Birchstone Brief for the week ended 8 October 2021

Birchstone Insights

Reimbursement Agreements: Draft Section 100A Taxation Ruling

At recent industry events, ATO officials have provided some insight on the Commissioner’s proposed draft taxation ruling on section 100A reimbursement agreements.

Although the ATO’s ‘Advice under development – trust specific issues‘ page still does not indicate an expected completion date, it is understood that the ruling will be released in early 2022.

Some points of interests in relation to the draft taxation ruling are as follows:

  • it will cover every element of section 100A (as opposed to being limited to what is an ordinary family or commercial dealing);
  • it will include several examples (approximately 10) on the application of section 100A to specific fact patterns; and
  • there will be an accompanying practical compliance guideline which will explain the circumstances in which the ATO will apply compliance resources, including the circumstances where the Commissioner will seek to review years back to 2014/2015 income year (and in some circumstances even earlier) which is when the ATO first published its fact sheet on section 100A.

The ATO accepts that merely because distributions were made in a way that optimised the family’s tax position does not mean that section 100A applies. However, the existence of some additional risk factors may mean (according to the ATO) that it does. Those factors include where:

  1. beneficiaries are unlikely to ever receive their entitlement;
  2. beneficiaries don’t know they have an entitlement; and
  3. funds representing the beneficiary’s entitlement have been used in a way that would make it difficult for the trustee to pay their entitlement if it was called on.

Section 100A has been a sleeper provision for many years, but we expect to see (and already have seen to some extent) increased activity from the ATO once the ruling is released. Now is the time to be engaging with your clients to determine which ones have section 100A risks and putting in place a plan to deal with the ATO’s ruling once it is released. It goes without saying, if you have any questions or would like to discuss any client matters, please get in touch with one of the Birchstone team.

ATO Update

ATO Guidance: Treatment of military invalidity benefits

The ATO has released guidance on the remediation program for historical income tax assessments and super reporting for individuals impacted by the decision in Commissioner of Taxation v Douglas [2020] FCAFC 2020 (first covered in the Birchstone Brief for the week ended 11 December 2020). In that case,  two out of three taxpayers were entitled to concessional tax treatment in relation to invalidity benefits paid to them as former Australian Defence Force members.

Taxpayers are affected by the decision if they received invalidity benefits paid under pensions provided under the Defence Force Retirement and Death Benefits Scheme and the Military Superannuation and Benefits Scheme which started on or after 20 September 2007.

ATO Notice: Data matching program

The Commissioner has issued a notice which sets out that the ATO will acquire government payments data from government entities who administer government programs for 2017-18 to 2022-23 financial years.

TR 2021/D6 – Games and sports exemption

The ATO has released a Draft Taxation Ruling which refreshes the views expressed in TR 97/22W on whether societies, associations or clubs are exempt from income tax under table item 9.1(c) of section 50-45 of the Income Tax Assessment Act 1997 (Cth).

Product Ruling

The ATO has issued Product Ruling PR 2021/12 – Challenger Lifetime Annuity (Liquid Lifetime).

State Taxes

ACT Budget 2021-22: Tax measures

The ACT Budget for 2021-22 has been delivered, with the following tax-related measures included:

  • a reduction in the conveyance duty rates; and
  • payroll tax exemptions for apprentices and trainees.

Payroll tax (Tas): Tourism and hospitality

The Tasmanian Government has made an order that payroll tax be waived for 6 months from 1 July 2021 for eligible employees in the tourism and hospitality industry.

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