Birchstone Brief for the weeks ended 24 May to 28 June 2024

Special Edition

This special edition of the Birchstone Brief covers relevant tax developments for the weeks ended 24 May 2024 to 28 June 2024. 

We will return to our regular schedule of weekly updates from this Friday 12 July 2024, when the Birchstone Brief for the week ended 5 July 2024 will be delivered to your mailboxes. 

ATO Updates

DIS on Minerva case

The ATO has issued a Decision Impact Statement (DIS) regarding the Full Federal Court’s decision in Minerva Financial Group Pty Ltd v FCT [2024] FCAFC 28 (covered in the Birchstone Brief for the weeks ended 15 and 22 March 2024). In that case, the Court ruled that Part IVA did not apply to certain schemes entered into by the taxpayer and related entities as, although it was clear a tax benefit had been obtained, an objective consideration of the application of the factors in section 177D to the circumstances of the case led to the conclusion that none of the parties to any of the schemes had entered into or carried out any part of them for the sole or dominant purpose of obtaining a tax benefit.

The DIS provides that:

  • While the Full Court concluded that Part IVA did not apply, the Commissioner considers that the Court reached this conclusion on the basis of the particular facts of the case. As such, the Commissioner does not consider that the Full Court’s decision has any impact on any of the Commissioner’s current advice and guidance.
  • The Commissioner considers that the Full Court’s decision does not disturb the Commissioner’s long-held view that Part IVA can apply to a scheme involving the exercise of a trustee’s discretion to distribute income. Further, the Commissioner considers that whether Part IVA applies to such a scheme will not depend on the trustee’s evidence of their purpose, but rather on a consideration of the eight factors in section 177D collectively applied to the objective facts.

Draft update to TR 2023/4 released for consultation

The ATO has issued TR 2023/4DC1, which sets out the ATO’s proposed changes to TR 2023/4. If implemented, the changes will incorporate a new Appendix 2 into TR 2023/4, which will set out the ATO’s view of the extended meaning of the word ‘employee’ for the purposes of the SGAA 1992. The ATO’s view as set out in the draft update is consistent with relevant case law developments that have occurred since SGR 2005/1 was last updated.

SGR 2005/1 has also been withdrawn with effect from 25 June 2024.

TR 2013/5 updated

The ATO has updated TR 2013/5, which sets out the Commissioner’s view regarding when a superannuation income stream commences and ceases, to take account of recent legislative amendments.  


State Taxes

Key Revenue-Related Measures from South Australian 2024-25 Budget

The South Australian Treasurer handed down the 2024-25 South Australian Budget on 6 June 2024. The key revenue-related measures are as follows:

  • Property value caps for both the first home buyer stamp duty exemption and first home owner grant will be abolished with effect from 6 June 2024.
  • An exemption from payroll tax on wages paid to GPs relating to the provision of bulk billed services will be introduced with effect from 1 July 2024. The exemption will apply to ‘wages’ paid to a GP regardless of whether they are engaged by the paying practice as an employee or independent contractor.  

Key Revenue-Related Measures from Queensland 2024-25 Budget

The Queensland Treasurer handed down the 2024-25 Queensland Budget on 11 June 2024. The key revenue-related measures are as follows:

  • The eligibility criteria for the regional 1% payroll tax discount will be adjusted from the 2024-25 payroll tax year to exclude businesses with annual Queensland taxable wages of more than $350 million.
  • The 50% payroll tax rebate on the exempt wages of apprentices and trainees will be extended until 30 June 2025.
  • The eligibility thresholds for the first home concession and first home vacant land concession will be increased to $800,000 (up from $550,000) and $500,000 (up from $400,000) respectively. The increased eligibility thresholds will apply for contracts entered into from 9 June 2024 inclusive.
  • The rate of additional foreign acquirer duty levied on purchases of residential property in Queensland by foreign owners will be increased from 7% to 8% with effect from 1 July 2024.
  • The surcharge rate of land tax for foreign companies, trustees of foreign trusts and foreign absentees will be increased from 2% to 3% from 30 June 2024.

