Birchstone Brief for the week ended 30 April 2021

Dan’s Deliberations

The ATO has released its decision impact statement following the Full Federal Court decision in FCT v Apted, and updated practice statement PS LA 2020/1, after deciding it will not appeal the decision.

Apted dealt with the ATO’s discretion to provide taxpayers with further time to meet the ’12 March’ requirements for JobKeeper and the Cash Flow Boost (i.e. to hold an ABN and to have provided notice of income or supplies in the relevant periods). The Court decided that the ATO’s approach of only providing further time in “limited circumstances” as set out in the explanatory statement was wrong. The discretion is expressed broadly with no limitations.

The updated PS LA 2020/1 provides further guidance on the ATO’s new approach. The ATO’s focus when deciding whether to exercise its discretion will now be on whether there is evidence that an ‘active business’ was being carried on. Where there is evidence of an active business, and there is a reasonable explanation why the business did not hold an ABN or had not reported supplies or income to the ATO by 12 March 2020, the discretion will generally be granted. The updated PS LA 2020/1 has a new list of factors the ATO will consider when deciding whether or not to exercise its discretion. There are also some changed and new examples. Overall, the ATO’s stated new approach is fair and reasonable.

The ATO will be revisiting prior decisions to deny JobKeeper and the Cash Flow Boost where they consider the outcome may have been different if the Court’s reasoning was applied. Where the ATO previously decided not to exercise their discretion to allow further time to meet the 12 March requirements, the ATO will review this automatically and they state there is no need to contact them.

However, if the ATO has not previously made a decision on it’s discretion (either because the taxpayer never applied on the basis they didn’t think they would qualify or because the ATO never considered exercising their discretion), and the taxpayer thinks they should now qualify based on the ATO’s new guidance in PS LA 2020/1, they should seek advice about having their circumstances reviewed by the ATO.

ATO Update

Decision Impact Statement released: ‘Later time’ discretion for ABN registration

The ATO has issued a decision impact statement on the Full Federal Court’s decision in FCT v Apted [2021] FCAFC 45 (covered in the Birchstone Brief for the week ended 26 March). In that case, the Full Federal Court upheld a decision of the AAT to exercise its ‘later discretion’ to extend the date by which a JobKeeper applicant was required to have an ABN. The decision impact statement states that the Commissioner accepts the Court’s view that the ‘later time’ discretion is not restricted to the limited circumstances described in the extrinsic materials to the rules. It also states that, consistent with the Court’s decision, it is relevant to the exercise of discretion whether the Commissioner has been provided with evidence that an active business was being carried on prior to 12 March 2020.

Practice Statement Law Administration PS LA 2020/1 – Commissioner’s discretion to allow further time

In response to the decision handed down in Apted v FCT [2021] FCAFC 45, the ATO has issued a Practice Statement which provides guidance on when the Commissioner will exercise the discretion to allow further time for an entity to hold an ABN or provide notice of assessable income or supplies for the purposes of qualifying for the cash flow boost or the JobKeeper payment. The Practice Statement sets out the factors that the Commissioner will consider and provides examples to clarify the circumstances under which the Commissioner will exercise the discretion, including:

  • a business operating an enterprise without an ABN;
  • a business with no supplies in a tax period that ends before 12 March 2020; and
  • a new business not registered for GST.

ATO guidance: Tax governance for top 500 privately owned groups

The ATO has released practical guidance on how they assess tax governance for the Top 500 privately owned groups, which relies upon ‘seven principles of effective tax governance’.

ATO consultation paper: Strengthening client verification

The ATO has released a consultation paper seeking feedback on proposed guidelines for client verification within tax and superannuation practices.


The ATO has issued the following rulings:

State Taxes

Qld: Land tax exemption for primary production land

The Queensland Office of State Revenue has issued Public Ruling LTA053.1.3 which sets out the Commissioner’s interpretation of section 53 of the Land Tax Act 2010 in relation to the land tax exemption for land used solely for the business of primary production. The ruling sets out the Commissioner’s views on the requirements of section 53 (and the related Land Tax Regulations), including:

  • whether land is ‘used’;
  • the meaning of the term, ‘used solely’;
  • whether a business is being ‘conducted’; and
  • evidence that the land is being used solely for the prescribed activities of a primary production business.


Coal of Queensland Pty Ltd v Innovation and Science Australia [2021] FCAFC 54 – Mining activities deemed not to be core R&D activities

The Full Federal Court has upheld the AAT’s decision that a taxpayer’s coal mining activities were not core or supporting R&D activities.

The taxpayer company held an exploration permit for coal covering 120 square kilometres in the Bowen basin area in Queensland, known as the ‘Wilton Project’. The Wilton Project had not been commercially viable due to the high levels of ash content and banded coal seams. In 2011, the taxpayer commenced a series of activities to investigate the nature and economic viability of mining part of the Wilton Project, including surveys, drilling, and expert analysis. In 2013, Innovation and Science Australia (ISA) rejected the taxpayer’s application for registration of their activities as core or supporting R&D activities. The AAT affirmed the ISA’s decision, citing that the taxpayer’s activities were generic exploration activities that weren’t conducted for generating new knowledge and that the taxpayer hadn’t proceeded from hypothesis to experiment, observe and form logical conclusions.

The issues in dispute included whether:

  • the AAT made findings that were not open on the evidence and applied a wrong legal standard in considering whether the activities were of a kind whose outcome cannot be known or determined in advance;
  • the AAT had failed to give adequate reasons and failed to make findings on material questions of fact; and
  • the AAT had erred by failing to consider a submission that the activities were supporting R&D activities.

The Full Federal Court unanimously dismissed the taxpayer’s appeal. The Court supported the AAT’s finding that the activities did not generate any new knowledge, as this was backed up by evidence. Further, the Court held that the AAT had not misapplied the relevant provisions by focusing on the 2012 year as opposed to the whole project, because it had still considered the later years. Additionally, the AAT had not failed to consider the argument that the activities were supporting R&D activities, rather, its approach reflected the way the arguments were presented.


Your Future, Your Super – Draft regulations released

The Government has issued exposure draft regulations that support the changes being introduced by the Treasury Laws Amendment (Your Future, Your Super) Bill 2021  (covered in the Birchstone Brief for the week ended 19 February 2021). Amongst other things, the draft regulations will:

  • set out the methodology for the annual performance assessments;
  • outline what a ‘stapled fund’ is and the tie-breaker rules for determining an employee’s stapled fund; and
  • provide more detail on the disclosure of portfolio holdings to members.


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