July 2024 Monthly Tax Update

In the July 2024 edition of Andersen in Australia’s Monthly Tax Update, we provide recent legislative updates and outline the latest developments in the areas of corporate tax, individual tax, indirect tax and international tax. We also examine the ATO’s recent activities, publications, rulings and other guidelines and discuss the latest Australian tax cases.

Key Sections

Legislation Updates

Following our last update, the following Bill has received assent and is now law.

Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 202

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 received assent as Act No 52 of 2024 on 28 June 2024. The Act contains measures including a temporary increase of the small business instant asset write-off, the small business energy incentive and amendments to the non-arm’s length expenses rules for superannuation.

• Temporary increase to instant asset write-off threshold

Schedule 1 to the Act amends the Income Tax (Transitional Provisions) Act 1997 to increase the $1,000 instant asset write-off threshold in Div 328 of ITAA 1997 to $20,000 from 1 July 2023 to 30 June 2024.

The higher threshold applies to the cost of eligible depreciating assets, second element costs and general small business pools. The amendments also extend deferral of the 5 year “lock-out” rule for the small business simplified depreciation rules to 30 June 2024. Div 328 contains the simplified depreciation regime available to small businesses (entities with an aggregated annual turnover of less than $10 million).

• Small business energy incentive

A 20% bonus deduction is available for eligible expenditure that supports electrification or more efficient energy use, incurred from 1 July 2023 until 30 June 2024. The incentive applies to eligible expenditure on the cost of assets or improvements of up to $100,000, with the maximum bonus deduction being $20,000. It is accessible for businesses with an aggregated annual turnover of less than $50 million.

• Super fund non-arm’s length expense rules

Schedule 7 to the Act amends the non-arm’s length income (NALI) provisions as they apply to expenditure incurred by superannuation funds (described as the non-arm’s length expense rules). The amendments will:

1. Exempt large APRA-regulated funds and exempt public sector superannuation funds from these rules. The rules will therefore have limited application to self-managed superannuation funds (SMSFs) and small APRA-regulated funds.
2. Limit the income of SMSFs and small APRA-regulated funds that are taxable as NALI from a general expense breach to twice the difference between the amount actually charged and the arm’s length expense amount that would have been charged for a general expense. In addition, fund income taxable as NALI will be limited to taxable income of the fund less contributions and related deductions.
3. Distinguish between specific and general expenses for the purposes of the rules for both general and specific expenses of the fund, and;
4. Exempt expenses that were incurred or might have been expected to be incurred before the 2018–19 income year.

The amendments apply to income derived in the 2018–19 income year or a later income year, and to expenses incurred or expected to have been incurred in the 2018–19 or later income years.

Other Legislation Update

Future made in Australia bill introduced

A legislation which proposes to give effect to the Federal Government’s commitment to establish a new principal Act under its ‘Future Made in Australia’ agenda has been introduced in the House of Representatives.

The Future Made in Australia Bill 2024 proposes to:

• expand the Government’s priorities with Export Finance Australia, previously Export Finance and Insurance Corporation, supporting domestic projects in the national interest consistent with the Future Made in Australia National Interest Framework; and

• enable the Australian Renewable Energy Agency to support the research, development, demonstration, commercialisation, manufacturing and deployment of renewable energy technologies that are critical to the net zero transformation and help position Australia as a renewable.

Food donations tax offset bill introduced

A Private Members Bill was introduced in the Senate which proposes to create a food donations tax offset for companies for certain expenditure incurred in undertaking food donations activities for registered food charities.

The Tax Laws Amendment (Incentivising Food Donations to Charitable Organisations) Bill 2024 proposes to introduce a refundable tax offset if a company’s aggregated turnover is less than $20 million, otherwise the offset is a non-refundable tax offset.

According to the explanatory memorandum, the amount of the proposed tax offset is capped at the lower of $5 million or a specified percentage of the expenditure incurred in undertaking the food donations activities.

2024–25 interest rate for adjusting family law super entitlements

A legislative instrument relating to the adjustment of superannuation entitlements of separated and divorced spouses, and of separated de facto couples has been made.

The Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2024 provides for the adjustment of superannuation entitlements that are provided under certain orders or agreements that split particular kinds of future superannuation benefits made in property settlements under the Family Law Act 1975.

The instrument relates to orders or agreements providing for a base amount split of future superannuation benefits (one of 2 kinds of splits that can be made under the Family Law Act of most types of superannuation), payable in respect of a defined benefit superannuation interest or an interest in a self-managed superannuation fund.

The instrument commences on 1 July 2024.

BEPS Pillar two legislation referred to Senate Committee

Bills to implement the 15% global minimum tax and domestic minimum tax in Australia have been referred to the Senate Economics Legislation Committee for review.

The package consists of three bills which form part of a set of legislation required to implement a global and domestic minimum tax in Australia include:

• Imposition Bill: Taxation (Multinational – Global and Domestic Minimum Tax) Imposition Bill 2024 – imposes top-up tax, namely the Australian IIR top-up tax, the Australian UTPR top-up tax and the Australian Domestic Minimum Tax or DMT

• Assessment Bill: Taxation (Multinational – Global and Domestic Minimum Tax) Bill 2024 – establishes the liability and framework for these taxes, and

• Consequential Bill: Treasury Laws Amendment (Multinational – Global and Domestic Minimum Tax) (Consequential) Bill 2024 – contains consequential and miscellaneous provisions affecting tax legislation necessary for the administration of these taxes. This includes provisions addressing the lodgment of new tax returns (and a GloBE Information Return), assessment and collection of the taxes, penalties, private rulings, appeals procedures and record-keeping obligations.

The Bills form part of a set of legislation required to implement a global and domestic minimum tax in Australia as part of Pillar Two of the OECD/G20’s Two Pillar Solution. Pillar Two seeks to address the tax challenges arising from the digitalisation of the economy under Action 1 of the Base Erosion and Profit Shifting (BEPS) project with the broad aim of ensuring multinational enterprises pay a fair share of tax wherever they operate around the globe. 

The Senate Committee is due to report on the Bills by 14 August 2024.

For further information, please refer here.

Updated tax agent and BAS agent registration fees under the new registration period

A legislative instrument amending the registration application fees for tax agents and BAS agents under the new one-year registration period has been made.

Tax Agent Services Amendment (Updating Fees) Regulations 2024 amends the fee amounts that apply to new and renewal registration applications from 1 July 2024. The base registration application fee is $273 for tax agents and $54 for BAS agents. These amounts are one-third of what the previous fees (under a registration period of 3 years) would have increased to on 1 July 2024 under the indexation provisions.

If a tax agent or BAS agent has an existing registration on 1 July 2024, when they next apply to renew their registration, they would be subject to the revised renewal period and revised fee.

The change to the minimum registration period from at least 3 years to at least one year was enacted by Treasury Laws Amendment (2023 Measures No 1) Act 2023.

The registration fees will continue to be indexed every year from 1 July 2025.

New obligations introduced for tax practitioners’ Code of Professional Conduct

A legislative instrument containing additional professional and ethical obligations of tax practitioners has been made.

Tax Agent Services (Code of Professional Conduct) Determination 2024 sets out additional professional and ethical obligations of tax practitioners under s 30-10 of the Tax Agent Services Act 2009 (the Act). These obligations form part of the Code of Professional Conduct for tax practitioners in Australia, both registered tax agents and BAS agents.

The additional obligations detailed in the legislative instrument cover the following areas:

• upholding and promoting the ethical standards of the tax profession (s 10)
• false and misleading statements (s 15)
• conflicts of interest in dealings with government (s 20)
• maintaining confidentiality in dealings with government (s 25)
• keeping of proper client records (s 30)
• ensuring tax agent services provided on a practitioner’s behalf are provided competently (s 35)
• quality management systems (s 40), and
• keeping clients informed of all relevant matters, including matters that could significantly influence their decision to engage the tax practitioner’s services and the Tax Practitioner Board’s register of tax agents
• and BAS agents (s 45).

This legislative instrument will commence from 1 August 2024. Section 45 will apply to matters that have arisen on or after 1 July 2022. For matters which arose between 1 July 2022 and commencement, disclosure to clients must be made within 90 days of this legislative instrument commencing.

