October 2024 Monthly Tax Update

In the October 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

Bill to streamline small business tax obligations and amending foreign resident CGT regime introduced

The Treasury Laws Amendment (2024 Tax and Other Measures No 1) Bill 2024 (the Bill) was introduced into the House of Representatives on 12 September 2024 and referred to the Senate Economics Legislation Committee for report by 24 October 2024. The Bill contains amendments relating to the foreign resident capital gains withholding regime, self-amendment period for small and medium businesses, and other tax administration matters.

The Bill introduces various amendments, including:

• increasing the foreign resident capital gains withholding rate from 12.5% to 15%.
• removing the current $750,000 threshold before which withholding applies for transactions involving either taxable Australian real property or an indirect Australian real property interest that provides company title interests.
• extending the time from two years to four years in which small or medium business taxpayers may apply to have an income tax assessment for income years starting on or after 1 July 2024 amended.
• allowing an employer to make a standing declaration to their agent that is valid for multiple single touch payroll (STP) lodgments made by that agent.
• extending the circumstances in which the Commissioner may retain an entity’s tax refund to encourage taxpayers to provide the Commissioner with valid financial institution account details for the refund to be paid into

Bill introduced to extend anti-money laundering regime to lawyers and accountants

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (the Bill) was introduced into parliament on 11 September 2024 and referred to the Senate Legal and Constitutional Affairs Legislation Committee for report by 13 November 2024. The Bill contains measures to implement significant reforms to Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime.

Generally, entities covered by the AML/CTF regime have various obligations to mitigate and manage the risk of money laundering and terrorism financing.

The Bill proposes to:

• extend the AML/CTF regime to certain higher-risk services provided by real estate professionals, and professional service providers including lawyers, accountants trust and company service providers, and dealers in precious stones and metals – also known as ‘tranche two’ entities.
• improve the effectiveness of the AML/CTF regime by making it simpler and clearer for businesses to comply with their obligations.
• modernise the regime to reflect changing business structures, technologies and illicit financing methodologies.

A significant aspect of the Bill is the expansion of the regime to encompass certain services offered by “gatekeeper professions,” which include professionals such as lawyers, conveyancers, accountants, and trust and company service providers.

Other Legislation Update

PAYG withholding exemption for US entertainers

The Taxation Administration (Withholding Variation for Certain Payments to US Resident Entertainers Including Athletes) Legislative Instrument 2024, effective 10 September 2024, varies the amount an Australian payer must withhold to nil for certain withholding payments made to entertainers who are residents of the United States of America (US). The withholding variation applies to payments for activities undertaken as an entertainer in Australia and the sum of all payments does not exceed USD$10,000.

This PAYG concession aligns with the provision in the Double Tax Agreement (DTA) that no Australian tax is payable by US resident entertainers where their gross receipts from such activities do not exceed US$10,000 for the relevant income year.

Australian payers are also exempt from providing a payment summary for payments to US resident entertainers where no amount was withheld from those payments in a financial year.

This instrument replaces the instrument ‘Taxation Administration Act 1953 – Pay as you go withholding – Variation to remove the requirement to withhold from payments for certain US resident entertainers and sport persons’ (F2014L00379) which would otherwise sunset on 1 October 2024.

Consultation opens on miscellaneous amendments to Treasury portfolio laws

The Federal Government has released a draft bill and draft legislative instrument for consultation that are meant to introduce miscellaneous amendments to the Treasury portfolio laws.

The Treasury Laws Amendment Bill 2024: Minor and technical Amendments (Spring 2024) (the Bill) will:

• repeal provisions in the Australian Securities and Investments Commission Act 2001 which require the Minister to consent to certain proceedings;
• amend reporting requirements for public companies in the Corporations Act 2001;
• amend the Foreign Acquisitions and Takeovers Act 1975 to clarify the calculation of penalties for contraventions of subsection 95(4);
• amend section 26 of the Petroleum Resource Rent Tax Assessment Act 1987;
• amend the Income Tax Assessment Act 1997 to ensure the thin capitalisation rules in Division 820 of that Act operate as intended; and
• amends the Corporations Act to align the requirements placed on the liquidator of a Corporate Collective Investment Vehicle.

