March 2017 Monthl Tax Reie · An Uber driver supplies ‘taxi travel’ for GST purposes Uber B.V....

Monthly Tax ReviewMarch 2017

© Tax and Super Australia Monthly Tax Review March 2017 2

Welcome to the Monthly Tax Review: March 2017

The Monthly Tax Review (MTR) is a compilation of key case law, regulator updates and industry insights for you to easily stay abreast of the ever changing tax landscape.

This edition contains tax and superannuation developments covering the period from Friday 17 February to Friday 24 March (inclusive).

To aid your navigation, we have linked all resources and source materials within the MTR notes. If you require a greater in depth understanding of an issue, just click on the link through to the additional materials.

We hope you enjoy this edition.

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The Team at Tax and Super Australia

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About the Monthly Tax Review notes

GREEN For legislation: The Bill has passed both Houses of Parliament or received Royal Assent (ie enacted as law).

For case law: The decision has been delivered by the relevant Court or the Administrative Appeals Tribunal.

For ATO pronouncements: Issued in final form and can be relied upon as the Commissioner of Taxation’s position on, or interpretation of, an issue.

AMBER For legislation: The Bill has been introduced and is currently progressing through the Parliament. The measures have not yet been enacted. The Bill may be amended, or not pass through Parliament altogether.

For ATO pronouncements: Issued in draft form and under consultation. Can be relied on as the Commissioner’s position on, or interpretation of, an issue until issued in final form or otherwise withdrawn.

RED For legislation: Released in exposure draft form and subject to consultation. May be amended before being tabled in Parliament as a bill or scrapped altogether.

For regulator updates or Treasury papers: Issued in draft form or issued in final form as a recommendations paper. There is no certainty that the recommendations will be implemented.

TRAFFIC LIGHTS

Our traffic light system will help you determine whether the tax development has been finalised, is being progressed, or still at early discussion stage. If you only want to know if a measure has passed or an ATO pronouncement has been finalised – then just “Read the Green”.

STRUCTURE

HeadlinesIn-depth analysis of tax and super matters that have occurred over the past month that will be important to you and your clients. These are must read items!

Tax Bulletin BoardA snapshot of salient items which have happened during the month that are of relevance to you (which you may have missed).

State of PlayA summary on the status of all tax and super related legislation before Parliament, recent court decisions, and new ATO pronouncements such as tax rulings and determinations. All references are linked to source if you require further information.

Income Tax Assessment Act 1997 ............... ITAA97

Income Tax Assessment Act 1936 ............... ITAA36

A New Tax System (Goods and Services Tax) Act 1999 ..........GST Act

Fringe Benefits Tax Assessment Act 1986....................................................FBTAA

Taxation Administration Act 1953 .................... TAA

Goods and Services Tax .................................GST

Fringe Benefits Tax ......................................... FBT

Pay As You Go ............................................PAYG

Commissioner of Taxation ............... Commissioner

Australian Taxation Office ............................. ATO

Tax Practitioners Board ................................... TPB

Administrative Appeals Tribunal ...................... AAT

Federal Court of Australia ................Federal Court

Full Court of the Federal Court of Australia .......................................... Full Court

High Court of Australia ........................High Court

GLOSSARY


ContentsHeadlines ................................................................................................................................................. 5

Cases ........................................................................................................................................................ 5An Uber driver supplies ‘taxi travel’ for GST purposes .........................................................................5Company losses not deductible .......................................................................................................10Share trading losses not deductible ..................................................................................................17

ATO Announcements ................................................................................................................................ 21Lump sums for healthcare practitioners are assessable ......................................................................21

Tax Bulletin Board .................................................................................................................................. 27Legislation ............................................................................................................................................... 27

Consultation on innovative super income stream products .................................................................27Cases ...................................................................................................................................................... 28

Evidence by video link not permitted ................................................................................................28Equitable ownership is sufficient to obtain marriage breakdown roll-over ............................................28Option fee is not consideration for margin scheme purposes .............................................................28

ATO Legal Database ................................................................................................................................ 29ATO warning on R&D incentive for agricultural activities ....................................................................29ATO warning on R&D incentive for software development ..................................................................29GST: definition of second-hand goods .............................................................................................29Guidance on simplified transfer pricing record keeping .....................................................................29Decision Impact Statement – WTPG case .........................................................................................29Decision Impact Statement – Elecnet case ........................................................................................30Guidance on GST on low value imports ...........................................................................................30ATO guidance: concessional contributions – defined benefit interests .................................................30ATO guidance: total superannuation balance ...................................................................................30ATO guidance on transitional CGT relief finalised .............................................................................31ATO guidance on transfer balance cap finalised ...............................................................................31Draft guidance on central management and control .........................................................................31

Government announcements ..................................................................................................................... 32Help for young entrepreneurs ..........................................................................................................32

ATO announcements ................................................................................................................................ 33Super guarantee health check .........................................................................................................33Financial curriculum in schools ........................................................................................................33Foreign exchange rates ...................................................................................................................33Notice of Assessment error now corrected ........................................................................................332014-15 SMSF statistical overview ...................................................................................................33Firefox for AUSkey users ..................................................................................................................34Transitioning to the PLS ...................................................................................................................34Submission form for new Remedial Power .........................................................................................34General interest charge ..................................................................................................................34Cash economy – Canberra and Perth ..............................................................................................34ATO review of GST benchmark market values ..................................................................................35Early tax returns for working holiday makers .....................................................................................35Consultation on innovation incentives ..............................................................................................35April and May system outages .........................................................................................................35ATO guidance on finalising deceased estates ...................................................................................36FBT return 2017 .............................................................................................................................36

Inspector-General of Taxation .................................................................................................................... 37Submission on super guarantee non-payment ...................................................................................37Submission on taxpayer engagement ...............................................................................................37

Tax Practitioners’ Board ............................................................................................................................. 38Transitional registration for tax (financial) advisers .............................................................................38Registration for financial planners and advisers .................................................................................38Registration renewal for tax (financial) advisers .................................................................................38

Board of Taxation ..................................................................................................................................... 39CEO update ..................................................................................................................................39LCG 2016/8 on CGT relief for superannuation funds finalised: main differences compared to draft .....40

State of Play ........................................................................................................................................... 42Bill Status at 24 March 2017 .................................................................................................................. 50


HEADLINES

Headlines

CASES

An Uber driver supplies ‘taxi travel’ for GST purposes

Uber B.V. v Commissioner of Taxation [2017] FCA 110 (17 February 2017)

Overview

The Federal Court has concluded that a taxpayer who is an uberX driver supplies “taxi travel” for the purposes of the GST Act. Therefore the taxpayer is required to register for GST.

All legislative references are to the GST Act.

What is the case about?

The taxpayer was an “uberX Partner”. The services provided by Partners are facilitated by two smartphone applications, the “Uber app” and the “Uber Partner app”. The Uber app allows registered Riders to request transportation services from various categories of services, including UberBLACK (luxury hire cars), uberTAXI (registered taxis) and uberX. The Uber Partner app allows Partners to accept requests from Riders.

This case is concerned solely with the category of Partners who provide uberX services (uberX Partners or Partners) to registered riders (uberX Riders or Riders).

How the uberX service works

A Rider accesses and uses the services of an uberX Partner as follows (summarised):

1. The Rider opens the Uber app on a smartphone device and sign-in details are entered.

2. The Rider is given access to a map that shows the location of nearby available uberX Partners.

3. The Rider provides their pick up address.

4. The Rider is given the option to request a fee estimate.

5. The Rider presses a button to request an uberX.

6. The Uber app sends the request, via the Uber Partner app, to the uberX Partner. The Partner accepts the request.

7. The screen displays various details of the uberX Partner and the vehicle.

8. During the ride with the uberX Partner, the Rider is not provided with a real-time calculation or ongoing tally of the cost of the ride by the Uber app.

9. After using the uberX service, the Rider and the Partner may rate each other and leave feedback.

GREEN


HEADLINES

The process of calculating the service fee for use of the uberX Partner service may be summarised as follows.

¢ When the Rider enters the Partner’s vehicle, the Partner presses a button in the Uber Partner app to indicate that the ride has commenced.

¢ The Rider is then driven to the nominated destination where the Partner makes an electronic record of the destination location by pressing a button in the Uber Partner app to indicate that the ride has ended.

¢ The pick-up location and destination locations are used by Uber B.V. (licensee of the apps) to calculate the cost to be charged to the Rider by the uberX Partner for the ride, a calculation which takes place on computer services which are located outside Australia.

¢ The cost is calculated in accordance with a Service Fee Schedule. The cost may vary if there are any relevant promotional fee discounts or demand-based pricing (‘surge pricing’).

¢ At the conclusion of an uberX Partner ride, the Rider’s credit card or PayPal account which is held on file by Uber B.V. is charged with the amount of the calculated fee and an electronic receipt is issued by Uber B.V. on behalf of the uberX Partner to Rider by email.

¢ An amount reflecting the Uber fee for use of the Uber Partner app is deducted from the payment received from the Rider and Uber B.V. then pays the remaining balance to the uberX Partner by way of an electronic transfer to a bank account.

The following are additional features of the services:

1. the services are provided in private vehicles (typically owned by the uberX Partner);

2. there is no requirement for uberX Partners to hold a hire car or taxi driver licence;

3. the Rider has to download and sign up to the Uber app, which includes agreeing to terms and conditions and providing payment details before the Uber app can be used to make a booking;

4. the Rider can only make bookings through the Uber app on their smartphone; it is not possible for members of the public to make a booking unless they have first registered as a Rider; and

5. the trip cost is calculated based on both the time taken for the ride and the distance covered in the ride (rather than by a mixture of time or distance).

In operating as a Partner, the taxpayer did not do any of the following:

¢ wait at ranks or other specific locations;

¢ accept street or kerbside hails; or

¢ drive in a bus lane or transit lane unless he had the required numbers of passengers to do so.

¢ operate a taximeter or otherwise provide any ongoing tally of the cost of the ride;

¢ display a schedule of fares;

¢ have any rides pre-booked for a specific time;

¢ provide uberX services to anyone other than registered Riders;

¢ wear a uniform; or

¢ display any roof light or other indication on the vehicle identifying it as a taxi or limousine, or as being associated with Uber.


HEADLINES

What is the issue?

The fundamental question in the case is whether persons who are Uber drivers are required to be registered for GST purposes. Specifically, the Court considered whether uberX Partners (ie. the drivers) supply “taxi travel” as defined for GST purposes.

Note: The $75,000 turnover threshold for mandatory GST registration does not apply to suppliers of ‘taxi travel’. An entity that supplies taxi travel in carrying on its enterprise is required to register, regardless of whether its GST turnover meets the threshold (s144-5).

What did the Federal Court say?

The Federal Court concluded that the taxpayer supplied ‘taxi travel’ and was thereby required to register for GST.

Issues of statutory construction

The Court commented on six relevant principles of statutory construction.

a. It is important to acknowledge the distinction between the legal and the grammatical meaning of statutory text. The search for “legal meaning” involves the application of “the processes of statutory construction” and that the identification of statutory purposes and legislative intention is the product of those processes and not the discovery of some subjective purpose or intention.

b. The consideration of text often requires consideration of context.

