Morgan S Tax Month June 2014 Developments
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M O R G A N’ S T A X M O N T H - June 2014 Developments -
This is a collection of developments in Australian tax law and practice that occurred in June 2014 and which aims at being of relevance to tax lawyers.*
F John Morgan A member of the Victorian Bar (www.FJMtax.com)
Table of Contents ______
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CHAPTER 1 ACTS, BILLS AND ANNOUNCEMENTS
Chapter 2 Acts & Bills
Chapter 3 *Tax Laws Amendment (2014 Measures No 1) Bill 2014 receives Royal Assent: (1) limited refunds of overpaid GST; & (2) farm management deposits improved [1] The Tax Laws Amendment (2014 Measures No 1) Bill 2014 on 30 May 2014 received Royal Assent as Act No 34 of 2014. It had passed all stages without amendment. The Bill amends the GST Act and the TAA to ensure that overpaid GST is refundable only in certain circumstances. It also amends the ITAA 1997 and the Banking Act 1959 to improve the operation of the Farm Management Deposit (FMD) Scheme. [LTN 104, 2/6/14] Chapter 4 Passed Senate and awaits Royal Assent on 19 June 2014 Tax and Superannuation Laws Amendment (2014 Measures No 2) Bill 2014 - contains amendments to prevent dividend washing, protect taxpayers re anticipation of certain discontinued announcements, and changes to the Medicare levy low-income threshold for families. [LTN 116, 19/6/14]
Chapter 5 *Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014 - Anti-dividend washing, discontinued measures protection [2] The following Bills have passed the House of Reps without amendment and now move to the Senate: Tax and Superannuation Laws Amendment (2014 Measures No 2) Bill 2014 - contains amendments to prevent dividend washing, protect taxpayers re anticipation of certain discontinued announcements, and changes to the Medicare levy low-income threshold for families.
*NB: I have gathered these articles from various sources for the purposes of study and teaching and I have acknowledged the sources. None of this publication should reproduced in breach of copyright belonging to the acknowledged source. The headings to the articles are often mine (and shouldn’t necessarily be attributed to the publisher). Where I’ve editorialised, its separately distinguished. Source Abbreviations: ‘EDTN’ = Electronic Daily Tax News, published by CCH; ‘LTN’ = Latest Tax News published by Thomson Reuters; ‘WTB’ = Weekly Tax Bulletin, published by Thomson Reuters; ‘Taxvine’ is the weekly publication by the Tax Institute of Australia; TaxBar = Melbourne Tax Bar Association Newsletter at www.vicbar.com.au / Members / Bar Associations / Tax. Morgan’s Tax Month – June 2014 Developments
[LTN 107, 5/6/14] Chapter 6 Passed the Senate and awaits Royal Assent Tax and Superannuation Laws Amendment (2014 Measures No 2) Bill 2014 - This Bills has passed all stages without amendment, having been passed by the Senate on 19 June 2014. [LTN 116, 19/6/14] Chapter 7 Royal Assent Tax and Superannuation Laws Amendment (2014 Measures No 2) Bill 2014 – Act received Royal Assent as Act No 68 of 2014 on 30 June 2014. It contains amendments to: introduce an integrity rule to limit the ability of taxpayers to obtain a tax benefit from "dividend washing"; ensure outcomes are preserved in relation to tax assessments where: (i) taxpayers have reasonably and in good faith anticipated the impact of identified announcements made by a previous Government that the tax law would be amended with retrospective effect; and (ii) the current Government has now decided that the announced proposal to change the law will not proceed; and increase the Medicare levy low-income threshold for families and the dependent child-student component of the threshold. [LTN 123, 30/6/14]
Chapter 8 *Tax and Superannuation Laws Amendment (2014 Measures No. 3) Bill 2014 passes House of Reps – restrictions on dedn for mining rights and information [3] The Tax and Superannuation Laws Amendment (2014 Measures No 3) Bill 2014 has passed the House of Reps without amendment and now moves to the Senate. It proposes to amend the capital allowances provisions in the ITAA 1997 to limit immediate deductibility of expenditure on mining rights and mining information. DATE OF EFFECT: applies to transactions to acquire mining rights and mining information entered into after 7.30pm Australian Eastern Standard Time, 14 May 2013. [LTN 106, 4/6/14] Chapter 9 Passed Senate and awaits Royal Assent on 19 June 2014 Tax and Superannuation Laws Amendment (2014 Measures No 3) Bill 2014 - amends the capital allowances provisions in the ITAA 1997 to limit immediate deductibility of expenditure on mining rights and mining information. [LTN 116, 19/6/14] Chapter 10 Royal Assent Tax and Superannuation Laws Amendment (2014 Measures No 3) Bill 2014 – received Royal Assent on 30 June 2014 as Act No 69 of 2014. [LTN 123, 30/6/14]
Chapter 11 FATCA Agreement Implementation Bill 2014 – passes into law [4] Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014 – passed the House of Representatives on 5 June 2014. It supports implementation of the US FATCA Agreement. [LTN 107, 5/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 12 Passed the Senate and awaits Royal Assent Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014 - has passed all stages without amendment, having been passed the Senate on 19 June 2014. It supports implementation of the US FATCA Agreement. [LTN 116, 19/6/14] Chapter 13 Royal Assent Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014 received Royal Assent on 30 June 2014 as Act No 67 of 2014. It supports implementation of the US FATCA Agreement in Australia. [LTN 123, 30/6/14] Chapter 14 Committee recommends binding treaty action re FATCA agreement The Interim Report of the Joint Standing Committee on Treaties on FATCA was tabled in the House of Reps on Mon 23.6.2014. The report contained the Committee's recommendation in relation to its inquiry into the Agreement between the Government of Australia and the Government of the United States of America to Improve International Tax Compliance and Implement FATCA. The Committee said it supported the Agreement and recommended that binding treaty action be taken. The Committee said it would table a full report of its inquiry into the Agreement "in due course". [LTN 118, 23/6/14]
Chapter 15 *Budget deficit levy Bills pass into law [5] The package of 15 Bills, including the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014, was passed by the Senate on Tue 16.6.2014, without amendment and effectively awaits Royal Assent. The package of Bills will amend the tax laws to introduce a 3-year progressive levy on high income earners. The Levy will apply at a rate of 2% on the part of their taxable income that is in excess of $180,000 per annum. The Levy will be active for the financial years 2014-15 to 2016-17, so will commence on 1 July 2014 and end on 30 June 2017. [LTN 114, 17/6/14] Chapter 16 Budget repair levy Bills receive Assent The package of 15 Budget deficit repair levy Bills received Royal Assent on Wed 25.6.2014: Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 48 of 2014 Income Tax Rates Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 45 of 2014; Income Tax (Bearer Debentures) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 43 of 2014; Income Tax (First Home Saver Accounts Misuse Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 44 of 2014; Income Tax (TFN Withholding Tax (ESS)) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 46 of 2014; Tax Laws Amendment (Interest on Non-Resident Trust Distributions) (Temporary Budget Repair Levy) Bill 2014 – Act No 47 of 2014; Tax Laws Amendment (Untainting Tax) (Temporary Budget Repair Levy) Bill 2014 – Act No 49 of 2014; and Trust Recoupment Tax Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 50 of 2014; Morgan’s Tax Month – June 2014 Developments
Family Trust Distribution Tax (Primary Liability) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 41 of 2014; Fringe Benefits Tax Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 42 of 2014; Superannuation (Departing Australia Superannuation Payments Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 51 of 2014; Superannuation (Excess Non-Concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 52 of 2014; Superannuation (Excess Untaxed Roll-Over Amounts Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 53 of 2014; Taxation (Trustee Beneficiary Non-disclosure Tax) (No 1) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 54 of 2014; Taxation (Trustee Beneficiary Non-disclosure Tax) (No 2) Amendment (Temporary Budget Repair Levy) Bill 2014 – Act No 55 of 2014. The Bills had passed all stages without amendment. [LTN 120, 25/6/14] Chapter 17 Budget levy Bills - Senate committee recommends that they be passed (with Greens dissenting because they want it to be permanent) The Senate Economics Legislation Committee tabled its report on Mon 16.6.2014, on the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and 14 related Bills. The Committee majority recommended the Senate pass the Bills, although the Greens dissented. The Greens recommended that the Senate not pass the main Bill in its current form, and instead pass an amendment making the tax increase permanent with additional measures to minimise tax avoidance. [LTN 113, 16/6/14]
Chapter 18 *Paid Parental Leave Amendment Bill pass House of Reps [6] The Paid Parental Leave Amendment Bill 2014 on Mon 2.6.2014, passed the House of Reps without amendment and now moves to the Senate. It proposes to ease administrative burdens on business by amending the Paid Parental Leave legislation to remove the requirement for employers to provide Government funded parental leave pay to their eligible long-term employees. From 1 July 2014, employees will be paid directly by the Department of Human Services, unless an employer opts in to provide parental leave pay to its employees and an employee agrees for their employer to pay them. These amendments were originally contained in the Social Services and Other Legislation Amendment Bill 2013 (which received Royal Assent on 31 March 2014) but the Government removed them from that Bill after Opposition amendments in the Senate had made changes to the amendments. [LTN105, 3/6/14]
Chapter 19 *Carbon Tax and Mining Tax repeal Acts re-introduced [7] The Government re-introduced a series of Bills in the House of Reps on Mon 23.6.2014, to repeal the carbon tax and the mining tax and related measures. The Bills had previously been defeated in the Senate. The carbon tax repeal Bills are: Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 [No 2]. Morgan’s Tax Month – June 2014 Developments
Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 [No 2] – proposes to repeal the personal income tax cuts that were legislated to commence on 1 July 2015, and repeal the associated amendments to the low-income tax offset. True-up Shortfall Levy (General) (Carbon Tax Repeal) Bill 2013 [No 2]. True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Bill 2013 [No 2]. Customs Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Excise Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provisions) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Climate Change Authority (Abolition) Bill 2013 [No 2]. Clean Energy Finance Corporation (Abolition) Bill 2014. The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No 2], also re-introduced on Mon 23.6.2014, proposes to repeal the mining tax and make consequential amendments to other legislation, including the ITAA 1997 and the Taxation Administration Act 1953, required as a result of the repeal of the MRRT. These include repeal of: company loss-carry back; low income superannuation contribution; the income support bonus; geothermal expenditure deduction; and schoolkids bonus. The instant asset write-off threshold would be reduced from $6,500 to $1,000, and the accelerated depreciation arrangements for motor vehicles would be discontinued. [LTN 118, 23/6/14] Chapter 20 Carbon tax repeal and mining tax repeal Bills pass Reps All but 1 of the carbon tax repeal Bills were passed by the House of Reps on Thur 26.6.2014, without amendment and now proceed to the Senate (which resumes on 7 July 2014, with the newly elected Senators taking their place). Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 [No 2]. Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 [No 2] – proposes to repeal the personal income tax cuts that were legislated to commence on 1 July 2015, and repeal the associated amendments to the low-income tax offset. True-up Shortfall Levy (General) (Carbon Tax Repeal) Bill 2013 [No 2]. True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Bill 2013 [No 2]. Customs Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Excise Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provisions) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Climate Change Authority (Abolition) Bill 2013 [No 2]. Morgan’s Tax Month – June 2014 Developments
The Clean Energy Finance Corporation (Abolition) Bill 2014 was not passed by the House and debate on that Bill will resume after 14 July 2014 when the House resumes. The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No 2] was also passed by the House of Reps on Thur 26.6.2014, without amendment and now proceeds to the Senate. [LTN 122, 27/6/14]
Chapter 21 *Green Army allowance subject to withholding (but no super guarantee) - Regs amended [8] The Tax and Superannuation Laws Amendment (Green Army Programme) Regulation 2014 was registered on Fri 27.6.2014, to amend the Superannuation Guarantee (Administration) Regulations 1993 to ensure that the superannuation guarantee is not payable by Green Army service providers on allowance payments to Green Army Programme participants. The Regulation will also amend the Taxation Administration Regulations 1976 so that payments of the Green Army allowance are subject to withholding for tax purposes. The Green Army Programme is a voluntary initiative, which will recruit young people aged between 17 and 24 years who are interested in protecting their local environment. The Programme will commence in July 2014 and be delivered by external service providers who will be directly responsible for the payment of Green Army allowances. DATE OF EFFECT: The regulation will commence on 1 July 2014, ie the day on which the Social Security Legislation Amendment (Green Army Programme) Bill 2014 commences. That Bill awaits Royal Assent. [LTN 122, 27/6/14]
Chapter 22 *Service with ADF in Afghanistan tax-exempt and closure of the AVO (consequential changes): Regulations amended [9] The Tax Laws Amendment (2014 Measures No 1) Regulation 2014 was registered on Fri 13.6.2014. It amends the Income Tax Regulations 1936 to include service with the Australian Defence Force's Operation Slipper in Afghanistan to be "eligible duty" and exempt from income tax. It also makes consequential amendments to the Income Tax Assessment Regulations 1997 to address any issues that might otherwise arise from the closure of the Australian Valuation Office on 30 June 2014. [LTN 112, 13/6/14]
Chapter 23 *Revised Switzerland-Australia Double Tax Treaty signed and draft legislation to make it law released [10] On 30 July 2013, Australia and Switzerland signed a revised tax treaty, to replace the existing tax treaty signed in 1980. The revised treaty aims to align the bilateral tax arrangements more closely with current Australian and international treaty policy settings. Treasury on Wed 4.6.2014, released exposure draft legislation, which proposes to give the revised treaty the force of law in Australia. The revised treaty will enter into force after both countries have completed their respective domestic requirements. COMMENTS are due by 18 June 2014. [LTN 106, 4/66/14] Morgan’s Tax Month – June 2014 Developments
Chapter 24 *Effective life of depreciating assets: new determination made [11] The Income Tax (Effective Life of Depreciating Assets) Amendment Determination 2014 (No 1) was registered on Fri 6.6.2014. It applies from 1 July 2014 and provides taxpayers in specific industries and for specific assets with effective lives as a basis to calculate the decline in value (depreciation) of an asset for income tax purposes. The authority for making an effective life determination is provided by s 40-100(1) of the ITAA 1997. [LTN 108, 6/6/14]
Chapter 25 *Requirement to lodge 2014 returns: legislative instruments made [12] Legislative instruments were made on Tue 10.6.2014, requiring: Lodgment of returns for the year of income ending 30 June 2014 in accordance with the ITAA 1936, the ITAA 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997. This instrument establishes due dates for lodgment of returns. Lodgment of income tax returns by all persons who were either a liable parent or a recipient parent under a child support assessment. The instrument requires lodgment of returns for the year of income ending 30 June 2014 in accordance with the ITAA 1936 and the Taxation Administration Act 1953 – Department of Human Services – parents with a child support assessment. Lodgment of statements by superannuation providers in relation to superannuation plans (other than self-managed super funds) for each financial year ended 30 June in accordance with the Taxation Administration Act 1953. This instrument describes the lodgment of Member Contributions Statements. Lodgment of account activity statements by First home saver account providers for the year ending 30 June 2014 in accordance with the Taxation Administration Act 1953. This instrument sets out the way in which First home saver account providers are required to lodge First home saver account activity statement. [LTN 109, 10/6/14]
Chapter 26 *Withholding Schedules for 2014-15 year released [13] The Taxation Administration Act Withholding Schedules 2014 were released on Tue 10.6.2014. These schedules set out the formulas and procedures to be used for calculating the amount to be withheld by entities from withholding payments. This instrument commences on 1 July 2014, and the withholding schedules specify the formulas and procedures to be used for working out the amount to be withhold by an entity from a withholding payment covered by Subdiv 12-B, 12-C or 12-D of Sch 1 to the Taxation Administration Act 1953. The withholding schedules are made for the purposes of collecting income tax, Medicare levy, Temporary Budget Repair levy and amounts of liabilities to the Commonwealth under the Higher Education Support Act 2003, the Social Security Act 1991 and the Student Assistance Act 1973. The withholding schedules in this instrument replace schedules, which currently apply. [LTN 109, 10/6/14]
Chapter 27 Announcements Morgan’s Tax Month – June 2014 Developments
Chapter 28 *Tax dispute inquiry announced by House of Representatives Tax Committee [14] The House of Reps Standing Committee on Tax and Revenue on Fri 6.6.2014, launched its inquiry into tax disputes. The inquiry will cover all categories of taxpayers and include: fair treatment and respect of taxpayers; how the ATO uses performance information in managing tax disputes; whether the legal framework could be updated to encourage earlier dialogue between taxpayers and the ATO, such as through alternative dispute resolution and real time compliance strategies; whether a separate agency should manage ATO litigation, whether the ATO should have a separate appeals area, or if current arrangements should continue; and comparisons with revenue agencies overseas. As part of the inquiry, the Committee has requested the Inspector-General of Taxation to conduct a formal review into tax disputes in relation to large businesses and high wealth individuals. The Committee will concentrate on small business and individuals generally. Although the Committee will receive evidence of individuals' experience with the tax system, the Committee said it will not act on behalf of individual taxpayers in the inquiry. COMMENTS are due by 4 July 2014. [LTN 108, 6/6/14]
Chapter 29 *AUSTRAC signs finance intelligence exchange agreement with Peru [15] AUSTRAC has announced that Australia has signed an agreement to share financial intelligence with Peru. "Criminals involved in money laundering, terrorism, tax evasion, drug trafficking and other serious crimes do not respect borders, so cooperation is needed between financial intelligence units and law enforcement in a range of countries," said Minister for Justice Michael Keenan. The memorandum of understanding sets out agreed terms for the exchange of information between the 2 jurisdictions. Mr Keenan said the information is analysed by AUSTRAC and, where appropriate, provided to other Commonwealth, State and Territory agencies, including the Australian Federal Police and the Tax Office. Source: Minister for Justice media release, 6 June 2014 [LTN 109, 10/6/14]
