Birchstone Brief for the week ended 17 February 2023

Gift & Loan Back Arrangements – Webinar

The “gift and loan back” strategy is popular for individuals with high:

• occupational risks;
• bankruptcy risks; and/or
• family provision claim risks,

who own assets in their personal capacity that are vulnerable to those risks. The strategy aims to strip the value out of the personal asset pool, without transferring any assets themselves (which would generally trigger CGT and/or duty liabilities).

Gift and loan back arrangements have been in vogue for many years now, and they come in a variety of forms. But the 2022 decision of the Queensland Supreme Court in Re Permewan raised many questions about the efficacy of the strategy.

Join Daniel Taborsky and Lisa Monaco on 21 March at 11am AWST / 2pm AEDT where they will put the gift and loan back strategy under the microscope and discuss:

• what the strategy is and how it should work;
• whether the strategy is still viable in light of recent cases;
• what the potential benefits and risks are; and
• what should be done when setting up new, or maintaining existing, gift and loan back arrangements.

Click the link below to find out more and to register for the webinar.

ATO Updates

PCG regarding working from home deductions finalised

PCG 2023/1 finalises PCG 2022/D4 and sets out the ATO’s compliance approach to taxpayers claiming a deduction for additional running expenses incurred while working from home. In summary, the PCG provides that from 1 July 2022 taxpayers can only claim such expenses if they use the:

• ‘actual expenses’ method (that is, calculating and claiming actual expenses incurred as a result of working from home); or 
• the revised fixed-rate method (as outlined at paragraphs 23 to 26). 

Also of note is the fact that the finalised PCG retains elements of PCG 2022/D4 which were critcised by tax professionals (as discussed in the Birchstone Brief for the week ended 4 November 2022).

Class rulings issued

The ATO has issued:

• CR 2023/4 – Controlled Thermal Resources Ltd – Exchange of shares for shares in Controlled Thermal Resources Holdings Inc; 
• CR 2023/5 – Royal Institute for Deaf and Blind Children – Arrangements for donations of medical fees from participating ear, nose and throat surgeons; 
• CR 2023/6 – Australia and New Zealand Banking Group Ltd – Exchange of shares for shares in ANZ Group Holdings Ltd;
• CR 2023/7 – Link Administration Holdings Ltd – Demerger of PEXA Group Ltd; and
• CR 2023/8 – Insurance Australia Group Ltd – IAG Capital Notes 2. 

Other News

Productivity Commission to undertake inquiry into philanthropy

The Treasurer has requested that the Productivity Commission undertake an inquiry into philanthropic giving in Australia.  The terms of reference provide that the inquiry will involve, among other things, an examination of the tax expenditure framework that applies to charities. The Commission has also been asked to advise on priority areas for reform to address barriers or harness opportunities to increase philanthropy, having regard to (amongst other things) the integrity of the taxation system. 

The goal of the review is to boost charitable donations and achieve the government’s goal of doubling philanthropic giving by 2030. The final report should be provided in the first half of 2024. 

National principles for charitable fundraising established

The Assistant Minister for Competition, Charities and Treasury has announced that the Commonwealth, State and Territory Treasurers have agreed to a set of national fundraising principles to streamline and harmonise State and Territory requirements regarding charitable fundraiser conduct. Regulatory guidance will be developed in collaboration with the charitable fundraising sector, with each participating jurisdiction to release an implementation plan by July 2023. 

Legislation

Bill regarding TPB reform, off-market share buy-backs and franked distributions funded by capital raisings introduced

The Treasury Laws Amendment (2023 Measures No 1) Bill 2023 (Cth) was introduced into the House of Representatives on 16 February. If enacted into law, the Bill will:

• implement certain recommendations of the Independent Review of the Tax Practitioners Board; 
• align the tax treatment of off-market and on-market share buy-backs undertaken by listed public companies and amend the income tax law regarding selective share cancellations to ensure alignment of tax treatment across the capital management activities of listed public companies; and
• prevent companies from franking certain distributions funded by capital raisings.