A Practice Statement has been issued by the ATO which highlights the approach that the staff of the ATO must follow to check out whether to allow an extension of time to apply for direction identification number for individuals. Typically, an individual must apply for their DIN before being appointed as a director, and should have DIN when they become an eligible officer.
The ATO can give an extension of time to apply for a DIN when it is appropriate to do so, considering all relevant circumstances. Here are the following matters that should be considered:
- Reasons for not applying before their appointment.
- The time length the individual must apply for their director ID.
- The individual’s director ID compliance history.
- Circumstances that prevented or are preventing the individual from applying for their director ID.
- The purpose of the director ID regime.
- Whether the individual is subject to enforcement action.
Part IVA and early stage innovation companies
The ATO has released a draft determination outlining the Commissioner’s view on the applicability of Part IVA to early-stage innovation company (ESIC) schemes, as detailed in TA 2024/1, titled “Early Stage Investor Tax Offset Claimed Using Circular Financing Arrangements” (TA 2024/1). This document expresses the ATO’s concerns regarding specific arrangements that allow individuals to claim the ESIC tax offset for shares purchased through customized financing methods. Key features of these arrangements include:
- An investment opportunity in a start-up is presented to individuals by the scheme’s operators, with the start-up positioned to meet the criteria of an ESIC as per subsection 360-40 of the ITAA 1997.
- A financing arrangement is provided to cover the individual’s share subscription, minus any required nominal deposit. This allows the individual to purchase shares, often up to an amount eligible for the maximum tax offset.
- The operators lend money to the individual for purchasing shares in the start-up, and subsequently, funds are circulated among the start-up, the individual investor, and the operators to utilise the tax offset.
In the draft determination, the ATO offers that while the application of Part IVA to any specific arrangement depends on a weighing of all the appropriate circumstances, Part IVA is intended to apply to arrangements similar to those mentioned in TA 2024/1. The draft determination goes through the conditions of Part IVA in detail and explains how an arrangement as mentioned in TA 2024/1 would be caught.