The Bill amends various Treasury portfolio regulations to correct drafting errors and unintended outcomes, repeal inoperative provisions, and make other technical changes.

Consultation on both draft legislation closed on 11 October 2024.

For more information, please refer to the Treasury website.

Tax invoice waiver for motor vehicle incentive payments

A legislative instrument has been established to continue waiving the requirement for a tax invoice in specific situations where a motor vehicle incentive payment is issued to a motor vehicle dealer.

A New Tax System (Goods and Services Tax): Waiver of Tax Invoice Requirement (Motor Vehicle Incentive Payment Made to Motor Vehicle Dealer) Determination 2024 eliminates the need for a recipient of a motor vehicle supply to hold a tax invoice in certain circumstances for the relevant input tax credit to be attributed to a tax period. This applies when the recipient makes a creditable acquisition from a motor vehicle dealer and, in addition to the payment made by the recipient, the dealer receives or is entitled to receive third-party consideration in the form of a motor vehicle incentive payment. Instead of a tax invoice, the recipient must retain a document that meets the information requirements specified in the instrument.

The instrument repeals and replaces a 2014 instrument (F2014L00582), which was due to sunset on 1 October 2024, and had the same substantive effect. The instrument commenced on 11 September 2024.

Other Updates

Payday super design details released

Treasury had released further details on the proposal to require employers pay their employees’ superannuation on payday on 18 September 2024.

The 2023–24 Budget measure suggests that, starting July 1, 2026, employers will be required to pay their employees’ superannuation concurrently with their salary and wages, rather than adhering to the current quarterly payment schedule.

The government released the following policy design details on the measure:

• An updated superannuation guarantee charge framework will ensure employees are fully compensated for any delay in receiving their superannuation, incentivise employers to catch-up on any missed payments, and increase the severity of consequences for employers that deliberately or repeatedly do the wrong thing.

• Businesses will become liable for the updated superannuation guarantee charge if superannuation contributions are not received by their employees’ superannuation fund within 7 days of payday. This allows time for payment processing to occur, as well as for swift action to be taken against non-complying employers.

• Revised choice of fund rules will make it easier for employees to nominate their existing superannuation fund when they start a new job, reducing unintended duplicate accounts and giving employers more timely and accurate details. 

More information on the design is available from the fact sheet on the Treasury website. According to the government, legislative design will progress through the second half of 2024 ahead of draft legislation being released for consultation.

For more information, please refer here.

Exposure draft legislation on the proposed denial of GIC and SIC deductions

The Treasury had released Exposure draft legislation on a proposal to deny deductions for general interest charge (GIC) and shortfall interest charge (SIC).

Currently, taxpayers may claim deductions on expenditure incurred to the extent that it is for GIC and SIC in the year in which the charges are incurred. The 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO) measure proposes to amend s 25-5 and 26-5 of ITAA 1997 to deny the income tax deductions for amounts of GIC and SIC incurred by a taxpayer from 1 July 2025. 

The last day for comments is 16 October 2024. 

For more information, please refer here.

Draft amendments to determination on tax agent obligations under the Code of Professional Conduct

Exposure draft amendments (and updated explanatory material) have been released to clarify expectations regarding section 15 (concerning false and misleading statements) and section 45 (related to keeping clients informed of relevant matters) of the Tax Agent Services (Code of Professional Conduct) Determination 2024 (the Determination).

The Determination commenced on 1 August 2024, introducing eight supplementary obligations to the Code of Professional Conduct in the Tax Agent Services Act 2009, as part of the government’s response to the PwC leak scandal. Tax Agent Services (Code of Professional Conduct) Amendment (Measures No 1) Determination 2024 amended the original Determination, establishing that the obligations under the enhanced Code will take effect from January 1, 2025, for larger firms, and from 1 July 2025, for smaller firms.

The last day for comments was 2 October 2024.

