Birchstone Brief for the week ended 30 June 2023

ATO Updates

Draft guidance regarding the NALI rules and CGT provisions

TD 2023/D1 explains the Commissioner’s view regarding how the non-arm’s length income (NALI) rules and CGT provisions interact in determining the amount of statutory income that is NALI in circumstances where a superannuation fund’s non-arm’s length dealings result in a capital gain.

Finalised determination regarding income from an individual’s fame

TD 2023/4 finalises TD 2022/D3 (covered in the Birchstone Brief for the week ended 7 October 2022) and confirms the Commissioners view that income from the use of an individual’s fame cannot be alienated to a related entity.

Draft guidance on Commissioner’s discretion to determine that an entity does not ‘control’ another entity

TD 2023/D2 relates to the exercise of the Commissioner’s discretion, contained in section 328-125(6) of the ITAA 1997, to determine that an entity which has between a 40% and 50% interest in another entity does not ‘control’ that entity for the purpose of being ‘connected with’ it. It covers several specific issues concerning the Commissioner’s administration of that discretion, namely:

  • whether the discretion should be exercised where a third entity controls the day-to-day management of the other entity’s affairs despite having below a relatively insignificant interest in the company; and
  • whether control percentages of between 40% and 50% should be disregarded because the remaining holders of interests in the test entity will together necessarily control the entity, irrespective of their number or relationship to each other.

PS LA 2011/15 updated

The ATO has updated PS LA 2011/15 following the adoption of a new function allowing tax agents to make lodgment deferral requests online and the commencement of the new sharing economy reporting standard.

Draft update to the central management and control test company residency test

The ATO has issued a PCG 2018/9DC1 to PCG 2018/9 (which deals with identifying where the central management and control of a company is located). The update proposes to include a risk assessment framework to assist foreign-incorporated companies in managing compliance risks and provide certainty regarding the ATO’s compliance approach to the central management and control test of corporate tax residency.

ATO Charter released

The ATO Charter replaces the Taxpayer’s Charter and sets out:

  • what can be expected when interacting with the ATO;
  • the ATO’s commitments to taxpayers;
  • what the ATO asks of taxpayers when dealing with them; and
  • the steps that can be taken when a taxpayer would like to have a decision reviewed or lodge a grievance.

Class and product rulings issued

The ATO has issued:

  • CR 2023/33 – Commonwealth Bank of Australia – CommBank PERLS XVI Capital Notes;
  • CR 2023/34 – The Illawarra Community Housing Trust Ltd – Deductibility of donations under a Payment Direction Deed; and
  • PR 2023/9 – KPMG – FTC Automator platform – Fuel tax credits.


State Taxes

ACT: 2023-24 Budget released

The ACT Treasurer handed down the 2023-24 ACT Budget on 27 June 2023. The key tax-related measures are as follows.

  • From 1 July 2025, businesses (excluding universities with a campus in the ACT) with Australia-wide wages above $50 million will be subject to an additional 0.25% payroll tax and those with Australia-wide wages above $100 million will be subject to an additional 0.50% payroll tax.
  • From 1 July 2023, the price threshold for the off-the-plan duty concession will increase from $600,000 to $700,000 and the lowest conveyance duty tax rate for owner-occupiers will be reduced from 0.6% to 0.49%.

Revenue Legislation Amendment Bill 2023 (NSW) now law

The Bill, which amends the:

  • Duties Act 1997 (NSW) by removing the public landholder duty concession; and
  • Land Tax Management Act 1956 (NSW) to extend the time in which an individual may treat unoccupied land as their principal place of residence,

has received royal assent and is now law.

First Home Buyer Legislation Amendment Bill 2023 (NSW) now law

The Bill (covered in the Birchstone Brief for the week ended 2 June 2023) has received royal assent and is now law.



Container Homes Designer Domain Pty Ltd v FCT [2023] AATA 1815 – AAT rules part payment of a contract was not a deposit

The AAT has held that the payment of 50% of a total contract price upon entry into that contract was not a deposit within the meaning of Division 99 of the GST Act. As such, the  taxpayer (who was the supplier under the contract) was not liable for GST as a result of its customer’s decision to unilaterally cancel the contract but allow the taxpayer to keep the deposit. In making its decision, the Tribunal commented that a payment should not be easily inferred as a deposit without good reason and placed significance on the fact that:

  • the amount of money paid was substantial; and
  • the contractual documents described the payment as an advance as opposed to a deposit.

