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Practice Update - January 2025

Updated: Jan 8

Practice Update

January 2025

🔶SASIC ANNOUNCES NEW ENFORCEMENT PRIORITIES WITH A FOCUS ON COST-OF-LIVING PRESSURES🔶

ASIC has outlined its enforcement priorities for 2025, focusing on protecting Australians from financial harm, particularly amid rising cost-of-living pressures. Key priorities include:

Misconduct exploiting superannuation savings and property investment schemes
Failures by insurers to act in good faith
Insider trading and market integrity breaches
Consumer credit avoidance tactics
Cybersecurity deficiencies among licensees
Greenwashing and misleading ESG claims
Vulnerable consumer exploitation in used car finance
Auditor misconduct and superannuation service failures

ASIC's enforcement actions aim to deter misconduct and improve compliance across financial sectors. In 2024, new investigations rose by 25%, with civil proceedings up 23%. Efforts also led to significant outcomes in greenwashing, crypto, predatory lending, and insider trading cases.

🔶MODERNIZING TAX ADMINISTRATION SYSTEMS (MTAS)🔶

On 18 December 2024, the Government announced plans to modernize income tax reporting, aiming to reduce compliance costs for trustees, beneficiaries, and tax agents by allowing most trust tax returns to be filed electronically.

Key changes include pre-filling trust income for beneficiaries and requiring trustees to report beneficiaries’ tax file numbers (TFNs) in the tax return’s statement of distribution, removing the need for separate notifications to the ATO.

The amendment will take effect after receiving Royal Assent, but it is not yet law.

🔶FEDERAL COURT DECISION: COMMISSIONER OF TAXATION🔶

In November 2024, The Federal Court ruled that a $33 million gift received by an Australian resident from a non-resident relative was not considered income. This decision reinforced the need for the Australian Taxation Office (ATO) to provide evidence to support its assessments.

The case serves as a reminder for taxpayers to prove that amounts received from non-residents are gifts, not income, under ordinary tax concepts. This is especially relevant in Australia's multicultural society, where gifts from offshore relatives are common.

It's advisable to maintain thorough documentation for such gifts whenever possible. Proper records can help avoid disputes with the ATO and ensure clarity in differentiating gifts from taxable income.

🔶GUIDANCE ON SECTION 99B: PCG 2024/3 AND TD 2024/9🔶

The Australian Taxation Office (ATO) has issued Practical Compliance Guideline PCG 2024/3 and Taxation Determination TD 2024/9, emphasizing section 99B of the Income Tax Assessment Act 1936 (ITAA 1936), which concerns distributions, payments, or benefits received by Australian tax residents from foreign trusts.

Key Points on Section 99B:

Inclusion in Assessable Income: Australian residents must include trust property received in their taxable income unless covered by two exemptions:
Corpus Exemption: Excludes amounts representing the trust's corpus unless taxable if received by a resident.
Non-Taxable Exemption: Excludes amounts not assessable if derived by a resident taxpayer.

ATO Guidance Highlights:

Applies to payments/benefits from non-resident trusts.
Exemptions include trust corpus and pre-CGT gains.
It's advisable to obtain offshore trust records for accurate tax calculations.
Low-risk scenarios include deceased estates distributing up to $2 million within two years of death or loans/property provided on commercial terms.
Compliance is complex, often due to difficulties in accessing offshore trust documentation.

Consult a qualified accountant to ensure your records are complete and accurate for tax reporting.

🔶MOLONEY V COMMISSIONER OF TAXATION: SMALL BUSINESS CGT CONCESSIONS HIGHLIGHT THE IMPORTANCE OF PRECISE COMPLIANCE.🔶

This AAT decision underscored the complexities of meeting the $6 million maximum net asset value (MNAV) test for small business CGT concessions. A central issue was the valuation of shares during an internal restructuring.

Key takeaways include:

The necessity of robust, defensible valuations to withstand scrutiny.
Growing difficulties in satisfying the MNAV test as asset values increase over time, compounded by the absence of indexation.
For accountants, this serves as a critical reminder to thoroughly evaluate valuations in transactions that depend on accessing small business CGT concessions.

Failure to meet requirements may result in disputes with the ATO or loss of eligibility for valuable concessions. Consult a tax professional to safeguard your entitlements.

🔶 ‘AIRBNB TAX’ TO COME INTO EFFECT FROM JANUARY 1 IN VICTORIA🔶

From 1 January 2025, Victoria will impose a 7.5% short stay levy on accommodation bookings under 28 days with a fee. This includes booking fees, cleaning fees, and GST, but excludes credit card fees.

Exemptions apply to principal places of residence (e.g., homes rented during holidays) and certain accommodations like hotels and crisis housing. The levy applies to private rooms in non-PPR homes, entire houses, granny flats, and tiny homes.

Booking platforms must handle registration and payment; property owners or tenants are liable for independent bookings. Entities earning over $75,000 annually must report quarterly; others report annually.

The revenue will fund affordable housing, with 25% allocated to regional Victoria. Bookings made before 1 January 2025 are exempt. Further registration details will be available online.