Chapter 30 *Abbott Government's Commission of Audit - final report tabled [16] The Chair of the Senate Select Committee into the Abbott Government's Commission of Audit presented the final report in the Senate on Thur 19.6.2014. The Committee made 4 recommendations. Among other things, the Committee recommended that the Government white paper on tax reform include a review of all government tax expenditures and concessions. It also recommended that by 31 December 2014, the Government provide a response to each of the recommendations made by the National Commission of Audit, and that the response should indicate whether the recommendation has been accepted by the Government and when it will be implemented. [LTN 116, 19/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 31 *PAYG instalment threshold changes to start on 1 July 2014 [17] Small Business Minister Bruce Billson recently announced changes to the PAYG instalment thresholds (see below), meaning many people may no longer have to pay PAYG instalments. The ATO has now advised that, following the Minister's announcement, the following PAYG instalment threshold changes will apply from 1 July 2014; the business or investment income threshold will increase from $2,000 to $4,000. Currently, the ATO requires an individual to pay PAYG instalments if $2,000 or more of gross business or investment (eg dividends or interest) income was reported on their most recent tax return; the balance of assessment threshold will increase from $500 to $1,000. Currently, the ATO requires an individual to pay PAYG instalments if the tax payable on the last assessed tax return was $500 or more; the notional tax threshold will increase from $250 to $500. Currently, the ATO requires an individual to pay PAYG instalments if the individual's notional tax was $250 or more. Notional tax is basically the tax attributable to the taxpayer's business and investment income for the most recent assessment; and the requirement for entities registered for GST to remain in the system even if they have a zero instalment rate will be removed. [LTN 120, 25/6/14] Chapter 32 Tax changes to support SMEs: Minister for Small Business The Minister for Small Business, Bruce Billson, on Fri 20.6.2014 addressed the G20 Agenda for Growth: Opportunities for small and medium enterprises conference held in Melbourne. Mr Billson discussed policy initiatives of the Government to reduce "red tape" for small businesses. In the area of tax compliance, the Minister announced the Government was "working up a measure for reducing compliance costs for taxpayers by $56m per year, by reducing PAYG (instalments) reporting requirements for a range of small businesses." He said around 372,500 small businesses would benefit from administrative changes to PAYG instalment thresholds, and around 32,500 small businesses would no longer have to lodge a BAS simply to report their PAYG instalments. A further 340,000 small businesses would still be required lodge a BAS, but would no longer have to interact with the PAYG instalment system. "By simply reviewing thresholds that are more than a decade old, we can cut the red-tape burden which lands most heavily on small business," Mr Billson said. (Further details of the announcement are contained in the Minister for Small Business's media release, 20 June 2014.) Mr Billson also discussed disincentives to SME participants sharing ownership of their business. "The Australian tax system currently imposes taxes on discounts on interests granted under an employee share scheme in the year of issue and many have reasonably argued that these tax arrangements are a disincentive for many start-ups to set up an employee share scheme and are inconsistent and out-of-step with global practice," he said. The Minister said the Government was "examining ways to address these concerns in the context of the National Industry Investment and Competitiveness Agenda". [LTN 117, 20/6/14] Morgan’s Tax Month – June 2014 Developments
CHAPTER 33 CASES AND APPEALS
Chapter 34 High Court
Chapter 35 *Howard v FCT - Damages assessable to taxpayer director personally [18] The High Court on Wed 11.6.2014, dismissed a taxpayer's appeal from the Full Federal Court decision in Howard v FCT [2012] FCAFC 149. The Full Federal Court had upheld the Commissioner's appeal against a decision that damages were received by the taxpayer in a fiduciary capacity (meaning the damages were thus assessable to the taxpayer). The taxpayer was involved in a failed golf course joint venture project. The taxpayer and the other 2 joint venturers, who were directors of a company (DL) involved in the project, successfully sued the other joint venturers for breach of fiduciary duty and in 2002 and were awarded damages by the Supreme Court of Victoria for the loss of a business opportunity (a decision that was upheld on appeal in 2005). The taxpayer received $861,853. The Commissioner assessed the taxpayer on this amount, but the taxpayer objected on the basis that he had received the money as trustee for DL and it was therefore assessable to the company. At first instance, in Howard v FCT (No 2) [2011] FCA 1421, the Federal Court agreed with the taxpayer, but that was reversed by the Full Federal Court. The High Court held that the taxpayer was liable to income tax on the equitable compensation received in satisfaction of the Supreme Court judgment. The Court said the taxpayer did not receive the amount as constructive trustee for DL because, at the time he obtained or became entitled to that amount, there was no actual conflict, and no real possibility of conflict, between his personal interests and his duties as a director of DL. As to the litigation agreement, the Court held that as it provided for the assignment of the taxpayer's future income, rather than his underlying rights to receive those sums, the proceeds of the action were income in his hands. The sum received was correctly included in his assessable income, the High Court said. (Howard v FCT [2014] HCA 21, High Court, French CJ, Hayne, Crennan, Gageler and Keane JJ, 11 June 2014) [LTN 110, 11/6/14] Chapter 36 High Court’s summary of the Judgment Today the High Court unanimously dismissed an appeal from a decision of the Full Court of the Federal Court of Australia, holding that the appellant, Stephen Howard, was liable to income tax on equitable compensation received in satisfaction of a judgment. Mr Howard was a director of Disctronics Ltd ("Disctronics"). In his income tax assessment for the 2005 income year, he did not include, as part of his assessable income, his share of an award of equitable compensation received in satisfaction of a judgment in proceedings in the Supreme Court of Victoria. Those proceedings concerned a joint venture, of which Mr Howard was a member, involving the purchase, lease and on-sale of a golf course. Whilst the joint venture was on foot, Mr Howard and two other directors of Disctronics, who were also members of the joint venture, endeavoured to have Disctronics become the purchaser of the golf course, although two other members of the joint venture did not agree. Subsequently, the two other members of the joint venture diverted to their own use the business opportunity pursued by the joint venture and, in so doing, were found Morgan’s Tax Month – June 2014 Developments
to have breached fiduciary duties they owed to Mr Howard and the other members of the joint venture. The Commissioner of Taxation ("the Commissioner") assessed Mr Howard to income tax on the basis that his share of the equitable compensation was part of his assessable income for the relevant year. Mr Howard disputed the assessment, claiming that he received the amount of equitable compensation as constructive trustee for Disctronics and that it was, therefore, incorrectly included in his assessable income. He argued that from the time the directors decided to try to involve Disctronics as the purchaser, his fiduciary obligations to Disctronics as a director meant that he could not retain that gain for himself to the exclusion of Disctronics. Mr Howard appealed to the Federal Court in the exercise of its original jurisdiction against the Commissioner's decision. The primary judge held that Mr Howard had received the compensation as constructive trustee for Disctronics and that it was, therefore, incorrectly included as part of his assessable income. That holding was reversed on appeal to the Full Court, which held that there could be no conflict of interest in the way contended for by Mr Howard, and no breach of his fiduciary duty to Disctronics. The Full Court also rejected Mr Howard's additional claim that by a litigation agreement between Disctronics and its directors, entered into at about the time the Supreme Court proceedings were instituted, he had assigned the right to receive the amount of equitable compensation to Disctronics, such that the income was not derived by him beneficially. By grant of special leave, Mr Howard appealed to the High Court. Dismissing the appeal, the High Court held that Mr Howard did not receive the amount of equitable compensation as constructive trustee for Disctronics because, at the time Mr Howard obtained or became entitled to that amount, there was no actual conflict, and no real possibility of conflict, between his personal interests and his duties as a director of Disctronics. As to the litigation agreement, the Court held that as it provided for the assignment of Mr Howard's future income, rather than his underlying rights to receive those sums, the proceeds of the action were income in his hands. The sum received was correctly included in his assessable income. [2014] HCASum 20
Chapter 37 Full Federal Court
Chapter 38 *FCT v Hunger Project Australia - Organisation for relief of hunger found to be a PBI – merely by raising funds and not delivering direct relief [19] In a decision handed down on Fri 13.6.2014, the Full Federal Court has held that Hunger Project Australia (HPA) is a public benevolent institution even though it was predominately engaged in fund raising. HPA is a not-for-profit company, which is part of a global network of entities that operate under the name "The Hunger Project". The principal objective of the Hunger Project is the relief of global hunger. The activities of HPA are mainly directed at raising funds, which are then disseminated to Hunger Project members in the developing world. It is those entities that directly perform charitable acts to relieve hunger. The question raised by this appeal was whether HPA is a "public benevolent institution" (PBI) within the meaning of s 57A(1) of the Fringe Benefits Tax Assessment Act 1986. The Commissioner contended that an entity that merely engages in fund raising activities and does not materially perform charitable works directly for the benefit of the public is not a PBI. Morgan’s Tax Month – June 2014 Developments
At first instance, in The Hunger Project Australia v FCT [2013] FCA 693, the primary judge (Perram J) rejected that contention and found that HPA was a PBI even though it was predominately engaged in fund raising. The Full Federal Court has now found that decision was correct and dismissed the Commissioner's appeal. The Court considered the ordinary contemporary meaning or understanding of a PBI was "broad enough to encompass an institution, like HPA, which raises funds for provision to associated entities for use in programs for the relief of hunger in the developing world". (FCT v Hunger Project Australia [2014] FCAFC 69, Full Federal Court, Edmonds, Pagone and Wigney JJ, 13 June 2014.) [LTN 112, 13/6/14] Chapter 39 Extract from [2014] FCAFC 69 Ordinary meaning 27. The Commissioner correctly accepts that the expression public benevolent institution does not have any technical legal meaning and that, in the absence of a statutory definition, it must be given its ordinary meaning. He contends, however, that it is possible to glean from observations made in some of the judgments in Perpetual Trustee that the ordinary meaning requires the direct provision of aid. 28. We do not consider that the judgments in Perpetual Trustee support the Commissioner’s restrictive interpretation of the ordinary meaning of the expression. 29. The matter in issue in Perpetual Trustee was whether the Royal Naval Home in Sydney was a public benevolent institution for the purposes of s 8(5) of the [Estate Duty Assessment Act 1914 – 1928] EDA Act. The Royal Naval House provided accommodation and recreation for petty officers and lower ratings of the navy when onshore. Because the relief provided by the Royal Naval House was provided directly, the issue [of] whether an institution could be a public benevolent institution if it did not itself directly provide relief did not arise for consideration by the Court. 30. Starke J said (at 232) that in ordinary English usage a public benevolent institution means “an institution organized for the relief of poverty, sickness, destitution or helplessness.” Dixon J (at 233) similarly gave a meaning to the expression, which focused on the objectives or purpose of the relevant institution: an institution fell within the expression if it “organised”, or was “conducted for” or “promoted” the relief of poverty or distress. 31. The Commissioner relies primarily on passages in the judgments of Evatt J and McTiernan J. Evatt J said the following about public benevolent institutions (at 235): Such bodies vary greatly in scope and character. But they have one thing in common: they give relief freely to those who are in need of it and who are unable to care for themselves. 32. The Commissioner places emphasis on the word “give” in this passage and submits, in effect, that this means that the relief must be directly given. He argues that an institution that simply raises funds does not “give” relief. In our opinion this reads far too much into the words used by Evatt J. Read in context his Honour was simply emphasising that the relief must be given or provided free of charge. His Honour was not suggesting that an institution cannot be a public benevolent institution if it does not itself directly give relief to those in need. 33. McTiernan J dissented on the facts. Before turning to the passage relied on by the Commissioner, it should be noted that in his lengthy judgment McTiernan J emphasised (at 237) that there did not appear to be any definite understanding of the precise meaning of the expression. His Honour also said that the question whether a particular institution was a public benevolent institution should not be approached by propounding a single or irrefutable test or definition, and then considering whether the institution in question meets each element of that test or definition. 34. Yet that is essentially the approach that the Commissioner urges in this matter. Morgan’s Tax Month – June 2014 Developments
35. Later in his judgment, McTiernan J noted that s 8(5) of the EDA Act had, prior to its amendment, exempted from estate duty gifts for “religious, scientific, charitable or public educational purposes”. His Honour then said (at 242): A comparison of the two sub-sections appears to show that the Legislature intended to exclude from the benefit of the exemptions granted by the Act a number of gifts which, though good charitable gifts in the technical sense, were not for religious or scientific or for public educational purposes or were not made upon the principle of giving direct relief or assistance to mankind in sickness or in need. 36. The Commissioner emphasises the words “direct relief or assistance” in this passage. Again, however, when read in context we do not consider that this passage provides any support for the Commissioner’s contention in this case. His Honour’s use of the word “direct” was not addressed to the nature of the institution that received the relevant gifts, but rather to the purpose or character of the gifts themselves. The point his Honour was making was that as a result of the amendment, only gifts that were eleemosynary in nature, that is gifts that provided aid to those in need, were exempt. Gifts that were charitable only in the technical legal sense (cf. Chesterman v Federal Commissioner of Taxation [1925] UKPCHCA 2; (1926) 37 CLR 317 at 319) were no longer exempt. His Honour was not in any way propounding a single or irrefutable test for a public benevolent institution which involved the direct provision of relief. 37. There is a further difficulty with the Commissioner’s reliance on what was said in the various judgments in Perpetual Trustees. Even if there could be divined from the various judgments a single expression of the common understanding of public benevolent institution, the Commissioner’s approach suggests that the common understanding in 1931, when Perpetual Trustee was decided, must forever fix the common understanding or meaning of the expression. We doubt that is the correct approach. 38. Whilst past judicial statements concerning the ordinary meaning of a word or expression can often assist in divining the meaning of the word or expression, the common understanding of the meaning of an expression may change over time depending on the particular expression in question. When the question is whether a particular institution is a public benevolent institution, the answer depends on the common or ordinary understanding of the expression at the relevant time. The question is not to be approached as a legal question to be dealt with by the mechanical application of past authority, irrespective of the present current understanding of the expression in the currently spoken English language: Ambulance Service (NSW) v Deputy Commissioner of Taxation [2002] FCA 1023; (2002) 50 ATR 496 at [40]- [42] (Ambulance Service). 39. There is much to be said for the proposition that the common understanding or usage of the expression in question here has expanded or changed since Perpetual Trustee was decided; ACOSS at 575C-E (per Priestley JA); Ambulance Service of New South Wales v Deputy Commissioner of Taxation [2003] FCAFC 161; (2003) 130 FCR 477 at [44]. It is unlikely that global aid networks comprising separate fundraising entities such as the Hunger Project were prevalent when Perpetual Trustee was decided. Even if it was the case that the common understanding of a public benevolent institution in 1931 involved the institution directly dispensing relief, we can see no reason why that common understanding may not have changed over time to encompass organisations that may be structured in ways that separate fund raising entities from entities that dispense relief or aid using those funds. [Emphasis added]
Chapter 40 *PTTEP Australasia (Ashmore Cartier) Pty Ltd v FCT - Taxpayer wins appeal on calculation of taxable profit under the PRRT Assessment Act [20] The Full Federal Court has unanimously allowed the taxpayer's appeal from the decision in PTTEP Australasia (Ashmore Cartier) Pty Ltd v FCT [2013] FCA 1175. In that case, the Court at first instance held in the Commissioner's favour that in calculating the taxpayer's taxable profit under s 22 of Petroleum Resource Rent Tax Assessment Act 1987 (the ‘PRRT Assessment Act’), the Morgan’s Tax Month – June 2014 Developments
"consideration receivable" by the taxpayer for the sale of shipments of crude oil was to be determined in accordance with clause 4.1 of the agreement between the parties. The issue both at first instance and on appeal was whether clause 8 of a supplemental agreement between the parties operated to substitute the amount payable under that clause for the amount originally payable under clause 4.1 of the initial agreement. The Commissioner contended that this (and related) clauses did not operate to substitute a new adjusted amount payable, as the amount introduced by new clause 8 was not part of the relevant consideration, but as a separate financing arrangement and therefore could not be part of the consideration receivable. However, in allowing the taxpayer's appeal, the Full Court found that the net effect of the new arrangement was the economic recognition that the actual amount payable to the taxpayer had to take into account the fact that it, as seller, had the economic use of funds for a short period of time. In this way, it found that it was conceptually no different from the parties agreeing to accept an amount paid in advance for a different amount paid on the date of transfer and that, furthermore, the parties accounted for the amounts consistent with this construction. (PTTEP Australasia (Ashmore Cartier) Pty Ltd v FCT [2014] FCAFC 71, Full Federal Court, Middleton, Pagone and Wigney JJ, 13 June 2014.) [LTN 115, 18/6/14]
Chapter 41 Federal Court
Chapter 42 *International Litigation Partners Pte Ltd v FCT - Commissioner denied access to documents in Family Law proceedings [21] The Federal Court has denied the Commissioner's request for access to documents that are part of Family Law proceedings. The case involved an appeal against an appealable objection decision under s 14ZZ of the Taxation Administration Act 1953. The applicant is International Litigation Partners Pte Ltd. In the course of the proceeding, the Court said the Commissioner sought leave to inspect all documents on a file provided to the Court by the Federal Circuit Court of Australia other than documents on that file relating to a child. The file in question is a Federal Circuit Court (Family Law Division) file between a man and his former wife, apparently involving their dispute concerning property and in respect of a child of their marriage. The Commissioner sought to access the file in order to determine whether International Litigation Partners was an Australian resident for tax purposes and whether it derived profits in Australia. The Commissioner is not a party to the Family Law proceedings, and the Court considered that the utility in the Commissioner gaining access to the documents was outweighed by the public interest in confidentiality of Family Law proceedings. (International Litigation Partners Pte Ltd v FCT [2014] FCA 671, Federal Court, Jagot J, 20 June 2014.) [LTN 121, 26/6/14]
Chapter 43 *Re Sisley and FCT - Excess super assessments stand: no special circumstances [22] The AAT has held that no special circumstances existed to warrant granting a taxpayer's request that the Commissioner exercise his discretion to allocate excess super contributions to another year. Morgan’s Tax Month – June 2014 Developments
