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Monthly Tax August 2023

Monthly Tax Update August 2023

In the August 2023 edition of Andersen in Australia’s Monthly Tax Update, we provide recent updates in legislation along with tax developments in the areas of corporate tax, individual tax, indirect tax and international tax. We also include the ATO’s recent activities, including its publications, rulings issued in the past month, latest Australian tax cases and other news in this edition.

Inside this Monthly Tax Update you will find

Legislation Update

OECD Updates

Other Updates

ATO Rulings & Activity

Latest Australian Tax Cases

Legislation Update

Treasury Laws Amendment (2023 Law Improvement Package No 1) Bill 2023

Legislation which proposes to implement certain recommendations of the Australian Law Reform Commission’s Financial Services Interim Reports A and B, among other measures, passed the House of Representatives on Tuesday 1 August.

The Treasury Laws Amendment (2023 Law Improvement Package No. 1) Bill 2023, which was introduced on 14 June 2023, proposes to:

  • ‘unfreeze’ the Acts Interpretation Act 1901 so that the current version applies to the Australian Securities and Investments Commission Act 2001 and Corporations Act 2001;
  • create a single glossary of defined terms in the Corporations Act 2001;
  • repeal redundant definitions;
  • address unclear or incorrect provisions;
  • simplify unnecessarily complex provisions;
  • implement findings of the thematic review of insurance instruments due to sunset on 1 October 2023;
  • move certain matters currently in legislative instruments into primary law;
  • make minor and technical amendments to 10 Acts in the Treasury portfolio; and
  • repeal the ASIC Corporations (Superannuation and Schemes: Underlying Investments) Instrument 2016/378.

New Thin Capitalisation Rules passed by Lower House – Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023

Legislation which proposes new interest limitation rules, implement the proposed thin capitalisation reforms and introduce a new public tax disclosure requirement on multinational groups has been passed by the House of Representatives on 9 August 2023.

The Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023, which was introduced in the House of Representatives on Thursday 22 June, proposes to:

  • limit the amount of debt deductions certain multinational entities can claim in an income year: the new thin capitalisation rules seek to align with the OECD’s earnings-based best practice model which allows an entity to deduct net interest expense up to a benchmark earnings ratio; and
  • introduce new rules on the disclosure of information about subsidiaries: for financial years commencing on or after 1 July 2023, Australian public companies (listed and unlisted) must disclose information about subsidiaries in their annual financial reports.

The Bill, which has now been introduced in the Senate, is currently being examined by the Senate Economics Legislation Committee.

The Committee is due to report by 31 August 2023.

Social Services and Other Legislation Amendment (Strengthening the Safety Net) Bill 2023

The Social Services and Other Legislation Amendment (Strengthening the Safety Net) Bill 2023 has been passed to give effect to increases in social security rates for certain payments.

From 20 September 2023, the base rate of JobSeeker Payment will increase by $40 per fortnight. In addition, the age at which the higher rate of Jobseeker Payment for single recipients is paid will be reduced from age 60 to 55, for those who have been receiving the payment for a continuous nine months.

The maximum rates of Rent Assistance payment will also increase by $24 per fortnight.

These measures were originally announced in the 2023 Federal Budget. 

Miscellaneous Amendments to Treasury Portfolio Laws 2023

Treasury has released draft legislation proposing amendments to ensure the tax law in relation to GST input tax credits operates as intended.

Particularly, the proposed amendments will ensure that input tax credits for creditable acquisitions are attributed to appropriate tax periods. If the input tax credits were not taken into account in a GST return for a period, the new provisions allow a taxpayer to elect that the input tax credit be attributable to a later tax period. The election must be made within the general time limit of 4 years after the GST return for the tax period is due, and attribute the credits to a time period within that time limit. Amendments will also clarify the interaction between the time limit rules and the provision enabling the Commissioner to determine the tax period to which a credit is attributable.

These draft amendments to the GST Act and TAA 1953 in Treasury Laws Amendment (Measures for Consultation) Bill 2023: Miscellaneous and technical amendments—Spring 2023 will apply to tax periods that start on or after 1 July 2012 so as to ensure the law conforms with the ATO’s past practice and taxpayers’ expectations.

