What’s new?
Disclosure of business tax debt
On 28 October 2019, the Disclosure of Business Tax Debt measure received Royal Assent allowing the Australian Taxation Office (ATO) to disclose tax debt information of businesses to registered credit reporting bureaus (CRBs). Under this law, the ATO will only be able to disclose tax debt information of a business that is within a declared class of entities, and where certain criteria are met. The criteria and declared class of entities are set out in the legislative instrument which was registered on 23 December 2019 with a commencement date of 21 February 2020. An entity that is a complying superannuation fund is specifically excluded from the declared class of entities. The Commissioner is not obliged to disclose tax debt information, and will apply administrative safeguards above and beyond the legislative safeguards before reporting the tax debt information of a business.
For more information, see Disclosure of business tax debts.
Hybrid mismatch rules - foreign income or losses
The hybrid mismatch rules are designed to prevent entities from gaining an unfair competitive advantage through hybrid mismatch arrangements. Generally, these arrangements exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions.
These rules have been legislated in the following Australian income tax law:
- Division 832 of the ITAA 1997
- related amendments to the ITAA 1997 (which includes amendments affecting Division 207 franking entitlements), and
- related amendments to the ITAA 1936.
These rules operate in Australia to neutralise hybrid mismatches by disallowing deductions or including amounts in assessable income.
Effective dates:
- Division 832 of the ITAA 1997 has an effective start date for income years beginning on or after 1 January 2019, with the exception of certain aspects of the imported mismatch rules.
- The related measures referred to above have effect for distributions received and flows occurring on or after 1 January 2019, apart from particular transitional measures applying to certain distributions received in relation to Additional Tier 1 capital instruments that have been issued by certain financial or insurance institutions.
For more information, see:
Removal of death benefit increase deduction
From 1 July 2019, the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 removed the death benefit increase deduction. From 1 July 2019, this deduction is no longer available.
Non-arm’s length income (NALI)
On 2 October 2019, the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 that amends section 295-550 of the Income Tax Assessment Act 1997 (dealing with NALI), was given Royal Assent.
From 1 July 2018, NALI was expanded to also include income derived by an SMSF from a scheme in which the parties were not dealing with each at arm's length where the fund incurred expenses in deriving the income that are less than, including nil expenses, those which the SMSF would otherwise have been expected to incur if the parties were dealing on an arm's-length basis.
The expenses may be of a revenue or capital nature in the same way that NALI may be statutory or ordinary income.
From 1 July 2018, income derived by an SMSF in the capacity of beneficiary of a trust through holding a fixed entitlement to the income of the trust will be NALI where:
- the SMSF acquired the entitlement under a scheme or the income was derived under a scheme in which parties weren't dealing with each other at arm's length, and
- the SMSF incurred expenses in acquiring the entitlement or deriving the income that are less than, including nil expenses, what the SMSF would otherwise have been expected to incur if the parties were dealing on an arm's length basis.
For more information, see Non-arm's length income.
Stapled structures
Measures have been introduced to address risks posed by arrangements involving stapled structures, and to limit access to concessions available to foreign investors for passive income. A stapled structure is an arrangement where two or more entities that are commonly owned (at least one of which is a trust) are bound together, such that interests in them (for example, shares or units) cannot be bought or sold separately.
For more information, see Stapled structures.