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The ATO has confirmed that, if intangible capital improvements are made to a pre-CGT asset, they can be a ‘separate CGT asset’ from that pre-CGT asset if the relevant requirements are satisfied.

The result of this is that, while the disposal of the pre-CGT asset itself will be exempt from CGT, the improvements which are treated as a separate, post-CGT asset could still give rise to CGT.

Example
A farmer, holding pre-CGT land, obtains council approval to rezone and subdivide the land.

Those improvements may be separate CGT assets from the land, so if the land is sold with those improvements (the council approval), there may be some CGT (even though the land itself is exempt).

The ATO has notified taxpayers that as from 19 January 2017, newly registered small businesses have the option to report less GST information on their business activity statement (BAS).

Therefore, if you plan to register for GST after receiving this Update, we can help you access the reporting benefits of the simpler BAS early.

From 1 July 2017, small businesses generally will only need to report GST on sales, GST on purchases, and Total sales on their BAS.

The AAT has held that GST applied to the disposal of four properties that had been built, leased and then sold.

GST does not ordinarily apply to sale of residential premises unless they are ‘new residential premises’. However, there is a special rule in the GST law that states that a newly constructed property will not be ‘new residential premises’ if it has been applied only to receive residential rent (i.e., leased out) for at least a five year period.

In this case, the taxpayer had acquired four properties between November 2003 and August 2007, then built residential dwellings on them and, once completed, the dwellings were leased, and then sold between January 2011 and August 2012.

The AAT agreed with the ATO that the sales of four properties in question should be treated as sales of new residential premises.

In particular, some of the dwellings had been simultaneously marketed for sale whilst being leased. Also, there were periods of time where the dwellings were without at tenant.

Due to the combination of these factors, none of the dwellings were used only for making input taxed supplies (of residential rent) for a five year period. Therefore, when disposed of, they should have been treated as taxable supplies and subject to GST.

The AAT also held that the ‘margin scheme’ could not be applied to reduce the GST payable, as the taxpayer was not able to provide any written evidence of an agreement between her and the purchasers to apply the margin scheme, as required by the GST Act.

The ATO has announced it is embarking on the following three (major) data matching programs:

• Share Transactions Data Matching Program. The share transactions data matching program has been conducted since 2006 to ensure compliance with taxation obligations on the disposal of
shares and similar securities. The collection of transaction history data dating back to 20 September 1985, which was the introduction of the CGT regime, is used to enable cost base and
capital proceeds calculations.

The ATO will continue to acquire details of around 61 million share transactions, in relation to 3.3 million individuals, for the period 20 September 1985 to 30 June 2018 from various
sources which include share registries, such as Link Market Services, Computershare, Advanced Share Registry Services and Automic Registry Services, and the Australian Securities Exchange
Limited.

• Credit and Debit Card Data Matching Program. The ATO will continue to annually acquire data relating to credit and debit card payments to merchants, in this case acquiring data for the
2015/1016 and 2016/2017 financial years from the big four banks, as well as other banks such as the Bank of Queensland and the Bendigo and Adelaide Bank and others involved with
credit and debit card payments which include American Express, First Data Merchant Solutions, Diners Club Australia and Tyro Payments Limited.

It is estimated that around 950,000 records will be obtained, including 90,000 matched to individuals.

• Online Selling Data Matching Program. The ATO will continue to acquire online selling data with an estimated 20,000 to 30,000 records obtained relating to registrants who sold good and
services to an annual value of $12,000 or more during 2016, 2017 and 2018 financial years, from eBay Australia and New Zealand Pty Ltd (which owns and operates www.ebay.com.au). It is
estimated that around half of the matched accounts will relate to individuals.

Deductions can be maximised for SBE business taxpayers by accelerating expenditure and prepaying deductible business expenses.  Former STS taxpayers who have continued to use the STS cash method since before 1 July 2005 cannot accrue expenses, but other SBE taxpayers on an accruals basis can accrue expenses (see above regarding accruing expenditure).

Accelerating expenditure – SBE

Former STS taxpayers who have continued to use the STS cash method since before 1 July 2005 and who qualify as an SBE are generally only entitled to deductions if they have paid the amount by 30 June.

All SBE taxpayers can choose to write-off depreciable assets costing less than $20,000 in the year of purchase*.  Also, assets costing $20,000 or more are allocated to an SBE general pool and depreciated at 15% (which is half the full rate of 30%) in their first year.  Therefore, where appropriate, SBE business taxpayers should consider purchasing/installing these items by 30 June 2016.

(*) The small instant asset write-off threshold has been temporarily increased to ‘less than $20,000’, for assets acquired and installed ready for use between 7.30 pm (AEST) 12 May 2015 and 30 June 2017. 

It should be noted that SBE taxpayers choosing to use the SBE depreciation rules are effectively ‘locked in’ to using those rules for all of their depreciable assets.

Prepayment strategies – SBE

SBE taxpayers making prepayments before 1 July 2016 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2017).  Otherwise, the prepayment rules are the same as for non-SBE taxpayers.

The kinds of expenses that may be prepaid include:

     Rent on business premises or equipment.

     Lease payments on business items such as cars and office equipment.

     Interest – check with your financier to determine if it’s possible to prepay up to 12 months interest in advance.

     Business trips.

     Training courses that run on or after 1 July 2016.

     Business subscriptions.

     Cleaning.