The taxpayer had contributed over $678,000 into his superannuation funds over a 3-year period when the statutory limit was $450,000. The Commissioner said the taxpayer must now pay tax at 46.5% on the excess contributions. The taxpayer was a self-employed person and contributed money and shares to his super fund which exceeded the relevant contribution caps. He said he misunderstood the rules and would not have made the excess contributions if he had understood the true position. The taxpayer also argued the misunderstanding was effectively induced by erroneous advice he received during phone calls he had with ATO officers in 2010 and 2011. The Tribunal said it was not persuaded the taxpayer made the excess contributions as a result of advice he received from the Commissioner's officers. It said the complexity of the superannuation rules and the taxpayer's commitments as a carer did not, in its view, amount to special circumstances. The Tribunal also found that exercising the discretion would not be consistent with the objectives of Div 292 of the ITAA 1997. The Commissioner's objection decision was therefore affirmed. (AAT Case [2014] AATA 411, Re Sisley and FCT, AAT, McCabe SM, AAT Ref: 2013/1787, 24 June 2014.) [LTN 121, 26/6/14]
Chapter 44 Federal Circuit Court [ - ]
Chapter 45 Administrative Appeals Tribunal (AAT)
Chapter 46 *Re Dempsey and FCT - Taxpayer not an Australian resident for tax purposes [23] The AAT has allowed a taxpayer's objection to amended assessments issued to him for the 2009 and 2010 income years after finding the taxpayer was not a "resident" of Australia as that term is defined in s 6(1) of the ITAA 1936. The Commissioner had issued amended assessments to the taxpayer increasing his assessable income for the 2009 and 2010 income years by $200,540 and $305,516, respectively. The increases were the result of the Commissioner's inclusion of income derived by the taxpayer from his employment in the Kingdom of Saudi Arabia during each of the income years in question. The taxpayer had prepared and lodged his income tax returns for the 2009 and 2010 years on the basis that he was a foreign resident. It was common ground that the taxpayer was domiciled in Australia for each of the income years in question. The Tribunal largely accepted the taxpayer's evidence. The Tribunal said the taxpayer's presence in Saudi Arabia "was hardly casual or passing. So far as intention is relevant, [the taxpayer] had, at the time when he first left Australia for the Kingdom, a reservation as to whether he would make Saudi Arabia his home for the duration of the [project] and beyond". The Tribunal accepted the taxpayer had intended to make Saudi Arabia his home for the duration of the project and beyond into the indefinite future. The Tribunal concluded the taxpayer resided in Saudi Arabia in the 2009 and 2010 income years. It was also satisfied the taxpayer's permanent place of abode was in Saudi Arabia for the years in question. Morgan’s Tax Month – June 2014 Developments
(AAT Case [2014] AATA 335, Re Dempsey and FCT, AAT, Ref No: 2013/4861; 2013/4862, Justice Logan PM, Hack DP, Kenny SM, 29 May 2014.) [LTN 98, 23/5/14] Chapter 47 Extract from [2014] AATA 335 28. On the Saudi Kayan project, Mr Dempsey had 12 engineers who reported directly to him. In the course of the project, he came to be in charge of approximately 800 employees. He reported directly to the Project Manager, a Mr Mal Noe. The Saudi Kayan project involved construction work over a 640 acre site. It was technically demanding with very limited margins for error. Mr Dempsey described it as, and we accept that it was, “one of the most professionally challenging projects that I have worked on over a long career”. … 30. In Saudi Arabia, Mr Dempsey lived in an apartment in a secure residential compound built and maintained for the use of various companies’ senior staff from developed countries. He lived in two such apartments; one for nine months, the other for the balance of the term of his employment by Fluor Arabia Ltd. Each apartment which he occupied was rented by Fluor Arabia Ltd for his use. Each was furnished but Mr Dempsey was able to and did acquire such additional items as he deemed necessary to suit his needs. To that end, he acquired an additional refrigerator. Mr Dempsey also supplied his own cutlery, crockery, bedding, linen, towels and the like. He also engaged and paid for local cleaners to clean the apartment three times a week. … 36. This living arrangement prevailed for the whole of the period from September 2007 to May 2010 in which Mr Dempsey was in Saudi Arabia. He did not have to, and did not, share either of them with anyone. 37 Mr Dempsey worked long hours on the Saudi Kayan project. His typical working week was of six 12 hour days’ duration with Friday being a rest day. Occasionally, in periods of peak demand in the progression of the project, he also worked on Friday. A typical working day for Mr Dempsey in Saudi Arabia commenced at approximately 4:30 am when he left for work and concluded at about 6:00 pm when he returned home. He drove to work in a Fluor Arabia Ltd vehicle supplied for his exclusive use in company with at least one other passenger. It was a company requirement that he drive with at least one other person at all times. This was because it was not unknown in the Kingdom for persons travelling alone to be attacked. Because he was supplied with a vehicle by his employer, there was no need for him to acquire a vehicle himself. 38. To enable him lawfully to drive within the Kingdom, Mr Dempsey obtained and, for the duration of his time there, maintained a Saudi Arabian driver’s licence. … 41. Mr Dempsey received two weeks holiday every eleven weeks. He received a holiday travel allowance in addition to his salary. It would have been possible for him to spend his holidays at his apartment in the residential compound but this would have entailed remaining within the compound. It was not possible, for example, for him to use his apartment there as a base for local touring within the Kingdom because such touring was not permitted. Unsurprisingly, he chose to take his holidays abroad. Fluor Arabia Ltd imposed no restriction as to where he might travel using his travel allowance. An analysis of the duration and location of his holiday travel over the duration of his employment in Saudi Arabia discloses that he favoured two destinations, Thailand and Australia, with the greater time being spent in Thailand. … 43. In 2004, Mr Dempsey purchased a house in a residential compound at Mudgeeraba on the Gold Coast. The Mudgeeraba house was then in a reasonably new condition, having been built in 2002. It had had but one previous owner. Mr Dempsey purchased the house with the assistance of a loan, secured by a mortgage over the property. … Morgan’s Tax Month – June 2014 Developments
45. Prior to leaving for overseas, Mr Dempsey cleaned the house, cleaned and emptied his refrigerator, made the beds and put sheets as dust covers over his furniture. To add extra security, he put wooden dowels in the tracks of sliding windows and doors at the house and, in addition, he drilled holes in the sides of his garage door and its surrounds so as to secure that door with bolts which would prevent it being forced up. Mr Dempsey turned off his hot water and mains power but not power to household lighting. He put a timer on the household lights for security reasons. He also made an arrangement with a neighbour whereby, in return for a payment of $300 to $400 every six months, that neighbour agreed to mow the lawn and to cut the hedge at the house. 46. Mr Dempsey left in his garage a Mercedes Benz motor car. He prepared this for extended immobilisation. During one of the holiday visits which he made to Australia, Mr Dempsey acquired a late model, well equipped four wheel drive vehicle. This, too, he kept in his garage at the house. Unlike the Mercedes Benz, the four wheel drive had electronics which required that it be stored with the vehicle electrics connected. He placed this vehicle on trickle charge, leaving a power circuit on for this purpose. He kept up the registration on each vehicle. 47. Mr Dempsey chose not to sell the Mudgeeraba house while he was employed in Saudi Arabia. Since his return to Australia at the end of that employment, that house is where he has lived. 48. Initially, Mr Dempsey’s decision to retain the house was grounded in an uncertainty on his part as to what he would encounter when he took up his employment in Saudi Arabia. His reasons for retaining the house changed once he found that he enjoyed the employment. He could not put a precise time as to when this occurred but the reasons why he retained the house did change. They became a combination of just not being bothered and the lack of an attractive alternative financial return. Related to the latter was also the impact on house prices of the 2008 “Global Financial Crisis”. Nonetheless, the longer that Mr Dempsey stayed in Saudi Arabia, the more the possibility of selling that house loomed in his thinking. Had prospective successor employment there come to pass, he believes that he would have sold it in the course of that term of employment. 49. Mr Dempsey also made a deliberate decision not to rent out the Mudgeeraba house while he was in Saudi Arabia. He had had the earlier experience of renting out a house which he owned in Nerang while engaged for a year on project work in Cape York. He had found this to be “a waste of time financially”, quite apart from the wear and tear on the property. This experience also intruded on his decision not to rent out the Mudgeeraba house. On his calculation, the benefit which he would derive from renting out the property would be about $50.00 to $60.00 per week by the time that he deducted agent management fees, rates and water charges, property maintenance costs and the costs of alternative storage for his furniture and vehicles. This was not to mention the anticipated wear and tear on the property. All in all, he decided that it was not worth the trouble. 50. Mr Dempsey’s reasons for retaining and not renting the Mudgeeraba house while he was in Saudi Arabia make perfect sense to us. In expressing this view, we have also taken into account that Mr Dempsey could well afford to make such a choice. He was well paid. He had neither need nor ability to purchase accommodation in Saudi Arabia. He did not need the capital tied up in the house for any other purpose. He had ready access to other capital to satisfy his other wants of life, as indicated by his being able to deploy a substantial sum for the advantageous purchase of the four wheel drive vehicle or to purchase weapons and equipment associated with his hobby of shooting. Mr Dempsey also did not need the relatively modest net additional income, which it might generate if rented. 51. As to this hobby, Mr Dempsey maintained a diverse collection of pistols and rifles and related equipment in a secure armoury at the Mudgeeraba house. He enjoyed range shooting. At the time when he first left for Saudi Arabia, he held both the requisite weapons licences under Queensland legislation as well as a membership of the Gold Coast Gun Club. He kept each of these current for the duration of the time when he was in Saudi Arabia. Morgan’s Tax Month – June 2014 Developments
52. At least so far as Mr Dempsey’s pistols (which we infer were concealable weapons) were concerned, Queensland residency was a relevant consideration in relation to the operation of the concealable weapon licencing provisions of the Weapons Act 1990 (Qld) [6] . That Mr Dempsey must have put forward to Queensland authorities that he was a Queensland resident in order to hold or renew such a licence was a feature of the submissions made to us in defence of the amended assessments and related objection decision. We address that submission and others like it based on statements in tax returns and incoming and outgoing passenger cards below. 53. We infer from Mr Dempsey’s hobby and his reference to storage costs being one consideration telling against his renting out the Mudgeeraba house that the existence of his home armoury and the apprehended cost of alternative, legislatively compliant weapons storage was included in his decision not to rent out the property. 54. On those occasions when he visited the Gold Coast when he decided to make Australia a leave destination, Mr Dempsey stayed at his Mudgeeraba house. On such visits, he took the opportunity to pursue his hobby by using his firearms on a range. … 56. In 1987, when he was living in Canberra, Mr Dempsey met and formed an intimate relationship with a woman. Out of respect for her privacy we shall call her Ms C. Though they never lived together, the relationship produced two children, a son born in 1988 and a daughter born in 1991. The intimate relationship ceased about a year after the daughter’s birth. It was then that Mr Dempsey moved to the Gold Coast, acquiring the Nerang property already mentioned. Ms C remained in Canberra with the children, together with a child from an earlier relationship of hers. Thereafter, Mr Dempsey provided financial assistance to Ms C for the education and living expenses of his two children. He also, in 1994, bought a car in his name but which was used by Ms C in Canberra. He kept up the registration of that car until recently. 57. Until about 1996, relations between Mr Dempsey and Ms C were, as he put it, “strained”. Since then, they have become and remain good friends, though they have not resumed an intimate relationship. 58. After Mr Dempsey moved to the Gold Coast in 1992, it became his habit to visit Canberra for a fortnight about every six months to see the children with them, and Ms C, in turn, visiting him at the Nerang property on the Gold Coast about every six months. In the interval between when he acquired the Mudgeeraba house in 2004 and when he first left for Saudi Arabia, Ms C visited Mr Dempsey there on three occasions, twice with the children and once by herself for about three weeks in the course of a return journey by her from Malaysia to Canberra. 59. By 2008, Mr Dempsey’s son was in Melbourne studying at university and his daughter had commenced studies at university in Canberra.
Chapter 48 *Re Moignard and FCT - Taxpayer not presently entitled to profit from sale of premises deposited in his account [24] The AAT has held that an individual taxpayer who was the controller of several trusts that operated a wine growing business and who was also a beneficiary was not presently entitled to an amount of over $480,000 that one of the trust made from the sale of business premises that occurred on the same day the trust purchased it under an option agreement it exercised with the landlord. The Commissioner had issued default assessments to the taxpayer, arguing that because the profits from the sale were deposited into an account operated by the taxpayer, the taxpayer was presently entitled to the amount as assessable income under either s 101 or s 97 of the ITAA 1936. However, the AAT found that the Commissioner incorrectly interpreted the operation of s 101 as the section required the exercise of the trustee's discretion for it to apply, which it found was not the case here. Further, it found that the mere receipt of funds by a discretionary beneficiary would only activate s 101 if the receipt had been "allocated", which again it found was not the case in the Morgan’s Tax Month – June 2014 Developments
circumstances. The AAT also found that the taxpayer as a beneficiary was not assessable on the funds under s 97 for similar reasons. In addition, the AAT noted that some 80% of the funds deposited were disbursed, not for taxpayer's personal use, but for vineyard and wine-related expenses of the business in the relevant year of income. In any event, the AAT found that a disclaimer made by the taxpayer to the income was effective despite it being made some 11 months after the payment was made. In this regard, the AAT noted, among other things, that the taxpayer did not have access to relevant documentation, then held by ASIC, to make the disclaimer sooner. (AAT Case [2014] AATA 342, Re Moignard and FCT, AAT, Ref No 2012/3591, Dunne SM, 30 May 2014.) [LTN 105, 3/6/14]
Chapter 49 *Re Power and FCT - Serious hardship claim refused [25] A taxpayer has been unsuccessful before the AAT in seeking to be released from his tax liabilities under s 340-5 of Sch 1 of the TAA. As of 4 May 2014, the taxpayer's outstanding tax debts amounted to around $58,000. However, the Tribunal was not satisfied the taxpayer's situation, if required to pay the tax debts, would be of serious hardship. Even if it were a case of serious hardship, the Tribunal said it would not exercise the discretion to grant relief. The Tribunal noted that no explanation was offered for the failure by the taxpayer to meet his tax liabilities as they arose. It said that instead of paying what it considered to be manageable assessments, the taxpayer "largely ignored his tax liabilities over the last 5 or 6 years, and has allowed the amounts due to accumulate with interest". (AAT Case [2014] AATA 343, Re Power and FCT, AAT, Ref No: 2013/4539, Molloy DP, 2 June 2014.) [LTN 105, 3/6/14]
Chapter 50 *Re Huckle and FCT - Serious hardship claim refused [26] A taxpayer has been unsuccessful before the AAT in seeking to be released from his tax liabilities under s 340-5 of Sch 1 of the TAA. As of 21 February 2014, the taxpayer's tax debt amounted to around $81,000. The taxpayer contended his income tax debts have arisen as a result of his unauthorised early access of superannuation benefits in order to support his gambling addiction. Although acknowledging the taxpayer's intentions to control his gambling addiction, the Tribunal was not satisfied the taxpayer's situation, if required to pay the tax debts, would be of serious hardship. Even if it were a case of serious hardship, the Tribunal said it would not exercise the discretion to grant relief. The Tribunal noted the taxpayer was earning a "high income" in the mining industry and that his household expenses included discretionary spending that could be reduced. It said the sale of the taxpayer's car or investment property would also significantly reduce his tax liability. Furthermore, it noted the taxpayer had preferred the repayment of other debts to his tax debt. Morgan’s Tax Month – June 2014 Developments
Accordingly, the taxpayer's application was dismissed. (AAT Case [2014] AATA 362, Re Huckle and FCT, AAT, Ref No: 2013/6125, Cunningham SM, 6 June 2014.) [LTN 110, 11/6/14]
Chapter 51 *Re Mack and FCT - Trust distributions through interposed beneficiary a sham - assessments affirmed [27] The AAT has affirmed that husband and wife beneficiaries of a family trust were each assessable on 50% of the income from a family trust that had been distributed to an "interposed" trust beneficiary on the basis that the arrangement was a profit washing scheme. The husband and wife taxpayers were beneficiaries of the Mack Family Trust, through which the husband's accounting practice was operated [in rural Queensland]. On 27 June 2002, the Glenferry Trust was constituted [with Drgee Pty Ltd as trustee] and [it was] made a beneficiary of the Mack Family Trust. The husband and wife taxpayers, [Drgee Pty Ltd] and Danbowl Pty Ltd [as trustee of the Eleventh Hour Unit Trust or ‘EHUT’], were unit holders in the Glenferry Trust. Danbowl [atf the EHUT] was also [the sole] beneficiary of the Glenferry Trust [that could receive it’s income]. [The Macks did not control Danbowl or the EHUT.] In the 2002 income year, the Mack Family Trust disclosed a net income of $263,092, of which, small amounts were distributed to the taxpayers and their children etc, while $210,000 was distributed to the Glenferry Trust. In the same year, the Glenferry Trust distributed its entitlement to Danbowl [atf the EHUT]. In the 2003 income year, a similar pattern occurred. [The idea was that the profits of the Glenferry Trust, and others who distributed to Danbowl atf the EHUT, could ‘wash’ their profits through losses in a loss trust, save for 15% of those profits, which apparently were kept as a promotor’s fee]. [Having lodged returns on this basis, the taxpayers did an ‘about face’ claiming that the Glenferry Trust’s income was not distributed to Danbowl atf the EHUT, but was off-set by various deductions.] In July 2007, the Commissioner issued assessments to the Glenferry Trust and the taxpayers for the 2002 and 2003 years to treat the distributions from the Mack Family Trust as income of the Glenferry Trust to which the husband and wife taxpayers were presently entitled on a 50/50 basis on the grounds that the arrangement was a "profit washing scheme". The taxpayers argued that they did not participate in the arrangement, [and] the Glenferry Trust was entitled to reduce its income to nil in both income years on the basis of the availability of deductions for accrued director's and management fees, and that their personal assessments should likewise be reduced. However, the AAT dismissed the taxpayers' applications essentially on the grounds that the arrangement was a sham and that therefore they could not have participated in the arrangement. In arriving at this conclusion, the AAT found that it could not rely on the husband's evidence because on "critical matters", it was "so at odds with contemporaneous documents and with matters that are incontrovertible" and especially that the taxpayer denied participating in the arrangement, yet on 27 June 2002 he arranged for the creation of the Glenferry Morgan’s Tax Month – June 2014 Developments
