Birchstone Brief for the week ended 31 March 2023

ATO Updates

PS LA on rectification directions issued

The ATO has issued PS LA 2023/1, which provides guidance to ATO staff regarding the issuance of rectification directions to a trustee (or a director of a corporate trustee) of a self-managed superannuation fund for contraventions of the Superannuation Industry (Supervision) Act 1993 (Cth). 

Draft guidance on electric vehicle home charging expenses released

The ATO has issued PCG 2023/D1, which provides a cents per kilometer rate of 4.20 cents which can be used to calculate the electricity costs of charging an electric vehicle at a residential premises. The rate can then be multiplied by the number of relevant kilometers travelled in a given FBT or income year. The Guideline will apply to zero emissions vehicles and not plug-in hybrid electric vehicles, and contains various requirements which must be met for taxpayers to be able to rely on it. 

FBT rates and thresholds released for 2023-24 

The Commissioner has released various FBT rates and thresholds for the FBT year commencing on 1 April 2023, including the cents per kilometer rate for the private use of a vehicle other than a car (TD 2023/1) and reasonable food and drink amounts for employees living away from home (TD 2023/2). 

Past FBT determinations withdrawn

The following FBT determinations have been withdrawn with effect from 30 March 2023 (but continue to bind the Commissioner in relation to the relevant period to which they applied):

• TD 2017/2; 
• TD 2017/3;
• TD 2017/4;
• TD 2017/5;
• TD 2017/6; and
• TD 2017/14.

IT 2208 withdrawn

IT 2208, which dealt with the deductibility of administration expenses in exploration and prospecting businesses, has been withdrawn with effect from 30 March 2023. 

State Taxes

Victorian SRO updates ruling on when Commissioner will accept personal cheques

TAA-001v2 updates and replaces TAA-001 and clarifies the State Revenue Office of Victoria’s position regarding when the Commissioner will accept payment of a tax debt by personal cheque. Generally speaking, the SRO encourages and prefers payment by BPay, EFT and credit card, but will still accept personal cheques in certain circumstances. 

Payroll Tax (Vic): Ruling regarding interest and penalty tax updated

PTA-036v5 explains how penalty tax and interest is applied to a range of payroll tax defaults and replaces PTA-036v4 from 1 April 2023.

Other News

Consultation on changes to tax rate for superannuation balances above $3 million

The government has released a consultation paper seeking feedback regarding its proposal to increase the headline tax rate applied to superannuation earnings corresponding to the proportion of an individual’s superannuation balance that is greater than $3 million to 30%.

Cases

Konebada Pty Ltd ATF William Lewski Family Trust v FCT [2023] FCA 257 – Legal and advisory services not acquired by trustee in carrying on an enterprise

The Federal Court has found that the trustee of a family trust was not entitled to claim input tax credits in relation to legal and advisory services it acquired on behalf of members of its family group on the basis that they were not incurred in carrying on an enterprise.  

Chief Commissioner of State Revenue (NSW) v Godolphin Australia Pty Ltd [2023] NSWCA 44 – Horse breeding and racing business not eligible for land tax exemption

The NSW Court of Appeal has ruled that the respondent taxpayer was not entitled to a land tax exemption for primary production in respect of the land on which it conducted a business of breeding, training, racing and selling thoroughbred racehorses. This was because a majority of the Court was not satisfied that the taxpayer had proven its dominant use of the land in the relevant years was maintaining animals for the purpose of selling them, their natural increase or bodily produce as was required to avail of the exemption. In so doing, the Court overturned Ward CJ’s decision reported at [2022] NSWSC 430.

DQTB v FCT [2023] AATA 515 – Taxpayers’ minor agistment activities did not constitute a business

The AAT has held that two taxpayers who owned a 75-acre property and provided agistment (including some animal husbandry and veterinary care services) for livestock belonging to their wholly-owned company were not carrying on a business, and were therefore unable to claim deductions for associated expenditure which significantly exceeded the agistment income reported in their tax returns. 

Legislation

Bill to give workers greater right to recover unpaid superannuation introduced

If enacted, Schedule 3 Part 1 of the Fair Work Legislation Amendment (Protecting Worker Entitlements) Bill 2023 (Cth) (which was introduced into the House of Representatives on 29 March 2023) will insert a new Division 10A into Part 2-2 of the Fair Work Act 2009 (Cth) to provide a new entitlement to superannuation contributions in the National Employment Standards (NES).

This will require employers to make superannuation contributions for the benefit of an employee so as to avoid application of the superannuation guarantee charge (SGC), and thereby provide a mechanism by which a greater number of Australian workers would be able to personally seek to recover unpaid superannuation (as it would constitute a breach of a workplace entitlement). The amendments are intended to complement (and not override or replace) the ATO’s existing broad regulatory powers to recover SGC amounts where an employer has a superannuation guarantee shortfall. 

Further, by including a right to superannuation contributions in the NES, employers who fail to make the required contributions could be subject to a civil penalty and/or other court orders generally available for breaches of the NES. 

Refining and improving tax system Bill passes House of Representatives

The Treasury Laws Amendment (Refining and Improving Our Tax System) Bill 2023 (Cth) (discussed in the Birchstone Brief for the week ended 24 March 2023) passed the House of Representatives on 29 March 2023.

Exposure draft legislation & explanatory material: intangibles & multinational tax integrity

Treasury has released exposure draft legislation (and associated explanatory material) intended to implement an anti-avoidance measure (announced as part of the October 2022-23 Federal Budget) to prevent large multinational businesses (significant global entities) from claiming tax deductions for payments relating to intangibles connected with low corporate tax jurisdictions.