It follows amendments to the Act that introduced the concept of disqualified entities which, due to certain findings of misconduct, cannot be used to provide tax agent services on behalf of a tax practitioner without the Tax Practitioners Board’s permission. Please refer here for further information.

PAYG withholding schedules for 2024–25

The ATO has issued a legislative instrument (F2024L00664) containing 15 withholding schedules specifying the formulas and procedures for working out the amount required to be withheld by an entity from certain payments under the Pay As You Go (PAYG) system.

Taxation Administration (Withholding Schedules) Instrument 2024 facilitates the collection of income tax, Medicare levy, Higher Education Loan Program, Student Start-up Loans, Australian Apprenticeship Support Loans, VET Student Loans and Financial Supplement repayments. The instrument repeals and replaces the Taxation Administration Withholding Schedules 2023 (F2023L00743) (2023 instrument). It also repeals the redundant legislative instrument Taxation Administration Act 1953 – Pay as you go withholding – Tax table for additional amounts to withhold as a result of an agreement to increase withholding (F2014L01665) (2014 agreement to increase withholding instrument).

All withholding schedules have been updated by the instrument to give effect to recent amendments to the tax rates and Medicare levy thresholds. The schedules have also been updated to provide ATO website “Quick Code” (QC code) information and remove redundant web links, web content, file type and file size references.

The following changes have been made to specific withholding schedules:

• schs 1 and 15 have been updated to account for amendments made to the Income Tax Rates Act 1986 in 2024. These amendments modified income tax rate thresholds and tax rates for individuals for the 2024–25 and later income years.
• schs 1, 8, 9, 11 and 13 have been updated to account for amendments made to the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge — Fringe Benefits) Act 1999 in 2024. These amendments affect the Medicare levy low-income thresholds and phase-in limits which apply to assessments for the 2023–24 and later income years.
• sch 8 has been updated to account for the annual indexing of the repayment income thresholds for study and training support loans.
• sch 29 in the 2023 instrument has been renumbered to sch 10 in this instrument, to ensure the sequential numbering of schedules.

The instrument also repeals the redundant legislative instrument Taxation Administration Act 1953 – Pay as you go withholding – Tax table for additional amounts to withhold as a result of an agreement to increase withholding (F2014L01665) (2014 agreement to increase withholding instrument). Schedule 14 of the instrument (which was also included in the 2023 instrument) replaces the 2014 agreement to increase withholding instrument.

The instrument commences on 1 July 2024.

New version of APRA confidentiality determination

A legislative instrument has been made on when certain information provided by financial sector entities to APRA under specified reporting standards is non-confidential.

Australian Prudential Regulation Authority (confidentiality) determination No 1 of 2024 revokes and replaces an existing confidentiality determination (F2023L01062). The instrument updates the existing confidentiality determination to reflect the positions outlined in APRA’s March 2024 response to consultation in addition to the existing positions. 

The information which is determined by the instrument to be non-confidential will form the basis of statistical publications which will be of use to regulators, policymakers, industry, researchers, analysts and other interested parties and will ultimately promote greater transparency, best-practice and accountability across the superannuation industry. 

The instrument commenced on 8 June 2024.

OECD

OECD releases further guidance for BEPS Two-Pillar Solution

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) has released supplementary elements relating to the report on Amount B of Pillar One and guidance to ensure consistent implementation and application of the global minimum tax under Pillar Two on 17 June 2024.

The Inclusive Framework had also agreed a streamlined process for recognising which jurisdictions have qualified rules and a rule order to prevent one jurisdiction from imposing top-up tax if the profits have already been subject to top-up tax under another jurisdiction. The Inclusive Framework Secretariat has published a Question & Answer document summarising the main features of the Transitional Qualification Mechanism. This mechanism will provide jurisdictions with the certainty that their rules will be recognised as qualified by other implementing jurisdictions for a transitional period while a full legislative review is being undertaken and will provide MNEs with certainty as to which jurisdictions rules it must comply with in line with the agreed rule order.

For further information, please refer here.

Amount B of Pillar One

Additional guidance has been published in relation to the Pillar One Amount B which was released on 19 February 2024 pending completion of design aspects. Amount B provides for a simplified and streamlined approach to the application of the arm’s length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries.

