Fringe benefits provided to religious practitioners

The ATO has issued a draft tax ruling TR 2018/D2 expressing the Commissioner’s preliminary view of exempt fringe benefits provided to religious practitioners.  It replaces TR 92/17 immediately, but may be revised when the ruling is finalised. The law it considers prescribes that a benefit

  • provided by a registered religious institution
  • to an employee religious practitioner, or their spouse or child
  • in respect of the practitioner’s pastoral duties or directly related religious activities

is exempt from fringe benefit tax.  The ruling considers each of these requirements in sequence.

Registered Religious Institution

When the ACNC was introduced, the Fringe Benefit Tax Assessment Act was amended so that only ‘registered religious institutions’ (registered charities with a sub-type of advancing religion) could provide exempt fringe benefits to religious practitioners.  This is one of the key changes reflected in the ruling.

A charity is able to have multiple charitable purposes.  Where one of those purposes is ‘advancing religion’ this condition is met.

Religious Practitioner

The old ruling indicated that a minister of religion would have “many” of the following characteristics:

  • Is a member of a religious institution
  • Is recognised by ordination or other admission or commissioning, or …has the authority to carry out the duties of a minister based on theological training or experience
  • Is officially recognised as having authority on doctrine or religious practice
  • Is distinct from ordinary adherents of the religion
  • Is an acknowledged leader in spiritual affairs or the institution, and
  • Is authorised to act as a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies.

Now the Commissioner has tightened his interpretation and considers that “except in rare cases, a minister of religion would have all of these characteristics.”

The old ruling directly referred to lay persons acting in the capacity of a minister of religion.  This reference has been removed, but an example indicates that they are still likely to be considered religious practitioners.

Pastoral duties or other directly related religious activities

The Commissioner’s view of pastoral duties has been expanded and now includes providing pastoral supervision to those engaged in pastoral duties.  This may offer greater security when providing fringe benefits to pastoral team leaders or executive leaders in para-church organisations.

a copy of the ruling TR 2018/D2 is available at https://www.ato.gov.au/law/view/document?docid=DTR/TR2018D2/NAT/ATO/00001

We would be glad to discuss the potential impact of this ruling with you.

The ATO is inviting public comment on the ruling by 24th August 2018.  We would encourage you to let us know of any concerns you may have with the ruling, but more importantly to communicate such concerns to the ATO via the submission process.

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New Guidelines for employers providing utes, work vans, etc.

For a long time there has been a misconception that work vehicles such as utes and panel vans have a blanket FBT exemption, and the ATO has got this in its sights.

About a year ago, the ATO issued a draft Guideline on the private use that is acceptable for a work vehicle to remain FBT exempt. It required a fair bit of monitoring by the employer, but the more recent version (PCG 2018/3) which was released in July 2018 seems more workable.

The new Guideline, which applies from 1st April 2018, gives employers greater certainty that they are operating within the rules. This will apply if:
• The vehicle is provided for work use;
• The vehicle cost (incl GST) was below the luxury car tax threshold at the time it was bought;
• It is not provided as part of a salary sacrifice arrangement;
• You have a policy that limits private use of the vehicle;
• The employee uses the vehicle to travel between home and work, and any diversion from this is limited to 2 kilometres;
• Other private use of the vehicle is restricted to no more than 1,000 kilometres per year, with no trip being more than 200 kilometres.
• The employer receives confirmation from the employee on the last two points and is “satisfied on reasonable grounds” of the vehicle’s private use (i.e. don’t turn a blind eye to what really went on)

Talk to us about how we can help you implement some processes for your business. The Guideline is available here.

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ATO to target individual tax claims this tax season

With an additional $130.8m government funding injection, the ATO has signalled that this tax season it will target work related expense claims by individuals. Having recently conducted a pilot program where over 850 individual tax returns were audited, the ATO is convinced that when it comes to tax claims, taxpayers are overstepping the mark.

The main areas of concern are claims for home office, including claims for mobile phones and internet, as well as laundry and home to work travel, especially where relaxed recordkeeping rules apply (such claiming for a car based on kilometres travelled, or $150 for work clothing).

The ATO has signalled its intention to require taxpayers to prove that it is necessary for them to incur these expenses in order to earn income, even if there is no requirement to produce receipts. This may mean, for example, getting a letter from your employer to verify that you are required to use your car for work. Unlike other areas of the law, tax law puts the onus of proof on the taxpayer, not the ATO. In other words, you need to prove your case.

You’d think that the ATO would get more mileage from targeting the corporates instead of the little guy, but ATO sources suggest that at $8.7 billion, the gap in underpaid tax from individuals is more than three times the amount of tax foregone from large corporates. Over-claiming expenses is seen as a significant contributor to this problem.