Amendments are also proposed to s 27-15 of ITAA 1997 to explicitly provide that GST payable by way of reverse charge is deductible to the extent that the GST is greater than any input tax credits the taxpayer is entitled to and s 8-1 requirements are met.

The last day for comments on the draft legislation is 23 August 2023.

Australian Prudential Regulation Authority (confidentiality) determination No. 3 of 2023

Certain information given to Australian Prudential Regulation Authority (APRA) under-reporting standards specified in a determination will be non-confidential.  

According to Australian Prudential Regulation Authority (confidentiality) determination No. 3 of 2023 (the Determination), non-confidential information includes reporting documents which are:

  • subject to the Determination in their entirety
  • partly subject to the Determination, and
  • partly subject to the Determination where the information relates to a MySuper product. 

The information determined by the Determination 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. It will ultimately promote greater transparency, best-practice and accountability across the superannuation industry. 

The Determination replaces Australian Prudential Regulation Authority (confidentiality) determination No. 3 of 2022.

OECD updates

OECD update on progress of international tax reforms (BEPS 2.0), Pillar One and Pillar Two – Public Consultation and Administrative Guidance

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) released the following important documents related to Pillar One and Pillar Two:

Pillar One

The OECD has released a public consultation document outlining the design elements of Amount B of Pillar One. Amount B is intended to streamline the process for pricing baseline marketing and distribution activities in accordance with the arm’s length principle in order to enhance tax certainty and reduce resource-intensive disputes. Interested parties are invited to submit their comments on the consultation document with a particular focus on issues identified by 1 September 2023.

On Amount A of Pillar One, the Inclusive Framework will publish the text of a Multilateral Convention (MLC) once specific concerns expressed by various jurisdictions are resolved. The MLC will allow jurisdictions to reallocate and exercise a domestic taxing right over a portion of residual profits of covered multinational enterprises.

Pillar Two

The Inclusive Framework has issued a package of documents as part of ongoing work under Pillar Two.

The GloBE Information Return sets out a standardised information return to facilitate compliance with and administration of the GloBE Rules. The document incorporates transitional simplified reporting requirements that allow reporting of GloBE calculations at a jurisdictional level in response to feedback following public consultation undertaken in March 2023.

A second set of Agreed Administrative Guidance addresses on currency conversion rules when performing GloBE calculations, tax credits and application of the substance-based income exclusion. It also contains a permanent safe harbour for jurisdictions that introduce a qualified domestic minimum top-up tax and a transitional safe harbour in relation to the application of the undertaxed profits rule for fiscal years commencing on or before the end of 2025.

Background material on Pillar Two, including a summary of the Pillar Two Model Rules and frequently asked questions, has also been updated.

 

OECD update on the progress of international tax reforms (BEPS 2.0)

Other work

Progress on other tax and development initiatives highlighted in the report include:

The report also highlighted the Outcome Statement agreed by 138 countries and jurisdictions summarising the package of deliverables developed by the Inclusive Framework on the remaining elements of the Two-Pillar Solution to Address the Tax Challenges arising from the Digitalisation of the Economy.

Other updates

Government Audit of ATO’s management of taxpayers’ use of transfer pricing and related party debt

The Auditor-General is an independent officer of the Parliament. Supported by the Australian National Audit Office (ANAO), the Auditor-General provides an independent assessment of public sector reporting, administration and accountability.

The ANAO examines public sector entities’ performance by conducting audits in the areas of operations, resources, information systems, performance measures, monitoring systems, legal and other compliance and corporate governance process.

For the ATO, this means that the ANAO conducts performance audits that examine the efficiency and effectiveness of the administration.

This year the ANAO is undertaking an audit to assess the effectiveness of the ATO’s management of transfer pricing for related party debt.  The topic is very timely with the recent change to the thin-cap provisions with significant transfer pricing complications and the ATO’s challenging and assessing any international related party financing arrangements as high risk.  This has also been evident in recent court cases on the topic.

