Tax Month – December 2019

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

– December 2019 Edition –

Tax developments for tax practitioners by a tax practitioner.

 

Compiled by F John Morgan
A member of the Victorian Bar (www.FJMtax.com)

Table of Contents

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Tax Articles

• Australia’s tax take is second-highest in world – that is taxes on income and profits as a percentage of total taxes – AFR article shows OECD rankings
• Australian Residents, Foreign Trusts and Foreign Funds – The New Black! – covering the Australian tax implications of Australian individuals being trustees or beneficiaries of foreign trusts

Legislation

Acts & Bills

• Treasury Laws Amendment (International Tax Agreements) Bill 2019 received Royal Assent as Act No 107 of 2019 – Australian-Israel DTA & new Div 764 DTA deemed source rule
• Peru-Australia Free Trade Agreement; Indonesia-Australia Comprehensive Economic Partnership Agreement & Free Trade Agreement between Australia and Hong Kong, China – given force of law in Australia
• Customs Tariff Amendment (Peru-Australia Free Trade Agreement Implementation) Regulations 2019 – rules for granting preferential tariff rates for goods imported from Peru under FTA
• Treasury Laws Amendment (2019 Measures No 3) Bill 2019 – introduced proposing changes to concessions for ‘testamentary trusts’, FBT definition to include ‘Uber’ etc, company loss recoupment rules, small business restructures and various superannuation changes
• Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 introduced – increase $100m threshold to $150m; cap refunds to $4m pa; extend GAAR to R&D offsets and allow Innovation Board to issue binding rulings
• Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2019 – service of compliance orders overseas and also general service overseas under the Mutual Assistance Treaty
• Treasury Laws Amendment (Measures for Consultation) Bill 2019: hybrid mismatch rules – draft legislation for changes to ‘hybrid mismatch rules’ – Submissions by 24 Jan 2020
• Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 is now law – including the controversial measures denying ‘main residence’ CGT relief to ‘non-residents’

Announcements & Drafts

• 2019-20 MYEFO released – significant revenue write-downs, surpluses remain, 2.25% growth in 2019/20, black economy measures, mismatch measures, eligible rollover fund measures and more ‘tax clinic’ funding

Cases

High Court

• BMW & Westpac cases – High Court rules that the Federal Court Act and the NSW Civil Procedure Act do not support Courts making ‘Class Funding Orders’ representative class actions
• High Court torpedoes class actions – holding that existing laws do not support Courts making ‘class funding orders’

Full Federal Court

• CofT v The Trustee for the Michael Hayes Family Trust – Taxpayer trustee not taxed on income of subsidiary trust because it was taxed under Div 6C – ‘mistake’ cured & ATO loses appeal

Federal Court

• Pike v CofT – Zimbabwe emigrant to Australia left family here but left overseas to work – not taxable here under DTA
• CofT v Eichmann – Land used for business sheds, materials and vehicles (somehow) not an ‘active asset’ – decision in favour of taxpayer overturned
• CofT v Bosanac (No 5) & DCT v Huang – stays refused on tax debts in two cases – principles for granting stays articulated

Administrative Appeals Tribunal (AAT)

• The Trustee for the Whitby Trust v CofT – Section 99A assessments upheld despite beneficiaries being presently entitled
• Wing v CofT – Company’s Small Business CGT exemption couldn’t save shareholder from Division 7A tax on deemed divided and shortfall penalty affirmed
• Diarra V CofT – 25% of ‘shortfall’ penalty assessments for lack of ‘reasonable care’ affirmed
• Miley v CofT – Div 152 ‘market value’ test failed because ‘sale price’ not allocated to the restrictive covenants (they enhanced the value of the shares sold)
• GSJW v CofT – AAT gives the taxpayer a rare win, ‘releasing’ the taxpayer from $900k of GIC on ‘serious hardship’ grounds (leaving only $40k of ‘primary tax’)
• Jarvis-Lavery v CofT – Income tax and GST assessments affirmed for lack of proof

Other Courts & Tribunals

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Appeals

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Rulings

Decision Impact statements

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Rulings

• TR 2019/6 – ‘in Australia’ requirement for DGRs and charities – deductions for gifts, exemption of charity’s income and franking credits for charities (finalised TR 2018/D1)
• TR 2019/D7 – new draft ruling on deductions for employees’ transport expenses – overlapping TR 2018/D6 for FBT purposes (Comments due 28 Feb 2020)

Determinations

• TD 2019/14 – Does ‘trust splitting’ work (viz: trigger CGT-event E1)? – Yes and No – it depends on the facts

