Birchstone Brief for the week ended 23 February 2024

ATO Updates

Decision Impact Statement on the Wood case

The ATO has issued a Decision Impact Statement (DIS) regarding the Federal Court’s decision in FCT v Wood 2023 [2023] FCA 574. In that case, the Federal Court confirmed that a taxpayer was entitled to a deduction for a $200,000 payment made in settlement of legal proceedings, dismissing the Commissioner’s appeal from a previous AAT decision in XPTC v FCT [2022] AATA 4147 (covered in the Birchstone Brief for the week ended 16 December 2022).

The Court found that as the payment of the settlement sum arose out of activities the taxpayer had performed in gaining assessable income it could not, based on the relevant Settlement Deed, sensibly be characterised as a loss of capital or of a capital nature.

The DIS sets out that:

  • the Commissioner accepts that, on the facts found by the AAT, this conclusion was available to the Court;
  • the Commissioner considers that the decision is likely to have limited application beyond its own factual circumstances; and
  • the Commissioner’s position is that the decision does not represent a departure from established principles concerning section 8-1, and cases concerning the application of these principles always turn on the facts of the particular case.

Taxation Ruling regarding ‘crediting’ amounts to partners of CLPs finalised

TR 2024/2, which finalises TR 2017/D4 and is proposed to apply to income years commencing both before and after its date of issue, sets out the Commissioner’s position regarding when a corporate limited partnership (CLP) “credits” an amount to one of its partners within the meaning of section 94M of the ITAA 1936.

The ruling is relevant as, pursuant to sections 94L and 94M of the ITAA 1936, certain distributions, payments and credits made by a CLP to one of its partners are deemed to be dividends, which are included in the partner’s assessable income by virtue of subsection 44(1).

In summary, the Commissioner’s position as set out in TR 2024/2 is that for a CLP to “credit” an amount to one of its partners:

  • there must be something more than a mere credit entry in the CLP’s accounts;
  • this must be, in substance, an application or appropriation by the CLP of its resources to confer a benefit on the relevant partner;
  • the benefit must be legally enforceable and not subject to a condition precedent; and
  • the benefit must be separate and distinct from the partner’s existing interest in the CLP.

Taxation Ruling regarding deductibility of self-education expenses finalised

TR 2024/3, which finalises TR 2023/D1 and replaces TR 98/9 and 92/8, sets out the Commissioner’s position regarding the deductibility of self-education expenses under section 8-1 of the ITAA 1997 and provides extensive examples. It is the ATO’s intention that the ruling be read in conjunction with TR 2020/1, which sets out general deductibility principles for work expenses under section 8-1.

Statement regarding recovery of tax debts placed on hold prior to 2017

The ATO has issued a statement saying it will not be taking any further action to recover or offset tax debts placed on hold prior to 2017 whilst it reviews and develops a “pragmatic and sensible way forward” that takes into account concerns raised by the community.

Class and Product Rulings issued 

The ATO has issued:

  • CR 2024/9 – InvoCare Limited – Employee share scheme – Shares disposed of under a scheme of arrangement;
  • CR 2024/10 – InvoCare Limited – Scheme of arrangement and special dividend;
  • CR 2024/11 – Incitec Pivot Limited – Reduction of share capital;
  • CR 2024/12 – A2B Australia Limited – Special dividend;
  • PR 2024/1 – FTC Automator Platform – Use by clients of KPMG and Geotab Australia to calculate fuel tax credits.


AusNet Services Ltd v FCT [2024] FCA 90 – Valid Div 615 rollover election prevents cost base uplift

The Federal Court has dismissed a taxpayer’s submissions that the conditions of the Division 615 rollover had not been met in relation to a 2015 restructure of the stapled group of which it was the parent company, as a result of which it was interposed as the head company of two previously separate income tax consolidated groups. As a result, the taxpayer was not able to claim an uplift in the cost bases of the assets held by subsidiary members of the unified tax consolidated group.

Esso Australia Resources Pty Ltd v FCT [2024] FCA 87 – PRRT assessments overturned

The Federal Court has allowed a taxpayer’s appeal against petroleum resource rent tax assessments that had included monthly reservation fees and a settlement sum receivable under a gas processing agreement, finding that the relevant payments were neither assessable tolling receipts nor assessable property receipts for the purposes of the Petroleum Resource Rent Tax Assessment Act 1987 (Cth).


Birchstone Brief

Curated for the needs of SME tax professionals. The Birchstone Brief is delivered to your inbox every week. It contains all the tax developments you need to know from the previous week, with insights from the team at Birchstone Tax Law.

Subscribe to our mailing list, you will receive the Birchstone Brief and updates to our webinars and resources.