The Court considered that the Explanatory Memorandum to the Bill which introduced Div 144 provides a relevant part of that context. In particular, the relevant part of the Explanatory Memorandum makes clear that the exception which was created in respect of taxis was informed by an appreciation of the difficulties which had arisen with goods and services taxes in overseas jurisdictions and the fact that some but not all taxi drivers were registered for GST purposes. This meant that GST was not paid by all drivers or, in the case of unregistered taxi drivers, GST could be collected and not remitted.

A plain object of Div 144 was to address this problem by requiring all persons who supplied “taxi travel” to be registered for, and remit, GST. In these circumstances, the concept of “taxi travel” as defined in s 195-1 should be construed broadly and not technically.

c. In construing the phrase “taxi travel”, it is relevant to take into account the fact that the legislation is directed to persons who supply “taxi travel”, who need to understand whether or not they are obliged to register for GST, notwithstanding that their income does not reach the general statutory threshold. This reinforces the desirability of construing the legislation in a practical and common sense way and to avoid an approach which is “unduly technical or overly meticulous and literal” (Saga Holidays Ltd v Commissioner of Taxation [2005] FCA 1892).

d. The relevant provisions of the GST Act are “always speaking”. Merely because software technology of the type used in providing the uberX service may not have been known at the time that Div 144 was inserted into the GST Act is not determinative.

e. The Court did not consider that the definition of “taxi travel” in s195-1 is in truth a composite phrase. Rather, the focus in the definition on “travel that involves transporting passengers, by taxi or limousine, for fares” (emphasis added) expressly differentiates between two types of vehicles, as is further reflected in the use of the disjunctive “or”.


HEADLINES

f. Appropriate caution needs to be taken in using dictionary meanings. It must be remembered that statutes always have some purpose or object to accomplish. That is not to say, however, that reference can never be made to dictionary meanings in ascertaining or confirming the ordinary meaning of words.

Applying the above principles and other principles, the Court considered that the words in s195-1 should be given their “ordinary, everyday meanings and not a trade or specialised meaning”.

Definitions of taxi, limousine and hire car

The ordinary meaning of the word “taxi” is a vehicle available for hire by the public and which transports a passenger at his or her direction for the payment of a fare that will often, but not always, be calculated by reference to a taximeter.

This meaning is supported by dictionary definitions set out in the judgment:

a. Macquarie (online): a car for public hire, especially one fitted with a taximeter;

b. Oxford (online): a motor vehicle licensed to transport passengers in return for payment of a fare and typically fitted with a taximeter;

c. Collins English Dictionary (online): a car, usually fitted with a taximeter, that may be hired, along with its driver, to carry passengers to any specified destination;

d. Merriam-Webster (online): a car that carries passengers to a place for an amount of money that is based on the distance travelled;

e. Macmillan (online): a car whose driver is paid to take you to a particular place, especially a fairly short distance;

f. The Chambers Dictionary (13th edition, UK, online): a car which may be hired together with its driver to carry passengers on usually short journeys, and which is usually fitted with a taximeter for calculating the fare.

The word “limousine” should also be given its ordinary meaning. That meaning is a private luxurious motor vehicle which is made available for public hire and which transports a passenger at his or her direction for the payment of a fare. This meaning is confirmed by the definition in the Macquarie Dictionary, 3rd edition.

A “hire car” is a synonym for a “limousine” in ordinary parlance.

Further, the ordinary meaning of the words “limousine” (and its synonym “hire car”) involves a luxury vehicle.

Application to the taxpayer

The Court concluded that the taxpayer was supplying taxi travel as defined in sections 144-5(1) and 195-1 when he was operating as an uberX Partner. At that time, he was supplying travel that involved transporting passengers by taxi for fares.

The fact that his car did not have a taximeter installed in it is not determinative of the question because it is not an essential aspect of the ordinary meaning of the word “taxi” that a vehicle must have such a device. This is reflected in the dictionary definitions which make clear that while such a device is usually present in a taxi, it is not essential to the ordinary meaning of that word. The Court also does not consider that the ordinary meaning of the word “taxi” requires consideration to be given to the numerous other characteristics which the taxpayer advanced as being essential to the notion of a “taxi”.


HEADLINES

Although not necessary to determining the issue at hand, the Court also commented that the type of car used by the taxpayer – a Honda Civic – is not a “luxury car”. As a consequence, the taxpayer was not supplying a service which involved travel by “limousine”. However, the position may be different in a case of other uberX Partners who do use luxury cars in providing uberX services.

ATO guidance on ride-sourcing

The ATO has released guidance on how the income tax and GST laws apply to ride-sourcing activities (the most prominent of which is Uber).

The webpage “Providing taxi travel services through ride-sourcing and your tax obligations” (search QC 45175 on www.ato.gov.au) summarises a driver’s income tax and GST obligations.

“What the community is asking us” (QC 45175) contains frequently asked questions that the ATO has received from members of the community.

The ATO has an ongoing data matching program in relation to ride-sourcing. The ATO receives details of payments made to ride-sourcing providers (ie. drivers) from accounts held by a ride-sourcing facilitator (ie. Uber). Information about the data matching program can be found on the ATO website (search for QC 50759).


HEADLINES

Company losses not deductible

RGGW and Commissioner of Taxation (Taxation) [2017] AATA 238 (20 February 2017)

Overview

The corporate taxpayer was denied a deduction for prior year losses as it did not pass either the continuity of ownership test or the same business test.

All legislative references are to the ITAA97 unless otherwise stated.


The taxpayer, a company, was a 50% partner in a partnership that was established to develop a shopping centre. By the time the development was completed, the partnership was in a precarious financial position. A receiver and manager was appointed to the partnership and the taxpayer was placed into administration.

The taxpayer claims that the partnership incurred tax losses during the 1990 to 1995 years, and that its share of those tax losses exceeds $25m.

During the 1996 to 2003 tax years, the taxpayer lodged tax returns which declared positive taxable income (disregarding the tax losses claimed) on which income tax would ordinarily be payable. However, the carry forward tax losses extinguished those tax liabilities.

The Commissioner denied the claims for the tax losses.

Group structure

The taxpayer sat within a very complex family corporate structure (the Marshall Group). In broad terms the Marshall Group is owned by the Marshall family. The group comprises a number of companies and trusts.

Refer to the AAT decision for details of the group structure, including changes in ownership over the years. The below commentary contains references to various entities within the structure.

What was the issue?

The AAT considered:

1. whether tax losses are available to the taxpayer through application of the continuity of ownership test (COT)

2. whether tax losses are available to the taxpayer through application of the same business test (SBT); and

3. whether, assuming losses are available, the taxpayer has established the quantum of its entitlement.

GREEN


HEADLINES

What did the AAT decide?

The AAT concluded that none of the carry forward losses are available to the taxpayer under the COT or the SBT.


HEADLINES

Continuity of ownership test

The taxpayer is not entitled to claim any of the carry forward losses by application of the COT.

The AAT considered the COT separately for the following groups of income years:

Years Relevant COT AAT decision

1996 and 1997 Section 80A of the ITAA36 COT not satisfied

1998 and 1999 Section 165-12 (not subject to the requirement in s165-165 (the ‘same share test’))

COT not satisfied

2000 to 2003 Section 165-12 (subject to the requirement in s165-165 (the ‘same share test’))

COT not satisfied

1996 and 1997

The 1990 loss

Since any losses that are available must be taken into account in the order in which they were incurred (s79E(3)(c) of the ITAA36), the first loss year to consider is the 1990 year. The AAT considered the available evidence. Given the uncertainty as to the beneficial ownership in 1990 (owing to gaps in documentation and the vagueness of witness statements and oral evidence), the AAT was not satisfied that the continuity of ownership is established between that year and either the 1996 or 1997 year.

The 1991, 1992 and 1993 losses

For the same reasons as for 1990, any losses incurred in 1991, 1992 or 1993 cannot be taken into account in the 1996 to 1999 income years.

The 1994 and 1995 losses

The AAT could not accept that continuity of ownership is established between either of the 1994 or 1995 loss years and any of the 1996 to 1999 income years. The documentary support for the required continuity of ownership was “strikingly absent”.

The AAT noted that it is not unreasonable to expect that a case put forward in support of tax losses of almost $5million, should be supported by more than assertions and broad-brush submissions. The taxpayer was part of a large and sophisticated corporate group that would have been expected to keep proper records. That it did not do so is not explained away by the passage of time.

1998 and 1999

The 1990 loss

In relation to the 1990 loss, the AAT reached the same conclusion for 1998 and 1999 as it did for 1996 and 1997. The test for 1998 and 1999 is in the ITAA97 rather than the ITAA36. The ITAA97 has a more stringent requirement that the continuity of ownership must be established not only for the loss year and the income year but in all the intervening years as well. Based on the facts, the losses incurred in 1990 cannot be taken into account in any of the 1996 to 1999 income years.


HEADLINES

The 1991, 1992 and 1993 losses

For the same reason as as for 1990, any losses incurred in 1991, 1992 or 1993 cannot be taken into account in the 1996 to 1999 income years.

The 1994 and 1995 losses

The losses incurred in 1994 and 1995 cannot be taken into account in 1998 and 1999. See the discussion above for the 1996 and 1997 income years.

2000 to 2003

Section 165-165 cannot be satisfied, because whatever interests were held by the various members of the Marshall family during any of the loss years (ie. 1990 to 1995) are fundamentally different from interests held in any of the 2000 to 2003 income years.

Same business test

The AAT concluded that the taxpayer is not entitled to claim the prior year losses on application of the SBT.

Activities in the loss years (up to and including the 1995 year)

The shopping centre was sold in August 1993. That left the taxpayer with no assets. There is no evidence that any business activity was carried on after the sale of the shopping centre. The AAT found that the taxpayer was dormant from that time until the later activities commenced (see below).

Activities in the income years (from 1996)

During 1995, a trust structure acquired a number of service stations that were to be leased. The taxpayer owned all the units in the B Trust, which in turn owned all the units in the trust that owned the service stations. The taxpayer received the rental income from the service stations by way of trust distributions through the structure. That income was declared as assessable income in the taxpayer’s tax returns.

Consideration of the SBT

Former s80E of the ITAA36 applies in respect of the 1996 and 1997 years. Section 165-13 of the ITAA97 applies in respect of the 1998 and later years. Approaching the issue on a substantive basis, the AAT found that the evidence does not support the availability of the SBT under either provision.

The taxpayer’s attempted characterisation of its pre-1996 business as a business of “investment” is not an accurate one. In the AAT’s view, a more accurate characterisation is as a business of property development. The taxpayer’s own documentation also did not fully support its arguments.

The post-1995 business is accurately described as investing in units in a trust. There is no element of property development involved in any of the activities undertaken by the taxpayer after the service station investment was decided upon and made.

The earlier business of the taxpayer is not the same as the later one.

Even if the AAT had accepted that the earlier business had been, or had included, a business of ‘investment’, it would nevertheless have concluded that the later business was not the same. In Avondale Motors (Parts) Pty Ltd v Commissioner of Taxation [1971] HCA 17, the High Court (Gibbs J) held that the words ‘same business’ in what became s80E(1)(b) of the ITAA36 mean


HEADLINES

precisely that: ‘mere similarity of kind is not enough’. That is not to say that a business may not change the way it carries on its activities, provided the earlier business is the same business as the later one. That is clearly not the case here.

