2021-22 Budget Measures Released by the Government and the ATO

In this blog, you’ll come to know about 2021-22 budget measurements announced by the government and the ATO.

From Government

Minimum Superannuation Decreased Rates

The government has declared further extension short period of time reduction in minimum superannuation for a year until 30^th June 2022.

Technical Changes to Tax Law

Treasury has announced draft legislation that incorporates various technical changes to the tax law. These medications will identify unintended results and make sure that legislation provides effect to the original policy intent. Among various changes, one of the modifications is related to the temporary loss carryback provisions, and it will enable an organization to alter a choice made under the rules for the 2021 or 2022 income years by giving an approved notice to the Commissioner before the end of the modification or amendment period for the appropriate assessment.

The GST act will be modified to offer that medical practitioners can issue ‘disability certificates’ as rules allow GST free supplies of cars to eligible disabled people.

Excise Refunds for Brewers and Distillers

Earlier, in the Federal Budget, the government declared an expansion of existing provisions enabling a refund of alcohol excise paid by brewers and distillers who are eligible and now can get full excise refunds with a cap of $350,000 from 1^st July 2021. From 1^st July 2021, there will be no need for the excise duty to be paid.

Screen Production Incentive Reforms

Treasury has announced exposure draft laws to change the Australian Screen Production Incentive. The incentive offers tax offsets for expenses on Australian feature movies, TV production, and other screen events, digital, post, and visual effects in the screen industry, and large budget international productions shot in Australia. There are three tax offsets that are available under this incentive are the location tax offset, producer tax offset, and the PDV tax offset.

Declared in the 2020-21 budgets, the reforms maximize the available offset for some taxpayers, however, also enforce strict requirements and raise eligible expenses cap to access the offset. The reforms:

Maximize the producer offset rate up to 30%, across all types of qualifying films that are not feature movies released in theatres.
For the producer and PDV offset, increase the minimum eligible Australian production expenses threshold to $1m.
The 65 commercial hour cap on claiming eligible Australian production expenses is cut-off for a series and season series.
Expenses on general business overheads will not be counted as eligible Australian production expenditure for any offset.
Expenses on services and goods given by the resident of Australia outside Australia will no longer be counted for a company’s eligible Australian production expenditure.
For a documentary, development expenses and remuneration given to the producers, directors, and principal cast up to 20% of the total production expense on a movie can be considered as eligible Australian production expenditure.

From the ATO

ATO Examining Work from Home Deduction

The ATO indicates that it will focus on four types of expenses related to working from home this year. These will be suitable where customers use the actual procedure to claim deductions related to working from home.

The four categories that are nominated for expenses:

Personal expenses include tea, coffee, and toilet paper
Child’s education-related expenses such as laptops or online learning courses
Requesting large expenses up-front
Occupancy expenditures such as rent, property insurance, mortgage interest, land taxes, and rates that can’t be demanded by employees working from home.

Not Allowed to ‘Copy and Paste’ Deduction Claims

The ATO shows that it’ll not be on the lookout for maximized claims as opposed to the overall expectations that such expenditure will be minimized for most taxpayers working from home. However, copying and pasting previous year’s claims are not allowed without proof to support the deductions being claimed.

Consultation Paper for Verification of Client’s Identity

The ATO has released a consultation paper to adopt a new standardised framework for practitioners so that they can follow when making the identity of clients.

Generally, the ATO is urging tax agents to do identity checks for:

All customers, including new clients’ representatives.
Existing clients’ representatives.
Existing clients where their concern is that the client might not be who they pretend to be.

Some general requests that tax agents must be alert to and where it could be suitable to complete some verification processes that would include:

Bank account changes requests
Request for changes in returns or statements
Requests to lodge statements or returns along with important or unusual refunds
Requests to roll-over or release superannuation
Requesting for information from the ATO systems

Covid-19 Travel Restrictions and Permanent Establishment

A tax issue that may arise for some foreign organizations is whether the constant presence of employees in Australia can be the result of Covid-19 travel restrictions could be the reason for a permanent establishment in Australia for the purpose of tax and then it could expose the organization to Australian income tax.

The ATO has indicated that to determine whether the foreign businesses have a permanent establishment in Australia, there will not be applying compliance resources, if:

The temporary presence of employees in Australia will continue to be a result of travel restrictions due to covid-19.
When there is a relaxation of international travel restrictions, then those employees temporarily in Australia will move overseas as soon as possible.
The entity has not identified those employees as permanent establishments or producing Australian income sources in Australia for tax laws of another jurisdiction.

