M o r g a n’ s    T a x    M o n t h

– June 2012 Developments –

This is a collection of developments in Australian tax law and practice that occurred in June 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

*Various Bills pass the Senate and some get Royal Assent [1]

Regulations amended to allow flat 15% withholding from remuneration paid to Seasonal Workers under the Mobility Program [2]

Coalition’s position on various Biils – including the transfer pricing Bill [3]

*Bills referred to Committees [4]

*Tax Laws Amendment (2012 Measures No 2) Bill 2012 & PAYG Withholding Non-compliance Bill 2012 – after doubling of MIT withholding rate removed to separate Bill [5]

*Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 was introduced – to double the MIT withholding tax rate to 15% [6]

*Regulations amended to include further “information exchange countries” to which reduced MIT withholding applies – Korea; Macau; Mauritius and Cook Islands [7]

*Transfer pricing Bill passes House of Reps [8]

Medicare levy low-income thresholds – Bill passed all stages [9]

*Tax Laws Amendment (Investment Manager Regime) Bill 2012 was introduced in the House of Reps – Elements 1 & 2 [10]

*Tax exemption for victims of overseas terrorism – Bill amended [11]

*Tax Bills receive Assent – No 3 Bill, Seasonal Mobility Withholding Tax Bill & Non-resident Rates Bill [12]

*Shipping reform Bills receive Assent [13]

*Tax Bill (No 2) and PAYG Withholding Bill await Assent – director penalty regime; Consolidation cost setting; TOFA & Consolidation [14]

Veterans’ Affairs Legislation Amendment Bill 2012 was introduced in the House of Reps [15]

*Legislative Instruments Amendment (Sunsetting Measures) Bill 2012 was passed by the House of Reps [16]

*Tax Laws Amendment (2012 Measures No 4) Bill 2012 – introduces LAFHA changes with delayed start; GST incapacitated entity change and further consolidation change [17]

 

Announcements

*Reps Economics Committee held a public hearing into PAYG(w) increase for MITs and the proposed increases in the Departure Tax [18]

*New Charities & Not-for-profits Commission releases its Taskforce Implementation Report including its various functions [19]

*Greens will seek to scrap State royalty credit from mining tax [20]

*PM rules out abolishing negative gearing – on Q&A (disagreeing with Henry Review) [21]

*Scrip-for-scrip rollover and CGT small business concessions – paper released [22]

*Div 7A: private company loans – 2012-13 benchmark interest rate – down from 7.8% to 7.05% pa [23]

Accountants’ exemption from Financial licensing requirements finally announced [24]

Business Tax Working Group releases Consultation Guide – how to get to a revenue neutral reduction in the company tax rate [25]

 

 

CASES AND APPEALS

High Court

*FCT v Byrne Hotels – Commissioner can’t appeal decision that for $5m net value purposes an agent’s commission for the sale of a hotel counts [26]

Hart v Cwth DPP – taxpayer accountant refused leave to appeal against $14.7m pecuniary penalty order [27]

*Fortescue Metals Group lodges Constitutional challenge to the mining tax [28]

 

Full Federal Court

*FCT v Greenhatch – CGT: only discounted part of gain included in beneficiary’s assessable income [29]

*MTAA Superannuation Fund (R G Casey Building) Property Pty Ltd v FCT – Taxpayer loses appeal re GST refund claims for supplies under amended pre-GST leases [30]

 

Federal Court

*FCT v Traviati – matter remitted to AAT after it erred in remitting 5% penalty – it should decide ‘careless’ issue first and ‘reasonably arguable’ issue second – ‘harshness’ irrelevant given scheme of provisions [31]

*DCT v Hua Wang Bank Berhad (No 3) & Ors – Wickenby matter: GIC remitted, but stay refused because foreign taxpayers would remit funds overseas [32]

*Barossa Vines Limited v FCT – Leave granted to amend application to contest ATO decision to withdraw product rulings [33]

*Gashi & Anor v FCT – Husband fails onus to show asset betterment assessments and 75% penalties were excessive but wife’s evidence she was just a house wife was accepted [34]

*Groves v FCT (No 4) – Stay of CGT appeal granted to ABC Learning Centres wife – pending Supreme Court ruling on alleged sale of shares [35]

 

Federal Magistrates Court

 

Administrative Appeals Tribunal (AAT)

*Re Hopkins and Anor and FCT – Commissioner disallowed $1m deduction – 46 default beneficiaries should have been assessed [36]

*Re JCZC and FCT – boat deductions disallowed but penalty reduced to 25% because it was not “reckless” and not “reasonably arguable” [37]

