Birchstone Brief for the week ended 19 March 2021

ATO Update

JobKeeper voluntary repayments: ATO worksheet

The ATO has released guidance on the tax consequences for businesses that voluntarily repay JobKeeper payments. The worksheet outlines that JobKeeper payments that are voluntarily repaid must still be included in a business’ assessable income. However, voluntary repayment of JobKeeper payments may be deductible in limited circumstances (e.g. where it is directed at preventing a reduction in business or publicising and promoting the business in the short-term).

Draft effective lives of assets in salt harvesting industry: Draft determination

The ATO has released a draft determination to add a list of effective life determinations for assets used in the salt harvesting industry.

ATO releases FBT rates and thresholds: 2021-2022 

The ATO has released the FBT rates and thresholds for the FBT year commencing on 1 April 2021.

Class Rulings

The ATO has issued Class Ruling CR 2021/22 which sets out the tax consequences for entities who subscribed for and acquired CommBank PERLS XII Capital Notes (PERLS XII) issued by the Commonwealth Bank of Australia (CBA).

State Taxes

NSW: Payroll tax on relevant contracts

Revenue NSW has released Commissioner’s Practice Note CPN 016 which explains the application of the relevant contracts provisions to businesses providing financial services and credit services. The payment of commission or other forms of remuneration by an Australian Financial Services or Australian Credit licensee to their authorised agents may be liable for payroll tax if the contract is a ‘relevant contract’ for the purposes of section 32 of the Payroll Tax Act 2007 (NSW).

Qld: Transfer duty on cancelled agreements

The Queensland Office of State Revenue has published Public Ruling DA 115.1.3 which provides updated guidance on when cancelled agreements will be exempt from transfer duty. The ruling provides that the exemption under section 115(1) of the Duties Act 2001 (Qld) will only apply when the agreement has been ended through cancellation rather than performance, before any of its commercial or practical purposes have been achieved.

Tas: Stamp duty concession

The Tasmanian Government has announced an increase in the threshold from $400,000 to $500,000 for the stamp duty concessions available for Tasmanians buying their first home and pensioners down-sizing.

Cases

Dodson v FCT [2021] AATA 484 – Taxpayer denied SAPTO and Medicare Levy concession

The AAT has affirmed the Commissioner’s decision that a taxpayer was not eligible to receive the Senior and Pensioner Tax Offset (SAPTO) or the associated Medicare Levy concessions.

The taxpayer received a carer payment for care that she provided to her adult son which was exempt from tax because both she and her son were under the pension age. The taxpayer incorrectly included the carer payment twice in her 2019 income tax return at two different labels. As a result, the taxpayer’s assessment included the SAPTO and she received the associated Medicare Levy concession. The taxpayer subsequently amended her income tax return to remove the double-counting of the carer payment, resulting in an amended assessment which disallowed the SAPTO and associated Medicare Levy concession. The Commissioner disallowed the taxpayer’s objection to her amended assessment.

The issue in dispute was whether the amended assessment was wrong because the taxpayer was eligible to receive the SAPTO and associated Medicare Levy concession. The AAT found that the taxpayer was not entitled to receive the SAPTO because her assessable income did not include a social security pension amount, as the carer payments were exempt from tax. Because the taxpayer was not entitled to the SAPTO, she could not access the associated Medicare Levy concession.

Women’s Life Centre Inc v Commissioner of the Australian Charities and Not-for-profits Commission (Taxation) [2021] AATA 500 – Pregnancy counselling service denied public benevolent institution status

The AAT has affirmed a decision of the Commissioner of the Australian Charities and Not-for-profits Commission (ACNC) not to register a charity providing counselling services as a public benevolent institution (PBI).

Women’s Life Centre Inc (WLC) is an organisation that was incorporated to provide counselling services to pregnant women and mothers. Amongst other things, WLC objects were to:

  • provide relief of poverty, suffering, distress, destitution, misfortune [sic] or helplessness for pregnant women and mothers of all sections of the public irrespective of race, colour or creed;
  • to provide counselling for women facing a crisis pregnancy;
  • to provide information about the consequences of abortion; and
  • to provide free pregnancy testing.

In 2017, WLC amended their constitution to list other objectives, including support for women in need during pregnancy and after childbirth; and other related purposes.

In 2018, the ACNC registered WLC as a charity with the purpose of advancing health and the purpose of advancing social or public welfare. Later, WLC sought endorsement as a PBI from the ATO which would exempt it from paying income tax. However, the ACNC declined to register WLC as a PBI. WLC sought review of this decision at the AAT.

The issue in dispute was whether WLC satisfied the definition of a PBI. The AAT held that the WLC was not a PBI as defined by case law for the purposes of the ACNC Act. The AAT found that WLC had not established how the women who used WLC’s services were ‘in need’ and  how the services were directed to those ‘in need’, as opposed to being made available more generally.

Antegra Pty Ltd v Chief Commissioner of State Revenue  [2021] NSWSC 107 – Taxpayer denied low cost accommodation exemption for subdivision

The New South Wales Supreme Court has held that a taxpayer was not entitled to a land tax exemption for low cost accommodation as the land did not include a ‘community or residential community’.

The taxpayer purchased a caravan park which received authority to create 225 community development lots and one community property lot. In December 2011, the taxpayer’s land was registered on the residential parks register. Later, the land was subdivided and manufactured homes were placed on the community development lots, with the purchasers of the manufactured homes entering into lease agreements with the plaintiffs for 99 years. The Commissioner of State Revenue assessed each community development lot as being subject to land tax in the 2016, 2017 and 2018 tax years, and denied the low cost accommodation exemption under section 10Q of the Land Tax Management Act 1956 (NSW).

Land which is or includes a “community or residential community” is entitled to a land tax exemption. Because each lot was either a vacant, or had a single home on it, the ‘community or residential community’ requirement could not be satisfied and the taxpayer was not entitled to the low cost accommodation exemption.

Appeals

The taxpayer has appealed to the Full Federal Court from the decision in Clough Ltd v FCT [2021] FCA 108 (amount paid for cancellation of employee entitlements not deductible – summarised in the Birchstone Brief for the week ended 26 February 2021).

Legislation

Treasury Laws Amendment (2021 Measures No 2) Bill 2021 – Deductible gift recipient endorsement

The Bill which amends the requirements for endorsement as a deductible gift recipient (DGR) has been introduced into Parliament. Schedule 1 of the Bill amends the Income Tax Assessment Act 1997 (Cth) to include charity registration as a precondition for endorsement for all DGR categories. Currently there are 11 DGR categories that do not require the fund, authority or institution to be a registered charity (or be operated by one) to be eligible for DGR endorsement.

Subscribe

Birchstone Brief

Curated for the needs of SME tax professionals. The Birchstone Brief is delivered to your inbox every Monday. It contains all the tax developments you need to know from the previous week, with insights from the team at Birchstone Tax Law. No fluff. It’s the one email you will look forward to receiving.


 

* indicates required