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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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
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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
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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
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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
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)
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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)
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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
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BOARD OF TAXATION
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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.
