TaxTalk

TaxTalk Alerts 2013-14: International Assignment Solutions
Australia: Modified PAYG withholding processes require immediate action from foreign employers – 10 September 2013
The Australian Tax Commissioner has for many years authorised foreign employers to vary to nil the Pay-As-You-Go (PAYG) withholding obligations in respect of salary or wages paid from a foreign payroll to assignees working in Australia. The Australian PAYG withholding rules give the Commissioner discretion to reduce the prescribed amount of PAYG withholdings which ordinarily apply to salary or wages of employees working in Australia. The Commissioner has previously exercised this discretion on the condition that the employer agrees to meet the assignee’s end of year Australian tax liability, e.g., for 'tax equalised' employees, or where the employer is prepared to put an arrangement in place to ensure that the tax liability will be paid.

Recently, the Commissioner has reviewed this practice following concerns raised by senior Australian Tax Office (ATO) staff. The Commissioner indicated initially that no further variations would be granted, and that the ATO would begin on July 1, 2014 to enforce the PAYG withholding obligations in respect of foreign employers and their assignees working in Australia.

Following consultation on the proposed changes, the ATO has agreed with PwC’s suggestions on how to retain the PAYG withholding variation for foreign employers going forward. Affected foreign employers should consider the actions that they need to take as all such employers will likely have to change their processes in some way.

Read the full Global Watch alert.

Fringe Benefits Tax Amendment

Fringe Benefits Tax Amendment – 17 July 2013
The Fringe Benefits Tax Amendment (DisabilityCare Australia) Act 2013 amends s6 of the Fringe Benefits Tax Act 1986 to increase the FBT rate from 46.5% to 47% for FBT years commencing on or after 1 April 2014. The amendment, which forms part of the Government's DisabilityCare Australia (National Disability Insurance Scheme) reforms, aligns the FBT rate with the increase in the Medicare levy from 1.5% to 2%.

Read the full Alert.

Employee Share Scheme Reporting for 2013 - Start preparing now

Employee Share Scheme Reporting for 2013 - Start preparing now – 24 June 2013
Now is the time to start preparing your Employee Share Scheme reporting for 2013. We have highlighted some considerations as part of this process for the 2013 year in this Alert. Should you have any questions, please don't hesitate to contact one of our PwC Employee Share Scheme team members listed on the Alert.

Read more...

Change to visa pricing structure and fee increases from 1 July 2013

Change to visa pricing structure and fee increases from 1 July 2013 – 18 June 2013
The Department of Immigration and Citizenship (DIAC) has announced a new visa pricing structure and fee increases effective on and from 1 July 2013. This will include introduction of additional fees for dependant family members being included in an application.

Read our full Alert on the paper.

Australia: 2013-2014 Federal Budget may impact some assignees

Australia: 2013-2014 Federal Budget may impact some assignees – 17 May 2013
The Federal Treasurer, Honourable Wayne Swan, MP delivered his sixth budget (Budget) at 7:30 PM AEST on May 14, 2013. This Global Watch describes some tax changes proposed by the Government in the 2013-14 Budget as well as certain announcements made prior to the Budget. Employers should evaluate how these changes affect their global mobility programs, including increased costs under their tax equalization policy.

Read our full Alert on the paper.

Employee Share Scheme Reporting

Employee Share Scheme Reporting – 23 April 2013
It is that time of year again when companies need to get ready for their 2013 Employee Share Scheme (ESS) reporting requirements which are due on 14 July and 14 August 2013.

Over the last 12 months, we have seen a significant increase in the data matching activities of the ATO in relation to ESS income. The ATO’s data matching activities have resulted in employees seeking additional information from their employer on how the amounts reported on their ESS statements have been determined.

In particular, companies should consider the ATO’s data matching when deciding how to report for their internationally mobile employees. For these employees, it may be the case that only a portion of the ESS income is subject to Australian income tax. Where the employer has reported the full ESS income and the employee has only reported a portion of the ESS income in their income tax return, the ATO is issuing data matching notices to these employees. Employers should consider only reporting the ESS income that is subject to income tax in Australia to avoid this mismatch.

Read our full Alert on the paper.

