Birchstone Brief for the week ended 5 February 2021

ATO Updates

COVID-19 and permanent establishments: ATO guidance

The ATO has updated its guidance on whether the presence of employees in Australia, due to the impacts of COVID-19, may create a permanent establishment. The updated guidance provides that the ATO will not apply compliance resources to determine if a taxpayer has a permanent establishment in Australia if:

  • the taxpayer did not otherwise have a permanent establishment in Australia before the effects of COVID-19;
  • the temporary presence of employees in Australia continues to be solely as a result of COVID-19 related travel restrictions;
  • the employees temporarily in Australia will relocate overseas as soon as practicable following the relaxation of international travel restrictions; and
  • the taxpayer has not recognised the employees as creating a permanent establishment or generating Australian source income in Australia for the purpose of the tax laws of another jurisdiction.

This approach is applicable until 30 June 2021.

COVID-19 and FBT car parking benefits: ATO guidance

The ATO has updated its guidance on circumstances in which, because of COVID-19, employers will not be considered to have provided car parking fringe benefits.  This includes when:

  • the work car park is closed because of COVID-19;
  • all of the commercial parking stations within a 1km radius of the business premises are closed on a particular day due to COVID-19; or
  • on 1 April 2020, the lowest fee charged by all of the commercial parking stations within a one kilometre radius of your business premises for all-day parking was less than $9.15.

Decision Impact Statement on FCT v Boggiato [2020] FCA 1139 – Promoters of R&D exploitation scheme

The ATO has issued a decision impact statement on the decision handed down in FCT v Boggiato [2020] FCA 1139. In this case, the Federal Court of Australia held that a chartered accountant and his associated companies were promoters of tax exploitation schemes for promoting refundable Research and Development Tax Incentive offsets when these claims were not reasonably arguable. It was also held that the unlimited time period for the Commissioner to commence proceedings for a ‘scheme involving tax evasion’ could not apply to a scheme that was not implemented.

The ATO’s decision impact statement states that ‘the decision of the Court confirms that the promoter penalty laws can apply to promoters of bespoke arrangements for individual clients’. The ATO also stated that they are leaving open whether to re-test the point on the unlimited period to commence proceedings for an unimplemented scheme to an appropriate future case.

Addendum to Excise Ruling ER 2012/1: Meaning of ‘manufactured or produced’

The ATO has issued an Addendum to Excise Ruling ER 2012/1, which deals with the meaning of the expression ‘manufactured or produced’ for the purposes of the Excise Acts.

Cases

CUB Australia Holding Pty Ltd v FCT [2021] FCA 43 – Validity of section 353-10 notice

The Federal Court has ruled that a section 353-10 notice issued by the ATO requiring the taxpayer to provide information was valid. In 2018, the ATO issued a section 353-10 notice requiring the taxpayer to produce certain documents. The taxpayer refused to produce some of the documents on the grounds of legal professional privilege. A further section 353-10 notice was issued in 2020 requiring the taxpayer to provide information on the documents for which privilege was claimed, including the titles of the documents and the names of the authors. The taxpayer argued the 2020 notice was not valid.

The Federal Court rejected the taxpayer’s argument that the 2020 notice was not authorised by section 353-10, holding that it was valid because (i) the purpose of the 2020 notice, being to obtain information necessary to assess the taxpayer’s privilege claim, was a valid purpose and (ii) the information would assist the ATO to determine whether to accept or challenge the privilege claim, which could lead to production of the documents.

Separately, CUB also contended that the titles of the documents were themselves privileged. That issue is yet to be determined.

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