M o r g a n’ s   T a x   M o n t h

– May 2013 Developments –

This is a collection of developments in Australian tax law and practice that occurred in May 2013 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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2013-14 FEDERAL BUDGET

Executive Summary – 18bn deficit; profit shifting targeted; medical expense tax offset and Baby Bonus to go [1]

Government updates and outlines its “tax reform roadmap” [2]

*Package of measures targets multinational profit shifting structures: thin cap ratios reduced; CFCs; foreign exempt income; non-portfolio dividends; etc [3]

*Changes to Australia’s foreign resident CGT regime – the ‘principal asset’ test in the ‘Taxable Australian Real Property’ or TARP Test [4]

*Foreign resident to be subject to a 10% non-final CGT withholding tax – purchaser to withhold and remit [5]

*Preventing “dividend washing” and doubling up of franking credits [6]

*Consolidation: loopholes to be closed – and further Tax Board recommendations [7]

*Restriction on immediate deduction for mining rights and information [8]

*Confirmation that self-education expenses to be capped at $2,000 pa [9]

*Further extension of monthly PAYG instalments to big non-corporate entities [10]

*Establishment of Tax System Advisory Board [11]

Opposition Budget Reply: Opposition may not oppose and may keep all of Labor’s ‘savings’ – but will keep current tax thresholds and delay SGC rise [12]

 

 

ACTS, BILLS AND ANNOUNCEMENTS

Acts & Bills

*Tax Laws Amendment (2013 Measures No 1) 2013 introduced: ‘connected entity’ test and ‘stake-holder’ test strengthened; natural disaster payments exempted; DGR for ethics education [13]

*Tax Amendment Bill (No 2) introduced: monthly PAYG; transparency; CGT discount for non-residents; etc [14]

*Tax and Super Amendment (No 1) Bill amended re loss carry-back; SMSF related party acquisition measures deleted [15]

Tax and Super Bill (No 2) passes House of Reps [16]

*Higher education loan scheme: repayment income and rates [17]

*Increase in Medicare levy and DisabilityCare Australia fund: draft legislation released [18]

*Medicare levy and DisabilityCare Bills [19]

*Increase in Medicare levy low-income threshold for families: Bill introduced [20]

Private Health Insurance Rebate – base premium: Bill introduced [21]

Shipping reform tax incentives – specification of kinds of vessels that are not exempt and thus eligible for incentives [22]

Tax and Superannuation Laws Amendment (No.2) – Committee recommends consultation on super account mergers [23]

*General Anti-Avoidance Rules (Part IVA) and our ‘transfer pricing’ provisions – Bill passes House of Representatives [24]

New Disaster Recovery Allowance Bill passes Reps – including provisions to make it taxable, but subject to rebates to keep the rate low [25]

*Baby Bonus changes: Bill amended [26]

 

Announcements

Multinational profit shifting: Govt seeks comments on issues paper [27]

*Government announces it will not to proceed with planned increase to the Family Tax Benefit, Part A – due to commence 1 July 2013 [28]

*R&D tax incentive changes – draft legislation to limit the non-refundable tax offset to companies with aggregate assessable income under $20bn [29]

*July 2015 increase in tax-free threshold to be [indefinitely] “deferred” [30]

*Australia-Switzerland tax treaty to be revised – negotiations concluded and will be signed soon (including access to Swiss Bank details) [31]

*Protecting the corporate tax base from erosion and loopholes: Government releases discussion papers for consultation [32]

*OECD revises its Transfer Pricing Guidelines including safe harbours [33]

 

 

CASES AND APPEALS

High Court

*FCT v Unit Trend Services Pty Ltd GST margin scheme case – Commissioner wins in High Court [34]

*FCT v Greenhatch – High Court refuses taxpayer’s application for leave to appeal – only the discounted portion of the capital gain is included in the beneficiary’s assessable income [35]