The new guidance published provides:

• the definitions of “qualifying jurisdictions” within the meaning of section 5.2 and 5.3 of the Amount B guidance that will facilitate adjustments to the return calculated under the simplified and streamlined approach for tested parties located in those qualifying jurisdictions; and

• the definition of “covered jurisdictions” within scope of the political commitment on Amount B that recognises that subject to their domestic legislation and administrative practices, members of the Inclusive Framework commit to respect the outcome determined under the simplified and streamlined approach to in-scope transactions where such an approach is applied by a covered jurisdiction and to take all reasonable steps to relieve potential double taxation that may arise from the application of the simplified and streamlined approach by a covered jurisdiction where there is a bilateral tax treaty in effect between the relevant jurisdictions. The approach developed to produce the list of covered jurisdictions facilitates tax certainty for jurisdictions most interested in implementing Amount B from 1 January 2025. Notably, the list of Covered Jurisdictions for the Inclusive Framework political commitment on Amount B includes Malaysia, South Africa, Thailand and Vietnam.

Pillar Two

A package of Administrative guidance has been published which sets out:

• simplified procedures that will allow multinational enterprise (MNE) groups to aggregate various categories of deferred tax liabilities for determining whether they have reversed within 5 years and therefore do not need to be recaptured;

• clarification on the methodology used to determine deferred tax assets and liabilities for Global Anti-Base Erosion (GloBE) purposes, further guidance on the allocation of cross-border current and deferred taxes and the profits and taxes on certain flow-through tax structures, and

• specific guidance on the treatment of securitisation vehicles under a jurisdiction’s domestic minimum top-up tax that will prevent these vehicles giving rise to volatile outcomes under the GloBE rules.

The Inclusive Framework has also released additional interpretative Country-by-Country Reporting guidance which ensures the consistent treatment of intragroup payments and avoids the need for further adjustments under the global minimum tax where a consistent treatment is applied in the first place.

Other updates

TPB updated guidance relating to disqualified entities

The Tax Practitioners Board (TPB) has finalised information sheets on new obligations relating to disqualified entities under the Code of Professional Conduct applicable from 1 January 2024.

Having considered the comments and submissions received in relation to the information contained in the Exposure Draft Information Sheets issued on 18 December 2023, the TPB has now published the finalised Information Sheets:

• TPB(I) 41/2024 explains the obligations of registered tax practitioners under Code item 15 in s 30-10(15) of the Tax Agent Services Act 2009 (TASA) in respect of their employment, contracting with, or otherwise use of a disqualified entity to provide tax agent services on their behalf. Code item 15 states that registered tax practitioners must not knowingly employ or use the services of a disqualified entity to provide tax agent services on their behalf, unless approved by the TPB.

• TPB(I) 42/2024 explains the obligations of registered tax practitioners under Code item 16 in s 30-10(16) of TASA in respect of their arrangements with a disqualified entity. Code item 16 states that registered tax practitioners must not enter an arrangement with a disqualified entity in connection with providing tax agent services.

Code items 15 and 16 were enacted by the Treasury Laws Amendment (2023 Measures No 1) Act 2023 applicable from 1 January 2024, subject to transitional provisions applying for some existing arrangements until 31 December 2024.

For further information, please refer here.

ATO Rulings & Activity

ATO update on claiming $20,000 instant asset write-off

The Australian Taxation Office (ATO) has released a guide that outlines the criteria for small businesses to claim the Federal Government’s $20,000 instant asset write-off (IAWO).

To be eligible for the IAWO, businesses will need to have an aggregated annual turnover of less than $10 million.

The eligible assets must have been first used or installed ready for use, between 1 July 2023 and 30 June 2024, with the $20,000 threshold applicable on a per asset basis – enabling instant write-off on multiple assets.

The ATO further adds that eligible small businesses will also be able to write off the first cost of improvements incurred between 1 July 2023 and 30 June 2024 under $20,000, to qualifying assets that were written off in a previous tax year.

The IAWO is applicable for both new and second-hand assets, though with some exclusions and limits.

The usual rules for claiming deductions when it comes to IAWO still apply, with eligible businesses only able to claim the business portion of the expense with records to prove it.

