M o r g a n’ s   T a x   M o n t h

– August 2012 Developments –

This is a collection of developments in Australian tax law and practice that occurred in August 2012 and which aims at being of relevance to tax lawyers.*

F John Morgan
A member of the Victorian Bar (www.FJMtax.com)

Table of Contents

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ACTS, BILLS AND ANNOUNCEMENTS

Acts & Bills

*Tax relief for merging super funds: draft legislation released – reinstating Div 310 with modifications – to allow rollover of all gains and losses (not SMSFs) [1]

*COAG project to harmonize directors personal liability for their corporation’s crime: third tranche related to tax crimes – some rights to prosecute dropped [2]

Miscellaneous tax law, mining tax and resource tax changes: draft legislation [3]

MIT’s that invest in energy efficient commercial buildings to get a ‘concessional’ 10% withholding rate: draft legislation released [4]

Transfer Pricing Bill now awaits Assent – giving tax treaties retrospective force of domestic law back to 2004 [5]

*Bill No 4 passes House of Reps with Government amendments to LAFHA provisions – picking up the recommendations of the Reps Committee [6]

Veterans’ Affairs Legislation Amendment Bill 2012 was passed by the House of Reps to exempt certain benefits from tax [7]

Company loss carry-back: draft legislation released (burdened by same ‘integrity’ measures as loss carry forward) [8]

Charities and NFP Bills introduced [9]

The Tax Laws Amendment (Investment Manager Regime) Bill 2012 has now passed all stages without amendment and effectively awaits Royal Assent [10]

 

Announcements

R&D Tax Incentive quarterly ‘opt-in’ credits for companies with turnover under $20m: Treasury consultation paper [11]

Business tax reform discussion paper canvasses options to fund company tax rate cut [12]

Treasury’s Forward Work Program for Tax Measures [13]

Submissions sought on the merits of having an Inter-Governmental Agreement to help facilitate the USA FATCA laws [14]

 

CASES AND APPEALS

High Court

High Court special leave decisions: 2 granted (Mills and Consolidated Media), one refused (Esso Resources) [15]

Mr Stephen Gageler SC has been appointed as the new High Court judge to replace Justice Gummow [16]

 

Full Federal Court

*FCT v McWilliam – Employee correct to say his ‘acquisition date’ for shares under the old Div 13A (regarding ESS) was the date of his contract and not later when options issued or resolutions passed [17]

*FCT v Visy Industries USA Pty Ltd – Deduction for indemnity fee under a forward exchange contract – Commissioner loses appeal [17]

Mitsui & Co (Australia) Ltd v FCT – taxpayer loses appeal and can only depreciate ‘farm-in’ costs (can’t apportion between production and exploration) [18]

 

Federal Court

BCI Finances Pty Limited v FCT – Court approves order requesting overseas evidence in tax case where receipt from foreign bank doubted as loan [19]

Hua Wang Bank Berhad & Ors v FCT (No 2) – Commissioner’s information request to UK HMRC upheld [20]

 

Federal Magistrates Court

Administrative Appeals Tribunal (AAT)

*Re Sea Shepherd Australia Limited and FCT – Sea Shepherd Australia Limited not a deductible gift recipient because it doesn’t provide direct care to animals [21]

Re Hourani and Tax Practitioners Board – Application for tax agent registration refused (AAT confirms TPB’s deision) [22]

*Re Sneddon and FCT – Taxpayer resident of Australia under ordinary concepts despite over 2 years away, based on property maintained and money remitted here – therefore Qatar employment income assessable [23]

*Re The Trustee for MH Ghali Superannuation Fund and FCT – Amended assessments to include as “special income” in the contract year (2006) despite being settled in 2011 [24]

Re Fortune Corporation Pty Ltd – tax agent registration terminated for lodging returns for Indian taxpayers based on unverified information from two business men to whom he paid the refunds [25]

Re Murray and FCT (No 3) – Amended assessments based on Liechtenstein bank information upheld for the 1999 to 2007 years [26]

Re Vita Hot Bread Pty Ltd and FCT – Failure to show assessments excessive – industry benchmark disparity [26]

Re Boer and FCT – No permanent place of abode outside of Australia: taxpayer a resident and assessable on his Oman oil technician income [27]

 

Other Courts & Tribunals

Australia DIS Pty Ltd v DCT – Statutory demand for unpaid tax debts upheld (ie no genuine dispute) despite change of trustee and debt being largely estimates [28]