OECD Updates

Australia supports OECD Pillar 2 Subject to Tax Rule

Australia has signed a Statement of Support for the “Subject to Tax Rule” (STTR) as part of Pillar 2 of the OECD/G20 Two-Pillar Solution, which was agreed upon in 2021 to tackle the tax challenges posed by the digitalization of the economy.

In particular, Pillar 2 of the OECD/G20 Two-Pillar Solution consists of:

• 2 interlocking domestic rules (together the Global anti-Base Erosion Rules (GloBE) rules):

1. an Income Inclusion Rule (IIR) to impose top-up tax on a parent entity in respect of the low taxed income of a constituent entity; and
2. an Undertaxed Payment Rule (UTPR) to deny deductions or require an equivalent adjustment to the extent the low tax income of a constituent entity is not subject to tax under an IIR, and

• a treaty-based rule Subject to Tax Rule (STTR) that allows source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum rate. 

The Pillar 2 STTR can be implemented by either joining the elective Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR MLI) or by making bilateral amendments to tax treaties. A signing ceremony for the STTR MLI occurred on 19 September 2024, marking the first significant step toward implementing the STTR in bilateral tax agreements.

Along with the global minimum tax legislation recently introduced into parliament, Australia’s support for STTR means that it has supported the OECD’s Pillar 2 reforms in their entirety.

For more information, please refer here.

OECD publishes XML Schema on international crypto asset reporting framework

The OECD has released its XML Schemas and User Guides to support the transmission of information between tax authorities pursuant to the Crypto-Asset Reporting Framework (CARF) and the amended Common Reporting Standard (CRS).

The OECD states that the CARF XML Schema, CRS XML Schema, and their associated user guides represent the reporting requirements of the CARF and the revised CRS, which were approved in 2023 and later endorsed by the G20 and the Global Forum as international standards.

Although the XML Schemas and User Guides are mainly intended to facilitate the automatic exchange of information between tax authorities, the OECD notes that jurisdictions can also require the use of these XML Schemas for domestic reporting by Reporting Crypto-Asset Service Providers and Reporting Financial Institutions.

The first exchanges under both the CARF and the amended CRS are expected to commence in 2027. For more information, please refer to OECD website.

OECD Tax Policy Reforms 2024

On 3 October 2024, the OECD released a report detailing the tax reforms implemented in 2023 across 90 member jurisdictions of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, including all OECD countries.

The report highlights the changing tax policy landscape as governments work to ease the cost-of-living crisis impacting households and businesses. It indicates a shift away from the tax-reducing reforms implemented during the COVID-19 pandemic and the following period of high inflation, moving towards more balanced strategies that include rate increases and base broadening initiatives.

The report also highlights data suggesting that:

• the trend of reducing corporate tax rates is reversing with more jurisdictions implementing rate increases than decreases
• significant progress is being made towards implementing the Global Minimum Tax
• there is an emerging trend towards increasing social security contributions
• the pace of value-added tax (VAT) relief measures is slowing
• the use of reduced VAT to promote lower-carbon economies through reduced rates for electric vehicles or zero rates for solar panels is increasingly common, and
• several high and upper-middle income countries strengthened health-related excise taxes on tobacco, alcoholic beverages, sugar-sweetened beverages, and gambling.

For more information, please refer here.

ATO Rulings & Activity

Guidance on corporate collective investment vehicle regime finalised

The ATO has issued Law Companion Ruling LCR 2024/1 on the tax treatment for corporate collective investment vehicles (CCIVs).

LCR 2024/1 outlines the Commissioner’s perspective on the amendments to taxation laws introduced by the Corporate Collective Investment Vehicle Framework and Other Measures Act 2022, which clarify the tax treatment for CCIVs.

A CCIV is a new type of company limited by shares designed for funds management. From a regulatory standpoint, a CCIV is a registered company with its assets and liabilities organized into “sub-funds” and operated by a single corporate director. For tax purposes, each sub-fund of a CCIV is considered a separate tax entity classified as a trust. The general trust taxation rules apply to CCIVs, with some modifications, particularly when they do not qualify for the attribution managed investment trust (AMIT) regime.