There is the added problem for the taxpayer arising from its dormant status between August 1993 and the recommencement of activities during the 1996 financial year. This is because:

¢ under the ITAA36 it is necessary to identify the business carried on by the taxpayer ‘immediately before the [change of ownership] took place’. If that point in time is during the taxpayer’s dormancy, then no such business is capable of being identified; and

¢ a similar issue arises under the ITAA97 if the ‘test time’ falls within the dormancy period.

What is the key message?

A company can only deduct a prior year tax loss against current year assessable income if:

¢ it satisfies the COT – that is, there is a continuity of majority ownership between the loss year and the income year; or

¢ if it does not satisfy the COT, then it satisfies the SBT – that is, the company carried on the same business from the loss year through to the income year.

Note: the former loss recoupment rules in the ITAA36, which were applied in this case in relation to the earlier income years under consideration, were slightly different to the current day rules but the underlying principles were the same.

How does the COT operate?

The COT is contained in s165-12.

To satisfy the COT, a company must be able to show that throughout the ‘ownership test period’ there has been a continuity of beneficial ownership of shares carrying the following rights:

¢ the right to exercise more than 50% of the voting power

¢ the right to receive more than 50% of the company’s dividends; and

¢ the right to receive more than 50% of any capital distributions.

The COT must be satisfied in relation to each category of ownership right but the persons who own the rights in each category may be different.


HEADLINES

For each category of ownership right, COT must be applied under a ‘primary test’ or an ‘alternative test’. The primary test deals with direct beneficial ownership of shares by natural persons (ie. no tracing through interposed entities is required). The alternative test applies where there is an indirect beneficial ownership of shares through interposed entities such that tracing is required.

The ownership test period is the period from the start of the loss year to the end of the income year in which the loss is recouped.

Ownership rights in relation to voting power attaching to an individual’s share in a company may only be taken into account if the individual owns exactly the same share throughout the relevant ownership test period (referred to as the ‘same share test’). A share split or share consolidation will count as the same shares for the COT, provided that the same person remains the beneficial owner of the shares throughout the ownership period.

Shares held by a discretionary trust

It is not possible to trace through a discretionary trust to determine the underlying beneficial owner of the shares, as potential beneficiaries of a discretionary trust do not have any interest in the trust assets. In these circumstances, specific rules allowing COT to be satisfied apply where:

¢ a trust has made a family trust election; or

¢ Division 165-F applies to provide an alternative tracing test (which broadly requires the discretionary trust to have held a fixed entitled to 50% or more of the company’s income or capital for the duration of the ownership test period and for the discretionary trust to have passed the non-fixed trust loss test rules).

How does the SBT operate?

The SBT is contained in s165-13.

The SBT is satisfied where the company carries on the same business throughout the year in which the loss is deducted as it did immediately before the change in majority ownership occurred.


HEADLINES

The SBT consists of three elements, all of which must be satisfied in order to satisfy the SBT.

SBT elements Description

1. The same business test

The company must carry on the same business that it carried on immediately before the SBT test time (ie. when COT was breached).

2. The new business test

The company must not derive assessable income from carrying on a business of a kind that it did not carry on before the SBT test time.

3. The new transaction test

The company must not derive assessable income, in the course of its business operations, from a transaction of a kind that it had not entered into before the SBT test time.

There is an anti-avoidance rule which prevents a company from satisfying the SBT if before the test time the company:

¢ started to carry on a business it had not previously carried on; or

¢ in the course of its business operations, entered into a transaction of a kind that it had not previously entered into.

The ATO has released guidance on the SBT in Taxation Ruling TR 1999/9.

Proposed similar business test

On 6 April 2016, the Government released Exposure Draft legislation in relation to a proposed ‘similar business test’, also referred to as the predominantly similar business test and the business continuity test.

The new test is proposed to apply in respect of losses incurred in 2015-16 or later income years. The current SBT rules will apply to losses incurred prior to 1 July 2015.

The test period will remain the same as under the existing SBT.

The new business test and new transaction test will be retained.

Under the proposed first element of the SBT, the following matters must be taken into account in ascertaining whether the company’s current business is similar to its former business:

¢ the extent to which the assets (including intangible assets and goodwill) that are used in its current business to generate assessable income were also used in the company’s former business to generate assessable income

¢ the extent to which the sources from which the current business generates assessable income were also the sources from which the former business generated assessable income; and

¢ whether any changes to the former business are changes that would reasonably be expected to have been made to a similarly placed business.

Resources

The Tax Summary 2016 & 2017, 6.410 and 6.430.

TR 1999/9


HEADLINES

Share trading losses not deductible

Spence and Commissioner of Taxation (Taxation) [2017] AATA 307 (10 March 2017)

Overview

The taxpayer attempted to claim deductions for share trading losses for 2007, 2008, 2009 and 2010. The AAT concluded that while the taxpayer conducted a share trading business in 2007 and 2008, the taxpayer could not substantiate that he was entitled to deductions greater than those allowed by the Commissioner. The AAT further held that the taxpayer did not conduct a share trading business in 2009 and 2010 and therefore could not deduct any of the share trading losses.


The taxpayer failed to lodge income tax returns for each of the 2007, 2008, 2009 and 2010 income years. The Commissioner issued default notices of assessment for each year, which included interest earned by the taxpayer.

The taxpayer lodged an objection to each of the notices of assessment and also attempted to claim share trading losses for each year.

The Commissioner sought from the taxpayer an explanation and substantiation (including source documents) of the losses the taxpayer alleged he had incurred in the course of share trading.

The taxpayer only provided a certain spreadsheet dated September 2013 that purported to summarise the taxpayer’s share trading activities.

The Commissioner then used his powers under s353-10 of Schedule 1 to the TAA to request information concerning the taxpayer’s share trading activities from COMMSEC, CMC Markets and E*Trade. CMC Markets and E*Trade provided a list of trades undertaken. COMMSEC indicated that the taxpayer had not undertaken any trades.

The Commissioner subsequently amended the taxpayer’s taxable income, finalising the objection decisions, on the basis of the share trading losses reflected in the information received.

The taxpayer contests that he is entitled to share trading loss deductions of a greater quantum than those allowed by the Commissioner.

What is the issue?

The AAT considered a number of issues. The two to be discussed herein are:

¢ whether the taxpayer carried on a share trading business in respect of 2007, 2008, 2009 and 2010; and

¢ what is the magnitude of the deductions for share trading losses incurred each year?

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What did the AAT decide?

General comments

The AAT concluded that the taxpayer did not discharge his onus of proving that the quantum of share trading losses claimed are deductible.

The taxpayer did not supply concrete tangible evidence in support of his case that he was carrying on a share trading business. he had been asked to provide a summary of how the share trading losses were calculated. He provided the spreadsheet but it was not consistent with the records provided by COMMSEC, CMC Markets and E*Trade.

The taxpayer also made errors in the calculations and attributed the wrong dates to some transactions.

At the hearing, the Commissioner was unable to cross-examine the taxpayer on the spreadsheet. The taxpayer did not bring a copy despite the AAT advising him before the hearing that he should bring it.

The AAT concluded that it was not able to rely on the spreadsheet as it is unlikely to be accurate and the Commissioner could not satisfactorily cross-examine the taxpayer due to the taxpayer’s unwillingness to cooperate.

The taxpayer could not provide evidence to explain the nature of his share trading activities and to substantiate the losses allegedly suffered.

Moreover, the type of activities allegedly undertaken by the taxpayer (ie. operation of a share trading business) is one that would ordinarily be readily verifiable by documentation (such as bank statements, share trading reports, business plans, loan agreements etc). The taxpayer has produced nothing of this nature either to the AAT, or to the Commissioner when requested.

Specific comments re: 2007 and 2008

It was accepted that the taxpayer was involved in a share trading business for 2007 and 2008.

However, the taxpayer could not satisfy the AAT that he incurred losses greater than that already allowed in the objection decision. The only document relied on by the taxpayer to quantify his losses appears to be the spreadsheet. However, the taxpayer provided neither documentary evidence to substantiate the amounts nor any documentary evidence to substantiate share losses than that already allowed by the Commissioner.

Accordingly, the taxpayer has not discharged his burden of establishing that he incurred share trading losses greater than that allowed as a deduction in the objection decision.

Specific comments re: 2009 and 2010

The taxpayer did not conduct a share trading business in 2009 and 2010.

The information obtained by the Commissioner from COMMSEC, CMC Markets and E*Trade establishes that the taxpayer engaged in no share trades in 2009 or 2010.

By contrast, the taxpayer’s spreadsheet refers to only three share transactions in 2009, all occurring on 30 June 2009. The spreadsheet also identifies three transactions in 2010, but inexplicably, the date given for these transactions is 30 June 2008.

Having regard to the primary source being the records of COMMSEC, CMC Markets and E*Trade it seems there was no activity whatsoever in these years. In such circumstances, by reference to the factors identified in precedents (see below), the AAT cannot, without further evidence, accept that the taxpayer was engaged in a share trading business.


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Further, even if one were to accept the taxpayer’s records at face value the three share transactions identified are more likely to be viewed as being on capital rather than revenue account. In each case, on the taxpayer’s own case, the shares in question were purchased in mid-2001 and retained, suggesting an intention to hold the shares for long term capital growth, not short term resale. As such these transactions are more likely to be on capital rather than on revenue account and accordingly any losses are not deductible but must be retained for offset against future capital gains which may arise.

The taxpayer cannot be entitled to deductions for share trading losses because he was not engaged in a share trading business. The loss is not one incurred “in carrying on a business for the purpose of gaining or producing your assessable incomes”: s8-1(1)(b) ITAA 1997.

Further, the taxpayer has also provided no evidence whatsoever to substantiate the alleged losses.

Finally, as observed above, the transactions in 2009 and 2010 appear to be on capital account and are not deductible in any event: s8-1(2)(a).

What is the key message?

Carrying on a business of share trading

Whether a taxpayer is carrying on a business is a question of fact. Usually, the AAT will determine that question by assessing a number of factors about a taxpayer’s activities, although the AAT must assess all the circumstances and no single factor is necessarily determinative.

In this case, the AAT referred to AAT Case 6,297 (1990) 21 ATR 3747, cited in Shields and Commissioner of Taxation [1999] AATA 4:

The question is...essentially one of fact. In deciding this issue the case law has established the following factors as generally relevant considerations:

(a) the nature of the activities and whether they have the purpose of profit-making;

(b) the complexity and magnitude of the undertaking;

(c) an intention to engage in trade regularly, routinely or systematically;

(d) operating in a business-like manner and the degree of sophistication involved;

(e) whether any profit/loss is regarded as arising from a discernible pattern of trading;

(f) the volume of the taxpayer’s operations and the amount of capital employed by him;

and more particularly in respect of share traders:

(a) repetition and regularity in the buying and selling of shares;

(b) turnover;

(c) whether the taxpayer is operating to a plan, setting budgets and targets, keeping records;

(d) maintenance. of an office;

(e) accounting for the share transactions on a gross receipts basis;

(f) whether the taxpayer is engaged in another full-time profession.