Trust [and the issue of the units in that trust, that carried the right to all the income of that trust, to Danbowl atf the EHUT]. In any event, the AAT found that if the taxpayers had participated in the arrangement, then there were no grounds to support their claim that deductions for accrued director and management fees were available to the Glenferry Trust to reduce its taxable income to nil. Finally, the AAT found it was appropriate in the circumstances for the Commissioner to assess the Mack Family Trust income on a 50/50 basis to the husband and wife taxpayers, particularly as they failed to discharge the onus of proving the assessments were excessive. It also found that the matter involved evasion of tax, and that therefore the Commissioner was entitled to amend the assessments out of time. Similarly, it found that the Commissioner was entitled to impose 50% shortfall penalties for "recklessness" and that there were no grounds for remission of the penalty. (AAT Case [2014] AATA 367, Re Mack and FCT, AAT, Ref Nos 2012/5582, 2012/5583, 11 June 2014, Hack DP.) [LTN 113, 16/6/14]
Chapter 52 *Re Ogden and FCT - Large claims for work-related and investment deductions reduced significantly [28] The AAT has confirmed that a taxpayer, a professional sales commission agent, was not entitled to various work-related deductions and personal investment deductions on the basis he had not discharged the onus of proof in regard to the items in dispute, except in relation to certain minor items. The taxpayer during the relevant year was employed by 2 business entities that required him to use his own motor vehicle to visit clients and attend meetings. He claimed that as he was not provided with a permanent office by either of his employers, but attended the employers' offices for sales meetings and used the "hot-desking" method, he could claim deductions for the use of parts of his home as a home office, car space, and other related expenses - as well as various personal investment expenses. Originally the taxpayer had claimed over $97,000 worth of expenses, which reduced his taxable income to just over $21,000 in the year in question. After various concessions made by the Commissioner, only some $57,000 of expenses remained in dispute. However, the AAT found that the taxpayer was not entitled to a deduction for the totality of the amounts that remained in dispute. For example, it found that work related travel expenses involving accommodation and meals were not properly substantiated or were of a private nature. The AAT found that, on the basis of the evidence, only 11.7% of expenses (including mortgage interest, heating, lighting, cleaning, insurance, rates etc) should be allowed as a deduction. The AAT also held that the 25% shortfall penalty for failing to take reasonable care should be maintained in all the circumstances. It also found there were no grounds for reduction to 10% in view of the taxpayer's medical condition as there was no evidence before the Tribunal of such matters. (AAT Case [2014] AATA 385, Re Ogden and FCT, AAT, Ref No 2012/5365, Ettinger SM, 20 June 2014.) [LTN 118, 23/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 53 *Re Van Gestel and FCT - Alleged identity fraud in BAS: Tribunal has jurisdiction to review [29] The AAT has found that it has jurisdiction to entertain a review of an objection decision that affirmed assessments of net GST amounts and net fuel credit amounts owed by a taxpayer. Monthly BASs were lodged in the name of the taxpayer's business for the July 2010 and August 2010 periods. Both BASs resulted in refunds, $9,695 for July 2010, and $8,791 for August 2010. The refunds were deposited into a third party bank account nominated over the phone, according to the Commissioner. The Commissioner subsequently conducted an audit of the taxpayer's business and issued amended assessments requiring the taxpayer to pay back the refund issued after finding the taxpayer was not conducting a business. The taxpayer contended that he had been a victim of identity fraud and did not lodge the BASs in question. The taxpayer then applied to the Tribunal to review the decision and reach a view about the fraud so he could be relieved of the obligation to pay the debt. The Commissioner argued the AAT did not have jurisdiction to review the decision as the taxpayer was not technically "dissatisfied" with the objection decision as required by s14ZZ(1)(a)(i) of the TAA. The Tribunal accepted that the taxpayer was dissatisfied with the objection decision and a review of that decision necessarily extended to its factual basis, which included the agreed facts by both parties such as there was no business being carried on. However, the AAT said the factual basis may also include the disputed allegation that the taxpayer never claimed the credits in the first place. It said if that allegation were made out, the assessment would necessarily be amended to show the taxpayer did not have any liability at all arising out of the transactions referred to in the BAS. Therefore, it held that it had jurisdiction to review the objection decision and the taxpayer's arguments will be addressed at a hearing. (AAT Case [2014] AATA 396, Re Van Gestel and FCT, AAT, Ref No 2014/0616, McCabe SM, 20 June 2014.) [LTN 119, 24/6/14]
Chapter 54 *Re RepairCo and FCT - No deductions for contributions to employee welfare fund - and assessments within time [30] The AAT has confirmed that a taxpayer, an automotive repair company, was not entitled a deductions for a contribution paid to an off-shore "employee welfare fund" in the 1998 income year nor to a deduction for the resultant carried forward loss and another contribution in the 1999 income year. However, the AAT found that while the Commissioner could issue assessments for these income years in 2012, an assessment to deny a deduction for resulting carried forward losses that was issued for the 2002 income year was out of time. The taxpayer and a number of related companies carried on an automotive repair and spare parts business. In 1998, the taxpayer claimed deductions of $400,000 for contributions made to an "employee welfare fund". Its beneficiaries were the 2 employee-operators of the business and a spouse. In 1999, the taxpayer claimed deductions for further contributions of $25,000 and carried forward losses resulting from the original contribution in 1998. In 2012, Morgan’s Tax Month – June 2014 Developments
the Commissioner issued amended assessments to deny the original and later contributions and the resultant carried forward losses (including for the 2002 income year), together with issuing Pt IVA determinations. The fund had been established in June 1998 as an offshore discretionary trust fund. In dismissing the taxpayer's application, the AAT found that the contributions were not deductible as they were not made for the purpose of gaining or producing the taxpayer's assessable income but rather they were made for the purpose of generating tax deductions. In doing so, the AAT dismissed the taxpayer's argument that as it conducted a "business of providing personnel to other entities in the group", the contributions were deductible. The AAT also found major problems in the way the fund was set up and operated, including that the idea for the fund originated not with the business itself, but with its accountant and at no stage had the taxpayer identified any need to provide for the retention of its employees and that only one payment of $22,780 had ever been made out of the fund in 15 years. The AAT then found that the notices of assessment for the 1998 and 1999 years were not out of time as they came within relevant items in s 171A of the ITAA 1936 (the time period to make assessments for "nil liability returns" for the 2003-04 or earlier years). However, the AAT found the Commissioner did not have the power to issue an assessment for the 2002 year because this assessment came within s 170(1), Item 4 which only allows a 4-year time limit for issuing assessments. Finally, the AAT found that it had been appropriate for the Commissioner to impose 75% penalty tax for "intentional disregard" of the law and that there were no grounds for remission of the penalty. (AAT Case [2014] AATA 414, Re RepairCo and FCT, AAT, Frost DP, Ref Nos 2012/4885-4887, 25 June 2014.) [LTN 121, 26/6/14]
Chapter 55 Other Courts & Tribunals [ - ]
Chapter 56 Appeals
Chapter 57 *Australian Pipeline Limited as Responsible Entity for the Australian Pipeline Trust v FCT – taxpayer withdraws appeal – entity an ‘associate’ before joining consolidated group [31] The taxpayer has discontinued its appeal to the Full Federal Court against the decision of Robertson J in Australian Pipeline Limited as Responsible Entity for the Australian Pipeline Trust v FCT [2013] FCA 1372. The Federal Court had dismissed the taxpayer's appeal from an adverse private ruling concerning the issue of whether the conditions for the exception provided in s 705-47(5) of the ITAA 1997 (dealing with the consolidation tax cost setting amount for assets where entities become subsidiary members of consolidated groups) were satisfied for the period 1 July 2011 to 30 June 2012. [LTN 108, 6/6/14] Chapter 58 Catchwords from [2013] FCA 1372 INCOME TAX – tax cost setting amount for assets where entities become subsidiary members of consolidated groups – off-market take-over bid – GasNet Australia Trust became an associate of Australian Pipeline Trust no later than 3 October 2006 when Australian Pipeline Trust had acquired more than 50% of the units in GasNet Australia Trust – joining time was 20 December 2006 when Australian Pipeline Trust had acquired 100% of the units in GasNet Australia Trust and GasNet Australia Trust became a subsidiary member of the consolidated group – whether GasNet Australia Morgan’s Tax Month – June 2014 Developments
Trust was not an associate of the Australian Pipeline Trust “just before the joining time” within the meaning of s 705 -47(5)(b)(i) of the Income Tax Assessment Act 1997.
Chapter 59 *Blank v FCT (No 2) – taxpayer appealed decision of Edmonds J not to re-open the decision he was assessable on international sums held to be deferred remuneration [32] The taxpayer has appealed to the Full Federal Court against the decision of Edmonds J in Blank v FCT (No 2) [2014] FCA 517. The Federal Court had dismissed the taxpayer's application to re-open his case after the Court at first instance in Blank v FCT [2014] FCA 87 held that a payment of US$160m made to him following his termination from his employment was assessable as "ordinary income" in his hands. The Court arrived at this decision on the basis that the payment was "deferred compensation for services rendered" arising from negotiating a settlement in relation to his right to participate in his employer company's "profit participation plan". [LTN 115, 18/6/14]
Chapter 60 *Re Qantas Airways Ltd and FCT – taxpayer appeals adverse car parking FBT assessment decision [33] The taxpayer has appealed to the Federal Court against the decision in AAT Case [2014] AATA 316, Re Qantas Airways Ltd and FCT. In that case, the AAT held that car parking facilities provided by the taxpayer to its employees in certain locations were subject to FBT for the 2007 to 2010 FBT years. [LTN 117, 20/6/14]
Chapter 61 *FCT v Resource Capital Fund III LP – taxpayer seeks leave to appeal to the High Court from DTA and valuation decision [34] The taxpayer has lodged an application for special leave to appeal to the High Court against the Full Federal Court decision in FCT v Resource Capital Fund III LP [2014] FCAFC 37. In that case, the Full Court unanimously allowed the Commissioner's appeal and held that the taxpayer, a non-resident limited partnership, was assessable on a capital gain of $58m it made on the sale of shares it held in an Australian company that carried out mining operations in Australia. [LTN 120, 25/6/14]
Chapter 62 *FCT v Darling – Husband has applied for special leave to appeal to the High Court: Commissioner should not have access to Court documents for an audit [35] It is understood that one of the parties (the husband) has applied for special leave to appeal to the High Court against the decision of the Full Court of the Family Court in FCT v Darling [2014] FamCAFC 59. The Full Court of the Family Court had ruled that the Court at first instance wrongly applied its discretion to prevent the Commissioner from using certain documents filed in the Court for the purposes of a tax audit of one of the parties (the husband) to the proceedings (and related entities) in relation to the 1991 to 2010 income years. [LTN 122, 27/6/14] Morgan’s Tax Month – June 2014 Developments
CHAPTER 63 COMMISSIONER’S PUBLICATIONS & NEWS
Chapter 64 Decision Impact statements
Chapter 65 *Fishermen joint venturers not ‘employees’ for super (SGC) purposes: ATO view on AAT case: Re Dominic B Fishing Pty Ltd and FCT [36] The ATO on Thur 5.6.2014, issued a Decision Impact Statement on the decision in AAT Case [2014] AATA 205, Re Dominic B Fishing Pty Ltd and FCT. In that case, the AAT held that fishing crew members on a commercial fishing vessel operated by the taxpayer, were not "employees", at common law, or under the extended meaning of that term in s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA). As such, the taxpayer company was not required to make superannuation contributions in respect of the crew members. The ATO said the Tribunal's view that the case was limited to its own facts and does not provide any authoritative guidance on cases concerning whether a worker is an employee for the purposes of the SGAA was consistent with the Commissioner's position. In relation to the Tribunal's finding that the fishermen were in a joint venture with the taxpayer, the ATO said the Commissioner did not have an opportunity to make submissions to the Tribunal about this issue in the case. It said the Commissioner will seek to make full submissions on this point in similar cases that arise in the future, with a view to further clarifying the issue of when a fisherman or fishermen is or is not in a joint venture with a boat owner. [FJM Note: About 6 months before this case, there was another fishermen case where the taxpayer lost such an argument and had to pay SGC – see my note on this Re Dominic B Fishing Pty Ltd case in the ‘April Developments’ edition of Morgan’s Tax Month (under AAT Cases), as it makes reference to this previous case that went the other way.] [LTN 107, 5/6/14]
Chapter 66 Rulings
Chapter 67 TR 2014/3 – Income from a ‘permanent establishment’ O/S, represented by substantial equipment, not ‘NANE’ under s23AH unless carrying on business [37] This Ruling, issued Wed 11.6.2014, considers the application of the requirement in s 23AH of the ITAA 1936 that a company "carry on a business at or through a permanent establishment (PE)", in circumstances where a company is taken to have a PE: in relation to substantial equipment under para (b) of the definition of PE in s 6(1) of the ITAA 1936; or under an Article in one of Australia's tax treaties that deems an enterprise to have a PE if it has substantial equipment in a contracting State. The Ruling states that where a company is taken to have a PE in relation to substantial equipment (by domestic law or tax treaty), the foreign income derived will not be ‘non-assessable non-exempt’ (NANE) income under s 23AH, unless the income is derived in actually carrying on a business at or through the PE in the foreign jurisdiction. It says where the s 6(1) definition of PE applies or where the definition of PE under a tax treaty applies, a company does not automatically satisfy the requirements in s 23AH. The Ruling indicates that whether a company is actually carrying on a business at or through the PE is a question of fact and degree determined by the circumstances of each case. The Ruling contains 3 Morgan’s Tax Month – June 2014 Developments
examples and was previously issued as Draft Taxation Ruling TR 2013/D8. It is largely unchanged from the Draft. DATE OF EFFECT: Applies to years of income commencing both before and after its date of issue. [LTN 110, 11/6/14] [LTN 111, 12/6/14]
Chapter 68 TR 2014/4 - Effective life of depreciating assets from 1 July 2014 [38] This Ruling, released on Wed 25.6.2014, applies from 1 July 2014, and explains the methodology used by the Commissioner in making determinations of the effective life of depreciating assets under s 40-100 of the ITAA 1997. The Ruling replaces Taxation Ruling TR 2013/4, which is withdrawn with effect from 1 July 2014. To the extent that the Commissioner's views in that Ruling still apply, they have been incorporated into TR 2014/4. The ATO has prepared a consolidated version of the amended determination, which is set out in the Schedule to the Ruling. The Commissioner has made new determinations that commence on 1 July 2014 pursuant to s 40-100, determining the effective life of assets covered by the following descriptions including: polymer film and sheet packaging material manufacturing, railway rolling stock manufacturing and repair services, ready-mixed concrete manufacturing, scientific research services, and waste remediation and materials recovery services. [LTN 120, 25/6/14]
Chapter 69 Determinations
Chapter 70 *TD 2014/13 - Voting power and the UK DTA [39] This Determination, issued on Wed 4.6.2014, states that a UK company "holds directly" at least 10% of the voting power in an Australian company for the purposes of Article 10.2(a) of the United Kingdom Convention (ie the Australian-UK double taxation agreement (DTA)) where: a nominee shareholder owns shares carrying at least 10% of the voting power in the Australian company for the benefit of the UK company; and the nominee undertakes to UK company to exercise all rights of voting and other privileges attaching to the shares in such manner as UK company shall direct or approve. DATE OF EFFECT: Applies to years of income commencing both before and after its date of issue. [LTN 106, 4/6/14]
Chapter 71 *TD 2014/14 - Deductibility of capital support payments [40] This Determination, issued on Wed 4.6.2014, states that a capital support payments, which have the features outlined in the Determination are of capital nature and are not deductible under s 8-1 of the ITAA 1997. It also states that such payments are not a losses from a financial arrangement and accordingly are not deductible under ss 230-15(2) and (3) of the ITAA 1997. In addition, the Determination indicates that such payments are included in the cost base and reduced cost base of the parent's investment in the subsidiary, and therefore not deductible under s 40-880 of the ITAA 1997. DATE OF EFFECT: Applies to years of income commencing both before and after its date of issue. Morgan’s Tax Month – June 2014 Developments
[LTN 106, 4/6/14]
Chapter 72 *TD 2014/15 - R&D: deductibility of design expenditure [41] This Taxation Determination, released Wed 11.6.2014, concerns a situation where an R&D entity incurs expenditure on various stages of design activities (design expenditure), connected with it beginning to hold a tangible asset, and that expenditure also falls within the terms of s 355-205 of the ITAA 1997. Section 355-205 deals with the entitlement of R&D entities to deduct amounts of expenditure for the purpose of calculating any tax offset they are allowed under s 355-100. Broadly, the Determination indicates that design expenditure will not be notionally deductible under s 355-205 where it is covered by para 355-225(1)(b) because it is included in the cost of a tangible depreciating asset for the purposes of Div 40. It includes a detailed example examining design expenditure over the life of a project and setting out when those expenditures would be included. The Determination was previously issued as Draft TD 2013/D9 and contains changes from the Draft. DATE OF EFFECT: Applies to years of income commencing both before and after its date of issue. [LTN 110, 11/6/14]
Chapter 73 *TD 2014/16 - Capital gains: improvement threshold 2014-15 is $140,443 [42] This TD, released on Wed 25.6.2014, specifies for the purposes of s 108-85 of the ITAA 1997, that the CGT improvement threshold for the 2014-15 income year is $140,443. [LTN 120, 25/6/14]
Chapter 74 *TD 2014/17 - Car depreciation limit 2014-15 is $57,466 [43] The ATO on Wed 25.6.2014, released Taxation Determination TD 2014/17 which states that the car limit for the 2014-15 financial year is $57,466. The car limit is used to work out decline in value deductions of certain cars under the income tax law. [LTN 120, 25/6/14]
Chapter 75 *LCTD 2014/2 - Luxury car tax threshold for 2014-15: is $61,884 or $75,375 for a fuel-efficient car [44] The ATO on Wed 18.6.2014, released Luxury Car Tax Determination LCTD 2014/2 which states that the luxury car tax threshold for the 2014-15 financial year is $61,884. The Determination also states that the fuel-efficient car limit for the 2013-14 financial year remains at $75,375. DATE OF EFFECT: Applies to the financial year commencing 1 July 2014. [LTN 115, 18/6/14]
Chapter 76 Class Rulings & Product Rulings
