Morgan’s Tax Month – September 2014 Developments
M o r g a n’ s T a x M o n t h
- September 2014 Developments -
This is a collection of developments in Australian tax law and practice that occurred in September 2014 and which aims at being of relevance to tax lawyers.*
F John Morgan
A member of the Victorian Bar (www.FJMtax.com)
Table of Contents
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ACTS, BILLS AND ANNOUNCEMENTS 4
Acts & Bills 4
*Tax and Superannuation Laws Amendment (2014 Measures No 5) Bill 2014 introduced – reduce various offsets and update DGRs [1] 4
*Mining tax repeal and abolition of small business tax breaks - start dates proclaimed [2] 4
*Tax and Superannuation Laws Amendment (2014 Measures No 4) Bill 2014 passed; awaits Assent - thin cap; foreign resident CGT; foreign dividends [3] 5
*New Australia-Swiss DTA – Bill passes all stages [4] 5
Omnibus Repeal (Autumn 2014) Bill 2014 awaits Royal Assent - repeals legislation across 10 portfolios, including Treasury [5] 5
*CGT exemption to trustees for compensation and insurance: Draft legislation released [6] 6
Medicare levy surcharge and rebate - income thresholds to be frozen – Bill introduced [7] 6
Announcements 6
Parliamentary committee recommends tax changes re Northern Australia [8] 6
Tax reform needed to maintain living standards: Treasury Secretary [9] 6
The future of tax: BCA paper released [10] 7
*OECD/G20 BEPS project – 1st set of deliverables released [11] 7
*G20 Finance Ministers agree to modernise global tax rules and close gaps [12] 8
*Complaints about tax disputes: Ombudsman appeared at Parliamentary inquiry [13] 8
CASES AND APPEALS 8
High Court 8
Full Federal Court 9
*Task Technology Pty Ltd v FCT - software licence use payments held to be royalties [14] 9
Federal Court 9
Federal Circuit Court 9
Administrative Appeals Tribunal (AAT) 9
*Re Coshott and FCT - Settlement payment for damages subject to CGT - and no cost base for legal costs (because there was no evidence) [15] 9
*Re GHP 104 160 689 Pty Ltd and FCT - R&D tax concession claims mostly allowed [16] 11
Re Moore and FCT - Over-claimed GST credits: penalty for "recklessness" affirmed [17] 12
*Re Riley and FCT - Compensation payment for domestic assistance assessable as ordinary income [18] 13
*Re Hicks & Associates Pty Ltd, Hicks and FCT - Assessments treating $800,000 in purported loans as income upheld [19] 13
*Re KNNW and FCT – Bulk of tax debt released on hardship grounds but application for release of the balance denied [20] 14
Other Courts & Tribunals 14
*Soong v Director of Public Prosecutions (Cth) - Conviction upheld for failure to provide security for tax liabilities [21] 14
*Windoval Pty Limited (Trustee) v Donnelly (Trustee in Bankruptcy) - Bankruptcy trustee claws back gift to family trust intended to defeat tax liability [22] 15
Appeals 16
*MBI Properties Pty Ltd v FCT – Transcript Released by High Court [23] 16
*Re Coshott and FCT – Taxpayer appeals decision that CGT applied to settlement proceeds to an action for breach of contract and negligence [24] 16
COMMISSIONER’S PUBLICATIONS & NEWS 17
Decision Impact statements 17
Chemical Trustee Limited v DCT Judgment to DCT for unpaid tax debt: ATO view on Chemical Trustee Ltd [25] 17
Rulings 17
Determinations 17
*TD 2014/D15 – PSI Entity’s receipts when not providing services is still PSI [26] 17
*TD 2014/D16 – a right for an employee to acquire an interest in shares subject to shareholder, is not an "indeterminate right" for ESS purposes [27] 18
Class Rulings & Product Rulings 18
Class Rulings, Product Ruling, Addendum to Product Ruling released [28] 18
ATO Interpretive Decisions (ATOIDs) 18
Tax Alerts 18
Other ATO news or statements 19
*Professional firm profits and assessing Pt IVA risk: ATO draft guidelines [29] 19
*ATO working with oversea regulators re global tax evasion: speech [30] 19