*Sent v FCT – High Court refuses taxpayers application for leave to appeal the decision that he had derived the bonuses he directed to a share trust [36]

 

Full Federal Court

*Sanctuary Lakes Pty Ltd v FCT – Full Court confirms denial of id=”mce_marker”8m deductions in restructure of golf resort complex [37]

 

Federal Court

Caporale v DCT – Application seeking stay, based on the Commissioner’s alleged failure to follow the “Model Litigant” policy, dismissed [38]

Fitzroy Services Pty Ltd v FCT – No deduction for interest on foreign loans and management fees – but time limit to amend [39]

*DCT v Chemical Trustee Limited (No 8) & Ors – Judgment for DCT of over $28m despite claims of abuse of process [40]

 

Federal Circuit Court

 

Administrative Appeals Tribunal (AAT)

*Re Nordern and FCT – Taxpayer was a resident (overseas 200 days in one year, jointly owned house in Australia occupied by wife and children, which he visited on leave and salary paid into Australian account) [41]

*Re Healy and FCT – Expenses incurred in annulling bankruptcy related to DPN not deductible [42]

*Re Balens and FCT – Release from tax debts refused [43]

*Re Heaney and FCT – id=”mce_marker”79k of ‘non-commercial’ farm losses could not be deducted against medical practitioner’s income under s35-55 discretion – too much debt [44]

*Re Cancer and Bowel Research Association Incorporated as trustee for Cancer and Bowel Research Trust and FCT – DGR status denied and tax-exempt status referred back to the Commissioner [45]

Re ZZGN and FCT – PRRT: deductibility of certain exploration expenditure [46]

 

Other Courts & Tribunals

*R v Sakovits – Jail sentences imposed on 2 company directors in dishonest tax avoidance case – 5 years with a minimum of 2.5 years [47]

*FCT & Darling and Anor – Commissioner cannot use Family Court documents for tax purposes [48]

*Taxpayer v DPP – Wickenby: Conviction for fraud valid and sentencing to proceed [49]

Wickenby judgments deleted by courts because of Suppression orders [50]

 

Appeals

Re Purvis & Ors v FCT – Qantas pilots appeal AAT decision that ‘loss of [pilots’] licence insurance’ payments was assessable as an ETP [51]

Re Carter v FCT – taxpayer seeks an extension of time in which to appeal to the Federal Court from ATO ‘benchmark’ based assessments [52]

Re IOOF Holdings Limited v FCT – Taxpayer appeals to Federal Court from decision that it is not entitled to ‘rights to future income’ deductions under amended legislation [53]

*Resource Capital Fund III LP v FCT –Commissioner appeals decision that sale of miner’s shares by non-resident was not assessable to Full Federal Court [54]

 

 

COMMISSIONER’S PUBLICATIONS

Decision Impact statements

Share buy-backs were capital proceeds: ATO view on Consolidated Media case [55]

Limited liability Partners also liable for tax debts of of the partnership: ATO view on McGuire case [56]

 

Rulings

TR 2013/D2 – derivation of income by commercial software developers for ‘hosted’ or ‘cloud’ services pre-paid for a period (subject to ‘Arthur Murray’ contingency) [57]

TR 2013/D3 – meaning of ‘foreign income’ of a ‘member’ of a ‘disciplined force’ under s23AG [58]

*TD 2013/D4 – An employee can’t avoid the Div 35 sub-$250k ‘income test’ by the employer re-imbursing him part of the business expenses – they are part of Div 35 ‘excess’ [59]

 

Determinations

TD 2013/9 – FBT: car parking threshold for 2013 is increased from $7.83 to $8.03 [60].

