ATO’s ‘external Compliance Assurance Process’ (using external auditors the taxpayer pays for) declared effective by National Audit office

Background 1. The Australian Taxation Office is responsible for the management of income tax issues for approximately 1400 large public groups and superannuation funds operating in Australia. In 2014–15, the two types of entity contributed $47.6 billion (or 65.5 per cent) of the total income tax receipts collected from companies and superannuation funds.1 In 2014–15, the Australian Taxation Office…

Re Zhang and FCT – Taxpayer partly successful in proving that many receipts were not assessable and the 50% SFP should be reduced to 25% (reducing $4m assessment)

A taxpayer has been partly successful before the AAT in discharging the onus of proving that various amounts deposited into his bank accounts from the 2001 to 2008 income years were not income, but were other amounts, which he could explain. At the same time, he was able to demonstrate there was no fraud or…

International Tax Agreements Amendment Bill 2016 introduced – New Australia-Germany DTA force of law – including latest G20/OECD BEPS actions

The Minister for Revenue and Financial Services: Ms Kelly O’Dwyer, introduced the International Tax Agreements Amendment Bill 2016 in the House of Representatives on Thursday 1.9.2016. It proposes to amend the International Tax Agreements Act 1953 to give the force of law in Australia to the double tax agreement (DTA) between Australia and Germany that…

Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 – Corporate Tax rate reduction to 27.5% for SBE’s; increase SME turnover threshold to $10m; increase unincorp SBE offset to 8%

The Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 was introduced in the House of Reps, on Thursday 1.9.2016. It contains the following proposed amendments. Corporate Tax Rate Reduction – 27.5% for SBE’s and 25% for all in 11 years The Bill proposes to amend the Income Tax Rates Act 1986 to reduce the corporate…

Treasury Laws Amendment (Income Tax Relief) Bill 2016 introduced to increase the 32.5% threshold from $80,000 to $87,000

On 1 September 2016, the Treasurer introduced the Treasury Laws Amendment (Income Tax Relief) Bill 2016 to amend the rates act to increase the threshold for the 32.5% from $80,000 to $87,000. The result will be that individuals (voters) will now need taxable income over $87,000 to start paying tax at 37% rate (that is,…

T a x  T e c h n i c a l  –  M o n t h l y  N e w s

– September 2016 Developments –

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

Treasury Laws Amendment (Income Tax Relief) Bill 2016 introduced to increase the 32.5% threshold from $80,000 to $87,000

Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 – Corporate Tax rate reduction to 27.5% for SBE’s; increase SME turnover threshold to $10m; increase unincorp SBE offset to 8%

International Tax Agreements Amendment Bill 2016 introduced – New Australia-Germany DTA force of law – including latest G20/OECD BEPS actions

10% foreign CGT withholding provisions – exemption given for LPR’s and beneficiaries of deceased estates and for surviving joint proprietors – by ATO ‘legislative instrument’

Tax and Superannuation Laws Amendment (2016 Measures No 2) Bill 2016 introduced – Statutory Remedial Power; Averaging; Luxury Car Tax

Budget Savings (Omnibus) Bill 2016 enacted (Act No. 55) – reduction in R&D offsets by 1.5% points: 45% to 43.5% and 40% to 28.5%

Announcements

‘Backpacker Tax’ – result of the review: tax at 19% up to $37,000 from 1 January 2017 (mid-way between the resident and non-resident rates)

Review of Research and Development incentives released – 6 recommendations and three phases of implementation – things can be improved

BASE EROSION & PROFIT SHIFTING (BEPS)

Irish Government wins strong backing from its Parliament for EU Apple appeal

EU decision to make Apple refund 13b euro to Ireland was based on illegal state aid in the past, not BEPS transfer pricing rules in the future where profit should be in US: OECD BEPS chief, Saint Amans

Bahamas leaks – ICIJ release 1.3m leaked documents from their corporate registry adding further insight into the leaked ‘Panama Papers’

Country-by-Country Reporting – ATO guidance on applications for exemption

Switzerland ratifies the Convention on Mutual Administrative Assistance in Tax Matters: automatic exchange of foreign account info and CbC reports

U.S. doesn’t need CbC ‘Master’ or ‘Local’ files… for now: Robert Stack, Deputy Assistant Secretary (International Tax Affairs) at the U.S. Treasury

CASES AND APPEALS

High Court

Full Federal Court

Tech Mahindra Limited v FCT – Indian company with Australian PE liable for tax on income for services performed outside Australia as a ‘know-how’ royalty (despite twists and turns in Australia-India DTA)