Chapter 77 CR 2014/46 - Capital notes [45] The ATO on Wed 4.6.2014, issued Class Ruling CR 2014/46 (Westpac Banking Corporation – Westpac Capital Notes 2). It applies from 1 July 2013 to 30 June 2025. Broadly, the Ruling states that under item 2 of the table in s 109-10 of the ITAA 1997, a holder will acquire their capital notes on 23 June 2014, being the date the contract for the issue of the notes is entered into. [LTN 106, 4/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 78 CR 2014/47-48 - Lifetime care and support scheme; transfer payments [46] The ATO on Wed 11.6.2014, issued the following Class Rulings: CR 2014/47: Self purchasing of services for assessed treatment and care needs in the NSW Lifetime Care and Support Scheme. It applies from 25 June 2012. Broadly, the Ruling states that payments received by a participant in the scheme are not included in their assessable income under s 6-5 of the ITAA 1997. CR 2014/48: Treatment of transfer payments made to employees of Green State Power Pty Ltd. It applies from Wed 11.6.2014 to 30 June 2015. The Ruling states that the proposed transfer payments made in accordance with the scheme are made in consequences of the termination of employment. [LTN 110, 11/6/14]
Chapter 79 CR 2014/49 - Rugby Union education payments not assessable [47] The ATO on Wed 18.6.2014, issued Class Ruling CR 2014/49 (Payments made under the Education and Training Grant Program provided by the Rugby Union Players' Association). It applies from 1 April 2013. Broadly, the Ruling states that amounts received under the program are not assessable under either ss 6-5 or 15-2 of the ITAA 1997. [LTN 115, 18/6/14]
Chapter 80 CR 2014/50-53 - Return of capital; early retirement schemes [48] The ATO on Wed 25.6.2014, released the following Class Rulings: CR 2014/50: Proposed return of share capital: IPE Limited. It applies from 1 July 2013 to 30 June 2015. Among other things, the Ruling states that the proposed return of capital will not be a dividend as defined in s 6(1) of the ITAA 1936. CR 2014/51: Nyrstar Port Pirie Workforce Renewal Scheme. It will be available for applications within 2 weeks following Wed 25.6.2014 to 31 December 2014. The Ruling states that the early retirement scheme to be implemented is an early retirement scheme for the purposes of s 83-180 of the ITAA 1997. CR 2014/52: Snack Brands Australia Early Retirement Scheme. It applies from Wed 25.6.2014 to 25 September 2014. The Ruling states that the scheme to be implemented is an early retirement scheme for the purposes of s 83-180 of the ITAA 1997. CR 2014/53: The Real McCoy Snackfood Co Pty Ltd Early Retirement Scheme. It applies from Wed 25.6.2014 to 25 September 2014. The Ruling states that the scheme to be implemented is an early retirement scheme for the purposes of s 83-180 of the ITAA 1997. [LTN 120, 25/6/14]
Chapter 81 PR 2014/9-11 - Option and loan facility; home buy savings account; timber project [49] The ATO, on Wed 4.6.2014, issued the following Product Rulings: PR 2014/9: Tax consequences of investing in the UBS Structured Option and Loan Facility. It applies to entities that enter into the scheme from Wed 4.6.2014 until 30 June 2017. Among other things, the Ruling states that where the investor has an principal loan and does not acquire a related Morgan’s Tax Month – June 2014 Developments
option, the interest incurred under the principal loan, reduced by an amount reasonably attributable to the cost of capital protection worked out under step 3 of the method statement in s 247-20(3) of the ITAA 1997, will be deductible under s 8-1. PR 2014/10: Tax consequences for a customer holding a Home Buy Savings Account and a home loan with the Commonwealth Bank of Australia. It applies to entities that enter into the scheme from Wed 4.6.2014 until 30 June 2017. The Ruling states that the notional bonus interest to accrue on the customers' home buy savings account will not be assessable income under s 6-5 of the ITAA 1997. PR 2014/11: WA Blue Gum Project 2014. It applies to entities that enter into the scheme from Wed 4.6.2014 until 30 June 2014. The Ruling states that provided the scheme is carried out in accordance with the Ruling, for income years ended 30 June 2014 to 30 June 2024, the Commissioner will exercise his discretion under s 35-55(1) in relation to the deferral of losses from non-commercial business activities. [LTN 106, 4/6/14]
Chapter 82 PR 2014/12 - Almond project [50] The ATO Wed 25.6.2014, issued Product Ruling PR 2014/12 (AIL Almond Grower Project - Swan Hill 2007 Growers (to 15 June 2007) - financial years ending 30 June 2013 and 30 June 2014). It applies to growers that enter into the scheme between 18 October 2006 and 15 June 2007. Among other things, the Ruling states that provided the activities are carried out as described in the Ruling, the Commissioner will extend his discretion under s 35-55 to allow losses to be claimed for financial years ended 30 June 2013 and 30 June 2014. [LTN 120, 25/6/14]
Chapter 83 ATO Interpretive Decisions (ATOIDs) [ - ]
Chapter 84 Practice Statements
Chapter 85 Draft Practice Statement PS LA 3624 released on Administrative Penalties under s284-75(3) of the TAA1 [51] The ATO on Thur 26.6.2014, issued Draft Practice Statement Law Administration PS LA 3624 (Administration of the penalty imposed under s 284-75(3) of Sch 1 to the TAA). A taxpayer is liable to an administrative penalty under s 284-75(3) where: they fail to lodge a return, notice or other document by the due date for lodgment; and the return, notice or other document is necessary for the Commissioner to accurately determine a tax-related liability of the entity; and the Commissioner determines the tax-related liability without the assistance of that document. The Draft explains the circumstances in which an entity becomes liable to a s 284-75(3) penalty, and how the penalty is assessed, including remission. COMMENTS are due by 23 July 2014. [LTN 121, 26/6/14]
Chapter 86 Tax Alerts [ - ] Morgan’s Tax Month – June 2014 Developments
Chapter 87 Other ATO news or statements
Chapter 88 Project Wickenby: AUSTRAC funds flow analysis 2012-13 [52] AUSTRAC on Tue 3.6.2014, released analysis of funds flows between Australia and 13 tax secrecy jurisdictions. According to AUSTRAC, one of the effectiveness measures for Project Wickenby is decreased funds flows to, and increased funds flows from, the 13 tax secrecy jurisdictions of interest to the task force. Key findings reported by AUSTRAC are as follows: The net value of funds flowing into Australia from tax secrecy jurisdictions was $13bn - incoming transfers were worth $60bn, while outgoing transfers were worth $47bn. There is far less money flowing to tax secrecy havens than 5 years ago, with a decrease of 13% in the value of outwards funds flows from Australia to tax secrecy jurisdictions in 2012-13 compared to 2007-08. The value of outwards funds flows to 6 of the 13 tax secrecy jurisdictions decreased by more than 30% eg Liechtenstein (55% decrease), Vanuatu (51%) and Jersey (30%). Source: Minister for Justice media release, 3 June 2014 [LTN 105, 3/6/14]
Chapter 89 ATO ready to trial external compliance assurance process: ATO Commissioner [53] The Commissioner on Tue 3.6.2014, spoke at the Corporate Tax Association annual convention. Mr Jordan said the ATO has been consulting on External Compliance Assurance (sometimes referred to as external compliance assurance process or ECAP). ECAP aims to leverage already rigorous external audit and assurance processes for public companies and give some taxpayers with turnovers of between $100m and $5bn the opportunity to use their company auditors to review factual matters the ATO has an interest, Mr Jordan said. Further, he announced the ATO was "now ready to pilot this approach and this is likely to start this month". Mr Jordan said the ATO was also "driving sensible closure to unnecessarily long-running cases and audits". "Continuing dialogue for 5 years or more is not productive, prevents closure and damages trust," he said. The Commissioner also reported that the he was pleased with the results from the ATO's independent review function set up in July last year for income tax audits of large businesses. As at the end of April 2014, 14 cases of independent review had been completed, with 6 and a half in the taxpayer's favour. Of the 7 and a half in the ATO's favour, 6 of those cases were now at settlement stage. Other key points from the speech: remedial power for Commissioner - the ATO has recently concluded a consultation process with Treasury and the tax profession drafting a joint statement of intent. Mr Jordan said the ATO was "now preparing to package up a proposal with Treasury to Government, to progress this concept." new leadership team at the ATO - the ATO will announce new appointments to Chief Tax Counsel and Deputy Chief Tax Counsel "shortly"; and new mission statement - the new mission of the ATO is "to contribute to the economic and social wellbeing of Australians by fostering willing participation in the tax and superannuation systems". [LTN 106, 4/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 90 Audit improvements from outside the ATO will be adopted more widely in the ATO: Commissioner's speech [54] The Commissioner on Thur 12.6.2014, addressed the Institute of Chartered Accountants Australia (ICAA) Practice Forum. Mr Jordan said the ATO has received feedback from tax and audit professionals who were recently recruited from outside the ATO. The staff provided feedback on how the ATO could improve the way it manages audits. Their suggestions included better project management of audits, some greater sense of materiality levels, improvements to communications, and better targeted and streamlined information gathering. Mr Jordan said many of these ideas were already being implemented in the Public Groups and International business line and that the ATO intends to adopt these principles more widely across the ATO for other taxpayers as well. [LTN 112, 13/6/14]
Chapter 91 Individuals warned to get work-related deductions right: ATO [55] The ATO has signalled that it will pay close attention to work-related expenses claimed as deductions by individuals when they lodge their 2013-14 tax returns. The ATO says incorrect expense claims are becoming easier for it to detect. This year, the ATO says it will not be limiting its attention to particular occupations. Rather, it will pay particular attention to work-related expense claims relating to: overnight travel; transporting bulky tools and equipment; and the work-related proportion of use for computers, phones or other electronic devices. In addition to these focus areas, the ATO says it will continue to review incorrect or excessive claims for all other work-related expenses. [LTN 114, 17/6/14]
Chapter 92 *Tax Office website updates – including administrative treatment for abolition of $6,500 write-off which has not yet been repealed [56] From the ATO website: Instant asset write-off and simplified depreciation - Administrative treatment - The ATO has noted the Government's intention to repeal the provision allowing small businesses an accelerated initial deduction for motor vehicles. The ATO says taxpayers, including those who use early balancing substituted accounting periods, who lodge a tax return for the 2013-14 income year can self-assess under the existing law. Once the law is enacted, the taxpayer who self-assessed in that way will need to seek an amendment to apply the new law. No shortfall penalty will apply and if they seek to amend their return within a reasonable time, the ATO says it will also remit the shortfall interest charge (SIC) to nil. If an amendment is not sought within a reasonable time, SIC will be charged from the date the change becomes law. [Note that the Government intends to repeal the provision allowing accelerated initial deduction for motor vehicles in conjunction with the repeal of the mining tax.] Legislation to repeal the minerals resource rent tax law - Administrative treatment - The ATO has noted that it previously announced administrative treatment concerning the Government's decision to repeal the mining tax has not been changed. The ATO says it has allowed low volume, non- paying entities until: Morgan’s Tax Month – June 2014 Developments
o 1 December 2014 to lodge their 2012-13 MRRT returns and starting base returns; o the later of 1 December 2014 and the first day of the 6th month after their 2013-14 MRRT year to lodge their 2013-14 MRRT returns. Fund income tax return instructions 2014 - Instructions to help taxpayers complete the Fund income tax return for the 2014 income year. Tax file number - application or enquiry for individuals - Information on applying for a TFN. [LTN 115, 18/6/14]
Chapter 93 *External compliance assurance process: ATO releases more details [57] The ATO has released further details of its external compliance assurance process (ECAP) for taxpayers in the large market, including guideline materials for assurance practitioners when conducting agreed-upon procedures engagements under the ATO's ECAP pilot program. The ATO said the intent of the pilot program is to test the effectiveness and viability of taxpayers using existing registered company auditors to conduct assurance on factual matters. If effective, the ATO said "this approach will reduce compliance costs and red tape for business taxpayers and ensure that the right amount of tax is being paid in Australia." The ATO said the objective of ECAP is to provide certainty more quickly to taxpayers by offering them the choice of nominating their statutory company auditor to undertake assurance work, leveraging their existing knowledge and understanding of the business and its natural systems, or for the ATO to undertake the assurance. The ATO said it will initiate the ECAP engagement with the taxpayer entity (the engaging party) by a letter identifying the matters to be assured. The engaging party will then consider their choice and may engage the assurance practitioner. [LTN 120, 25/6/14]
Chapter 94 *AUSTRAC releases Circular on ATO Project DO IT (Do it before 19.12.14) [58] AUSTRAC has released its Information Circular No 86 on the ATO's Project DO IT offshore voluntary disclosure initiative. The Circular says the initiative allows taxpayers to voluntarily disclose previously unreported foreign income and assets before 19 December 2014. It said the ATO is urging taxpayers with offshore assets to declare their interests ahead of a global crackdown on people using international tax havens. [LTN 121, 26/6/14]
Chapter 95 *ATO steps up data mining program to target offshore tax evaders [59] The ATO says it is mining data to identify individuals with undisclosed offshore income and assets. Deputy Commissioner Michael Cranston said the new information would be used to encourage people to disclose under Project DO IT, the ATO's offshore disclosure initiative. "The net is closing for people who have undeclared offshore income – we're looking at all our data and will be in touch with financial institutions, advisers and thousands of people over the coming months," said Mr Cranston. He said the ATO will be asking some people to explain offshore transactions and suggesting that they may want to disclose under Project DO IT. Morgan’s Tax Month – June 2014 Developments
The ATO will significantly increase its compliance focus by examining data including: information from overseas tax authorities on Australians with offshore investments and bank accounts; information from Australian and foreign banks on fund flows, interest and account balances; information from informants about offshore accounts, and money transfers to and from offshore bank accounts. To date, the ATO's Project DO IT initiative has received 166 disclosures raising an additional $13m in tax liabilities. There have been more than 250 expressions of interest, where taxpayers have identified themselves and said they will be making a disclosure. There have also been more than 600 general enquiries. Mr Cranston said the ATO expects a large number of disclosures towards the end of the initiative as taxpayers get their affairs in order. He said most people getting in touch with the ATO are reporting accounts in Switzerland, Israel, Lichtenstein, the Netherlands, South Africa and Hong Kong, "so we'll obviously be looking closely at [the] flow of funds to those countries". Source: ATO media release, 30 June 2014 [LTN 123, 30/6/14]
Chapter 96 *Div 7A: private company loans - 2014-15 benchmark interest rate is 5.95% (down from 6.20%) [60] As a result of the release of Reserve Bank data, the benchmark interest rate for the 2014-15 income year, for the purposes of the deemed dividend provisions of Div 7A of the ITAA 1936, can now be calculated to be 5.95% (down from 6.20% for 2013-14). The benchmark interest rate is the same as the Indicator Lending Rates - Standard Bank Variable Housing Loans Interest Rate last published by the Reserve Bank of Australia before the start of the income year: s 109N(2) of the ITAA 1936. For the 2014-15 year, this is based on the rate for May 2014, published recently by the Reserve Bank. Presumably, the Tax Office will confirm the benchmark interest rate in a Taxation Determination as per its normal practice. [LTN 116, 19/6/14]
Chapter 97 *GIC and SIC rates for Jul-Sep 2014 quarter are 9.69% and 5.69% respectively [61] The Tax Office has advised that the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) rates for the 1st quarter of the 2014-15 financial year (ie 1 July 2014 to 30 September 2014) are as follows: GIC annual rate is 9.69%; GIC daily compounding rate is 0.02654794%; SIC annual rate is 5.69%; SIC daily compounding rate is 0.01558904%. [LTN 106, 4/6/14]
Chapter 98 *PAYG instalments – GDP adjustment for 2014–15 is 4% [62] Each year, the ATO adjusts PAYG instalment amounts using a formula that takes into account the expected growth in the economy. For the 2014-15 income year, the ATO has advised that the GDP adjustment used to work out taxpayers' quarterly PAYG instalment amounts will be 4%. [LTN 123, 30/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 99 *2013-14 tax return forms, schedules, and accompanying guides released [63] The Tax Office has released the following tax return forms, schedules and accompanying guides for the 2013-14 financial year: Business industry codes 2014 CGT schedule 2014 Company tax return and instructions 2014 Consolidated groups losses schedule 2014 Dividend and interest schedule 2014 Explanatory notes for the life insurance companies taxation schedule 2014 Family trust election, revocation or variation 2014 Franking account tax return and instructions 2014 Fund income tax return 2014 Guide to reportable tax positions 2014 Individual tax return and instructions 2014 Information for primary producers 2014 International dealings schedule and instructions 2014 Interposed entity election or revocation 2014 Key changes - contains overview of key changes and item-by-item description of changes to forms Losses schedule and instructions 2014 Non-individual PAYG payment summary schedule 2014 Partnership tax return and instructions 2014 Reportable tax position schedule and instructions 2014 Research and development tax incentive schedule 2014 Salary and wage occupation codes 2014 Self-managed superannuation fund annual return and instructions 2014 Strata title body corporate tax return and instructions 2014 Trust tax return 2014 Venture capital deficit tax return and explanatory notes 2014 [LTN 107, 5/6/14]
CHAPTER 100 GST DEVELOPMENTS
Chapter 101 Legislation & Announcements (GST)
Chapter 102 *Tax Laws Amendment (2014 Measures No 1) Bill 2014 receives Royal Assent: (1) limited refunds of overpaid GST [64] The Tax Laws Amendment (2014 Measures No 1) Bill 2014 on 30 May 2014 received Royal Assent as Act No 34 of 2014. It had passed all stages without amendment. The Bill amends the GST Act and the TAA to ensure that overpaid GST is refundable only in certain circumstances. [LTN 104, 2/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 103 Cases (GST)
Chapter 104 *Re Dotrac Pty Ltd & Ors and FCT - GST: no enterprise re property development, so input tax credits refused [65] Two taxpayers have been unsuccessful before the AAT in a matter concerning input tax credits (ITCs) claims in respect of purported acquisitions made in 2 property developments. The first taxpayer (a company) and the second taxpayer (a partnership of 2 individuals) claimed to have made acquisitions in relation to property development. The first taxpayer also claimed to have made acquisitions in relation to another property development. Both taxpayers were registered for GST. However, the Commissioner issued to both taxpayers amended assessments denying ITCs claimed on those purported acquisitions – in the first taxpayer's case, for the tax periods April 2010 to June 2011, and in the second taxpayer's case, for the tax periods April 2009 to December 2010. The Commissioner's position was that neither taxpayer carried on an enterprise at all, so that neither of them could be entitled to any ITCs. The Commissioner also imposed administrative penalty at the rate of 50% on the shortfall amount. The Tribunal dealt mainly with the arrangements of the first property development as it was of the view the arrangements did not differ materially from the second property development. The Tribunal noted there had been some work done on the property; however, the parties disputed what that work consisted of, how much of it was done, who it was done for, and whether it had been paid for. The Tribunal heard from the taxpayers that they were "principal contractors to the project". The project was presumed by the Tribunal to be the development of the property for eventual subdivision. However, the Tribunal noted that exactly what the "principal contractors" did in respect of the property remained the subject of "quite profound mystery". The Tribunal said the same observation applied in respect of what the "principal contractors" were supposed to have acquired from entities, described by the taxpayers as the "subcontractors", who were said to have undertaken some of development activities. The Tribunal said each taxpayer's claim for ITCs failed "at the most basic level". The Tribunal found, on the balance of probabilities, that there were "supplies" by the subcontractors; however, it was of the view that any supplies were not made by the subcontractors to the taxpayers. The Tribunal also affirmed the penalty at 50% of the shortfall amount. (AAT Case [2014] AATA 336, Re Dotrac Pty Ltd & Ors and FCT, AAT, Ref No: 2013/1392, Frost DP, 29 May 2014.) [LTN 104, 2/6/14]