Key Revenue-Related Measures from the NSW 2024-25 Budget

The NSW Treasurer handed down the NSW 2024-25 Budget on 18 June 2024. The key revenue-related measures are as follows:

  • From 4 September 2024, medical centers that meet bulk-billing thresholds (that is, at least 80% of services are bulk-billed if located in metropolitan Sydney and at least 70% of services if located elsewhere) will be eligible for a refundable payroll tax rebate associated with payments to contractor GPs.
  • In alignment with most other jurisdictions, NSW will no longer index its land tax thresholds from the 2025 land tax year. As such, the NSW land tax thresholds will be fixed at $1,075,000 for the tax-free threshold and $6,571,000 for the premium rate threshold.
  • With effect from 1 January 2025, the foreign purchaser duty surcharge will be increased from 8% to 9% and the foreign owner land tax surcharge will be increased from 4% to 5%.

Key Revenue-Related Measures from the ACT 2024-25 Budget

The ACT Treasurer handed down the ACT 2024-25 Budget on 25 June 2024. The key revenue-related measures are as follows.

  • Increasing the income eligibility for access to the Home Buyer Concession Scheme to $250,000 a year for homebuyers who have not owned a property in the previous 5 years.
  • Temporarily extending the  stamp duty concession for off-the-plan unit purchases to include properties valued up to $1 million in 2024-25 (up from $800,000).
  • A temporary increase to the stamp duty exemption to the first transfer of unit-titled dwellings on suburban residential (RZ1) blocks for purchases valued at up to $1,000,000 (up from $800,000) in 2024-25.  
  • An introduction of a payroll tax surcharge for large national and multi-national businesses operating in the ACT will be brought forward by one year and commence in 2024–25. The surcharge rates will be 0.25% for businesses with Australia-wide wages above $50 million and 0.5% for businesses with Australia-wide wages above $100 million, which will increase to 0.5% and 1% respectively in 2025-26. The payroll tax threshold will remain at $2 million.
  • A new land tax threshold will be introduced at $1 million average unimproved value. Marginal land tax rates will be adjusted in 2024-25.

Tasmanian Government’s Revenue-Related Re-election Commitments

The recently re-elected Tasmanian Government has released a fact sheet summarising the revenue-related changes it will make as part of the commitments made during its 2024 election campaign.

  • The transfer duty concession for eligible first-home buyers will of established homes will increase from a 50% exemption on properties valued up to $600,000 to an 100% exemption on properties valued up to $750,000. This measure is currently slated to apply from 18 February 2024 to 30 June 2026.
  • The 50% transfer duty concession for eligible pensioners selling their existing home to downsize to a lower cost home or unit worth up to $600,000 will be extended to 30 June 2025.
  • The payroll tax rebate for apprentices, trainees and youth employees will be extended to 30 June 2025.
  • The tax-free threshold for land tax will increase from $100,000 from $125,000 with effect from 1 July 2024.
  • The existing three-year land tax exemptions for all newly-built housing made available for long-term rental will be extended to 30 June 2026.

 Payroll Tax (Vic): Exemptions for certain payments to GPs

The Victorian Government has announced that exemptions from payroll tax will be provided for certain payments made to GPs in Victoria, as follows:

  • All Victorian general practice businesses will receive an exemption from any outstanding or future assessments issued for payroll tax on payments to contractor GPs for the period up to 30 June 2024.
  • A further 12-month exemption for payments to contractor GPs will be available for any general practice business that has not already received advice and begun paying payroll tax on payments to their contractor GPs on this basis.
  • An ongoing exemption from payroll tax will be provided for payments to both contractor and employee GPs providing bulk-billed consultations from 1 July 2025.



Godolphin Australia Pty Ltd v Chief Commissioner of State Revenue (NSW) [2024] HCA 20 – High Court unanimously approves NSW Court of Appeal’s ‘use-for-a-purpose’ approach

The High Court has unanimously dismissed the taxpayer’s appeal against the NSW Court of Appeal’s decision reported at [2023] NSWCA 44 (covered in the Birchstone Brief for the week ended 31 March 2023).

In that case, a majority of the NSW Court of Appeal was not satisfied that the taxpayer had proven its dominant use of land on which it conducted a business of breeding, training, racing and selling thorough bred racehorses was maintaining animals for the purpose of selling them, their natural increase or bodily produce in the relevant years.

