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Tax Measures
Federal Budget 2012/13

Swan's smoke 'n mirrors approach to the Budget nips and tucks in order to balance the books in the short-term, rather than altering their position on the mining and carbon taxes.

FBT: Executives targeted by further LAFHA changes
Further restrictions will be made to the rules regarding Living Away From Home Allowances and benefits.  The reforms will prevent employers from giving the tax concession to employees who aren't maintaining a second home, or are maintaining two homes indefinitely by:
  • Limiting access to the tax concession to employees who maintain a home for their own use in Australia, that they are living away from for work; and
  • Providing the tax concession for a maximum period of 12 months for an individual employee for any particular work location. 
The 12 month time limit will not apply to employees working under fly-in fly-out arrangements.  
 
"These reforms will stop businesses from being able to give a very large taxpayer-funded tax break to employees who aren't maintaining a second home, or are maintaining two homes indefinitely."  Treasurer, Wayne Swan
 
Date of effect
From 1 July 2012 for arrangements entered into after 7.30pm (AEST) 8 May 2012 and from 1 July 2012 for arrangements entered into prior to that time.
 
CGT refinement & tightening
Several measures were announced or reinforced to amend how CGT applies in certain circumstances.  These measures have a negligible revenue impact:
  • Non-residents locked out of 50% CGT discount
  • Non-residents will no longer be able to access the 50% general CGT discount.  The discount will be available to gains accrued prior to the date of effect where non-residents choose to obtain a market valuation of assets at 8 May 2012.  
Date of effect
7.30pm (AEST), 8 May 2012
 
Beneficial interests
Changes recommended providing greater consistency in the application of the scrip for scrip rollover and small business concessions to trusts, superannuation funds and life insurance companies.
 
In particular, this measure seeks to ensure that the provisions concerning absolutely entitled beneficiaries, bankrupt individuals, security providers and companies in liquidation interact appropriately with the CGT provisions and with the connected entity test in the small business entity provisions.

Date of effect
At the option of taxpayers from 2008/09 income year and automatically from the date of Royal Assent
 
Broadening of revenue asset and trading stock rollovers
Broadening of the revenue asset and trading stock rollovers that apply when interests in a company or unit trust are exchanged for shares in another company.
 
The change seeks to ensure that revenue asset and trading stock rollovers will be available for all interests that qualify for the general conditions of each of the CGT rollovers, rather than only shares in consolidated groups. The measure will also require that replacement shares in the interposed company must maintain the character of the original revenue asset or trading stock asset that was exchanged.
 
Date of effect
7.30pm (AEST), 8 May 2012
 
Broadening relief for natural disaster victims
Technical amendments to resolve issues with the previously announced CGT relief measure for taxpayers affected by natural disasters.
 
Under this announced change, taxpayers that are eligible for an automatic CGT exemption (such as the CGT main residence exemption) are not prevented from choosing the same CGT treatment available to other taxpayers under the announced relief measure. It will also allow taxpayers that participate in an eligible land swap program for natural disasters in relation to their main residence to treat the replacement land they receive under the program as their main residence.
 
Date of effect
1 July 2011
 
Broadening of exemption for compensation payouts and insurance policies
This measure will disregard CGT consequences where a taxpayer receives compensation, damages or certain insurance proceeds indirectly through a trust. This will ensure that the taxpayer has the same CGT outcome as a taxpayer who receives these proceeds directly. It will also ensure that insurance policies owned by superannuation funds that were treated as being CGT exempt prior to the 2011/2012 Budget changes to compensation payments and insurance policies continue to be CGT exempt.
 
Date of effect
2005/2006 income year
 
Income tax & deceased estates
Amends the 2011/2012 Budget measure to legislate the ATO practice of allowing a testamentary trust to distribute an asset of a deceased person without a CGT taxing point occurring.  The changes:
  • Seek to reduce compliance costs by ensuring that the deceased's tax return does not need to be amended as the taxing point will be recognised by the entity transferring the asset;
  • Modify the application dates for two of the minor changes announced in the 2011/12 Budget so as not to disadvantage taxpayers; and
  • Broaden the scope of the integrity provisions to also apply to assets passing via survivorship.
Date of effect
Royal Assent of amending legislation

Tightening of scrip for scrip rollover provisions

The scrip for scrip rollover provides CGT relief for shareholders when they exchange their shares in a company takeover and a capital gain would otherwise arise. It also provides relief for unit holders of trusts involved in takeovers.
 
The measure seeks to ensure that taxpayers cannot get around the scrip for scrip roll-over's integrity provisions by holding interests to acquire ownership rights, such as convertible preference shares, rather than the underlying shares; and defer indefinitely the CGT liability that would have otherwise arisen under the integrity provisions for the on-sale of the target entity by the acquiring entity.
 
The measure will also seeks to strengthen the integrity provisions by: broadening the scope of the rules that apply to intra-group debt to cover debts owed to group entities other than the head entity; removing the CGT exemption for the repayment of such debts as it undermines the effectiveness of the integrity provisions; and ensuring that the integrity provisions apply appropriately to trusts.
 
Date of effect

7.30pm (AEST), 8 May 2012

Cross border transactions delay and extension
The date of effect of the GST cross border package announced in the 2010/2011 Budget will be pushed back from 1 July 2012.  The original package sought to significantly reduce the number of non-residents drawn into Australia's GST system by limiting the 'connected with Australia' provisions; expanding the reverse charge provisions; extending the GST free rules for cross border supplies; and removing the need for some non-residents to register.
 
In addition, the Government will seek to extend the measures.  This includes changes to the proposed reforms for the supply of goods by non-residents and not proceeding with changes relating to the non-resident agency provisions.
 
As an integrity measure, the Government will also clarify and narrow the definition of permanent establishment for GST purposes.
 
Date of effect
First quarterly tax period after Royal Assent of enabling legislation


Part IVA changes confirmed
As announced in a media release on 1 March 2012, the Government has provisioned for changes to Part IVA.   
 
The changes to the general anti-avoidance rules in Part IVA of the ITAA 1936 will apply to arrangements that are entered into or executed after 1 March 2012.  
 
Currently, Part IVA can only apply if a taxpayer receives a tax benefit in connection with a scheme. In recent years, some taxpayers have successfully argued that no 'tax benefit' has arisen because, had they chosen not to enter into a particular scheme, there would have been no imposition of tax. In other words, had the taxpayer done nothing or entered into a different arrangement, there would have been no tax liability. Accordingly, entering into the scheme has not resulted in a tax benefit.
 
Even though no consultation paper or draft legislation has been released, the intended outcome is that the application of Part IVA is widened. Any proposed rules are intended to apply from 2 March 2012, which means that there will be some uncertainty on how the rules will apply until legislation is finally introduced.

Date of effect
2 March 2012

Budget Details
Click through to the pages below for details about how the Budget affects you.

For the greater good
Business
Individuals
Superannuation
Compliance
Family & Community
Download the 2012/13 Budget Summary

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Last updated May 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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