Chapter 105 *Re North Sydney Developments Pty Ltd and FCT - GST: taxpayer's letter to the ATO was a sufficient s105-55 ‘stop the clock’ notification of ITC entitlement [66] A taxpayer has been successful before the AAT in seeking orders to allow its claim for GST input tax credits, totalling $2.8m, and to set aside a private ruling issued by the Commissioner, which had refused its claim [to those credits]. The taxpayer claimed it was entitled to ITCs of $2.2m (relating to December 2005) and $600,000 (for January 2006). Morgan’s Tax Month – June 2014 Developments
For the months of May 2004 to November 2005, the Commissioner accepted the taxpayer was entitled to ITCs in relation to amounts it claimed in its monthly BASs. However, the taxpayer did not lodge BASs for December 2005 and January 2006. In March 2006, a mortgagee [was] appointed a controller to the substantial property, whose (not yet completed) development had been the reason for the GST purchases reported in the taxpayer's BASs - lodged up to November 2005. In June 2006, the taxpayer was placed in receivership, and the receiver subsequently sold the partially completed development. On 3 September 2006, the taxpayer wrote to the Commissioner informing him of the receiver's appointment and that it was unable to lodge the BASs for December 2005 and January 2006 until it was able to access the necessary books and records taken by "ASIC and the receivers". The letter was also to "provide notice that substantial GST refunds are due for these months". In October 2012, the taxpayer applied for a private ruling [that it was entitled to the ITC’s it had now calculated]. In June 2013, the Commissioner issued a private ruling which provided that the 4-year time limit to notify the Commissioner of the refund sought had expired (s 105-55 of Sch 1 to the TAA). The taxpayer objected and the Commissioner disallowed the objection. The taxpayer then sought review from the Tribunal. The Tribunal noted the taxpayer's letter was not in the "permissive form" the Commissioner endorsed as sufficient notification. Accordingly, the key issue was whether the letter was sufficient notification for the purposes of s 105-55(1) (a) of Sch 1 to the TAA. The Tribunal held the taxpayer's letter of 3 September 2009 was a notification for the purposes of s 105-55(1)(a) of Sch 1 to the TAA in relation to ITCs relating to the tax periods December 2005 and January 2006. (AAT Case [2014] AATA 363, Re North Sydney Developments Pty Ltd and FCT, AAT, Ref No: 2013/4756, Taylor SC, 6 June 2014.) [LTN 111, 12/6/14] Chapter 106 Relevant portions of the AAT’s reasons After considering a number of authorities (including Central Equity Ltd v Federal Commissioner of Taxation [2011] FCA 908; MTAA Superannuation Fund (RG Casey Building) Property Pty Ltd v Commissioner of Taxation [2011] AATA 769; National Jet Systems Pty Ltd v Commissioner of Taxation [2011] AATA 766 and Brookdale Investments Pty Ltd v Commissioner of Taxation [2013] AATA 154) the Tribunal observed as follows (at [25]): The common themes resonating through the decisions to which I have referred are the absence of any formal notification content requirement, a disavowal of amount specificity and the apparent sufficiency of a notice where it communicates a claim relating to a particular tax period in relation to a particular kind of tax liability. Implicit in the third theme, and variously expressed in the judgments and reasons, is a refusal to endorse any particular requirement for the details, grounds or even circumstances relied on to support the claim. The Tribunal’s conclusion was as follows (at [31]): In my view, North Sydney’s 3 September 2009 letter did notify the Commissioner of “the refund, other payment or credit” to which TAA Schedule Morgan’s Tax Month – June 2014 Developments
1: s 105-55(1)(a) applied. It did so for two reasons. Firstly, the provision required no greater specification than the tax period involved, and the nature of the refund or input tax credit claimed. The letter, by describing the notification as relating to the expected outcome of Business Activity Statements for December 2005 and January 2006, satisfied the requirements of a complying notification. Secondly, if the letter required some greater degree of specificity in order to permit satisfaction that any subsequent claim was covered by the notification, the letter also satisfied that requirement. It did so because it indicated that the reason for the notification was the lack of access to the contemporary books and records in the possession of the receiver. On this view any subsequent claim would be limited to a summarised reproduction of the information in the purchase, payment and supply records maintained by the receivers. [Chris Sievers’ report]
Chapter 107 Re Advent 7 Pty Ltd and FCT - ITC claims denied as they were not substantiated [67] The AAT has rejected a taxpayer's appeal and upheld the Commissioner's disallowance of its input tax credit (ITC) claims. The taxpayer's main business activity was computer system design, although it also marketed licensed computer software. It accounted for GST on a cash basis. The Commissioner audited the taxpayer and reduced its ITC claims from $404,491 to nil in respect of the tax periods 1 April 2008 to 30 June 2011, and imposed a penalty of just over $200,000 for recklessness in making its BASs. The Commissioner claimed the taxpayer could not demonstrate that acquisitions of any services were actually made, and even if it could, there was no taxable supply. The Tribunal rejected the taxpayer's claims and held that it was not satisfied that services were provided to the taxpayer such as to enable it to claim the ITCs in respect of the relevant period. In upholding the penalty imposed, the Tribunal said the taxpayer was "grossly indifferent as to whether what was stated in the BASs was true or not, and failed to take reasonable care to comply with the applicable taxation laws". (AAT Case [2014] AATA 365, Re Advent 7 Pty Ltd and FCT, AAT, Deutsch DP, AAT Ref: 2012/4690-4691, 10 June 2014.) [LTN 114, 17/6/14]
Chapter 108 Rulings & Other things (GST)
Chapter 109 Fishermen joint venturers not ‘employees’ for super (SGC) purposes: ATO view on AAT case: Re Dominic B Fishing Pty Ltd and FCT [68] The ATO on Thur 5.6.2014, issued a Decision Impact Statement on the decision in AAT Case [2014] AATA 205, Re Dominic B Fishing Pty Ltd and FCT. In that case, the AAT held that fishing crew members on a commercial fishing vessel operated by the taxpayer, were not "employees", at common law, or under the extended meaning of that term in s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA). As such, the taxpayer company was not required to make superannuation contributions in respect of the crew members. The ATO said the Tribunal's view that the case was limited to its own facts and does not provide any authoritative guidance on cases concerning whether a worker is an employee for the purposes of the SGAA was consistent with the Commissioner's position. In relation to the Tribunal's finding that the fishermen were in a joint venture with the taxpayer, the ATO said the Commissioner did Morgan’s Tax Month – June 2014 Developments
not have an opportunity to make submissions to the Tribunal about this issue in the case. It said the Commissioner will seek to make full submissions on this point in similar cases that arise in the future, with a view to further clarifying the issue of when a fisherman or fishermen is or is not in a joint venture with a boat owner. [FJM Note: About 6 months before this case, there was another fishermen case where the taxpayer lost such an argument and had to pay SGC – see my note on this Re Dominic B Fishing Pty Ltd case in the ‘April Developments’ edition of Morgan’s Tax Month (under AAT Cases), as it makes reference to this previous case that went the other way.] [LTN 107, 5/6/14]
CHAPTER 110 SUPERANNUATION DEVELOPMENTS
Chapter 111 Legislation, Announcements etc. (Super) [ - ]
Chapter 112 Cases (Super)
Chapter 113 *Re Vuong and FCT - Super accessed early assessable, but penalty remitted [69] The AAT has held that an amount of superannuation accessed early by a taxpayer should be fully assessable to him, but ordered that a 25% penalty imposed by the ATO be remitted in full. The taxpayer was the unwitting victim of a scam concerning early access to his superannuation when he was not entitled to do so. The scam involved the taxpayer accessing his total superannuation of over $114,000 for a fee of 29% of that amount to be paid to the scam promoter. He therefore received a net amount of just over $81,000. The ATO audited the taxpayer and issued an amended assessment, which included the amount of $114,697.23 as his assessable income, resulting in a tax shortfall of $45,298.64. The Commissioner had also imposed a shortfall interest charge of $2,896.46. Shortfall penalty was also imposed. After the taxpayer's objections were disallowed, he sought review before the AAT. The Tribunal said it accepted that it was always the taxpayer's intention to access his superannuation early, but it did not accept that he intended to do so unlawfully. The AAT said the taxpayer was ignorant as to the law and was led to believe that if he rolled over his superannuation from one fund to another, he would have a lawful entitlement to access it. The Tribunal concluded that the entire amount of $114,697.23 should have been included in the taxpayer's assessable income. However, it considered the Commissioner should remit the 25% penalty in full. The Tribunal considered that the taxpayer at all times acted with honest, albeit naïve, intent. He was seeking to access his superannuation early, but by legitimate means, the AAT said. (AAT case [2014] AATA 402, Re Vuong and FCT, AAT, Hughes M, AAT Ref: 2013/3241, 2013/6761, 23 June 2014.) [LTN 119, 24/6/14]
Chapter 114 Rulings & Other things (Super) [ - ] Morgan’s Tax Month – June 2014 Developments
CHAPTER 115 CARBON TAX & EMISSIONS REDUCTION FUND
Chapter 116 Carbon Tax repeal Acts re-introduced [70] The Government re-introduced a series of Bills in the House of Reps on Mon 23.6.2014, to repeal the carbon tax and the mining tax and related measures. The Bills had previously been defeated in the Senate. The carbon tax repeal Bills are: Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 [No 2]. Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 [No 2] – proposes to repeal the personal income tax cuts that were legislated to commence on 1 July 2015, and repeal the associated amendments to the low-income tax offset. True-up Shortfall Levy (General) (Carbon Tax Repeal) Bill 2013 [No 2]. True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Bill 2013 [No 2]. Customs Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Excise Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provisions) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Climate Change Authority (Abolition) Bill 2013 [No 2]. Clean Energy Finance Corporation (Abolition) Bill 2014. [LTN 118, 23/6/14] Chapter 117 Carbon tax repeal and mining tax repeal Bills pass Reps All but 1 of the carbon tax repeal Bills were passed by the House of Reps on Thur 26.6.2014, without amendment and now proceed to the Senate (which resumes on 7 July 2014, with the newly elected Senators taking their place). Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 [No 2]. Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 [No 2] – proposes to repeal the personal income tax cuts that were legislated to commence on 1 July 2015, and repeal the associated amendments to the low-income tax offset. True-up Shortfall Levy (General) (Carbon Tax Repeal) Bill 2013 [No 2]. True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Bill 2013 [No 2]. Customs Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Excise Tariff Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provisions) Bill 2013 [No 2]. Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Bill 2013 [No 2]. Climate Change Authority (Abolition) Bill 2013 [No 2]. Morgan’s Tax Month – June 2014 Developments
The Clean Energy Finance Corporation (Abolition) Bill 2014 was not passed by the House and debate on that Bill will resume after 14 July 2014 when the House resumes. [LTN 122, 27/6/14]
CHAPTER 118 MINERALS & PETROLEUM RENT RESOURCE RENT TAX
Chapter 119 The Mining Tax repeal Act re-introduced [71] The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No 2], also re-introduced on Mon 23.6.2014, proposes to repeal the mining tax and make consequential amendments to other legislation, including the ITAA 1997 and the Taxation Administration Act 1953, required as a result of the repeal of the MRRT. These include repeal of: company loss-carry back; low income superannuation contribution; the income support bonus; geothermal expenditure deduction; and schoolkids bonus. The instant asset write-off threshold would be reduced from $6,500 to $1,000, and the accelerated depreciation arrangements for motor vehicles would be discontinued. [LTN 118, 23/6/14] Chapter 120 The Mining Tax Repeal Bills pass House of Reps The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No 2] passed by the House of Reps on Thur 26.6.2014, without amendment and now proceeds to the Senate (along with the Bills to repeal the Carbon Tax). [LTN 122, 27/6/14]
CHAPTER 121 AUSTRALIAN CHARITIES & NOT-FOR-PROFITS (ACNC) SECTOR
Chapter 122 ACNC repeal Bill should be passed on recommendation of Senate committee divided along party lines [72] The Senate Economics Legislation Committee on Mon 16.6.2014, tabled its report on the Australian Charities and Not-for-profits Commission (Repeal) (No 1) Bill 2014. The Bill, which is still before the House of Reps, proposes to repeal the Australian Charities and Not-for-profits Commission Act 2012, thereby abolishing the Australian Charities and Not-for-profits Commission (the ACNC). The Committee majority recommended the Bill be passed, although the Labor and Greens Senators issued dissenting reports. [FJM Note: A substantial (if not over-whelming) majority of the relevant professions do NOT support the abolition of the ACNC.] [LTN 114, 17/6/14]
Chapter 123 *ACNC reminders for charities – lodge their 2013 Annual Information Statement by 30.6.14 or risk removal from register and loss of tax exemption [73] The Australian Charities and Not-for-profits Commission (ACNC) has reminded charities of the 30 June 2014 deadline for lodging their 2013 Annual Morgan’s Tax Month – June 2014 Developments
Information Statement. The ACNC warned it is a legal requirement that all registered charities submit an annual statement. Details of how to lodge the 2013 Annual Information Statement can found at acnc.gov.au/2013AIS or contact the ACNC Advice line on 13 22 62 or email [email protected]. The Commission also says that organisations that have not made contact with it or lodged their Annual Statement that they are at risk of being removed from the ACNC Register, and thereby lose their tax concessions. It has urged organisations to check if their NFP is included on the list of charities the Commission is seeking to contact. [LTN 118, 23/6/14]
CHAPTER 124 BOARD OF TAXATION [ - ]
CHAPTER 125 EXTERNAL SUPERVISORS – IGOT; OMBUDSMAN, JCPAA & ANAO
Chapter 126 *Transfer pricing report by IGoT released by Minister - ATO management of these issues criticised [74] The Government on Mon 2.6.2014, released the Inspector-General of Taxation's (IGT) report into the ATO's management of transfer pricing matters. The report was presented to the Assistant Treasurer in December 2013. The review found that key causes of stakeholder concerns were inadequate succession planning and resource management. Mr Noroozi reported that experience specialist officers had left the ATO's transfer pricing area and their knowledge was not effectively disseminated across the organisation. Another significant cause reported by the IGT was the complex interactions between the ATO's internal functions and a lack of clarity with respect to the decision-making process. The IGT made 18 recommendations aimed at developing sufficient organisational capability to address transfer-pricing risks. The ATO agreed to 17 of the recommendations in whole, part or principle. Mr Noroozi said that while the ATO has provided reasoning where it has disagreed, he was concerned, particularly where he had sought to avoid lengthy disputes by allowing ATO specialists or taxpayers to challenge generalist case officer decisions earlier in the compliance cycle. Furthermore, he said the ATO's decision to limit consultation on transfer pricing matters may impede its awareness of emerging arrangements and potential risks. In releasing the report, the Acting Assistant Treasurer, Senator Cormann said the Government was "confident that the appropriate implementation of these recommendations will result in more efficient processing of transfer pricing matters by the ATO moving forward". [LTN 99, 26/5/14] Chapter 127 Extract from IGoT’s Report Chapter 1 — Background Conduct of review 1.1 This is the Inspector-General of Taxation's (IGT) report of his review into the Australian Taxation Office's (ATO) management of transfer pricing matters. It is produced pursuant to section 10 of the Inspector-General of Taxation Act 2003 (IGT Act 2003). Morgan’s Tax Month – June 2014 Developments
1.2 The review arose from concerns raised by taxpayers, tax professionals and their representative bodies in relation to the long timeframes and excessive costs of dealing with the ATO on transfer pricing matters. The IGT started this review, pursuant to subsection 8(1) of the IGT Act 2003, by announcing the terms of reference on 25 October 2012 (a copy is reproduced in Appendix 1). 1.3 The IGT received a significant number of written submissions in response to the terms of reference and also met with a range of stakeholders, including academics, current and former ATO officers as well as taxpayers, tax advisers and their representative bodies, to better understand the issues covered by this review. Broadly, the issues raised related to the ATO's overarching strategy and recent organisational changes, protracted timeframes to complete compliance activities, lack of ATO communication during compliance activities, inadequate public advice and guidance and ineffective use of consultative forums. The key underlying theme seemed to be insufficient staff capability in dealing with transfer pricing matters. 1.4 Most submissions impressed on the IGT that the above issues have been exacerbated by major changes in the global business environment over the past two decades such as: ongoing evolution of globalisation leading to the decline of trade barriers and increasing the privatisation of business activity, which is said to have facilitated the expansion of many businesses globally and increased the importance of transfer pricing policies; ongoing (re)location of the production of final products and components to various jurisdictions to improve business efficiency with decisions based on production costs, infrastructure, tax incentives and skilled labour force; the concentration of service functions and assets, such as research and development, internal finance, production and intangible assets within different business units of a Multi-National Enterprise (MNE) which may be located in different jurisdictions; and advances in telecommunications that has allowed, amongst other things, the advent of electronic commerce and '24/7' trading.1 1.5 To assist with the IGT's consideration of issues, the IGT established a working group comprising key tax practitioners and representatives: Richard Atkinson (Rio Tinto); Chris Bowman (BTTP Consulting); Stuart Coggin (GlaxoSmithKline); Michael Fenner (Chevron); Geoffrey Gill (Deloitte); Denise Honey (Pitcher Partners); Nick Houseman (PricewaterhouseCoopers); Jason Levine (GM Holden); Steve O'Connor (Lloyds International); Jesper Solgaard (Ernst & Young); Richard Vann (University of Sydney); and senior ATO officials. 1.6 We greatly appreciate the generosity of the members of this working group in freely giving their time and expertise. Their involvement has greatly enhanced the outcomes of this review. 1.7 The working group considered stakeholders' concerns and canvassed potential solutions to the systemic issues in a frank and confidential manner. It should be noted, however, that the views and recommendations expressed in this report are not necessarily those of individual members of the working group. The views and recommendations were finalised by the IGT after much deliberation, and based on input received and discussions with the ATO and a range of external stakeholders. 1.8 The IGT also worked progressively with ATO senior management to distil the scope for improvement and to agree on specific actions. Furthermore, the Commissioner of Taxation (Commissioner) was provided with an opportunity to make submissions on any implied or actual criticisms contained in this report.