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On a broader note, Taxation Ruling TR 97/11 sets out the Commissioner’s view of the indicators of carrying on a business:

Indicators which suggest a business is being carried on

Indicators which suggest a business is not being carried on

a significant commercial activity not a significant commercial activity

purpose and intention of the taxpayer in engaging in the activity

no purpose or intention of the taxpayer to carry on a business activity

an intention to make a profit from the activity no intention to make a profit from the activity

the activity is or will be profitable the activity is inherently unprofitable

repetition and regularity of activity little repetition or regularity of activity

activity is carried on in a similar manner to that of the ordinary trade

activity carried on in an ad hoc manner

activity organised and carried on in a businesslike manner and systematically - records are kept

activity not organised or carried on in the same manner as the normal ordinary business activity - records are not kept

size and scale of the activity small size and scale

not a hobby, recreation or sporting activity a hobby, recreation or sporting activity

a business plan exists there is no business plan

commercial sales of product sale of products to relatives and friends

taxpayer has knowledge or skill taxpayer lacks knowledge or skill

Resources

Taxation Ruling TR 97/11


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ATO ANNOUNCEMENTS

Lump sums for healthcare practitioners are assessable

Lump sum payments received by healthcare practitioners

Overview

The ATO has released guidance in relation to healthcare practitioners who are paid a lump sum as an incentive from a healthcare centre operator. In the ATO’s view, these lump sums are assessable as ordinary income and are not receipts of a capital nature.

The ATO has commenced compliance activities in relation to these arrangements.

What is the ATO guidance about?

The ATO has published a webpage to clarify the Commissioner’s view that a lump sum payment received by a healthcare practitioner from a healthcare centre operator are likely to be ordinary income and not a capital gain.

Important! This guidance has only been published in the form of a non-binding general webpage. It has not been published as a Taxpayer Alert or a binding public ruling.

What are the arrangements of concern?

In the healthcare services industry, it is now common for some practitioners to operate from healthcare centres run by third parties. This frequently occurs without any stated partnership or employment relationship between the third party and the practitioner.

The third parties that run these centres generally encourage practitioners to start work or continue to work from their centres. They may offer lump sum payments for this purpose.

The ATO’s concerns relate to the tax treatment of the lump sum payments.

The ATO is looking at arrangements which have most or all of the following features:

¢ A healthcare centre operator provides the practitioner with fully equipped consulting rooms, administrative services, clerical staff and facilities as necessary for them to provide healthcare services. The agreements entered into typically state that there is no employment relationship between the practitioner and the operator.

¢ In return for these facilities and services, the practitioner is required to pay the operator an agreed percentage of the receipts for the healthcare services they provide.

¢ The practitioner is required to provide healthcare services from the healthcare centre for an

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agreed minimum period of time, minimum weekly working hours and working patterns.

¢ The practitioner is required to use your best endeavours to grow and promote the interests of the healthcare centre.

¢ The operator pays the practitioner a lump sum

§ it is described as being consideration for a restraint imposed, for goodwill, for other terms or conditions, or for a combination of the three

§ the payment is ordinarily made when the practitioner enters into the agreement or start to provide healthcare services to patients from the healthcare centre (whichever is the later) or whenever the agreements relating to the provision of healthcare services are renewed.

Whilst these are common features, any other arrangements that relate to a lump sum payment for the ongoing provision of healthcare services from a medical centre may still be of concern to the ATO.

What are the tax issues?

The ATO is concerned about the tax treatment of the lump sum payment.

In the view of the ATO, generally these lump sum payments are not capital receipts but are income. The lump sum will typically be ordinary income of the practitioner for providing services to their patients from the healthcare centre. The result is that practitioners are required to include the full amount of the lump sum payment in their assessable income under s6-5 of the ITAA97.

The ATO is aware of practitioners who have received these lump sums treating the payments as a capital gain. They have then applied the small business CGT concessions to reduce the capital gain, sometimes to nil.

Why is the ATO of the view that the payments are income?

The ATO formed its view that the lump sum payments are of an income and not a capital nature because:

¢ the lump sum payment is an inducement for the practitioner to enter into the agreements to provide healthcare services from the healthcare centre

¢ the lump sum is fundamentally connected to the practitioner’s provision of those services

¢ in the alternative, the lump sum payment represents a profit or gain from an isolated transaction in the course of the practitioner providing healthcare services

¢ the mere fact the payment is a one-off lump sum, or expressed to be principally consideration for the restraint imposed, for the goodwill or for the other terms or conditions, does not define it as having the character of a capital receipt

¢ there is no transfer of goodwill as:

§ the third party operating the healthcare centre does not acquire the right to provide healthcare services from the practitioner

§ the practitioner does not cease to provide healthcare services.

The whole of the lump sum payment is assessable as ordinary income in the hands of the practitioner.


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What does the ATO advise?

The ATO advises that it is looking closely at these arrangements to determine if they are compliant with income tax laws and whether the anti-avoidance provisions may apply.

The ATO notes that from 2013, it has consistently issued private rulings on relevant arrangements treating the whole of the lump sum payment as assessable ordinary income.

The document includes a comment that a taxpayer can only rely on a private ruling if they applied for it. Presumably, the ATO is advising taxpayers against using private rulings issued to other taxpayers prior to 2013 – which may contain an outcome that the lump sum is capital – as support for an argument that their own lump sum receipt is capital in nature.

What is the ATO doing?

The ATO has commenced targeted activities and examinations of healthcare practitioners who may have treated these lump sum payments as capital gains.

The ATO says that it is working to provide further advice and guidance to health practitioners who may have engaged in, or is considering engaging in, such arrangements.

An example from the ATO

Example: A new doctor joins the practice

Dr Lee has recently been approached by Medical Centre Z, a medical centre operator, with an offer to join a well-established healthcare centre.Medical Centre Z’s offer includes the payment of a lump sum connected to an agreement where Dr Lee is required to work 40 hours a week, Monday to Friday, providing healthcare services to patients attending the medical centre.The medical centre provides Dr Lee with the use of their facilities and all the support services needed to run the practice so she can focus solely on what she loves best, working with patients. For the use of these facilities and services, the medical centre takes a percentage of her billable receipts.Dr Lee is unsure how this payment will be treated for tax purposes. A friend suggests that the payment is a capital gain and she would be able to apply for CGT concessions. This doesn’t seem quite right to her so she decides to talk to her accountant about the payment.Her accountant confirms her thoughts; the payment is not a capital gain as it is essentially made for her agreeing to provide her healthcare services at the medical centre. Dr Lee needs to treat the payment as ordinary income and report it and pay tax on it accordingly. Her accountant advises her that had she tried to include the payment as a capital gain she would have underpaid her tax and been exposed to tax adjustments and potential penalties.


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Real life examples: private rulings

The ATO’s guidance reflects the position that it has taken in private rulings. Two key examples are private ruling #87150 and #1012605180483.

Private ruling #87150 – profits or gains from isolated transactions

Facts

The taxpayer, a medical practitioner, entered into an agreement with a medical centre to relocate and carry on their medical practice at the centre.

The taxpayer was required to practise exclusively from the medical centre for a fixed number of years and pay a service fee.

The medical centre paid the taxpayer a lump sum incentive in return. Should the taxpayer terminate the agreement early, they are required to repay a proportion of the incentive payment.

The taxpayer is carrying on the business of a medical practice. They receive payment from the billing of patients. They retain 50% of the payment and 50% is paid to the service entity.

ATO decision

The ATO concluded that the lump sum was a profit or gain from an isolated transaction and therefore assessable under s6-5.

The ATO referred to Taxation Ruling TR 92/3, which discusses profits or gains from isolated transactions, and the High Court’s decision in Federal Commissioner of Taxation v Myer Emporium Ltd (1987) 163 CLR 199 (Myer).

The term “isolated transactions” refers to:

(a) those transactions outside the ordinary course of business of a taxpayer carrying on a business; and

(b) those transactions entered into by non-business taxpayers.

The relevant feature of Myer is:

The amount in issue was a profit from a transaction which, although not within the ordinary course of the taxpayer’s business, was entered into with the purpose of making a profit and in the course of the taxpayer’s business.

In applying Myer to the taxpayer’s situation, the ATO said that:

The receipt of the amount is clearly not in respect of the ordinary course of your business as a medical practitioner but is incidental to the business that you are carrying on albeit that the transaction was unusual or extraordinary.


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Private ruling #1012605180483 – not capital proceeds for restrictive covenant

Facts

The taxpayer received a lump sum payment (the purchase price) from a company to relocate from one centre and to practice at the company’s centre.

The taxpayer must operate from the company’s premises and engage the company’s support services at the exclusion of any others for a certain period of time.

The taxpayer must not provide services within a certain kilometre radius of the premises, with penalties for breaching the agreement.

ATO decision

The ATO concluded that the lump sum receipt was assessable as ordinary income under s6-5.

As a practitioner, the taxpayer is an independent contractor, earning income from the exercise of their personal skills, in their personal services business. They are not earning income through a business structure that they own. It follows the restrictive covenant the taxpayer is subject to ties their provision of personal services (which is revenue in nature) rather than restrains a business structure (of a capital nature).

Therefore the lump sum is revenue in nature.

Further, the lump sum does not constitute capital proceeds from entering into a restrictive covenant (CGT event D1).

The payment received by the taxpayer was not for a restrictive covenant of a capital nature that restricted a business structure and tied it to exclusively operate from a new premise. The ATO considers that the taxpayer did not operate under a business structure but, instead, provided personal services as an independent contractor.

Also, the payment was not for a restrictive covenant of a capital nature that sterilised the taxpayer from conducting a certain business or profession. If that was the case you would not have had to work at the new practice but, instead, merely had to cease working at the old practice.

Since the restrictive covenant in the contract tied the taxpayer to providing their personal services (as an independent contractor) for a period of X years in the new practice, despite not being an employee, the ATO considers the restrictive covenant is revenue in nature.

Since the restrictive covenant in the contract tied the taxpayer to using the premises and services provide by the new centre, which are revenue expenses connected to the day-to-day earning of the taxpayer’s assessable income, the ATO considers the contract was similar to the kind of lease inducement in the case FC of T v Cooling 90 ATC 4472 (see below), which was revenue in nature.

Since the restrictive covenant in the contract and the payment received was connected to the quality of the taxpayer’s personal reputation and skills, which made them an “attractive target”, the ATO considers the payment is revenue in nature. Reputation and skills are not, in themselves, capital in nature.

The ATO considers the payment to be an isolated commercial transaction, with the purpose of obtaining a commercial profit.

In Cooling, the taxpayer firm received a lease incentive payment. The Court concluded that the transaction formed part of the business activity and a not insignificant purpose of it was to obtain a commercial profit by way of the incentive payment.

Note: The Commissioner is of the view that a lease incentive given to a business taxpayer will generally be assessable income of the taxpayer (IT 2631).


HEADLINES

Resources

Private ruling #87150

Private ruling #1012605180483


TAX BULLETIN BOARD

Tax Bulletin Board

LEGISLATION

Consultation on innovative super income stream products

Treasury Laws Amendment (Innovative Superannuation Income Streams) Regulations 2017

The Government has released draft superannuation income stream regulations and a draft explanatory statement for public consultation. The regulations introduce a new set of design rules for innovative lifetime superannuation income stream products, including deferred products, investment-linked pensions and annuities and group self-annuitised products. Super funds may receive a tax exemption on income from assets supporting these new products in some circumstances.

