Birchstone Brief for the week ended 23 July 2021

Monique’s Musings

There are a lot of factors to consider when drafting consent orders for Family Law property settlements – so here’s another. 

The marriage or relationship breakdown rollover under Subdivision 126-A of the Income Tax Assessment Act 1997 (Cth) generally enables the transferor to disregard the capital gain or loss that would otherwise arise from the change of ownership of an asset because of a Court order or binding financial agreement made under the Family Law Act 1975 (Cth). 

One of the requirements for the rollover to apply is that the asset must be transferred to the spouse personally. An issue may arise if the orders contain, what is commonly referred to as, an “and/or nominees” clause because the transferee then has the ability to direct the asset be transferred to an entity that he or she controls. The rollover will not apply if the transferee does not receive the asset directly. 

A case that illustrates this point is Ellison v Sandini Pty Ltd [2018] FCAFC 44. The case involved a transfer of shares from a company controlled by Mr Ellison (Company). The Court orders (by consent) required the Company to transfer the shares to Ms Ellison but the parties subsequently agreed to transfer the shares to Ms Ellison’s family trust.  As such, the roll-over did not apply and the Commissioner assessed Mr Ellison on the capital gain made on transferring the shares.

In addition to ensuring that the consent orders do not provide for a transfer to a party other than a spouse (where it is intended for the roll-over to apply), it is also important to ensure that the parties to the orders and any contemplated transfers are identified in the correct capacity. While that may seem obvious in hindsight, these errors can inadvertently occur as we saw in this case where the consent orders described the Company as acting as trustee for the wrong trust. 

Our next webinar on “Tax Tips, Tricks and Traps for Family Law Property Settlements” will discuss a number of tax issues to give family lawyers, accountants and financial advisors involved in the process the knowledge they need to identify tax issues that can derail a property settlement. The webinar will be run on Wednesday 28 July at 11am AWST and you can find out more details and register for free here.

ATO Update

Class Rulings

The ATO has issued the following class rulings:

  • CR 2021/45 – Saracen Mineral Holdings Limited – Tax-exempt share plan shares disposed under scheme of arrangement;
  • CR 2021/46 – Australia and New Zealand Banking Group Limited – ANZ Capital Notes 6;
  • CR 2021/47 – Asaleo Care Limited – Scheme of arrangement and special dividend; and
  • CR 2021/48 – Dexus – Scrip for scrip roll-over.

State Taxes

NSW: Payroll tax relief 

The NSW Government has announced that businesses will receive further payroll tax relief to ease the financial burden of COVID-19 lockdowns. The payroll tax relief measure include:

  • deferred lodgment and payment 2020-21 annual reconciliations until 7 October 2021;
  • interest free payment plans for payroll tax customers that defer their payments; and
  • reductions in payroll tax for eligible businesses that have experienced a 30% decline in turnover.


Lotus Oaks Pty Ltd as trustee for the Bozzo Family Trust v Commissioner of State Revenue [2021] VSC 388 – Primary production exemption

The Victorian Supreme Court has upheld land tax assessments made by the Commissioner of State Revenue on the basis that the taxpayer (a trust) did not qualify for the primary production exemption.

For a trust to qualify for the primary production exemption under the since amended section 67 of the Land Tax Act 2005 (Vic), it required:

  • the principal business of the trust to be primary production of the type carried on on the land; and
  • a beneficiary of the trust be normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.

The land in question was used by the Trust to cultivate crops as well as for residential property development. In 2016, the profit from the sale of property was $87,820, and in 2017 this amount was $3,050,637. Despite there being substantial primary production activities undertaken, the Court held that the property development was the most important business and the principal business of the trust was not primary production.

The Court also held that the individual who regularly visited the land and made major decisions was not ‘normally engaged in a substantially full-time capacity in the business of primary production’. Although the specified beneficiary did make regular visits, he was involved with 20 other companies that participated in primary production and property development. For this reason, the Court held that the individual could not demonstrate that his participation was for a ‘considerable part’ of his time, and this condition could not be satisfied.

Razzy Australia Pty Ltd & Anor v Commissioner of State Revenue [2021] VSC 409 – Interest payable on refund of stamp duty

The Victorian Supreme Court has held that interest payable on a refund of stamp duty should be paid at the maximum rate of 10% under the Supreme Court Act 1986 (Vic), rather than at a market value rate under the Taxation Administration Act 1997 (Vic). In earlier proceedings, the Victorian Supreme Court held that the taxpayer’s notional acquisition of a significant interest in a landholder trust was exempt from duty and ordered the Commissioner of State Revenue to refund stamp duty (first covered in the Birchstone Brief for the week ended 16 April 2021).


Determination made: Victorian COVID-19 business grants

determination has been made to include certain Victorian COVID-19 business grants as eligible programs under section 59-97 of the Income Tax Assessment Act 1997 (Cth), meaning they will be treated as non-assessable non-exempt income.


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