The ANAO adopts a consultative approach to its forward audit program, underpinned by a risk-based methodology that considers the priorities of the Parliament and the views of entities and other stakeholders. The ANAO’s review is a timely opportunity for tax agents and the profession to articulate their experiences in engaging with the ATO on the management of transfer pricing issues on related part debt.

If you are interested in contributing your experience with the ATO in its management of assessing taxpayer’s related party debt, then the ANAO proposes to examine following: 

  • Does the ATO have a sound strategic framework to manage the use of transfer pricing for related party debt? 
  • Are the risks relating to transfer pricing for related party debt appropriately managed? 
  • Does the ATO effectively manage transfer pricing for related party debt? 

The ANAO welcomes members of the public contributing information for consideration when conducting performance audits. Submissions to the audit are closing 29 October 2023 and the ANAO is due to table its findings in March 2024. 

For more information, please refer here.

Private Clients and Global Mobility – Consultation on individual tax residency

Treasury is consulting on a new individual tax residency framework based on recommendations made in the Board of Taxation’s 2019 report Individual Tax Residency Rules – a model for modernisation.

The former government had announced in the 2021–22 Budget that it would replace the individual tax residency rules with a new framework based on the model recommended by the Board in its 2019 report. The outcomes of the consultation will help inform the government’s decision on whether to proceed with this measure. Given the Board’s 2019 report was prepared before the COVID-19 pandemic, the consultation will also provide an opportunity to consider whether the new framework produces appropriate outcomes in all circumstances.

Board of Taxation’s proposed model

The Board’s model in the 2019 report proposed a 2-step approach broadly consisting of:

  1. The 183-day test –  a primary “bright line” test, under which a person physically present in Australia for 183 days or more in any income year will be a tax resident. A “government officials test” will also replace the outdated Commonwealth superannuation test.
  2. Secondary tests – a range of tests relating to individuals commencing or ceasing residency, to apply to individuals who are not tax residents under the first step.

The Board sought to ensure the model’s design was consistent with principles of adhesive residency, certainty, simplicity and integrity. The model focuses on physical presence as the primary measure of residency, with consideration of connections that an individual has to Australia. The proposed rules apply only objective criteria, removing the need to test intention or undertake a broad examination of all relevant facts and circumstances.

Consultation paper

The objective of the consultation is to formulate broad principles that will ensure a modern and robust framework that will mitigate against the need for complex rules requiring adjustment over time to address newly identified issues.

Design features of the proposed model that the Treasury seeks input on include:

  • the physical presence thresholds under the secondary tests for individuals with strong connections to Australia
  • the suitability of factors identified for determining whether an individual is strongly connected to Australia
  • the secondary test for determining when a long-term resident will cease to be a tax resident
  • rules for long-term Australian tax residents who depart Australia to take up overseas employment, and
  • transitional rules for moving from the existing residency rules to the new framework.

Consultation on individual tax residency

The government has indicated that it does not plan to adopt the Board’s recommendation that the new rules align domestic tax residency with outcomes under double tax agreements at this stage. Although such a rule may help address manipulation of the tax system, the government considers it would add complexity for many taxpayers with otherwise simple tax affairs.

The details of the framework outlined in the consultation paper have not received government approval and are not yet law. 

Interested parties are invited to comment on this consultation up until 22 September 2023.

For more information, please refer here.

Superannuation Funds, Financial Institutions, and Insurers – APRA finalizes requirements for public remuneration disclosure of top executives

The Australian Prudential Regulation Authority (APRA) has finalised new requirements for superannuation entities, authorised deposit-taking institutions and insurers to publicly disclose information on aspects of their remuneration.

Prudential Standard CPS 511 Remuneration requires APRA-regulated entities to annually publish information on their remuneration frameworks, design, governance and outcomes. Larger and more complex entities must disclose additional quantitative information, including on payments to top executives and how they have placed a material weight on non-financial measures such as risk management. This follows industry feedback on the consultation that was launched in 2022.

