Tax Bill (2015 Measures No 6) now law · Tax Bill (2015 Measures No 6) now law TSLA (2015 Measures...
Transcript of Tax Bill (2015 Measures No 6) now law · Tax Bill (2015 Measures No 6) now law TSLA (2015 Measures...
Copyright © The Institute of Chartered Accountants in
Australia 2014. All rights reserved. 1
Bruce Thomas
Senior Tax Trainer
Chartered Accountants Australia & New Zealand
S17 Latest key tax developments
Tax Bill (2015 Measures No 6) now law
TSLA (2015 Measures No 6) Act 2015
• Look-through earnout rights – CGT treatment from 24 April 2015
• Foreign resident CGT withholding regime from 1 July 2016.
Tax Bill (2015 Measures No 6) now law
TSLA (2015 Measures No 6) Act 2015
• Look-through earnout rights – CGT treatment from 24 April 2015
• Foreign resident CGT withholding regime from 1 July 2016.
Business
Sale
Yr
0
Yr2Yr1$100
k
$200kYr3
Earnout
Payment
12 month
discount
Div 152
concessions
Earnout Right
Div 152
concessions
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Tax Bill (2015 Measures No 6) now law
TSLA (2015 Measures No 6) Act 2015
• Look-through earnout rights – CGT treatment from 24 April 2015
• Foreign resident CGT withholding regime from 1 July 2016.
Your client
Property$2.0m+
Owns
Selling
Negotiations
VendorNR
Agent
ATORemit
Small business restructure roll-over now law
TLA (Small Business Restructure Roll-over) Act 2016
• Optional roll-over relief for:
– Active assets; transferred between
– Small business entities; as part of a
– Genuine restructure of an ongoing business
• Start date: 1 July 2016.
Mum & Dad
100%
CGT assets
Dep’n assets
Trading stock
Revenue assets
Mum & Dad
100%
New EntityOld entity$2m T/O
$6m NAVGenuine restructure
3 years
GST and digital products
T&SLA (2016 Measures No 1) Act 2016
Contains amendments on:
• GST treatment of digital products and other services
• GST treatment of cross-border transactions between businesses
• Farm management deposits (FMDs).
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Innovation tax incentives
TLA (Tax Incentives for Innovation) Act 2016
Tax incentives for investors in:
• Early stage innovation companies; and
• Venture capital investment.
Optus share buy-back
Cable & Wireless Australia & Pacific Holding (in liq) v FCT [2016] FCA 78
• Non-resident taxpayer got $3.9bn from Optus for share buy-back
• Amount debited to ‘Buy-back Reserve’ account
• Taxpayer claimed it was a form of ‘Share Capital’ account
• Taxpayer sought refund of $452m withheld
• Federal Court held amount correctly withheld - $3.9bn was paid out of profits.
No share trading business
Re Devi v FCT [2016] AATA 67
• Childcare worker turned over $600,000 in share transactions
• $20,000 loss incurred
• AAT found taxpayer was an investor, not a share trader
• No deduction for losses allowed
• Transactions not regular, systematic or sophisticated
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Cents per km car deductions
TLA (2016 Measures No 1) Regulation 2016
• Repeals cents per km rates based on engine capacity
• From 2015-16, a single rate ($0.66 per business km) applies
• FCT has power to set rates from 2016-17.
Interest expense had no nexus with income
Re Jarvis v FCT [2016] AATA 99
• Couple sought interest deductions on home loan facility
• AAT held interest not deductible
• No nexus with taxpayer’s income
• Business carried on by other entities
Bank
Jarvis
BusinessTrading
entity
Homeloan
$ re-draw@ interest $ on-lent
i-free
$ usedin business
Easier access to company losses
Exposure draft legislation
• Same business test will continue to exists for companies
• Supplemental test to allow access losses if satisfy a ‘similar business test’
• Allow companies to seek opportunities to innovate
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$2.0m turnover test and Division 152
Re PFGG v FCT [2015] AATA 972
• $5.4m capital gain from sale of mining tenements
• AAT found taxpayer not entitled to CGT small business concessions
• Small business entity test failed
• Annual turnover of connected entity over $2.0m
• Reimbursement of fuel expenses was ordinary income ($55k = 2.5%)
• Taxpayer has appealed to the Federal Court
$6.0m NAV test and Division 152
Breakwell v FCT [2015] FCA 1471
• Taxpayer made capital gain in 2008 via sale of business by trust
• Taxpayer owed over $2m to a related trust, including $1.1m pre Div 7A debt
• Argued these were not assets of trust, not included in $6.0m NAV test
• Federal Court dismissed taxpayer’s appeal
• Held that loans included in NAV test of trust – not statute-barred.
