Prior guidance on Div 7A withdrawn
Following the release of TR 2022/D1 earlier this year, the ATO has withdrawn TR 2010/3 and accompanying PS LA 2010/4 with effect from 1 July 2022.
The effect of this is that the ATO’s previous position (that a UPE held on sub-trust for the benefit of a corporate beneficiary could be loaned back to the trust on commercial terms without any Div 7A consequences) has now been rolled back in favour of the new view expressed in TR 2022/D1: that a trust’s use of a UPE held on sub-trust for the benefit of a corporate beneficiary will constitute the provision of financial accommodation regardless of whether a commercial rate of return is paid.
When finalised, TR 2022/D1 will apply to trust entitlements created on or after 1 July 2022. Entitlements conferred on or before 30 June 2022 can still rely on TR 2010/3 and PS LA 2010/4.
ATO confirms US GILTI rules do not correspond to CFC provisions
The ATO has issued TD 2022/9 (previously released as draft TD 2019/D12), which confirms that section 951A of the US Internal Revenue Code of 1986 (the assessing provision of the US global intangible low taxed income (GILTI) rules) is not a provision of a law of a foreign country that corresponds to section 456 or 457 of the ITAA 1936 for the purposes of the hybrid mismatch rules in s 832-130(5) of the ITAA 1997.
The practical effect of this is that, for the purposes of applying Australia’s hybrid mismatch rules:
- the fact that an amount is included as GILTI in the US will not affect whether a deduction/non-inclusion outcome arises; and
- amounts treated as GILTI in the US will not be regarded as dual inclusion income.
The Determination applies before and after its date of issue.
ATO extends transitional period for corporate tax residency
The Commissioner has amended paragraph 104AA of PCG 2018/19 to give foreign incorporated companies a further 6 months (until 31 December 2022) to revise their governance arrangements in light of the ATO’s view on “central management and control” (as set out in TR 2018/5) for the purposes of retaining their foreign tax resident status.
ATO will focus on ‘wash sales’ this tax time
The ATO has announced that it will be focusing on ‘wash sales’ this tax time through the application of its sophisticated data analytics to large swathes of data from cryptocurrency exchanges and share registries.
A ‘wash sale’ refers to the sale of an asset followed by the reacquisition of the same or a substantially similar asset close to the end of an income year where the deliberate purpose of sale is to generate a capital loss that can then be carried forward.
Taxpayers who engage in wash sales risk the application of Pt IVA of the ITAA 1936 to such transactions and, consequently:
- having any associated capital loss denied; and
- potentially being penalised and charged with interest.
Effective life of depreciating assets for 2022-23
The ATO has issued TR 2022/1, which contains the effective life of depreciating assets acquired from 1 July 2022 for the purposes of section 40-100 of the ITAA 1997.
Class ruling and addendum issued
The ATO has issued the following:
- CR 2022/59 – Cedar Woods Properties Ltd – Bonus share plan; and
- CR 2013/14A2 – Addendum to CR 2013/14 – Goods and services tax: goods and services supplied by dentists.