Birchstone Brief for the week ended 21 July 2023

We’re back! Following the success of our inaugural Advisers’ Day, we’re doing it again on Friday, 1 September 2023 at Fraser’s Kings Park!

The day will be packed with tax, trust and estate planning sessions curated for professionals in the SME space. The program for the day will address both common challenges and emerging trends in the field including:

• Characterising Workplace Relationships: Employee v Contractor; 
• Common Payroll Tax Mistakes;
• Estate Planning for Blended Families;
• Dealing with UPEs and Loans in Estate Plans; 
• Family Law Panel: Separating Fact from Fiction; 
• Trust Distributions: How to Get Them Right; and 
• a Small Business CGT concessions workshop. 

There will also be time to network and unwind over drinks after the technical sessions conclude at 5PM. 

All attendees will receive a CPD Certificate for the event. Western Australian lawyers will receive 6 CPD points in Competency Area 4 – Substantive Law.

Tickets

Secure your seat today, and take advantage of our early bird pricing of just $149 until 31 July 2023! 

Unable to attend in person? We’ve got you covered with a remote live streaming option. 

If you wish to send 4 or more people from your firm, please contact us for tailored pricing. Also, for firms interested in sending different team members to different sessions, corporate tickets are available for $299.

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

ATO Updates

Decision impact statement: Complete Success Solutions Case

The ATO has issued a decision impact statement (DIS) regarding the Full Federal Court’s decision in FCT v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19 (covered in the Birchstone Brief for the week ended 3 March 2023). 

In the DIS, the ATO states that the Commissioner considers the Full Court’s decision supports the proposition that the cancellation of a GST benefit under Division 165 is not prevented by the absence of knowledge or wilful blindness to the actions of parties involved in entering or carrying out the scheme as a whole or various parts of it. 

The Commissioner is reviewing the impact of the decision on related advice and products, including PS LA 2005/24 (which deals with the application of general anti-avoidance rules). 

ATO press release regarding overseas R&D rules

Following the Commissioner’s success in T.D.S. Biz Pty Ltd v FCT [2023] FCA 710, the ATO has issued a press release reminding businesses to comply with the overseas R&D rules. 

ATO to obtain data from motor vehicle registries 

The ATO has given notice that it will acquire data from State and Territory motor vehicle registry authorities for the 2022-23 to 2024-25 income years. 

This data will be matched with other ATO data to determine tax compliance risk profiles and identify relevant cases for administrative action. 

Tax agent annual lodgment performance results

The ATO has announced that tax agents can now access their annual on-time lodgment performance results through the lodgment program status feature on online services for agents. 

Class and product rulings issued

The ATO has issued the following:

• PR 2023/12 – Challenger Guaranteed Annuity (Short Term); 
• PR 2023/13 – UBS Structured Option and Loan Facility; 
• CR 2023/37 – Sovereign Metals Limited – Demerger of NGX Limited; 
• CR 2023/38 – Qantas Airways Limited – 2022/23 Qantas Manager Incentive Plan; and
• CR 2023/39 – Habitat for Humanity Australia – Deductibility of donations under a payment direction deed. 

Other News

Consultation paper on individual tax residency rules

Treasury has released a Consultation Paper regarding a new, modernised individual tax residency framework based on recommendations made by the Board of Taxation in its 2019 report Reforming Individual Tax Residency Rules – A Model For Modernisation. The modernisation of the individual residency rules based on the recommendations in the report was originally announced by the former Morrison Government in the 2021-22 Federal Budget. 

Under the Board’s proposed model, the primary test for individual tax residency would be a ‘bright line’ test – under which a person who is physically present in Australia for 183 days or more in any income year would be an Australian tax resident. Individuals who did not meet the primary test could also potentially be Australian tax residents if they fell within any of the secondary tests, which will depend on a combination of physical presence and measurable, objective criteria. 

Treasury is inviting interested parties to comment on the Consultation Paper by 22 September 2023. 

Cases

Ierna Beneficiary Pty Ltd v Commissioner of Taxation [2023] FCA 725 – Commissioner’s admission evidence of excessive assessments

The Federal Court has agreed to consent orders that a taxpayer’s appeal against amended assessments should be allowed, after the Commissioner conceded that the assessments made were, in fact, excessive. In making its decision, the Court noted that:

• the Court could only exercise its powers to vary the assessments under section 14ZZP of the TAA 1953 where a taxpayer had discharged the burden of proof imposed by section 144ZO;
• as a taxation appeal is a judicial proceeding, the burden imposed by section 144ZO can only be satisfied by admissible evidence; and
• the Commissioner’s admission that the assessments were excessive was sufficient proof they were, to the extent of that admission, as a matter of fact excessive.

Aston v Commissioner of Taxation [2023] AATA 1848 – AAT refuses to allocate excess contributions to previous income year 

The AAT has upheld the Commissioner’s decision to refuse to reallocate excess concessional superannuation contributions to the 2018-19 financial year after the taxpayer made a contribution via direct debit on 26 June 2019 which was not received by his super fund until 1 July 2019. This was because the Tribunal considered the circumstances did not qualify as “special circumstances” under section 291-465 of the ITAA 1997. In making its decision, the AAT noted that:

• the time it took the taxpayer’s super fund to process his contribution was not unusual;
• the resulting tax imposed (as the taxpayer had made a further concessional contribution in August 2019 and subsequently exceeded the concessional contributions cap in the 2019-20 year) was not harsh; and
• when making concessional contributions close to the end of an income year, it is reasonable for taxpayers to confirm timely receipt, regardless of perceived payment timeframes.

Richmond v Commissioner of Taxation [2023] AATA 1915 – No deduction for conditional joint venture expenditure

The AAT has affirmed the Commissioner’s decision that a $1.5 million conditional payment made by a taxpayer to acquire a 75% interest in a joint venture was not tax deductible under either section 8-1 (as it constituted capital expenditure) or Division 40 (as it did not result in the taxpayer obtaining a mining, quarrying or prospecting right or mining, quarrying or prospecting information) of the ITAA 1997.

Sexyworld (Aust) Pty Ltd v Commissioner of Taxation [2023] AATA 1919 – No CFB for adult shop companies 

The AAT has held that six related companies operating adult shop businesses were ineligible for the cash flow boost. This was because:

• payments to the group’s employees were made by a payroll company rather than the entities themselves, and as such the entities had failed to establish that they had made payments to employees as required by section 5(1)(a)(i) of the CFB Act; and
• the AAT considered that all but one of the companies had entered into a scheme with the dominant purpose of making themselves entitled to the cash flow boost, and as such had offended the anti-avoidance provisions of the CFB Act.

Appeals

The NSW Chief Commissioner of State Revenue has applied to the High Court for special leave to appeal against the NSW Court of Appeal’s decision in Chief Commissioner of State Revenue (NSW) v Shell Energy Operations No 2 Pty Ltd [2023] NSWCA 113 (covered in the Birchstone Brief for the week ended 2 June 2023).