The ruling clarifies that the CCIV tax framework utilizes the existing tax framework applicable to trusts and the established attribution flow-through regime (i.e., the AMIT regime) rather than establishing a separate tax regime. This is mainly accomplished through the introduction of a deeming principle in subdivision 195-C of the ITAA 1997, under which it is assumed that:

the business, assets and liabilities of a CCIV sub-fund constitute the trust estate of a separate trust, and

the CCIV is the trustee and the members of the sub-fund are beneficiaries of this separate trust.

Accordingly, application of the deeming rule means that a CCIV is not taxed as a company and CCIV investors are not taxed as shareholders. The ATO’s view is that this deeming principle is intended to have wide operation, unlike most other deeming provisions that are construed strictly. However, it is confined to tax law purposes, and no actual trust relationship is created for general law purposes.

The ruling also covers other specific tax interpretative issues in connection with the deeming principle, including the relevance of various corporate tax laws to CCIV sub-funds, interaction with third parties and GST issues.

LCR 2024/1 was previously issued in draft form as LCR 2023/D1. A compendium has been issued on the feedback received on the draft ruling.

This ruling is effective from 1 July 2022, being the commencement date of the CCIV regime.

Determination on deductibility of financial advice fees paid by individuals

The ATO has released a determination regarding the deductibility of financial advice fees paid by individuals who are not operating an investment business.

Taxation Determination TD 2024/7 replaces the withdrawn Taxation Determination TD 95/60W, which addressed whether fees paid for obtaining investment advice are allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for taxpayers not engaged in an investment business. While TD 2024/7 maintains the views expressed in TD 95/60W, it introduces new content regarding the deductibility of financial advice fees as tax-related expenses under section 25-5 of ITAA 1997.

According to TD 2024/7, an individual can claim a deduction for fees paid to a financial adviser if they meet the criteria outlined in section 8-1 (general deductions) or section 25-5 (tax-related expenses) of the ITAA 1997. In some cases, it may be necessary to apportion the deduction, as the entire amount of the fees paid might not be fully deductible.

Broadly speaking, an individual is entitled to a deduction under the general deductions provision to the extent that the loss or outgoing is incurred in gaining or producing assessable income. However, an individual is not entitled to deduct any loss or outgoing under s 8-1 to the extent that:

• it is an outgoing of capital or of a capital nature
• it is an outgoing of a private or domestic nature
• it is incurred in gaining or producing a taxpayer’s exempt or non-assessable, non-exempt income, or
• a provision of the Act prevents it from being deducted.

Fees incurred by an individual for financial advice may be deductible under the tax-related expenses provision, provided the advice pertains to managing their “tax affairs.” Not all advice from a financial adviser qualifies for deduction; for instance, if the adviser simply provides factual information about a financial product without applying or interpreting taxation laws, it does not count as managing the individual’s tax affairs. Additionally, an individual cannot deduct fees or commissions for advice concerning the operation of Commonwealth taxation laws unless that advice is given by a “recognised tax adviser.”

An individual must provide sufficient evidence of an expenditure to claim it as a deduction. According to TD 2024/7, an itemized invoice—such as a fee disclosure statement or an advice fee consent form—that includes the following details would be considered adequate:

• the name of the financial adviser
• the amount of the expense
• an explanation of the advice provided
• the date that the expense was incurred, and
• the date that the invoice was produced.

Guidance on First Home Super Saver Scheme refreshed

The ATO has set out its preliminary views on factors relevant in applying the “hypothetical resident taThe The ATO has updated its guidance on the First Home Super Saver Scheme (FHSS Scheme) in light of recent legislative amendments. 

The FHSS Scheme was modified by the Treasury Laws Amendment (2023 Measures No 3) Act 2023 to enhance its flexibility with effect from 15 September 2024. In light of these changes, the ATO released Taxation Ruling TR 2024/4 and Guidance Note GN 2024/1 to explain how the FHSS Scheme operates under the new provisions. Consequently, the earlier guidance based on the previous legislation, specifically Law Companion Ruling LCR 2018/5 and Guidance Note GN 2018/1, has been withdrawn.

