Birchstone Brief for the week ended 23 April 2021

Dan’s Deliberations

The High Court has granted the Commissioner special leave to appeal against the decision of the Full Federal Court in Carter v FCT [2020] FCAFC 150Carter considers when a disclaimer of trust income by a default beneficiary will be effective so that the beneficiary is not taxed on that income.

There is a general legal principle that a person cannot be compelled to accept a gift. A disclaimer is the legal mechanism where a beneficiary can reject a trust distribution made to them. The leading Australian case on disclaimers, prior to Carter, was FCT v Ramsden [2005] FCAFC 39 where the Full Federal Court held that a beneficiary could disclaim their interest in the income of a trust, as long as that disclaimer was made within a reasonable time of the beneficiary becoming aware of the distribution. If an effective disclaimer is made, it operates retrospectively so that the beneficiary was never presently entitled to the income of the trust and therefore will not be taxed on it.

From a read of the special leave hearing transcript, the High Court appears interested in considering the fundamental issue, which was decided in Ramsden, of whether a disclaimer can operate retrospectively to prevent a beneficiary from being presently entitled to trust income where, absent the disclaimer, they would have been presently entitled. The answer to that question will have significant implications for the use of disclaimers.

Other questions that the High Court will need to consider, include:

  • What is a reasonable period of time within which a beneficiary must disclaim a trust distribution?
  • And when does that period start running? From the time the beneficiary first finds out about their entitlement? Or from when they first understand the full nature of the distribution (including the tax implications of it)?

ATO Update

Decision Impact Statement released: Business not entitled to cash flow boost

The ATO has issued a Decision Impact Statement on the AAT’s decision in Slatter Building Group Pty Ltd v FCT [2021] AATA 456 (covered in the Birchstone Brief for the week ended 12 March). In that case, the AAT held that the taxpayer company was not entitled to the first cash flow boost because it had not made a taxable supply in a period that ended before 12 March 2020, as its first business activity statement was lodged for the quarter ending 31 March. The Decision Impact Statement outlines that the AAT’s decision is consistent with the Commissioner’s interpretation, and that the same interpretation would apply to the identical requirement in the JobKeeper provisions.

Practice Statement Law Administration PS LA 2021/2 – Commissioner’s discretion to retain refunds

The ATO has issued PS LA 2021/2 which sets out when the Commissioner will exercise the discretion  to retain a refund where a taxpayer has an outstanding notification under a taxation law that may affect the amount of the refund. Amongst other things, the Practice Statement sets out the Commissioner will consider exercising the discretion to retain a refund when there are reasonable grounds to believe that the taxpayer is engaged in phoenix behaviour or other high-risk behaviour.

JobKeeper overpayments: ATO guidance

The ATO has released updated guidance on how it will manage JobKeeper overpayments, including when a JobKeeper overpayment does not need to be repaid. The updated guidance sets out that businesses that have repaid or are repaying JobKeeper overpayments do not need to include these amounts as assessable income. Further, an overpayment may not need to be repaid if an ‘honest mistake’ has been made.

Draft Practical Compliance Guideline PCG 2021/D3 – Imported hybrid mismatch rules

The Commissioner has released Draft PCG 2021/D3 which sets out the ATO’s assessment of risk in connection with the imported hybrid mismatch rules. The Draft PCG outlines the Commissioner’s views on whether a taxpayer has undertaken reasonable enquiries in relation to non-structured arrangements, including the level of supporting information required. The Draft PCG also contains a risk assessment framework in relation to international related-party dealings.

Draft Goods and Services Tax Determination GSTD 2021/D1 – Adjustable beds, pressure management mattresses and overlays

The Commissioner has released Draft GST Determination GSTD 2021/D which sets out when the supply of an adjustable bed, pressure management overlay or spare part is GST-free.

Class Rulings

The ATO has issued the following class rulings:

  • CR 2021/28 – RXP Services Limited – Scheme of arrangement and special dividend; and
  • CR 2021/29 – Commonwealth Bank of Australia – CommBank PERLS XIII Capital Notes.

State Taxes

NSW: Power of attorney declaring information as true and correct

Revenue NSW has released Commissioner’s Practice Note CPN 008  which sets out the Commissioner’s view on when a person under a power of attorney can declare that the information provided in an approved form is true and correct. The Practice Note outlines that a power of attorney can only make such a declaration when an individual is under a legal disability.



The taxpayer has made a special leave application to the High Court of Australia from the decision in FCT v Auctus Resources Pty Ltd [2021] FCAFC 39 (Commissioner able to rely on section 8AAZN to recover R&D offset – covered in the Birchstone Brief for the week ended 26 March).


JobMaker Hiring Credit Reporting Obligations Amendment Instrument 2021 – JobMaker reporting obligations

The Commissioner has registered a legislative instrument to amend the reporting obligations for the JobMaker Hiring Credit scheme.


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