*Implications of OECD BEPS Actions Items from ATO perspective: speech [31] 20
*Australia's laws are robust re aggressive international tax planning: Treasurer [33] 20
*GIC and SIC rates for Oct-Dec 2014 quarter [34] 21
*ATO launches voice authentication for telephone calls [35] 21
New task force, including ATO, to target outlaw motorcycle gangs [36] 21
GST DEVELOPMENTS 21
Legislation & Announcements (GST) 21
*GST on imported goods: no agreement on lowering $1,000 threshold [37] 21
Cases (GST) 22
*Re The Trustee of Oenoviva (Australia & New Zealand) Plant and Equipment Trust and FCT - GST input tax credits: no standing to act on behalf of another entity [38] 22
Rulings, Determinations & Other things (GST) 22
*Re North Sydney Developments Pty Ltd v FCT - Sufficient notification of GST refund – ATO reaction [39] 22
*GSTR 2014/D4 - GST: meaning of "passed on" and "reimbursed" for the purposes of the new ‘anti-refund’ provision: s142-10 [40] 23
SUPERANNUATION DEVELOPMENTS 24
Legislation, Announcements etc. (Super) 24
*CGT exemption to trustees for compensation and insurance: Draft legislation released [41] 24
*Super fund mergers and the proportioning rule: Draft legislation released [42] 24
Cases (Super) 25
Rulings & Other things (Super) 25
*Super excess contributions tax: ATO view on Dowling case [43] 25
*ATO SMSF quarterly statistics for June 2014 released [44] 25
CARBON TAX & EMISSIONS REDUCTION FUND 26
MINERALS & PETROLEUM RENT RESOURCE RENT TAX 26
*Government tries again - new mining tax repeal Bill introduced [45] 26
*Mining tax repeal Bill – deal done with PUP in Senate and now awaits Assent [46] 26
Mining tax repeal and associated measures - start dates to be proclaimed: Government [47] 27
Mining tax repeal and abolition of small business tax breaks - start dates proclaimed [48] 28
Mining tax repeal - exemption from MRRT return lodgment: Legislative Instruments [49] 28
AUSTRALIAN CHARITIES & NOT-FOR-PROFITS (ACNC) SECTOR 29
*ACNC to revoke registration of 400 charities that appear not to be operating [50] 29
BOARD OF TAXATION 29
EXTERNAL SUPERVISORS – IGoT; OMBUDSMAN, JCPAA & ANAO 29
TAX PRACTITIONERS BOARD & LEGISLATION 29
Re Su and Tax Practitioners Board - prohibition period upheld [51] 29
Re Burnett and Tax Practitioners Board - Tax agent registration renewal denied [52] 30
*‘Sufficient number’ and ‘fee or other reward’ for tax (financial) advisers: TPB drafts Information Sheets released [53] 30
*‘Tax (financial) adviser’ registration options: TPB updates [54] 31
STATE TAXES 31
Legislation & Announcements (State) 31
NSW: State Revenue Legislation Amendment (Electronic Transactions) Bill introduced [55] 31
Qld payroll tax: twice yearly lodgment for small businesses [56] 31
SA: Budget Bill awaits Assent [57] 32
Cases (State) 32
NSW land tax: Loomes v Chief Comr of State Revenue - discretion to "write off" unpaid land tax refused [58] 32
NSW land tax: Woods v Chief Comr of State Revenue – Principal Place of Residence (‘PPR’) exemption revoked, but Comr told to reconsider delay [59] 32
NSW payroll tax: Lombard Farms Pty Ltd v Chief Comr of State Revenue - discretion to de-group refused – taxpayer loses appeal [60] 33
NSW payroll tax: Boston Sales and Marketing Pty Ltd v Chief Comr of State Revenue - de-grouping determination refused [61] 34
SA: Emergency Services Levy remissions - retirement villages [62] 34
Vic land tax: Marrone & Anor v Comr of State Revenue - primary production exemption allowed [63] 35
Rulings & Other (State) 35
Qld payroll tax: exempt allowances for motor vehicles and accommodation - updated Public Ruling to harmonise with other States [64] 35
Vic stamp duty: first home buyer duty concession [65] 35
Vic payroll tax: SRO disclosure opportunity or ‘employers’ who’ve treated the contractor provisions as applying holders of Private Security Individual Operator Licences [66] 36