Debt owed
(Statute Barred)
ETUT FDT
Mr
Breakwell
Connected
entities
Business
100%
Purchaser Sold
CGT
distributed
CGT distributed
Net Assets > $NAV
$6.0m NAV test and Division 152
Re Miley v FCT [2016] AATA 73
• 3 equal shareholders sold 100% of shares to arm’s length buyer
• Taxpayer’s share of proceeds: $5.9m
• Issue whether taxpayer satisfied $6.0m NAV test
• AAT held MV of shares was reduced by 16% to reflect minority shareholding
Billy Ray
1/3rd
Liam Miley
1/3rd 1/3rd
ABC Co Pty Ltd 3rd party
buyer
All selling shares to 3rd party
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90% SBP test and Division 152
FCT v Devuba Pty Ltd [2015] FCAFC 168
• Company claimed Div 152 concessions re sale of shares in another company
• FCT argued concessions not available due to dividend access share
• AAT held concessions available - 90% SBP test passed by company
• Full Court dismissed FCT’s appeal
• Court held dividend couldn’t be declared to dividend access shareholder
Requirement Passed?
CGT event Yes
CGT gain Yes
$2m T/O or $6m NAV test Yes
Active assets Yes
CGT concession stakeholder N/A
90% SBP ???
Trading Co
Pty Ltd
Devuba
Pty Ltd100%
Listed Co LtdListed Co buys Devuba’s shares in Trading Co.Devuba wants Div 152 concessions
Dad – 85 A Class sharesMum – 15 Z Class DAS shares
Allocable cost of pre-CGT assets
Financial Synergy Holdings Pty Ltd v FCT [2016] FCAFC 31
• Taxpayer won appeal against decision re allocable cost of pre-CGT assets
• Full Federal Court held MV of cost base for ACA determined at joining time
• This was at date of acquisition by consolidated group
FDT
Pre-
CGT
Div 122 rollover
07/1985
Trading Co
FSH Pty
LtdDiv 126 rollover }
$1.56m
07/198
5
10/1985
$30.0m
Consolidated
group
ACA calcs
07/2007
SBRR and ‘genuine restructures’
LCG 2016/D2 and LCG 2016/D3
• LCG 2016/D2 explains consequences of choosing roll-over
– Div 7A 1936 not turned off
• LCG 2016/D3 explains
– ‘Genuine restructure of an ongoing business’
– ATO will check contrived & unduly tax-driven restructures
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SBRR and ‘genuine restructures’
LCG 2016/D2 and LCG 2016/D3
LCG 2016/D2 explains consequences of choosing roll-over
– Div 7A 1936 not turned off.
LCG 2016/D3 explains
– ‘Genuine restructure of an ongoing business’
– ATO will check contrived & unduly tax driven restructures
Example
Family Co Pty Ltd transfers a factory to Family Trust for $260,000. The whole amount is via
a Division 7A loan for $260,000. This is a valid Div 7A loan. Failure by Family Trust to
make Div 7A loan repayments will trigger deemed dividends.
SBRR and ‘genuine restructures’LCG 2016/D2 and LCG 2016/D3
LCG 2016/D2 explains consequences of choosing roll-over
– Div 7A 1936 not turned off.
LCG 2016/D3 explains
– ‘Genuine restructure of an ongoing business’
– ATO will check contrived & unduly tax-driven restructures
Example
Dad owns Fish&Chips Pty Ltd. Under SBR roll-over, transfers “Chip” business to Chips Pty Ltd. Now,
Dad owns 2 companies. 12 months later, transfers shares in Chips Pty Ltd to son.
Not “genuine restructure of an ongoing business.” It was a form of succession planning.
Fish&Chips Pty Ltd retrospectively fails SBR rollover.
Fish&Chips Pty Ltd now pays tax on asset transfer.
R&D tax incentive
New ATO checklist
ATO has released a new checklist for R&D tax incentive claimants to:
• Self-assess eligibility
• Source advice on record-keeping requirements
• Correct mistakes and challenge decisions
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Testing drug's safety was core R&D activity
Re JLSP v Innovation Australia [2016] AATA 23
• Taxpayer an Australian-based company in global drug research group
• Ran clinical trial of client's drug in Australia
• AAT found taxpayer conducted core R&D activity:
– Experimental
– Substantial purpose of trial to generate new knowledge
• AAT disagreed with Innovation Australia that purpose must be dominant
FBT rates, thresholds for 2017
Annual refresh
• TD 2016/1: Indexation factors for valuing non-remote housing
• TD 2016/2: FBT record-keeping exemption threshold - $8,286
• TD 2016/3: Cents-per-km rates for vehicles other than cars
• TD 2016/4: Weekly amounts for food and drink expenses of employees receiving LAFHA
• TD 2016/5: Benchmark interest rate - 5.65% pa
• TD 2016/7: Car parking threshold is $8.48.
GST adjustments for windfall gains
GSTD 2016/D1
• Increasing adjustment for supply can give rise to excess GST
• Division 142 of GST Act prevents refund of excess GST if excess passed on to
customer & supplier not reimbursed.
Consumer
Supplier
ATO
Refund GST(‘Reimbursed’)
Sale(GST ‘passed on’)
GST previously remitted,now can be refunded
SaleGST remitted
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Dispute over contract for sale of land
SAMM Property Holdings Ltd v Shaye Properties Ltd [2016] NSWSC 362
• Was contract GST inclusive or GST exclusive?
