Birchstone Brief for the week ended 1 April 2022

ATO Updates

Decision Impact Statement – CFMMEU v Personnel Contracting

The ATO has released a Decision Impact Statement on the High Court’s decision in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (CFMMEU v Personnel Contracting).

In its Decision Impact Statement, the ATO takes the view that the High Court’s decision:

  • is relevant to legislation administered by the Commissioner involving the ordinary meaning of the term ‘employee’;
  • provides clarity in the approach to be taken when characterising the legal relationship of parties under the common law test of employment;
  • has not disturbed the well-established practice of examining the totality of the relationship between parties when determining whether a worker is an employee or an independent contractor, but rather clarified that the written contract terms must be examined to establish the character of the relationship where it is an accurate and accepted record of the agreement between the parties; and
  • constitutes a rejection of the multifactorial test, but permits a Court to look beyond the written contract to the conduct of the parties in certain circumstances (broadly where the contract is not wholly written, has been varied or otherwise displaced by conduct, is challenged as a sham or otherwise invalid, or it is alleged that the contract should be set aside due to some legal, equitable or statutory right or remedy).


The ATO has issued the following rulings:

  • CR 2022/29 – NPP Australia Ltd – Scrip for scrip roll-over;
  • CR 2022/30 – BPAY Group Holding Pty Ltd – Scrip for scrip roll-over;
  • CR 2022/31 – Swick Mining Services Ltd – In specie distribution of Orexplore Technologies Ltd shares;
  • CR 2022/32 – Victorian Department of Health – Early retirement scheme 2022-2023;
  • CR 2022/33 – Magmatic Resources Ltd – Return of capital by distribution of shares in Australian Gold and Copper Ltd; and
  • PR 2022/3 – AIA Australia Ltd – Priority Protection – Income protection insurance cover.

ATO Guidance Updated: TR 93/25

The ATO has issued an Addendum to TR 93/25, which considers whether the proceeds of certain illegal activities will be treated as assessable income under section 6-5 of the Income Tax Assessment Act 1997 (Cth) and the deductibility of amounts that are recovered from or repaid and any fines or penalties imposed for an associated offence.

The Addendum was published on 30 March 2022 and modernises TR 93/25 to take account of changes in legislation and case law.

ATO Guidance Finalised: Meaning of ‘connected with’

The ATO has issued the following documents providing guidance on determining whether an entity is ‘connected with’ another entity for the purposes of calculating aggregated turnover under Subdivision 328-C ITAA1997:

  • TD 2022/5, which finalises TD 2021/D3, and sets out the Commissioner’s view and provides practical examples on determining whether an entity directly controls a corporate limited partnership under s 328-125(2) and is therefore connected with it, and also confirms that a corporate limited partnership is capable of being an ‘affiliate’ of another entity within the meaning of section 328-130;
  • TD 2022/6, which finalises TD 2021/D4, and provides the Commissioner’s view on how the public entity exemption to the ‘indirect control test’ in s 328-125(7) applies where a public entity is interposed in an ownership structure; and
  • TD 2022/7, which finalises TD 2021/D2, and sets out the Commissioner’s view and provides practical examples on determining whether an entity directly controls, or is directly controlled by, a partnership, foreign hybrid or non-entity joint venture under s 328-125(2).


Singapore Telecom Australia Investments Pty Ltd v FCT (No 2) [2022] FCA 260Federal Court denies $259 million carried forward loss under transfer pricing rules

The Federal Court of Australia has found that a taxpayer company was not entitled to a carried forward loss of $259 million on the basis that it had received a transfer pricing benefit from an agreement with a related foreign company.

The proceedings in this case concerned the form of final orders and costs for the decision in Singapore Telecom Australia Investments Pty Ltd v FCT [2021] FCA 1597 (covered in the Birchstone Brief for the week ended 14 January 2021). The taxpayer company submitted that its appeal against the Commissioner’s objection decision for the 2011 year should be partly allowed on the basis that it should have been able to access a carried forward loss of $259,584,589 in that year as it had made interest payments over the life of a loan note insurance agreement (LNIA).

The Court ultimately dismissed the taxpayer’s appeal, finding that the carried forward loss should not be taken into account in applying section 136AD(3) of the Income Tax Assessment Act 1936 (Cth) or section 815-15(1) ITAA1997 to the taxpayer’s income year ending 31 March 2011. This was because section 815-15(1) proceeded on the basis that an ‘amount of profits’ is to be ascertained with reference to a particular year of income. As such, it would be inconsistent with the language of the section and the transfer pricing scheme to take into account a carried forward loss from a prior income year in the way the taxpayer contended.



A New Tax System (Goods and Services Tax) (GST-free Health Goods) Determination 2022 – Supply of certain health goods declared GST-free

The Minister for Health and Aged Care issued a Determination on 18 March 2022 declaring the supply of the following health goods to be GST-free:

  • condoms;
  • barrier dams, femidoms and harness devices;
  • personal and surgical lubricants that are water-soluble and suitable for use with condoms;
  • preparations for use by humans that contain folic acid as the only active ingredient and have a recommended daily dose of 400 to 500 micrograms of folic acid;
  • sunscreen preparations for dermal application that are marketed principally for use as sunscreen and are SPF15 or higher; and
  • nicotine for use as an aid in withdrawal from tobacco smoking where the nicotine is administered in preparations for transdermal use or oromucosal use.


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