For more information, please refer to the ATO website.

ATO update on implementation of the OECD/G20 Two Pillar Solution for multinational businesses in Australia

The ATO provided an update on the status of Australia’s implementation of Pillar Two of the Organisation for Economic Co-operation and Development (OECD)/G20 Two-Pillar Solution to address the tax challenges arising from the digitalisation of the economy.

The guide contains key Pillar Two related information including:

• the status of the ATO’s implementation of Pillar Two;
• key consultation feedback and findings;
• Australian specific administration and interpretation issues; and
• OECD guidance materials.

For more information, please refer to the ATO website.

ATO update on when the Commissioner may disregard the operation of Division 7A

The ATO has released an advisory for tax professionals explaining when the Commissioner of Taxation may disregard the operation of Division 7A.

According to the ATO, taxpayers can apply for the Commissioner’s discretion to disregard the operation of Division 7A, or to allow a deemed dividend to be franked.

The discretion may only be granted if an honest mistake or inadvertent omission has resulted in a breach of Division 7A and the circumstances support the exercise of the discretion – provided that there is sufficient supporting evidence.

The ATO further states that it receives applications for the Commissioner’s discretion from taxpayers who claim an honest mistake was made because they relied on the advice of their tax professional.

However, the ATO reasons that reliance on professional advice doesn’t always constitute an honest mistake or inadvertent omission, and that the adviser’s actions must have contributed to the breach and the client’s reliance on the advice must have been reasonable.

For these requests, the ATO will consider the relevant facts, including:

• the nature of the advice
• the disclosures made to the adviser
• whether there’s evidence that the adviser’s actions contributed to the breach
• whether the adviser has made an honest mistake or inadvertent omission

For more information, please refer to the ATO website.

Draft WET determination on addition of water to cider or perry

The ATO has issued a draft determination on the definition of “cider or perry” to assist alcohol manufacturers with correctly classifying their products for wine equalisation tax (WET) purposes.

Draft Wine Equalisation Tax Determination WETD 2024/D1 sets out the Commissioner’s view on how much water can be added before a beverage will no longer meet the definition of “cider or perry” for the purposes of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act). The Commissioner considers that a beverage will not be cider or perry where it is made up of water or other unfermented substances added (alone or in combination) to a fermented substance in a volume exceeding that of the fermented substance.

The definition of cider or perry does not preclude the fermentation of the juice of apples or pears when that juice has been reconstituted by mixing apple or pear concentrate with water. That amount of water is not taken into account when determining whether unfermented substances comprise more than half the total volume of a final beverage, to the extent that the water is necessary to reconstitute concentrate to the equivalent of natural undiluted juice.

A beverage that does not satisfy the definition of cider or perry for the purposes of the WET Act due to the proportion of unfermented substances is an “other excisable beverage” for the purposes of the Schedule to the Excise Tariff Act 1921 and is subject to excise duty at the applicable rate.

When finalised, the determination is proposed to apply from 1 July 2024. Comments on the draft determination, including on the proposed date of effect, can be submitted until 12 July 2024.

ATO update on changes to income tax reporting under MTAS

With the Modernisation of Trust Administration Systems (MTAS) coming into effect from 1 July, the Australian Taxation Office (ATO) has released a guide on the changes to income tax reporting for trustees and trust beneficiaries.

For trustees, the ATO has amended the trust tax return statement of distribution that will provide beneficiaries with the information they need to complete their trust income reporting obligations.

As for trust beneficiaries, the ATO advises then to look out for the trust income schedule, which needs to be lodge with their tax return.

Trust beneficiaries would need to include the information from their trust’s completed statement of distribution in their trust income schedule.

For trust beneficiaries that had received a distribution of trust income from a managed fund, the trust income schedule instructions will explain how the information on the tax statement provided by the managed fund needs to be reported on the trust income schedule.

For more information, please refer to the ATO website.

Updated ATO guidance on when super income streams commence and cease

The ATO has updated its ruling (TR 2013/5) explaining when a superannuation income stream commences and ceases. These concepts are important for determining the income tax consequences, for both the superannuation fund and the member, of the superannuation income stream benefits paid from a superannuation income stream.

