Birchstone Brief for the week ended 5 August 2022

ATO Updates

Release of July exchange rates

The ATO has released the average foreign exchange rates for July 2022 for the purposes of converting foreign income into Australian dollars. 

Class Rulings issued

The ATO has issued the following class rulings:

  • CR 2022/69 — Macquarie Group Ltd — Macquarie Capital Notes 6;
  • CR 2022/70 — Pambula & District Community Development Ltd — Off-market share buy-back; and
  • CR 2022/71 — Westpac Banking Corporation — Westpac Capital Notes 9. 


State Taxes

ACT: 2022-23 Budget released

The ACT Chief Minister and Treasurer handed down the ACT 2022-23 Budget on 2 August 2022. Notable tax-related measures involve the continued reduction of conveyance duty rates by:

  • raising the lower limit of the conveyance duty tax threshold from $200,000 to $260,000 for residential owner-occupiers;
  • increasing the income eligibility threshold for the Home Buyer Concessions Scheme from $160,000 to $170,000; and
  • increasing the price eligibility threshold for the Deferred Duty and Disability Duty Concession Schemes from $750,000 to $1 million.


Other News

TPB releases draft information sheets

The Tax Practitioners Board (TPB) has released four exposure draft information sheets providing insight as to the TPB’s position on BAS and Tax agent services, fees, and client confidentiality.  A copy of the drafts can be found below:

Consultation paper on multinational tax integrity released

The government has released a consultation paper regarding plans to implement its election promise of a multinational tax integrity package to:

  • address the tax avoidance practices of multinational enterprises (MNEs); and
  • improve transparency via better public reporting of MNEs’ tax information.



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

As foreshadowed in the Birchstone Brief last week, we now provide a more detailed overview of the decision of the Supreme Court of Victoria Court of Appeal in which the Court scrutinised the exercise of the trustee’s “absolute discretion” and ultimately ordered the removal of the trustee. 

This dispute involved the Owies family, being the parents, John and Eva (who had passed away at the time of the proceedings), and their three children, Michael, Deborah and Paul.

The default beneficiaries of the family trust were  Michael, Deborah and Paul. The trustee was a corporate trustee, initially controlled by John and Eva, and subsequently Michael. The initial guardian and appointor  was John, and subsequently Michael (as a result of variations to the trust deed which were in dispute).

From 2011 to 2018, distributions of income were made in the following proportions: 40% to John, 40% to Michael and 20% to Eva. In 2019, 100% of the income was distributed to John. 

Deborah and Paul commenced proceedings against the trustee:

  • challenging the variations to the appointor and guardian, which ultimately appointed Michael;
  • seeking declarations that there had been no valid distributions of income (based on the available records) and, if the distributions of income were valid, that the trustee had failed to give real and genuine consideration to the beneficiaries such that the distributions were made in breach of trust; and
  • seeking the removal of the trustee.
At first instance, it was held that:
  • the variations to the appointor and guardian were beyond the scope of the amendment power and consequently invalid;
  • the distributions of income were valid, however, the trustee failed to give proper consideration to Paul and Deborah in 2015 and 2016, and Deborah in 2018 (an important factor resulting in the finding of a breach of trust for some years but not others was the lack of opportunity for the trustee to obtain information about Paul and Deborah); and
  • the trustee should not be removed.

On appeal, the Court of Appeal held that the trial judge took an unduly narrow view of the evidence and structure of the deed which led him into error for the 2017 and 2019 income years (in which a breach was not found). In assessing whether the trustee genuinely discharged its duty, the Court held that, “as the trustee did not make enquiry of either Paul or Deborah… the inescapable inference is that the trustee was not informed to an extent that enabled it to make a genuine decision”. The Court accordingly found a beach of trust in relation to the 2017 and 2019 distributions as well.

The breach of trust rendered the distributions voidable (rather than void), which means that a beneficiary could apply to the Court for an order of the Court could be made to set the distributions aside. However, in this case, that order had not been sought at trial. 