• NSW Supreme Court ordered a contract for sale of property be rectified to
reflect common intention of parties that purchase price was exclusive of GST
GST treatment of digital currency
Discussion paper
• GST treatment of digital currency (e.g. bitcoin)
• Potential approaches available to
– Identify digital currencies in GST law; and
– Change GST treatment to remove “double GST ”
Accommodation in commercial premises
Castan Investments Unit Trust and FCT [2016] AATA 298
• AAT has affirmed an objection decision of FCT re GST on supply of
accommodation
• AAT said only issue it was required to determine was whether supply of
accommodation was correctly described
• It held taxpayer failed to discharge the onus of proof
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Pharmacies claiming large GST refunds
ATO information
• ATO gives help to pharmacies to avoid delays in processing large GST refunds
due to recent changes to the PBS
• It says to reduce the likelihood of undue delays in processing, pharmacies’
contact and financial institution details should be up to date
ATO replacing ELS lodgment service
Standard Business Reporting system
• From July 2016, ELS will be replaced with SBR-enabled practitioner lodgment
service for all tax-related returns and tax-related statements
• ELS to be kept as safety net until 31 March 2017
Trustee had power to apply trust capital
Fischer v Nemeske Pty Ltd [2016] HCA 11
• High Court dismissed an appeal in a matter involving trustee powers
• Held trustee validly exercised a power to apply trust capital or income by
creating a debt reflecting value of shares held
Dr Cr
XYZ Shares 3,904,300
Asset revaluation reserve 3,904,300
Asset revaluation reserve 3,904,300
Mr & Mrs Beneficiary 3,904,300
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Definitions of employee and contractor
House of Representatives Committee report
House of Reps Committee on Education & Employment recommended that:
• ATO & Fair Work Ombudsman to align definitions of employee and contractor
across government agencies
• Productivity Commission investigates impact on small business of lowering GST
threshold on importation of physical goods
• Government reassesses policy case for taxing GRPs of persons over 65.
Data matching
ATO scoping future audit activity
ATO has announced data matching programs on:
• Electoral rolls
• Contractor payments 2016-19
• Merchants – specialised payments systems 2014-17
• Credit and debit cards 2014-15
Transfer pricing
Simplified transfer pricing record-keeping
• ATO has updated FAQs about simplifying transfer pricing record-keeping
• Some of the questions featured include:
– What happens when simplified transfer pricing record-keeping option is
applied?
– Branch, trust, partnership application of simplification options
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Transfer pricing
PSLA 2016/1
• It provides guidance to ATO staff when they are proposing transfer pricing
adjustments involving imported purchases with potential customs implications
• It applies from 14 April 2016.
Public benevolent institution
ACNC draft interpretation statement
• ACNC has released a draft interpretation statement on PBIs
• It sets out views on what “public”, “benevolent” and “institution” mean for ACNC
purposes.
ATO warns about iTunes scams
Latest telephone scam
• ATO is reminding public to be alert to scammers impersonating the ATO
demanding iTunes gift cards as a form of tax debt payment
• Over the past month 8,692 phone scam reports were received
• ATO said it also recently received reports of not only iTunes cards but also pre-
paid Visa gift cards
• It says ATO will never request payment of a tax debt via pre-paid or gift cards
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Property developers and trusts
ATO audit focus
• ATO is continuing to focus on trusts developing and selling properties as part of
their normal business
• It said some trusts are incorrectly claiming the 50% CGT discount when
developed properties are sold
• ATO said it has escalated 75% of cases reviewed for audit and have received
voluntary disclosures
Property transfers and pre-filling
Automatic reporting
• From 1 July 2016, all state revenue collection agencies will report transfers of
freehold or leasehold interests to ATO
• ATO uses information to expand its CGT data matching
• ATO will also be make this information available through pre-filling
Non-profit foundations and evasion
TA 2016/5
• Purported tax-exempt non-profit “foundations” used to evade tax
• ATO reviewing arrangements where taxpayers stream income through a
foundation that is treated as not being subject to tax
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PSI diverted to SMSF
TA 2016/6
• Diverting PSI to a SMSF
• FCT considers that such arrangements may be ineffective at alienating PSI
• It also notes amount received by the SMSF may be non-arm’s length income.
Entity
Client
Client makes paymentto entity
related to individual
Earnings distributedto SMSF
Individual providespersonal services
SMSF has ownership interest in entity
IndividualSMSF
Decision impact statement
Orica Limited v FCT [2015] FCA 1399
• ATO won pre-2013 Part IVA case
• Federal Court held dominant purpose of intra-group refinancing arrangement
with US subsidiary was to obtain deductions
• Claim that Head Co could have used group losses dismissed
• ATO says case shows Part IVA can apply to artificial arrangements that shift
taxable profits from Australian tax base
Decision impact statement
Norman Superannuation Fund and FCT [2015] AATA 914
• Related trusts sold, re-acquired publicly listed shares on same day
• Under scheme, trustees received 2 dividends & double imputation benefits to
negate tax liability
• S.177EA of Part IVA held to applied to deny additional imputation benefits
• ATO says new dividend washing rules in S.207-157 now remove need to make
S.177EA determination
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