Birchstone Brief for the week ended 3 December 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

Rulings

The ATO has issued the following rulings:

  • CR 2021/83 – Victorian Department of Jobs, Precints and Regions – Early retirement scheme 2021-2022;
  • CR 2021/84 – Faethm Holdings Pty. Limited – Employee Option Plan – Commissioner’s discretion to reduce the minimum holding period in relation to options acquired;
  • CR 2021/85 – Department of Education and Training – Early retirement scheme 2021-2023;
  • CR 2021/86 – Flinders Adelaide Container Terminal Pty Ltd – Early retirement scheme; and
  • PR 2021/16 – ING Bank (Australia) Limited – Orange Everyday Round Up to Charity.

Cases

Kwan v FCT [2021] AATA 4465 – Taxpayer not carrying on a business

The AAT has held that a taxpayer’s amended assessment was not excessive or otherwise incorrect as the taxpayer had failed to establish that she was carrying on a business.

In 2019, the taxpayer (a former ATO auditor) obtained an ABN as a sole trader, registered a business name and entered into a 12-month residential lease. For the 2019 year, the taxpayer sought to claim a $107,302 business loss as a deduction (which the taxpayer reduced to $74,232 following a voluntary disclosure) which she claimed related to her property development business and her other business of selling goods to her friends. The Commissioner disallowed the taxpayer’s claim for the business loss on the basis that she was not conducting a business, and subsequently issued an amendment assessment to the taxpayer for $36,395. The taxpayer objected, the Commissioner disallowed her objection, and the taxpayer applied to the AAT for review.

The AAT affirmed the objection decision under review, finding that the taxpayer had failed to show their amended assessment was excessive or otherwise incorrect. The AAT found that the taxpayer had not established any of the relevant factors which would lead to the conclusion that she was carrying on a business. Relevantly, the taxpayer did not keep any records and had not undertaken a property development venture before the hearing date.  For this reason, the taxpayer could not be said to have been carrying on a business and was not entitled to deduct any of the business losses.

M3K Services Pty Ltd v FCT [2021] AATA 4416 – Overpaid GST

The AAT has found a taxpayer company was not entitled to a refund of overpaid GST because it had ultimately passed these amounts on to the end consumers.

The taxpayer was in the business of supplying and administering costmetic injectables. The taxpayer treated all of the supplies as fully taxable, when in fact, the supply of cosmetic injectables were GST-free. After discovering the cosmetic injectables were GST-free, the taxpayer sought a refund for its overpaid GST (representing the GST amounts it remitted on the supply of the cosmetic injectables). The Commissioner’s denied the taxpayer’s request for a refund of the overpaid GST pursuant to section 142-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth), as it had passed on the excess GST to the customers.

The AAT affirmed the Commissioner’s decision on the basis that the taxpayer had not established that it had not passed on the excess GST to its customers. The AAT reasoned that the starting point is that businesses recover all of their costs (including amounts incorrectly remitted as GST), and the taxpayer had failed to prove otherwise.

Legislation

Windfall gains tax (Vic): Bill receives assent

The Bill which introduces a windfall gains tax in Victoria on profits associated with the re-zoning of land has received assent and is now law (covered in the Birchstone Brief for the week ended 15 October 2021).

Exposure draft materials: Miscellaneous amendments

The Government has released exposure draft materials to make miscellaneous amendments to Treasury portfolio laws.

Exposure draft materials: Intangible asset depreciation

The Government has released exposure draft materials for a measure announced as part of the 2021 Budget which will allow taxpayers to self-assess the tax effective lives of certain depreciating intangible assets, such as patents, copyrights and in-house software. This change will apply to assets acquired from 1 July 2023, after the temporary expensing measure has concluded.

Subscribe

Birchstone Brief

Curated for the needs of SME tax professionals. The Birchstone Brief is delivered to your inbox every week. It contains all the tax developments you need to know from the previous week, with insights from the team at Birchstone Tax Law. No fluff. It’s the one email you will look forward to receiving.


 

* indicates required