T a x T e c h n i c a l – M o n t h l y N e w s
– October 2018 Developments –
This is a collection of developments in Australian tax law and practice that occurred in October 2018
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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Legislation
Acts etc.
- Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Act 2018 passes into law – introducing offences and penalties for ‘sales suppression tools’ and adding ‘cleaning’ and ‘courier’ payments as reportable to the ATO
- Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 becomes law – MAAL extended to foreign trusts and partnerships; additional ‘Small Business CGT Concession’ conditions for CGT events affecting shares and interests in trusts
- Treasury Laws Amendment (Lower Taxes for Small and Medium Businesses) Bill 2018 becomes law accelerating 25% company tax rate by 5 years for ‘base rate entities’ (Sub-$50m turnover & no more than 80% passive income)
- New Regulation giving business names not registered on ASIC’s national register another 5 years to continue being registered on the ABR (and have an ABN)
- Treasury Laws Amendment (Black Economy Taskforce Measures No 2) Bill 2018 – new s26-105 to deny deductions for wages etc if PAYG amounts not withheld; amendments to s396-55 extend reporting obligations to contractor payments in the road freight, IT, security & investigation or surveillance industries
- Treasury Laws Amendment (2018 Measures No. 5) Bill 2018 progresses – AMIT technical changes; update the list of DGRs and add indigenous language promotion; IP licensing subject to restrictive trade practices law
- Draft Anti-avoidance rules for circular trust distributions – Sch 2F ‘family trusts’ type entities to be removed from trusts ‘excluded’ from Div 6D ‘closely held trust’ Regime (sort of)
- Draft legislation to disallow certain deductions in relation to vacant land – unless used in carrying on a business or incurred by a company etc (unintended consequences for ‘residential premises?)
- Draft legislation to prevent deductions for repayment of principal on ‘concessional loans’ owed by previously exempt State and Territory Bodies on becoming taxable (eg. privatised)
- Regime to centralise ‘business registers’; starting with ASIC transferring 34 registers to the ABR (ATO); ‘Director Identification Number’ requirement to be created – draft legislation released
- Draft Legislation – Assignments of Partnership Interests precluded from getting Div 152 ‘small business CGT relief – only assignments when the assignee becomes a partner will remain eligible
Announcements
- Digital economy and strengthening Australia’s corporate tax system – Treasury discussion paper released
- Sub-$50m turnover companies to get their 27.5% rate to reduced to 25.0% five years earlier: 2020/21 instead of $2026/27 – after Labor agrees to support the measure
- Labor policy to double maximum ‘civil penalties’ for ‘promoting’ ‘tax exploitation schemes’ to $10m – against the backdrop of the Appleby leak of client documents in Bermuda, including the now contentious Glencore restructuring and allegations the ‘Big 4’ accountants could have been ‘promotors’
- Consultation on proposed amendments to Div 7A – 10 year complying loans; self-correct ‘inadvertent’ breaches; UPE’s brought within Div 7A
Cases
High Court
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Full Federal Court
- CofT v Sharpcan Pty Ltd – Full Federal Court held that $600k that a pub paid for 10 year statutory ‘gaming machine entitlements’ were s8-1 deductible (as not ‘capital’) or deductible on a 5-year ‘blackhole’ write-off basis (if it was a capital expense)
- Satyam Computer Services Ltd v CofT – DTA a sword not shield – Indian company taxable on DTA ‘royalties’ outside Australia’s withholding tax scope – because the DTA deemed those receipts to have an Australian ‘source’, so as to be assessable as ‘ordinary income’
Federal Court
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Administrative Appeals Tribunal (AAT)
Other Courts & Tribunals
Appeals
Rulings
Decision Impact statements
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Rulings
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Determinations
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Law Companion Rulings
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 2017/1 – Procurement, marketing, sales and/or distribution hubs – new Schedule 2 for ‘non-core’ procurements (25% safe level of ‘mark-ups’) – ATO audit allocation of resources advice for practical ‘swim between the flags’ compliance guidance
- PCG 2018/7 – restructuring out of arrangements likely to offend the new ‘anti-hybrid rules’ – 6 examples where the ATO will NOT apply Part IVA and a list of ‘low risk’ features (for deploying audit resources)
Tax Alerts
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Other ATO news or statements
- ATO guidance on new ‘electronic sales suppression tools’ bans – characteristics; offences; fines; administrative penalties and transitional rules for possessing such tools
- Sales suppression software – ATO reminds people of the ban, the transitional relief and their audit experience of abuse using this sort of software
- Tax treatment of compensation paid to individuals from financial institutions for faulty advice or improperly charged fees, etc. – Commissioner posts guidance on website (in light of the Hayne Royal Commission into the Financial Services Industry)
GST
Legislation & Announcements (GST)
- GST – States agree to end ‘tampon tax’ and consider the Commonwealth’s new basis for dividing the GST Revenue between the States & Territories – Council on Federal Financial Relations meeting
- ‘Feminine hygiene products’ to be GST-free – consultation on the definition (removing the ‘tampon tax’)
Cases (GST)
- Company director jailed for 4 years for $1m GST refund fraud – $11m in GST embedded expenses claimed but it appears all fictitious
- SM Ho & Ors c CofT – GST on sale of properties – Lot 1 only 50% leased, only 50% GST-free; Lot 2 unleased and not input taxed; Lots 3&4: ‘margin’ can’t be calculated using development costs
Rulings, Etc. (GST)
Superannuation
Legislation etc. (Super)
Cases (Super)
- Aussiegolfa Pty Ltd (Trustee) v CofT – ATO will not appeal its loss on the superannuation ‘sole purpose’ test and will accept its win on the ‘sub-fund’ being the relevant entity for the ‘in-house assets’ 5% cap issue
- Watson v CofT – Super Div 293 tax upheld against AIRC Vice President – legislation giving him the same status as a judge did not make him a judge for the purposes of the s293-190 exemption and did not offend s72(iii) of the Constitution
Rulings etc. (Super)
- ASIC recommends SMSF policy reforms – Answers to questions on notice to the Parliamentary Joint Committee on Corporations and Financial Services
- PS LA 2018/1 – Guidance to ATO staff on when to refer SMSF auditors to ASIC for potential disciplinary action
- Super fund ‘downsizer’ contributions – industry asks ATO what to do with ‘ineligible’ contributions received since the 1 July 2018 start to this regime
State Taxes
Legislation & Announcements (State)
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Cases (State)
Rulings & Other (State)
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Other Developments
Australian Charities & Not-for-Profits Commission (ACNC)
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Base Erosion & Profit Shifting (BEPS)
Board of Taxation
Inspector General; National Audit Office, JCPAA
- IGT’s ‘Valedictory Speech’ included calls for the Government address his outstanding recommendations, including: to appoint an independent board to control the ATO; creation of an independent appeals branch under a new 2nd Commissioner and to rename the IGT as the ‘Taxation Ombudsman’
- Inspector General’s last (2017/18) Annual Report – covering its recent Complaints/Ombudsman Role and Systemic Reviews recently completed or ‘in progress’
- IGT’s report – no evidence of systemic internal fraud or corruption in the ATO – report prompted by ATO fallout following the high profile ‘Project Elbrus’ investigation – IGT made 13 recommendations to ATO & 1 to Government (all accepted, at least in part)
Miscellaneous
Tax Practitioners Board
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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’.