Birchstone Brief for the week ended 11 December 2020

ATO Updates

Taxation Ruling released: Natural Resource Income – application of section 6CA of the Income Tax Assessment Act 1936 (Cth)

The ATO has released TR 2020/5 relating to the application of section 6CA of the Income Tax Assessment Act 1936 (Cth), which is a provision that deems ‘natural resources income’ as being attributable to sources in Australia. Natural resources income is income calculated by reference to the value or quantity of natural resources produced and/or recovered in Australia. The Ruling applies to income derived by a non-resident and sets out when a payment is calculated by reference to the value or quantity of natural resources produced in Australia, as well as related issues with Australia’s tax treaties and withholding obligations. 

Updated transfer pricing guidance released: interest-free loans between related parties

The ATO has updated PCG 2017/4 relating to issues with cross-border related party financing arrangements. The ATO has updated the PCG by inserting Schedule 3 into the Guidelines, which concerns interest-free loans between related parties. Schedule 3 will apply from 1 January 2020 onwards to new and existing loans.

ATO releases GIC and SIC rates: 1 January 2021 – 31 March 2021

The ATO has released the shortfall interest charge (SIC) and general interest charge (GIC) rates for 1 January 2021 to 31 March 2021.

State Taxes

Landholder provisions (Vic): Updated revenue ruling

The Victorian State Revenue Office has issued an updated revenue ruling detailing the type of valuation evidence, and instances in which such evidence is required, for determining whether a company or unit trust scheme is a landholder for the purposes of calculating duty on a relevant acquisition. The updated revenue ruling is a response to the amended definition of ‘land holding’ contained within the Duties Act 2000 (Vic), which now incorporates an interest in fixtures held separately from land, and land taken to be beneficially owned due to an economic entitlement held in relation to the relevant land.

Cases

Commissioner of Taxation v Douglas [2020] FCAFC 220 – Tax treatment of ADF invalidity payments

The Full Federal Court held that taxpayers in two out of the three test cases were entitled to concessional tax treatment in relation to invalidity benefits paid to them as former Australian Defence Force members. The ATO lost its appeals in relation to the taxation treatment of arrears of invalidity pay owed to Mr Douglas and invalidity pension payments to Mr Walker, which were to be assessed as superannuation lump sums (rather than superannuation income stream benefits) and therefore, subject to concessional tax treatment. On the other hand, Mr Burns who also received the invalidity pension payments was not entitled to concessional tax treatment on the basis that the invalidity pensions were not a pension for the purposes of the SIS Act, and satisfied the definition of ‘superannuation income stream’. 

Appeals

The Commissioner of Taxation has made a special leave application to the High Court of Australia from the decision in ACN 154 520 199 Pty Ltd (in liquidation) v FCT [2020] FCAFC 190 (Gold refiner entitled to input tax credits worth $122m – summarised in the Birchstone Brief for the week ended 20 November).

Legislation

JobMaker Hiring Credit Reporting Obligations Instrument 2020 (Cth) – JobMaker Reporting Obligations Instrument released

The Government has registered the JobMaker Reporting Obligations Instrument which outlines the information that participating employers must supply to the ATO, how the employers must report this information and the timeframes for reporting. The instrument took effect on 4 December 2020.

Treasury Laws Amendment (2020 Measures No 5) Bill 2020 (Cth) – Non-assessable non-exempt grant programs and New Zealand KiwiSaver schemes

This Bill amends taxation laws to treat eligible state and territory small business grants relating to the coronavirus recovery as NANE income. Further, the Bill permits the Commissioner of Taxation to make payments of a New Zealand resident’s unclaimed superannuation directly to New Zealand KiwiSaver schemes. Currently, the payments have to first be transferred to an Australian complying superannuation fund. The Bill has passed Parliament and awaits assent.

Treasury Laws Amendment (2020 Measures No 6) Bill 2020 (Cth) – Temporary full expensing measures

The Bill implementing changes to the temporary full expensing measures has been passed by the Parliament and awaits assent. A description of the proposed amendments in relation to the temporary full expensing measure can be accessed in the Birchstone Brief for the week ended 27 Nov

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