Tax Month – August 2019

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

– August 2019 Developments –

This is a collection of developments in Australian tax law and practice that occurred in August 2019
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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Tax Articles

• ATO proposal that lawyers must report Promoter Penalties involvement to their regulator – TASA parity or ‘over-reach’ – good policy or bad?
• Should lawyers have to report ATO ‘Promoter Penalties’ activity to their legal regulator – a line by line analysis of the ATO’s reasons
• LIV opposes, as misconceived, the ATO’s proposal to make Vic & NSW Lawyers report, to their regulator, conduct that offends (or might offend) the ‘Promotor Penalty Provisions, under changes they suggest, in Legal Profession Uniform Law
• Law Council of Australia’s submissions opposing the ATO’s proposal to change the Legal Profession Uniform Law and Rules to make any actual or potential ‘Promoter Penalty’ conduct a ‘show cause event’ threatening the lawyers ‘practising certificate’
• Tax Haven complications – ‘Panama’ and ‘Paradise’ Papers – CFC, MAAL, DPT, DTA, MLI and Part IVA (as the great John McEnroe used to say: ‘are you serious?’)

Legislation

Acts etc.

• Disclosure of Tax Debt information to ‘credit reporting bureaus’ – Summary
• Disclosure of Tax Debt information to ‘credit reporting bureaus’ – the key text of the Bill (exception to secrecy laws)
• Disclosure of Tax Debt information to ‘credit reporting bureaus’ – Law Council of Australia’s consultation submission
• No Small Business CGT relief for ‘Everett assignments’ of partnership interests
• Schedule 2F ‘family trusts’ no longer carved out of rules against ‘circular distributions’
• Bill to introduce a new s26-102 to limit deductions for holding costs on vacant land

 

Announcements

• Treasurer’s ‘roadmap’ to the Governments’ legislative response to Commissioner Hayne’s recommendations in his Banking Royal Commission Final Report

Cases

High Court

• Glencore loses High Court Appeal – ‘legal professional privilege’ does not found an action but only provides immunity from disclosure (a ‘shield not a sword’)
• The AFR on Glencore – High Court backs ATO in fight with mining giant over Paradise Papers
• ATO’s take on the Commissioner’s Glencore ‘privilege’ victory in the High Court (with editorial comment)
• Glencore v CofT – Law Council’s summary of the High Court’s seminal decision holding ‘legal professional privilege’ is only a ‘shield’ not a ‘sword’

Full Federal Court

• Burton v CofT – Only 50% of US CGT allowed as foreign tax offset as only 50% of Australian capital gain assessable & a majority said the DTA argument failed – appeal dismissed

Federal Court

• Binqld Finances Pty Ltd (In Liq) v Israel Discount Bank Ltd – Commissioner ordered to produce a copy of his deed, with certain taxpayer information redacted because it was “protected” under TAA53 secrecy provisions
• Douglass v CofT – Partnership income subject to PSI rules because it did not plant and equipment, or tools of trade, needed to perform the work
• Fortunatow v CofT – PSI income rules – taxpayer’s company passed the ‘unrelated clients test’ by advertising to the public through ‘Linked In’ and through recruiting companies he used to deal with his 8 ultimate clients

Administrative Appeals Tribunal (AAT)

• Firefighters Benefit Fund of WA Inc v CofT – Firefighters Benefit Fund carrying on insurance business for income tax purposes and was therefore assessable on receiving member contributions
• Ariss v CofT – Personal services income: consultant’s attempt to split income with spouse fails

Other Courts & Tribunals

• NZ Commr of Inland Revenue fails in Supreme Court Appeal against a decision enforcing her to deliver information to the Korean National Taxation Service under the NZ-Korea Double Tax Agreement

Appeals

• —

Rulings

Decision Impact statements

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Rulings

• —

Determinations

• TD 2019/D5 – Early stage innovation companies – tax offset and CGT exemption: administration of ‘early stage’ $1m expenses incurred under early stage test

Law Companion Rulings

• —

Class Rulings & Product Rulings

• —

ATO Interpretative Decisions

• —

Practice Statements

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Practical Compliance Guides

• PCG 2019/D3 – Thin cap: ATO ‘practical compliance guide’ to using the ‘arm’s length debt test’ – what is the ‘low risk’ approach to this high risk Div 820 approach?

Tax Alerts

• —

Other ATO news or statements

• NTLG June 2019 Key Messages – Commissioner’s Remedial Power not working as intended; ATO panels; Environmental Scan; IGT’s report on the ‘Future of the Tax Profession’; ATO engaging with taxpayers
• ATO’s Report on Consultations in July 2019 – consultations received, open & completed and meetings of various Steering, Working, Stewardship, Co-design & Focus Groups

GST 

Legislation & Announcements (GST)

• —

Cases (GST)

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Rulings, Etc. (GST)

• —

Superannuation

Legislation etc. (Super)

• Measure to ensure that ‘salary sacrificed’ to employer superannuation contributions do reduce the SGC employer contribution
• Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2019 reintroduced – SGC opt out for some employers of multi-employer members; NALI provisions extended to non-arm’s length expenses and ‘Total Superannuation Balance’ to include LBRA balances in some cases
• ‘Opt-in’ insurance in super funds for members under 25 or with sub $6,000 account balances – Senate Committee’s report tabled

Cases (Super)

• Wilkins v ASIC – SMSF loans applications in wrong name: mortgage broker’s ban reduced by AAT from 3 years to 18 months as not dishonest

Rulings etc. (Super)

• —

State Taxes

Legislation & Announcements (State)

• —

Cases (State)

• —

Rulings & Other (State)

• WA transfer duty: Tax Institute calls for exemption on ‘business restructures’
• Land Tax Trust Surcharge – Nomination of Principal Place of Residence (PPR) beneficiary and notice of beneficial interests

Other Developments

Australian Charities & Not-for-Profits Commission (ACNC)

• —

Base Erosion & Profit Shifting & OECD

• —

Board of Taxation

• Board of Taxation – August 2019 Update – VicBar’s Dr Julianne Jacques acting Chair; Corporate Residency review; 169 signatories to Voluntary Transparency Code; FBT Compliance Cost report soon; ‘granny flat’ (life care) arrangements & tax impediments to avoiding elder abuse

Inspector General and other external supervisors

• Small Business Ombudsman is investigating the Government clawing back millions in R&D claims from small business (ATO offends Kate Carnell again)
• Inquiry into the performance of the Inspector-General of Taxation (IGT) – Law Council of Australia (LCA) Submission to the Senate Committee

Miscellaneous

• ASIC disqualifies Cairns director from managing companies after engaging in illegal phoenix activity

Tax Practitioners Board

• Keith James Independent Review of TPB and TASA – Discussion Paper released on 1 August 2019 – Submissions by 30 August 2019
• ‘What lawyers want’ – a submission to the Independent Review of TASA and the TPB arising from the release of its Discussion Paper and my earlier submissions about non-lawyers doing legal work

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[i]           Sources – abbreviations: ‘KPMG’: KPMG Daily Tax News; ‘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; ‘TaxVine’: The Tax Institute’s ‘TaxVine’.