Tax Month – December 2017

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

– December 2017 Developments –

This is a collection of developments in Australian tax law and practice that occurred in December 2017
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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ACTS, BILLS AND ANNOUNCEMENTS

Acts, Bills & Draft Legislation

• Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 introduced – replacing, broadening and enhancing ‘whistleblower’ access and protections
• Judiciary Amendment (Commonwealth Model Litigant Obligations) Bill 2017 – Model Litigant Obligations Bill referred to Senate committee for report by 8 May 2018

Announcements

• Deductible Gift Recipients – changes in regulation including: charity registration; no ‘in Australia’ reform (‘external conduct standards’ instead); report political donations and ‘remediation’ work by environmental organisations

BASE EROSION & PROFIT SHIFTING (BEPS)

• Trump’s US tax reform – not just 20% corporate rate but also proposals for compensating ‘base broadening’ such as denying US deductions for BEPS leakage amounts or US tax on foreigner export profits (with 80% ‘foreign tax credits’)
• OECD Model Tax Convention – latest edition released with significant changes from the OECD/G20 BEPS project (Hybrids, Treaty Benefits, PE avoidance and Dispute Resolution)
• OECD releases first ‘peer reviews’ on spontaneous exchange on private tax rulings affecting Multi-Nationals – BEPS Action 5, minimum standard

CASES AND APPEALS

High Court

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Full Federal Court

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Federal Court

• Carr v CofT – Federal Court refuses to remit the AAT decision on Default Assessments back to the AAT (taxpayer hopelessly unprepared in the AAT)
• Donoghue v FCT (No 2) – Commissioner’s application to dismiss action (on taxpayer failing to appear) dismissed – arguable case involving tax residence and $17m tax and penalty

Administrative Appeals Tribunal (AAT)

• Ferozkohei v CofT – Taxpayers fail to prove claim various rental property deductions as relevantly incurred or not incurred at all

Other Courts & Tribunals

• DCT v Arico (No 2) – Victorian Supreme Court refused stay of collection proceedings for $2.1m in unpaid tax and refused to vary freezing orders to allow borrowings for legal fees (not full or frank disclosure about assets)

Appeals

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COMMISSIONER’S PUBLICATIONS & NEWS

Decision Impact statements

• Lewski v. Commissioner of Taxation – ‘Decision Impact Statement’ following beneficiary escaping amended assessments
• Whitby Land Company Pty Ltd (Trustee) v. Deputy Commissioner of Taxation – Decision Impact Statement – alternative assessments on beneficiaries and the trustee (under both s98 & s99A) held valid – not ‘tentative’

Rulings

• TR 2017/D10 – Vesting of Trusts – draft ruling goes through extending a trust’s vesting date; CGT consequences of vesting a trust; and Taxation of trust net income after the vesting date

Determinations

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Law Companion Guides

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Class Rulings & Product Rulings

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ATO Interpretative Decisions

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Practice Statements

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Practical Compliance Guides

• PCG 2017/4 – ATO guidance on assessing cross-border, related ‘financing arrangements’ risk levels – self assessed and ATO assessment for audit or further inquiry

Tax Alerts

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Other ATO news or statements

• GIC set at and SIC rates – for Q3, 2017-18 (Jan – Mar 2018) set at 8.72% pa and 4.72% pa, respectively
• Corporate tax transparency report for 2015–16 – ATO release report for over 2,000 of the biggest companies paying 60% of company tax
• Searching for edited versions of ‘private binding rulings’ – ATO explains and consults on proposed changes
• Changes to company tax rates – 30% & lower 27.5% rate – 2016/17 threshold: $10m turnover; 80% passive income test in 2017/18 Year
• Reducing the corporate tax rate – ATO’s summary of the relevant law, bills and progressive reduction of the tax rate, to 25%, for all companies by 2026/27
• Franking credit rate equals 27.5% if company’s prior year turnover satisfies the new year’s turnover threshold for a 27.5% tax rate – ATO’s guidance
• ATO suspends its audit ‘guidance’ on professional firm structures that are ‘too effective’ in income splitting – partnerships of discretionary trusts and Everett assignments
• Trust vesting – ATO seeks feedback on TR 2017/D10 and overviews how a trust comes to vest and with what effect

