Birchstone Brief for the week ended 19 August 2022

ATO Updates

Synthesised text of tax treaty with the Republic of Hungary

The ATO has published a synthesised text regarding the application of Australia’s double tax agreement with the Republic of Hungary (DTA) as modified by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which was signed by Australia and the Republic of Hungary on 7 June 2017. The synthesised text does not constitute a source of law but is simply intended to facilitate understanding of how the MLI has modified the DTA. 

Draft GST Determinations issued – Attribution rules for deferred farm-out arrangements & adjustment note information requirements

A Deputy Commissioner of Taxation has issued two draft determinations for the purposes of the GST Act. Namely: 

• LI 2022/D11, which specifies additional information requirements pursuant to section 29-75(1)(c) of the GST Act that must be included in an adjustment note (including recipient created adjustment notes); and
• LI 2022/D12, which sets out specific attribution rules for certain deferred transfer farm-out arrangements where a supply or acquisition made under a contract is subject to preconditions. The specific rules are necessary to prevent the basic rules in Division 29 and the special rules in Chapter 4 from applying inappropriately to such arrangements. 

State Taxes

General statement for transfer duty and leases (NSW)

RevenueNSW has released a general statement regarding the application of transfer duty to leases ahead of the planned publication of a regulation and Commissioner’s Practice Note which will contain a more detailed explanation.

In summary, the general statement explains that the creation and extinguishment of dutiable property (which includes leases) will be dutiable unless exempt or excluded. Excluded items include the grant, renewal or variation of a lease for no consideration and any transactions prescribed by the Regulations.

When introduced, the regulation will apply retrospectively from 19 May 2022. 

Other News

ANAO report on effectiveness of ATO’s engagement with tax practitioners

The Australian National Audit Office (ANAO) has published a report regarding its audit into the effectiveness of the ATO’s engagement with tax practitioners in creating effective and efficient taxation and superannuation systems. The report concluded that the ATO largely: 

• consulted effectively with tax practitioners;
• provides effective services and support for tax practitioners; and
• implemented its tax practitioner engagement activities in an effective way. 

• its overarching tax practitioner engagement strategy;
• developing a performance framework;
• documentation of selection criteria for standing and special purpose tax practitioner consultation groups; and
• its registered agent phone line.

Cases

Meridian Energy Australia Pty Ltd v Chief Commissioner of State Revenue (NSW) [2022] NSWSC 1074 – Purchase of power station company not subject to landholder duty

The NSW Supreme Court has ruled that the acquisition of all the shares in a company that operated three power stations in NSW was not subject to landholder duty. The principal reasons for this were that, in the Court’s view: 

• firstly, pursuant to statutory vesting orders, the power stations were not land (or interests in land) but innominate sui generis property interests vested in the company; 
• secondly, the power stations or power station assets were not ‘goods’ – the Court finding that the fact they had been statutorily severed from the land on which they stood (and from then on existed as innominate sui generis property interests) did not transmute them into goods simply because it might be thought they should be treated as part of the assets on which an impost for landholder duty could be made; 
• thirdly, on the basis that the power stations were not landholdings and the Pacific Hydro methodology was not applicable in valuing the company’s associated leases, the dutiable value of the taxpayer’s acquisition of shares in the company was therefore nil; and 
• fourthly, the taxpayer’s acquisition of shares in the company was consequently not a ‘relevant acquisition’ for landholder duty purposes. 

Legislation

Family Court Amendment Bill 2022 (WA) – Bill providing for separating de facto couples to split super awaits assent

The Bill allowing de facto couples in WA to split their superannuation in the event of a relationship breakdown has been passed by both Houses of the WA parliament and now awaits royal assent. Once the amendments have become law, the long-anticipated reforms (together with the commencement of a corresponding Commonwealth enactment) will mean that West Australians in de facto relationships are no longer disadvantaged when it comes to splitting superannuation assets following separation, thereby bringing WA into line with all other Australian jurisdictions. 

Proposed exclusions from shorter period of review for small and medium entities

The federal government has published exposure draft regulations to exclude certain entities with significant international tax dealings or particularly complex affairs from the shorter two-year period of review for income tax assessments afforded to small business entities (the aggregated turnover threshold for access to which was increased from $10 million to $50 million in October 2020). 

Duties Amendment (Farm-in Agreements) Bill 2022 (WA) – Bill to address issues with farm-in agreements transfer duty concessions introduced

A Bill has been introduced into the WA Legislative Assembly to address issues with the transfer duty concessions for farm-in agreements involving mining tenements. The amendments were developed in consultation with industry to ensure that the legislation is consistent with the Commissioner of State Revenue’s longstanding assessment practices, and moreover to prevent relief extending (as it does on a current reading of the legislation) to circumstances in which relief was never intended.