The disclosure requirements will commence for all entities from their first full financial year following 1 January 2024. APRA has agreed to provide additional flexibility around the timing of disclosures, with annual disclosures required within 6 months of an entity’s financial year-end.

In addition, APRA proposed collecting and publishing more granular data on remuneration. APRA’s response to submissions to its consultation on draft Reporting Standard CRS 511 Remuneration will be delayed, and the commencement date will be extended accordingly.

Further, APRA will publish the findings from an implementation review of CPS 511 shortly to assist the industry with implementing the new requirements.

A response paper to the CPS 511 consultation and the updated prudential standard are available on the APRA website.

For more information, please refer here.

Licensing exemption for foreign financial-services providers

The federal government plans to overhaul the existing licensing-relief regime for foreign financial services providers.

The government has presented an exposure-draft bill and is seeking submissions on it. The bill – Treasury Laws Amendment (Measures for Future Bills) Bill 2023: Licensing exemptions for foreign financial services providers, provides AFSL exemptions for foreign financial services providers seeking to provide services to Australian professional and wholesale investors. The bill does this by amending the Corporations Act (“the Act”) to create 4 licensing exemptions for foreign providers:

  • the professional-investor exemption, which is an exemption for the provision of services to professional investors;
  • the comparable-regulator exemption, which is an exemption for a provider servicing wholesale clients if the provider is already regulated by a comparable overseas regulator;
  • the market-maker exemption, which exempts a provider of services that involve making a market for derivatives that are able to be traded on a specified licensed market;
  • the fit-and-proper-person-test exemption, which exempts a provider from the fit-and-proper-person test when applying for an AFSL to service wholesale clients if the provider is regulated by a comparable overseas regulator.

The professional-investor exemption will replace the existing professional-investor exemption in s 911A(2E) of the Act (as inserted by reg 7.6.02AG of the Corporations Regulations). The comparable-regulator exemption will replace the “sufficient-equivalence relief” in the ASIC Corporations (Foreign Financial Services Providers — Foreign AFS Licence) Instrument 2020/198. As for the market-maker and fit-and-proper-person test exemptions, they will be new exemptions that have not previously existed. 

If the bill is enacted, it will commence on 1 April 2024.

Submissions on the bill close on 8 September 2023.

For more information, please refer here.

Government taking decisive action in response to PwC tax leaks scandal

An extensive government crackdown on tax adviser misconduct will increase maximum penalties for advisers and firms promoting tax exploitation schemes from the present $7.8 million to more than $780 million.

Sparked by the PwC matter, the package of reforms announced covers three priority areas for action:

  1. Strengthening the integrity of the tax system

    The government will increase maximum penalties for advisers and firms who promote tax exploitation schemes from $7.8 million to over $780 million.

    Tax promoter penalty laws will be expanded so they are easier for the ATO to apply to advisers and firms who promote tax avoidance.

    The time limit for the ATO to bring Federal Court proceedings on promoter penalties will be increased from four years to six years after the conduct occurred.
  2. Increasing the power of regulators

    The reforms will:
    • Remove limitations in the tax secrecy laws that were a barrier to regulators acting in response to PwC’s breach of confidence;
    • Enable the ATO and Tax Practitioners Board to refer ethical misconduct by advisers (including but not limited to confidentiality breaches) to professional associations for disciplinary action;
    • Protect whistleblowers when they provide the Tax Practitioners Board with evidence of tax agent misconduct;
    • Give the Tax Practitioners Board more time – up to 24 months – to complete complex investigations;
    • Improve the Tax Practitioners Board’s public register of practitioners, so that people have more transparency over agent and firm misconduct.
  3. Strengthening regulatory arrangements

    The government says the PwC scandal has shown some regulatory frameworks are not fit for purpose.

    It says it has raised questions about the adequacy of regulations applying to large consulting, accounting and auditing firms and how this misconduct was able to occur and go undetected without consequence for so long.
    This includes whether there are appropriate governance obligations on these firms in areas such as transparency, executive responsibility, management of conflicts of interest and dealing with misconduct.

