Monday
More Section 100A Green Zone Examples
The ATO has released a paper with five additional examples which they propose to include in the green zone. The details of the paper can be found here. Feedback is requested by 4 October 2022 and can be submitted by contacting Tax & Super Australia’s member services team on 03 8851 4555 9am – 5pm (AEST) Monday to Friday (excluding Public Holidays) or by emailing members@taxandsuperaustralia.com.au.
Review of the Your Future, Your Super measures
The Government has announced that Treasury will conduct a review of the Your Future, Your Super (YFYS) measures with the intention to make sure they are serving members’ long-term interests. Submission are to be made by: **** In addition to public submissions and stakeholder consultations, the Government will establish a Technical Working Group to work alongside Treasury to evaluate the YFYS performance test. The 12-member Working Group is comprised of independent economists, academics, investment advisers and representatives from retail and not-for-profit super funds.
Draft Update: TR 2005/5 taxation of US and UK financial institutions
The ATO has issued an updated draft of Taxation Ruling TR 2005/5 Income tax: ascertaining the right to tax United States (US) and United Kingdom (UK) resident financial institutions under the US and the UK Taxation Conventions in respect of interest income arising in Australia. The update will amend the Ruling to clarify certain aspects of the second limb of the definition of “financial institution” as used in Australia’s double-tax conventions with the United States and the United Kingdom. Key aspects covered by the draft update include: when an enterprise is substantially deriving its profits from carrying on a business of spread activities; why some activities are not considered to be the provision of finance; and changes to the use of the word “bank” by financial institutions following changes to Australian banking law. The draft update will also apply to residents of other countries with a double-tax agreement with Australia if they contain an article that is similarly worded and has the same effect as the United States or United Kingdom conventions.
Share buy-back scheme a reimbursement agreement
The Federal Court has concluded that a share buy-back scheme undertaken by a taxpayer involved a reimbursement agreement for the purposes of sec 100A of the Income Tax Assessment Act 1936 (ITAA 1936), and that the deemed dividend component of the scheme was part of a ‘dividend stripping operation’ as defined by sec 207-155 of the Income Tax Assessment Act 1997.
Broadly, a company with retained earnings bought back shares of around $10 million held by a discretionary trust which were deemed by sec 159GZZZP ITAA 1936 to be a dividend for tax purposes. However, the share buy-back dividend constituted corpus of the trust for trust purposes. A newly introduced corporate beneficiary was made presently entitled to certain other trust income, which also meant it was entitled to the share buy-back dividend, the tax on which was wholly offset by the franking credits attached. The Court’s conclusion meant that the corporate beneficiary was deemed not to be presently entitled to the trust income, and the trustee was taxable instead. BBlood Enterprises Pty Ltd v Commissioner of Taxation [2022] FCA 1112.
Rental repairs or improvements
A taxpayer that incurred over $77,000 in works carried out to a rental property has had a part of their claim allowed as repairs, but a portion disallowed as capital improvements. The taxpayer claimed that various tenants had damaged the property over several years, requiring extensive work to repair. After review, the tribunal was satisfied that some expenditure went beyond a repair and was instead an improvement (to be claimed under the capital works provision). The tribunal was unable to dissect an invoice for labour costs and instead referred it back to the taxpayer to apportion in accordance with TR 97/23. Wulf and FCT [2022] AATA 3094.
Protect yourself online
The ATO has reminded taxpayers and agents of the importance of cyber security, with the Australian Cyber Security Centre (ACSC) sharing guides and resources throughout October to assist with protecting your information from cyber criminals. We note this is particularly relevant given the recent news of the hacking of a major Australian corporate, exposing the personal details of almost 10 million customers.
Cheaper Child Care Bill
The Government introduced the Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022 into the House of Representatives today. The purpose of the Bill is to give effect to the Government’s election commitments to make early childhood education and care (ECEC) more affordable for 96 per cent of families currently using child care, with no families being worse off. The Bill implements a range of measures to increase the level of Child Care Subsidy (CCS) for families, improve child care provider transparency and accountability, improve data and analytics capability, and strengthen payment integrity.
Rental repairs or improvements
The AAT has found that a taxpayer who rented a property to her husband while separated for less than an arm’s length amount should have her deductions capped at the amount of rent received. The tribunal said that the losses and outgoings incurred by the taxpayer in excess of the rental income were not necessarily incurred in gaining or producing assessable income and made reference to IT 2167, and instead could be explained by the familial relationship between the taxpayer and husband. The tribunal also found a penalty was warranted, but chose to remit it by 25%. Rizkallah and FCT [2022] AATA 3081
IGTO annual report 2020-21
The Inspector General Taxation Ombudsman’s annual report for 2020-21 has been tabled in parliament. A key focus of the IGTO’s complaint investigations in that year were related to access and eligibility to receive Government economic stimulus measures – including JobKeeper, Boosting Cash Flow, Early Release of Superannuation and other tax payments. The report reveals that the IGTO received 1,632 complaints during the year, of which 85% were processed and finalised within the year. This annual report is a re-issue of the original report issued on 7 October 2021.