The Court also ordered the removal of the trustee, finding that the trustee failed to act impartially and failed to give real and genuine consideration to two of the primary beneficiaries. The Court also noted that the relations between the beneficiaries were irreconcilably damaged such that it was not in the best interests of the beneficiaries for the trustee to continue in office.

This case is a confronting reminder of the complexities associated with the conduct and management of family trusts and brings to the forefront the question of the measures that trustees ought to be taking to fulfil their trustee duties. 

YDXM v FCT [2022] AATA 2382 – AAT finds army officer could not claim law units as self-education expenses

The AAT has held that a taxpayer who was a member of the Australian Army since 2008 could not claim costs incurred on units in a postgraduate law degree as work-related self-education expenses on the basis that there was not a sufficient connection between the taxpayer’s role as a General Services Officer and the expenses incurred.

The AAT did not accept the taxpayer’s argument that their completion of the law degree led to a promotion from Captain to Major and an increase in taxable income. Instead, the Tribunal held that the course of study and units undertaken were general in nature and did not make up a substantial part of the taxpayer’s role as a General Services Officer. The AAT did not deny that the law units (and the degree itself) were a factor that may have led to the promotion, however, there was no correlation sufficiently strong enough to warrant their status as a work-related self-education expense.

Appeal News – JMC Pty Ltd v FCT – Higher education provider appeals Federal Court finding lecturer was engaged as employee

The applicant company has appealed to the Full Federal Court against the Federal Court’s decision in JMC Pty Ltd v FCT [2022] FCA 750 (first covered in the Birchstone Brief for the week ended 1 July 2022). 



Treasury Laws Amendment (2022 Measures No 2) Bill 2022 – Miscellaneous tax and super measures re-introduced

The Federal government has introduced a Bill containing several tax-related measures, some of which were previously contained in Bills introduced by the Coalition government that lapsed upon the proroguing of parliament for the 2022 federal election. The measures include: 

  • empowering the Commissioner to direct an entity to complete an approved record-keeping course if he reasonably believes the entity has failed to comply with its tax-related record-keeping obligations as an alternative to existing financial penalties; 
  • requiring electronic platform operators to provide the ATO with information on transactions made through their platforms;
  • removing the $250 non-deductible threshold for work-related self-education expenses;
  • enabling small business entities to apply to the Small Business Taxation Division of the AAT for an order pausing or otherwise affecting the operation or implementation of a decision by the Commissioner which is being reviewed by the AAT;
  • allowing individuals aged 55 and over (reduced from 60) to make downsizer contributions from the sale of their main residence to their superannuation plans.

Treasury Laws Amendment (2022 Measures No 1) Bill 2022 – Bill providing for miscellaneous tax and superannuation measures passes House of Representatives

The Bill (first covered in the Birchstone Brief for the week ended 29 July 2022) has passed through the House of Representatives and the Senate and is currently awaiting royal assent. The Senate made the following changes to the Bill, which have been agreed to by the House of Representatives:

  • lowering the reporting threshold for tax transparency laws such that the ATO will be required to make public tax information (including total income, taxable income and income tax payable) for Australian private companies with turnover of $100 million or more (down from $200 million); and
  • removing grandfathering arrangements that exempted certain large proprietary companies from the requirement to submit audited annual reports to ASIC. 

Exposure draft: adjustment to tax on certain credits or payments to Indian firms

The government has released draft legislation to implement Australia’s commitment to amend its domestic taxation laws to stop the Australian taxation of income of non-resident Indian firms providing technical services remotely (and not through a permanent establishment) to Australian customers. The proposed amendments are contingent on the Australian-India Economic Cooperation and Trade Agreement (AI-ECTA) coming into force. 



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.

Subscribe to our mailing list, you will receive the Birchstone Brief and updates to our webinars and resources.