    Treasury will be co-ordinating a whole government response to the PwC matter and the systemic issues raised. This work will deliver options to the government progressively over the next two years.

Consultation to ensure options are targeted and effective will begin in the coming months. It will include:

  • Implementing remaining recommendations from the independent review of the TPB, including strengthening the range of sanctions available to the TPB;
  • A Treasury review of the promoter penalty laws to ensure they address the types of promoter activity prevalent today, including schemes that are bespoke, complex, and/or operate across jurisdictional boundaries;
  • A Treasury review of emerging fraud and threats to clamp down on systemic abuse of our tax system perpetrated by tax agents and other bad actors;
  • A Treasury and Attorney‑General’s Department joint review of the use of legal professional privilege in Commonwealth investigations, with options for Government to respond to concerns that some claims of privilege are being used to obstruct or frustrate investigations;
  • A Treasury examination of the regulation of consulting, accounting and auditing firms to consider whether reforms are needed. This work will require collaboration with states and territories, given cross‑jurisdictional regulation of partnerships, as well as engagement with ongoing Parliamentary committee inquiries;
  • A Treasury review of the compulsory information gathering powers of the ATO to ensure it has the right tools to perform its role effectively and enable it to assist law enforcement agencies to investigate serious criminal offences perpetrated against the tax and superannuation systems;
  • A Treasury review of the secrecy provisions that apply to the ATO and Tax Practitioner Board to consider whether there are further circumstances in which it is in the broad public interest for information obtained by these regulators to be shared with other regulatory agencies;
  • A Department of Finance review into the use of confidentiality arrangements across all Government agencies to ensure they are fit for purpose, legally binding and enforceable. The review will also identify opportunities to strengthen the management of conflicts of interest in contracts;
  • A Department of Finance review to explore options to increase the transparency and visibility of where Commonwealth contracts have been terminated for material breach.

Legislation to strengthen the integrity of the tax system and increase the powers of regulators will be introduced this year, with consultation on the reforms beginning shortly.

For more information, please refer here.

PwC compliance report to Tax Practitioners Board

In response to a Tax Practitioners Board (TPB) order, PricewaterhouseCoopers (PwC) has provided a report detailing improvements made to its management of compliance and conflicts of interest. Please refer here for a copy of the report.

The TPB welcomed the improvements and acknowledged that PwC has agreed to pro-active transparency, taking various steps including additional training for 1,300 personnel on legal and ethical issues. Among other things, the order required appropriate training be given every 6 months on compliance with the Code of Professional Conduct and a central register of confidentiality agreements be maintained. Names of relevant partners and staff who attended the training and the content of the training are also be to provided to the TPB. 

Under the order, PwC is required to report to the TPB every 6 months until 31 December 2024.

For more information, please refer here.

ATO Rulings & Activity

Rules for conducting R&D activities overseas

Following the Administrative Appeals Tribunal’s recent decision in T.D.S. Biz Pty Ltd v Commissioner of Taxation [2023] FCA 710, the ATO has issued an advisory on claiming an offset under the Research and Development (R&D) tax incentive.

According to the ATO, while companies can claim an offset for R&D expenditure incurred by them on R&D activities conducted overseas, it is subject to rules and limitations, including holding an Advance Overseas Finding for those activities.

Additionally, to be eligible for the offset, the anticipated expenditure incurred on overseas activities must be less than the expenditure on Australian activities over the life of the relevant activities.

Companies seeking to claim an R&D offset are advised to check their eligibility.

The ATO says it aims to increase transparency within the R&D program and will hold companies to a high standard when it comes to complying with, and understanding, R&D laws.

For more information, please refer here.

ATO focus on compliance with super guarantee in 2023-24

The ATO has identified 8 key focus areas in its 2023–24 Corporate Plan including collectable debt, improving compliance for Australia’s largest taxpayers and superannuation guarantee non-compliance. It will also address small business tax performance through digital innovations and continue to invest in data and digital while protecting taxpayers against fraud and managing cybersecurity. According to the ATO, the ATO’s vision is that where possible, through smart use of data and digitalisation, tax, superannuation and registry interactions “just happen”. 