In dismissing the appeal, the High Court unanimously approved of the ‘use-for-a-purpose’ approach that had been adopted by a majority of the Court of Appeal. That is, the High Court concluded that the land tax exemption was not available to the taxpayer in the relevant land tax years as, while it had used the land to maintain horses, it could not be said on the facts that the dominant purpose of that use was for the sale of the horses, their progeny, or their bodily produce (as the taxpayer had accepted that it could not prove that its use of the land for that purpose was anything more than a ‘significant’ use).

Merchant v FCT [2024] FCA 498 – Related schemes subject to Part IVA & dividend stripping provisions

In what appears to be the first judicial decision to have considered the dividend stripping provisions, the Federal Court has held that a number of related schemes involving: 

  • the sale of over 10 million shares in Billabong by a discretionary trust (MFT) controlled by one of the co-founders of that business (Mr M) to a related superannuation fund (GMSF) in order to crystallise a capital loss in MFT of approximately $56 million;
  • the subsequent sale of the MFT’s shares in a start-up company, Plantic Technologies Ltd (Plantic), which resulted in a significant capital gain of approximately $85 million (that was largely offset against the capital loss from the MFT’s disposal of the Billabong shares to the GMSF); and
  • the forgiveness of approximately $55 million in loans owed to three related companies (in which Mr M was the sole shareholder) by Plantic as a condition precedent to the completion of the sale of MFT’s shares in Plantic,

fell foul of both Part IVA and the dividend stripping provisions.

The Court ultimately rejected the commercial rationale for the Billabong share sale that was advanced by the taxpayers and affirmed the Commissioner’s Part IVA determination, ruling that the evidence established that the predominant reason for the transaction was to crystallise a capital loss in the MFT.

The Court also agreed with the Commissioner that the dividend stripping provisions applied to a broadly identified dividend stripping scheme, finding that: 

  • the taxpayers had failed to discharge their onus of proving that the debt forgiveness by the three related companies had not been motivated predominantly because of a desire to avoid the payment of top-up tax on the undistributed profits of those companies (which would, absent the debt forgiveness, have been substantial) upon the subsequent payment of dividends to Mr M; and
  • the effect of the dividend stripping scheme was, in substance, to transfer the undistributed profits of the related companies to MFT, from where they could be distributed at substantially lower rates of tax.

Furthermore, the Court also made the following notable observations in relation to the operation of the dividend stripping provisions: 

  • an assessment issued to give effect to a determination made by the Commissioner under section 177E will not necessarily be excessive simply because it is established that a particular step in the relevant scheme, viewed in isolation, did not have the dominant purpose of tax avoidance;
  • the application of section 177E is not to be determined on the basis of events that did not occur – and, as such, the question of purpose posed by the section is to be assessed objectively with reference to the events that actually occurred;
  • section 177E does not require a complete or substantially complete avoidance of tax to apply – rather, it is capable of applying where the tax avoidance purpose was to avoid the imposition of a higher rate of tax than that which was payable as a result of a dividend stripping scheme; and
  • a dividend stripping scheme does not cease to be one simply because every party who played a role in the scheme was not involved in ‘careful planning’ or did not act ‘in concert’ with others.

For those interested, the Court also considered whether the TOFA provisions applied to the expiry of certain future payment rights held by Mr M as a result of MFT’s disposal of its shares in Plantic.  

We note that the taxpayers have since appealed against this decision to the Full Federal Court.

FCT v Michael John Hayes Trading Pty Ltd ATF MJH Trading Trust [2024] FCAFC 80 – Full Federal Court overturns AAT’s dividend stripping decision

The Full Federal Court has held that the AAT erred in reaching its decision reported at [2023] AATA 3005 (first covered in Birchstone Brief for the week ended 29 September 2023).  In that case, the Tribunal had determined that a distribution of fully franked dividends to corporate taxpayers following a group restructure was not made as part of a dividend stripping scheme because:

  • although the corporate taxpayers received the dividends free of tax, the original (individual) shareholders did not receive a capital sum as a substitute for taxable dividends; and
  • the required tax avoidance purpose was not present.

