Birchstone Brief for the week ended 15 October 2021

ATO Update

ATO Guidance: Working from home deductions

The ATO has extended the application of PCG 2020/3 until 30 June 2022, which will allow employees working from home as a result of the COVID-19 pandemic to use the ‘shortcut rate’ to calculate their additional running expenses.

ATO Guidance: Meaning of ‘connected with’

The ATO has released the following guidance on determining whether certain types of entities are ‘connected with’ another entity for the purposes of the aggregated turnover provisions in Subdivision 328-C of the Income Tax Assessment Act 1997 (Cth):

  • TD 2021/D2 – Partnerships, foreign hybrids and non-entity joint ventures; and
  • TD 2021/D3 – Corporate limited partnerships.

Decision Impact Statement: Auctus

The Commissioner has released a Decision Impact Statement on the decision in Commissioner of Taxation v Auctus Resources Pty Ltd [2021] FCAFC 39 (first covered in the Birchstone Brief for the week ended 26 March 2021). In that case, it was held that the Commissioner could rely on the power contained in section 8AAZN(3) of the Taxation Administration Act 1953 (Cth) (regarding administrative overpayments) to recover refundable R&D tax offsets that were paid to the taxpayer. The Decision Impact Statement states that the decision ‘…confirms the Commissioner’s view that section 8AAZN applies to all payments which a taxpayer is not entitled’.

Class Rulings

The ATO has issued the following class rulings:

  • CR 2021/67 – Primewest (HICT) Pty Ltd – Return of capital;
  • CR 2021/68 – FAR Ltd – Return of capital; and
  • CR 2021/69 – Latitude Group Holdings Limited – Latitude Capital Notes.

TD 2021/7 – Aggregated Turnover

The ATO has released a Taxation Determination which sets out how to calculate the annual turnover of a connected entity or an affiliate (for the purposes of calculating a taxpayer’s aggregated turnover) when that connected entity or affiliate has  a different accounting period to the taxpayer. This Taxation Determination finalises Draft Taxation Determination TD 2021/D1.

TD 2021/D1 – Employee share schemes

The ATO has released a Draft Taxation Determination which sets out the principles for working out when disposal restrictions under an employee share scheme are ‘genuine disposal restrictions’, and when those restrictions are lifted for the purposes of determining the ESS deferred taxing point.

State Taxes

Duties (Vic): Landholder provisions

The Victoria State Revenue Office has released Ruling DA-055v3 which sets out its views on the obligations on making a relevant acquisition and the calculation of landholder duty.

Payroll tax (TAS): Tourism, hospitality and ancillary industries

The Tasmanian State Revenue Office has released guidance on the payroll tax waiver for wages paid to people in the tourism, hospitality and ancillary industries.

Cases

FYYB v Commissioner of Taxation [2021] AATA 3567 – Superannuation fund denied penalty remission

The AAT has denied a superannuation fund (Fund) a further remission of penalties imposed for their long running contravention of section 67(1) of the Superannuation Industry (Supervision) Act 1993 (Act).

In 2015, the Fund borrowed $220,000 in contravention of section 67 of the Act (prohibition against borrowing). Following a fiscal management report where the contravention was noted, the fund agreed that the loan would be restructured. However, the fund did not rectify the contravention, and so in 2018 the Commissioner issued penalties for three contraventions of section 67 of the Act (relating to the 2015, 2016 and 2017 years). The penalty was originally $31,800 but the Commissioner remitted it down to $7,500. The Fund objected to the Commissioner’s decision on penalties, and after having the objection disallowed, it sought review at the AAT.

The AAT affirmed the Commissioner’s decision. Relevantly, the Fund had not rectified the contravention at the time of the hearing. The AAT also found there was nothing which would indicate that Fund could not pay the penalty or that it was oppressive.

Wood v Commissioner of Taxation [2021] FCA 1236 – Federal Court denies medical practitioner relief from tax debt

The Federal Court has affirmed the AAT’s decision (first covered in the Birchstone Brief for the week ended 12 February) to deny a taxpayer release from his tax liabilities on grounds of serious hardship.

The taxpayer was a medical practitioner who incurred a substantial tax debt of over $1.1 million. He argued he would suffer serious hardship if he was required to pay it. Following the Commissioner’s decision not to release him from his tax liabilities, he applied to the AAT for review. The AAT ultimately found the taxpayer would not suffer serious hardship in meeting his tax debt and affirmed the decision under review.

The Federal Court dismissed the taxpayer’s appeal against the AAT’s decision and held that the taxpayer should not be released from his tax liabilities on grounds of serious hardship. The Federal Court found that the AAT had not erred in reasoning the taxpayer could have found significantly cheaper rental accommodation or in rejecting the argument that $100,000 on school fees was necessary for a reasonable education. Further, the Federal Court held that the AAT was correct in finding that the taxpayer had not established this his or his wife’s household income would not increase in the future in relation to how much available money there would be to service the tax debt.

Legislation

New Bill (Vic): Windfall gains tax

A new Bill has been introduced into the Parliament of Victoria which introduces a windfall gains tax for re-zoned land.

DGRs: Extension of time for charity registration

Legislative Instrument has been registered which sets out certain criteria that must be satisfied by a deductible gift recipient when seeking an extension of time to register as a charity.

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