GST DEVELOPMENTS

Legislation & Announcements (GST)

• GST-free status of certain tertiary courses continued by Minister making a 2017 under the definition of ‘education course’ in the GST Act
• Digital Currencies ‘financial supplies’ – Treasury Laws Amendment (2017 Measures No 3) Regulations 2017 – to complete the measure giving ‘digital currencies’ the same status as ‘foreign currencies’

Cases (GST)

• Aquatic Air Pty Ltd v Siewert & Anor – non-tax case disagrees with Commr’s GST assessments (denying Air Ambulance supplies were GST-free) and Commr then disagrees with the Court (hmm…)
• GST: Decleah Investments Pty Ltd and Anor as Trustee for the PRS Unit Trust v CofT – property subdivision and margin scheme – 4 valuations failed the ‘approved’ standard and the AAT raised the shortfall penalty from 25% to 50%

Rulings, Etc. (GST)

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SUPERANNUATION DEVELOPMENTS

Legislation, Announcements etc. (Super)

• Government to review rules for early release of superannuation, including: (1) to members in hardship and (2) to victims of crime as compensation from the perpetrator’s funds
• Housing Affordability Bill: superannuation changes to establish (1) First Home Super Saver Scheme; (2) Downsizer extra $300k super contributions from sale of house

Cases (Super)

• Mercer Superannuation (Australia) Limited v Billinghurst – Trustee’s duty is to member (not retiring employer) – ‘transfer value’ of of defined pension benefit as ‘indexed’ – SCT decision upheld

Rulings & Other things (Super)

• Excess Transfer Balance Determinations – ATO will send from January 2018 – guidance for SMSF members and trustees
• SMSF $1.6m ‘transfer balance cap’ reporting – when pre & post 1 July 2017 events and pre-existing income streams must be reported – ATO guidance

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

• New Commissioner for the Australian Charities and Not-for-profits Commission (ACNC) – the Hon Dr Gary Johns
• Waubra Foundation v ACNC Commissioner – Revocation of charity status for ‘wind noise’ prevention – not for “promotion of the prevention or control as diseases” or “protecting human rights”

BOARD OF TAXATION

• Board of Taxation’s December 2017 meeting – CEO’s report – pipeline of possible projects; Sounding Board; Tax Transparency Code report (120 signatories – 50% of company tax)

EXTERNAL SUPERVISORS – IGT, JCPAA & ANAO etc.

• Audit of ATO’s ‘Reinventing’ Program – ANAO’s report on cost management showed good systems but poor use

TAX PRACTITIONERS BOARD & LEGISLATION

• TPB – 2016/17 Annual Report – number of registered tax practitioners tops 80,000 & privacy warning

STATE TAXES

Legislation & Announcements (State)

• NSW: Revenue Legislation Amendment (Surcharge) Bill passed – exemption from Foreign owned purchaser surcharge for development of homes & form of declaration for small business exemption from insurance duty
• SA: Foreign Investor Surcharge (on transfer duty) – increased from 4% to 7% from 1 January 2018
• Vic: State Taxation Acts Further Amendment Bill passed – payroll exemption for ‘for profit’ training organisations; absentee owner surcharge – extra exemption; foreign purchaser extra duty for first home owner
• Tas: Land Tax Amendment Bill 2017 – apportioning principal residence and other land values – passed

Cases (State)

• Vic land tax: Living and Leisure Australia Ltd v Comr of State Revenue – Agreements to use of Crown land in ski resort dutiable as a ‘lease’ – exclusive possession granted

Rulings & Other (State)

• NSW: Residential Premises that are not ‘Dwellings’ – for 8% Surcharge Transfer Duty and 2% Surcharge Land Tax for ‘foreign persons’
• Vic: SRO explains the ‘Vacant Residential Land Tax’ – noting the 15 January 2018 deadline to report land vacant for more than 6 months in calendar 2017

OTHER DEVELOPMENTS

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[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.