Hannover Life Re of Australasia Ltd v FCT [2023] FCA 680 – Federal Court confirms insurance company’s overhead expenses were partly creditable

The Federal Court has confirmed that, to the extent an Australian life insurance company’s overhead expenses related to its GST-free supplies of reinsurance services, those expenses were partly creditable. The Court also accepted that, subject to one modification, the company’s method of apportionment was ‘fair and reasonable’ in the circumstances.

Mylan Australia Holding Pty Ltd v FCT [2023] FCA 672 – Commissioner wins discovery dispute in Part IVA proceedings

The Commissioner has been successful in obtaining discovery orders against a corporate taxpayer in preparation for a Part IVA dispute involving disallowed interest expense deductions. The documents in question concerned tax modelling analysis and the taxpayer’s (an Australian subsidiary of a multinational group) capacity to service debt.
In ordering discovery of the relevant documents,  the Federal Court ruled that, contrary to the taxpayer’s arguments:

  • neither the tax modelling documents nor documents evidencing debt servicing capacity were irrelevant merely due to being subjective in nature; and
  • the relevant documents could also be used to determine the manner in which the scheme that was entered into or carried out.

BSA Ltd v Chief Commissioner of State Revenue [2023] NSWCATAP 159 – Company liable for payroll tax

The New South Wales Civil and Administrative Tribunal has held that subcontracting arrangements regarding the supply and installation of pay TV and broadband equipment and the making of service calls were ‘relevant contracts’ subject to NSW payroll tax.

Gogulan v Chief Commissiner of State Revenue [2023] NSWCATAD 162 – Taxpayer denied NSW land tax principal place of residence exemption

This case considers what it means for a property to be continually used and occupied for residential purposes and for no other purpose to qualify as a principal place of residence and therefore be exempt from NSW land tax.

Wei v Chief Commissioner of State Revenue [2023] NSWCATAD 161 – Foreign property owners denied exemption from surcharge land tax

The New South Wales Civil and Administrative Tribunal has confirmed the fact that foreign property owners were absent from Australia due to COVID-19 travel restrictions was irrelevant to the question of whether they were subject to surcharge land tax. As such, they were not exempt from the surcharge as neither of them were Australian residents nor ordinarily resident in Australia during the relevant land tax years.

Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd v Commissioner of State Revenue [2023] VCAT 634 – Investors’ acquisitions aggregated for landholder duty purposes

The Victorian Civil and Administrative Tribunal has held that shares separately acquired by independent and unrelated investors in a landholder as part of a capital raise together formed, evidenced, gave effect to or arose from substantially one arrangement, transaction or series of transactions and were therefore aggregated for landholder duty purposes.

Nguyen v Commissioner of State Revenue [2023] VCAT 694 – Foreign purchaser liable for additional duty in respect of property transfer

This case dealt with multiple properties which were transferred jointly to the taxpayer and a foreign purchaser, with the final decision being that the transfers were liable for foreign purchaser additional duty.



Draft legislation to create new DGR category for community charity funds released

Treasury has released exposure draft legislation and explanatory materials for consultation. The draft Bill will:

  • establish a new general DGR category for ‘community charity funds’; and
  • create a compliance regime for such funds under the TAA 1953 like that which currently exists for ancillary funds.

Treasury Laws Amendment (2023 Measures No 2) Bill 2023 (Cth) now law

The Bill (first covered in the Birchstone Brief for the week ended 12 May 2023) has received royal assent and is now law.

Treasury Laws Amendment (Refining and Improving Our Tax System) Bill 2023 (Cth) now law

The Bill (first covered in the Birchstone Brief for the week ended 24 March 2023) has received royal assent and is now law.

Treasury Laws Amendment (Military Superannuation Benefits) Regulations 2023 registered

Regulations (previously released in draft and covered in the Birchstone Brief for the week ended 5 May 2023) which complement the Treasury Laws Amendment (2022 Measures No 4) Act 2022 (Cth) in reversing the Full Federal Court’s decision in FCT v Douglas [2020] FCAFC 220 have now been implemented.



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