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TAX BULLETIN BOARD

CASES

Evidence by video link not permitted

Vasiliades v Commissioner of Taxation (No 2) [2017] FCA 185 (1 March 2017)

The Federal Court held that the taxpayer, who is based in France, should not be permitted to give evidence by video link, despite his serious health problems. He should attend in Australia to give evidence in person. The cross-examination of him is likely to take some time and is expected to involve a significant volume of documents, many of which are difficult to read because of the quality of the available copies. There is also the practical difficulty of the time difference with Paris in conducting a cross-examination expected to last up to two days.

Equitable ownership is sufficient to obtain marriage breakdown roll-over

Sandini Pty Ltd v Commissioner of Taxation [2017] FCA 287 (22 March 2017)

The Family Court ordered the taxpayer to transfer shares in his wholly owned company to his former wife. The Federal Court concluded that the court order did cause CGT event A1 to happen, with the result that the former wife became the equitable owner of the shares. The Court held that changes in equitable ownership alone are sufficient for a CGT event A1 to occur. Consequently, the taxpayer is entitled to the marriage breakdown CGT roll-over in Subdivision 126-A of the ITAA97.

Option fee is not consideration for margin scheme purposes

The Trustee for the Whitby Trust and Commissioner of Taxation (Taxation) [2017] AATA 343 (20 March 2017)

The taxpayer entered into a Deed of Option with the vendor of a property for an option to purchase the property. The purchase price included a non-refundable option fee of $2m. The taxpayer exercised the call option and purchased the property.

The AAT held that the option fee should not form part of the acquisition cost of the property in applying the GST margin scheme rules. the option fee was consideration for a separate and distinct supply of a bundle of rights.

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TAX BULLETIN BOARD

ATO LEGAL DATABASE

ATO warning on R&D incentive for agricultural activities

TA 2017/4

The ATO and AusIndustry are reviewing the arrangements of entities that are claiming the R&D Tax Incentive in respect of agricultural activities where some (or all) of the expenditure incurred is on activities which are not eligible R&D activities.

ATO warning on R&D incentive for software development

TA 2017/5

The ATO and AusIndustry are reviewing the arrangements of entities that are claiming the R&D Tax Incentive on software development projects where some (or all) of the expenditure incurred is on activities which are not eligible R&D activities.

GST: definition of second-hand goods

GSTD 2017/D1

Draft GST Determination GSTD 2017/D1 considers what is excluded from being ‘second-hand goods’ by paragraph (b) of that term in Division 195 of the GST Act.

Guidance on simplified transfer pricing record keeping

PCG 2017/2

Practical Compliance Guideline PCG 2017/2 sets out the eight simplified transfer pricing record keeping options that are available to reduce the compliance burden of eligible taxpayers.

Decision Impact Statement – WTPG case

2015/6427

The ATO has released its Decision Impact Statement on WTPG v Commissioner of Taxation [2016] AATA 971.

The ATO states that the AAT’s reasoning is consistent with the Commissioner’s view. There are no implications for impacted ATO precedential documents or impacted Law Administration Practice Statements.

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TAX BULLETIN BOARD

Decision Impact Statement – Elecnet case

M104 of 2016

The ATO has released its Decision Impact Statement on the High Court decision in Elecnet (Aust) Pty Ltd (as trustee for the Electrical Industry Severance Scheme) v Commissioner of Taxation [2016] HCA 51.

The ATO states that the High Court’s decision is consistent with the Commissioner’s view of the law. There are no implications for impacted ATO precedential documents or impacted Law Administration Practice Statements.

Guidance on GST on low value imports

LCG 2017/D2

Draft Law Companion Guideline LCG 2017/D2 discusses the amendments proposed by Treasury Laws Amendment (GST Low Value Goods) Bill 2017 (the Bill), which was tabled in Parliament on 16 February 2017. The broad purpose of the Bill is to ensure that Australian GST is payable on supplies of low value imported goods that are purchased by consumers in Australia.

The Bill makes supplies of low value goods to consumers connected with Australia if they are imported into Australia. This means that GST may now apply to the supply of these goods. Low value goods are goods that have a customs value of $1,000 or less

ATO guidance: concessional contributions – defined benefit interests

LCG 2016/11

This Guideline clarifies how the amendments to the calculation of concessional contributions and excess concessional contributions apply to contributions and amounts allocated by superannuation providers for the financial years commencing on or after 1 July 2017.

ATO guidance: total superannuation balance

LCG 2016/12

This Guideline provides guidance on how a taxpayer’s total superannuation balance is calculated from 30 June 2017. This was previously released in draft form in December.

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TAX BULLETIN BOARD

ATO guidance on transitional CGT relief finalised

LCG 2016/8

The ATO has finalised LCG 2016/8, which discusses the transitional CGT relief for super funds in relation to the transfer balance cap and transition-to-retirement reforms. The draft guideline was released on 24 November 2016.

** Of all the LCGs on the super reforms which have now been finalised, LCG 2016/8 contains the most differences from the draft version. Our SMSF consultant has prepared a brief commentary comparing the draft to the final Guideline. This commentary can be found after the Bulletin Board items.

ATO guidance on transfer balance cap finalised

LCG 2016/9

The ATO has finalised LCG 2016/9, which discusses the new rules in relation to the transfer balance cap. The draft guideline was released on 24 November 2016.

Draft guidance on central management and control

TR 2017/D2

This ATO has issued Draft Taxation Ruling TR 2017/D2. It sets out the Commissioner’s preliminary view on how to apply the central management and control test of company residency following the High Court decision in Bywater Investments Limited & Ors v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation.

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TAX BULLETIN BOARD

GOVERNMENT ANNOUNCEMENTS

Help for young entrepreneurs

Government announcement

Small Business Minister Michael McCormack has announced that new products are now available to help young Australians who are starting a business for the first time. Government agencies, including the ATO, ASIC, and the Department of Industry, Innovation and Science, has partnered with young small business owners to form a “fix-it squad”, which explored how Government could help. People starting a business can download ASIC’s First Business App or visit the Plan & Start page on business.gov.au for valuable information.


TAX BULLETIN BOARD

ATO ANNOUNCEMENTS

Super guarantee health check

Super guarantee client health check

The ATO has released a super guarantee ‘health check’ to help tax professionals quickly check that their clients are meeting their superannuation obligations, and if not, where to go to help them get back on track.

Financial curriculum in schools

ATO adds value to developing financial literacy

In partnership with the Australian Curriculum, Assessment and Reporting Authority (ACARA) and the Australian Securities and Investment Commission (ASIC), the ATO has developed resources that align to the Australian Curriculum for students in years 7 to 10.

The educational resources include Tax Super and You, an online teaching resource containing lesson plans and interactive activities, as well in-school visits, webinars and videos.

Foreign exchange rates

ATO adds value to developing financial literacy

The ATO has released the monthly average foreign exchange rates for February 2017.

Notice of Assessment error now corrected

Arithmetic error on notice of assessment corrected

Notices of assessment issued after 4 Feb 2017 will no longer display the error message, as long as the only adjustment is a result of excess concessional contributions (ECC).

2014-15 SMSF statistical overview

2014-15 SMSF Statistical Overview available now

The ATO has released its annual statistical report on SMSFs for 2014-15.

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TAX BULLETIN BOARD

Firefox for AUSkey users

Attention Firefox AUSkey users

The upcoming version of Mozilla Firefox (version 52) does not support AUSkey. To continue using AUSkey, users will need to download the Firefox browser extension or use an alternative browser.

Other compatible browsers will not be affected. A list of browsers compatible with AUSkey can be found on the Australian Business Register website.

Transitioning to the PLS

Transitioning to the PLS

Closure of the ELS gateway will commence from 31 March 2017 on a form-by-form basis. From this date, FBT returns can only be lodged through the PLS. All other forms, services and reports will remain available in the ELS, and will be progressively removed from 30 September 2017.

Submission form for new Remedial Power

Commissioner’s remedial powers

The ATO has released a form for practitioners and taxpayers to fill out and submit potential issues for resolution using the Commissioner’s new Remedial Power.

General interest charge

General interest charge (GIC) rates

The ATO has released the GIC rates for the June 2017 quarter. The annual rate is 8.78% and the daily rate is 0.02405479%.

Cash economy – Canberra and Perth

Tax officers hit the streets to help businesses

The ATO will be visiting more than 400 businesses in Perth and Canberra as part of a campaign to help small businesses that may be operating in the cash and hidden economy to stay on top of their tax affairs.

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TAX BULLETIN BOARD

ATO review of GST benchmark market values

Seeking feedback on benchmark market values

The ATO is seeking feedback for its review of GST and non-commercial rules – benchmark market values in relation to how it establishes and presents its benchmarks. The review focuses on long-term accommodation and employment service fees.

Early tax returns for working holiday makers

Working holiday makers - 2017 early lodgers

When preparing an early 2017 tax return for working holiday makers, the agent will need to provide a schedule identifying income earned up to 31 December, and from 1 January onwards. This will ensure the correct tax rates are applied.

Consultation on innovation incentives

Consultation - tax incentives for early stage investors

From 1 July 2016, clients that invest in a qualifying early stage innovation company may be eligible for tax incentives.

The ATO is seeking feedback on documents relating to these new tax incentives. Specifically, it is inviting comment on:

¢ a subsidiary test

¢ expenditure test times

¢ incurred expenses.

April and May system outages

Preparing for planned system outages

Important system maintenance

To provide resilient and stable systems for Tax Time 2017, the ATO plans to undertake additional weekend system maintenance in April and May. System maintenance will occur:

¢ 10.00pm EDT Friday 31 March to 6.00am EST Monday 3 April

¢ 10.00pm EST Thursday 13 April to 6.00am EST Tuesday 18 April (Easter)

¢ 8.00pm EST Saturday 6 May to 8.00am EST Sunday 7 May.

The ATO advises that there are steps that can be taken to prepare for the planned outages. If an agent intends to work during the outages, it is important to review online details or download online reports before the outage times.

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TAX BULLETIN BOARD

ATO guidance on finalising deceased estates

Making it easier to finalise deceased estates

The ATO has introduced some changes to tax agents’ experience of managing the tax affairs of deceased clients, including:

¢ rewriting ATO web content and creating a checklist to assist decisions

¢ introducing a new telephone option for deceased estates

¢ providing a direct channel for public trustees to consult ATO experts via the Complex issues resolution service.

FBT return 2017

Fringe benefits tax return 2017

Completing your 2017 fringe benefits tax return

The ATO has released the FBT return 2017 stationery, as well as the instructions on completing the return.

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TAX BULLETIN BOARD

INSPECTOR-GENERAL OF TAXATION

Submission on super guarantee non-payment

Submission to the Inquiry into Superannuation Guarantee non-payment

The IGT has made a submission to the Senate Economics References Committee’s Inquiry into Superannuation Guarantee non-payment.

Submission on taxpayer engagement

Submission to the Inquiry into Taxpayer Engagement with the Tax System

The IGT has made a submission to the House of Representatives Standing Committee on Tax and Revenue’s Inquiry into Taxpayer Engagement with the Tax System.

