T a x T e c h n i c a l – M o n t h l y N e w s
– November 2016 Developments –
This is a collection of developments in Australian tax law and practice that occurred in November 2016
which aims to be relevant to tax practitioners.[i]
Compiled By
F John Morgan
A member of the Victorian Bar (www.FJMtax.com)
Table of Contents
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You are free to use this material, provided you include a link back to the article on this site.
ACTS, BILLS AND ANNOUNCEMENTS
Acts, Bills & Draft Legislation
Backpacker tax – ‘working holiday makers’ on certain visas will be taxed at 15% on their ‘working holiday [net] income’ (up to $37,000) in a compromise between the Government’s 19% rate and Senate’s 10.5% NZ rates (to match NZ’s rate
Announcements
Review of non-resident withholding tax for investors in CIV’s – consultation paper released: proposed changes include a 5% uniform WHT for all investors or only those in the ‘Asia Region Fund Passport’ countries.
FIRB issues Guidance Note No. 47 on imposing tax conditions on takeovers etc – comply with tax laws; provide information; pay tax debts; provide annual report on compliance with these conditions etc.
BASE EROSION & PROFIT SHIFTING (BEPS)
Multilateral Convention to close tax treaty loopholes – over 100 countries (including Australia) adopt the Convention, amending over 2,000 bilateral tax treaties
CASES AND APPEALS
High Court
Blank v Commissioner of Taxation – USD 160,033,328, paid in 20 instalments, under a Glencore Profit Participation Plan, was held to be assessable as ‘ordinary income’ (and not a capital gain)
Millar v FCT – taxpayer fails to get leave to appeal the Full Federal Court decision that the ‘back to back’ loan agreements were a ‘sham’ despite there being no actual intention to deceive (just sign here)
Hua Wang Bank Berhad; Bywater Investments & Ors v Commissioner of Taxation – taxpayers resident; foreign income taxed – foreign directors met overseas but ‘rubber stamped’ decisions made in Australia (by Vanda Gould)
FCT v Jayasinghe – Commissioner grated leave to appeal decision that the taxpayer’s income from the UN was exempt from tax as the ‘holder of an office’ under the Privileges and Immunities Act
Full Federal Court
MNWA Pty Ltd v DCT – Full Court dismisses appeal to have statutory demands set aside despite allegations of a global deal and written agreements providing security
Federal Court
DCT v King – the Court made the orders sought by the DCT, namely that the taxpayer’s $60k Part X ‘personal insolvency agreement’ (towards $600k of tax liabilities) be set aside and he be bankrupted to allow proper scrutiny
BCI Finances Pty Limited (in liq) v Binetter (No 4) – Wickenby: Major victory for Commissioner: recovery of over $120m via liquidator of 4 Binetter family companies
Administrative Appeals Tribunal (AAT)
Re DHDF and FCT – Taxpayer subject to Div 293 tax on super contributions because arrears of income paid pushed him over the $300,000 income threshold (compensation not derived in the arrears years)
Re Gupta and FCT – it was not enough that arrears workers compensation paid were paid ‘for the injury’ – rather it was paid for loss of income (rather than loss of income earning capacity)
Other Courts & Tribunals
Shaw / Rablin v DCT – DPN summary judgment set aside – arguable defences for taking s269-35(2)(a) ‘reasonable steps’ to obtain finance for company to pay its liability and, on failing, to place the company into liquidation
DCT v Tannous – DPN validly served on director by posting, even though letter returned to ATO and DPN valid despite not using exactly the wording stipulated in the Act
DCT v Peter Sleiman Investments Pty Ltd – Winding up order granted to DCT despite Part IVC appeal proceedings not being resolved – trustee declared it held its properties for unit trusts perhaps defrauding creditors (ATO)
Appeals
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COMMISSIONER’S PUBLICATIONS & NEWS
Decision Impact statements
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Rulings
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Determinations
TD 2016/17 – when a contractual right ‘becomes’ a right to acquire a beneficial interest in a share for the purpose of the ‘intermediate rights’ provisions in Div 83A (relating to employee share schemes)
TD 2016/18 – Redeemed South Australian workers compensation payments are assessable as a substitute for income
TD 2016/D4 – Commissioner proposes to rule that ‘foreign trusts’ do ‘disregard’ capital gains under s855-10, despite s95(1) directing trusts to calculate their tax law ‘net income’ as if they were a resident
TD 2016/D5 – A ‘non-resident trust’ can ignore capital gains under Div 855 but beneficiaries can’t escape s99B assessment if those amounts are paid to them when they are ‘resident’
Law Companion Guides
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Class Rulings & Product Rulings
CR 2016/84 – Centuria Capital Ltd creates a new stapled share and unit structure by selling key assets to a new unit trust and making an ‘in-specie’ distribution of the units to shareholders to be ‘stapled’
CR 2016/87-88 – Off-market share buy-back; Early retirement scheme
