Assistant Treasurer Michael Sukkar has announced that the start date for targeted amendments to Division 7A will now be revised from 1 July 2020 to “income years commencing on or after the date of royal assent of the enabling legislation”.
Another proposed tax measure aimed at removing the capital gains discount at the trust level for Managed Investment Trusts and Attribution MITs will see its start date revised from 1 July 2020 to the income years commencing on or after three months after the date of royal assent of the enabling legislation.
On the superannuation front, the start date for increasing the maximum number of allowable members in an SMSF from four to six has also been revised from 1 July 2019 to royal assent of the enabling legislation.
Changes to calculating exempt current pension income (ECPI) will also have a new start date of 1 July 2021.
Mr Sukkar’s announcement on the last day of the financial year comes as the profession contends with great uncertainty over the proposed Division 7A changes, with no further consultation or draft legislation released since the Treasury’s last consultation paper in October 2018.
The three professional accounting bodies, together with The Tax Institute and the Law Council of Australia, had earlier called for Mr Sukkar to delay the start date until a thorough consultation had occurred.
Chartered Accountants Australia and New Zealand tax leader Michael Croker said the revised start date would bring little comfort to tax practitioners.
“What lies ahead for Division 7A remains unclear,” Mr Croker told Accountants Daily.
“As a former tax practitioner, Assistant Treasurer Michael Sukkar knows the sensitivity surrounding changes to Division 7A, particularly at a time when shareholders are struggling to meet loan repayment obligations under the current law.
“Treasury’s perspective is that Division 7A has developed to become a financing mechanism and needs to be scaled back. Exactly how that scale-back occurs has been controversial, with different approaches put forward by Treasury officials and the Board of Taxation.
“Tax professionals are keen to know how the transition to the ‘new’ Division 7A will occur. They and their clients need time to adjust. Some argue that their clients can’t transition, and that whatever the new Division 7A looks like, existing arrangements should be left undisturbed.”
In announcing the revised start dates, Mr Sukkar said they were made as a result of the “reprioritisation of government resources and the shortened parliamentary sitting period in 2020 due to the COVID-19 crisis”.
“The government is committed to legislating to implement each of these measures and will continue to progress them for delivery as soon as possible,” he said.
The deferred start date to proposed Division 7A changes comes after the ATO announced that taxpayers struggling to make minimum yearly loan repayments because of COVID-19 would now be able to request for an extension of the repayment period.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.