Federal Court

Caratti v Commissioner of the Australian Federal Police (No 2) – Validity of search warrants upheld re tax investigation of alleged $15m fraud

Benjamin v FCT – Court confirms AAT’s decision to refuse extension of time to challenge objection decisions – 7 years out of time: ‘rested on his rights’

Administrative Appeals Tribunal (AAT)

Re Zhang and FCT – Taxpayer partly successful in proving that many receipts were not assessable and the 50% SFP should be reduced to 25% (reducing $4m assessment)

Re PBKQ and FCT – Service charge deduction claim refused; penalty for failure to provide document penalty

Re Reany and FCT – Travel expense and transport of bulky tools deduction claim refused for 100km round trip with bulky tools – Cretani’s case notwithstanding

Re RSPG and FCT – AAT denies taxpayer 91% credits for ITCs on construction of a retirement village – given large percentage of ‘residential premises’

Re DTMP and FCT – taxpayer’s late request for an expansion of her grounds of appeal denied for the primary tax because FCT prejudice (would have assessed others) but allowed for penalties (no prejudice)

Re Silver Mines Limited v Minister for IRD – no extension of time for R&D applications – death of director not unexpected and failure of tax agent to advise could be ‘exceptional circumstances’ but delay was applicant’s

Re Landy and FCT – taxpayer held ‘resident’ for the year he worked in Oman – living in bachelors’ quarters supplied by employer whilst leaving family and home in Australia

Other Courts & Tribunals

Hudson v FCT – Taxpayer loses appeal against conviction for failing to lodge returns

Appeals

COMMISSIONER’S PUBLICATIONS & NEWS

Decision Impact statements

FCT v AP Energy Investments Ltd – non-resident’s sale of shares not taxable in Australia – ‘principal asset’ not real estate – ‘sunk cost’ method of valuing mining information was ok

Rulings

Determinations

Law Companion Guides

Class Rulings & Product Rulings

ATO Interpretative Decisions

Practice Statements

PS LA 2005/24 – Practice Statement on ATO’s application of General Anti-avoidance Rules (GAAR) – rewrite whole document for legislative change

Practical Compliance Guides

Tax Alerts

TA 2016/10 – Cross Border ‘Round Robin’ Financing Arrangements – funding an overseas entity which (indirectly) returns the funds with ‘debt deductions’

TA 2016/11 –defeat the MAAL (s177DA) by inserting a partnership with an Australian minority partner (an ‘Australian entity’) as the distributor with the old foreign supplier as its agent (no change in operations)

Other ATO news or statements

Singapore and Australia to share data by ‘Competent Authority Agreement’, using the ‘Common Reporting Standard’ to reduce tax evasion

Interest penalty rates for 1 October to 31 December 2016 – GIC: 8.75% and SIC: 4.76% (with summary of when they apply)

GST DEVELOPMENTS

Legislation & Announcements (GST)

Cross-border (B2B) changes started 1 October 2016 and Digital (eg. Netflix) (B2C) changes will commence on 1 July 2017

GST Legislative Instruments registered: AFS recipients of financial services may issue RCTI; Food retailers may use simplified method to calculate ITC’s; Makers of research grants can issue RCTI; Recyclers may issue RCTI; No adj note for s83-5 reverse charge; no ‘tax invoice’ for undercover agents

GST: definition of GST-free ‘adult and community education courses’ – new Legislative Instrument by the Minister to replace the 2000 Instrument

New Zealand’s “Netflix” tax starts 1 Oct 2016 – GST on ‘qualifying remote services to NZ customers – offshore suppliers (including Australian) may have to register and pay

Cases (GST)

Re RSPG and FCT – AAT denies taxpayer 91% credits for ITCs on construction of a retirement village – given large percentage of ‘residential premises’

Rulings, Announcements, Etc (GST)

SUPERANNUATION DEVELOPMENTS

Legislation, Announcements etc. (Super)

Superannuation changes announced in the Budget – Exposure draft of legislation and explanatory statements (for some measures) released for consultation

Changes to 2016-17 Budget super changes – $500k lifetime limit ditched in favour of $100k pa non-concessional contributions – with 3 year carry forward (plus some cost saving measures)

Legislating the objective of superannuation – exposure draft of Bill and EM for consultation

Introducing the $1.6m cap on the amount that can be transferred to the tax-free portion of the fund

Budget Super changes – concessional contributions cap down to $25k & 30% (Div 293) income threshold lowered to $250k (from $300k)

Introducing the ‘Low Income Superannuation Tax Offset’ (LISTO) – refund of 15% contributions tax if more than marginal tax rate (adjusted income up to $37k and capped at $500)