Taxation Ruling TR 2013/5 has been updated to:

• reflect recent legislative amendments, including the introduction of the transfer balance cap provisions and the concept of retirement phase for superannuation interests contained in the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016;
• the sunsetting on 1 April 2021 of the Income Tax Assessment Regulations 1997, and replacement with the Income Tax Assessment (1997 Act) Regulations 2021, and
• include the ATO view on when a superannuation income stream ceases and a new one commences under a successor fund transfer.

The ruling contains an appendix that provides historical guidance to iterations of the relevant provisions that have applied in the intervening years since the original publication of the ruling in 2013. There is no change to the ATO view stated in the ruling.

The updated ruling was published as a draft for public comment in September 2023. Following consultation, the ruling has been updated to clarify the ATO’s view on what is required for a superannuation interest to be considered to be supporting a superannuation income stream, if a previous superannuation income stream ceased due to not meeting the pension requirements in the Superannuation Industry (Supervision) Regulations 1994.

Medicare levy exemption data-matching program

According to the Gazette notice (C2024G00310), the ATO will acquire Medicare Exemption Statement data from Services Australia for the 2023–24 to 2025–26 financial years.

Data items that will be collected include:

• Full name, date of birth, residential address
• Entitlement status, and approved entitlement period details.

The data acquired will be matched with ATO systems to ensure individuals are correctly claiming exemption from payment of the Medicare levy and Medicare levy surcharge. The ATO estimates that records relating to approximately 180,000 individuals will be obtained each financial year.

Minor updates to guidance on fixed-rate method for WFH deductions

The ATO has made minor updates to guidance on its compliance approach to claiming a deduction for additional running expenses incurred while working from home.

The updates to Practical Compliance Guideline PCG 2023/1 insert the word “usage” after references to “mobile and home phone” to clarify that such expenses do not include the decline in value of a mobile phone handset. The updates also remove references to the fixed-rate method as “revised” and apply minor grammatical changes in line with current ATO style and accessibility requirements.

Draft ATO guidance on meaning of “employee” for super guarantee

The ATO has issued a draft update to its income tax ruling on the meaning of “employee” to insert its guidance for superannuation guarantee (SG) purposes. It has also withdrawn an old SG ruling on the same issue.

Taxation RulingTR 2023/4 considers who is an “employee” for pay as you go withholding purposes. The draft consolidation TR 2023/4DC1 inserts guidance in Appendix 2 on when a person is considered to be an employee under s 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA).

The draft update is being published to:

• confirm the ATO’s view in light of case law developments in the context of SGAA since the last update of SGR 2005/1 Superannuation guarantee: who is an employee?
• consolidate the ATO’s view in respect of the common law definition of employee in the withdrawn SGR 2005/1 and TR 2023/4, and
• provide a holistic ATO view of the common law meaning of employee and extended meaning of the word as contained in SGAA.

Once finalised, Appendix 2 will apply both before and after its date of issue.

As a result, SGR 2005/1 was withdrawn on 25 June 2024.

Reasonable travel and meal allowances for 2024–25

The Commissioner has set out in TD 2024/3 the amounts considered to be reasonable (reasonable amounts) for the substantiation exception in Subdivision 900 B of the Income Tax Assessment Act 1997 for the 2024–25 income year in relation to claims made by employees for:

• overtime meal expenses — for food and drink when working overtime
• domestic travel expenses — for accommodation, food and drink, and incidentals when travelling away from home overnight for work (particular reasonable amounts are given for employee truck drivers, office holders covered by the Remuneration Tribunal and Federal Members of Parliament), and
• overseas travel expenses — for food and drink, and incidentals when travelling overseas for work.

Overtime meals

The reasonable amount for overtime meal expenses is $37.65 for the 2024–25 income year.

Domestic travel

The reasonable amount for accommodation applies only for short stays in commercial establishments like hotels, motels and serviced apartments. If a different type of accommodation is used (eg a hostel or caravan park), the reasonable amount cannot be used even if the employee receives an allowance.

The reasonable amount for meals depends on the period and time of travel. That is, the reasonable amounts only apply to meals (ie breakfast, lunch and dinner) that fall within the time of day from the commencement of the employee’s travel to the end of the travel that is covered by the allowance.

