Birchstone Brief for the week ended 2 January 2023

Happy New Year

This is the first edition of the Birchstone Brief for 2023, covering tax developments from the end of December through to the week ended 6 January. 

The team at Birchstone Tax Law hope you had a safe, relaxing and well deserved break. 

And now – the tax news!

Section 100A Webinar

Join Daniel Taborsky on 24 January at 11AM AWST/2PM AEDT as he dissects the finalised ATO guidance on section 100A (TR 2022/4 and PCG 2022/2).

What are the differences between the draft guidance and the finalised versions?

What should you be doing now? 

Click the button below to register.

ATO Updates

Transitional compliance approach for corporate tax residency extended

The ATO has amended PCG 2018/9 to further extend the transitional compliance approach period for eligible foreign incorporated companies to change their governance arrangements so that their central management and control is exercised outside Australia until 30 June 2023. The Commissioner has emphasised that the transitional period will not be extended any further beyond this date. 

ATO expresses concerns about SMSF schemes involving asset protection

The ATO has expressed its concerns about SMSFs entering into certain schemes involving asset protection. The relevant schemes are those that claim to protect SMSF assets from creditors by mortgaging them to an ‘asset protection trust’ commonly referred to as a ‘Vestey Trust’. A Vestey Trust is a discretionary trust set up to acquire the equity in an SMSF’s assets through an equitable mortgage, which is supported by the execution of a promissory note from the SMSF in favour of the Vestey Trust and a caveat over the SMSF’s real property in the name of the Vestey Trust. Some schemes also allow for a transfer of an SMSF’s cash holdings to the Vestey Trust’s bank account. 

The ATO is concerned about such schemes for the following reasons:

• firstly, these kinds of arrangements are unnecessary because the superannuation system already protects SMSF assets from creditors; and
• secondly, a scheme such as that described above is a compliance risk that may contravene one or more superannuation laws.

The ATO encourages trustees involved in such schemes to make a voluntary disclosure. This will be taken into account by the ATO when determining its compliance action. 

Lodgment dates for large and medium taxpayers

Taxpayers and their advisors are reminded that the due date for lodgment of 2022 income tax returns for all large and medium entities that were taxable in the 2021 income year is 31 January 2023, unless required earlier. 

State Taxes

Duties (NSW): Exemption for first home buyer shared equity scheme

The Duties Amendment (Excluded Transactions) Regulation 2022 (NSW) amends the Duties Regulation 2022 (NSW) to prescribe a transaction which results in an increase in a person’s interest in dutiable property under an agreement entered into with the State under a shared equity scheme as an ‘excluded transaction’ for the purposes of sections 8(1)(ix) and 8(3)(k) of the Duties Act 1997 (NSW). A ‘shared equity scheme’ for these purposes is as defined in section 24B of the First Home Owner Grant and Shared Equity Act 2000 (NSW). Notably, excluded transactions are not dutiable transactions for the purposes of the Act.

Duties (NSW): DUT 031 updated

The Chief Commissioner of State Revenue has released an updated ruling regarding when declarations or acknowledgements of trust in agreements for sale will give rise to a NSW duty liability. The update reflects the effect of section 8AA of the Duties Act 1997 (NSW), which imposes duty on certain acknowledgements of trust from 19 May 2022. 

Land tax (Vic): Primary production exemption rulings finalised

The State Revenue Office of Victoria has finalised two rulings on the primary production exemptions from Victorian land tax, LTA-010 and LTA-011 (first covered in the Birchstone Brief for the week ended 14 October 2022). 

Payroll tax (Qld): Ruling on relevant contracts and medical centres released

The Acting Commissioner of Queensland State Revenue has released PTAQ000.6.1, which has effect from 22 December 2022 and explains the Commissioner’s view regarding the application of the relevant contract provisions in the Payroll Tax Act 1971 (Qld) to contractual arrangements between medical centres and medical practitioners engaged to provide the medical centre’s patients with access to their services. 

The ruling covers a number of topics, including:

• when a contract is a relevant contract; 
• engaging a practitioner through an entity; 
• exemptions from the relevant contract provisions; and
• recent relevant cases, such as Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 259. 

Other News

AAT to be abolished and replaced

The Commonwealth Attorney-General has announced that the Albanese Government will abolish the AAT and replace it with a new administrative review body. Legislation will be introduced this year to establish the new body following consultation with stakeholders. 

Cases

Del Castillo v FCT [2022] AATA 4233 – AAT confirms multi-dwelling property not an active asset

The AAT has upheld an objection decision in which the Commissioner held that a taxpayer who developed and rented out multiple dwellings on the same block of land was not entitled to claim the small business CGT concessions in respect of the property’s subsequent sale on the basis that it was not an active asset. This was because the block fell within the exception in section 152-40(4)(e), as it was an asset which was mainly used by the taxpayer to derive rent. 

FCT v Landcom [2022] FCAFC 204 – Full Federal Court upholds first instance margin scheme decision

The Full Federal Court has dismissed the Commissioner’s appeal against the decision in Landcom v FCT [2022] FCA 510 (covered in the Birchstone Brief for the week ended 13 May 2022), upholding the primary judge’s decision that where there is a supply of several freehold interests in land, the GST margin scheme applies separately to each interest, notwithstanding that they were all supplied to the same purchaser under a single contract. 

Appeals

The taxpayer has appealed to the Full Federal Court against Cheeseman J’s decision in Hedges v FCT [2022] FCA 1389 (covered in the Birchstone Brief for the week ended 25 November 2022).