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Super Guarantee Charge Amnesty Announced

The federal government’s recently announced 12 month Amnesty on underpaid super is welcomed news for employers, providing a one-off opportunity to self-correct past super guarantee (SG) non-compliance without penalty.

If the legislation is passed as announced, the Amnesty will be available from 24th May 2018 to 23rd May 2019. Employers who voluntarily disclose previously undeclared SG shortfalls during the Amnesty, and before the commencement of audit activity will:
• not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
• (perhaps more importantly) be able to claim a tax deduction for catch-up payments made in the 12-month Amnesty period.

Employers will be required to pay all employee entitlements, including the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge (GIC).

The Amnesty is applies to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018. It will not apply to the period starting on 1 April 2018 or subsequent periods.

It represents a good opportunity for employers to get their super obligations in order. The government has signaled that there will be higher penalties for correcting past sins once the Amnesty is over.

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Victorian Long Service Leave changes soon to begin

In May this year, the Long Service Leave Act 2018 (Vic) received Royal Assent, signalling some significant changes to the Long Service Leave entitlements of Victorian employees, and impacting all Victorian employers

The changes, which will take effect from 1st November 2018, will affect the entitlements of Victorian employees, unless they are specifically exempted.

Some of the more significant changes are as follows:
• Entitlement to take Long Service Leave to arise after 7 years (currently 10 years);
• Greater flexibility for employees in taking long service leave (will be able to take as little as a day at a time);
• Unpaid parental leave up to 52 weeks will count as part of the employee’s service period (it currently does not count)
• More generous provisions for employees who have transitioned to working a different number of hours (eg from full-time to part-time)
• Failure to comply with the Act will attract criminal penalties (previously attracted civil penalties)

Victorian employers are advised to familiarise themselves with the new rules.

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Proposed tax shock for those engaging contractors or employees

The May 2018 Federal Budget has left little doubt that anyone looking for a tax deduction for payments to contractors or employees had better get their house in order.

Currently payers are required to withhold the required amount of tax from payments to employees, and either obtain an ABN from a contractor, or withhold tax if no ABN is provided. Where such withholding does not occur, the payer is required to pay the tax, although in practice this is generally only enforced in the case of a tax audit.

From 1st July 2019 the government will amend the tax law to deny a tax deduction where a withholding obligation exists but no tax was withheld. The announcement, which was a recommendation contained in the final report of the Black Economy Taskforce, significantly changes the playing field, creating a financial disincentive for businesses to engage in Black Economy behaviour.

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Proposed changes to Public Fund Bank Accounts

In December 2017 the Federal government announced that it would be seeking to remove the requirement for certain Deductible Recipient Funds to operate a separate fund bank accounts, managed by a majority of people deemed to be more responsible.

There is currently no legislation, so this requirement is still in place for public funds including school building, overseas aid and necessitous circumstances funds. Even when the legal requirement is removed, the governing documents of impacted Funds might require such funds to continue to operate under the old rules. Those seeking to reduce the level of administration by closing a bank account should consult their governing rules, as they may need to be amended.

charity

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Xero Online Accounting Software

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Xero is the new and innovative way to complete your accounting records. Have you ever asked any of the following questions? 1. How can I spend less time working on my books? 2. Can bookkeeping be simplified? 3. Everythings on … Continue reading

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Big changes ahead for GST on property developments

In the ever-changing tax landscape, a GST Bill currently before Parliament is bound to have significant ramifications for both purchasers and property developers. If the Bill passes in its current form, from 1 July 2018, purchasers of new residential premises or new residential subdivisions will need to remit the GST on the property’s purchase price directly to the ATO as part of the settlement process. 

This is a significant change from the current arrangement where the developer collects the full proceeds and remits GST to the ATO in the next BAS (which can be up to three months after settlement). The reforms, which are intended to target developers who avoid remitting the GST by dissolving the business before the next BAS lodgement, will put a significant burden on purchasers.

For some developers there will be a significant cash flow impact because the purchaser will be required to pay 1/11th of the full sale price directly to the ATO, even if the developer’s GST liability on the sale would be less than this (e.g., where they can apply the GST margin scheme). In these cases, developers will need to seek a refund from the ATO.

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Uber drivers beware!

As many are now aware, Uber drivers need to register for GST by the time they complete their first drive. The ATO is well aware of the identity of Uber drivers and has begun to send “please explain” letters to drivers who have overlooked registering for GST. What many are unaware of however is that the GST registration applies to any other businesses that they run as a sole trader. Take the example of someone who has a micro business that turns over less than $75,000. Under GST law, the business owner is not required to be registered for GST and there should be no GST on the things they sell to customers. However, if this same micro business person starts driving for Uber, the GST registration applies not only to their Uber activities but to their micro business as well. It will be easy for some to be caught out by this requirement.

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