Birchstone Brief for the week ended 26 November 2021

News and Events

It Takes a Village… and a Child Maintenance Trust

On Wednesday 8 December at 11am AWST, Birchstone Tax Law will be hosting a free webinar on child maintenance trusts. To find out more details and register, click here. If you can’t make it but would like a copy of the recording, register and we’ll send you a copy of the recording.

ATO Update

PS LA 2021/3 – Remission of additional superannuation guarantee charge

The ATO has issued an updated Practice Statement which sets out revised principles for what ATO officers need to consider in making a decision on the remission of the additional super guarantee charge imposed under subsection 59(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth).

MS 2021/D3 – Invalidity pensions for ex-Defence Force personnel

The ATO has published a Draft Legislative Instrument which sets out an alternative method for calculating the tax-free component and taxable component of superannuation benefits paid to ex-Defence Force personnel out of invalidity pensions. This Draft Legislative Instrument comes in response to the decision in FCT v Douglas [2020] FCAFC 220 (first covered in the Birchstone Brief for the week ended 11 December 2020), in which it was decided that that the tax-tree and taxable components of the superannuation lump sum payment should be determined before the amount is paid. Under the alternative method proposed in the Draft Legislative Instrument, the lump sum payment will be treated as having the same tax-free and taxable proportions as the underlying interest.

SPR 2021/D3 – In-house assets

The ATO has released a Draft Determination which sets out that when, during the 2021-2022 income year, a self-managed superannuation fund:

  • allows a related party to defer the payment of rent under a lease agreement (on arm’s length terms) because of the financial impact of COVID-19 which creates an asset held by the fund; or
  • holds an asset that is an interest in a company or unit trust which is not an in-house asset under the Regulations and that company or unit trust allows a tenant to defer the payment of rent under a lease (on arm’s length terms) because of the financial impact of COVID-19,

the asset is not an in-house asset of the fund in the 2021-22 income year when the rent was deferred, nor any future income years.

Rulings

The ATO has issued the following rulings:

  • CR 2021/79 – Woolworths Group Limited – Off-market share buy-back;
  • CR 2021/80 – Two10degrees Pty Ltd – Use of Global Altering Platform In-Vehicle Management System for fuel tax credits;
  • CR 2021/81 – Liontown Resources Limited – Demerger of Minerals 260 Limited;
  • CR 2021/82 – Youfoodsz Holdings Limited – Employee Share Scheme – Shares disposed of under scheme of arrangement; and
  • PR 2021/15 – Tax consequences for a Customering entering into a Prepay Plus Agreement with Nutrien Ag Solutions Limited.

Cases

Sanderson v FCT [2021] AATA 4305 – Residency case

The AAT has held that an individual was an Australian tax resident despite only spending 83 days in Australia during the relevant income year.

The taxpayer was an Australian citizen and spent a substantial amount of time overseas in his business dealings. The taxpayer married his second wife in 2007 and subsequently purchased houses in the Philippines (2008) and in Queensland (2010). The taxpayer’s wife and child relocated to the Queensland property in 2010. The taxpayer continued to predominantly live overseas (in hotels and serviced apartments), but regularly returned to Australia to see his family. In 2016, the taxpayer travelled to Australia 11 times staying a total of 83 days. After being issued with an amended assessment based on a higher taxable income, the taxpayer objected to the assessment (which was disallowed) and then subsequently sought review by the AAT of the Commissioner’s decision.

The key issue at hand was whether the taxpayer was an Australian tax resident in the 2016 income year. The AAT affirmed the Commissioner’s decision that the taxpayer was an Australian tax resident as he had maintained a continuity of association with Australia. In reaching this decision, the AAT relied on the following factors:

  • the taxpayer owned a home where he lived with his family when he visited Australia;
  • the taxpayer travelled to Australia as frequently as possible;
  • the taxpayer financially supported his family; and
  • the taxpayer had Australian health insurance and Medicare.

Legislation

New Bill introduced

A new Bill has been introduced into Parliament which makes various tax-related changes, including:

  • extending the loss carry back rules;
  • amending the deductible gift recipient provisions; and
  • making changes to the employee share scheme rules to remove cessation of employment as a taxing point.

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