BONUS – Regulatory Roundup October 2016
Backpacker tax: Government backs down
The Federal Government has responded to pressure and dropped its plan to introduce a 32.5% tax on backpacker workers. Instead, working holidaymakers will be taxed at a lower rate of 19%, starting January 1, 2017. They will still be charged from the first dollar earned.
Under the original $540 million proposal in the May 2015 budget, non-residents with working visas such as working holidaymakers were going to be subjected to a 32.5 cent in the dollar tax rate between income levels of zero and $80,000 from January 1.
This compared with a zero tax rate between $0 and $18,200 for residents, 19 cents for income between $18,201 and $37,000 and ordinary marginal rates above that.
The government had expected to recoup $500 million from the higher tax rate. It will now increase the passenger levy by $5 to cover the change. The passenger levy – or passenger movement charge – is currently $55 and will therefore increase to $60. The new rate will apply from July 1, 2017. The government will also increase the tax on working holiday makers’ superannuation payments when they leave Australia to 95%.
The government will also reduce the visa application charge for working holiday makers by $50 to $390. It will also be making some changes to the 417/462 visas to improve the supply of working holiday makers and to improve its attractiveness, as a visa, for people to come on holiday to Australia. This will include two things – the first is to extend the age of eligibility from 30 to 35, and to change the same employer test to say that someone can work for the same employer for 12 months, but no more than six months in the one location.
The tourism sector will get a boost to market jobs to backpackers, with $10 million promised to Tourism Australia to promote the nation to potential working holiday makers. And it is understood legislation will be required to enact the new tax arrangements, therefore the changes still require passage through Parliament.
To generate more accurate data and boost integrity of the scheme by preventing exploitation of working holiday makers, their employers will be required to undertake a once-off registration with the ATO. Employers who do not register will be required to withhold tax at the 32.5% rate. Working holiday makers will be made aware of registered employers via the publication of a list on the ABN Lookup.
ATO not doing the best on revenue collection, says national auditor
The Australian National Audit Office (ANAO) has released a report which indicates that while the ATO may have indicated that hundreds of millions of dollars in tax revenue was being taken in, the actual amount may have been overstated.
The new report by the ANAO found that the ATO had on at least one occasion over a five-year period “overstated” revenue raised from its data matching activities by $368.7 million. Its report also noted other cases where revenue may have been distorted.
“The ATO’s monitoring of revenue and expenses associated with compliance measures could be improved. It has not had methodologies in place to accurately calculate additional revenue and expenses for all measures when introduced and does not have a comprehensive set of performance indicators.”
The report highlights, for example, that the ATO had been using an outdated assumption of “base” levels of revenue. “The base levels of revenue that the ATO has been using to estimate aggregate level compliance revenue (that is, for all compliance activity) have been based on an unreliable estimate of business-as-usual revenue — a flat ‘base’ level of revenue for income tax and GST, which has not been adjusted since 2010-11.”
The ATO maintains that it has indeed met or exceeded revenue targets. “The main conclusion drawn by the ANAO from the review is that it is unclear whether the ATO met the revenue commitments arising from compliance measures over the period 2010-11 to 2014-15,” wrote acting second commissioner Alison Lendon in response to the report. “The ATO does not agree with this conclusion, with one exception where we know we have not met our commitment.”
The ANAO is critical of the methodologies and assumptions that underpin the ATO’s figures. “Inaccurate attribution undermines the assurance to government that the agreed amount of additional revenue is actually being raised and that the additional resources provided are used as agreed,” the report says.
The ANAO calls on the ATO to develop better ways of measuring and reporting revenue, and include penalties and interest in its revenue models. It also considers that indirect revenue needs to be accounted for in a more timely manner, and that delays in collecting tax revenue (the time from when a tax assessment made and when that tax is collected) may also have an influence on final outcomes.
Fuel tax credits for heavy vehicles just got a little easier to understand
The ATO says it has listened to complaints about providing clarity in regard to fuel tax credits, and so has developed and issued new information (and updated a ruling) to make it easier to work out fuel tax credit entitlements for your clients.
Part of its efforts are in the form of updated guidance documents, which can help determine your clients’ fuel tax credit entitlements for fuel used in heavy vehicles.
- A new practical compliance guideline (PCG 2016/11) details the methods you can use to apportion fuel used in heavy vehicles to power auxiliary equipment. There are percentages you can apply so you won’t need to do complex calculations or sample testing when you work out your clients’ claims.
- And a new fuel tax determination (FTD 2016/1) explains that the fuel tax credit rate is reduced by the road user charge for heavy vehicles idling on a public road, or powering air conditioning for the main cabin when travelling on a public road.
The ATO has also clarified the meaning of a “public road” in fuel tax ruling FTR 2008/1 (paragraphs 121-127). A public road is a road available for use by members of the public.
It says tax practitioners should use the:
- “heavy vehicle for travelling on public roads” rate for travel on toll roads, bus lanes and busways, and
- “all other business uses” rate for travel on forestry, mining access and agricultural property roads, as these are examples of roads not considered public.
If tax practitioners have not used the correct rate when calculating fuel tax credits for their clients, the ATO says that an adjustment will need to be made to their activity statement.