Mid-Year Economic and Fiscal Outlook (‘MYEFO’)
The Mid-Year Economic and Fiscal Outlook (‘MYEFO’) report was recently released.
It indicates that the underlying Budget deficit is expected to be $5.2 billion in 2019 (down from the $14.5 billion deficit estimated in the 2018/19 Federal Budget).
The substantial deficit reduction is reportedly a result of increased tax collections, with individual tax collections up $4.1 billion and company tax collections up $3.4 billion.
Additionally, the MYEFO report also provides a useful snap shot of what the Government is thinking when it comes to tax policy – particularly where previously announced reforms are still pending.
A few tax-related policy updates confirmed in the MYEFO worth mentioning include the following:
q GST compliance program – The Government is looking to provide $467 million of ATO funding from 2020 to 2024 to fund additional GST-related audits and the development of analytical tools to combat emerging risks to the GST system.
q $10,000 cash payment limit – The Government will delay the introduction of an economy-wide cash payment limit of $10,000 from the originally proposed 1 July 2019 start date, until 1 July 2020.
q Abandonment of the proposed changes to intangible asset depreciation – The Government has announced it will not be proceeding with the current proposal to allow taxpayers to self-assess the effective lives of certain intangible depreciating assets.
q Super access for victims of crimes – The Government proposes to introduce legislation to allow victims of certain crimes (i.e., serious violent crimes) access to their perpetrator’s superannuation to pay any outstanding compensation.
q Increasing the integrity of limited recourse borrowing arrangements (‘LRBAs’) – The Government is making an adjustment to the previously announced reforms requiring outstanding balances of LRBAs to be included in a member's total superannuation balance by extending the start date and limiting impacted taxpayers.
q Superannuation guarantee (‘SG’) penalty increase – Where employers fail to come forward during the 12-month SG amnesty, the Government is proposing to increase the minimum penalty from 50% to 100% of the Superannuation Guarantee Charge.
Editor: Note the required legislative amendments needed to implement the tax concessions promoted by the ATO under the SG amnesty (at the time of writing) is yet to be passed by Parliament.
This is despite the fact that the Government's proposed SG Amnesty is meant to run from 24 May 2018 to 23 May 2019.
Taxation of income for an individual’s fame or image
The Government has released a consultation paper with respect to the implementation of the 2018/19 Federal Budget announcement relating to the direct taxation of an individual’s fame or image at their marginal tax rates.
The proposed reform aims to ensure that all remuneration (including both cash and non-cash benefits) provided for the commercial exploitation of a person’s fame or image will be included in their assessable income.
Editor: These reforms reflect the Government’s concern that high-profile individuals (including sportspersons, actors and other celebrities) have been ‘taking advantage’ of lower tax rates by licencing their fame or image to another (generally related) entity for the purpose of tax-effective income splitting.
Following the Federal Budget announcement, the ATO withdrew its draft Practical Compliance Guideline PCG 2017/D11 (the ‘draft PCG’).
The draft PCG had set out a 10% safe harbour for apportioning lump sum payments for the provision of a professional sportsperson’s services and the use and exploitation of their ‘public fame’ or ‘image’ under licence.
In withdrawing the draft PCG, the ATO advised that for the period up to 1 July 2019, it will not seek to apply compliance resources to review an arrangement complying with the terms of the draft PCG if it was entered into prior to 24 August 2018 (i.e., being the date the draft PCG was withdrawn).