Tax changes announced for 2014

By John Kelly
Editor-in-Chief, Smart Tax Handbook


Now that the Abbott Government has had time to settle in and consider the changes announced but not legislated by the previous Government, it will be interesting to see what tax changes 2014 holds in store for us.

A press release addressing which of the unlegislated Labor tax initiatives the new Government would proceed with and which they would abandon was issued just before Christmas.

The 4 main initiatives the Government intends to proceed with are:

1. Capital gains tax (CGT): inclusion of earnout payments, i.e. additional purchase payments for a business that are dependent on the earnings of the business after the change of ownership, as part of the value of a business asset.
2. Not-for-profits: clarification that not-for-profits must operate principally in Australia to be eligible to access to income-tax exemptions and deductible gift-recipient status.
3. Instalment warrants: treatment of investors in instalment warrants, which are a method of purchasing an asset that allows for instalment payments, as owners of the relevant underlying assets for income tax purposes. 
4. Goods and services tax (GST): replacement of GST-free concessions for going concerns and farm land with a reverse charge mechanism, which would move the responsibility for accounting for GST from the seller to the buyer. Note that a side effect of this initiative may be an increased stamp-duty charge if the GST is considered to be part of the consideration for the sale.

The 4 main initiatives the Government intends to abandon are:

1. Research and development refundable tax offset: allowing this offset to be paid in quarterly instalments.
2. Bad debts: ensuring consistent treatment in related-party financing arrangements.
3. Not-for-profits: ensuring that tax concessions for not-for-profits are targeted only at those activities which further the not-for-profit's altruistic purposes. Note, however, that the Government will not be abandoning this issue altogether and will still seek simpler and better ways to target not-for-profit tax concessions.
4. CGT: providing CGT relief for taxpayers buying replacement assets after a natural disaster.

The Coalition intends to pass any of the previous Government's tax legislation it has decided to move forward with this year, in an effort to provide greater certainty for taxpayers.

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