Re Davsa Forty-Ninth Pty Ltd ATF Krongold Ford Bus Unit Trust and FCT – No summonses for taxpayer to examine ATO employees [38]

*Re IOOF Holdings Limited and FCT – Taxpayer applied for ruling on consolidation effect of ‘rights to future income’ in Dec 2010 and expected a ruling before the 31 March cut-off but failed to get back-dated ruling [39]

 

Other Courts & Tribunals

 

Appeals

*Esso Australia Resources Pty Ltd v FCT – taxpayer applies for leave to appeal reversal of deduction claim under PRRT [39]

 

 

COMMISSIONER’S PUBLICATIONS

 

Decision Impact statements

Re Mehta and FCT – Taxpayer held to be a share trader: ATO view [40]

 

Rulings

*TR 2012/2 -Effective life of depreciating assets, from 1 July 2012 [41]

TR 2012/3 – TOFA: gains and losses related to exempt and NANE income [42]

*TR 2012/4 – TOFA: determining what is an “arrangement” [43]

*TR 2012/5 – Taxation of dividends and s 254T of the Corporations Act [44]

 

Determinations

*TD 2012/8 – Temporary absences from foreign service under s 23AG [45]

*TD 2012/10 – When income tax will be a “present legal obligation” for Div 7A purposes [46]

*TD 2012/11 – CGT streaming – beneficiaries can “reasonably expect to receive net financial benefit” if the capital gain is realised [47]

*TD 2012/12 – Division 7A can still operate via the interposed entity rules in Subdiv E, even though the exclusion rules in Subdiv D apply [48]

TD 2012/13 – TOFA: tax treatment under a hedging financial arrangement, when a ‘cessation event’ happens is the gain or loss over the specified years [49]

*TD 2012/15 – Div 7A benchmark interest rate for 2012-13 down from 7.80% to 7.05% [50]

*TD 2012/16 & LCTD 2012/1 – Car depreciation limit is $57,466 and luxury car tax threshold is $75,375 – for 2012-13 [51]

*TD 2012/17 – Reasonable travel and meal allowance amounts for 2012-13 [52]

*TD 2012/D4 – No CGT event E1 or E2 if trust deed changed under a valid amending power, unless trust terminates [53]

*TD 2012/D5Proportionate approach to the assessment of trust net income [54]

 

Class Rulings

CR 2012/38-40 – Incentive plan; executive share plan; ex gratia payment [55]

Class Rulings 2012/41-45 – Demerger; return of capital; early retirement; income of specialists [56]

 

ATO Interpretive Decisions (ATOIDs)

*ATO ID 2002/380 withdrawn – deductibility of GIC [57]

 

Practice Statements

*Recovery of income tax and GST liabilities of a trust where there has been a change of trustee [58]

 

Tax Alerts

TA 2012/3 – ATO warns about financial products that exploit franking credits [59]

 

Other Commissioner news

Extending CGT exemption for compensation payments: ATO administrative treatment [60]

*ATO discontinues its cash sales benchmarks [61]

2012 ATO guidance to employees in various Industries in filling out their Income Tax Returns [62]

Other 2012 Guidance from the ATO in completing Income Tax Returns [63]

 

 

GST DEVELOPMENTS

 

Legislation (GST)

Draft Regulations released so credit unions do not lose their reduced input tax credits for credit union services after they re-brand as banks [64]

*Tax and Superannuation Laws Amendment (2012 Measures No 1) Bill 2012 – Act No 75 of 2012 – power to hold back ‘high risk’ GST refunds [65]

*GST Regulations amended – re: goods and services supplied by government agencies (Div 81 etc) [66]

 

Cases (GST)

*MTAA Superannuation Fund (R G Casey Building) Property Pty Ltd v FCT – Taxpayer loses appeal – pre-GST lease not GST-free because of rent review [67]

*Re Climo and FCT – real estate promoting house and land packages held liable to GST and penalties – not an employee or agent [68]

 

Rulings & Other things (GST)

*GSTD 2012/5 – Creditable purpose of retail foreign currency exchange transactions – outbound (GST-free) and inbound (Input Taxed) [69]

*GSTD 2012/D1 – Telecommunications interconnection services to non-resident is GST-free [70]

*GSTD 2012/D2 – Global roaming outside Australia is GST-free also [71]

*GSTD 2012/D3 – Rights re international telecommunication network is GST-free [72]

*GSTD 2012/D4 – Global roaming inside Australia is GST-free [73]

 

GST Announcements (Other)

