW Accountants & Advisors.

Managing tax detail and compliance can be overwhelming, especially for small and medium-sized and even larger private businesses. From cloud migration to strategice planning, international business to tax and accounting compliance, we offer comprehensive tax services that help you identify and manage potential tax risks before they become a problem, maximise tax opportunities and minimise exposure, take realistic tax positions, and ensure compliance with all ATO requirements.

This way, you can focus on what matters most to you: growing your business.

Our extensive involvement in the industry and deep understanding of legislative and administrative reforms means we are actively involved and up-to-date on all current tax issues that impact businesses. Our knowledgeable teams are dedicated to ensuring that your business is fully compliant with tax regulations and optimized for the best possible tax outcomes.

We believe in providing a personal touch, so our senior engagement leaders take the time to keep you informed and answer any questions you may have. Our goal is to provide you with peace of mind, knowing that your tax affairs are being managed by experienced professionals that are an extension of your team.

The range of our services to private and unlisted businesses is extensive and includes: 

• accounting and taxation compliance
• business advisory
• business and financial structures
• corporate governance
• international business advisory
• outsourced accounting solutions
• performance improvement
• strategic planning
• succession planning.

The post Tax for Private Business appeared first on SW Accountants & Advisors.

Navigating the detail of tax can be a daunting task for businesses and finance teams, particularly for companies with complex transactions, structures and workforces. We’ll help you identify and manage tax risks, maximise opportunities and minimise exposure, take realistic tax positions and ensure compliance with all ATO requirements. 

We have a highly skilled specialist tax teams working with multinational corporations and Australian subsidiaries of overseas companies, as well as Australian and Asia Pacific firms of all sizes.  

Our significant involvement in industry and a high level of involvement in reforms, both legislative and administrative, means we are actively involved and across all current tax issues that impact business.  

We are closely involved in consultative processes, making submissions to Treasury and/or the ATO and have extensive experience managing successful ATO reviews including Combined Assurance Reviews (CARs), Streamlined Assurance Reviews (STARs) and ATO top 20 and top 100 reviews.  

Our team can provide end-to-end solutions across: 

• corporate & International tax advisory 
• Country by Country reporting 
• employment taxes (PAYG, FBT, superannuation and payroll) 
• expatriate taxes 
• FATCA / CRS 
• fuel tax credits 
• fund tax advisory 
• Government grant assistance 
• global workforce mobility services 
• GST and indirect taxes 
• tax due diligence 
• transfer pricing 
• tax structuring 
• tax effect accounting  
• tax governance implementation and review 
• tax controversy, dispute, review and audits 
• tax compliance automation 
• research and development tax incentive 
• remuneration and benefits (share schemes) 
• State taxes (Stamp Duty, Land Tax, GAIC).

The post Tax for Corporates appeared first on SW Accountants & Advisors.

COVID-19 restrictions have led to adverse trading conditions, causing some businesses to temporarily close or downsize their operations.

These range from the small CBD coffee cart in the office foyer, through to huge airlines suspending some routes.

Not all these businesses will reopen, and it is expected that many will end up being put on the market.

Implicitly, the expression “going concern” factors in more than just the mere sale of business assets. Explicitly, the GST law requires that the vendor:

• continues with enterprise operations until the day of supply; and
• supplies all things necessary for the continued operation of the enterprise.

In ruling GSTR 2002/5, the ATO has accepted that the temporary suspension of the enterprise does not disqualify the business being sold as a going concern.

However, it is critical that the enterprise can continue after the transfer of ownership, despite the purchaser not needing to continue to carry on the enterprise.

Business owners weighing up whether to resume operations or to sell the business need to be mindful of the affect their decision has on whether the business can be sold as a GST-free going concern. For example, the following actions can adversely affect eligibility:

• Changing from property development, by cancelling off-the-plan sales, and instead selling the entire vacant lot
• Selling an office building or factory on terms such as vacant possession
• Surrendering any statutory permits or licenses
• Selling plant and equipment.

It is strongly recommended that when weighing up options, business owners consider the implications of their actions on GST and taxation more generally.

How can our team assist?

Our tax experts can assist business owners to make informed decisions that factor in the whole picture, and result in the most beneficial tax outcome possible.

Reach out to our team to discuss today.

Contacts

The post Selling a business post-COVID-19 appeared first on SW Accountants & Advisors.

Fringe Benefits Tax

Fringe Benefits Tax (FBT) is a complex area when dealing with tax exempt organisations, such as schools.

In particular, entertainment can be a challenging area to work with as:

• the minor and infrequent benefits exemption is not available to tax exempt organisations; and
• the on-premises exemption is not available to tax exempt organisations.

Most organisations have documented policies and procedures in place for internal use that provides guidance on what constitutes entertainment for FBT purposes. ShineWing Australia’s employment tax team has assisted many tax exempt organisations including education institutions with preparation and implementation of internal policies and procedures on FBT.