Marrickville Legal Centre v Chief Comr of State Revenue – NSW land tax: Legal Centre denied access to OSR boarding house information [29]

*R v Seller; R v McCarthy – Permanent stay of Wickenby case relating to whisky distillation schemes – because evidence compelled without privilege against self-incrimination given to prosecution in breach of the law [30]

R v Agius; R v Zerafa – Jail & CBO (respectively) for Wickenby convictions – false invoicing to Vanuatu and loans back [31]

 

Appeals

FCT v Rawson Finances Pty Ltd – taxpayer against decision that it failed to discharge its onus of showing deposits not income [32]

Re Sanctuary Lakes Pty Ltd and FCT – Taxpayer and Commissioner appeal to Federal Court [33]

Gashi & Anor v FCT – both taxpayer(s) and Commissioner to appeal to the Full Federal Court regarding a decision on default assessments decided on ‘onus’ [33]

Collection Point Pty Ltd v FCT – FOI Applicant appeals decision denying it access to unclaimed money [34]

Re Yazbek and FCT – taxpayer appeals to Federal Court from decision the he was relevantly a ‘beneficiary’ under s170(1), item 1, para (d) for the purposes of giving the Commissioner 4 years in which to amend [35]

Messenger Press Proprietary Limited & Ors v FCT – Commissioner appeals to Federal Court decision that 18 News Corp group companies were entitled to over $2bn in deductions for foreign exchange losses [36]

 

COMMISSIONER’S PUBLICATIONS

Decision Impact statements

Esso Australia Resources case – statement about FFC decision disallowing PRRT deductions, pending the taxpayer’s appeal to the High Court [37]

CGT maximum net asset value test: ATO interim view on Byrne Hotels case [38]

Soong v DCT – reversed effect of Meredith for service of DPN’s, but new Div 269 and retrospective operation of amendments, re-instated Meredith [39]

RCI Pty Ltd v FCT – Pt IVA did not apply to a scheme carried out by the James Hardie Group to reduce the capital gain before transferring shares to a related US company [40]

FCT v Futuris Corporation Limited – Value shifting provisions over-rode Part IVA to reduce the capital gain assessable on a float [41]

 

Rulings

TR 2012/D6 – R&D tax offsets: feedstock adjustments [42]

 

Determinations

Class Rulings & Product Rulings

CR 2012/57-61 – Share buy-back; Qantas incentive plans; special dividend [43]

CR 2012/62-64 – depreciating CD’s, DVD’s etc & ‘scrip for scrip’ CGT relief [44]

 

ATO Interpretive Decisions (ATOIDs)

Practice Statements

Penalties for False or Misleading Statements – one where a tax shortfall results and the other where none results [45]

 

Tax Alerts

Other Commissioner News

The ‘employee v’s contractor’ question – various publications issued by the Commissioner [46]

New member appointed to test case litigation panel – former Federal Court judge: Justice Lindgren [47]

SMEs and wealthy individuals: new ATO compliance resource released [48]

Former Tax Commissioner Michael Carmody retires from public service on 24 August 2012 [49]

Prescribed private funds transitional period to change their rules closes on 1 October 2012 [50]

 

GST DEVELOPMENTS

Legislation & Announcements (GST)

GST margin scheme and subdivided land: draft legislation released [51]

Refunding of excess GST: draft legislation released [52]

 

Cases (GST)

ECC Southbank Pty Ltd as trustee for Nest Southbank Unit Trust & Anor v FCT – shared and studio (student) accommodation was ‘commercial residential premises’ largely because of reception desk services [53]

Yacoub v FCT – Taxpayer appeals to Full Federal Court regarding GST on properties sold [54]

Unit Trend Services Pty Ltd v FCT – GST margin scheme and avoidance – appeals partly allowed [55]

 

Rulings & Other things (GST)

GST treatment of amounts recovered from customers to cover fees imposed by a financial institution for a dishonored payment by the customer [56]

GSTD 2012/6 – GST: Input tax credits under Div 66 on acquiring 2nd-hand goods and on-leasing them before selling them [57]

GSTR 2012/4 – GST treatment of exit payments by retirement village residents [58]

 

SUPERANNUATION DEVELOPMENTS

Legislation (Super)

