5. Other budget announcements 5.5 Insolvency reforms to support small business The Government will implement certain insolvency reforms, effective from 1 January 2021 (subject to the passing of legislation) to support small business, including the following: The introduction of a new streamlined process to enable eligible incorporated small businesses (broadly, those with liabilities of less than $1 million) in financial distress to restructure their debt. Simplifying the liquidation process for eligible incorporated small businesses (to allow faster and lower-cost liquidations, increasing returns for creditors and employees). Support for the insolvency sector (to ensure it can respond effectively to increased demand and to the needs of small business). Currently, the insolvency system faces a number of challenges. These include an increase in the number of businesses in financial distress due to COVID-19, a ‘one-size-fits-all’ system, and high costs and lengthy processes that can prevent distressed small businesses from engaging with the insolvency system early thereby reducing their opportunity to restructure and survive. Temporary insolvency and bankruptcy protections that were introduced in March 2020 to provide relief for businesses impacted by COVID-19 are due to expire on 31 December 2020 (e.g., under these measures, directors are temporarily relieved from personal liability for trading while insolvent). However, the number of companies being put into external administration is expected to increase significantly, putting additional stress on the system. Therefore, the above proposed reforms will help more businesses to successfully get to the other side of the crisis.
5. Other budget announcements 5.4 Supporting the mental health of Australians in small business – COVID-19 response package The Government will provide $7 million in 2020/21 to support the mental health and financial wellbeing of small businesses impacted by COVID-19, including: $4.3 million to provide free, accessible and tailored support for small business owners by expanding Beyond Blue’s NewAccess program in partnership with the Australian Small Business and Family Enterprise Ombudsman; and $2.2 million to expand a free accredited professional development program that builds the mental health literacy of trusted business advisers so that they can better support small business owners in times of distress, delivered through Deakin University.
5. Other budget announcements 5.3 Additional funding to address serious and organised crime in the tax and superannuation system. The Government will provide $15.1 million to the ATO to target serious and organised crime in the tax and superannuation systems. This extends the 2017/18 Budget measure Additional funding for addressing serious and organised crime in the tax system by a further two years to 30 June 2023.
5. Other budget announcements 5.3 Clarifying income tax exemptions for individuals engaged by the IMF and World Bank group. The Government will clarify privileges and immunities, including income tax exemptions, available to Australian individuals performing short term missions on behalf of the International Monetary Fund (‘IMF’) and three institutions of the World Bank Group (‘WBG’). The measure will apply retrospectively from 1 July 2017. This measure will clarify that Australian short-term experts are entitled to an exemption from income tax for their relevant income from the organisations. This aligns Australia’s domestic legislative framework with its international obligations and provides certainty for taxpayers. This outcome is consistent with Australia’s longstanding support for and contributions to the IMF and the WBG.
5. Other budget announcements 5.2 Superannuation reforms The Government will provide $159.6 million over four years from 2020/21 to implement reforms to improve outcomes for superannuation fund members. Currently, structural flaws in the superannuation system mean that unnecessary fees and insurance premiums are paid on multiple accounts, members pay too much in super fees, underperforming products are costing members in lost retirement savings, and there is inadequate transparency on how funds are spending members’ money. From 1 July 2021, the proposed reforms will make the system better for members in four key ways: Your superannuation follows you – An existing superannuation account will be ‘stapled’ to a member to avoid the creation of a new account when that person changes their employment. Empowering members – A new, interactive, online YourSuper comparison tool will help members decide which super product best meets their needs. Holding funds to account for underperformance – MySuper products will be subject to an annual performance test. Funds that underperform will need to inform their members. Funds that fail two consecutive underperformance tests will not be permitted to receive new members unless their performance improves. By 1 July 2022, annual performance tests will be extended to other superannuation products. Increased accountability and transparency – The Government will strengthen obligations on superannuation trustees to ensure their actions are consistent with members’ retirement savings being maximised. For example, trustees will be required to comply with a new duty to act in the best financial interests of members.
5. Other budget announcements 5.1 Removing CGT for ‘granny flat arrangements A targeted CGT exemption will apply from 1 July 2021 (subject to the passing of legislation), for ‘granny flat arrangements’. Broadly, these involve older Australians or people with disabilities transferring their home or the proceeds from the sale of their home (and/or other assets) to their adult children or other trusted persons in return for the promise of ongoing housing and care. Under this exemption, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities. This change will only apply to agreements that are entered into because of family relationships or other personal ties and will not apply to commercial rental arrangements. This measure is consistent with the recommendations made in the Board of Taxation’s Review of Granny Flat Arrangements, the Government’s National Plan to Respond to the Abuse of Older Australians announced on 19 March 2019, and the 2017 Australian Law Reform Commission’s Report: Elder Abuse — A National Legal Response
4. FBT Changes 4.2 Reducing the compliance burden of FBT record keeping The Government will provide the ATO with the power to allow employers to rely on existing corporate records, rather than employee declarations and other prescribed records, to finalise their FBT returns. The measure will have effect from the start of the first FBT year (i.e., on 1 April) after the date of Royal Assent of the relevant legislation. Currently, the FBT legislation prescribes the form that certain records must take, and forces employers (and in some cases employees) to create additional records in order to comply with FBT obligations. This measure will allow employers (with what the Commissioner determines as adequate alternative records) to rely on existing corporate records, removing the need to complete additional records. This will reduce compliance costs for employers, while maintaining the integrity of the FBT system.
4. FBT changes 4.1 FBT exemption for retraining and reskilling employees From 2 October 2020, the Government will introduce an FBT exemption for retraining and reskilling benefits provided by an employer to redundant, or soon to be redundant, employees, where the benefits may not be related to their current employment (e.g., where an employer retrains a sales assistant in web design in order to redeploy them to an online marketing role in the business). This measure is designed to encourage employers to assist redundant workers to transition to new employment opportunities within or outside an employer’s business (e.g., to prepare such employees for their next career), without triggering an FBT liability. Currently, FBT is payable if an employer provides training to redundant, or soon to be redundant, employees and that training does not have a sufficient connection to their current employment. The FBT exemption will not extend to retraining acquired by way of a salary packaging arrangement. It will also not be available for Commonwealth supported places at universities (which already receive a benefit) or extend to repayments towards Commonwealth student loans. The Government will also consult on allowing an individual to claim a tax deduction for education and training expenses they incur themselves, where the expense is not related to their current employment (e.g., where the expense relates to future employment).
3. Changes affecting companies 3.3 Meetings conducted via virtual attendance In order to reduce regulatory barriers, the Government has announced it will undertake public consultation on making permanent changes to the Corporations Act 2001. These changes would allow companies to call and conduct meetings electronically (with a quorum achievable through virtual attendance of shareholders and officers) and also to provide certainty that company officers can electronically execute a document.
3. Changes affecting companies 3.2 Clarifying the corporate residency test The corporate residency rules are fundamental to determining a company’s Australian income tax liability. The Government will amend the law to provide that a company that is incorporated offshore will be treated as an Australian tax resident if it has a ‘significant economic connection to Australia’. This test will be satisfied where both the company’s core commercial activities are undertaken in Australia and its central management and control is in Australia. This change will ensure the principles governing the residency of foreign incorporated companies will reflect the position prior to the 2016 court decision in Bywater Investments Limited & Ors v. FCT; Hua Wang Bank Berhad v FCT  HCA 45 (after this decision the ATO withdrew Taxation Ruling (‘TR’) 2004/15 and later released TR 2018/5, incorporating the High Court’s residency test). The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation, but taxpayers will have the option of applying the new law from 15 March 2017.