The reasonable amount for incidentals applies in full to each day of travel covered by the allowance, without the need to apportion for any part-day travel on the first and last day.

Reasonable amounts are provided for 3 salary levels — up to $143,650; between $143,651 to $255,670; and $255,671 and above.

Employee truck drivers

Reasonable amounts are given for meals (breakfast, lunch and dinner) as follows:

• breakfast — $30.35
• lunch — $34.65, and
• dinner — $59.75.

The amounts for each of these meal breaks are separate and cannot be aggregated into a single daily amount. The amounts also cannot be moved from one meal to another (eg if the full amount for breakfast is not expended, it cannot be carried over to lunch or dinner).

Overseas travel

Reasonable amounts are provided for 3 salary levels — up to $143,650; between $143,651 to $255,670; and $255,671 and above.

Salary excludes any allowances received. If the employee travels to 2 or more countries on the same day, the cost group of the country that is in the higher cost group should be used to determine the reasonable amount for that day.

The reasonable amount for incidentals applies in full to each day of travel covered by the allowance, without the need to apportion for any part-day travel on the first and last day.

ATO upcoming changes to investment entities’ third-party data tax controls assurance reviews

The Australian Taxation Office (ATO) has released a reminder on upcoming changes to its assurance reviews for investment industry entities.

From 1 July, the ATO will rate investment entities’ third-party data tax controls during assurance reviews, and will also check the presences of systems and processes that:

• ensure accurate reporting of third-party data; and
• mitigate the risks of inaccuracies in income tax reporting and distribution statements, where applicable.

To help investment entities set up better practices, the ATO released its governance over third-party data supplementary guide in 2022. This guide helps set up better practices for managing third-party data tax controls.

According to the ATO, the guide is applicable to entities that are a:

• large superannuation fund;
• managed investment trust or attribution managed investment trust (AMIT);
• corporate collective investment vehicle (CCIV); and
• insurance company.

The ATO expects all investment entities to have put controls in place that follow the principles in the guide by 1 July.

For more information, please refer to the ATO website.

ATO guidance on hybrid mismatch rules

The ATO has released a determination (TD 2024/4) clarifying application of certain aspects of the “liable entity” and “hybrid payer” definitions in Div 832 of ITAA 1997, regarding the hybrid mismatch rules.

Hybrid mismatch rules are designed to prevent multinational corporations from exploiting differences in the tax treatment of an entity or instrument under the laws of 2 or more tax jurisdictions.

Broadly, a hybrid mismatch will arise if:

• an entity enters into a scheme that gives rise to a payment, and
• the payment gives rise to a deduction/non-inclusion mismatch, or a deduction/deduction mismatch.

TD 2024/4 sets out the Commissioner’s view on 2 separate but related issues, ie whether:

• hypothetical income or profitswithin the tax base of a country can be used to identify a “liable entity” or entities in the country for the purposes of s 832-325, and
• a “non-including country” for the purposes of s 832-320(3) of the “hybrid payer” definition can be a jurisdiction other than the country where the payee of the relevant payment is located or resides.

It is the Commissioner’s view that the identification of a “liable entity” or entities in a country in respect of income or profits for the purpose of s 832-325 can be based wholly on hypothetical income or profits within the tax base of the country. This will be necessary where, for example:

• an entity has not actually derived any income or profits in a particular period, or
• an entity has derived income or profits in a particular period, but no part of those income or profits are within the tax base of the country.

The entity being tested therefore does not need to be a tax resident of the country, and need not have ever carried on income-producing activities or derived income or profits from the country, or propose to do so in future.

For the purposes of s 832-320(3), a “non-including country” can be a jurisdiction other than the country where the payee of the relevant payment is located or resides. Therefore, the laws of a jurisdiction other than the country where the payee is located or resides may fall for consideration in determining whether there is a hybrid payer within the meaning given by s 832-320.

This Determination applies both before and after its date of issue.

TD 2024/4 was previously released as Draft Taxation Determination TD 2024/D1. A compendium has been issued on the feedback received on the draft ruling.

