Birchstone Brief for the week ended 16 December 2022


Merry Christmas and Happy New Year

 This is the final edition of the Birchstone Brief for 2022.

The team at Birchstone Tax Law wish you a Merry Christmas and a Happy New Year! We hope you have a safe, relaxing and well deserved break.

Thank you for taking your time to read the Birchstone Brief each week, and we look forward to being back in your inboxes in 2023.


Section 100A – Webinar and Updated Documentation Pack

The ATO released its finalised guidance on section 100A on 8 December 2022. While the ATO was keen to have the guidance finalised before the end of the year, the timing of the release is interesting given the Guardian AIT (decided in favour of the taxpayer) and BBlood (decided in favour of the Commissioner) decisions are currently on appeal to the Full Federal Court. The Guardian AIT appeal was heard in August (with a judgment expected early next year) and the BBlood appeal is scheduled to be heard in March 2023.

The finalised versions of the taxation ruling (TR 2022/4) and the practical compliance guidance (PCG 2022/2) have, for the most part, retained the key principles from the drafts. There has, however, been some tweaking around the edges (more so for the practical compliance guidance than the taxation ruling). The changes include:

  • a recognition of cultural practices when determining what is an ordinary family or commercial dealing;
  • the inclusion of additional examples (and the modification of some existing ones); and
  • the removal of the Blue Zone.

Probably the most important change is the addition of comments to PCG 2022/2 on record keeping and documentation (para 49 to 52). Those comments are broadly consistent with the approach taken in our Section 100A Documentation Pack.

In the new year, we will be running a webinar on Tuesday 24 January 2023 to go through the finalised ATO guidance in detail, as well as discussing the practical question: “what now?”. Click the button below to register.

Our Section 100A Documentation Pack is being reviewed and an updated version will be available in the new year. Those that have already purchased a pack will be given a free update. 



Register for our section 100A webinar



ATO Updates

Draft guidance on employee/contractor distinction

The ATO has released a draft ruling and practical compliance guideline regarding the employee/contractor distinction. 

TR 2022/D3 explains the Commissioner’s view regarding when an individual is an ’employee’ of an entity within the meaning of section 12-35 of Schedule 1 to the TAA 1953 for PAYG withholding purposes. It replaces TR 2005/16 (which has been withdrawn with effect from 15 December 2022), and is proposed to have retrospective application once finalised. As the term ’employee’ is not defined in section 12-35 (or any other tax or superannuation legislation), the draft ruling sets out the Commissioner’s view of the meaning of that term at common law. Interestingly, although the common law meaning of ’employee’ is also relevant for the purposes of section 12(1) of the SGAA 1992, TR 2022/D3 is expressly stated not to be binding on the Commissioner in relation to that provision. 

Unsurprisingly, the draft ruling takes account of the High Court’s landmark decisions in Personnel Contracting and Jamsekexpressly stating that:

  • whether a worker is an employee of an entity within the ordinary meaning of that term is a question of fact to be determined through an objective assessment of the totality of the relationship between the parties, having regard only to the legal rights and obligations which constitute that relationship (at paragraph [7]); and 
  • where the parties have comprehensively committed the terms of their relationship to a written contract and the validity of that contract is not in dispute, it is the legal rights and obligations in the contract alone that are relevant in determining whether a worker is an employee (at paragraph [9]). 

PCG 2022/D5 outlines the Commissioner’s compliance approach for businesses that engage workers and classify them as employees or independent contractors. The draft PCG:

  • covers all federal tax and superannuation obligations administered by the ATO and sets out information intended to help businesses assess their risk rating;
  • contains four risk zones (ranging from ‘very low risk’ to ‘high risk’) and explains the likely level of ATO involvement in respect of situations that fall within each zone where it either receives a complaint from a worker or proactively initiates a review; and 
  • will apply from its date of issue once finalised. 

Notably, paragraph [11] of the draft PCG states that while SGR 2005/1 is being reviewed in light of Personnel Contracting and Jamsek, it still represents the Commissioner’s published view on the extended definition of an employee for superannuation guarantee charge purposes until it is updated. 

Guidance regarding GST and certain supplies made by residential colleges finalised

PCG 2022/3 finalises PCG 2022/D3 (first discussed in the Birchstone Brief for the week ended 16 September 2022) and sets out the Commissioner’s compliance approach for universities and residential colleges that are supplying accommodation, meals, tertiary residential college courses and religious services to resident students and claiming associated input tax credits. The purpose of the guideline is to assist these taxpayers to determine if such supplies can be treated as GST-free. 

Class and product rulings issued

The ATO has issued: 

  • CR 2022/111 – Horizon Oil Ltd – Return of capital and dividend; 
  • CR 2022/112 – BNK Banking Corporation Ltd – Special dividend and return of capital; 
  • PR 2022/10 – Swiss Life (Singapore) Pte. Ltd Life Asset Portfolio Universal Asia; and 
  • PR 2022/11 – Allianz Guaranteed Income for Life. 


State Taxes

First Home Buyer Choice (NSW): Guidance released

Revenue NSW has issued the First Home Buyer Choice Guide, which contains an overview of the new opt in annual property tax announced in the 2022-23 NSW State Budget (covered in the Birchstone Brief for the week ended 24 June 2022) and enacted by the Property Tax (First Home Buyer Choice) Act 2022 (NSW)

Land tax (NSW): Reductions or exemptions for boarding houses and low-cost accommodation 

Revenue NSW has released: 

  • LT-113, which provides that where land is used primarily as a boarding house in accordance with the guidelines contained in the ruling, an exemption from land tax or a pro rata reduction in the taxable land value of the land will be available; and
  • LT-114, which provides that land situated within a 5 kilometre radius of 1 Martin Place, Sydney used to provide low-cost rental accommodation in accordance with the guidelines contained in the ruling is exempt from land tax. 


Other News

IGTO releases update on ATO administration of deceased estates

The Inspector-General of Taxation and Taxation Ombudsman (IGTO) has released an update regarding the progress, status and expected due dates of the ATO’s implementation of its 2020 report Death and Taxes – an Investigation into ATO systems and processes for dealing with deceased estates. Various recommendations have already been adopted, and expected future changes include allowing registered tax practitioners who have been appointed by legal personal representatives to access any correspondence sent to a deceased taxpayer’s MyGov that is not otherwise accessible through online services for agents. 


XPTC v FCT [2022] AATA 4147 – Deduction allowed for settlement but not associated legal costs

A taxpayer has received a mostly favourable outcome before the AAT, with the Tribunal holding that: 

  • contrary to the Commissioner’s position, his payment of $200k in settlement of court proceedings was deductible under section 8-1 of the ITAA 1997; and 
  • allegedly associated legal costs totaling approximately $73k were not deductible, with the AAT finding it was impossible to quantify what proportion of the legal fees related to the taxpayer’s income-earning activities on the available evidence. 


Various tax measures now law 

The following Bills received royal assent on 12 December and are now law: 

Exposure draft legislation and explanatory materials: income tax exemption for wholly-owned Australian subsidiaries of the Future Fund 

Treasury has released exposure draft legislation and explanatory materials to provide a corporate income tax exemption for wholly-owned Australian incorporated subsidiaries of the Future Fund Board of Guardians. 


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