*New SIS Regs for SMSFs require ‘market values’ for assets in accounts, fund assets to be held separate, investment strategies to be reviewed “regularly’ and insurance for members to be considered [59]

*Intra-fund consolidation of superannuation interests: draft legislation released [60]

Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 (‘MySuper) has now awaits Assent [61]

Refund of excess super contributions up to $10k – regs amended to allow refund to ATO who can tax this amount and refund the balance to the taxpayer [62]

SMSF trustee penalties; early release scheme promoters; roll-overs listed as ‘money laundering’ – draft legislation released [63]

MySuper Core Provisions Bill amended [64]

Superannuation data and payment standards: draft ‘SuperStream’ legislation released [65]

 

Cases (Super)

*Kelly v FCT – Taxpayer appeals decision that Family Trust is denied deductions for contributions for its directors on the basis that they were not entitled to any remuneration under the constitution and not ‘employees’ [66]

*Parliamentary Trustee of the Parliamentary Contributory Superannuation Fund v FCT – taxpayer appeals the constitutionality of the Superannuation Surcharge legislation as it applies to MPs [67]

Notaras v Notaras – SMSF trustee replaced for breach of duty –one brother removed the other under Trustee Act [68]

Re Longcake and FCT – Excess contributions tax assessment set aside – special circumstances existed [69]

 

Rulings (Super)

Pabian Park case: Decision Impact Statement on SMSF non-compliance [70]

 

Announcements etc (Super)

Treasurer rules out increasing preservation age (from 60 to 62) for taking superannuation [71]

Process for selecting default super funds in modern awards will be evidence based and expert led – says the Minister [72]

FSC releases draft superannuation governance standard for members who are trustees of public offer funds – to operate from 1 July 2013 [73]

 

CARBON TAX

Floor price on carbon permits to be scrapped – Australia’s trading scheme to be linked to Europe’s (but some volume limits remain) [74]

 

MINERALS & PETROLEUM RENT RESOURCE RENT TAX

BOARD OF TAXATION

EXTERNAL SUPERVISORS – IGoT; OMBUDSMAN & ANAO

Tax Inspector-General calls for submissions for Work Program [75]

 

TAX PRACTITIONERS BOARD & LEGISLATION

Unregistered NSW tax agent ordered to pay $64,000 penalty: TPB [76]

 

STATE TAXES

Legislation (State)

ACT: Taxation Administration Amendment Bill introduced – to allow the ATO to give information to the ACT State Revenue Office [77]

SA stamp duty: off-the-plan apartment duty concession [78]

Vic: Fire Services Property Levy Bill introduced [79]

WA: Budget pay-roll tax rebates; other revenue law amendments: Bills update [80]

 

Cases (State)

Bilquip Pty Ltd & Ors v Chief Comr of State Revenue – NSW payroll tax: common directors, so grouping decision affirmed [81]

Comr of State Revenue v Liquid Rock Constructions Pty Ltd – Vic payroll tax – Commissioner could not appeal decision that employers were not grouped, based on an alleged shared use of an employee [82]

The Smith’s Snackfood Company Limited v Chief Comr of State Revenue (NSW) – NSW payroll tax: vending machine contractors, some services exempt [83]

 

Rulings (State)

Qld ex-gratia duty relief for those who lost their concession as a result of not building a house quickly enough [84]

 

Other (State)

Qld OSR closes offices to lodgement of documents for stamping from 24 August 2012 [85]

 

OTHER DEVELOPMENTS

Changes recommended concerning Managed Investment Schemes [86]

Ernst & Young releases global survey on transfer pricing [87]

*Gordon J on when retrospective tax legislation may become unconstitutional – putting some ‘jurisprudential backbone’ into our pet bug-bear [88]

 

THE END

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NB: I have gathered these articles from various sources for the purposes of study and teaching and I have acknowledged the sources. None of this publication should reproduced in breach of copyright belonging to the acknowledged source. The headings to the articles are often mine (and shouldn’t necessarily be attributed to the publisher).

Source Abbreviations: ‘EDTN’ = Electronic Daily Tax News, published by CCH; ‘LTN’ = Latest Tax News published by Thomsons; and ‘Taxvine’ is the weekly publication by the Tax Institute of Australia; Greenfields = Greenfields Financial Services; TaxBar = Melbourne Tax Bar Association Newsletter at www.vicbar.com.au / Members / Bar Associations / Tax

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