Class rulings issued

Issue No.1	CR 2024/30 Gamma Investments HoldCo Pty Ltd — reduction of share capital. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.2	CR 2024/31 Link Administration Holdings Limited – scheme of arrangement and special dividend. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.3	CR 2024/32 Advanced Share Registry Limited – scheme of arrangement and special dividend. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.4	CR 2024/33 PointsBet Holdings Limited – return of capital. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.5	CR 2024/34 Carbon Revolution Limited – exchange of shares for Carbon Revolution plc shares. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.6	CR 2024/35 Cirrus Networks Holdings Limited – scheme of arrangement. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.7	CR 2024/36 National Australia Bank Limited – NAB Capital Notes 8. This ruling applies from 1 July 2023 to 30 June 2035.
Issue No.8	CR 2024/37 Calima Energy Limited – return of capital. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.9	CR 2024/38 Best & Less Group Holdings Pty Limited – employee share scheme – disposal of shares. This ruling applies from 1 July 2021 to 30 June 2024.
Issue No.10	CR 2024/39 EROAD Australia Pty Ltd – Fuel Tax Credits Solution. This ruling applies to taxable fuel acquired on or after 1 July 2024 to 30 June 2026.

Other rulings issued

Issue No.1	Product Ruling PR 2024/9 Summit Rural (WA) Pty Limited – End of Season Scheme. This ruling applies from 12 June 2024 to specified customers that enter into the scheme from 12 June 2024 until 30 June 2026.
Issue No.2	Product Ruling PR 2024/10 St. James’s Place Fund Administration Bond and Portfolio Administration Bond. This ruling applies from 1 July 2023 to specific entities that either enter into a Bond or receive a Death Benefit under a Bond from 1 July 2023 until 30 June 2026.
Issue No.3	Product Ruling PR 2024/11 Utmost Executive Investment Bond. The ruling applies from 1 July 2024 to entities specified in paragraph 4 of the ruling. However, the ruling only applies to the extent that there is no change in the scheme or in the entity’s involvement in the scheme.

Latest Australian Tax Cases

• Royalty withholding tax – The Full Federal Court has allowed the appeal of the US owners of the trademarks in the Pepsi, Mountain Dew and Gatorade brands (PepsiCo/SVC) against an earlier Federal Court decision with respect to royalty withholding tax. A majority of the full court also held that the diverted profits tax (DPT) did not apply. In an earlier decision reported at 2023 ATC; [2023] FCA 1490), the Federal Court (Moshinsky J) held that royalty withholding tax was payable in respect of portions of payments under the PepsiCo/SVC’s exclusive bottling agreements with Schweppes Australia (referred to as the Bottler). Justice Moshinsky also held that, if royalty withholding tax did not apply, the DPT in Pt IVA of ITAA 1936 applied. [PepsiCo, Inc & Anor v FC of T 2024 ATC;[2024] FCAFC 86, 26 June 2024.]

• Income – The Commissioner has appealed to the Full Federal Court against the decision in Liang & Anor v FC of T 2024 ATC; [2024] FCA 535, 4 May 2024. In that case, the Federal Court allowed the taxpayers’ appeal from a decision of the AAT ([2023] AATA 4039), finding that the AAT failed to perform its statutory task when reviewing disallowed objections to amended assessments under s 166 of ITAA 1936. The AAT had failed to consider whether the contested deposits in question were income on the basis of the established facts before it, once it had decided the taxpayers’ evidence was not credible. The court held that the material presented and concessions made by the Commissioner ought to have led the AAT to conclude that the deposits were not income.[ Liang & Anor v FC of T 2024 ATC; [2024] FCA 535]

• Market value substitution rule – The AAT has set aside amended assessments in which the Commissioner relied on the market value substitution rule in s 116-30 of ITAA 1997 to use a much higher valuation in place of the actual capital proceeds as agreed/specified in a share sale agreement. The AAT held that, even though the parties to the share sale agreement did not deal with each other at arm’s length, the evidence provided by the expert witness of the taxpayers as to the valuation of the business was to be preferred, with the result that the taxpayers satisfied the maximum net asset value test. [Moloney & Ors v FC of T 2024 ATC; [2024] AATA 1483, 7 June 2024.]