Law Companion Rulings

• LCR 2016/12 – on ‘total superannuation balance’ 2016 reforms – 2019 ‘Addendum’ for LRBA & TRIS changes
• LCR 2019/5 – 27.5% corporate tax rate only for ‘base rate entities’ depending on ‘base rate passive income’ (s23AA & s23AB of Rates Act)

Class Rulings & Product Rulings

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ATO Interpretative Decisions

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Practice Statements

• PS LA 2019/D2 – Draft Practice Statement on ATO staff applying ‘general anti-abuse rules’ (purpose tests) in Australia’s DTAs and the MLI

Practical Compliance Guides

• PCG 2018/9 – update to ATO’s guidance for foreign-incorporated companies seeking to be no-resident: compliance deadline for transitioning CM&C out of Australia has been extended from 2019 to 30.6.21

Tax Alerts

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Other ATO news or statements

• ATO uses additional resources to widen ‘review’ from largest 320 groups to largest 500 & ‘tax assurance resources’ to groups with wealth exceeding $5m or revenue over $10m
• Data on ‘life-style assets’ from insurers – ATO seeks further five years of data under s353-10 notice to produce power
• Google announces settlement with ATO (paying an additional $481m) and ATO republishes this with its own spin
• ATO posts its ‘Consultation Report’ on 10 December 2019 – detailed with many links to other ATO posts
• ATO reminds taxpayers & agents that Partnership (‘Everett’) assignments since 8 May 2018, returned with ‘small business CGT relief’ will need amendment

GST 

Legislation & Announcements (GST)

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Cases (GST)

• Skourmallas v CofT – GST – motor vehicle dealer allowed claim for input tax credits but warned his victory could be ‘pyrrhic’
• Melbourne Apartment Project Pty Ltd v CofT – Sale of unit by charity was GST-free under s38-250 – ‘supply of accommodation’ not limited to leases etc.

Rulings, Etc. (GST)

• GSTR 2019/2 and PCG 2019/8 – GST: credit card issuing business – creditable purpose of acquisitions – ‘Green zone’ = 35% allocation to creditable ‘interchange’ services
• GSTR 2006/3 (Addendum) – Determining extent of creditable purpose for providers of financial supplies – including ‘direct estimation methods’
• GSTD 2019/D1 – GST and land development expenses in the ACT – what is part of the consideration for the grant of the Crown lease and what is not

Superannuation

Legislation etc. (Super)

• Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2019 – relating to ‘reversionary defined benefit pensions, successor fund transfers, deferred superannuation income streams, innovative income streams
• Treasury Laws Amendment (2019 Measures No 3) Bill 2019 – introduced – proposing various superannuation changes
• Legislation announced to close down to progressively ‘eligible rollover funds’ by 30.6.21 – hastening the Productivity Commission’s recommendation that this be don in 3 years

Cases (Super)

• CofT v Pavihi – Promoter of schemes to transfer super to SMSF’s – subject to $200,000 civil penalty and 7 year ban from being involved in establishing SMSFs
• CofT v Scone Race Club Limited; CofT v Racing Queensland Board – ‘Horse Racing Clubs’ and ‘Horse Racing Boards’ liable for SG Charge on jockey riding fees – ATO appeals allowed

Rulings etc. (Super)

• APRA released ‘heatmap’ for MySuper products – showing relative: investment performance; fees and costs; and sustainability (it says a ‘game changer’)

State Taxes

Legislation & Announcements (State)

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Cases (State)

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Rulings & Other (State)

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Other Developments

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

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Base Erosion & Profit Shifting & OECD

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Board of Taxation

• Corporate tax residency review: second Board of Taxation consultation paper – consulting on 2 main (remaining) options – ‘incorporation only’ test and a modified ‘central management and control’ test

Inspector General and other external supervisors

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Miscellaneous

• Foreign Acquisitions and Takeovers Amendment (Australia-Hong Kong Free Trade Agreement) Regulations 2019 – threshold for ‘non-sensitive’ acquisitions increased from $266m to $1,154m under HK FTA
• ABS ‘Personal Income In Australia 2011/12 to 2016/17 – $856bn in personal income in 2016-17 from 13.7m tax returns and other data
• ASIC disqualifies director for maximum of 5 years for illegal ‘phoenix’ activity involving $30m owing to the ATO – Taskforce and Assetless Administration Fund
• U.S.-China trade deal “totally done,” will expand U.S. exports – Lighthizer
• Law Institute of Victoria’s ‘Taxation & Revenue Committees’ very satisfying 2019 activities – Chair’s report

Tax Practitioners Board

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