Birchstone Brief for the week ended 15 September 2023

ATO Updates

Guidance on communications between objection officers and original decision-makers

The ATO has released PS LA 2023/2, which provides a framework for communication between original ATO decision makers and objection decision makers. The practice statement outlines the importance of the objection process, the particular responsibilities of the respective officers involved, and how to ensure open and transparent communications between them.

State Taxes

Duties (WA): Updated guidance on valuing mining tenements

RevenueWA has updated its guidance regarding the Commissioner of State Revenue’s treatment of certain issues when assessing and determining the dutiable value of a dutiable transaction that involves mining  tenements or the unencumbered value of mining tenements held by a landholder. DA 42.3 has been updated to include comments on the impact of deferred tax assets, acceptable valuation approaches and the effect of royalties. 

Payroll Tax (Qld): Additional time to register for GP amnesty

The Queensland Revenue Office has updated its website to reflect that medical practices making eligible payments to GPs now have until 10 November 2023 (previously 29 September 2023) to apply for the payroll tax amnesty applying to payments made under arrangements caught by the relevant contract provisions. The amnesty will apply to such payments made during the period 1 July 2018 to 30 June 2025. 

Land Tax (NSW): Guidance on expanded concession for unoccupied land intended for residential use

Revenue NSW has released CPN 031, which provides guidance regarding eligibility for the land tax concession available for unoccupied land on which a home is being constructed. This follows recent legislative changes which allow the Commissioner of State Revenue to extend the existing 4-year concession period to 6 financial years following the year in which the land is acquired in certain circumstances. The guidance predominantly focuses on the kinds of circumstances the Commissioner may consider exceptional and beyond a landowner’s control. 

ACT Revenue Office circular on principal place of residence updated

The ACT Revenue Office has updated GEN011.2, which is its circular regarding how it will determine a person’s principal place of residence for the purposes of the revenue laws it administers. The concept of a principal place of residence is relevant to numerous of the Territory’s tax concessions and exemptions, including for stamp duty, rates, land tax and payroll tax. 

 

Cases

Trustee for Kitchen Unit Trust v FCT [2023] AATA 2831 – AAT finds contractor was a common law and 12(3) employee (no written contract)

The AAT has found that a purported contractor engaged by the taxpayer was an ’employee’ of the taxpayer for superannuation guarantee purposes, both within the ordinary/common law meaning of that term and the extended definition afforded by section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth). As such, the Tribunal affirmed the objection decision under review that the taxpayer was liable for superannuation guarantee charge in relation to payments made to the worker from 1 July 2007 to 31 December 2012. 

Significantly, there was no written contract between the taxpayer and the worker. This required the Tribunal to ascertain the terms of their agreement based on what occurred in practice. Based on the Tribunal’s assessment of the evidence (noting that many of the relevant facts were in dispute), some of the reasons for its decision included that: 

  • the worker was given payslips by the taxpayer, which recorded an hourly rate and an annual salary; 
  • payments from the taxpayer into the worker’s bank account included descriptions such as ‘salary’ and ‘wages’; 
  • the inability of the worker to delegate the performance of the relevant services; and
  • the fact that the worker was subject to a high level of control from the taxpayer and intended to work within its business. 

GLDT Pty Ltd as Trustee of the George Lemezina Discretionary Trust v Commissioner for ACT Revenue [2023] ACAT 50 – Unit trust split did not give rise to a dutiable transaction

The ACT Civil and Administrative Tribunal has fully allowed two unitholding taxpayers’ objections against assessments of landholder duty. The Tribunal agreed with the taxpayers that the allocation of specific properties held by a unit trust (in which the taxpayers each held 50% of the units) to each of the taxpayers did not trigger a liability for landholder duty. This was because the Tribunal accepted that:

  • each of the taxpayers had been entitled to a distribution of 50% of the unit trust’s property before the split; 
  • these proportionate entitlements remained materially unchanged following the unit trust split; and
  • the change in the nature of the taxpayers’ interests (from a general interest of 50% each in all of the unit trust’s properties to each taxpayer having a specific interest of 100% in specific properties) did not result in the taxpayers acquiring a significant interest in the landholding unit trust which they did not have already. 

Frontlink Pty Ltd v Commissioner of State Revenue [2023] VSC 521 – Seller liable for land tax prior to settlement & ineligible for primary production exemption

The Victorian Supreme Court has dismissed a taxpayer’s appeal against a decision of the Victorian Civil and Administrative Tribunal reported at [2023] VCAT 54. This was because: 

  • there was no error in the Tribunal’s decision that there was nothing in the relevant sale contracts to suggest that the purchaser of four properties the taxpayer had contracted to sell, but which had not settled before the assessment date, had taken possession of the properties such as to deem the purchaser (and not the taxpayer) to be the owner of the properties for land tax purposes; and
  • the taxpayer’s appeal against the Tribunal’s decision that two other properties it owned were not eligible for the primary production exemption from land tax concerned a question of fact, not law (and the Court therefore had no jurisdiction to hear it). 

Appeals – Buzadzic

The taxpayer has appealed to the Full Federal Court against the decision reported at [2023] FCA 954 (covered in the Birchstone Brief for the week ended 18 August 2023), which was itself an appeal against an earlier AAT decision reported at [2021] AATA 4820. The litigation concerns default assessments issued to the taxpayer in respect of unreported income and the imposition of associated penalties for fraud and evasion.

The appeal will likely seek to challenge the primary Federal Court judge’s conclusions that:

  • the AAT did not apply the wrong or incorrect test regarding the taxpayer’s burden of proof or make unreasonable conclusions; and 
  • the Tribunal did not misapply or misconstrue relevant provisions of the income tax law. 

Appeals – Gosford Classic Car Museum

In a new development in the litigation concerning the operator of the Gosford Classic Car Museum’s entitlement to full input tax credits, the taxpayer has sought special leave to appeal to the High Court against the Full Federal Court’s decision reported at [2023] FCAFC 129 (covered in the Birchstone Brief for the week ended 18 August 2023). In that case, the Full Federal Court found that the taxpayer was subject to input tax credit limits as the relevant cars were displayed at the museum as well as being held for sale, and therefore were not only held as trading stock. 

 

Legislation

Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2023 (Cth) now law

The Bill (first covered in the Birchstone Brief for the week ended 25 November 2022) received royal assent on 14 September 2023 and is now law. 

Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 (Cth) introduced

A Bill has been introduced into the Commonwealth House of Representatives to enact various income tax measures, including several which have been discussed in previous editions of the Birchstone Brief. These include:

  • the temporary increase of the small business instant asset write-off threshold in Div 298 of the ITAA 1997 to $20,000 for the 2024 income year; 
  • the small business energy incentive, which is a bonus 20% deduction for eligible expenditure which supports electrification or more efficient energy use by small businesses, subject to certain exceptions (such as assets predominantly used to generate electricity and electric motor vehicles, although these may be eligible for other incentives); 
  • creating a new class of deductible gift recipient which may apply for endorsement from the Commissioner, namely ‘community charities’; 
  • amending the income tax law as it affects general insurers to ensure broad alignment with AASB 17; and
  • ensuring the NALE rules only apply to small superannuation funds and SMSFs, and limiting the amount of such funds’ income which is taxable as NALI in a particular income year for general NALE expenses to twice the amount of the general expense. 

 

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