The ATO will continue to use data to improve SG compliance and is working to create a single transparent view of employees’ SG for all funds and employers to help the ATO be proactive with employer non-compliance.  A key deliverable will also be to implement the government’s response to the review of the Modernising Business Registers Program.

The plan sets out the various tax and superannuation administration risks and the ATO’s planned strategies to manage them as well as broader organisational risks and itemises the ATO’s key performance measures to achieve its strategic objectives for the year.

ATO decision impact statement on gold bullion GST case

The ATO has issued a decision impact statement on the Full Federal Court decision in FC of T v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust 2023 ATC ¶; [2023] FCAFC 19. The decision considered the application of the general anti-avoidance provisions in Div 165 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

The Commissioner considers that the full court decision supports the proposition that the cancellation of an avoider’s GST benefit under Div 165 is not foreclosed by the absence of the avoider’s knowledge about or wilful blindness to the actions of parties involved in entering into or carrying out the scheme as a whole, or various parts of it. Further, the Commissioner considers Div 165 will operate to cancel the avoider’s GST benefit where the relevant matters in s 165-15 demonstrate that any one or more of the scheme participants, or a part of the scheme, had the dominant purpose or the principal effect of the avoider obtaining that GST benefit.

The ATO is reviewing the impact of this decision on related advice and guidance products, including Law Administration Practice Statement PS LA 2005/24 on the application of general anti-avoidance rules.

Comments are invited on the decision impact statement until 18 August 2023. For more information, please refer here.

ATO draft instrument on correcting fuel tax errors from previous tax periods

The ATO has released a draft determination on correcting fuel tax errors for consultation.

Draft LI 2023/D14 Fuel Tax (Correcting Fuel Tax Errors) Determination 2023 proposes to allow an error that has been made in working out a net fuel amount for an earlier tax period to be corrected when a fuel tax return for a later tax period is lodged. Where the circumstances in the determination are met, a taxpayer may choose to correct an error made in an earlier period by including the error amount in a fuel tax return in a later tax period instead of requesting an amended assessment for the earlier period.

The determination, however, will not apply to errors that were made in working out a net fuel amount for a tax period that started before 1 July 2012.

Once commenced, the determination will replace Fuel Tax: Correcting Fuel Tax Errors Determination 2013. The closing date for comments is 4 August 2023

For more information, please refer here.

ATO consultation on correcting GST errors draft legislation

The ATO has released a draft legislative instrument that allows GST errors made in an earlier tax period to be corrected in a later tax period in specified circumstances.

The draft instrument will allow an error that has been made in working out a net amount for an earlier tax period to be corrected by including the amount of the error in working out the net amount for a later tax period. Where the circumstances in the instrument are met, the taxpayer may choose to correct an error by including it in a GST return for a later tax period, instead of requesting the Commissioner to amend the assessment for the earlier tax period.

According to its explanatory statement, the instrument, LI 2023/D13 A New Tax System (Goods and Services Tax) (Correcting GST Errors) Determination 2023 :

  • applies only to errors relating to an amount of GST, an input tax credit or a GST adjustment;
  • does not apply to any error that results in the net amount for an earlier tax period being incorrect due to the operation of the A New Tax System (Wine Equalisation Tax) Act 1999 or the A New Tax System (Luxury Car Tax) Act 1999; and
  • does not apply to errors that were made in working out a net amount for a tax period that started before 1 July 2012.

Section 6 of the instrument specifies the circumstances where an error may only be corrected in a later tax period, which is:

  • the error relates to an amount of GST, an input tax credit or any GST adjustment;
  • the earlier tax period in which the mistake was made started on or after 1 July 2012, and the taxpayer lodges the GST return for the later tax period within the period of review for the assessment of the net amount of the earlier tax period;
  • at the time of lodging the GST return for the later tax period, the error does not relate to any current compliance activity or, if it does relate to any current compliance activity, the Commissioner has notified the taxpayer in writing that the error can be corrected under the determination;
  • the taxpayer has not corrected the error, to any extent, in working out their net amount for another tax period; and
  • where the error is a debit error, the time and value limits set out in section 7 are met.

