Birchstone Brief for the week ended 25 August 2023

ATO Updates

Guidance regarding the ‘principal purpose of a vehicle’ released 

The ATO has released LCTD 2023/1, which sets out the Commissioner’s view regarding how to determine if a car is a commercial vehicle that is not designed for the principal purpose of carrying passengers. Such cars are excluded from the definition of a ‘luxury car’ for the purposes of the luxury car tax. Notably, the determination confirms that the Commissioner considers a vehicle’s classification under the Australian Design Rules is not determinative in ascertaining its principal purpose.

Class and product rulings issued

The ATO has issued the following:

  • CR 2023/45 – Western Australian Debating League Incorporated – Payments to League Members;
  • CR 2023/46 – MetalsTech Limited – Return of capital by way of in specie distribution;
  • PR 2023/15 – Challenger Guaranteed Annuity (Floating Rate Fixed term);
  • PR 2018/15A1 – Addendum to PR 2018/15 – Income tax: taxation consequences for a customer entering into a Prepay and Grow Agreement with Ruralco; and
  • PR 2019/3A3 – Addendum to PR 2019/3 – Income tax: taxation consequences for customers entering into a Prepay Plus Agreement with Landmark.

State Taxes

Payroll tax (Vic): Relevant contracts & medical centres

The State Revenue Office of Victoria has released PTA-041, which clarifies its position on the payroll tax liabilities of medical centres and other health practices which make payments to medical contractors. The ruling is harmonised with similar rulings in South Australia, Queensland and New South Wales.

Payroll tax (NSW): Audits, interest and penalties to be paused for 12 months for medical centres contracting with GPs

The NSW Minister for Finance announced that the NSW Government will move to pause payroll tax audits for medical practices that contract with GPs for a period of 12 months. There will also be a 12-month pause on tax penalties and interest accrued on any such outstanding payroll tax debts which were incurred before and at the commencement of the 12-month period. Notably, the proposed pause only applies to GPs – it does not apply to the other wide range of health practitioners and practices mentioned in PTA 041.


Other News

IGTO Report – Small Business Litigation Funding Program

The Inspector-General of Taxation and Taxation Ombudsman (IGTO) has released a report entitled Improving the operation of the Small Business Litigation Funding Program. The report contains several recommendations the IGTO considers will improve the ATO’s administration of the program.


McEwan v Office of the Australian Information Commissioner [2023] FCAFC137 – Full Federal Court holds ATO’s disclosure of personal information was permitted

The Full Federal Court has dismissed an appeal against the Federal Court decision reported at [2022] FCA 1488, in which the Court dismissed an application for judicial review of the Australian Information Commissioner’s decision not to proceed with an investigation of the ATO’s disclosure of personal information to a third party in the course of its investigation of the applicant. The applicant’s position had been that the ATO officers (as taxation officers) were prohibited by the relevant legislative framework from disclosing its personal information to any entity other than another taxation officer.

The Full Federal Court agreed with the first instance decision, holding that in light of the relevant authorities and the proper construction of the relevant provision (section 355-50 of Schedule 1 to the TAA 1953), it was clearly permissible for an ATO officer to make disclosures of a taxpayers’ personal information to a third party in the course of performing their duties as a taxation officer. As such, the applicant’s appeal was dismissed.

Makrylos v FCT [2023] FCA 971 – Land acquired by property developer held to be trading stock from date of acquisition

The Federal Court has concluded that land acquired by the taxpayer in his own name was held as trading stock subject to a joint venture agreement as at the date of acquisition (and not 5 years later when the taxpayers’ plans to build his dream home on the land evolved into a 16-lot subdivision) and that its ultimate sale was undertaken in the ordinary course of a property development business conducted by the taxpayer. This was primarily due to the Court’s assessment of the taxpayer’s evidence, which was inconsistent and described as argumentative, selectively evasive, vague and unresponsive. As a result, the Court found that the taxpayer had failed to discharge his burden of proving that the relevant amended assessments were excessive or what they ought to have been, and consequently dismissed his appeal against them. 

Edge Developments Pty Ltd v Commissioner of State Taxation (SA) [2023] SASCA 88 – Equitable interest in land made unit trust a land holding entity

The South Australian Court of Appeal has dismissed the taxpayers’ appeal against the decision reported at [2022] SASC 55 (covered in the Birchstone Brief for the week ended 17 June 2022), affirming the first instance decision that a unit trust’s equitable interest in land pursuant to a performance charge was a relevant interest in land sufficient to render it a land holding entity. As such, a redemption of units in the unit trust that led to an increase in the relevant taxpayers’ interests was a dutiable transaction.


Exposure draft legislation: cap on deductions for PRRT purposes

Treasury has issued exposure draft legislation and explanatory material relating to the Government’s proposal in the 2023-24 Federal Budget to introduce a cap on the use of deductions to offset assessable income for the purposes of the petroleum resource rent tax (PRRT).

Qld Duties Regulation remade

The Duties Regulation 2012 (Qld), which was due to expire on 1 September 2023, has been remade into the Duties Regulation 2023 (Qld). The 2023 Regulation commences on 2 September 2023.



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