The Treasury Laws Amendment (Australia-India Economic Cooperation and Trade Agreement Implementation) Bill 2022 was introduced into the House of Representatives to stop Australian taxation on certain payments or credits made to entities that are Indian residents for tax purposes. These payments or credits are made for services provided remotely (not through a permanent establishment in Australia) to Australian customers that are covered by Article 12(3)(g) of the Indian agreement, that is not a royalty within the meaning of the ITAA 1936, and that is only taxable in Australia because of the operation of Article 12(3)(g) and Article 23 of the Indian agreement, as given effect by the Agreements Act. The Bill implements the side letter to the Australia-India Economic Cooperations and Trade Agreement (AI-ECTA) signed between the two countries on 2 April 2022. The Bill will commence on the later of the day of Royal Assent and the day the AI-ECTA enters into force for Australia.
Agent deregistered for criminal conduct
A Maitland tax agent has had his registration terminated for serious misconduct which led to a criminal conviction in the District Court of New South Wales. The agent was charged with a criminal offence of fraud in dishonestly obtaining property, a financial advantage or causing financial hardship by deception. Following his fraud conviction, the agent was sentenced to a term of imprisonment. He failed to notify the Tax Practitioners Board (TPB) of this conviction and sentence, which is required by law. He also made a false declaration in his application for renewal of registration that there were no matters affecting his good name, integrity, and character, in circumstances where he had pleaded guilty to the fraud offence. The TPB terminated his registration and applied the maximum ban of 5 years prohibiting him from reapplying for registration.
Tax chiefs meet to discuss multinational tax
Tax Commissioners and delegates from over 40 countries arrive in Sydney this week to mark the 15th Forum on Tax Administration Plenary meeting (FTA) to address multinational issues in tax administration. The FTA brings together Commissioners from around the world including all OECD and G20 countries to identify and discuss relevant global trends, improve the fairness and effectiveness of tax administration, and improve compliance. The FTA will focus on strategies across three key areas, including the implementation of the OECD’s Two-Pillar Solution, the digital transformation of tax administrations to achieve greater efficiencies and supporting tax capacity building in developing nations.
Separating WA couples can now split superannuation
De facto couples in Western Australia who separate will now be able to split their superannuation, granting them the same right as couples throughout Australia Until yesterday, due to the unique nature of the Family Court of Western Australia, de facto couples in WA did not have the same rights as those in other states.
The ATO has updated its guidance for advisers in understanding the general expectations on market valuation for tax purposes. It includes information on what market value means for tax purposes and the evidence and processes expected to support a valuation. While it aims to help taxpayers reduce tax risks associated with valuations it does not provide instructions or details on how to calculate or determine market value for tax purposes, as this requires careful consideration of a number of factors.
Don’t miss the upcoming TSA webinar on Valuations to be held next Friday. The webinar will cover the role and understanding of Valuation Methodologies for small to medium business entities in the course of determining income tax liabilities, requirements to assess and value a ‘business’ or transaction for the purposes of respective income tax requirements. Register below to attend this valuable event.
ASIC has released a consultation paper proposing to provide relief in relation to the employee share scheme (ESS) regime in Part 7.12 of the Corporations Act which takes effect on 1 October 2022. The relief seeks to remove some unintended technical issues that may make it hard for some entities to rely on the regime. The new regime in Div 1A of Pt 7.12 contains broad exemptions from the Corporations Act’s disclosure and licensing requirements for ESS. In particular, the provisions make it easier to offer ESS interests where there is no monetary consideration, and they significantly expand the ability of unlisted companies to make offers.
GST adjustment notes
The ATO has registered a new determination A New Tax System (Goods and Services Tax) Adjustment Note Information Requirements Determination 2022 which sets out the additional information requirements for a document to be an adjustment note or recipient created adjustment note under subsection 29-75(1) of the GST Act. Unless an exception applies, a supplier or a recipient must hold an adjustment note to attribute a decreasing adjustment from an adjustment event when completing their GST return for a tax period. Even where a document has insufficient information, the Commissioner has the discretion to treat a document as an adjustment note under subsection 29-75(1) of the GST Act. It replaces A New Tax System (Goods and Services Tax) Adjustment Note Information Requirements Determination 2012.