PR 2016/9 – TFS Indian Sandalwood Project 2016
CR 2016/89-90 – Demerger of Davenport Resources and Centuria Capital Limited Executive Incentive Plan
ATO Interpretative Decisions
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Practice Statements
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Practical Compliance Guides
PCG 2016/D17 – ATO compliance approach to exploration expenditure deductions under s8-1 or s40-730 – problem areas identified and role of systems and governance assurances to ATO
Tax Alerts
TA 2016/12 – Trusts: contrived s97(1)(a) ‘proportionate approach’ avoidance – distributable ‘trust law’ net income limited to exclude the economic substance in what would otherwise be the beneficiary’s taxable ‘net income’
Other ATO news or statements
Working holiday makers (backpackers) – Commissioner clarifies current practices whilst awaiting new laws: generally non-resident as they move around and 32.5% tax applies from $1
What ‘justified trust’ means to the ATO and how they use it to reduce the ‘gap’ between what they do collect and what they should collect (hoping to encourage voluntary compliance)
GST DEVELOPMENTS
Legislation & Announcements (GST)
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Cases (GST)
Re Tomker Pty Ltd (In Liquidation) – the 4 year rule in s105-50 affects the existence of an unpaid GST debt, not just recovery – effect of this in insolvent trading action against a director
A & A Property Developers Pty Ltd v MCCA Asset Management Ltd & Anor – purchaser did not have to pay more for the vendor’s GST – ‘tick the box’ system not activated by writing ‘GST’ in the box ( ‘plus GST’ required)
Re McKinnon Holdings (NSW) Pty Ltd and FCT – Claim for input tax credits denied – no payment made for supply and no assumption of finance liabilities by the purchaser/taxpayer (after agreement, nothing done)
Rulings, Announcements, Etc (GST)
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SUPERANNUATION DEVELOPMENTS
Legislation, Announcements etc. (Super)
Superannuation reform bills – ‘objectives’ of superannuation; the $1.6m cap; lower $25k cap; 5 year ‘catch up’; lower Div 293 threshold to $250k; remove the 10% employment income rule; remove TRIS & ‘anti-detriment’ etc.
2016-17 Superannuation Reforms – Treasury updates its summary and fact sheets
Cases (Super)
Re Abichandani and ASIC – AAT overturned ASIC decision to disqualify a highly qualified SMSF auditor, finding that the auditor had not been untruthful in withdrawing a complaint and that he was a ‘fit and proper person’
Rulings & Other things (Super)
ATO’s initiatives in Super – advice of reporting changes with new legislation; sharing data, not auditing; individualized report on 13 benchmarks for 261 large funds – ATO speech to ASFA
LCG 2016/D8 – transitional CGT relief for super funds affected by the $1.6m transfer balance cap – Draft Guideline released
LCG 2016/D9 Draft Guideline released on new concepts in the Superannuation ‘transfer balance cap’ legislation and how they work
AUSTRALIAN CHARITIES & NOT-FOR-PROFITS (ACNC) SECTOR
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BOARD OF TAXATION
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EXTERNAL SUPERVISORS – IGT, JCPAA & ANAO etc.
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TAX PRACTITIONERS BOARD & LEGISLATION
Hemanshu Juneja and Three Wickets Pty Ltd appeals against suspension of registration as a tax agent – for failure to lodge its own returns on time or, more recently, at all
Kishore v Tax Practitioners Board – Tax agent fighting deregistration argued resignation couldn’t determine ‘honesty’ under ‘Code’ – AAT determined that it could and appeal to Fed Crt was ‘incompetent’ as AAT had not finished
STATE TAXES
Legislation & Announcements (State)
Tas: Taxation and Related Legislation (Miscellaneous Amendments) Bill receives Royal Assent: harmonizing payroll tax for owner-drivers; duty on vesting property and general land tax free threshold for sports clubs
Vic: State Taxation Acts Further Amendment Bill 2016 receives Royal Assent – Payroll Tax motor vehicle allowances; Land Tax – taxable value; surcharge rate for absentee trusts
Cases (State)
NSW payroll tax: Tacey v Chief Comr of State Revenue – chemist ‘grouped’ with staff placement agency – primary tax not in dispute; appeal of 25% ‘lack of reasonable care’ penalty failed but had interest penalties reduced
Rulings & Other (State)
Tas stamp duty: Refund re retrospective exemption from duty on certain statutory vesting transactions
OTHER DEVELOPMENTS
ABN registration reviews to check entitlement: ATO and ABS to check a sample of 80k applications for entitlement to ABN – focus on individuals, partnerships and trust ABN’s issued Aug & Sept 2016
Financial Advisers – Bill introduced to set professional standards for the industry – Amending the Corporations Act 2001
[i] Sources – abbreviations: ‘ATOlpr’: ATO Legal Professions Relationships emails; ‘IT’: Inteliconnect Tracker (CCH); ‘LCA’: Law Council of Australia; ‘LTN’: Latest Tax News (Thomson Reuters); ‘Sievers’: Chris Sievers’ GST post (www. http://chrissievers.com); ‘TBA’: Tax Bar Association Newsletter; TX: Tax Week (Thomson Reuters); ‘Vine’: The Tax Institute’s Tax Vine.