The Ruling, Determinations, and IDs

Overseas Intangible Arrangements

The ATO has announced draft guidelines that deal with its compliance method to overseas intangible arrangements of the type mentioned previously in taxpayer alert.

The ATO ensures that the development, maintenance, enhancement, exploitation, and protection of intangible assets are identified and compensated according to arm’s length principles and that is constant with the transfer pricing provisions.

A practitioner with clients that have a business structure including foreign entities and transactions in relation to the development or utilization of intangible assets must review the draft guidance to check out the level of risk related to the arrangements.

A Receiver’s Responsibility to Maintain Funds to Match Post-Appointment Tax Liabilities

This determination indicates the receiver’s responsibility to retain money under Section 254 ITAA 1936, where an individual entity will have an assessed post-appointment tax liability. Section 254 creates a secondary tax liability for trustee and agents that offer the Commissioners collection against trustee and agents to the extent amount must have been maintained.

Income, gains, or profit of a capital nature are derived by an entity via actions of a receiver operating as the agent of an entity. When this triggers, the receiver should maintain money to pay the tax that will be assessed on the income, gains, or profits.

GST and Burial Rights

The ATO has released a draft determination concerning that whether GST is eligible for the supply of burial rights in a public area. The ATO has confirmed that these supplies by the government agencies are not liable to GST. According to the Division 81 GST Act, eliminates certain fees and charges are not being treated as consideration for the purpose of GST. One such exclusion is a charge or fee that is related to the provision, changes, or retention, under Australian law, of permission, authority, exemption, or licence.

Legislation

2021-22 Budget Measures – Part 1

The Treasury Laws Amendment Bill 2021 allows a series of 2021-22 budget measures:

Medicare levy low-income threshold

Maximizes the Medicare levy-low income thresholds for families, singles, pensioners, and seniors from 1^st July 2020.

Tax Relief for Storm and Floods Grants for SMEs and Primary Producers

Natural disaster recovery grant payments to small businesses and primary producers that relate to floods that happened due to heavy rainfall and storms between 19 February and March 31, 2021, are non-assessable non-exempt income. These amendments apply to assessments for the 2020-21 income year and later income years.

The government will assure 10,000 single parents with dependants to allow them to get a home loan with a deposit of 2% under the Family Home Guarantee. Same as the first home loan deposit scheme, the program will assure 18% generally needed for a deposit without lenders mortgage insurance.

Applicant should be an Australian citizen and age must be at least 18 years and should have annual taxable income of no more than $125,000.

Budget Measures – Part 2

The government has released legislation providing effect to some of the tax measures declared in the most recent Federal Budget and some of the measures declared last year. The following measures are included in the bill:

The extension to the end of the 2022 income year of the low and middle-income tax offset (LMITO).
The extension until the end of the 2025 income year of the junior minerals exploration incentive.
Changing the rules to reduce the Australian tax exposure for NZ sportspersons and support staff that spends an extended period in Australia while participating in cross-border league competitions due to covid-19.
Overview of the specific FBT exemption for employers to offer fringe advantages in relation to the education or training of redundant employees.
Overview of a CGT exemption for granny flat arrangements that fulfill specific conditions.

Table: 2020-21 Medicare levy low-income threshold amounts and phasing-in ranges

Category of taxpayer	No levy payable in 2020-21 if taxable income or family income does not exceed (figure for 2019-20)	Reduced levy in 2020-21 (if taxable income or family income is within range (inclusive)	Ordinary rate of levy payable in 2020-21 where taxable income or family income is equal to or exceeds (figure for 2019-20)
Individual taxpayer	$23,226 ($22,801)	$23,227-$29,032	$29,033 ($28,502)
Individual taxpayers eligible for the SAPTO	$36,705 ($36,056)	$36,706-$45,881	$45,882 ($45,070)
Families eligible for the SAPTO	$51,094 ($50,191)	$51,095-$63,867	$63,868 ($62,740)
Families with the following number of children and/or students	(family income)	(family income)	(family income)
0	$39,167 ($38,474)	$39,168 -$48,958	$48,959 ($ 48,093 )
1	$42,764 ($42,007)	$42,765 -$53,454	$53,455 ($52,509)
2	$46,361 ($45,540)	$46,362 -$57,950	$57,951 ($56,925)
3	$49,958 ($49,073)	$49,959 -$62,446	$62,447 ($61,341)
4	$53,555 ($52,606)	$53,556 -$66,942	$66,943 ($65,757)
5	$57,152 ($56,139)	$57,153 -$71,438	$71,439 ($70,173)