• Integrity measures

Integrity Measures

► Extension of GST – Offshore suppliers of hotel accommodation

From 1 July 2019, offshore suppliers of hotel accommodation in Australia will be required to include these sales when calculating their GST turnover. 

► Division7A and Unpaid Present Entitlements

The 2016 Federal Budget heralded the Government’s intention to make targeted improvements to the operation and administration of Division 7A of the ITAA 1936. Two years later, no legislation has been forthcoming, but an additional measure to deal with Unpaid Present Entitlements (UPEs) has been announced.

► Managed investment trusts

In the 2018-19 Federal Budget, the Government announced that Managed Investment Trusts (MITs) will be prevented from applying the capital gains discount at the trust level. Additionally, new jurisdictions have been added to the list of information exchange countries, which means residents in these jurisdictions will be eligible to access the reduced MIT withholding tax rate of 15%. 

► The ATO is coming for tax and superannuation debts

In this Budget, the Government has announced that it will provide an additional $133.7m to the ATO to address the levels of unpaid tax and superannuation debts in the community. It is intended to target taxpayers gaining an unfair financial advantage by not paying these amounts over those paying their fair share.

► Crackdown on Australia’s black economy

The Government has taken on Australia’s ‘black economy’ by proposing four new measures in an effort to improve the integrity of the Australian tax system.

► Illegal phoenixing gets snuffed out

The Government continues to target illegal phoenixing arrangements where a new company is established to continue the business of another entity that was liquidated to avoid paying its liabilities. Phoenixing has a negative effect on the economy at large through increased costs to regulators and a loss of tax revenue, and at an individual level through the avoidance of employee entitlements including wages, superannuation, and accrued leave.

► Addressing tax risks of stapled structures and limiting foreign investor concessions

Rehashing an earlier press release on 27 March 2018, the Budget reiterates a package of integrity measures directed at stapled structures and similar arrangements. The proposals address the perceived risks to the corporate tax base, due to the potential exploitation of these arrangements and limit concessions currently available to foreign investors.

► Holding vacant land to become more expensive

The Government is targeting taxpayers that engage in land banking or hold vacant land by denying a deduction for any costs in holding that land. 

► CGT changes for partners

The small business capital gains tax (CGT) concessions for partners in partnerships will be eliminated in certain circumstances.

► Impacts for Trusts

The Government has implemented three tax integrity measures to improve the taxation of trusts.

► High profile individuals

The Government has announced that, from 1 July 2019, income from the commercial use of an individual’s fame or profile must be attributed to that individual and included in their personal income.

► Thin capitalisation changes

Tightening of the thin capitalisation rules is one of the Government’s key international tax integrity measures included in this year’s Budget. The thin capitalisation provisions deny interest deductions to entities where they are either foreign owned, or own a foreign entity, and the legislation deems them to be insufficiently capitalised.