Chapter 128 ATO risk identification re high wealth individuals can be improved: ANAO [75] The Australian National Audit Office's Report No 35 assessing the effectiveness of the ATO's activities to promote tax compliance by high wealth individuals (HWIs) was tabled in Parliament on Wed 4.6.2014. The ATO defines HWIs as Australian resident individuals who, together with their associates, effectively control an estimated net wealth of $30m or more. Morgan’s Tax Month – June 2014 Developments
The ANAO reported the ATO has had a particularly extensive HWI active compliance focus, conducting audits and risk reviews of over 90% of the population between 2009-10 and 2012-13 and collecting almost $852m as a result of the compliance activities ($671m from audits and $181m from risk reviews). However, it said the results of the activities have not always been commensurate with the level of effort deployed by the ATO. Going forward and in anticipation of a focus on a larger pool of HWIs (from 2,600 to around 6,300), the ANAO said there was scope for the ATO to improve its risk assessments to better target active compliance activities and reduce compliance costs for both HWI taxpayers and the ATO. The ANAO made 2 recommendations aimed at improving the reliability of the Risk Differentiation Framework (RDF) through analysis of active compliance outcomes, and improving resource allocation by having greater regard to compliance risk and financial return. The ATO has agreed to the recommendations. [LTN 106, 4/6/14]
Chapter 129 Measuring effectiveness of ATO compliance activities can be improved: ANAO review [76] The Australian National Audit Office (ANAO) on Thur 12.6.2014, released Audit Report No 39 Compliance Effectiveness Methodology. The review examined the application of the ATO's Compliance Effectiveness Methodology (CEM) in evaluating the effectiveness of key compliance activities and in shaping the development of strategies to promote voluntary compliance. The review found the ATO applied generally sound project management practices and administrative frameworks in developing the CEM and preparing for its implementation within the 8 BSLs (Business and Service Lines) of the Compliance Group. However, it stated that in implementing the CEM as an ongoing business process from 1 July 2009, there has been a lack of strategic focus and direction on its application and outcomes, and on fully embedding the methodology into the ATO's core processes, including risk management. As a consequence, it stated the full benefits to be gained from the CEM as a means of improving the ATO's compliance strategies and treatments, resource allocation and external accountability have not been realised. The ANAO made 2 recommendations with the aim of the ATO taking a more strategic approach to selecting the compliance risks to be evaluated, and improving the conduct of compliance effectiveness evaluations and reporting of their results. The ATO has agreed to the recommendations. [LTN 111, 12/6/14]
Chapter 130 *Large business and high wealth individual tax disputes: IGT review [77] The Inspector-General of Taxation (IGT), Mr Ali Noroozi, on Thur 19.6.2014, commenced a review into the ATO's management of tax disputes involving large businesses and high wealth individuals (HWIs). Mr Noroozi said on 2 June 2014, the Acting Assistant Treasurer, Senator Mathias Cormann, referred an inquiry into tax disputes to the House of Reps Standing Committee on Tax and Revenue. The Committee stated that it would examine the issues in the inquiry through a number of themes which consist of every taxpayer market segment and the related legal and governance frameworks. The IGT has been asked to review the large business and HWI themes. Having regard to the high levels of disputation within the large business and HWI market segments, the potential for significant impacts on revenue and the ATO's improvement initiatives following earlier IGT reviews, the IGT said he Morgan’s Tax Month – June 2014 Developments
considered that the Committee's inquiry was timely and appropriate. As part of his review, the Inspector-General is inviting interested stakeholders to provide their views on potential improvements and examples of ATO approaches, which have yielded positive outcomes. The Terms of Reference and submission guidelines are available on the IGT website. COMMENTS are due by 18 July 2014. Source: IGT media release, 19 June 2014 [LTN 116, 19/6/14]
Chapter 131 *Administration of the ABR can be improved: ANAO report [78] The ANAO report on the Administration of the Australian Business Register (ABR) was released on Mon 23.6.2014. The objective of this audit was to assess the effectiveness of the administration of the Register. As at 7 May 2014, the ABR held information relating to 10.8 million ABNs, of which 7.7 million were active. The report says there has been limited progress in achieving whole-of-government objectives for the ABR. There also continues to be acknowledged problems with the integrity of ABR data, particularly regarding the number of entities on the register and incomplete and inaccurate entity information on the ABR. The ANAO report said these shortcomings undermine the operation of the ABR as providing the "single source of truth for whole-of-government business registrations". Accordingly, the ANAO said some 14 years after establishing the ABR, little real progress has been made by the ATO, in conjunction with ASIC, Industry and the Treasury, in achieving the goal of making it easier for business to deal with government through reducing business reporting and registration requirements and entry points to government. The report made one recommendation, to which the ATO, ASIC and industry agreed. It was that to make it easier for business to deal with government, the ANAO recommended that the Registrar of the ABR works with ASIC, the Department of Industry and the Department of the Treasury to: (i) review the entry points to government; and (ii) develop and implement the most effective and efficient delivery mechanism for businesses to meet their registration and reporting requirements. [LTN 118, 23/6/14]
Chapter 132 ANAO releases report on audit of agencies' ICT systems to prevent cyber attacks [79] The ANAO on Tue 24.6.2014, released its report No 50 of 2013-14 Cyber Attacks: Securing Agencies' ICT Systems. Agencies included in the audit included the ATO, ABS, Customs, and the Australian Financial Security Authority. The report found the agencies subject to audit had established internal information security frameworks, implemented controls designed to safeguard the enterprise ICT environment from external cyber attack, and had stipulated change management processes to authorise the implementation of security patches for applications and operating systems. The ATO agreed with the ANAO's overall assessment and agreed with its recommendations. The report made 3 recommendations. [LTN 119, 24/6/14] Morgan’s Tax Month – June 2014 Developments
CHAPTER 133 TAX PRACTITIONERS BOARD & LEGISLATION
Chapter 134 ‘Tax (financial) advisers’ may register with the TPB (by notifying) between 1 July 2014 to 31 December 2015 or provide a disclaimer [80] The Tax Practitioners Board (TPB) has reminded financial advisers who provide tax advice that they can notify the Board to be registered as tax (financial) advisers from next month. The TPB said the notification period begins on 1 July 2014 and ends on 31 December 2015. During this notification period, Australian financial services (AFS) licensees and their authorised representatives who provide tax (financial) advice services will need to either: notify the TPB to become registered as a tax (financial) adviser; or use a relevant disclaimer when they provide tax (financial) advice services for a fee or other reward. The Board said Australian financial services (AFS) licensees will soon receive a letter from the TPB with login details to access the online notification form. AFS licensees will be able to notify for registration on behalf of their authorised representatives. Further details on the notification option are available on the TPB website. Source: TPB media release, 1 June 2014 [LTN 104, 2/6/14]
Chapter 135 Registration requirements for tax (financial) advisers – draft regs released [81] The Government has released the Draft Tax Agent Services Amendment (Tax (Financial) Advisers) Regulation 2014 to amend the Tax Agent Services Regulations 2009 which prescribe a tailored set of ongoing registration requirements for tax (financial) advisers, as well as a number of other related amendments. At the same time, the Government has taken this opportunity to amend the experience requirements for BAS agents, and make other minor corrections and clarifications to the Tax Agent Services Regulations 2009. The Draft regs prescribe registration requirements for tax (financial) advisers, and also set out a number of other changes, which are designed to give effect to the regime and bring tax (financial) advisers in line with other entities regulated by the Board. The Tax Laws Amendment (2013 Measures No 3) Act 2013 amended the Tax Agent Services Act 2009 to bring financial planners that provide some tax agent services within the regime administered by the Tax Practitioners Board (TPB), by allowing them to register or re-register as tax (financial) advisers. With effect from 1 July 2017, financial planners seeking to register as tax (financial) advisers will be required to meet substantive ongoing education and experience requirements. Prior to this, financial planners may seek to register with the TPB, without having to meet these ongoing registration requirements. COMMENTS are due by 9 July 2014. [LTN 121, 26/6/14]
Chapter 136 Ayles v Tax Practitioners Board - Court confirms refusal to register - humanities degree not relevant [82] The Federal Court has dismissed an applicant's appeal from the decision in AAT Case [2014] AATA 112, Re Ayles and Tax Practitioners Board in which the AAT refused his application for registration as a tax agent on the basis that the applicant did not satisfy the necessary tertiary qualification experience which, according to the AAT, required the degree to be viewed "as a whole" in Morgan’s Tax Month – June 2014 Developments
determining whether it was "relevant to the tax agent services to which the application relates". This was despite the fact the applicant had only applied for a limited registration to prepare individual returns and that he had completed a subject in accounting and income tax law within his degree (with distinction). However, in dismissing the appeal, the Federal Court agreed with the AAT's interpretation that in terms of the specific tertiary requirements, it was not satisfied that the applicant's degree, when "viewed as a whole", was relevant to the tax agent services to which his application related. In this regard, the Court noted that the applicant's Bachelor of Arts (Humanities) degree was dominated by religious and humanitarian subjects. In short, the Court concluded that an assessment of whether a degree is relevant to tax agent services can only be undertaken by examining the subjects in the degree, and deciding whether the number and nature of those subjects is relevant to taxation services sought to be provided by the applicant, and that in this regard, the language of the provisions suggests that the degree is to be viewed "as a whole". (Ayles v Tax Practitioners Board [2014] FCA 675, Federal Court, Rangiah J, 26 June 2014.) [LTN 123, 30/6/14]
CHAPTER 137 STATE TAXES
Chapter 138 Legislation & Announcements (State)
Chapter 139 ACT: payroll tax and land tax changes: Amendment Bills introduced [83] The following ACT Bills were introduced into the ACT Legislative Assembly on 5 June 2014: Payroll Tax Amendment Bill 2014 - proposes to amend the Payroll Tax Act 2011 (ACT) to remove the exemption provided to employment agents on wages paid to subcontractors simply due to being a "genuine employer". By removing the exemption found at Sch 2, Pt 2.3, s 2.14(1)(g) of the Act, the ACT Government said a payroll tax exemption will no longer be available where a contractor employs themself or joins with other unrelated contractors to create a payroll company. Date of effect: will be effective from 1 July 2014. Land Tax Amendment Bill 2014 - proposes to amend the Land Tax Act 2004 (ACT) to introduce a fixed charge in the calculation of land tax. According to the ACT Government, there is an inequity in the current land tax system with units/townhouses as a larger group contributing less land tax than standard residential properties. The ACT Government said the changes would rebalance the land tax system to equalise the payment of land tax between standard residential properties and multi-unit dwellings. Date of effect: will be effective from 1 October 2014. [LTN 110, 11/6/14] Chapter 140 ACT payroll tax: employment agent exemption changes - start date delayed The ACT Treasurer announced in the ACT Budget 2014-15 (handed down 3 June 2014) that from 1 July 2014, the payroll tax threshold would increase to $1.85m (up from $1.75m) and the "genuine employer" exemption for employment agents would be repealed. The ACT Revenue Office says the amendments to remove the "genuine employer" exemption are contained in Payroll Tax Amendment Bill 2014 (ACT), which is currently before the ACT Morgan’s Tax Month – June 2014 Developments
Legislative Assembly, and is expected to be debated in August 2014. As currently drafted, the Bill would commence retrospectively from 1 July 2014, to ensure the new regime is operational for the full 2014-15 financial year. However, the ACT Revenue Office advises that the ACT Treasurer has since confirmed the new effective date for the removal of the "genuine employer" exemption to be 1 October 2014 to allow adequate time for the sector to adjust to the changes. According to the ACT Revenue Office, the ACT Government is expected to move an amendment to the Bill to extend the commencement date to 1 October 2014. [LTN 121, 26/6/14]
Chapter 141 NSW Budget 2014-15: abolition of business taxes; WorkCover; first homebuyers [84] The NSW Budget 2014-15 was handed down on Tue 17.6.2014. NSW Treasurer, Andrew Constance, announced the following revenue measures: Stamp duty - business taxes to be abolished - from 1 July 2016, the NSW Government will abolish stamp duty on business mortgages, unlisted marketable securities and transfer duty on non-real business transfers. Enhanced revenue compliance activity - due to the success of compliance activity measures taken in the 2013-14 Budget, the NSW Government has decided to extend the program. The enhanced package will expand analysis, investigation and audit of complex business and trust structures for stamp duties, payroll tax, land tax and mineral royalties. The NSW Office of State Revenue will also begin to administer mineral royalties from 1 July 2014. WorkCover premiums to be reduced - WorkCover premiums will be reduced by 5%. Changes for first homebuyers - from 1 July 2014, the threshold for the First Home Owners Grant on new homes will be increased to $750,000 (from $650,000). Also from 1 July 2014, the $5,000 New Home Owners Grant will be restricted to Australian citizens and permanent residents. Further information - The NSW Office of State Revenue (OSR) has released information on various tax changes announced as part of the Budget. Chapter 142 Budget Bill introduced The State Revenue and Other Legislation Amendment (Budget Measures) Bill 2014 (NSW) was introduced into the Legislative Assembly on Tue 17.6.2014. The Bill proposes to implement the above Budget measures as well as other changes. [LTN 114, 17/6/14] Chapter 143 NSW Budget Bill awaits Assent The State Revenue and Other Legislation Amendment (Budget Measures) Bill 2014 (NSW) has passed all stages without amendment and awaits Assent. The Bill contains legislative amendments to implement the NSW Budget 2014-15 measures as well as other changes. [LTN 117, 20/6/14] Chapter 144 NSW Budget Bill receives Assent; NSW public sector super changes The State Revenue and Other Legislation Amendment (Budget Measures) Bill 2014 (NSW) was assented on 24 June 2014 as Act No 37 of 2014. It had passed all stages without amendment and contains legislative amendments to implement the NSW Budget 2014-15 measures as well as other changes. Morgan’s Tax Month – June 2014 Developments
Chapter 145 NSW public sector superannuation changes According to the NSW Public Services Association (PSA), the Bill contains legislative amendments to "cement" the NSW Government's "recent win in the Court of Appeal in relation to superannuation and public sector pay". The Association refers to the Bill's amendments remaking the provisions of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011. Acting PSA General Secretary, Steve Turner, said this move comes as public sector unions in NSW was considering their options in relation to a High Court challenge to the Court of Appeal decision which upheld the Government's position that the public sector pay cap of 2.5% can be reduced by an increase in superannuation. (Source: PSA media release, 25 June 2014 .) [LTN 121, 26/6/14]
Chapter 146 Qld Budget 2014-15: family farm succession planning; home land tax exemption; etc [85] The Qld Budget 2014-15 was handed down on Tue 3.6.2014. Key Budget announcements include: Family primary production business transfer duty concession - from 1 July 2014, the Family Primary Production Concession will be extended. Currently, the concession is limited to lineal descendants, most often this is parent to child. The requirement of a direct lineal descendant will be removed. A family relationship will still be required and the transfer will still need to be by way of gift. The changes aim to provide greater flexibility in succession planning. Transitional home land tax exemption - from the 2014-15 land tax year onwards, the Land Tax Act 2010 (Qld) will be amended to provide a new exemption from land tax for land that does not receive a home exemption because the owner is in the process of selling their old home and moving into a new home, where certain conditions are met. Payroll tax exemption for Qld Government departments - from 1 July 2014, General Government Sector departments (excluding commercialised business units) and Queensland hospital and health services will no longer be required to pay payroll tax. Chapter 147 Qld Budget Bill introduced The Revenue Legislation Amendment Bill 2014 (Qld) was introduced into the Qld Legislative Assembly on Tue 3.6.2014, to implement the above Qld Budget 2014-15 proposals, as well as other amendments. [LTN 105, 3/6/14] Chapter 148 Qld: Budget Bill awaits Royal Assent The Revenue Legislation Amendment Bill 2014 (Qld) has passed all stages of the Qld Legislative Assembly with 1 Government amendment and awaits Royal Assent. The Bill implements the proposals announced as part of the Qld Budget 2014-15 - this includes amendments concerning: family primary production business transfer duty concession; transitional home land tax exemption; and payroll tax exemption for Qld Government departments. The Bill also contains other amendments. The 1 Government amendment corrects a simple clerical error. [LTN 110, 11/6/14] Chapter 149 Qld: Budget Bill receives Royal Assent The Revenue Legislation Amendment Bill 2014 (Qld) on 12 June 2014 received Royal Assent as Act No 35 of 2014. It had passed all stages of the Qld Legislative Assembly with 1 Government amendment. The Bill implements the Morgan’s Tax Month – June 2014 Developments
proposals announced as part of the Qld Budget 2014-15 - this includes amendments concerning: family primary production business transfer duty concession; transitional home land tax exemption; and payroll tax exemption for Qld Government departments. The Bill also contains other amendments. [LTN 114, 17/6/14]
Chapter 150 Tas: Payroll Tax Rebate; First Home Owner Grant: Amendment Bills update [86] The following Tasmanian Bills have passed the Tasmanian House of Assembly and have moved to the Legislative Council: Employment Incentive Scheme (Payroll Tax Rebate) Amendment Bill 2014 - passed without amendment, the Bill proposes to amend the Employment Incentive Scheme (Payroll Tax Rebate) Act 2009 (Tas) to implement a fourth tranche of the payroll tax rebate scheme and provide payroll tax incentives for medium and large businesses to create and retain new jobs in Tasmania. The amendments establish a scheme for the payment of rebates equivalent to the payroll tax paid on new employment created between 30 June 2014 and 30 June 2015 (the job creation phase), provided that the new positions are maintained until 30 June 2016 (the end of the job retention phase). First Home Owner Grant Amendment Bill 2014 - passed with amendments, the Bill proposes to amend the First Home Owner Grant Act 2000 (Tas) to provide legislative certainty to the previous State Government's policy of increasing the First Home Builder Boost (FHBB) from $15,000 to $30,000 for the period 7 November 2013 to 31 December 2014. The increased grant is currently being administered under a grant deed. [LTN 106, 4/6/14] Chapter 151 Amendment Bills await Assent The following Tasmanian Bills have passed all stages and await Royal Assent: Employment Incentive Scheme (Payroll Tax Rebate) Amendment Bill 2014- passed without amendment (with the effect summarized above). First Home Owner Grant Amendment Bill 2014 - passed with some amendments (but broadly still with the effect summarized above). [LTN 110, 11/6/14] Chapter 152 Amendment Bills receive Royal Assent The following Tasmanian Bills on 23 June 2014 received Royal Assent: Employment Incentive Scheme (Payroll Tax Rebate) Amendment Bill 2014 - as Act No 6 of 2014. First Home Owner Grant Amendment Bill 2014 - as Act No 5 of 2014. [LTN 120, 25/6/14]
