ATO Rulings and Activity February

Determination on single touch payroll approved form finalised

The ATO has finalised a legislative instrument on the information which the approved form may require to be reported through Single Touch Payroll (STP) for the purposes of s 389-5(2)(b) of sch 1 to the Taxation Administration Act 1953 (TAA).

Taxation Administration — Single Touch Payroll — Amounts to be Notified Determination 2021 provides that the following kinds of amounts must be in the approved form for STP reporting purposes:

an amount that is not a SGAA sacrificed ordinary time earnings amount (having the same meaning as the term “sacrificed ordinary time earnings amount” defined in the Superannuation Guarantee (Administration) Act 1992) but which, as the result of an effective salary sacrifice arrangement, reduces the ordinary time earnings of an employee:

1. an amount that is not a SGAA sacrificed salary or wages amount but which, as the result of an effective salary sacrifice arrangement, reduces the salary and wages payable to an employee
2. a superannuation liability amount
3. a tax offset amount
4. foreign tax paid amount
5. an exempt foreign income amount
6. a foreign employment income amount
7. a lump sum D amount (the amount of a genuine redundancy payment or an early retirement payment)
8. a payment made under the Community Development Employment Project scheme
9. a voluntary agreement to withhold amount, and
10. a labour hire arrangement amount.

The instrument reflects legislative changes made by the Treasury Laws Amendment (2019 Measures No 3) Act 2020 and theTreasury Laws Amendment (2018 Measures No 4) Act 2019 to the way superannuation guarantee is calculated and reported in relation to amounts salary sacrificed to superannuation. The instrument also enables voluntary reporting of child support obligations through STP to reflect legislative changes made by the Treasury Laws Amendment (2020 Measures No 2) Act 2020.

The instrument replaces the Commissioner’s previous determination (Legislative Instrument F2019L00122) that prescribed additional information the approved form may require using Standard Business Reporting enabled software.

Amounts determined in this instrument which were not previously required will not become amounts that are required by the approved form until the earlier of either:

1. the date after 4 January 2021 that an entity chooses to commence reporting those amounts, or
2. 1 January 2022.

For more information, please read here.

Guidance on buy-backs or redemptions of certain hybrid securities

The ATO has issued guidance on determining the market value of certain hybrid securities for capital gains tax purposes when they are bought back or redeemed.

Practical Compliance Guideline PCG 2021/1recognises practical problems faced by investors required to determine the market value of a hybrid security subject to a buy-back or redemption under the market value substitution rules set out in ss 116-30(2) or 159GZZZQ(2) of ITAA 1936.

The guideline will apply to a hybrid security that is an equity interest under Div 974 of ITAA 1997 where:

• the issuer has an option under which it may buy-back or redeem the hybrid security on a specified call date
• the hybrid security is listed on the Australian Securities Exchange, an overseas securities exchange or offered/held through a clearing system
• the terms of the hybrid security specify that the amount paid to buy-back or redeem the hybrid security must be equal to its face value
• the hybrid security will convert into ordinary shares in the issuer, or a connected entity of the issuer, if it is not bought back or redeemed on or before the specified call date
• the hybrid security carries a right to regular (at least annual) distributions calculated by reference to a fixed or floating market based coupon rate, and
• there is a strong and demonstrated market expectation prior to the announcement of a redemption or buy-back that the hybrid security will be redeemed or bought back on a date prior to the specified call date.

The ATO will accept that the market value for a hybrid security covered by the guideline on its specified call date is equal to its face value where all securities on issue are bought back or redeemed on the same date. For hybrid securities that feature a reinvestment

date before its specified call date, the guideline sets out the methodology for calculating market value on the reinvestment date. This calculation will be accepted by the ATO if the result is within a tolerance of 2% of the amount received for the buy-back or redemption.

The guideline does not apply to an acquisition, buy-back or redemption of a hybrid security that is subject to the taxation of financial arrangements provisions under Div 230 of ITAA 1997.

The guideline applies both before and after its date of issue