Birchstone Brief for the week ended 20 November 2020

News and Events

Family Trust Elections Webinar

The Birchstone Family Trusts Elections Webinar was held last Wednesday. A recording of the Webinar can be accessed here.

ATO Updates

Draft Practice Statement released: ATO’s approach to the extension of the Commissioner’s discretion to retain tax refunds

The ATO has released Draft Practice Statement PS LA 2020/D2 for consultation purposes that provides guidance about the ATO’s approach to the extension of the Commissioner’s discretion to retain tax refunds under the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth)

Practice Statement Released: Remission of additional superannuation guarantee charge

The ATO released Practice Statement Law Administration 2020/4  outlining the relevant considerations for ATO officers making a decision relating to the remission of the additional superannuation guarantee charge (SGC) which is imposed where an employer fails to lodge a super guarantee statement (SG statement) by the lodgement date.  

The Practice Statement sets out a ‘four-step penalty remission process’. However, for historical quarters where the taxpayer could have disclosed during the amnesty period (which ended on 7 September 2020), the penalty cannot be remitted below 100% of the SGC unless the employer voluntarily came forward to lodge an SG statement prior to being notified of ATO compliance action, or exceptional circumstances prevented the employer from lodging the SG statement.

The date of effect of the Practice Statement is 8 September 2020. The previous Practice Statement on remission of additional SGC (PS LA 2019/1) was withdrawn.

State Taxes

New South Wales Budget handed down: Further payroll tax relief and property tax reform

The NSW Government handed down its 2020-21 Budget which includes further payroll tax relief; the payroll rate will be cut from 5.45% to 4.85% for a two year period backdated to 1 July 2020, and the payroll tax threshold will be permanently increased from $1 million to $1.2 million.

The Budget also establishes a consultation process to seek feedback from the public on a possible transition away from the current transfer duty and land tax system. The NSW Government is considering giving home buyers the choice to pay either stamp duty and land tax (where applicable) or a new smaller annual property tax. The tax reform will aim to tackle the inefficient property tax system in NSW to lower barriers to home ownership and boost long-term growth.

Cases

Lambourne v FCT [2020] AATA 4562 – Deductions for clothing expenses denied

The taxpayer, who was employed by the Australian Defence Force as an Electronics Technician within the Navy, attempted to claim deductions for work-related clothing, fitness equipment, and other items. The AAT denied the taxpayer’s deductions for work-related clothing and other work-related expenses as the taxpayer did not satisfy the AAT that the expenditure was incurred for income-producing purposes.

R v Kinghorn (No 7) [2020] NSWC 1483Disclosure of information

This case concerned the disclosure of information that was collected during an ATO tax investigation that formed part of Project Wickenby. As part of the investigation, the taxpayer was required to attend an ATO compulsory examination. Following this compulsory examination, the ATO provided the Australian Federal Police (AFP) and the Commonwealth Director of Public Prosecutions (DPP) with a transcript of this meeting. Subsequently, the taxpayer was charged with making a false representation concerning his control of two companies with the intention of dishonestly influencing a public official; the Commissioner. The transcript was used by the AFP and the DPP to investigate these charges and compile the prosecution brief.

The New South Wales Supreme Court ultimately found in favour of the taxpayer, holding that the ATO was not entitled to disclose the transcript from the compulsory examination to the AFP or the DPP. As a consequence, the AFP and the DPP were not entitled to rely on this information to prosecute the taxpayer.

ACN 154 520 199 Pty Ltd (in liquidation) v FCT [2020] FCAFC 190Gold refiner entitled to input tax credits worth $122m

The Full Federal Court allowed a gold refiner’s appeal from the AAT, entitling the company to input tax credits worth $122 million. The taxpayer had acquired scrap gold from third-party suppliers. The taxpayer then processed this scrap gold into investment-grade gold and on-sold it to dealers as a GST-free supply of a precious metal. The issue was whether the supply of the gold by the refiner was ‘the first supply of that precious metal after its refining by, or on behalf of, the supplier’ to qualify it as a GST-free supply under section 38-385 of the GST Act.

The Full Federal Court ruled that although the scrap gold had already been refined before the refinery acquired it, on a proper construction of section 38-385, the refiner’s supply of gold to the dealers was the ‘first supply of that precious metal after its refining by … the supplier’. Therefore, they were regarded as GST-free supplies, and subject to the operation of Division 165 of the GST Act, the taxpayer was entitled to claim the input tax credits of approximately $122 million in respect of its acquisitions of scrap gold from the suppliers.

The issue of the possible application of the GST anti-avoidance provisions was remitted back to the AAT.

Appeals

The Commissioner has appealed the following case to the Full Federal Court:

The taxpayer has appealed the following case to the Federal Court:

Legislation

Economic Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 (Cth) – JobMaker Hiring Credit Bill receives Royal Assent

The Bill that facilitates the JobMaker Hiring Credit scheme received Royal Assent on 13 November 2020 and is now law.

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