Birchstone Brief for the week ended 29 July 2022

ATO Updates

ATO expands GST-free treatment of residential care in retirement villages and nursing homes

The ATO has released an addendum to GSTR 2012/3 broadening the circumstances in which the Commissioner considers that the operator of a retirement village provides a GST-free supply of residential care services to residents living in its serviced apartments for the purposes of section 38-25(3A) of the GST Act.

The addendum clarifies the Commissioner’s view that the provision of daily meals and heavy laundry services will only satisfy the requirements of section 38-25(3A) where the following principles are met:

• the resident must have a continuing need for the provision of daily meals and heavy laundry services;
• the operator must have an obligation to provide daily meals and heavy laundry services; and
• the operator must make available daily meals and heavy laundry services.

The addendum also includes numerous additional examples to illustrate the application of the above principles and assist with taxpayer compliance.

Class and Product Rulings issued

The ATO has issued:

• CR 2022/67 – Toyota Halo System – Used for fringe benefits tax car logbook and odometer records;
• CR 2022/68 – Ardent Leisure Group Ltd – Return of capital and special dividend; and
• PR 2022/6 – Tax consequences for a customer participating in Commbank Yello with the Commonwealth Bank of Australia.

State Taxes

Payroll Tax (NSW): Ruling on Commissioner’s discretion to exclude member from payroll tax group updated

The Chief Commissioner of State Revenue (NSW) has updated his ruling on his discretionary power to exclude a member from a payroll tax group, including the matters he will take into account in exercising that discretion. Updated Revenue Ruling PTA031v2 applies from 1 July 2022.

Other News

CPI number for June 2022 quarter released

The Australian Bureau of Statistics has released the Consumer Price Index (CPI) number for the June 2022 quarter – 126.1 (up from 123.9 for the March 2022 quarter). The CPI number is relevant to the indexation of a number of tax-related measures, such as the CGT improvement threshold, the car limit and various tax offsets and superannuation amounts and thresholds.

OECD releases update on BEPS Action 5

The OECD has released an update on its work to combat harmful tax practices in preferential tax regimes as part of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Article 5. The update showcases that as of July 2022, a total of 319 regimes have been reviewed, 112 of which have been abolished since the start of the BEPS project. The update also contains the agreed conclusions from the Forum on Harmful Tax Practices’ April 2022 meeting.

Cases

A Trustee’s Marching Orders – Owies v JJE Nominees Pty Ltd [2022] VSCA 142

The Victorian Court of Appeal has ordered the removal of a trustee of a family trust in the course of a dispute involving distributions from the family trust. A critical issue in the case was whether the trustee had failed to give ‘real and genuine consideration’ to the beneficiaries of the trust. This involved considering whether the trustee was properly informed of the differing circumstances of the beneficiaries in order to discharge its duties as trustee.

The Court ultimately found that the distributions were made in breach of trust, rendering the distributions voidable (but not void absent an order of the Court to set the distributions aside). The Court ordered the replacement of the trustee with an independent trustee on the basis that it was not in the best interests of the beneficiaries for the trustee to remain in office. Also considered in the case was the validity of amendments to the trust deed in relation to the roles of appointor and guardian.

Intrigued? Stay tuned for a more detailed update in next week’s Birchstone Brief.

Legislation

Treasury Laws Amendment (Electric Car Discount) Bill 2022 – Bill providing FBT exemption for electric vehicles introduced

A Bill providing an FBT exemption for zero or low emissions vehicles has been introduced into Federal Parliament. To qualify for the exemption:

• the value of the car at first retail sale must be below the luxury car tax threshold for fuel efficient cars ($84,916 for 2022-23);
• the car (as defined in the FBT Act) must be a battery electric vehicle, a hydrogen fuel cell electric vehicle, or a plug-in hybrid electric vehicle; and
• the car must be first held and used on or after 1 July 2022 (noting that cars ordered prior to 1 July 2022 will still be eligible so long as they were delivered on or after that date).

Moreover:

• the exemption will be available even if the car fringe benefit is provided under a salary packaging arrangement;
• the value of the exempt benefit will still be counted for the purposes of determining an employee’s reportable fringe benefit amount; and
• the Bill has been referred to the Senate Economics Legislation Committee, which is due to provide its report by 21 September 2022.

Treasury Laws Amendment (2022 Measures No 1) Bill 2022 – Miscellaneous tax and super measures re-introduced

The Federal Government has tabled a Bill reintroducing a range of tax and superannuation law amendments which were previously contained in Bills that have now lapsed. These include:

• ensuring that certain recovery grants paid to small businesses and primary producers in connection with Cyclone Seroja will not be taxable in the 2021-22 and later income years;
• providing income and withholding tax exemptions to FIFA and its wholly owned subsidiary FWWC2023 Pty Ltd for activities associated with the 2023 FIFA Women’s World Cup, which will apply from 1 July 2020 to 31 December 2028;
• minor and technical amendments to Treasury portfolio legislation, including retrospective amendments to the Fringe Benefits Tax Assessment Act 1986 (Cth) applying to the 2017-18 and later FBT years to restore access to FBT exemptions for certain tax exempt not-for-profit societies and associations inadvertently excluded under amendments made by the Tax Laws Amendment (2013 Measures No 2) Act 2013 and prevent overlap between employees covered by the $30,000 exemption cap and the $17,000 exemption cap;
• delaying the commencement of the Modernising Business Registers program to 1 July 2026 or an earlier date specified by proclamation; and
• transitional provisions relating to the replacement of the Superannuation Complaints Tribunal with the Australian Financial Complaints Authority.

Proposed amendments to mitigate impact of Douglas case

The Albanese government has released exposure draft legislation designed to remove potential adverse tax consequences for Defence Force members receiving certain defined benefit superannuation pensions following the Full Federal Court’s decision in FCT v Douglas [2020] FCAFC 220 (first covered in the Birchstone Brief for the week ended 11 December 2020). In that case, the Court held that invalidity pensions paid from the Defence Force Retirement and Death Benefits (DFRDB) and the Military Superannuation Benefits (MSB) Schemes commencing on or after 20 September 2007 were “superannuation lump sums” and not “superannuation income streams”.

The proposed amendments will:

• Introduce a non-refundable tax offset for veterans receiving an invalidity pension under the relevant Schemes (and eligible spouses and child beneficiaries after their death) to ensure they pay no more income tax or Medicare levy on their superannuation lump sum benefits than they would if they were treated as income stream benefits; and
• amend the definition of a ‘superannuation income stream’ to ensure that all other defined benefits pensions that commenced on or after 20 September 2007 will be taxed as superannuation income streams (as per the intended policy).

The amendments are proposed to apply retrospectively to income years commencing on or after 1 July 2007. The last day for comment on the exposure draft legislation is 5 August 2022.