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TAX BULLETIN BOARD

TAX PRACTITIONERS’ BOARD

Transitional registration for tax (financial) advisers

Transitional registration only available to 30 June 2017

A financial planner or adviser providing tax (financial) advice as part of their advice to clients for a fee or reward must be registered with the TPB as a tax (financial) adviser in order to provide this service legally. The transitional registration option expires on 30 June 2017.

Registration for financial planners and advisers

TPB registration for financial planners and advisers

A financial planner or adviser providing tax advice as part of their financial advice to clients for a fee or reward must be registered with the TPB as a tax (financial) adviser in order to provide this service legally.

These advisers may register under transitional registration (until 30 June 2017) or standard registration.

Registration renewal for tax (financial) advisers

Registration renewal for tax (financial) advisers

If the adviser notified to register with the TPB by 31 December 2014, their registration will expire on 31 January 2018 and they must lodge your renewal application by the end of December 2017 at the very latest.

If the adviser notified between July and December 2015, their registration expiry date is 31 July 2017 and they must renew their registration by 30 June 2017.

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TAX BULLETIN BOARD

BOARD OF TAXATION

CEO update

Board of Taxation CEO update

The CEO of the Board of Taxation, Karen Payne, has released her update for February 2017.

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TAX BULLETIN BOARD

LCG 2016/8 on CGT relief for superannuation funds finalised: main differences compared to draft

The LCG 2016/8 provides guidance on the transitional CGT relief available for superannuation funds because of the transfer balance cap and transition-to-retirement reforms. It explains the two forms of CGT relief available to superannuation funds depending on whether they use the segregated or the proportionate method (also known as the unsegregated method).

Date of cost base reset

The ATO makes a change in the final LCG 2016/8 to the date the cost base of an asset eligible for the CGT relief is reset. Draft guideline LCG 2016/D8 stated that a fund using the proportionate method that chooses to apply CGT relief “is deemed to have repurchased the CGT asset on 1 July 2017”. This date was changed to 30 June 2017 in the final LCG 2016/8.

This means the cost base of these assets and the start of the CGT discount period is reset to 30 June 2017 (not 1 July 2017, as previously indicated in the draft guideline).

Franking credits: holding period

The final LCG 2016/8 confirms at paragraph 66 that the deemed sale and repurchase for CGT purposes does not break the continuity of the 45-day or 90-day holding periods (as applicable) that a fund might need to satisfy to claim imputation benefits if CGT relief is chosen for a share or an interest in a share.

Transition to retirement income streams

There is new information on the application of the CGT relief to assets supporting a transition to retirement income stream (TRIS). The final LCG 2016/8 acknowledges the CGT relief is available to assets supporting a TRIS in an unsegregated fund where the value of the interest supporting the TRIS is not transferred to the accumulation phase before 1 July 2017. A new example on continuing TRISs and CGT relief under the proportionate method (Example 4) has been included in the final LCG 2016/8 to illustrate the ATO’s view on this.

The ATO also acknowledges that the CGT relief is intended to apply where a member of a fund using the segregated method receives a TRIS during the 2016/17 income year that continue past 1 July 2017 (i.e. the TRIS is not commuted back to the accumulation phase prior to 1 July 2017) and that the government is currently considering legislative options to clarify this position.

General anti-avoidance

The final LCG 2016/8 provides further clarification on the application of Pt IVA of ITAA 1936 (which deals with schemes to avoid tax) – it outlines when the ATO considers there is an abuse of the CGT relief provisions and may consider applying the general anti-avoidance provisions in Pt IVA.

A key paragraph of the draft guideline (paragraph 40) was removed from the final LCG 2016/8. Draft guideline LCG 2016/D8 stated at paragraph 40 that “a large difference between the expected excesses in members’ transfer balance accounts on 1 July 2017 and the gains sheltered by the CGT relief might indicate that a trustee has applied the CGT relief for reasons other than a member complying with the transfer balance cap or TRIS reforms commencing”.


TAX BULLETIN BOARD

The ATO’s commentary on an issue raised during consultation on CGT relief provisions concerning the relevance of commencing a pension (including a TRIS) after 9 November 2016 and the availability of CGT relief under the proportionate method was included in the final LCG 2016/8 at paragraph 50C. This paragraph states that “merely starting a pension during the pre-commencement period would not be of concern to the ATO from a Part IVA perspective. However, a commutation of the pension shortly after its commencement might be scrutinised more closely if the purpose of such action appeared consistent with obtaining a tax benefit.”

42

State of Play

State of Play ATO Pronouncements 17 February to 24 March

SUMMARY OF PRONOUNCEMENTS ISSUED AND WITHDRAWN PRONOUNCEMENT DESCRIPTION Date

Taxation Rulings

TR 2017/1 Income tax: deductions for mining and petroleum exploration expenditure 22 February 2017

TR 2017/D2 Income tax: Foreign Incorporated Companies: Central Management and Control test of residency 15 March 2017

TR 2004/15W Income tax: residence of companies not incorporated in Australia - carrying on business in Australia

and central management and control 15 March 2017

TR 92/4A1 - Addendum

Income tax: whether losses on isolated transactions are deductible 22 March 2017


Income tax: eligible termination payments (ETP): payments made in consequence of the termination of any employment: meaning of the phrase 'in consequence of'

22 March 2017


Income tax: deductions for interest incurred prior to the commencement of, or following the cessation of, relevant income earning activities

22 March 2017


Income tax: deductibility of interest expenses incurred by trustees on funds borrowed in connection with the payment of distributions to beneficiaries

22 March 2017


Income tax: Pay As You Go - withholding from payments to employees 22 March 2017

Taxation Determinations

GSTD 2017/D1 Goods and services tax: what is excluded from being second-hand goods by paragraph (b) of the definition of that term in Division 195 of the A New Tax System (Goods and Services Tax) Act 1999?

22 February 2017

TD 93/146A2 - Income tax: should a resident deduct withholding tax from interest payable under a loan from a non- 22 March 2017

43

State of Play


Addendum resident if there is no actual payment of the interest?

Legislative Determinations

GSTE 2013/1 (As Amended)

Goods and Services Tax: Correcting GST Errors Determination 2013 2 March 2017

GSTE 2017/1 Goods and Services Tax: Correcting GST Errors Amendment Determination 2017 (No. 1) 2 March 2017

PAR 2017/D1 Draft A New Tax System (Goods and Services Tax) Act 1999 (Particular Attribution Rules for Cooling off Periods) Determination (No. 5) 2017

13 March 2017

PAR 2017/D2 Draft A New Tax System (Goods and Services Tax) Act 1999 (Particular Attribution Rules for Retention Payments) Determination (No. XX) 2017

13 March 2017

PAR 2017/D3 Draft A New Tax System (Goods and Services Tax) Act 1999 (Particular Attribution Rules for Supplies and Acquisitions made through Agents) Determination (No. 6) 2017

13 March 2017

PAR 2017/D4 Draft Goods and Services Tax: Application of Particular Attribution Rules Determinations (Determination (No.08) 2017)

13 March 2017

PAR 2017/D5 Draft A New Tax System (Goods and Services Tax) Act 1999 (Particular Attribution Rule for Supplies of Gas or Electricity made by Public Utility Providers) Determination (No XX) 2017

13 March 2017

RCTI 2017/D5 Draft Goods and Services Tax: A New Tax System (Goods and Services Tax) Act 1999 Recipient Created Tax Invoice Determination (No. 0023) 2017 for wholesalers of photographic imaging equipment and related supplies

13 March 2017

WTI 2017/D1 Draft A New Tax System (Goods and Services Tax) Act 1999 Waiver of Tax Invoice Requirement Determination (No. XX) 2017 - Decision of a Court or Tribunal

13 March 2017

WTI 2017/D2 Draft A New Tax System (Goods and Services Tax) Act 1999 Waiver of Tax Invoice Requirement Determination (No. XX) 2017- customers of Custom Service Leasing Pty Ltd

13 March 2017

44

State of Play


WTI 2017/D3 Draft A New Tax System (Goods and Services Tax) Act 1999 Waiver of Tax Invoice Requirement Determination (No XX) 20XX for intangible supplies from offshore

13 March 2017

RCTI 2017/D6 Draft Goods and Services Tax: Recipient Created Tax Invoice Determination (No. XX) 2017 for Agricultural Products, Government Related Entities and Large Business Entities

14 March 2017

WAN 2017/D2 Draft A New Tax System (Goods and Services Tax) Act 1999: Waiver of Adjustment Note Requirement (No XX) 2017 - Decision of a Court or Tribunal

14 March 2017

RCTI 2017/D7 Draft Goods and Services Tax: Recipient Created Tax Invoices Determination (No XX) 2017 for Demand Side Response Aggregators

17 March 2017

RCTI 2017/D8 Draft Goods and Services Tax: Recipient Created Tax Invoices Determination (No XX) 2017 for Quarry Operators

17 March 2017

RCTI 2017/D9 Draft Goods and Services Tax: Recipient Created Tax Invoice Determination (No. XX) 2017 for Australian Direct Property Investment Association Inc. and their Originating Members

17 March 2017

PAR 2017/D6 Draft Goods and Services Tax: Particular Attribution Rules Devices Determination (No XX) 2017 for Banknote and Coin-operated Machines and Similar

17 March 2017

PAR 2017/D7 Draft Goods and Services Tax: Particular Attribution Rules Determination (No XX) for Lay-By Sales 17 March 2017

RCTI 2017/D10 Draft Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 15) 2017 for Horseracing Clubs

21 March 2017

RCTI 2017/D11 Draft Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 17) 2017 for Caravan Park Operators

21 March 2017

RCTI 2017/D12 Draft Goods and Services Tax: Recipient Created Tax Invoice Determination (No. xx) 2017 for defined commission and/or fee based services in the financial industry

21 March 2017

45

State of Play


RCTI 2017/D13 Draft Goods and Services Tax: Recipient Created Tax Invoice Determination (No. xx) 2017 for Greyhound Racing Clubs

21 March 2017

RCTI 2017/D14 Draft Goods and Services Tax: Recipient Created Tax Invoice Determination (No. xx) 2017 for Copyrighted Material

21 March 2017

CASH 2017/D1 Draft Goods and Services Tax: Accounting on a cash basis Determination (No. XX) 2017- Industrial Trade Unions

23 March 2017

PAR 2017/D8 Draft Goods and Services Tax: (Particular Attribution Rules Where Total Consideration is Not Known) Determination 2017

23 March 2017

WAN 2017/D3 Draft Goods and Services Tax: Waiver of Adjustment Note Requirement Determination (No. xx) 2017 - Members of MasterCard International and Visa International - Bank Interchange Transfers

23 March 2017

WTI 2017/D4 Draft Goods and Services Tax: Waiver of Requirement to hold a Tax Invoice Determination- Members of MasterCard International and Visa International - Bank Interchange Services

23 March 2017

Interpretative Decisions

ATO ID 2004/569 (Withdrawn)

Research and Development: application of clawback against other and core technology expenditure incurred on unregistered research and development activities

3 March 2017


Residency: Australian Defence Force member residing overseas and engaged in discharge of government functions

