Birchstone Brief for the week ended 23 June 2023

Cases

Bechtel Australia Pty Ltd v Commissioner of Taxation [2023] FCA 676 – Otherwise deductible rule not applicable to FIFO employees’ travel

The Federal Court has held that the otherwise deductible rule did not apply to the costs an employer incurred in paying for their FIFO employees’ travel costs.

The Court concluded that, since the employees were only rostered on for duty upon arrival at the work site under the relevant employment contracts, the travel expenses would not have been incurred by the employees in producing or gaining assessable income (but rather a pre-requisite to them doing so). As such, the otherwise deductible rule did not apply.

Notably, the Court affirmed that if the employees had been rostered on for duty as soon as they arrived at their point of origin airport, the otherwise deductible rule would have applied.

Geelong Turf Company Pty Ltd v FCT [2023] AATA 1718 – AAT finds failure to disclose SG shortfall not caused by exceptional circumstances

The AAT has held that there were no exceptional circumstances which prevented a taxpayer company from disclosing its SG shortfall in respect of the quarters ending December 2016 to March 2019 during the amnesty period. This was because the Tribunal:

• ruled that to constitute ‘exceptional circumstances’, there needs to be something especially unusual, uncommon, or unprecedented that distinguishes the relevant circumstances from an ordinary or common situation; and
• found that the facts advanced by the taxpayer did not constitute ‘exceptional circumstances’ within this definition.

The Tribunal consequently affirmed the Commissioner’s decision not to further remit the Part 7 penalties imposed in respect of the amnesty quarters beyond 100% of the applicable SGC (in accordance with section 62 of the Superannuation Guarantee (Administration) Act 1992 (Cth)).

DiStefano v FCT [2023] AATA 1697 – AAT allows deductions for vacant rental property

The AAT has set aside the Commissioner’s objection decision disallowing deductions claimed on an investment property in the 2017 income year. The taxpayer had not received rental income from the property since 2013 and it was uninhabitable during the relevant income year. The taxpayer had also made little progress with much needed renovations. Despite the Commissioner’s submissions to the contrary, the Tribunal held that:

• the taxpayer had done ‘just enough’ in 2017 to demonstrate he retained his commitment that he would eventually derive assessable income from the property; 
• the general slow progress toward realising the renovations did not outweigh the taxpayer’s clear purpose of the taxpayer’s original investment in the property; and
• as such, the nexus between the relevant outgoings and the production of assessable income remained, such as to make those outgoings deductible.

Chobani Pty Ltd v FCT [2023] AATA 1664 – Product containing a combination of yoghurt and confectionary not GST-free

The AAT has held that the supply of the Chobani flip strawberry shortcake flavoured yoghurt, which contained yoghurt in one compartment and a mixture of cookie and white chocolate pieces in a separate compartment, was not GST-free.

The product was designed to be mixed, and contained a combination of foods which, if they were sold separately, would be subject to different GST treatment (as yogurt is generally GST-free and biscuits and confectionary are not). At issue was whether the product was ‘a combination of’ food which was GST-free and food which was not, in which case it would not be GST free (section 38-3(1)(c) of the GST Act).

The Tribunal held that the product was a combination of food which was GST-free and food which was not, such that it was not GST-free. This was because the Tribunal considered the product was a combination of strawberry-flavoured yoghurt and cookie and white chocolate pieces which were not insignificant, readily separately identifiable and not subsumed into a separate product.

Appeals

The Commissioner has applied to the High Court for special leave to appeal the Full Federal Court’s decision in JMC Pty Ltd v FCT [2023] FCAFC 76 (discussed in the Birchstone Brief for the week ended 26 May 2023).

Legislation

Crimes Legislation Amendment (Combatting Foreign Bribery Bill 2023) (Cth) introduced

A Bill has been introduced into the House of Representatives which will, if enacted into law:

• amend Division 70 of the Commonwealth Criminal Code to strengthen Australia’s legal framework for investing and prosecuting foreign bribery; and
• make consequential amendments to the ITAA 1997 to preserve the existing rule prohibiting a taxpayer from claiming a deduction for a loss or outgoing to bribe a foreign public official.

Treasury Laws Amendment (Making Multinationals Pay Their Fair Share – Integrity and Transparency) Bill 2023 (Cth) introduced

A Bill has been introduced into the House of Representatives which will, if enacted into law:

• implement the changes to the thin capitalisation rules originally proposed as part of the Federal Government’s 2022-23 October Budget (covered in the Birchstone Brief for the week ended 28 October 2022); and
• for financial years commencing on or after 1 July 2023, require listed and unlisted Australian public companies to disclose certain information about their overseas subsidiaries as part of their annual financial reporting obligations under the Corporations Act 2001 (Cth).

The Bill has been referred to the Senate Economics Legislation Committee. A report is due on 31 August 2023.

Fair Work Legislation Amendment (Protecting Worker Entitlements) Bill 2023 (Cth) awaits assent

The Bill (covered in the Birchstone Brief for the week ended 31 March 2023), which includes a right to superannuation contributions in the national employment standards, has passed both Houses of Parliament and awaits royal awaits assent to become law.

Treasury Laws Amendment (Refining and Improving Our Tax System) Bill 2023 (Cth) awaits assent

The House of Representatives have agreed to proposed Senate amendments, and as such the Bill (first covered in the Birchstone Brief for the week ended 24 March 2023) has passed both Houses of Parliament and now awaits royal assent to become law.

Treasury Laws Amendment (2023 Measures No.2) Bill 2023 (Cth) awaits assent

The Bill (first covered in the Birchstone Brief for the week ended 12 May 2023) has been passed by both Houses of Parliament and now awaits royal assent to become law.

Treasury Laws Amendment (2022 Measures No.4) Bill 2022 (Cth) awaits assent

The Bill (first covered in the Birchstone Brief for the week ended 25 November 2022) has been passed by both Houses of Parliament and now awaits royal assent to become law.

Draft legislation to amend the non-arm’s length expense rules

Treasury has released draft legislation and explanatory materials proposing to amend the non-arm’s length income provisions as they relate to expenditure by superannuation funds. The draft legislation is consistent with the changes proposed in the 2023-24 Federal Budget (covered in the Birchstone Brief for the week ended 12 May 2023).

State Taxation Acts Amendment Bill 2023 (Vic) receives assent

The Bill containing proposed amendments to implement various tax-related measures announced in the 2023-24 Victorian Budget (covered in the Birchstone Brief for the week ended 26 May 2023) completed its passage through Victorian Parliament on 20 June 2023, received royal assent on 27 June 2023, and is now law.

Revenue Legislation Amendment Bill 2023 (Qld) awaits assent

The Bill containing proposed amendments to implement various tax-related measures announced in the 2023-24 Queensland Budget (covered in the Birchstone Brief for the week ended 16 June 2023) passed through the Queensland Parliament without amendment, received royal assent on 23 June 2023, and is now law.

Statutes Amendment (Budget Measures) Bill 2023 (SA)

A Bill containing proposed amendments to implement various tax-related measures announced in the 2023-24 South Australian Budget (covered in the Birchstone Brief for the week ended 16 June 2023) has been introduced into the South Australian House of Assembly.