The Full Federal Court allowed the Commissioner’s appeal, holding that the AAT:

  • had erred in its interpretation of section 207-155 of the ITAA 1997 by failing to give proper effect to the words ‘by way of, or in the nature of’ in that section as words of expansion (that is, while the Tribunal had relevantly observed that the original individual shareholders did not receive a capital benefit as a result of the relevant scheme, the Tribunal had erred in not considering whether the receipt by the corporate taxpayers of a capital sum was sufficient for a conclusion that the relevant scheme was ‘by way of, or in the nature of dividend stripping’); and
  • had also erred in its analysis of the dominant purpose of the scheme by hypothesizing that tax might have been paid at some future time on the relevant amounts the subject of the scheme, rather than determining whether the scheme involved a dominant purpose of avoiding tax on a distribution of profits to the original shareholders.

However, the Full Court rejected the Commissioner’s additional ground that an ‘incidental purpose’ of tax avoidance could be sufficient to justify concluding that a scheme was by way of, or in the nature of, dividend stripping, finding that a scheme could not be such if it lacked the essential characteristic of avoiding tax as its sole or dominant characteristic.

As the Full Court was ultimately not satisfied that the Tribunal had fully found all of the relevant facts, or that there was only one conclusion reasonably open on the facts as fully found, the case was remitted to the AAT for redetermination according to law.

Liang v FCT [2024] FCA 535 – AAT failed to perform statutory task

The Federal Court has ruled that the AAT failed to perform its statutory task in affirming objection decisions made in relation to amended assessments issued under section 166 of the ITAA 1936.

The Court held that:

  • The AAT’s rejection of the taxpayer’s evidence did not automatically lead to the conclusion that the objection decision should be affirmed, nor relieve the AAT from its obligations to review the objection decisions based on the material before it, as well as in light of particular concessions that had been made by the Commissioner.
  • On the basis of the material before it and the concessions made by the Commissioner, the AAT should have concluded that the disputed deposits were not income and overturned the objection decisions.

We note that the Commissioner has since appealed against this decision to the Full Federal Court.

Mesha Feet Pty Ltd v Allen [2024] FCA 680 – Federal Court confirms promissory notes and bills of exchange cannot validly discharge tax liabilities

In this case, the Federal Court dismissed a taxpayer’s application to set aside a statutory demand issued by the Commissioner in relation to its outstanding tax liabilities, holding that:

  • the taxpayer had not validly discharged its taxation liabilities by providing a “promissory note” and “bill of exchange” to the Commissioner (as payment of tax-related liabilities by such means was not approved of by regulation 21(2) of the Taxation Administration Regulations 2017 (Cth));
  • a promissory note is not “cash”; and
  • a bill of exchange is not a “cheque”.

BQKD v FCT [2024] AATA 1796 – No FBT on luxury cars provided to directors

The AAT has set aside FBT assessments issued to a corporate trustee of a family trust in respect of non-cash benefits constituted by the use of luxury cars by its three directors who were also beneficiaries of the relevant family trust. The reasons for this were that the Tribunal considered:  

  • the evidence did not establish that the directors were employed by the trustee company; and
  • even if the directors were found to have been in an employment relationship, the  non-cash benefits were not made available to them due to their employment with the trustee company, but rather were taken advantage of by the directors as they genuinely believed they were entitled to the use of the vehicles as beneficiaries of the family trust.

Doery v FC of T [2024] AATA 1493 – Taxpayer on welfare with no assets denied release of tax debts

The AAT has affirmed the Commissioner’s decision not to release a taxpayer who was on Centrelink benefits with no assets to his name from his tax liabilities on the grounds of serious hardship.

The reasons underlying the Tribunal’s decision were as follows.

  • Medical evidence adduced by the taxpayer failed to substantiate that the taxpayer had, at the relevant time, lacked the capacity to manage his financial affairs or adhere to a budget.  
  • The taxpayer had consciously prioritised purchasing a property over addressing his tax debts, and furthermore had favoured paying non-tax debts owed to other creditors ahead of meeting his tax liabilities.
  • On the evidence before it, the Tribunal considered that the taxpayer’s financial hardship would continue irrespective of whether he was released from his tax liabilities.