The new guidance considers the operation of the FHSS Scheme under the amended law. In particular, TR 2024/4 discusses:

• eligibility
• eligible contributions
• FHSS Scheme determinations
• requesting release of an amount under the FHSS Scheme
• obligations following a release request
• FHSS tax, and
• transitional rules to assist individuals who unsuccessfully attempted to use the FHSS Scheme before purchasing their first home.

To the extent that the views in LCR 2018/5 still apply, they have been incorporated into TR 2024/4.

GN 2024/1 replaces GN 2018/1. It discusses the following:

• making voluntary contributions
• eligibility to release amounts from super using the FHSS Scheme
• requesting an FHSS Scheme determination
• release of amounts from a superannuation fund
• purchasing or constructing a home
• implications if the taxpayer does not purchase or construct a home
• tax implications of using the FHSS Scheme, and
• unsuccessful attempts to use the FHSS Scheme before 15 September 2024.

Updated practice statement on Div 7A and statute barred loans

The ATO will obtain property management data from property management software companies covering tThe practice statement regarding the operation of Division 7A of the ITAA 1936 concerning loans that have become statute-barred has been updated.

Practice Statement Law Administration (General Administration) (PS LA 2006/2 (GA) states that private company and trustee loans that became statute-barred prior to the enactment of Division 7A will not be considered as resulting in a deemed dividend under Division 7A. The practice statement has been updated to align with current ATO style and accessibility standards.

ATO updated guidance on approach to invalidity of tax law claims

The ATO has released a list of frequent taxpayer mistakes identified through its recently expanded prThe ATO has updated its guidance on how it will treat correspondence from taxpayers claiming that they will not comply with tax laws because the laws are invalid or do not apply to them.

The update to PS LA 2004/10 reflects a change in process, indicating that the ATO does not view such claims as a suitable use of its resources. These claims often involve arguments related to constitutional issues or an individual’s legal status, and in many cases, they have been dismissed by Australian courts.

For claims that are not part of an ongoing matter, the ATO will maintain its existing process for filing such correspondence in line with its internal “Constitutional correspondence” procedures.

Updated practice statement on super guarantee charge

A practice statement on superannuation guarantee charge (SGC) has been updated on 26 September 2024.

Practice Statement Law Administration (General Administration) PS LA 2007/1 (GA) outlines scenarios where it may not be necessary to assess an employer for SGC, provided there is evidence that the employer has taken reasonable steps to comply with the law by the due date.

The content of the practice statement has been updated in line with current ATO style and accessibility requirements. It has also been checked for technical accuracy and currency.

Updated practice statement on information disclosure to Treasury

The ATO has revised its practice statement regarding the disclosure of information about taxpayers’ affairs to Treasury.

Practice Statement Law Administration PS LA 2005/23 outlines the protocol on disclosing protected information about taxpayers to the Treasury.

The practice statement has been updated to incorporate recent legislative changes to information-sharing laws. Specifically, the ATO is now permitted to share information with Treasury regarding a breach or suspected breach of a confidentiality obligation owed to the Commonwealth.

Updated practice statement on forestry managed investment schemes

The ATO has updated the practice statement on forestry managed investment schemes.

Practice Statement Law Administration PS LA 2008/2 aids ATO staff in applying Division 394 of the ITAA 1997 to forestry managed investment schemes and in preparing product rulings.

The statement has been updated as follows:

• The information in sections 3 and 4.6 of Attachment A on promoter penalty laws has been updated to reflect amendments in Treasury Laws Amendment (Tax Accountability and Fairness) Act 2024 that took effect on 1 July 2024.
• The references in section 2.2 of Attachment A to the withdrawn Taxation Ruling TR 94/4 and the withdrawn Practice Statement Law AdministrationPS LA 2006/2 were replaced with Miscellaneous Taxation Ruling MT 2008/1 and Practice Statement Law AdministrationPS LA 2012/5 respectively.

