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Tax provisions for businesses hit by natural disasters should be extended, says IPA.
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Collaterally damaged businesses ‘need safe harbour spot’
06 July 2022
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10 minute read
Businesses that rely heavily on other businesses that have been directly hit by special circumstances – such as floods, bushfires and the pandemic downturn – need to have the same access to safe harbour relief, said the IPA.
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The general manager technical policy, Tony Greco, said any business in that situation would suffer the same consequences of not being able to meet one of the four tests or make a profit in the relevant year.
“Given the number of businesses impacted by special circumstances particularly COVID-19 related, a safe harbour to self-assess the Commissioner’s discretion [is] most welcomed,” Mr Greco wrote in a submission to draft PCG 2022/D2.
“Without this avenue taxpayers would be required to apply for the Commissioner’s discretion and have to wait for the confirmation that the application was successful.
“The draft PCG makes tax administration easier for businesses hit by floods, bushfires, and COVID-19 events. Impacted businesses within the guidelines of the safe harbour will not need to apply for the discretion for the income years [ending] in 2019-20, 2020-21 and 2021-22.”
Mr Greco said this was a good way to reduce administration whilst protecting the integrity of the non-commercial loss provisions, and taxpayers who fell outside the guidelines were not prevented from applying for an exercise of the discretion in the usual way if their circumstances do not fall within the terms of the safe harbour.
But he said if a business depended on customers directly impacted by special circumstances then it would suffer similar consequences and would warrant similar consideration for safe harbour relief.
“The one suggestion we would like to be further explored, is for taxpayers not directly impacted by the special circumstances noted in the draft PCG to be similarly considered for the purposes of the safe harbour,” Mr Greco said.
“If a business relies on customers directly impacted by the special circumstances, it in turn would suffer the same consequences of not [being] able to meet one of the four tests or make a profit in the relevant year.
“If a business is significantly reliant on businesses directly impact by special circumstances, then due consideration is warranted for similar safe harbour relief. COVID-19 related restrictions are not isolated to lock down areas as downstream impacts are also common when consumers cannot travel.”
The PCG stipulates that “special circumstances outside of the control of the operator… are those which are sufficiently different to distinguish them from the circumstances that occur in the normal course of conducting a business activity”.
These include drought, flood, bushfire and include government health restrictions due to pandemic as well as explosions and disturbances to energy supplies.
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