Appeals – Buzadzic

The taxpayer has applied to the High Court for special leave to appeal against the decision reported at [2024] FCAFC 50, which was itself an appeal against the decision reported at [2023] FCA 954 (covered in Birchstone Brief for the week ended 18 August 2023). In rejecting the taxpayer’s appeal, the Full Federal Court had affirmed the primary judge’s decision that the AAT (in its decision reported at [2021] AATA 4820) had not:

  • applied the wrong test in respect of the burden of proof in;
  • made conclusions that were unreasonable; or
  • misconstrued or misapplied section 6-5 of the ITAA 1997 (in relation to ordinary income) or item 5 of section 170(1) of the ITAA 1936 (which relates to fraud or evasion).


Administrative Review Tribunal Bills now law

The following bills, first covered in the Birchstone Brief for the week ended 1 March 2024 and which provide for the abolition of the AAT and the establishment of a ‘new, fit-for-purpose federal administrative body’ known as the Administrative Review Tribunal, received royal assent on 3 June 2024 and are now law.

As stated on the website for the Attorney-General’s Department:

  • the government intends for the Administrative Review Tribunal to commence as soon as practicable before ethe end of 2024;
  • all matters currently before the AAT will continue as usual while the implementation of the new Tribunal is progressed; and
  • any matters that are before the AAT will transition to the new Tribunal automatically when it commences.

Bill addressing PwC leaks scandal and PRRT deductions cap now law

The Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023 (Cth) (first covered in Birchstone Brief for the weeks ended 17 and 24 November 2023) received royal assent on 31 May 2024 and is now law.

Bill implementing Revenue-Related Measures from South Australian 2024-25 Budget introduced

The Statutes Amendment (Budget Measures) Bill 2024 (SA) was introduced into the South Australian House of Assembly on 6 June 2024. If enacted into law, the Bill will implement the revenue-related measures announced as part of the South Australian 2024-25 Budget (the key measures of which are explained above).

Bill implementing Revenue-Related Measures from Queensland 2024-25 Budget now law

The Revenue and Other Legislation Amendment Bill 2024 (Qld), which implements the revenue-related measures announced as part of the Queensland 2024-25 Budget (the key measures of which are explained above), received royal assent on 18 June 2024 and is now law.

Bills implementing Revenue-Related Measures from NSW 2024-25 Budget now law

The Revenue Legislation Amendment Bill 2024 (NSW), which implements the revenue-related measures announced as part of the NSW 2024-25 Budget (the key measures of which are explained above), received royal assent on 24 June 2024 and is now law.

Victorian State Taxation Amendment Bill now law

The State Taxation Amendment Bill 2024 (Vic), which implements the revenue-related measures announced in the 2024-25 Victorian Budget (first covered in the Birchstone Brief for the week ended 17 May 2024), received royal assent on 4 June 2024 and is now law.

Bill replacing stamp duty on commercial and industrial property in Victoria with annual property tax now law

The Commercial and Industrial Property Tax Reform Bill 2024 (Vic), which replaces stamp duty on commercial and industrial property in Victoria with an annual property tax, received royal assent on 21 May 2024 and is now law. The change was first announced in the 2023-24 Victorian Budget (covered in the Birchstone Brief for the week ended 26 May 2023).

Bill implementing Tasmanian Government’s revenue-related election commitments now law

The Taxation Legislation (Affordable Housing and Employment Support) Bill 2024 (Tas), which implements the Tasmanian Government’s revenue-related election commitments made during its 2024 election campaign (as summarised above), received royal assent on 28 June 2024 and is now law.  

Bill implementing changes to first home buyer concessions announced in WA 2024-25 Budget passes Legislative Assembly

The Duties Amendment First (Home Owner Concessions Bill 2024) (WA),which if enacted into law will amend the Duties Act 2008 (WA) to implement the changes to the concessional transfer duty treatment for first home owners purchasing established homes announced in the WA 2024-25 Budget (covered in the Birchstone Brief for the week ended 17 May 2024), was passed by the Legislative Assembly on 12 June 2024. The Bill is now currently being considered by the Legislative Council.



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