Dan’s Deliberations
We have a new section to the Birchstone Brief this week – Dan’s Deliberations – insights from our Founding Director, Daniel Taborsky, on one of the developments contained in the Brief. We hope you enjoy.
The decision of the Full Federal Court in FCT v Apted [2021] FCAFC 45 is an important one for taxpayers that have been denied eligibility to JobKeeper or the Cash Flow Boost under the ‘integrity rules’ which required the taxpayer (i) to have had an ABN on 12 March 2020 and (ii) to have notified the ATO on or before 12 March 2020 of a taxable supply or assessable income during the specified periods.
The Full Federal Court held that the requirement for the taxpayer to have had an ABN on 12 March 2020 was a point-in-time test (i.e. if you looked at the Australian Business Register on 12
March 2020 it would have shown that the taxpayer had an ABN), and this requirement could not be satisfied subsequently by obtaining an ABN with an effective date prior to 12 March 2020. However, it is the Court’s comments on the Commissioner’s discretion to extend the date to have an ABN (or to notify the ATO of a taxable supply or assessable income) that have broad application.
The ATO’s view, relying on statements in the explanatory material, has been that its discretion to extend the 12 March 2020 date should only be exercised in limited circumstances. However, the text of the Rules contains no such limitation. The Rules state the taxpayer must have “had an Australian business number (ABN) on 12 March 2020 (or a later time allowed by the Commissioner)”. The discretion is expressed broadly with no limitations.
Reliance on explanatory material to interpret legislation must be done with caution. The primary purpose is to interpret the legislation, and that process starts and ends with the statutory text. As Logan J put it, the explanatory statement was, in this case, of no assistance:
For completeness, I should add that I have gained no assistance from the Explanatory Statement issued in respect of the CERP Rules. Indeed, that document contains views at variance with the text of the CERP Rules. It is neither necessary nor desirable to critique the Explanatory Statement, because the judicial function is to give primacy to the text adopted by the Treasurer in the CERP Rules.
The decision has broad application to taxpayers that have been denied eligibility to JobKeeper or the Cash Flow Boost on the basis that they did not meet the 12 March 2020 requirements. If the Commissioner has refused to exercise his discretion to provide further time to meet the requirements, now is the time to review your client’s claims.
ATO Update
Matters Under Consultation
The ATO has updated its Matters Under Consultation to include the following matters:
- Research and Development Tax Incentive for Software activities;
- Identity theft and fraud experience; and
- Potential concerns/risks for loss carry back and temporary full expensing measures.
Class Rulings
The ATO has issued the following class rulings:
- CR 2021/23 – EML Payment Solutions Limited – use of a living expenses card facility to acquire a stored value prepaid card;
- CR 2021/24 – Uber Australia Pty Ltd – promotions received by employees under the Uber Rewards loyalty program and Uber for Business platform; and
- CR 2021/25 – Blossomvale Holdings Ltd – return of capital.
Product Rulings
The ATO has issued Product Ruling PR 2021/1 which sets out the income tax consequences of an investment in the Challenger Guaranteed Annuity (Short Term).
Cases
FCT v Auctus Resources Pty Ltd [2021] FCAFC 39 – Commissioner able to rely on power to recover R&D offset
The Commissioner has successfully appealed a decision of the Federal Court in FCT v Auctus Resources Pty Ltd [2021] FCAFC 39.
The issue at first instance and on appeal was whether the Commissioner could rely on the power contained in section 8AAZN(3) of the Taxation Administration Act 1953 (Cth) (TAA), which deals with administrative overpayments, to recover refundable R&D Tax Offsets that were paid to the taxpayer.
It was common ground in the litigation that:
- the taxpayer had self-assessed whether its activities were capable of being registered as R&D activities;
- the taxpayer, on proper construction of the law, was not entitled to the R&D tax offset and the subsequent refund that it received; and
- the Commissioner’s assessment power in s 166 of the TAA did not include the power to assess tax offset refunds in the year ended 30 June 2013 (this power has since been added to s 166).
The primary judge at first instance concluded that the payment of the tax offset refund to the taxpayer was not “paid … by mistake” within the meaning of s 8AAZN(3) of the TAA. The primary judge found that the mistake referred to s 8AAZN(3) must have been one made by or imputed to the Commissioner and that no mistake had been made by the Commissioner as the payment was made automatically under the self-assessment regime.
On appeal, Justice Thawley (with McKerracher and Davies JJ agreeing) found that:
- the refund was “paid by mistake” at the time the refund was paid; and
- even if the refund was not “paid by mistake” at the time the refund was made, the taxpayer was retrospectively taken never to have been entitled to the refund and the refund was one “paid to a person by mistake” as soon as Innovation and Science Australia found that the taxpayer’s activities were not R&D activities.
Justice Thawley concluded that the text of s 8AAZN(3) should not be construed more narrowly that the ordinary meaning of the words of the provision.
Justice Thawley also found that the power contained in s 8AAZN(3) of the TAA could not be used in circumstances equivalent to the case from the year ended 30 June 2014 onwards (as the new assessment power in s 166 and the new section 172A brought tax offset refunds generally into the assessment process).
FCT v Apted [2021] FCAFC 45 – Extended date of ABN registration for JobKeeper applicant approved
The Full Federal Court has upheld a decision of the AAT to exercise its ‘later time’ discretion to extend the date by which a JobKeeper applicant was required to have an ABN (summarised in the Birchstone Brief for the week ended 8 January 2021).
The taxpayer was a sole trader who, when he retired in August 2018, cancelled his GST registration and ABN. The taxpayer commenced business again 12 months later without registering for GST or an ABN. After the taxpayer was denied the JobKeeper payments in April 2020 due to the lack of an ABN, the Commissioner of the Australian Business Register reactivated the taxpayer’s ABN – backdated to 1 July 2019. The AAT determined that the taxpayer’s backdated ABN registration satisfied the requirement of having an active ABN as at 12 March 2020. The AAT also held that the discretion under section 11(6) of the Coronvarius Economic Response Package (Payments and Benefits) Rules 2020 could be exercised to extend past 12 March 2020 the date by which the taxpayer was required to have an ABN.
The Full Federal Court disagreed with the AAT on the first point, ruling that the backdating of the ABN did not satisfy the requirement for the taxpayer to have an active ABN as at 12 March 2020. However, the Court ruled that the AAT was correct to exercise the discretion to allow the taxpayer more time to register for his ABN. Therefore, the taxpayer satisfied the ABN registration requirement and was entitled to receive the JobKeeker payments.
Appeals
The Chief Commissioner of State Revenue has made a special leave application to the High Court of Australia from the decision in Chief Commissioner of State Revenue (NSW) v Benidorm Pty Ltd [2020] NSWCA 285 (“declaration of trust” not dutiable – summarised in the Birchstone Brief for the week ended 29 January 2021).
Legislation
Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020 – Closure of eligible rollover funds
The Bill which facilitates the closure of eligible rollover funds that have a balance of less than $6,000 has received assent and is now law.
Land Tax Regulation 2021 (Qld) – Land tax regulations remade
The Land Tax Regulation 2021 (Qld) has been introduced to remake the Land Tax Regulation 2010 (Qld), by prescribing:
- primary productivities activities for the primary production exemption;
- how to make an application for a clearance certificate; and
- the period and documents required for taxpayers electing to pay land tax by instalments.
