Payments to a contractor can be subject to payroll tax under multiple bases.  Of these bases, 3 are now well-known.  This article summarises the 3 “known” bases and also discusses a potential 4th basis.  Below, when I refer to a “section” (sometimes abbreviated to “s”) I am referring to a section of the NSW Payroll Tax Act.  THE 3 “KNOWN” BASES Payroll tax applies to payments made by a business entity (a “taxpayer”) to a contractor under any of the following 3 bases: Employee: The contractor, though labelled a “contractor”, is in fact an employee of the taxpayer under the ..read more

If you live overseas for a period, you may be a “foreign resident” for Australian tax purposes, even though you are an Australian citizen.  Being a “foreign resident” is often advantageous from an Australian tax perspective because, generally speaking, a foreign resident is not required to pay Australian tax on their overseas income (whereas an “Australian resident” is). Not surprisingly, then, disputes between taxpayers and the Australian Taxation Office (“ATO”) about whether the taxpayer was a foreign resident or an Australian resident during a particular income year (typically, a year ..read more

Your employment package may include interests under an employee stock ownership plan (“ESOP”), such as shares or options.  If so, how will Australia tax you on those interests? It will depend on the answers to questions including: Do your ESOP interests relate to work you did overseas while you were a foreign resident? What is your residency status at the time you sell your shares: are you an Australian resident, a temporary resident or a foreign resident? Were you promised, or did you receive your ESOP interests before 1 July 2015? Does your employer’s group qualify as a “start-up”? Are ..read more

If a significant sum is transferred to you from overseas, the ATO will be alerted to the transfer and may seek to tax the amount on the basis that it represents income or gains made while you were an Australian resident.  Usually the ATO will give you some warning that it intends to do this and will allow you an opportunity to contact the ATO if you believe the amount is not taxable.  If you don’t contact the ATO within time or you do contact the ATO but, despite your explanation, the ATO is not satisfied that the amount is not taxable, then the ATO may proceed to issue you with an a ..read more

A private company can issue a special kind of share, called a dividend access share (“DAS”).  Broadly speaking, a DAS is a share that entitles its holder to only very limited rights.  The directors of a company may resolve to pay dividends to DAS holders; otherwise a DAS holder has no right to dividends, and also has no voting rights or rights to surplus assets when the company is wound up. The existence of a DAS can arguably give rise to various tax and non-tax benefits.  However, it can also cause tax ‘headaches’ in some situations.  In particular, it has generally been t ..read more

This post is intended for readers who are already familiar with the concepts of Division 7A, ‘unpaid entitlements to trust income’, section 109N complying loans, and “sub-trust” arrangements of the kind described in Taxation Ruling TR 2010/3 and Practice Statement PS LA 2010/4. ATO ID 2012/74 is about the application of Division 7A to an unpaid present entitlement to trust income (“UPE”) owed by the trustee of a fixed trust to a private company unitholder (where the trustee is an associate of the private company’s shareholder(s)). The ATO states that the UPE is not “caught” by Division 7A – th ..read more

If an individual sells shares, the income tax treatment will depend on whether the taxpayer carries on a business of buying and selling shares, or instead, is merely investing in shares.  In particular, a loss on sale of a share might be deductible (eg, against salary) for a taxpayer who carries on a share trading business, but not for a taxpayer who merely invests in shares.   Whether a taxpayer carries on a share trading business is a question of fact, and often a point of dispute between taxpayers and the Australian Tax Office (“ATO”).  In a number of rece ..read more

UPDATE NOTE:  TD 2012/D4, referred to in this post, has been finalised in TD 2012/21.  This post should be read in conjunction with my post of 27 October 2012 which discusses TD 2012/21. Changing the terms of a trust has historically been “risky” from an income tax perspective.  There was always a concern that the Commissioner of Taxation may have considered that the change triggered a capital gains tax liability (on the basis that the change caused a “resettlement” of the trust). Recently, changing the terms of a trust became less risky. Recently, the Commissione ..read more