OTHER DEVELOPMENTS 36
FoFA amendments regulation: disallowance motion postponed [67] 36
Financial advice and SoAs: regs made following PUP deal [68] 36
FoFA Amendment Bill: Senate committee recommends passage [69] 37
THE END 37
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ACTS, BILLS AND ANNOUNCEMENTS
Acts & Bills
*Tax and Superannuation Laws Amendment (2014 Measures No 5) Bill 2014 introduced – reduce various offsets and update DGRs [1]
The Tax and Superannuation Laws Amendment (2014 Measures No 5) Bill 2014 was introduced in the House of Reps this Thursday 4.9.2014. It proposes the following amendments:
· amend the ITAA 1997 and the Taxation Administration Act 1953 to abolish the mature age worker tax offset from the 2014-15 and later years;
· amend the ITAA 1997 to abolish the seafarer tax offset from the 2015-16 and later years;
· amend the ITAA 1997 to reduce the rates of the tax offset available under the R&D tax incentive by 1.5 percentage points. The higher (refundable) rate of the tax offset will be reduced from 45% to 43.5% and the lower (non-refundable) rates of the tax offset will be reduced from 40% to 38.5%. Will apply to years starting on or after 1 July 2014;
· amend the ITAA 1997 to update the list of specifically listed deductible gift recipients.
[LTN 171, 4/9/14]
Passed by the House of Representatives (and moves to the Senate)
The Tax and Superannuation Laws Amendment (2014 Measures No 5) Bill 2014 was on Wed 24.9.2014, by the House of Reps without amendment and now moves to the Senate. The Bill contains amendments concerning: abolition of mature worker tax offset and seafarer tax offset; reduce the rates of the tax offset available under the R&D tax incentive.
[LTN 186, 25/9/14]
*Mining tax repeal and abolition of small business tax breaks - start dates proclaimed [2]
The Governor-General on Mon 22.9.2014, proclaimed 30 September 2014 as the start date for Schedules 1 to 5 of the Minerals Resource Rent Tax Repeal and Other Measures Bill 2014 (which received Royal Assent on 5 September 2014 as Act No 96 of 2014). As a result, the Schedules will have the following dates of effect for most taxpayers:
Schedule 1 - Abolition of the mining tax from 1 October 2014 (with taxpayers final MRRT year (even if it is a part year) ending on 30 September 2014);
Schedule 2 - Abolition of the company loss carry-back from 1 July 2013;
Schedule 3 - Reduction of the instant asset write-off from 1 January 2014;
Schedule 4 - Abolition of accelerated depreciation for motor vehicles from 1 January 2014; and
Schedule 5 - Abolition of geothermal energy concessions from 1 July 2014.
Taxpayers with a substituted accounting period may have a different date of effect.
[LTN 183, 22/9/14]
*Tax and Superannuation Laws Amendment (2014 Measures No 4) Bill 2014 passed; awaits Assent - thin cap; foreign resident CGT; foreign dividends [3]
The Tax and Superannuation Laws Amendment (2014 Measures No 4) Bill 2014 has been passed by Parliament without amendment and effectively awaits Royal Assent, after being passed by the House of Reps on Wed 24.9.2014 and then by the Senate on Thur 25.9.2014. The Bill's main amendments are:
· Thin cap - (i) tightens the debt limit settings in the thin capitalisation rules to ensure that multinationals do not allocate a disproportionate amount of debt to their Australian operations eg reduces the maximum statutory debt limit from 3:1 to 1.5:1 (on a debt-to-equity basis) for general entities and from 20:1 to 15:1 (on a debt-to-equity basis) for non-bank financial entities; (ii) increases the de minimis threshold to $2m in interest deductions to minimise compliance costs for small businesses; and (iii) introduces a new worldwide gearing debt test for inbound investors.