Chapter 153 Vic: Budget and Other Measures Bill receives Royal Assent [87] The Building a Better Victoria (State Tax and Other Legislation Amendment) Bill 2014 (Vic) on Tue 17.6.2014, received Royal Assent as Act No 40 of 2014. It had passed all stages with Government amendments. The Bill amends the following Victorian Acts: the Duties Act 2000, the First Home Owner Grant Act 2000, the Land Tax Act 2005, the Payroll Tax Act 2007, and the Taxation Administration Act 1997 and for other purposes. Among other things, the Bill implements the proposals announced in the Victorian Budget 2014-15. Morgan’s Tax Month – June 2014 Developments
Chapter 154 Further information The Victorian State Revenue Office (SRO) has issued a new General Information Bulletin GEN 2/14 (Changes to State Taxes - June 2014) to explain the changes made by the Amending Act. The SRO has also issued a new Duties Act Bulletin D1/14 (Treatment of Life Insurance Policy Riders) to clarify the treatment of riders attached to life insurance policies following the abolition of duty on life insurance. [LTN 115, 18/6/14]
Chapter 155 WA: Revenue Laws Amendment Bill update [88] The Revenue Laws Amendment Bill 2014 (WA) has passed the WA Legislative Assembly without amendment and moves to the Legislative Council. It proposes to amend the Duties Act 2008 (WA) and the Land Tax Act 2002 (WA) to implement 2 of the revenue measures announced in the 2014-15 WA Budget, which make changes to the first homebuyer transfer duty concession and introduce a new land tax scale from 2014-15. The Bill also seeks to amend the Pay-roll Tax Assessment Act 2002 (WA) to implement the WA Government's 2013 election commitment to progressively increase the payroll tax exemption threshold to $850,000. [LTN 114, 17/6/14] Chapter 156 WA: Revenue Laws Amendment Bill awaits Assent The Revenue Laws Amendment Bill 2014 (WA) has passed all stages without amendment and awaits Assent. [LTN 121, 26/6/14]
Chapter 157 WA: Taxation Legislation Amendment Bill 2014 introduced to narrow the definition of ‘fourth limb’ charities – so ‘Chamber of Commerce’ can’t qualify [89] The Taxation Legislation Amendment Bill 2014 (WA) was introduced into the WA Legislative Assembly on Thur 26.6.2014. It proposes to amend the Duties Act 2008 (WA), Land Tax Assessment Act 2002 (WA), Pay-roll Tax Assessment Act 2002 (WA), and Taxation Administration Act 2003 (WA), to improve the efficacy of existing WA tax exemptions for charitable institutions. According to the WA Government, the amendments are in response to its concerns following a WA State Administrative Tribunal decision, which held that the WA Chamber of Commerce and Industry was a charitable organisation, and therefore eligible for WA taxation exemptions. Broadly, the amendments contained in the Bill seek to narrow the scope of the existing payroll tax, transfer duty and land tax exemptions as they apply to "fourth limb" charities. Date of effect: The amendments will apply on the day after the Bill receives Royal Assent. [LTN 121, 26/6/14]
Chapter 158 Cases (State)
Chapter 159 NSW land tax: Vartuli & Anor v Chief Comr of State Revenue - primary production land tax exemption refused [90] Two taxpayers (a couple) have been unsuccessful before the NSW Supreme Court in seeking the primary production land tax exemption in respect of a property pursuant to s 10AA(2) of the Land Tax Management Act1956 (NSW). The taxpayers purchased the land in November 1985. Since then they, or companies controlled by them, have conducted a small cattle-farming business on the land. Morgan’s Tax Month – June 2014 Developments
In 2006 part of the land was rezoned from "rural" to "residential" and the balance was rezoned for other non-residential use such as electricity transmission easements, new roads and bushfire asset-protection zones. The land ceased to be "rural land" for the purposes of s 10AA(4) of the Act. The parties did not dispute that the dominant use of the land was for the maintenance of animals for the purpose of selling them or their natural increase or bodily produce (s 10AA(3)(b)). However, the Commissioner argued the taxpayers did not meet the additional commerciality tests for the exemption to apply (s 10AA(2)). The Commissioner argued the use of the land did not have a "significant and substantial commercial purpose or character". The Commissioner issued land tax assessments for the 2007, 2008 and 2009 land tax years. The Tribunal did not agree with the Commissioner that the cattle grazing activities on the land were a hobby or token business. However, the Tribunal concluded "the use of the land lacked a significant and substantial commercial purpose or character because profits are not derived from the use of the land that make any real, as distinct from trifling, contribution to the income of the [taxpayers and associated companies]". (Vartuli & Anor v Chief Comr of State Revenue [2014] NSWSC 678, NSW Supreme Court, White J, 30 May 2014.) [LTN 104, 2/6/14]
Chapter 160 NSW land tax: Vowles Properties Pty Ltd v Chief Comr of State Revenue - primary production land tax exemption denied [91] A taxpayer has been unsuccessful before the NSW Civil and Administrative Tribunal in seeking to claim the primary production land tax exemption for a property for the 2009 to 2012 land tax years. The Commissioner had issued land tax assessments for 2 properties for which the taxpayer claimed the land tax exemption. However, before the Tribunal, the taxpayer conceded that one the properties was not exempt from land tax, but still sought the exemption for the other remaining land. The land was not zoned "rural land". The Tribunal was not satisfied that it was more likely than not that the dominant use of the land during the relevant period was for primary production in accordance with s 10AA(3) of the Land Tax Management Act 1956 (NSW). It also held the taxpayer had not satisfied the commerciality tests contained in s 10AA(2). It found there were some agistment and husbandry activities which had taken place on the land; however, it was of the view the activities were substantially in support of the livestock saleyards operation on the land. (Vowles Properties Pty Ltd v Chief Comr of State Revenue [2014] NSWCATAD 73, NSW Civil and Administrative Tribunal, Isenberg SM, 4 June 2014). [LTN 107, 5/6/14]
Chapter 161 NSW land tax: R&E Drafting Pty Limited v Chief Comr of State Revenue - primary production exemption refused [92] A taxpayer has been unsuccessful before the NSW Civil and Administrative Tribunal in seeking the primary production land tax exemption for the 2011 to 2013 land tax years. Morgan’s Tax Month – June 2014 Developments
The Commissioner had issued land tax assessments to the taxpayer for 3 parcels of property for the relevant years. The taxpayer argued it was entitled to the primary production exemption under s 10AA of the Land Tax Management Act 1956 (NSW) on the basis that all the parcels constituting the property were used for the purpose of cultivation of grasses of sale as hay, and in the case of one of the parcels cultivation of eucalyptus trees for sale as hardwood timber and firewood. The Commissioner contended that there was no such purpose and that the taxpayer had not discharged the onus of proving its case. The Tribunal found, based on the evidence before it, that there was no cultivation as required by the Act for the relevant years. The Tribunal agreed with the Commissioner's contention that cultivation requires more than allowing grass and trees to grow on land, and moreover, that labour and attention must be devoted to ensuring that this occurs. (R&E Drafting Pty Limited v Chief Comr of State Revenue [2014] NSWCATAD 75, NSW Civil and Administrative Tribunal, Block SM, 6 June 2014.) [LTN 110, 11/6/14]
Chapter 162 Rulings & Other (State)
Chapter 163 Qld: request for Commissioner assessment - Public Ruling updated [93] The Qld Office of State Revenue (OSR) has updated Public Ruling DA000.2.5 (Self assessors, the Duties Act 2001 (Qld) and the Taxation Administration Act 2001 (Qld)). The OSR says the Ruling now provides guidance on the circumstances in which the Commissioner may, on written application, make a Commissioner assessment of a matter that is required or permitted to be self assessed. The updated Ruling is taken to be effective from 29 May 2014. [LTN 110, 11/6/14]
Chapter 164 Qld payroll tax: 2013-14 annual return available for completion, lodgement and payment by 21 July 2014 [94] The Qld Office of State Revenue (OSR) has announced that the 2013-14 annual return for payroll tax is now available in OSRconnect. It says taxpayers need to lodge and pay their annual return no later than 21 July 2014. Further information is available on the OSR website. [LTN 121, 26/6/14]
Chapter 165 SA stamp duty: off-the-plan concession changes [95] RevenueSA has reminded taxpayers that changes to the off-the plan apartment concessions will come into effect from 1 July 2014. For eligible off-the-plan purchase contracts, entered into between 1 July 2014 and 30 June 2016 for apartments with a value of $500,000 or less, stamp duty will be payable on the deemed unimproved value of the apartment plus the value of any construction already undertaken at the date of the relevant contract and not the full market value of the apartment. For apartments valued at over $500,000, a concession will apply of up to $15,500. RevenueSA has also advised that the relevant descriptions of the stages of construction have been published in the SA Government Gazette and are also outlined in Information Circular 68 [LTN 107, 5/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 166 Vic payroll tax: 2013-14 Annual Reconciliation is available to be lodged and paid by 21 July [96] The Victorian State Revenue Office (SRO) has advised taxpayers that the 2013- 14 Annual Reconciliation is now available and is due to be lodged and paid by 21 July 2014. The SRO has produced a video about reconciliation for employers. Further information is available on the SRO website. [LTN 121, 26/6/14]
CHAPTER 167 OTHER DEVELOPMENTS
Chapter 168 FoFA amendments: Senate committee recommends Bill be passed, but provisions be clarified [97] The Senate Economics Legislation Committee on Mon 16.6.2014, tabled its report on the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014. The Bill, which is still before the House of Reps, proposes changes to the Future of Financial Advice (FoFA) laws to, among other things: remove the need for clients to renew their ongoing fee arrangement with their adviser every 2 years (known as the "opt-in" requirement); make the requirement for advisers to provide a fee disclosure statement (FDS) only applicable to clients who entered into their arrangement after 1 July 2013; remove para 961B(2)(g) of the Corporations Act, the "catch-all" provision, from the list of steps an advice provider may take in order to satisfy the best interests obligation; better facilitate the provision of scaled advice; and provide a targeted exemption for general advice from the ban on conflicted remuneration in certain circumstances. The Committee considered the best interests duty amendment (ie removal of para 961B(2)(g)) should proceed. Overall, the Committee majority recommended that the Bill be passed, subject to the Government giving due consideration to the following recommendations: The EM to the Bill include a paragraph that clearly and unambiguously spells out the best interests obligations - 961B(1) and (2), 961G, 961J and 961H - and the level of consumer protection they provide. The Government considers closely how these separate obligations work together and whether any further strengthening is required to ensure that a provider cannot circumvent these best interests obligations. The EM to the Bill makes clear that it is not the Government's intention to reintroduce commissions. The Government [has] consider[ed] the provisions governing conflicted remuneration and redraft[ed] them to ensure there is greater clarity around their implementation. The Government g[a]ve consideration to the terminology used in the EM and legislation (eg s 766B), such as information, general advice and personal advice, with a view to making the distinction between them much sharper and more applicable in a practical sense when it comes to allowing exemptions from conflicted remuneration. Labor and Greens Senators issued dissenting reports. [LTN 114, 17/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 169 FoFA amendments: Govt sets out the way forward [98] The Acting Assistant Treasurer on Fri 20.6.2014, set out how the Government intends to proceed with its proposed amendments to the Future of Financial Advice (FoFA) legislation. Senator Cormann said that the Government remains committed to implementing its FoFA amendments which seek to "strike the right balance" between protecting consumers and relieving the regulatory burden on the financial services sector. Broadly, the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, which is still before the House of Reps, proposes to: remove the "catch-all" requirement from the best interests duty, remove the opt-in requirement, simplify the annual fee disclosure statement rules, exempt general advice from conflicted remuneration and revise the grandfathering provisions. The Government said that it intends to proceed with the proposed amendment to remove the final catch-all step from the best interest duty in s 961B(2) of the Corporations Act. Senator Cormann rejected claims from some quarters that the proposed changes would somehow water down the best interest duty. To this end, he noted that the requirement for a financial adviser to act in the best interest of his or her client will remain in place. An adviser must also still satisfy the other existing FoFA obligations to ensure that advice is appropriate and prioritise the interests of the client ahead of their own. While the Bill provides that certain incentive payments related to the provision of "general advice" are not conflicted remuneration, the Government said that it has never sought to re-introduce commissions. To put this beyond doubt, the Government will prescribe that any payment related to the provision of general advice cannot be an upfront or a trailing commission. In addition, the Government will put in place regulation-making powers that may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration. The Government said that it will implement its time-sensitive FoFA changes through regulations (where legally possible), with effect from 1 July 2014. These include: the removal of the opt-in requirement and the catch-all provision from the best interest duty, removing the requirement for fee disclosure statements to be sent to pre- 1 July 2013 clients, supporting the provision of general advice and scaled advice, balance scorecard incentive payments and improvements to grandfathering. Changes that will be progressed through amendments to the Corporations Act via the Bill include a clarification on volume-based shelf-space fees, extending the time period advisers are required to send a fee disclosure statement from 30 to 60 days after the client's anniversary date, and expanding the regulation- making powers. Source : Acting Assistant Treasurer's media release, 20 June 2014 [LTN 117, 20/6/14]
Chapter 170 FoFA amendments: Regulation registered to implement time-sensitive changes [99] The Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 was registered on Mon 30.6.2014, to give effect to the Morgan’s Tax Month – June 2014 Developments
Government's proposed amendments to the FoFA legislation to implement its 2013 election commitments. The Regulation amends the Corporations Regulations 2001 to implement the time-sensitive FoFA changes until the measures contained in the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 can be passed by both Houses of Parliament. The Regulation makes "interim" changes (applicable from 1 July 2014 until 31 December 2015) to: remove the "catch-all" requirement from the best interests duty and facilitate "scaled advice"; remove the requirement for fee disclosure statements (FDS) to be sent to pre-1 July 2013 clients; and remove of the "opt-in" requirement so that investors will not be required to renew their ongoing fee arrangement with their adviser every 2 years. The Regulation broadens the FoFA grandfathering arrangements for the ban on conflicted remuneration and specifies that benefits relating to general advice are not conflicted (subject to certain conditions to ensure that commission-style payments cannot be re-introduced). The Regulation also clarifies that bonuses paid in relation to "permissible revenue" are not conflicted remuneration and allows benefits to be paid under a "balanced scorecard arrangement". The conflicted remuneration provisions have also been amended in relation to execution-only services and existing client-pays provisions, while the exemptions for basic banking products and training and education have been broadened. Other amendments cover stamping fees for capital raisings; brokerage fees paid for financial products traded on the ASX24; "mixed benefits"; and ensuring that the wholesale and retail client distinction applies in respect of the FoFA provisions. DATE OF EFFECT: The Regulation commences on 1 July 2014. [LTN 123, 30/6/14]
Chapter 171 *Automatic exchange of tax info re financial accounts: Treasury discussion paper [100] Treasury on Thur 19.6.2014, released a discussion paper entitled, Common Reporting Standard for the automatic exchange of tax information. Treasury noted the Common Reporting Standard for the automatic exchange of tax information is a single global standard for financial institutions' collection of financial account information on account holders who are residents in another jurisdiction, the reporting of it to the financial institutions' tax authority and the exchange of it automatically with other jurisdictions' tax authorities on an annual basis. The Common Reporting Standard was endorsed by G20 Finance Ministers and Central Bank Governors at their meeting on 22 and 23 February 2014. Treasury further noted that the Government has yet to make final decisions on its implementation in Australia and that the discussion paper seeks stakeholder views on: timing; financial institutions' potential implementation and compliance costs; and suggestions on how to minimise the implementation and compliance costs. COMMENTS are due by16 July 2014. [LTN 117, 20/6/14] Morgan’s Tax Month – June 2014 Developments
Chapter 172 *ACCC takes action against tax agent travelling to Indigenous communities [101] The Australian Competition and Consumer Commission (ACCC) has announced that it has instituted proceedings in the Federal Court against Adata Pty Ltd and Adata (Vic) Pty Ltd (together, Adata), alleging that Adata has breached the unsolicited consumer agreement provisions of the Australian Consumer Law (ACL). The ACCC said the allegations relate to Adata's supply of end of year individual tax return services to Indigenous recipients of Centrelink payments in remote communities in the NT and WA. It is also alleged that Adata's sole director was knowingly concerned in, or a party to, the conduct of Adata. The ACCC alleges that Adata breached the unsolicited consumer agreement provisions of the ACL. The Court will advise the parties about the timing of the first Directions Hearing shortly, the ACCC said. Source: ACCC media release, 30 June 2014 [LTN 123, 30/6/14] Chapter 173 Extract from Media Release The ACCC alleges that Adata breached the unsolicited consumer agreement provisions of the ACL by: receiving payments from consumers within the 10 business day cooling off period; failing to inform consumers of their termination rights; failing to provide consumers with an Agreement Document; failing to use an Agreement Document which complies with the ACL; and calling on consumers on a Sunday. The ACCC is seeking declarations, injunctions, refunds for affected consumers, and costs.
Chapter 174 THE END FJM 1.7.14