The practice statement has also been updated in line with current ATO style and acccessibility requirements.

Practice statement on workplace giving programs withdrawn

The ATO has withdrawn the practice statement on workplace giving programs. Practice Statement Law Administration PS LA 2002/15 explains the evidence required to support gifts made via workplace giving programs.

It was withdrawn on 19 September 2024 as the content is now addressed in the following ATO webpages:

• Workplace giving programs
• Workplace giving programs for employees
• Workplace giving and salary sacrifice arrangements, and
• Estimated tax savings for regular workplace giving donations.

Class rulings issued

Issue No.1	Class Ruling CR 2024/56 Alumina Limited – scheme of arrangement. This ruling applies from 1 July 2024 to 30 June 2025.
Issue No.2	Class Ruling CR 2024/57 Macquarie Group Limited – Macquarie Capital Notes 7. This ruling applies from 1 July 2024 to 30 June 2035.
Issue No.3	Class Ruling CR 2024/58 QV Equities Limited – scheme of arrangement. This ruling applies from 1 July 2024 to 30 June 2025.
Issue No.4	Class Ruling CR 2024/59 Smartgroup Corporation Ltd and subsidiaries – after tax recipient’s payments made after 31 March but before lodgment of the FBT return. This ruling applies from 1 April 2024 to 31 March 2028.
Issue No.5	Class Ruling CR 2024/60 NPR Trust No. 1 and NPR Trust No. 4 — scrip for scrip roll-over. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.6	Class Ruling CR 2024/61 Premier1 Lithium Limited – in specie distribution of Tully Investors Limited shares. This ruling applies from 1 July 2023 to 30 June 2024.
Issue No.7	Class Ruling CR 2024/62 FleetPartners Group Limited, FleetPlus Pty Limited and Fleet Partners Pty Limited – employer clients’ use of travel smartcard. This ruling applies from 1 April 2023 to 31 March 2029.

Other rulings issued

Issue No.1	Product Ruling PR 2024/16 Stela Agri Pty Ltd – Customer Prepay Flexi Agreement. This ruling applies to a small business entity as defined in s 328-110 of ITAA 1997 or an entity covered by s 82KZM(1A) of ITAA 1936 that enters into the relevant scheme from 11 September 2024 until 30 June 2027.
Issue No.2	Product Ruling PR 2024/17 C2 Equity Optimiser. This ruling applies from 2 October 2024 to specific investors that enter into the scheme from 2 October 2024 until 30 June 2027.

Latest Australian Tax Cases

• The Full Federal Court has unanimously dismissed Equality Australia’s appeal from a decision of the AAT ( 2023 ATC; [2023] AATA 2161 ) which had held that an entity such as the appellant that was organised to advocate for reform and change was too far removed from the traditional concepts of benevolence to qualify as a “public benevolent institution” (PBI)….The full court held that Equality Australia had not shown that the AAT erred by giving the term a meaning or qualification of its own, nor had it shown the AAT misapplied the criterion it had selected in reaching its conclusion that there was not a sufficient connection between the activities of Equality Australia and the relief of distress experienced by LGBTIQ+ people. [Equality Australia Ltd v Commissioner of Australian Charities and Not-for-profits Commission 2024 ATC; [2024] FCAFC 115, 5 September 2024.]

• Excess concessional contribution – The AAT has affirmed an assessment of Div 293 tax after finding that the proper construction of s 291-20 of ITAA 1997 was that the application of the carried forward unused concessional contributions cap was mandatory, not optional as the taxpayer had tried to argue.[WTBW v FC of T 2024 ATC; [2024] AATA 3268, 11 September 2024.]

• Assessable income – The Full Federal Court has confirmed that a settlement payment made by an insurer under a deed of release was assessable as income to the taxpayer recipient. In so finding, it dismissed the taxpayer’s appeal against the AAT decision in Sladden v FC of T 2023 ATC; [2023] AATA 3815. [Sladden v FC of T 2024 ATC, [2024] FCAFC 122, 19 September 2024.]