Birchstone Brief for the week ended 30 October 2020

Upcoming Webinar

Family Trust Elections

On 18 November 2020 at 11am AWST, Birchstone Tax Law will be running a free webinar on family trust elections. To find out more details and register, click here.

ATO Updates

Tax gap program findings for 2017/18

The ATO has released the tax gap summary findings for 2017/18. The overall tax gap for 2017/18 was $31.1 billion against the total expected tax of $454 billion, representing a net tax gap of 7%. Some highlights from the numbers include:

  • Personal income tax gap was 7.7% (down from 8.3% in 2016/17)
  • Corporate income tax gap was 5.6% (steady from 2016/17) which includes the small business tax gap of 11.5% (down from 12.5% in 2016/17) and the medium business tax gap of 6.2% (down from 6.8% in 2016/17)
  • GST gap was 7.3% (up from 6.9% in 2016/17)
  • FBT gap was 21.2% (down from 22% in 2016/17)

Other News

Appointments to the High Court of Australia 

The Prime Minister has announced the appointment of Justice Simon Steward and Justice Jacqueline Gleeson to the High Court. Justice Steward will fill the vacancy of Honourable Justice Geoffrey Nettle AC when his Honour retires on 30 November 2020 and Justice Gleeson will fill the vacancy of Honourable Justice Virginia Bell AC when her Honour retires on 28 February 2021. 

Justice Steward and Justice Gleeson are currently judges in the Federal Court. Justice Steward is a tax specialist (both as a judge and a barrister/solicitor before joining the Federal Court in 2018). Justice Gleeson has a wide range of expertise and is the daughter of former High Court Chief Justice, Murray Gleeson.

Legislation

Duties Regulations 2008 (WA) – Extension of primary production activities

Clause 4AA has been inserted into the Duties Regulations 2008 (WA), the effect being that primary production activities under section 101A(1)(e) of the Duties Act 2008 (WA) have been extended to include production-based agistment.

Production-based agistment is defined in the regulations as meaning the rearing of living creatures in accordance with an agistment arrangement provided for in a contract or agreement that is in writing. The agistment arrangement is limited to the purposes referred to in section 101A(1)(b)(ii) or (iii) of the Duties Act 2008 (WA), which is the production or collection of the living creature’s skins, shells or bodily produce, or selling parts of the living creature’s skins, shells or bodily produce. Further, the regulations state that the agistment contract or agreement is to be made between a person who may lawfully use dutiable property for the rearing of living creatures and a person who owns the living creatures.

Cases

Purcell v FCT [2020] AATA 4235 – Excess superannuation non-concessional contributions

In a case where the taxpayer was represented by her husband, and which was about the ‘principle’ and not the dollars, the AAT found that the Commissioner does not have discretion to remit ‘associated earnings’ on excess superannuation non-concessional contributions (ESNC) as the earnings proxy rate is not a ‘penalty’ that can be remitted.

The ATO issued an ESNC determination under section 97-25 of the TAA for $4,517.65 (being $4,000 of ESNC plus the associated earnings which was calculated at the GIC rate of 8.73%). The taxpayer argued that the proxy rate set under section 97-30 of the TAA, by which the associated earnings were calculated, was a ‘penalty’ which the Commissioner had discretion to waive or remit.

The AAT rejected the taxpayer’s argument that the proxy rate was a penalty. Rather, the proxy rate seeks to approximate the amount that would have been earned on excess contributions whilst in the superannuation fund, which the Commissioner has no discretion to waive or remit.

The taxpayer did not apply to the Commissioner under section 292-465 of the ITAA 1997 to disregard, or to reallocate to another financial year, the ESNC due to special circumstances.

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