Improving access to concessional contributions for individuals – the requirement to have less than 10% employment income will be abolished

‘Catch‑up’ concessional contributions will be allowed – unused concessional contribution limits can be rolled forward for 5 years – for account balances of $500,000 or less

Spouse contributions: 18% tax offset (up to $540) – will be extended to spouses earning up to $40k (up from $10,800)

Transition to Retirement Income Streams (TRIS) ‘integrity’ changes – income in fund on supporting assets no longer exempt (15%) and concessions on receipt also changed

Superannuation reform (2nd tranche) – exposure drafts: $1.6m retirement phase cap; $25k contribution caps; 30% contribution tax starts at $250k; 5 year contribution carry forward for sub-$500k balances

Cases (Super)

Rulings & Other things (Super)

Over 577,000 SMSFs as at June quarter 2016 – 1m members and $621b in assets

TD 2016/16 – A related party ‘LBRA’ will produce NALI when the asset could not have been funded on arm’s length terms

PCG 2016/5 – Safe harbours for related party LRBA’s for real property and listed shares to avoid audits of SMSF’s for NALI

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

BOARD OF TAXATION

EXTERNAL SUPERVISORS – IGT, JCPAA & ANAO etc.

ATO’s assessment of pilot for its ‘External Compliance Assurance Process’ (using external auditors the taxpayer pays for) declared a success by National Audit Office

TAX PRACTITIONERS BOARD & LEGISLATION

Re G J Brown & Co Pty Ltd and Tax Practitioners Board – Tax agent registration refused, as not “fit and proper person”

STATE TAXES

Legislation & Announcements (State)

Taxation and Related Legislation (Miscellaneous Amendments) Bill 2016 – amendments to Payroll Tax (owner drivers); Duties (vesting of dutiable property); and Land Tax (nil thresholds for clubs etc.)

Tasmania: Duties Amendment (Motor Vehicle Industry Red Tape Reduction) Bill – broadening the exemption for ‘demonstrator’ and ‘courtesy’ cars

Tasmania: Duties Amendment (Landholder and Corporate Reconstruction and Consolidation) Bill passes lower house – introducing landholder duty and legislated reconstruction relief

Cases (State)

Qld land tax: Vikpro Pty Ltd v Wyuna Court Pty Ltd –prohibition on landlords passing land tax on to lessees did not survive 2009 & 2010 amendments

Vic land tax: Vasiliades v Comr of State Revenue – PPR exemption refused – no jurisdictional error in assessing in and then reassessments

Rulings & Other (State)

Victorian State Taxes – Objections lodged out of time – draft ruling on exercise of the Commissioner’s power (TAA.004v3)

OTHER DEVELOPMENTS

Agricultural Land Register – First Report – 13.6% of agricultural land foreign owned and UK holds more than all the rest put together (52%)

Bitcoin is money – US judge says bitcoin was ‘funds’ for the purposes of a US prosecution for unlicensed money transmitting business

[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.

‘Apple’ received 13b Euro in tax benefits from Ireland, which the EU has declared illegal and required Ireland to recover

Brussels, 30 August 2016 The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid. Commissioner Margrethe Vestager, in charge of…

SMSF compliance action and focus areas: ATO speech at Tax Institute’s National Superannuation Conference in Melbourne

The ATO has provided a report on compliance outcomes in 2015-16 and focus areas for 2016-17. Speaking at the Tax Institute’s National Superannuation Conference on 25 August 2016, Assistant Commissioner Kasey MacFarlane discussed the following topics: Compliance outcomes in 2015-16 reflect an increasing use of new compliance enforcement tools available to the ATO since 1 July 2014. During the course of 2015-16,…

Budget Savings (Omnibus) Bill – introduced: many savings including some tax related e.g. reducing R&D off-sets by 1.5 percentage points

On 31.8.16, the Budget Savings (Omnibus) Bill 2016 was introduced in the House of Reps. It seeks to achieve savings across multiple portfolios to contribute to Budget repair. The Bill would implement measures announced in the 2016-17 Federal Budget and earlier Budget updates. Some of the changes include: Single touch payroll reporting – creates a new reporting framework,…

NSW stamp duty: Rulings – Commissioner insists that ‘market value’ must be GST inclusive; how the aggregation of dutiable transactions provision will be applied

The NSW Office of State Revenue (OSR) has issued the following Revenue Rulings: Revenue Ruling DUT 045 (Market value and GST). It states that the Chief Commissioner will not accept a valuation as a market valuation if it is expressed to be determined on a GST-exclusive basis, or has been made on that basis, or the…