*Government not to proceed with GST margin scheme restructure [74]

 

 

SUPERANNUATION DEVELOPMENTS

 

Legislation (Super)

*Refund of excess concessional contributions under Sch 4 of the Tax and Superannuation Laws Amendment (2012 Measures No 1) Act 2012 – draft regs released [75]

*SuperStream – Stronger Super Bills pass [76]

*Superannuation Platforms, Multifunds and Hedge Funds get shorter Product Disclosure Statements (PDS) from ASIC Class Order granting interim relief [77]

Two Bills with various Superannuation changes pass into law [79]

 

Cases (Super)

*Re Rawson and FCT – super excess tax on B-Pay contribution made on 29 June but not credited as received until 1 July (such a result, after B-Pay cut-off for the last business day of the year, is not a “special circumstance”) [80]

*Re Paget and FCT – Excess super contributions tax on late EFT – next day electronic transfer not a “special circumstance” [81]

*Re Kuyper and FCT – Super excess concessional contributions tax affirmed, no “special circumstances” in SGC contributions being made in July of next year [82]

*Re Pabian Park Pty Ltd Superannuation Benefits Fund and FCT – SMSF non-compliance notice set aside despite “serious” loan breach [83]

 

Rulings (Super)

National Audit Office says SMSFs need more interpretative assistance [84]

SMSFR 2009/4 Addendum issued on the definition of ‘in-house asset’ – to accommodate repeal of s67(4A) of the SIS Act [85]

 

Announcements etc (Super)

SuperStream Advisory Council – Govt calls for nominees [86]

*Minister announces SMSF auditor registration and qualification changes [87]

*Small Business Superannuation Clearing House – National Audit Office report says Medicare administering it effectively, but take-up is low and cost is high [88]

Default super funds in modern awards: Productivity Commission draft report [89]

 

 

CARBON TAX

 

 

MINERALS & PETROLEUM RENT RESOURCE RENT TAX

MRRT guides and ATO administrative approach released [90]

Extend MRRT and PRRT consolidation election date from 1 July 2012 [91]

 

 

BOARD OF TAXATION

 

 

EXTERNAL SUPERVISORS – IGoT; OMBUDSMAN & ANAO

ATO use of external debt collection agencies: ANAO report [92]

 

 

TAX PRACTITIONERS BOARD & LEGISLATION

*Tax Practitioners Board launches new CPE policy – 90 hours over 3 years [93]

*Tax Practitioners Board issues draft information sheet on holding moneys on trust for clients under item 3 of the code [94]

 

 

STATE TAXES

 

Legislation (State)

ACT: landholder; short-term commercial subleases, etc – Bills await notification [95]

NSW Budget Bill awaits Royal Assent [96]

Qld: payroll tax threshold; transfer duty home concession: Bill awaits Assent [97]

Tasmanian Revenue Measures Bill 2012 – passes the Lower House [98]

*Victorian Bills to implement the ‘landholder’ regime and Budget measures such as duty on Crown Grants [99]

WA payroll tax and grouping exclusions – law change and Commissioner’s Practice to match [100]

 

Cases (State)

Chief Comr of State Revenue v Ghali (RD) – Commissioner wins appeal on NSW land tax: principal place of residence exemption [101]

Karci v Comr of State Revenue (Taxation) – Vic stamp duty: false “off-the-plan” concession claim, penalty affirmed [102]

*Chief Comr of State Revenue v Tasty Chicks Pty Ltd – NSW payroll tax: grouped assessments – Commissioner’s appeal partly allowed [103]

*Comr of State Revenue v Snowy Hydro Limited – Commissioner wins Vic land rich provisions: power station joint venture – appeal [104]

 

Rulings (State)

WA stamp duty: valuations used by Commissioner [105]

 

Other (State)

*ACT Budget 2012-13: long-term plan for tax reform – replace most Territory taxes with increased rates [106]

*NSW Budget 2012-13: deferred abolition of duties; home buyer concessions [107]

*NSW: interest penalties – rate decrease from 4.37% to 3.66% [108]

Qld duty on transfer of prospecting and exploration permits and authorities [109]

Vic stamp duty: SRO forms under review [110]

 

OTHER DEVELOPMENTS

FoFA: ban on conflicted remuneration – draft regs released [111]

FoFA – Government may shift policy on replacement to accountants’ exemption: ICAA [112]

*Official interest rates cut to 3.50% [113]

*Grattan Institute recommends widening GST net, cutting income taxes, replacing transaction taxes with property taxes and increasing age for super [114]

 

 

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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