 

Class Rulings & Product Rulings

CR 2013/25-27 GST and fees; off-market takeover; transfer payments [61]

CR 2013/30-31 – Demerger; early retirement scheme [62]

 

 

ATO Interpretive Decisions (ATOIDs)

 

Practice Statements

 

Tax Alerts

 

Other Commissioner news

Reform of FBT airline transport benefits: ATO administrative treatment [63]

*ATO targets complex offshore structures with substantial data it is sharing with other revenue authorities [64]

Personal Services Income (PSI) – ATO will write to certain taxpayers and tax agents encouraging voluntary disclosures where appropriate [65]

Tax administrators from 45 economies unite to tackle offshore tax evasion [66]

*ATO trusts taskforce targets [67]

*ATO reminder about Trustee resolutions – by 30 June or earlier if required by Deed, and in writing if required by Deed or to ‘stream’ [68]

 

 

GST DEVELOPMENTS

 

Legislation & Announcements (GST)

 

Cases (GST)

FCT v Unit Trend Services Pty Ltd GST margin scheme case – Commissioner wins in High Court [69]

*Private Tutor case – ATO gives its view on case about GST registration and disallowed input tax credits [70]

Yacoub v FCT – Taxpayers withdraw their appeal against decision that GST was payable on properties sold [72]

Re Wynnum Holdings No 1 Pty Ltd & Ors v FCT – taxpayers withdrew appeal – input tax credits remain disallowed; no enterprise and not ‘commercial residential premises [73]

 

Rulings & Other things (GST)

*GSTD 2013/D1 – GST and acquisitions by a managed investment fund [74]

GSTD 2013/D2 – GST and acquisition of second-hand goods [75]

GSTD 2013/D3 – GST-free non-accommodation supplies by Charities etc at less than 75% of the consideration provided by the Charity etc – depreciating capital items [76]

CR 2013/32 – GST treatment of fees by NSW councils [77]

 

 

SUPERANNUATION DEVELOPMENTS

Legislation, Announcements etc. (Super)

*Doubling the tax on superannuation contributions for those earning over $300,000: draft legislation released [78]

*Higher super concessional contributions caps for older individuals – draft legislation released for consultation [79]

*Superannuation changes to be legislated: (1) $35k contribution cap for those over 50 & (2) withdrawal of excess contributions at marginal rates [80]

*Higher concessional contributions cap; extra 15% contributions tax; other changes [81]

*Council of Super Custodians and Charter – consultation begins [82]

*Trans-Tasman superannuation portability – (limits on New Zealand sourced amounts) [83]

*More MySuper reforms – tax loss and gain rollovers on transfers to ‘MySuper’ Fund [84]

*Tax and Super Amendment (No 1) Bill – SMSF related party acquisition measures deleted [85]

*Indexation of certain superannuation thresholds for 2013-14 [86]

 

Cases (Super)

*SCCASP Holdings as trustee for the H&R Super Fund v FCT – Trust distribution of capital gain was “special income” derived by SMSF [87]

Kronen v Comr of Taxation – Court dismisses application re super entitlements [88]

Re McLennan and FC – Superannuation withdrawal and re-contribution hit with excess contributions tax – nothing ‘special’ to disregard the excess [89]

 

Rulings & Other things (Super)

*The ATO has released a draft version of the ‘Fund Validation Service’ which contains draft fund details of APRA-regulated super funds [90]

 

 

CARBON TAX

MINERALS & PETROLEUM RENT RESOURCE RENT TAX

Mining tax should be abolished according to Senate committee [91]

 

 

AUSTRALIAN CHARITIES & NOT-FOR-PROFITS COMMISSION (ACNC)

*ACNC releases details of its approach to regulating charities [92]

*Freedom to Advocate (anti-gag) Bill for Not-for-Profits [93]

*Charitable deposit takers (acting like quasi banks): ASIC has issued a consultation paper proposing to remove their exemption (RG 87) [94]

*Statutory definition of “charity”: Bills introduced [95]

Administration of charitable trusts: report released [96]

 

 

BOARD OF TAXATION

 

EXTERNAL SUPERVISORS – IGoT; OMBUDSMAN, JCPAA & ANAO

ANAO report on Tax Practitioners Board regulation of tax practitioners [97]

