Notice of Ruling, Notice of Addendum

Overview

The Commissioner of Taxation has issued a new ruling, CR 2018/41, which outlines the position on the deductibility of employer contributions made to the Australian Construction Industry Redundancy Trust (ACIRT) on behalf of workers who are members of the Trust. This ruling was enacted in 2018 and applies from 1 July 2018 to 30 June 2024, with continued application to all entities within the specified class who entered into the scheme during the term of the ruling. The purpose of this ruling is to address the problem of providing clarity to employers regarding the deductibility of contributions made to the ACIRT. The Commissioner, Chris Jordan, is the enacting authority, and the policy objective is to ensure that employers can accurately determine the tax deductibility of their contributions to the Trust, thereby supporting the stability and welfare of workers in the construction industry. Additionally, an addendum to Taxation Ruling TR 2016/3 has been issued to correct and update certain details, particularly regarding the flowchart in Appendix 2. This addendum, TR 2016/3 Addendum, was enacted on 14 December 2016, to ensure the accuracy and relevance of the information provided to taxpayers concerning the deductibility of expenditure on a commercial website. The Commissioner of Taxation remains committed to providing clear and precise guidance to taxpayers, ensuring compliance with the relevant tax laws and regulations.

Scope and Application

The Commissioner of Taxation has issued Ruling CR 2018/41, which outlines the position regarding the deductibility of employer contributions to the Australian Construction Industry Redundancy Trust (ACIRT) for income tax purposes. This ruling applies to employers who contribute to the ACIRT on behalf of their workers who are members of this trust, and it governs their ability to claim tax deductions for these contributions. The ruling is effective from 1 July 2018 until 30 June 2024, with provisions to extend its application to entities within the specified class who joined the scheme during the term of the ruling beyond this date. Additionally, there is an addendum to Taxation Ruling TR 2016/3, which corrects the flowchart in Appendix 2 and updates other details concerning the deductibility of expenditure on a commercial website. This addendum applies from 14 December 2016 and aims to provide clarity on the tax treatment of such expenditures. Both rulings provide essential guidance for entities and individuals within their scope, ensuring compliance with Australian tax laws.

Key Provisions

The main operative sections of the Commissioner of Taxation's Ruling CR 2018/41 concern the deductibility of employer contributions to the Australian Construction Industry Redundancy Trust (ACIRT) (section 1). This Ruling clarifies that employers who contribute to the ACIRT on behalf of their workers who are members of the Trust may be able to claim a tax deduction for these contributions under the Income Tax Assessment Act 1997. The Ruling applies from 1 July 2018 to 30 June 2024 and continues to apply to all entities that entered into the scheme during the term of the Ruling (section 2). The obligations imposed by this Ruling on employers and other entities include ensuring that the contributions are made to the ACIRT in accordance with the terms of the Trust and that they keep proper records to substantiate their claims for tax deductions. Employers must ensure that the contributions are paid to the Trust and not directly to the employees, as direct payments would not be deductible (section 3). Furthermore, entities must ensure that the contributions are genuinely for the purpose of redundancy and not for other purposes, as this could affect the eligibility for a tax deduction. In terms of civil and criminal consequences for breaches, while the Ruling itself does not explicitly outline penalties, it is important to note that incorrect claims for tax deductions can lead to penalties under the Income Tax Assessment Act 1997. For instance, under section 284-15 of the Act, a person who makes a statement in a tax return knowing it to be false or misleading in a material particular can be liable for a civil penalty of up to $2,220 plus the general interest charge (GIC) on the unpaid tax (section 4). Additionally, if the breach is deliberate, it can lead to criminal charges under section 285-5, which can result in a maximum penalty of $22,200 or imprisonment for up to five years, or both, depending on the severity of the breach (section 5).