A ‘FBT manual’ is an easy to access guide that:

• provides a general guidance on FBT benefits
• sets out the school’s position on FBT
• sets out whether the expenditure itself is allowable under the school’s policies (regardless of FBT)
• acts a repository of various forms and declarations.

Payroll tax and superannuation review

The introduction of single touch payroll means that the ATO have real-time visibility and transparency over the data organisations are reporting. The ATO are able to pick up on errors more easily and a similar level or internal controls are expected from employers.

Payroll tax audits and superannuation reviews are also rising due to single touch payroll. Various data sets lodged across sectors are being examined by the State Revenue Offices and any anomalies are flagged promptly. Payroll tax payments to contractors have always been a complex issue and a favourite one for ATO and State Revenue Offices. Data matching identifies contractor engagements and highlights impacted employers to tax authorities for further investigation.

ShineWing Australia’s data analytics capabilities will prove invaluable in situations like these to help quickly work through large amounts of data, including arrangements between principles and contractors. Our payroll tax experts can help to identify any potential risks that may cause an issue in a payroll tax audit.

GST governance

In a changing environment, it is more critical than ever to manage indirect taxes, with a focus on reducing risk and managing processes efficiently. In a digitalised environment, the increased prevalence of GST means keeping pace with the changes in GST rules can be difficult.

ShineWing Australia can provide expertise and processes that help to:

• reduce the risk of non-compliance
• reduce adverse impacts on cash-flow
• avoid penalties from tax authorities and large tax debts by identifying risks prior to any compliance activity by the ATO.

ShineWing Australia’s GST team has assisted many organisations with GST governance procedures including data analytics, policy and procedure review.

Get in touch

Do any of these matters affect you? Reach out to one of our experts below for more information on how to navigate these tax issues for your organisation.

The post Schools Tax Guide appeared first on SW Accountants & Advisors.

In-house tax, finance and accounting functions are increasingly using business data analytics insights to assist in managing their GST obligations.

Manage GST compliance risks

The Australian Taxation Office are increasingly taking an automated approach to tax audits using data analytical tests to identify errors and anomalies.

Running analytical tests on your GST data regularly, or prior to any ATO reviews has a number of potential benefits such as:

• Demonstrating good tax governance
• Identifying errors for voluntary disclosure to reduce the risk of potential penalties
• Draw attention to potential process deficiencies
• Identify potential overpayments or cash-flow opportunities
• Highlight potential anomalies which could otherwise trigger a GST audit

In order to focus on potential anomalies within large volumes of transactional data our data analytical tool assesses your data against a number of automated tests including:

• Do the Business activity Statements reconcile to the P&L?
• Are transaction reversals consistent with the original transaction posting?
• Is the GST treatment of a type of supply (goods or services) consistent?
• Is there a significant delay between transaction date and posting date?
• Are supply types and customer and transactions treated consistently for GST classification?
• Are there any potential duplicate transaction postings?
• Is GST being charged when it shouldn’t be?

It is also possible to use CTS GST data analytics to form part of your regular BAS preparation process.

Maximise GST opportunities

We also find in practice that using GST data analytics tools and methodologies often identifies areas of significant opportunity for GST savings. In many cases, this arises in circumstances where the correct GST treatment is known, but is not followed in practice. This is because our data analytics approach is focussed on how transactions have actually been treated in reality, instead of relying on how you think they should have or would have been treated.

Our GST data analytics approach has uncovered significant savings in areas such as the following:

• GST incorrectly charged and remitted on transactions within a GST group
• Import GST not fully captured and recovered
• Taxable purchases being incorrectly recorded as being GST free, meaning input tax credits were not identified and claimed
• GST input tax credits being missed where amounts have been ‘on-charged’ or reimbursed
• GST apportionment percentages not being appropriately followed or regularly reviewed
• Incorrect GST input tax credit calculations (eg GST not equal to 10%)
• GST on bad debts
• GST on journals
• Transactions not recorded through the usual sale and purchase process

Many clients have engaged us to undertake this analysis on a regular periodic basis, while some prefer to automate the analysis as part of their BAS preparation process. To download the CTS GST Data Analytics flyer, click here.

If you are interested in learning more about how we can assist you to maximise your GST opportunities while managing your GST risks, click here to join us at the upcoming CTS Conference in Melbourne or please email us at CTSteam@sw-au.com.

The post NEW: CTS GST Data Analytics appeared first on SW Accountants & Advisors.

The Treasury Laws Amendment (2018 Measures No 1) Bill 2018 received Royal Assent on 29 March 2018. The changes come into effect from 1 July 2018. The new rules require purchasers of new residential premises and potential residential land to remit the GST payable on the supply directly to the ATO.