Australia: Visitor visa reforms begin 23 March while new lodgement fees for dependent visas begin 1 July

Australia: Visitor visa reforms begin 23 March while new lodgement fees for dependent visas begin 1 July – 18 March 2013
The Department of Immigration and Citizenship (DIAC) recently announced reforms to the Visitor visa program which go into effect March 23, 2013. The number of subclasses will be reduced from nine to five. Work activities carried out by business visitors will be restricted with the introduction of a new short-stay temporary work visa (Subclass 400). These changes will have significant impacts to companies in Australia who currently rely on business visas for workers engaging in short-term work.

From March 23, the visitor visa program will consist of the following visa subclasses:
  • Temporary work (short stay activity) visa - Subclass 400
  • Visitor visa - Subclass 600
  • Electronic Travel Authority (ETA) - Subclass 601
  • Medical Treatment visa - Subclass 602
  • eVisitor – Subclass 651
These new visa subclasses will replace the: Subclass 456 Business (Short stay) visa; Subclass 459 Sponsored Business Visitor (Short stay) visa; Subclass 977 ETA (Business Entrant - Short Validity) visa; Subclass 956 ETA (Business - Long Validity); and Subclass 651 eVisitor visa. The validity of any of these outgoing visa subclasses already granted will not be affected by these changes. Applicants holding these visas are therefore not required to apply for any of the new visa subclasses which become available on March 23.

The Regulations that provide the framework and outline the criteria for these new subclasses have not yet been released.

Read our full Alert on the paper.

Exposure draft legislation to remove 50% CGT discount for foreign and temporary residents released for public consultation

>Exposure draft legislation to remove 50% CGT discount for foreign and temporary residents released for public consultation – 13 March 2013
On 8 March 2013, the Assistant Treasurer released an Exposure Draft of legislation for public consultation proposing to remove the 50% CGT discount concession for foreign and temporary residents who dispose of assets after 8 May 2012. The Exposure Draft extends the proposed changes to certain Australian tax residents who change their residence to or from Australia while holding certain assets.

This announcement is important for not only individuals but also for employers with globally mobile populations in and out of Australia.

The proposed changes do not affect the CGT exemption for an individual's main residence (home).

Affected individuals should seek advice and consider the following actions:
  • Individuals who were a foreign resident or temporary resident on 8 May 2012 should obtain a market valuation of affected assets as at that date;
  • Australian tax residents who became non-residents (foreign residents) during the tax year ended 30 June 2012 (and after 30 June 2012 too) need to revisit choices they made (or are about to make) in their tax return under the deemed disposal rule; and
  • Australians tax residents who became non-residents prior to 1 July 2011 and chose not to have a deemed disposal of all of their assets when they became a non-resident, should also seek advice in relation to the Exposure Draft Legislation.
Employers with globally mobile populations should consider the potential impact of these proposed changes on their:
  • Existing mobile employee population, especially Australian citizens overseas;
  • Tax equalisation accruals (if the employees are equalised on personal income); and
  • Global Mobility policies for future assignments, especially for outbound assignments for Australian tax residents.
More detail on the proposed changes for different types of individuals For detailed information on the proposed changes including how the gains are allocated between the periods where the 50% CGT discount concession is available and the period when it is not, please refer to our Global Watch.

Fringe Benefits Tax (FBT) - determination of reasonable amounts for food and drink expenses

Fringe Benefits Tax (FBT) - determination of reasonable amounts for food and drink expenses – 28 February 2013
Taxation Determination (TD) 2013/4 issued on 27 February 2013 sets out the Commissioner's determination of reasonable amounts for food and drink expenses incurred by employees in receipt of a Living Away From Home Allowance (LAFHA) for 1 April 2013 to 31 March 2014.

