Australian Tax Professionals Urge the Revision of Anti-avoidance Tax Rules

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Tax practitioners have voiced their concern over the Australian Tax Office’s (ATO) proposed anti-avoidance rules, claiming they are “perverse” and could lead to businesses being unfairly penalised.

Current non-arms-length income tax regulations are an “unnecessary over-reach,” claim CPA Australia, Chartered Accountants Australia, and New Zealand, Institute of Financial Professionals Australia, Institute of Public Accountants, National Tax & Accountants’ Association, SMSF Association, and The Tax Institute in a joint statement released on February 17.

“Hard-working Australians could take a hit to their super simply by applying their professional or trade skills to their personal lives due to complex restrictions on non-arms length transactions,” CPA Australia stated. “Tradies and professional services workers are the most at risk in relation to these perverse rules.”

A “mate’s rate” or no rate at all is prohibited under the current regulations when dealing with related parties. 

Unless they charge for it, the laws could result in an accountant being penalised for completing their super fund returns. However, no penalties would apply to a non-tax agent who completes and submits their return.

Another person who can get into trouble is a real estate agent who decides to sell an investment property that their super fund owns without taking a commission. The same can be true for a tradesperson who handles renovations or upkeep independently and does not charge their fund.

Every contribution paid to the super fund, including required payments from employers, is subject to a penalty tax rate for getting incorrect that can be as high as 45 per cent.

If an Australian mistakenly violates these regulations with a $135,000 superannuation balance and a $90,000 annual income, they could be hit with a $6000 penalty tax.

Ultimately, tax practitioners nationwide are calling for a change in the non-arms length expensing rules to allow professional service workers to use their professional skills in their personal lives without risking their retirement savings.

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