Birchstone Brief for the week ended 6 October 2023

Other News

Hello to our valued readers!

Before diving into this week’s tax updates, we’ve got some heartwarming news to share.

One of our dedicated team members, Associate Director Lisa Monaco, has just embraced the joy of parenthood, welcoming little Kristian into the world on 20 September 2023. 

Amid our busy schedules and regular tax updates, moments like these remind us of the personal milestones that make life so special.

We are sending a big cheer and congratulations to Lisa and Dennis!

And to our dear readers – as always, thank you for being part of our community and sharing in our team’s celebrations.

ATO Updates

Draft ruling regarding capital allowances and composite items

TR 2023/D2 contains the Commissioner’s updated views regarding the income tax implications of composite items, and how to identify the relevant depreciating asset for Division 40 purposes. The draft ruling replaces TR 2017/D1, which was withdrawn with effect from 4 October 2023. Comments on the changes contained in TR 2023/D2 are invited until 3 November 2023. 

Class rulings issued

The ATO has issued:

• CR 2023/53 – National Australia Bank Limited – NAB Capital Notes 7; 
• CR 2023/54 – EML Payment Solutions Limited – Employer clients’ use of living expenses card facility;
• CR 2023/55 – EML Payments Solutions Limited – Employer clients’ use of meals and entertainment card facility; and 
• CR 2023/56 – Abacus Property Group – De-stapling and re-stapling as Abacus Group and Abacus Storage King – Employee share scheme. 

Cases

Assad v FCT [2023] AATA 2995 – No entitlement to ABN or GST registration as no evidence of an enterprise

The AAT has ruled that a taxpayer was not entitled to hold an ABN or be registered for GST on the basis that he was not carrying on an enterprise, and in so doing upheld the Commissioner’s objection decision to the same effect. The reason for this conclusion was that, despite the over $100,000 in input tax credits claimed by the taxpayer in the relevant period, absolutely no evidence (such as bookings or invoices or specific details of alleged customers) was put forward before the Tribunal to substantiate the taxpayer’s claims that he had undertaken an activity or series of activities in the form of a business. Nor was the mere fact that the taxpayer had arranged for a business name and registered an ABN and for GST evidence that he had been conducting a business enterprise.

Appeals – Edge Developments

The taxpayer has applied to the High Court for special leave to appeal against the South Australian Court of Appeal’s decision reported at [2023] SASCA 88 (covered in the Birchstone Brief for the week ended 25 August 2023). In that case, the Court of Appeal held 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; and
• as such, a redemption of units in the unit trust that led to an increase in the relevant taxpayers’ interests was a dutiable transaction.

Cases

Quirky Mama Productions Pty Ltd v Screen Australia [2023] AATA 3089 – Producer offset claim largely denied as relevant expenditure was not “incurred” 

The AAT has affirmed Screen Australia’s decision to deny the majority of expenses claimed as “qualifying Australian production expenditure” (QAPE) by a film production company for the purposes of the refundable Producer Offset. The primary reason for this was that the taxpayer company’s obligations to make large payments to certain suppliers were contingent – being subject to either the commercial success of the film being produced or the receipt of a refunded Producer Offset. As such, given that the taxpayer company did not have a presently existing liability to pay the relevant amounts at the relevant time, it could not be said to have “incurred” the bulk of the QAPE claimed.

Dalby v FCT [2023] AATA 3069 – Taxpayer ineligible to have objection decisions reviewed in Small Business Taxation Division 

The AAT has held that a taxpayer was ineligible to have objection decisions reviewed in the Small Business Taxation Division as they were not a “small business entity” in any of the income years under review. While the taxpayer’s aggregated turnover had dropped below the small business threshold in the income year in which the objection decisions were made, it was above $2 million in each of the income years to which an objection decision related. As such, given that the Tribunal had decided the taxpayer needed to be a “small business entity” in the income years under review and not in the income year in which the objection decision was made, the review of the objection decisions could not proceed in the Small Business Taxation Division. 

Legislation

Draft legislation and explanatory materials – additional 15% tax for large superannuation account earnings

Treasury has released exposure draft legislation and explanatory materials regarding the proposed amendments to Australia’s tax concessions for superannuation account earnings. If enacted, the amendments will from the 2025-26 income year reduce the tax concessions for individuals with a total superannuation balance above $3 million by imposing an additional 15% tax on certain earnings under a new Division 296 to be inserted into the ITAA 1997.