Treasury no better at preparing tax expenditure statements according to ANAO report [98]

 

 

TAX PRACTITIONERS BOARD & LEGISLATION

Tax Practitioners Board wants Tax Practitioners to advise of changes to their practice structure promptly [99]

Re Trevaskis and Tax Practitioners Board – Termination of tax agent’s registration for fraud affirmed [100]

 

 

STATE TAXES

Legislation & Announcements (State)

ACT: Budget Bill passed Legislative Assembly and awaits notification [101]

NSW: State Revenue Legislation Amendment Bill introduced – transfer duty on options to purchase land and mining tenements; fixed trust requirements; directors’ liability [102]

NT Budget 2013-14 – mineral royal regime; mining office expenses [103]

NT: Budget Bill introduced [104]

*Vic: State Tax Laws Amendment (Budget and Other Measures) Bill introduced [105]

Tasmanian Budget 2013-14 – payroll tax threshold increase and First Home Owners Grant abolished on established homes from 1 July 2014 [106]

Tas: Budget Bill introduced [107]

WA: Duties Legislation Amendment Bill 2013 introduced to unwind the scheduled abolition of various State taxes [108]

 

Cases (State)

*ACT stamp duty: ‘Off the Plan’ case will be appealed and during the appeal the policy continues of treating them as ‘interdependent’ assessed on land and building values [109]

ACT land tax: Peden & Comr for ACT Revenue (Administrative Review) – extension of time to apply for review refused [110]

ACT land tax: James & Comr for ACT Revenue (Administrative Review) – rental property – penalty for failure to notify Commissioner revised [111]

ACT land tax: Theron & Comr for ACT Revenue – penalty tax for unpaid land tax affirmed [112]

NSW payroll tax: Chief Comr of State Revenue v Print National Pty Ltd – taxpayer can object to notices to third parties to obtain facts for group assessment [113]

NSW land tax: Reolon v Chief Comr of State Revenue – primary production exemption refused as dominant purpose leasing rental property [114]

NSW land tax: Sayden Pty Ltd v Chief Comr of State Revenue – criteria for fixed trust satisfied, so taxpayer wins appeal [115]

NSW stamp duty: Zhuang & Ors v Chief Comr of State Revenue – new 20% purchaser lead to contract being taxed and transfer being taxed again [116]

NSW stamp duty: Trethowan v Chief Comr of State Revenue – transfer of property cancelled, so duty assessment set aside [117]

NSW land tax: Uechtritz v Chief Comr of State Revenue – PPR exemption allowed [118]

SA land tax: Girardi v Comr of State Taxation – appeal prohibited unless tax is paid or hardship relief sought [119]

WA landholder provisions Comr of State Revenue v Westnet Rail Holdings No 1 Pty Ltd & Anor – Commissioner loses appeal because ‘railway infrastructure rights’ not “land” [120]

WA stamp duty: Motor Yacht Marine Holdings Pty Ltd v Comr of State Revenue – Commissioner’s assessment of 2.5% late lodgment penalty affirmed [121]

 

Rulings & Other (State)

NSW payroll tax: fees paid to golf professionals by golf clubs – Revenue Ruling revised to harmonized position on grouping Pro-shop business with Club [122]

Qld payroll tax: fees paid to golf professionals by golf clubs – Public Ruling [123]

Vic stamp duty: OSR reminds taxpayers of 30 days to pay duty [124]

Vic payroll tax: fees paid to golf professionals by golf clubs – Revenue Ruling revised [125]

 

 

OTHER DEVELOPMENTS

OECD releases Draft Handbook on Transfer Pricing Risk Assessment [126]

Official interest rate lowered from 3.0% to 2.75% [127]

Code of ethics for accountants: revisions made [128]

2012-13 tax return forms, schedules, and accompanying guides released [129]

OECD Economic Outlook on Australia: tax changes might be needed [130]

Switzerland expected to settle US tax dispute deal [131]

 

 

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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