Newsletter: March 2016

DHS specified benefits and entitlements data matching

The ATO has advised that it will collect information from the Department of Human Services (DHS) for the following benefits and entitlements:

-       family tax benefits – part B;

-       paid parental leave scheme;

-       carers' allowance; and

-       Medicare entitlement statements.

This data will be compared with claims made in income tax returns for the invalid and invalid carer tax offset, and for exemptions from paying the Medicare levy and surcharge.

The program will enable the ATO to detect those who are NOT genuinely entitled to claim these offsets and exemptions.  Due to a number of legislative changes in recent years, some people continue to claim these offsets and exemptions incorrectly.

The ATO says that it has been undertaking this data matching program for more than five years and intends to continue conducting it for a further three years.

Buyers to withhold tax for ATO when buying certain properties

Editor:  Parliament recently passed legislation amending the taxation law to impose withholding obligations on the purchasers of certain Australian assets – generally property purchased from a non-resident.  However, the changes will affect most purchases of property in Australia!

The amendments impose a 10% withholding obligation on purchasers of 'Taxable Australian Real Property' (generally, this means an interest in Australian land) from certain foreign residents, as well as certain 'indirect Australian real property interests' (such as shares in companies that own a lot of land) and options to acquire such assets.

The amendments will generally apply where the contract to purchase an applicable asset is signed on or after 1 July 2016.

Tax Warning!

Where the land, or the interest in the land, is worth $2 million or more, the new law requires the purchaser to withhold 10% of the purchase price and send it to the ATO unless the vendor has obtained a 'clearance certificate' from the ATO and provided it to the purchaser prior to settlement.

This obligation arises regardless of whether the vendor is a foreign resident or not. 


On 1 August 2016, Harvey enters into a contract to purchase a residential property in an affluent Sydney suburb for $2.5 million, with settlement proposed to occur on 1 October 2016.  He does not know whether the vendor is a foreign resident. 

Despite many requests from Harvey’s lawyer, the vendor refuses to obtain a clearance certificate from the ATO to give to Harvey.

As Harvey is acquiring Australian land with a market value greater than $2 million and he has not received a clearance certificate from the vendor by the time settlement occurs, Harvey will be required to withhold and pay to the ATO $250,000, whether or not the vendor is an Australian resident.

Inactive Trusts –  ABNs to be cancelled

The ATO has advised that they will begin cancelling the ABNs of approximately 220,000 trusts, where there is evidence those trusts are no longer carrying on an enterprise.

Trust ABNs will be cancelled from February, where information available indicates that, for the last two years, the trust has not lodged BASs and/or trust income tax returns.

The ATO will send a letter if an ABN has been cancelled, including the reason for the cancellation, and a phone number to ring to get the ABN reinstated immediately if the recipient does not agree with the decision.

Editor: If you receive such a letter and think the trust should still be entitled to an ABN, let us know and we'll try and sort it out for you.  Please also let us know if there are any outstanding BASs or returns you need us to lodge!