Birchstone Brief for the week ended 4 December 2020

ATO Updates

Taxpayer Alert released: arrangements providing imputation benefits where economic exposure is offset

The ATO has released Taxpayer Alert TA 2020/5, detailing concerns about arrangements that are intended to provide imputation benefits to taxpayers where the taxpayer’s economic exposure to the dividend and capital performance of the share is offset through the use of derivative instruments. The ATO expresses concern that these arrangements result in taxpayers ‘inappropriately accessing the benefits of franking credits’, which should only be available to the true economic owner of the shares.

Draft legislative instrument released: Data and payment standard for SMSF rollovers

The ATO has issued a draft legislative instrument, SPR 2020/D3, that requires trustees of APRA-regulated funds and SMSFs to comply with the Superannuation Data and Payment Standards 2012 in relation to rollovers and transfers that are requested on or after 31 March 2021. Trustees will be required to send and receive rollover information and payments using the SuperStream framework.

State Taxes

Queensland Budget handed down: No changes to payroll tax, land tax or duties announced

The Queensland Government handed down its 2020-21 Budget which did not include any changes to payroll tax, land tax or duties. 

Other News

Government response to the Final Report of the Tax Practitioners Board

The Government has released the Final Report into the independent review of the Tax Practitioners Board (TPB) and its response to the Final Report. The Government supports 20 of the 28 recommendations made in the Report. The recommendations most notably include that the:

  • TPB and the ATO should maintain and publish a plan outlining how they will work together, encouraging early engagement and strengthening information sharing;
  • TPB and the ATO should be legally obliged to co-operate, share information and notify the other where breaches have been detected; and
  • TPB and ASIC should be legally obliged to co-operate, share information and notify the other where breaches have been detected.

The TPB has since announced that there will be further consultation on a range of possible reforms.

Film offset rates and threshold changed

The Minister for Communications announced there will be changes to the Division 376 tax offset arrangements for Australian film production expenditure on 30 September 2020.

Cases

Re Dion Investments Pty Ltd [2020] NSWSC 1661Surcharge land tax (NSW): Court allows trustee to surrender powers that may benefit a ‘foreign person’

The trustee of a discretionary trust holding NSW residential land sought judicial advice on various issues concerning its powers under the trust deed. The class of beneficiaries under the trust deed included beneficiaries which could satisfy the definition of a ‘foreign person’. Surcharge land tax is imposed unless the trust deed excludes a foreign person from being a beneficiary of the trust, with trustees having up until 31 December to amend their trust deeds to avoid incurring this surcharge

The trustee did not have the power to vary the trust deed to exclude foreign beneficiaries or surrender the power to appoint income and capital to foreign beneficiaries. As a result, the trustee would have been liable for surcharge land tax on the value of the NSW residential property held on trust. However, the NSW Supreme Court granted power to the trustee under section 81 of the Trustee Act 1925 (NSW) to surrender and release trusts or powers such that any beneficiary of the trust is not a beneficiary while they are a ‘foreign person’. Consequently, the trustee was not liable for surcharge land tax.

DCT v Wang [2020] FCA 1711 – Freezing orders issued against taxpayers 

The Federal Court granted freezing orders against a married couple who collectively have approximately $63.5 million of outstanding tax liabilities. The Court was satisfied there was a real risk of dissipation of the taxpayer’s assets in the absence of the order as the taxpayers significantly underreported their income for the previous 12 income years, they had means to dissipate their assets and they had significant financial connections outside of Australia, particularly in China.

Kidd v FCT [2020] AATA 4801 – Tax debt of $5,600 not waived: No serious hardship

In this case, the AAT was not satisfied that the taxpayer would suffer serious hardship if he was required to pay the relevant tax debt. The taxpayer attempted to exclude family tax benefit and foster payments received by his partner, which when considered resulted in a $1,700 fortnightly surplus after payment of household expenses. However, the AAT followed Federal Court authority and determined that those payments should be taken into account.

As such, the AAT found that the surplus would allow the taxpayer to enter into a payment arrangement with the ATO which would see his tax debt repaid in a reasonable time without impacting upon his ability to provide reasonable accommodation, food, clothing, medical supplies and education for himself and his family.

Appeals

The taxpayers have appealed to the Full Federal Court against the decision in Advanced Holdings Pty Ltd atf The Demian Trust v FCT [2020] FCA 1479 (summarised in the Birchtstone Brief for the week ended 16 October 2020).

Legislation

Treasury Laws Amendment (2020 Measures No 6) Bill 2020 (Cth) – Temporary full expensing: Eligibility criteria to be expanded

The Government introduced a Bill into the House of Representatives which, amongst other things, proposes to expand the eligibility criteria for businesses to access the temporary full expensing measure. A description of the proposed amendments in relation to the temporary full expensing measure can be accessed in last week’s edition of the Birchstone Brief.

Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2019 (Cth) – Extend federal jurisdiction to WA for family law superannuation splitting and bankruptcy matters

The Bill that proposes to give effect to a referral of power from WA to the Commonwealth in respect of superannuation splitting in family law proceedings for separating de facto couples in WA passed the Senate on Thursday 3 December 2020 with no amendments. Additionally, the Bill will extend federal bankruptcy jurisdiction to the Family Court of WA to hear bankruptcy proceedings concurrently with family law proceedings, where appropriate. 

Currency (Restrictions on the Use of Cash) Bill 2019 (Cth) –  Senate discharged Bill restricting cash payments over $10,000

The Bill that proposed to make it a criminal offence for entities to make or accept cash payments of $10,000 or more has been discharged by the Senate. The Government has not provided any reasons for why it will not proceed with it.

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