Individuals and Employee’s Tax

Due to the continued extenuating circumstances of COVID-19 and lockdowns since 1 July 2021, the 80 cents per hour temporary shortcut method to calculate working from home deductions has been extended to 30 June 2022. It is important that employees keep accurate records of the hours they worked from home, for example, a timesheet, roster or diary.

The High Court has found in favour of the taxpayer in the residency of Addy.

The High Court unanimously allowed the Taxpayer’s appeal, overturning the decision of the Full Federal Court. Their Honours drew a direct comparison between the Taxpayer as a UK national and a hypothetical Australian national, concluding that the Taxpayer was subjected to a more burdensome tax liability. This situation enlivened the nondiscrimination clause of the UK DTA, providing the taxpayer with relief from the higher tax liability under the backpacker tax.

The High Court’s judgment gives further clarity and certainty to taxpayers in a similar situation to the Taxpayer. This is relevant to working holiday visa holders who earn income in Australia and are regarded as Australian residents for tax purposes. Where the relevant double tax agreement contains an equivalent article to the non-discrimination article in the UK DTA, they may be subject to the lower tax rates imposed on Australian nationals, rather than the rates imposed under the backpacker tax.

However, this decision does not automatically mean that all backpackers in Australia are treated as Australian residents for tax purposes. In this case, the High Court concluded that the Taxpayer was an Australian tax resident based on the 183-day test and her specific circumstances. Each individual backpacker’s situation is unique and their tax residency should be based on their specific facts and circumstances.

The ATO has found that almost one-third of people made mistakes when claiming their interest deductions on their investment property.

The ATO has released a new Tax practitioner factsheet “Rental mortgage – interest expenses”, which lists what you can and can’t claim. It is now available for you to download for discussions with clients who have rental properties.

The ATO is reviewing arrangements involving sales of both new and second-hand luxury cars between participating entities designed to improperly obtain refunds of luxury car tax (LCT) and evade LCT on the retail sale of the cars: Taxpayer Alert TA 2021/4.

LCT is ordinarily imposed on the sale or importation of cars that exceed the LCT threshold. The threshold for the 2021–22 financial year is $69,152, or $79,659 for certain fuel-efficient cars.

LCT can be effectively deferred until the retail sale of a car or a change in use of that car, utilising decreasing adjustments and quoting provisions. These provisions can be exploited, particularly when coupled with illegal phoenixing behaviours.

The arrangements of concern typically involve the following features:

• the supply of a luxury car to a pre-determined recipient identified by the controlling mind of the arrangement;
• a number of wholesale sales of the car are purportedly made, along a chain of participating entities often acting in collusion, prior to the final retail sale to the pre-determined recipient;
• one of the entities claims a refund of LCT while creating a consequential liability to another entity in the supply chain;
• one or more of the participating entities (described as a ‘missing trader’) does not correctly report and pay their purported LCT liabilities to the Commissioner.