Property Changes from 1 July 2018

The Treasury Laws Amendment (2018 Measures No 1) Bill 2018 received Royal Assent on 29 March 2018. The changes come into effect from 1 July 2018. The new rules require purchasers of new residential premises and potential residential land to remit the GST payable on the supply directly to the ATO.

Application

The new rules apply to supplies by way of sale or long-term lease of new residential premises.

They also apply to supplies of potential residential land that is included in a property subdivision plan and that does not contain any residential buildings or buildings being used for commercial purposes such as a vacant block of land sold as part of a house and land package where the purchaser acquires the land prior to the commencement of construction.

New residential premises created as a result of substantial renovations are not subject to the withholding requirement.

In practice

Where a supplier makes a taxable supply of new residential premises or potential residential land the purchaser is required to withhold 1/11th of the price and pay this to the ATO on or before the day on which any part of the consideration for the supply (other than a deposit) is first provided. This will usually be at settlement.  However, for a contract under which the price is payable in instalments the GST amount will be due on or before the date for payment of the first instalment (not being a deposit).

Where the purchaser pays the withheld amount to the ATO the supplier will be entitled to a credit in its BAS equal to the amount paid by the purchaser.  This credit will then be offset against the GST liability on the sale of the property which the supplier is still required to report in its BAS.

The purchaser must either pay the withheld amount directly to the ATO or provide the supplier with a bank cheque made out to the ATO.   Provided the purchaser retains a record of the bank cheque payment no penalties will apply to the purchaser for any delay in the ATO receiving the payment from the supplier.

The amount to be withheld will be calculated based on the contract price for the sale of the property.  This therefore excludes settlement adjustments unless they are contractual adjustments which modify the price.

GST margin scheme

Where the sale is made under the GST margin scheme the purchaser is required to withhold 7% of the price.

Where the actual GST applicable to a development sold under the margin scheme is less than 7%, the developer needs to seek a refund of the difference through the BAS lodgement process.

Supplier notification obligations

The supplier is required to provide the purchaser with a written notice before the date of supply stating:

• Whether the purchaser is required to withhold and make a payment to the ATO; and
• If so, the supplier’s legal name and ABN, the amount required to be paid and when the amount is required to be paid.

The notification must be provided in respect of all sales and long-term leases of residential premises not only taxable supplies of new residential premises.

Failure to provide the notice gives rise to a strict liability offence with a maximum liability of 100 penalty units, (currently equal to $21,000 per infringement). As a strict liability offence where a company is prosecuted under the criminal code the company will be liable for a penalty which is 5 times that amount.

Penalties for failure to withhold

If the purchaser fails to withhold and pay the required amount to the ATO, the purchaser will be liable to a penalty equal to the amount of the withholding obligation.

However, no penalty applies if the purchaser relied on a notice provided by the supplier which indicates that the purchaser is not required to withhold and there is nothing in the contract or other information known to the purchaser which makes it unreasonable for the purchaser to believe that the supplier’s statement is correct.

Credits and refunds

If an amount is withheld in error the supplier can apply to the ATO for a refund outside of the BAS lodgement process.  The supplier must apply to the ATO at least 14 days before GST is payable on the supply.

In all other cases the credit and any available refund must be sought as part of the BAS lodgement process.

B2B transactions

The withholding obligation in respect of potential residential land is not intended to apply to B2B transactions. Therefore, where a recipient is registered for GST purposes, there is no withholding obligation. The only exception is where a GST registered purchaser does not acquire the land for a creditable purpose, such as when they acquire the land to build residential accommodation which they intend to rent out or purchase a block of land on which to build their personal residence.  In those circumstances, a withholding obligation will still apply.

Transitional rules

The new rules apply to all contracts of sale entered into on or after 1 July 2018.

Contracts signed before 1 July 2018 are not subject to the withholding requirement unless the consideration for the supply (other than a deposit) is to be provided on or after 1 July 2020. As such the new rules will apply to existing contracts and contracts entered into before 1 July 2018 where the consideration for the supply (other than a deposit) is not required to be provided until after 1 July 2020.

There are specific provisions that apply to existing development agreements with distribution clauses that are impacted by the withholding requirement.  These effectively deem the supplier to have received the GST amount for the purposes of the agreement between the parties so as not to disturb the existing arrangement.

To consider now

• Contracts should be reviewed to identify those contracts that fall within or outside of the transition period.
• Contracts will need to be updated to cater for the new withholding rules and to protect suppliers and purchasers.

• Property development feasibilities and cashflow projects should be reviewed and updated to factor in the change in timing of GST payments.
• Settlement statements and the settlement process will of course need to evolve to cater for the new rules. Ensure that your conveyancing practitioners have implemented appropriate procedures for contracts affected.

• Property development structures involving separate land owning and developer entities will need to consider the impact of the changes.

If you require a consultation on the likely impact this change will bring, please contact Daren McDonald.

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