Birchstone Brief for the week ended 6 November 2020

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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.

News

Increased visibility of superannuation assets in family law proceedings – Information sharing scheme delayed

The Attorney-General’s Department has indicated at the 2020-21 Budget estimates hearing that the Government’s proposed electronic information-sharing scheme to improve the visibility of superannuation assets in family law proceedings will not be operative until July 2021 at the earliest. It was announced in 2018 that the scheme would give the courts access to superannuation information held by the ATO which should result in faster and fairer family law property settlements. The scheme was intended to commence on 1 July 2020.

Updated R&D Guide to Interpretation

The Minister for Industry, Science and Technology has announced that the R&D Guide to Interpretation has recently been updated to provide greater clarity to the scope of eligible activities under the legislation. The updated Guide includes AusIndustry’s expectations in relation to record keeping to substantiate R&D activities.

Cases

Cooper & Oxley Builders Pty Ltd (in admin) atf Cooper & Oxley Builders Unit Trust v FCT [2020] AAT 4323 – GST: Company entitled to input tax credit where administrator paid invoice

This case considered the entitlement to input tax credits in circumstances where a company, which accounts for GST on an accruals basis, makes an acquisition but subsequently has administrators appointed who pay the invoice and account for GST on a cash basis. In this case, both the company and the administrator claimed the input tax credits. The Commissioner assessed the administrator on the basis that the administrator was not entitled to the input tax credits.

The AAT held that a company was entitled to claim an input tax credit for an acquisition that the company made before it was put into administration even though the administrator paid for the tax invoice. The AAT considered competing constructions of section 58-10 of A New Tax System (Goods and Services Tax Act 1999 (Cth), and concluded that representatives are only entitled to input tax credits on creditable acquisitions which they actually make (within the scope of their appointment) and not on acquisitions and supplies made before their appointment by an entity over which they had no control.

The AAT found that the administrator did not make the acquisitions to which the input tax credits related. Accordingly, the administrator was not entitled to the contested input tax credits.

Royal Wins Pty Ltd v Innovation and Science Australia [2020] AATA 4320 – R&D: Taxpayer unable to provide adequate contemporaneous documentation 

The taxpayer operated a gaming platform and registered R&D activities for the 2016 and 2017 income years. Two of the core R&D activities registered were:

  • Research and Development of Skill and Chance Game RTP Mathematical Algorithm to normalise returns; and
  • Planning, design and mathematical models for skill-based difficulty balancer.

The AAT held that a taxpayer was unable to show that the activities were core R&D activities under section 355-25 of the ITAA 1997 as the taxpayer was unable to provide adequate contemporaneous documentation to demonstrate that any relevant hypothesis had been developed or tested.

A requirement of section 355-25 is for experimental activities to be conducted by applying a systemic progression of work that is based on principles of established science that proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions.

FCT v Glencore Investment Pty Ltd [2020] FCAFC 187 – Transfer pricing

The Full Federal Court handed down its judgment on Friday 6 November. Further details on this case will be provided in the Birchstone Brief next week.

Watson v FCT [2020] HCASL 224; Lee & Anor v DCT [2020] HCASL 217 – High Court special leave to appeal refused

The High Court has refused the taxpayers’ applications for special leave to appeal to the High Court in Watson v FCT and Lee & Anor v DCT. In both matters, the High Court stated the proposed appeal had no prospect of success.

In Watson v FCT [2020] FCAFC 92, the Full Federal Court held that the administration costs incurred by the scheme administrator of a class action settlement fund were not deductible. In Lee & Anor v DCT [2020] NSWCA 95, the NSW Court of Appeal held that the directors were liable to pay director penalties imposed in relation to unpaid PAYG amounts.

Legislation

Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 9) 2020 (Cth) – JobMaker Hiring Credit Rules Released

The Government has released the draft statutory Rules for the JobMaker Hiring Credit. The Bill to implement the JobMaker Hiring Credit (the Economic Recovery Package (Jobmaker Hiring Credit) Amendment Bill 2020 (Cth)) provides the machinery provisions whilst the Rules set out how the JobMaker Hiring Credit will work. The draft Rules outline:

  • the start and end date of the scheme;
  • when an employer or business is entitled to a payment;
  • the amount and timing of payment; and
  • other matters relevant to the administration of the payment.

A summary of the details will be provided in the Birchstone Brief next week.

Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 (Cth) – Committee report released recommending the maximum members of SMSF be increased to 6

The Bill proposes to increase the maximum number of allowable members in SMSFs and small APRA funds from four to six. The Senate Economics Legislation Committee has released its report and has recommended that the Bill be passed. If passed, the amendments will apply from the start of the first quarter after the Bill receives Royal Assent.

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