24 March 2017


Deductions and expenses: Rental Property (Repair of Foundations) 24 March 2017


Residency: Senior Government Officials residing overseas and engaged in discharge of government functions

24 March 2017


Borrowing expenses - on purchase of vacant land and the construction of a house for future income producing purposes

24 March 2017

46

State of Play



CGT - deceased estate - cost base of CGT asset - legal costs incurred in confirming validity of the will

24 March 2017


CGT - deceased estate - cost base of CGT asset - legal costs to determine control of the estate 24 March 2017


Landlord - Costs associated with relocating tenants 24 March 2017


Landlord - Cost of defective building works report 24 March 2017


Letting fees incurred prior to property being available for rent 24 March 2017


Rental Repairs - repair to substantial part of entirety 24 March 2017


Rental repairs - replacement of an entirety 24 March 2017


Dependant Spouse Tax Offset - spouse living overseas 24 March 2017


Rental property repairs - replacing worn carpet by polishing existing floorboards 24 March 2017


Deductibility of rental property expenses - electricity power guarantee 24 March 2017

47

State of Play



Dependant Tax Offset - spouse in prison 24 March 2017


Borrowing expenses - costs of maintaining non-income producing property used as collateral for a loan

24 March 2017


Rental Expenses - cost of relocating assets to a rental property 24 March 2017


Rental Property Expenses - bank guarantee in lieu of deposit - deductibility of fees 24 March 2017


Capital Allowances: cost to employee of depreciating asset given by employer 24 March 2017


Capital gains tax: cost base - non income producing property - travel expenses - third element of cost base

24 March 2017


Spouse Tax Offset: separated spouse in receipt of family tax benefit 24 March 2017


Withholding tax obligation: payment to religious practitioners performing marriage services 24 March 2017


Capital Works: calculation of deduction - number of days used - leap year 24 March 2017


Capital Gains Tax: cost base - Finnish gift tax 24 March 2017


Capital Gains Tax: cost base - UK inheritance tax 24 March 2017

48

State of Play



Capital Allowances: low-value assets allocated to low-value pools 24 March 2017


Capital Allowances: stop holding depreciating assets allocated to a low value pool 24 March 2017


Capital gains tax: third element of cost base - travel and accommodation costs relating to initial repairs

24 March 2017


PAYG withholding: meaning of managed investment trust 24 March 2017


Residency: employee of a public sector organisation working permanently in Singapore 24 March 2017

Taxpayer Alerts

TA 2017/4 Claiming the Research and Development Tax Incentive for agricultural activities 20 February 2017

TA 2017/5 Claiming the Research and Development Tax Incentive for software development activities 20 February 2017

ATO Guidelines

PCG 2016/17 ATO compliance approach - exploration expenditure deductions 22 February 2017

PCG 2017/2 Simplified Transfer Pricing Record Keeping Options 22 February 2017

LCG 2017/D2 GST on low value imported goods 24 February 2017

LCG 2016/11 Superannuation reform: concessional contributions - defined benefit interests and constitutionally protected funds

28 February 2017

LCG 2016/8 Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds

8 March 2017

49

State of Play


LCG 2016/9 Superannuation reform: transfer balance cap 10 March 2017

LCG 2016/12 Superannuation reform: total superannuation balance 20 March 2017

Class Rulings

CR 2017/10 Income tax: Thinksmart Limited - delisting from ASX and shares converted into Depositary Interests 22 February 2017

CR 2017/11 Income tax: Heron Resources Limited - demerger of Ardea Resources Limited 1 March 2017

CR 2017/12 Income tax: 'Energy Queensland Limited Early Retirement Scheme 2017' 1 March 2017

CR 2017/13 Income tax: return of capital: Alliance Resources Limited 1 March 2017

CR 2017/14 Income tax: will the transaction item for a gift in a bank or credit card statement meet the requirements of a receipt under section 30-228 of the Income Tax Assessment Act 1997 ?

8 March 2017

CR 2017/15 Income tax: assessability of payments from the Victorian Taxi Reform Hardship Fund 15 March 2017

CR 2017/16 Income tax: Multiplex Development and Opportunity Fund - Return of capital 15 March 2017

CR 2017/17 Income tax: 'Department for Education and Child Development Early Retirement Scheme 2017' 15 March 2017

CR 2017/18 Fringe benefits tax: employer clients of McMillan Shakespeare Limited and its subsidiaries who participate in the fly-in fly-out travel program

15 March 2017

CR 2017/18 Fringe benefits tax: employer clients of McMillan Shakespeare Limited and its subsidiaries who participate in the fly-in fly-out travel program

16 March 2017

Decision Impact Statements

S134 & S135 of 2016

Bywater Investments Ltd & Ors v. Commissioner of Taxation 15 March 2017

50

Bill Status at 24 March 2017


Name of Bill

Status Description Introduced:

House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

51


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016

01/09/2016 This bill amends the: Income Tax Rates Act 1986 to reduce the corporate tax rate for small businesses with an aggregated turnover of less than $10 million to 27.5 per cent for the 2016-‐17 financial year and progressively extend that lower rate to all corporate tax entities by the 2023-‐24 financial year; and further reduce the corporate tax rate in stages so that by the 2026 27 financial year, the corporate tax rate for all entities will be 25 per cent; Income Tax Assessment Act 1997 to increase the small business income tax offset to 16 per cent of an eligible individual’s basic income tax liability that relates to their total net small business income from the 2026-‐27 financial year; and enable small businesses with an aggregated turnover of less than $10 million to access most small business tax concessions, and small businesses with an aggregated turnover of less than $5 million to access the small business income tax offset; and Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997 to make consequential amendments.

Social Services Legislation Amendment (Budget Repair) Bill 2016

01/09/2016 This bill amends: the Social Security Act 1991 to reduce from 26 to six weeks the period during which age pension and other payments with unlimited portability can be paid outside Australia at the means-‐tested rate; and pause for three years the indexation of various income thresholds that apply to certain social security benefits and allowances and the income test free area for parenting payment single; the Social Security Act 1991 and Social Security (Administration) Act 1999 to abolish the pensioner education supplement; the Social Security Act 1991, Social Security (Administration) Act 1999 and Veterans’ Entitlements Act 1986 to abolish the education entry payment; and seven Acts to make consequential amendments.

52


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

Social Services Legislation Amendment (Youth Employment) Bill 2016

01/09/2016 This bill amends the Social Security Act 1991 to: extend and simplify the ordinary waiting period for all working age payments; extend youth allowance (other) to 22 to 24 year olds in lieu of newstart allowance and sickness allowance; and provide for a four-‐week waiting period for certain persons aged under 25 years applying for youth allowance (other) or special benefit and require these job seekers to complete certain pre-‐benefit activities; and the Farm Household Support Act 2014 to make consequential amendments.

Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016

01/09/2016 This bill introduced with the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016, the bill amends the: A New Tax System (Family Assistance) Act 1999 to: increase family tax benefit (FTB) Part A fortnightly rates by $10.08 for each FTB child in the family up to 19 years of age; restructure FTB Part B by: increasing the standard rate by $1000.10 per year for families with a youngest child aged under one; maintaining certain standard rates for families, single parents who are at least 60 years of age, grandparents and great-‐grandparents; introducing a reduced rate of $1000.10 per year for individuals with a youngest child aged 13 to 16 years of age who are not single parents aged 60 or more or grandparents or great-‐grandparents; and removing the entitlement for single parent families who are not single parents aged 60 or more or grandparents or great-‐grandparents from the start of the calendar year their youngest child turns 17 years of age; and phase out the FTB Part A and Part B end-‐of-‐year supplements; Social Security Act 1991 to increase certain youth allowance and disability support pension fortnightly rates by approximately $7.48 for recipients under 18 years of age; and A New Tax System (Family Assistance)

53


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

(Administration) Act 1999 to make consequential amendments.

54


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

Tax and Superannuation Laws Amendment (2016 Measures No. 2) Bill 2016

14/09/2016 7/2/17 8/2/17 9/2/17 28/2/17 This bill contains the following amendments: 1. REMEDIAL POWER: proposes to establish a Remedial Power for the Commissioner of Taxation to allow for a more timely resolution of certain unforeseen or unintended outcomes in the taxation and superannuation laws. The power allows the Commissioner to make, by disallowable legislative instrument, one or more modifications to the operation of a taxation law to ensure the law can be administered to achieve its intended purpose or object. The power can only be validly exercised where: • the modification is not inconsistent with the intended

purpose or object of the provision; • the Commissioner considers the modification to be

reasonable, having regard to both the intended purpose or object of the relevant provision and whether the costs of complying with the provision are disproportionate to achieving the intended purpose or object; and

• the Department of the Treasury or the Department of Finance advises the Commissioner that any impact on the Commonwealth budget would be negligible.

• Date of effect: This measure would commence on the day after Royal Assent. This would allow the Commissioner to make legislative instruments from that date to modify the operation of a taxation law.

2. PRIMARY PRODUCER AVERAGING: the Bill proposes to amend the ITAA 1997 to allow primary producers to access income tax averaging 10 income years after choosing to opt out, instead of that choice being permanent. Date of effect: This change would apply to the 2016-‐17 income year and later income years. 3. LCT RELIEF: the Bill would amend the A New Tax System

55


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

(Luxury Car Tax) Act 1999 to provide relief from luxury car tax (LCT) to certain public institutions that import or acquire luxury cars for the sole purpose of public display. The changes would apply to public museums, galleries, and libraries that are registered for goods and services tax and that have been endorsed as deductible gift recipients. Date of effect: These amendments would apply to luxury cars that are imported or acquired from the day after the Bill receives Royal Assent. 4. MISC AMENDMENTS: The Bill proposes to make a number of miscellaneous amendments to the taxation, superannuation and other laws. These amendments include style and formatting changes, the repeal of redundant provisions, the correction of anomalous outcomes and corrections to previous amending Acts. Date of effect: Various.

56


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

Social Services Legislation Amendment (Simplifying Student Payments) Bill 2016

14/09/2016 21/3/17 23/3/17 This bill proposes to simplify means testing for student payments by: • removing the exemption from the assets test for

Youth Allowance and AUSTUDY payment recipients who are partnered to certain income support recipients;

• extending the social security means test rules used to assess interests in trusts and companies to independent Youth Allowance and AUSTUDY payment recipients;

• aligning the social security benefit income test treatment of gift payments from immediate family members with existing pension rules; and

• harmonising the family tax benefit income test with the Youth Allowance parental income test by including tax free pensions and benefits as income for the parental income test.

Superannuation (Objective) Bill 2016

09/11/2016 22/11/2016 23/11/2016 This Bill proposes to enshrine the primary objective of the superannuation system in legislation and the subsidiary objectives of the superannuation system in regulation. It would require new Bills and regulations relating to superannuation to be accompanied by a statement of compatibility with the objective of the superannuation system.

Treasury Laws Amendment (2016 Measures No. 1) Bill 2016

01/12/2016 13/2/17 14/2/17 This bill amends the: Terrorism Insurance Act 2003 to clarify that losses attributable to terrorist attacks using chemical or biological means are covered by the terrorism insurance scheme; Corporations Act 2001 to provide that employee share scheme disclosure documents lodged with the Australian Securities and Investments Commission are not made publicly available for certain start-‐up companies; and provide protection for retail client money and property held by financial services

57


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

licensees in relation to over-‐the-‐counter derivative products; Income Tax Assessment Act 1997 to update the list of deductible gift recipients; and Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997 to provide income tax relief to eligible New Zealand special category visa holders who are impacted by disasters in Australia.

