What’s new?
Domestic transfer pricing rules
Australia's new domestic transfer pricing rules are now contained in Subdivisions 815-B, 815-C and 815-D of the ITAA 1997. The new transfer pricing rules apply to income years beginning on or after 29 June 2013.
Division 13 of the ITAA 1936 was repealed with effect from 29 June 2013. Further, Subdivision 815-A of the ITAA 1997 will not apply to income years to which Subdivisions 815-B and 815-C apply. Subdivision 815-A will continue to apply from 1 July 2004 until the date the new transfer pricing rules take effect. Likewise, Division 13 of the ITAA 1936 continues to apply up until Subdivisions 815-B to 815-D take effect. Subdivisions 815-B, 815-C and 815-D ensure that consistent rules apply to both tax treaty and non-tax treaty cases.
Subdivision 284-E of Schedule 1 to the Taxation Administration Act 1953 now contains rules related to transfer pricing documentation.
Consistent with the approach under former Division 13 of the ITAA 1936, the new transfer pricing rules in Subdivision 815-B apply the arm's length principle to relevant dealings between both associated and non-associated entities.
Subdivision 815-C modernises Australia's transfer pricing rules in respect of the attribution of profits between a permanent establishment and the entity of which it is a part.
Subdivision 815-D sets out special rules about the way Subdivisions 815-B and 815-C apply to trusts and partnerships. These rules ensure that the new transfer pricing rules apply in relation to the net income of a trust or partnership in the same way they apply to the taxable income of a company.
Unlike the transfer pricing rules in former Division 13 of the ITAA 1936 and also Subdivision 815-A of the ITAA 1997, which rely on the Commissioner making a determination, Subdivisions 815-B and 815-C are self-executing in their operation. This better aligns Australia's domestic transfer pricing rules with the design of Australia's overall tax system which generally operates on a self-assessment basis.
Claim only one set of franking credits: don’t engage in dividend washing
The dividend washing integrity rule applies from 1 July 2013. The integrity rule prevents you from claiming franking credits where you have received a dividend as a result of dividend washing.
Dividend washing occurs where you, or an entity connected to you, claim two sets of franking credits by:
- selling shares that are held on the Australian Securities Exchange (ASX) and have become ‘ex-dividend’, and then
- purchasing some substantially identical shares using a special ASX trading market.
The Commissioner may also apply the anti-avoidance legislation to deny franking credit benefits to any dividend washing transactions.
See ato.gov.au/dividendwashing for more information.
Low income super contributions
The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, which is currently before Parliament, seeks to repeal the low income superannuation contribution for financial years starting on or after 1 July 2013. At the time of publication these changes had not become law.
Insurance
From 1 July 2014 a trustee is prohibited from providing insured benefits that are not consistent with the conditions of release in the Superannuation Industry (Supervision) Regulations 1994 (SISR) for death, terminal medical condition, permanent incapacity and temporary incapacity. The prohibition does not apply to the continued provision of insured benefits to members who joined a fund before 1 July 2014 and were covered in respect of that insured benefit before 1 July 2014 or to the provision of benefits under an approval that has been granted. This may require certain amendments to be made to the fund rules or the rules may be taken to be amended. (See regulation 4.07D of the SISR.)
From 1 July 2013, a regulated superannuation fund that did not self-insure on 1 July 2013 is no longer able to self-insure. If on 1 July 2013 the fund does self-insure in relation to a particular risk the fund may no longer self-insure in relation to that risk on and after 1 July 2016. This provides a three year transitional period for funds to move from self-insurance to external insurance arrangements. This may require certain amendments to be made to the fund rules or the rules may be taken to be amended. (See regulation 4.07E of the SISR.)
Conservation tillage tax offset
The Clean Energy Legislation (Carbon Tax Repeal) Bill 2013, which is currently before Parliament, seeks to repeal the refundable tax offset for conservation tillage with the effect that taxpayers who first use or install an eligible no-till seeder from 1 July 2014 will not be entitled to claim the conservation tillage offset. At the time of publication these changes had not become law.
Taxation of financial arrangements (TOFA)
Changes have been made to clarify the operation of the taxation of financial arrangements (TOFA) rules. Further information about these rules can be found in the Guide to the taxation of financial arrangements (TOFA) rules at ato.gov.au/tofa
Capital gains tax relief in relation to MySuper
Realised capital and tax losses can be transferred from a complying superannuation fund, a life insurance company or a PST to another entity where members' account balances have been mandatorily transferred to a MySuper product in another superannuation fund.
Income tax consequences may be deferred where an asset is transferred from a complying superannuation fund, a life insurance company or a PST to another entity where members' account balances have been mandatorily transferred to a MySuper product in another superannuation fund.
The amendments apply to the income year of the superannuation fund that includes 1 July 2013 and the following income years if the accrued default amounts of members are transferred between 1 July 2013 and 1 July 2017 (consistent with the date of introduction of MySuper and the deadline for the transfer of default members' accrued default amounts to a MySuper product).
Other changes to the Fund income tax return 2014
- In 2014 you do not need to complete a Losses schedule 2014 because the fund has a foreign tax loss. Note that you still need to complete a losses schedule if the fund has a total loss of more than $100,000.
- The following labels are now mandatory:
- R3 No-TFN quoted contributions item 10
- O Taxable income or loss item 11
- A Taxable income item 12
- T1 Tax on taxable income item 12
- J Tax on no-TFN quoted contributions item 12
- T5 Tax payable item 12
- I Tax offset refunds item 12.
You must include an amount at these labels even if it is zero.