The key points of this Final Determination are as follows:
  • i) Where food and drink expenses do not exceed amounts that are reasonable as set out in the TD, the expenses do not need to be substantiated.
  • ii) Where food and drink expenses exceed amounts that are considered reasonable, substantiation must be provided in full. If excess amounts are not substantiated, the reasonable amount will be exempt, but the excess paid to the employee will be subject to FBT.
  • iii) Based on feedback the ATO received, the final TD differs from the draft (previously issued on 28 September 2012) by removing the three tied salary band system for determining reasonable food and drink expenses.
  • iv) The reasonable food and drink allowance for one adult for 1 April 2013 to 31 March 2014 is $233 for one adult. This is less than the reasonable food and drink allowance for one adult for the prior year of $250 (as specified in TD 2012/5).
Given the reduction in this reasonable food and drink allowance amount, the Final Determination includes a transitional measure. The transitional measure applies where an employee and employer had an existing employment agreement in force as at 27 February 2013 that specified the food and drinks allowance at a rate in Taxation Determination TD 2012/5 and that employment agreement is not varied in a material way or renewed. Where the transitional measure applies, the rates in TD 2012/5 will continue to be accepted by the Commissioner as reasonable amounts for 1 April 2013 to 31 March 2014.

For a full copy of the Final Determination, please find a link to TD 2013/4 which details the reasonable amounts for food and drink.

If you have any queries or concerns, please don't hesitate to contact your PwC general contact or Tony Halcrow on +61 2 8266 7279.

Living Away from Home Bill gets Royal Assent

LAHFA concessions pass the Senate

LAHFA concessions pass the Senate – 19 September 2012
Today, the Senate have passed Tax Laws Amendment (2012 Measures No. 4) Bill 2012('the Bill') which includes the new rules on the tax treatment of Living-Away-From-Home ('LAFH') concessions.

As expected, the Senate have not made any amendments to the new rules and it is expected that the Bill will shortly receive Royal Assent.

The new rules will apply from 1 October 2012.

Australia: Living-Away-From-Home changes updated and almost law

Australia: Living-Away-From-Home changes updated and almost law – 23 August 2012
In the evening of 21 August 2012, the Australian Government introduced a much revised Bill to reform the Living-Away-From-Home (LAFH) rules.

Following the recommendations by the House of Representatives Standing Committee on Economics (Committee), the much revised Bill now:
  1. Retains the reformed LAFH rules for allowances and reimbursements in the Fringe Benefits Tax (FBT) regime (the previous version of the Bill included LAFH allowances in the income tax regime and some of the food and drink expenses in the FBT regime).
  2. Extends LAFH concessions to Fly-In Fly-Out (FIFO) and Drive-In Drive-Out (DIDO) workers even when these employees do not maintain a home in Australia.
  3. Provides a little more guidance on what a "material variation" to an employment contract is for the purposes of the transitional rules.
Unfortunately, there have been no changes in the revised Bill that mean that temporary residents who are not living away from an Australian home and who are not FIFO or DIDO workers would qualify for LAFH concessions from 1 October 2012.

The Bill has now been passed by the House of Representatives. In order for the Bill to become law, it must be passed by the Senate and receive Royal Assent from the Governor General. The Senate does not sit again until 10 September 2012.

Given the Bill is not opposed by the Opposition party, it is expected that the Bill will be passed into law in its current form and will apply from 1 October 2012. Employers should now finalise their response to the proposed changes.

Read our full Alert on the paper.

Report on LAFH Bill: House of Representatives Standing Committee on Economics

Report on LAFH Bill: House of Representatives Standing Committee on Economics – 16 August 2012
On 28 June 2012, the Australian Government introduced into Parliament the bill in relation to the new rules for Living-Away-From-Home (LAFH) concessions. This bill is not yet law.

The bill was referred to the House of Representatives Standing Committee on Economics and the Committee invited submissions and held a public hearing in relation to the bill. The Committee released its report on 15 August 2012.

The Committee supports the introduction of the tightened eligibility criteria for the LAFH concessions and has made several recommendations in relation to the bill.

The key recommendations are:

  1. expanding the definition of Fly-in Fly-Out (FIFO) and Drive-In Drive-Out (DIDO) workers to include workers who do not meet the test of maintaining a usual place of residence within Australia so that these workers can claim LAFH concessions;
  2. retaining the taxation treatment of LAFH allowances wholly within the FBT regime rather than in the income tax regime; and
  3. that Treasury provide clarification in relation to what constitutes a ‘material variation’ to a worker’s contract for the purposes of the transitional rules.
Read our full Alert on the paper.

