a new paragraph 26(1AA)(c) was inserted to ensure that
employees of recognised organisations that undertake aid or
charitable activities, that do not form part of Australian
'official development assistance', are eligible for
a regulation making power was inserted to allow the continuing
exemption to be extended in future as appropriate;
the application provisions were amended to ensure that income
received after 1 July 2009 in respect of services before 1 July
2009 is exempt
Senate Select Committee response
Submissions received by Treasury argued against the changes for
various reasons. The Committee responded to the below
Effect on competitiveness of Australian firms
Treasury only commented generally on these arguments again
referring to the supposed inequity between workers offshore and
workers in Australia.
Short notice of the change
Argument was that having any type of grandfathering provisions
where the old rules would apply to current assignees would create
inequity between those on different lengths of assignments.
Issues with PAYG withholding
Treasury responded that PAYG variations may be approved by the
ATO to avoid double withholding of tax. Employees can claim a
foreign income tax offset (FITO) as soon as the tax is withheld
with a payslip as required evidence. However where tax is not paid
regularly, the assignee will need to wait until the tax is actually
paid and amend their income tax return.
Treasury also confirmed that the ATO has no standing to impose
PAYG obligations on foreign entities. As such, a foreign employer
will not need to withhold PAYG from an Australian resident
Possible double taxation of fringe benefits
This has been acknowledged by Treasury even though some Double
Tax Agreements (DTA's) will limit the application.
Other administrative and compliance issues
Increase in compliance burden for assignees and employers has
Surprisingly, the Committee has made two recommendations which
could ease the burden imposed by these changes:
Will this achieve anything?
1 – The government should consider options for
limiting the new measure to reduce the compliance burden where it
would be disproportionate to the revenue gain
Short answer, no. The Government is aware of the numerous
additional compliance burdens that will be placed on individuals
and employers yet are still proceeding with the changes
2 - The Government should make the necessary consequential
changes to ensure there is no double taxation of fringe
This will only work with countries where the Double Tax
Agreement addresses fringe benefits (UK and New Zealand only!)
until each treaty individually is amended. This will not help the
double tax that will occur in all other countries
In discussing the recommendations, the Committee states the
Government could exempt the first $X,000 of offshore income or
limit the measure to large employers or by exempting offshore
salaries from PAYG.
In spite of these suggestions, the Senate Select Committee has
ignored and dismissed all other suggestions by corporates,
employers and individuals who will be actually effected directly by
The Tax Laws Amendment (2009 Budget Measures No. 1) Bill 2009
has had its third reading in Parliament and is expected to be
passed without amendment before 30 June 2009.
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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