3-year extension available for DGRs to register as charities
The ATO is urging DGRs who require more time to register as a charity to fill out a form to seek a 3-year extension to do so. The criteria that must be met and the factors the Commissioner must consider before deciding to grant an extension are set out in the Treasury Laws Amendment (2021 Measures No 2) (Deductible Gift Recipients—Extended Application Date) Instrument 2021. DGRs who have not registered as a charity or sought an extension by 14 December 2022 risk losing their endorsement.
ATO confirms deductible non-contingent liabilities should be excluded from CGT asset cost bases
TD 2022/14, which finalises TD 2019/D11, confirms the ATO’s position that a non-contingent liability cannot be both deductible for income tax purposes and form part of a CGT asset’s cost base. This is because section 110-45(2) of the ITAA 1997 operates to exclude expenditure that has been deducted or can be deducted from the cost base of CGT assets acquired after 7.30PM ACST on 13 May 1997 (unless that amount falls within one of the listed exceptions).
ATO issues draft views on alienation of income from an individual’s fame by related entities
The ATO has issued TD 2022/D3, which sets out the Commissioner’s draft view that any income derived from the use of an individual’s fame by a related entity (such as a company or a family trust) will be taken to have been derived by the individual and not the related entity. The Commissioner’s rationale for this view is that as individuals with fame have no property in that fame under Australian law, they are unable to transfer or vest any property in that fame to a related entity. Notably, the draft Determination distinguishes arrangements where the related entity engages the individual to provide services to third parties, stating that payments for such services can be assessable to the related entity (subject to the PSI rules and Part IVA). TD 2022/D3 marks a departure from the ATO’s previous guidance relating to professional sportspersons (PCG 2017/D11 and ATO ID 2004/511), which was withdrawn in 2018.
The draft Determination is proposed to apply retrospectively once finalised, although the ATO has stated it will not devote compliance resources to apply it in relation to the 2018-19 to 2022-23 income years if individuals have already entered into arrangements in good faith that are consistent with the principles outlined in PCG 2017/D11.
Draft updated guidance on individual tax residency tests released
The ATO has released TR 2022/D2, which contains fresh guidance on the Commissioner’s interpretation of the individual tax residency rules. The lengthy draft ruling:
- consolidates the ATO’s views on the ordinary concepts test, the domicile test and the 183-day test;
- accounts for key case law developments; and
- is intended to replace IT 2650 and TR 98/17, both of which have been withdrawn with effect from 6 October 2022.
Comments on the draft ruling are due by 25 November 2022.