Birchstone Brief for the week ended 8 March 2024

ATO Updates

Class Rulings issued  

The ATO has issued the following class rulings:

• CR 2024/14 – Victorian Rail Track – Early retirement scheme 2024;
• CR 2024/15 – Centro Electric Group Ltd – Exchange of shares for Cenntro Inc. shares; and
• CR 2024/16 – KeyInvest Limited – KeyInvest Limited Capital Notes.

Other News

Commonwealth Government to pay superannuation on paid parental leave

The Albanese Government has announced that the Commonwealth will pay superannuation on Paid Parental Leave from 1 July 2025. Further details on this measure will be released in the 2024 Budget.

Cases

Stern v FCT [2024] FCAFC 2 – Defined benefit pensions with commutation restrictions not excluded from transfer balance cap calculations

The Full Federal Court has dismissed the taxpayer’s appeal against the AAT’s decision reported at [2023] AATA 2010 (covered in the Birchstone Brief for the week ended 21 July 2023), rejecting their submissions that section 294-140 of the ITAA 1997 (which deals with when a taxpayer with capped defined benefit income streams will have an excess transfer balance for the purposes of Division 294) should be interpreted as excluding defined benefit lifetime pensions that are subject to commutation restrictions.  

Commissioner of Taxation v Hannover Life Re of Australasia Ltd [2024] FCAFC 23 – Full Court affirms life insurer’s entitlement to input tax credits for overheads

The Full Federal Court has dismissed the ATO’s appeal against the decision reported at [2023] FCA 680 (covered in the Birchstone Brief for the week ended 30 June 2023). In that case, the primary judge held that:

• to the extent a life insurance company’s overhead expenses related to its GST-free supplies of reinsurance services, those expenses were partly creditable (and the company was entitled to claim input tax credits to that extent); and
• subject to one modification, the company’s method of apportioning input tax credits was fair and reasonable in the circumstances.

Legislation

Bills to implement revised Stage 3 tax cuts and changes to Medicare levy thresholds now law

The:

• Treasury Laws Amendment (Cost of Living Tax Cuts Bill) 2024 (Cth), which will implement the Albanese Government’s announced changes to the Stage 3 income tax cuts for individuals originally legislated under the previous Morrison Government; and
• Treasury Laws Amendment (Cost of Living – Medicare Levy) Bill 2024 (Cth), which will increase income thresholds relevant to the Medicare levy in line with CPI movements with retrospective effect from the 2023-24 income years,

received royal assent on 5 March 2024 and are now law.

Both Bills were previously covered in the Birchstone Brief for the weeks ended 2 and 9 February 2024.