Final LAFH legislation introduced into Parliament

Living-Away-From-Home reforms - Considerations for business

2012-2013 Federal Budget – Effect on Assignment Costs

2012-2013 Federal Budget – Effect on Assignment Costs – 10 May 2012
The Federal Government promised Australia would be in surplus again by 2012-13 and the Federal Treasurer, the Honourable Wayne Swan, MP did not disappoint when he delivered his 5th Budget at 7:30 PM May 8, 2012.

Some of the key proposals in the budget that may increase the costs to your company and/or employees of sending them into or out of Australia on assignment are:

Increase to the non-resident tax rates: it is proposed that effective 1 July 2012 the first tax band will now be up to $80,000 and will have a flat tax rate of 32.5%. This will create additional costs for companies (if the employees are equalised) or outbound employees (if the employees not equalised) where the employee breaks Australian tax residence but continues to derive Australian sourced income. The 32.5% flat tax rate will increase to 33% from 1 July 2015.

Termination Payments: Golden handshake payments may no longer benefit from concessional tax rates from 1 July 2012 where the employee in receipt of this payment already has other adjusted taxable income in excess $180,000 (the threshold at which the top marginal tax rate applies in Australia). Consideration should be given as to whether retiring employees may wish to retire on or before 30 June 2012. The concessional tax rates should still apply for genuine redundancies.

CGT concessions and non-residents: non-residents will no longer be eligible for the 50% CGT discount on capital gains accrued after 7:30pm May 8, 2012. This may represent an additional cost to outbound Australians on assignment overseas (or their employer if tax equalised on personal income). Australians already residing overseas holding assets still taxable in Australia will need to consider getting these valued as at 8 May 2012 as the discount concession should still apply to gains that have accrued up to 8 May 2012.

Managed investment trusts: non-residents are currently subject to a 7.5% withholding tax on 'other income' distributions from Australian managed funds. This tax rate will increase to 15% effective 1 July 2012.

Superannuation: two measures were announced:
  1. the concessional contribution cap will remain at $25,000 from 1 July 2012 for all employees, with the Government deferring any decision to increase the cap in certain circumstances at this time. Any contributions in excess of this cap will be subject to excess contributions tax which is borne by employees.
  2. high income earners will be taxed on pre-tax superannuation contributions at 30% instead of the current 15% contribution tax rate for any part of the contribution that increases their adjusted taxable income above A$300,000. This may make foreign Superannuation an even more attractive proposal for inbound temporary visa holders working in Australia.
To find out more, read the IAS Global Watch Alert (8 May 2012) on this topic.

2012 Employee Share Scheme reporting – be prepared

2012 Employee Share Scheme reporting – be prepared – 7 May 2012
It is that time of year again when companies need to get ready for their 2012 Employee Share Scheme (ESS) reporting requirements. The deadlines are fast approaching to provide employees with an ESS Statement by 14 July 2012 and to provide the Australian Taxation Office (ATO) with an ESS annual report by 14 August 2012.

This is now the third year of ESS reporting and the ATO can be expected to enforce the above deadlines. Companies should start preparing now.

The ATO is starting to match the data that it obtains from ESS reporting against the information disclosed in employees’ income tax returns. Companies should consider this when deciding how to report for their employees, particularly internationally mobile employees.

It is also known that the ATO is sharing information with Office of State Revenue (OSR) authorities to assist with payroll tax reviews. Accordingly, companies should consider whether or not they are adopting the appropriate treatment of ESS awards for payroll tax purposes.

Read our full Alert on the paper.

Domestic Living Away From Home arrangements – are you ready?

Domestic Living Away From Home arrangements – are you ready? – 2 May 2012

Update on impact to domestic Australian employees

Reforms to the Living-Away-From-Home (LAFH) concessions will not only impact foreign nationals (at whom the reforms are aimed) but also domestic Australian employees and their employers.

Employers need to be aware of the potential increased cost to business and changes to administration and reporting obligations arising from LAFH arrangements involving domestic employees. These costs and changes will arise in relation to employees receiving allowances rather than reimbursements.

Domestic employees are those employees that are not temporary residents, for example Australian citizens or permanent residents.

The reforms are expected to apply from 1 July 2012. The final form of the proposed reforms has yet to be announced by the Government.

Read our full Alert on the paper.