Ruling on individual residency finalised
TR 2023/1 outlines the Commissioner’s views regarding the residency tests for individuals for tax purposes as set out in section 6(1) of the ITAA 1936 and when the Commissioner considers that a person will be a resident of Australia for tax purposes. The lengthy ruling:
- replaces IT 2650, IT 2681 and TR 98/17;
- finalises TR 2022/D2;
- takes into account recent cases, including but not limited to Harding v FCT, Pike v FCT and Addy v FCT;
- provides 18 examples; and
- considers how the residency tests apply to short-term temporary workers, working holiday makers, part-year residents and dual residents.
Ruling on labour costs and capital assets
TR 2023/2 finalises TR 2019/D6 and sets out the Commissioner’s view regarding the correct treatment of labour costs relating to the construction or creation of capital assets. In essence, the Commissioner considers that while labour costs are generally revenue in nature, ‘capital asset labour costs’ incurred specifically for constructing or creating capital assets are incurred on capital account and are therefore not deductible under section 8-1. The Commissioner considers that whether particular costs are so incurred is a question of fact and degree.
GSTR 2004/7 updated
The ATO has issued an addendum to GSTR 2004/7, which deals with when GST will be applied to the supply of certain things to non-resident individuals or entities outside of Australia, to reflect the ATO’s updated guidance regarding individual tax residency in TR 2023/1.
ATO to focus on SMSFs with interests in property development activities
The ATO has issued TA 2023/2, which alerts taxpayers that the ATO will pay increased attention to arrangements designed to divert profits from property development projects to SMSFs through the use of special purpose vehicles involving non-arm’s length arrangements.
The ATO is concerned that these types of arrangements lack commerciality and result in profits being shifted from related entities to a concessionally-taxed SMSF (and potentially the SMSF receiving tax offset refunds in relation to dividends received if the SPV is a company), thereby reducing the overall tax payable.
The Commissioner considers that:
- dividends and franking credits received by SMSFs under such arrangements may be non-arm’s length income within the meaning of section 295-550 of the ITAA 1997;
- Part IVA may apply to such arrangements; and
- such arrangements may result in compliance action being taken against the SMSF and its trustees/the directors of its corporate trustee.
Certain PAYG withholding labels to be pre-filled in activity statements from July 2023
The ATO has announced that, from July 2023, PAYG withholding data from single touch payroll (STP) reports will be used to pre-fill relevant taxpayer’s activity statements. Labels W1 and W2 will be automatically filled under these new arrangements, but labels W3 and W4 will not. Changes made to STP reports will also not pre-fill.
ATO to data-match income protection and rental property insurance data
As set out in two legislative instruments registered on the Federal Register of Legislation, the ATO will acquire:
The collected data will be matched against ATO records and used to ensure taxpayers are meeting their obligations.
Class and product rulings issued
The ATO has issued:
- CR 2023/30 – Wesbeam Holdings Limited – Selective off-market share buy back;
- CR 2023/31 – LogbookMe Pty Ltd – LogbookMe In-Car Logbook Solution for measuring the kilometres travelled in a vehicle for fuel tax credit purposes;
- CR 2023/32 – EROAD Australia Pty Ltd – Fuel Tax Credits Solution;
- PR 2023/7 – W.A. Blue Gum Project 2023; and
- PR 2023/8 – Elders Rural Services Australia Ltd – Rural Products Prepayment Program.