· Foreign residents and capital gains- amends the ITAA 1997 to ensure that the foreign residents CGT regime operates as intended by preventing the double counting of certain assets under the Principal Asset Test. A technical correction would also be made to the meaning of "permanent establishment" in s 855-15 of the ITAA 1997.
· Foreign dividends - rewrites and reforms the existing s 23AJ exemption for foreign non-portfolio dividends into the ITAA 1997 eg the exemption will apply where an Australian corporate tax entity holds a participation interest of at least 10% in a foreign company.
· Tax receipts - would amend the tax law to provide greater transparency to taxpayers about how their tax money is spent, by requiring the Commissioner of Taxation to issue a tax receipt to individuals for the income tax assessed to them.
[LTN 186, 25/9/14]
*New Australia-Swiss DTA – Bill passes all stages [4]
The International Tax Agreements Amendment Bill 2014 has been passed by Parliament without amendment and effectively awaits Royal Assent, after being passed by the Senate on Thur 4.9.2014. The Bill amends the International Tax Agreements Act 1953 to give the force of law in Australia to the revised double tax agreement between Australia and Switzerland and its Protocol, which was signed in Sydney on 30 July 2013.
[LTN 171, 4/9/14]
Receives Royal Assent
The International Tax Agreements Amendment Bill 2014 received Royal Assent on Wed 24.9.2014, as Act No 105 of 2014.
[LTN 186, 25/9/14]
Omnibus Repeal (Autumn 2014) Bill 2014 awaits Royal Assent - repeals legislation across 10 portfolios, including Treasury [5]
The Omnibus Repeal (Autumn 2014) Bill 2014 has now passed all stages without amendment, having been passed by the Senate late on Mon 22.9.2014, and awaits Royal Assent. The Bill amends or repeals legislation across 10 portfolios, including Treasury. The Bill also includes measures that repeal redundant and spent Acts and provisions in Commonwealth Acts
[LTN 184, 23/9/14]
*CGT exemption to trustees for compensation and insurance: Draft legislation released [6]
The Government Tue 23.9.2014 released draft legislation to give effect to minor ame [1]ndments to the operation of the CGT provisions in the ITAA 1997.
In particular, the proposed changes seek to ensure a CGT exemption is available to trustees and beneficiaries, who receive compensation or damages under certain insurance policies. It is intended that trustees or beneficiaries not be subject to CGT when they receive compensation or damages in respect of certain events (such as an injury an individual suffers at work) or under certain policies of insurance (such as illness, injury or death).
The amendments would also ensure that the CGT exemption available to a trustee of a superannuation entity covers insurance policies related to injuries or illness.
This measure was one of the 92 announced but unenacted tax and superannuation measures that the Assistant Treasurer announced on 14 December 2013 would proceed.
COMMENTS are due by 21 October 2014
[LTN 184, 23/9/14]
Medicare levy surcharge and rebate - income thresholds to be frozen – Bill introduced [7]
The Private Health Insurance Amendment Bill (No 1) 2014 was introduced in the House of Reps on Wed 24.9.2014. It proposes to implement a 2014 Budget announcement to pause the income thresholds, which determine the tiers for the Medicare levy surcharge and the Australian Government Rebate on private health insurance at 2014-15 rates for 3 years with effect from 1 July 2015. The Bill would amend the Private Health Insurance Act 2007 to set income thresholds for the income tiers at the 2014-15 rates in the financial years 2015-16, 2016-17 and 2017-18.