58


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

Superannuation Amendment (PSSAP Membership) Bill 2016

01/12/2016 13/2/17 14/2/17 This bill amends the Superannuation Act 2005 to enable members of the Public Sector Superannuation Accumulation Plan (PSSAP) who move to non-‐Commonwealth employment to remain in the scheme as contributory members.

Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017

9/2/17 21/3/17 23/3/17 Introduced with the Diverted Profits Tax Bill 2017, the bill amends: five Acts to provide for a diverted profits tax from 1 July 2017 to ensure that significant global entities are not able to avoid their tax obligations by diverting profits generated in Australia offshore; the Taxation Administration Act 1953 to increase the administrative penalties that can be imposed by the Commissioner of Taxation on significant global entities for breaching their tax reporting obligations; and the Income Tax Assessment Act 1997 to update the reference to Organisation for Economic Cooperation and Development (OECD) transfer pricing guidelines in Australia’s cross-‐border transfer pricing rules to include the 2016 OECD amendments to the guidelines.

Diverted Profits Tax Bill 2017 9/2/17 21/3/17 23/3/17 Introduced with the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017, the bill imposes a diverted profits tax at a rate of 40 per cent on the amount of a significant global entity’s diverted profits.

Treasury Laws Amendment (Bourke Street Fund) Bill 2017

9/2/17 15/2/17 15/2/17 17/2/17 28/2/17 Amends the Income Tax Assessment Act 1997 to include the Bourke Street Fund on the list of deductible gift recipients.

Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017

8/2/17 1/3/17 20/3/17 Amends: the A New Tax System (Family Assistance) Act 1999 to: increase family tax benefit (FTB) Part A fortnightly rates by $20.02 for each FTB child in the family up to 19 years of age; remove the entitlement to FTB Part B for single parent families who are not single parents

59


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

aged 60 or more or grandparents or great-‐grandparents from the start of the calendar year their youngest child turns 17 years of age; and phase out the FTB Part A and Part B end-‐of-‐year supplements; the Social Security Act 1991 to: increase certain youth allowance and disability support pension fortnightly rates by approximately $19.37 for recipients under 18 years of age; reduce from 26 to six weeks the period during which age pension and other payments with unlimited portability can be paid outside Australia at the means-‐tested rate; pause for three years the indexation of various income thresholds that apply to certain social security benefits and allowances and the income test free area for parenting payment single; extend and simplify the ordinary waiting period for all working age payments; extend youth allowance (other) to 22 to 24 year olds in lieu of newstart allowance and sickness allowance; and provide for a four-‐week waiting period for certain persons aged under 25 years applying for youth allowance (other) or special benefit and require these job seekers to complete certain pre-‐benefit activities; the A New Tax System (Family Assistance) Act 1999 and A New Tax System (Family Assistance) (Administration) Act 1999 to: cease the child care benefit (CCB) and child care rebate; introduce a child care subsidy (CCS) which is subject to both an income and activity test; introduce various rates of additional child care subsidy (ACCS) that are available in certain circumstances; and make amendments in relation to CCS and ACCS claims, reviews of decisions, provider approvals, and compliance obligations of approved providers of child care services; the Social Security Act 1991 and Social Security (Administration) Act 1999 to abolish the pensioner education supplement; the Social Security Act 1991, Social

60


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

Security (Administration) Act 1999 and Veterans’ Entitlements Act 1986 to abolish the education entry payment; six Acts to prevent new recipients of welfare payments or concession cards from being paid the energy supplement from 20 September 2017; the Social Security Act 1991 and Veterans’ Entitlements Act 1986 to cease the payment of pension supplement after six weeks temporary absence overseas and immediately for permanent departures; the Social Security (Administration) Act 1999 to enable automation of the regular income stream review process; the Social Security Act 1991, Farm Household Support Act 2014 and Veterans’ Entitlements Act 1986 to trial a social security income test incentive aimed at increasing the number of job seekers who undertake specified seasonal horticultural work, such as fruit picking; the Paid Parental Leave Act 2010 to: provide that parental leave pay under the Paid Parental Leave scheme will only be provided to parents who have no employer-‐provided paid primary carer leave, or whose employer-‐provided paid primary carer leave is for a period less than 20 weeks or is paid at a rate below the full-‐time national minimum wage; remove the requirement for employers to provide paid parental leave to eligible employees, unless an employer chooses to manage the payment to employees and the employees agree for the employer to pay them; and make amendments contingent on the commencement of the proposed Regulatory Powers (Standardisation Reform) Act 2017; and 11 Acts to make consequential amendments.

61


Name of Bill


House Passed: House

Introduced: Senate

Passed: Senate

Royal Assent

Treasury Laws Amendment (GST Low Value Goods) Bill 2017

16/2/17 Amends the: A New Tax System (Goods and Services Tax) Act 1999 to ensure that goods and services tax is payable on certain supplies of low value goods that are purchased by consumers and are imported into Australia; and Taxation Administration Act 1953 to broaden administrative penalties for making false or misleading statements.

Treasury Laws Amendment (2017 Measures No. 1) Bill 2017

16/2/17 2/3/17 20/3/17 Amends the: Income Tax Assessment Act 1997 to ensure that investors who invest through an interposed trust are able to access the capital gain concessions provided by the tax incentives for early stage investors and venture capital investment measures; and Australian Securities and Investments Commission Act 2001 to specify that the sharing of confidential information by the Australian Securities and Investments Commission with the Commissioner of Taxation is authorised use and disclosure of that information.

Treasury Laws Amendment (Working Holiday Maker Employer Register) Bill 2017

16/2/17 Amends the: A New Tax System (Australian Business Number) Act 1999 to ensure that working holiday maker employer registration information is not publicly released; and Taxation Administration Act 1953 to restrict the ability of the Commissioner of Taxation to provide certain protected information to the Fair Work Ombudsman.

Crimes Amendment (Penalty Unit) Bill 2017

16/2/17 Amends the Crimes Act 1914 to: increase the amount of the Commonwealth penalty unit from $180 to $210 from 1 July 2017; delay the first automatic Consumer Price Index (CPI) adjustment of the penalty unit until 1 July 2020; and provide for CPI indexation to occur on 1 July every three years thereafter.

Social Services Legislation Amendment Bill 2017

23/3/17 22/3/17 22/3/17

62


63

Cases at 23 November 2016

Cases from 17 February to 24 March CASE DATE TOPIC High Court None Full Federal Court Commissioner of Taxation v Normandy Finance and Investments Asia Pty Ltd (No 2) [2017] FCAFC 46 (21 March 2017)

21/3/17 COSTS – apportionment of costs of appeal – costs below remitted

Federal Court Uber B.V. v Commissioner of Taxation [2017] FCA 110 (17 February 2017)

17/2/17 TAXATION – whether a person supplying uberX services is required to be registered under Division 144 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act) – whether carrying on the enterprise of providing uberX services to passengers constitutes supply “taxi travel” within the meaning of s 144-‐5(1) (as defined in s 195-‐1) of the GST Act.

Commissioner of Taxation v Bosanac (No 3) [2017] FCA 141 (17 February 2017)

17/2/17 Taxation

Robinson v Commissioner of Taxation [2017] FCA 162 (21 February 2017)

21/2/17 TAXATION –whether in interests of justice to grant extension of time to appeal Tribunal decision – merit of proposed appeal – substantial injustice – application dismissed

Vasiliades v Commissioner of Taxation (No 2) [2017] FCA 185 (1 March 2017)

1/3/17 PRACTICE AND PROCEDURE – application to give evidence by way of video link – whether an order should be made pursuant to s 47A(1) of the Federal Court Act 1976 (Cth) – whether issues of credit and reliability are central in the case – balancing of factors in exercising discretionary power under s 47A(1) – application in the alternative for an adjournment of the trial date

Sandini Pty Ltd v Commissioner of Taxation [2017] FCA 287 (22 March 2017)

22/3/17 INCOME TAX – capital gains tax – roll over relief – whether a family court order transferring shares to a family trust may in some circumstances attract roll over relief pursuant to subdiv 126-A of the

64


CASE DATE TOPIC Income Tax Assessment Act 1997 (Cth) (‘ITAA’) – whether s 126-15(1) of the ITAA extends to transfers to companies or trusts associated with a spouse or former spouse – whether transferee must be an individual for the purposes of ss 126-5 and 126-15 of the ITAA - whether change in beneficial ownership constitutes a change in ownership for the purposes of s 104-10(2) of the ITAA – disposal of ownership by operation of law - whether the making of a family court order constituted a CGT event A1 – whether steps taken in furtherance of a family court order constituted the appropriation of shares pursuant to that order - whether there was a change in ownership by reason of constructive receipt of shares - whether there was a change in ownership by reason of s 103-10 of the ITAA - whether a spouse or former spouse’s involvement in the change of ownership is sufficient to enliven ss 126-5 and 126-15 of the ITAA

Administrative Appeals Tribunal RGGW and Commissioner of Taxation (Taxation) [2017] AATA 238 (20 February 2017)

20/2/17 TAXATION – carry forward losses – whether tax losses available – continuity of ownership – multiple formulations of test – continuity of ownership period – same business test – same business test period – complex family corporate structure – tax shortfalls – intentional disregard – recklessness – objection decisions in relation to income tax assessments affirmed – objection decisions in relation to administrative penalty set aside

Kishore and Tax Practitioners Board [2017] AATA 271 (28 February 2017)

28/3/17 TAX AGENTS – Code of Professional Conduct – termination of tax agent registration – whether conduct constituted breach of the Code – whether tax agent registration should be terminated – whether an alternative sanction is appropriate – decision set aside – decision in substitution that the Applicant be given a written caution

Spence and Commissioner of Taxation (Taxation) [2017] AATA 307 (10 March 2017)

10/3/17 TAXATION – income tax – failure to lodge income tax returns – entitlement to deductions – burden of proof – carrying on a share trading business – share trading losses – carry forward of losses – failure to object to penalties – whether penalties should have been considered in objection decision – decision affirmed

Walker and Commissioner of Taxation (Taxation) [2017] AATA 324 (14 March 2017)

14/3/17 TAXATION – income tax – allowable deductions – general deduction -‐ whether outgoings incurred in the course of deriving assessable income -‐ work-‐related expenses – travel between different work locations -‐ whether itinerant worker -‐

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CASE DATE TOPIC farm worker-‐ objection decision affirmed

The Trustee for the Whitby Trust and Commissioner of Taxation (Taxation) [2017] AATA 343 (20 March 2017)

20/3/17 GOODS AND SERVICES TAX – margin scheme – real property acquired following exercise of a call option – whether option fee forms part of the consideration for the acquisition of the real property for the purpose of applying the margin scheme – objection decision set aside in part and remitted to Commissioner for reconsideration in accordance with recommendation set out in the Tribunal’s reasons for decision – objection decision otherwise affirmed

March 2017 Monthl Tax Reie · An Uber driver supplies ‘taxi travel’ for GST purposes Uber B.V....

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