When issued, the draft instrument will replace Goods and Services Tax: Correcting GST Errors Determination 2013 (F2017C00156).

The closing date for comments is 2 August 2023.

For more information, please refer here.

Passenger movements data-matching program

The ATO will acquire passenger movement data from the Department of Home Affairs for 2023–24 through to 2025–26.

Data items the ATO will collect include a passenger’s full name; date of birth; arrival date; departure date; passport information and status type.

The data will be electronically matched with certain sections of ATO data holdings to identify taxpayers that can be provided with tailored information to help them meet their tax and superannuation obligations or to ensure compliance with taxation and superannuation laws. The program aims to:

  • identify potentially new or emerging non-compliance and entities controlling or exploiting those methodologies
  • identify ineligible tax and superannuation claims
  • gain insights to help develop and implement administrative strategies to improve voluntary compliance
  • refine existing risk detection models and treatment systems to identify and educate individuals and businesses who may be failing to meet their registration, lodgment and payment obligations
  • improve knowledge of the overall level of identity and residency compliance risks, and
  • promote voluntary compliance and increase community confidence in the integrity of the tax and superannuation systems.

For more information, please refer here.

Motor vehicle registries data-matching program

The ATO has issued a gazette notice that it will be acquiring motor vehicle registry data from the authorities of all eight states and territories for the period 2022-23 through 2024-25.

According to the ATO, the data items include:

  • identification details of purchasers, sellers, licenced dealers, fleet managers and leasing companies
  • transaction details, such as the sale price and market value of vehicles, vehicle characteristics, registration numbers and stamp duty.

The ATO will match acquired data to internal data holdings to identify relevant cases for administrative action and to determine a tax compliance risk profile of taxpayers buying, selling or acquiring motor vehicles. The data acquired will help ensure the correct reporting of income and entitlement to both deductions and input tax credits relating to the buying and selling of motor vehicles. The program also aims to identify cases for investigation, particularly in circumstances where interposed proxy ownership is used to conceal the real accumulation of wealth.

For more information, please refer here.

Class rulings issued:

  • Class Ruling CR 2023/37 Sovereign Metals Limited – demerger of NGX Limited. This ruling applies from 1 July 2022 to 30 June 2023.
  • Class Ruling CR 2023/38 Qantas Airways Limited – 2022/23 Qantas Manager Incentive Plan. This ruling applies from 1 July 2022 to 30 June 2026.
  • Class Ruling CR 2023/39 Habitat for Humanity Australia – deductibility of donations under a payment direction deed. This ruling applies from 1 July 2023.
  • Class Ruling CR 2023/40 Pemby Pty Ltd – use of an electric bicycle by an employee. This Ruling applies from 1 April 2022 to 31 March 2027.
  • Class Ruling CR 2023/41 Norwest Energy NL – scrip for scrip roll-over. This Ruling applies from 1 July 2022 to 30 June 2023.
  • Class Ruling CR 2023/42 NatPark FBT Register report – used for calculating car parking benefits. This Ruling applies from 1 April 2023 to 31 March 2027.
  • Class Ruling CR 2023/43 Australian Unity Limited – employee share scheme – Employee Mutual Capital Instrument Program. This ruling applies from 1 July 2021 to 30 June 2022.
  • Class Ruling CR 2023/44 Tulla Resources Plc – demerger and scrip for scrip roll-over. This ruling applies from 1 July 2022 to 30 June 2023.
  • Erratum to Class Ruling CR 2022/107 Bardoc Gold Limited – demerger and scrip for scrip roll-over. It amends CR 2022/107 to correct a legislative reference.

Other rulings issued:

  • Addendum to Product Ruling PR 2002/6 Tax consequences for a customer participating in CommBank Yello with the Commonwealth Bank of Australia. It amends PR 2022/6 to incorporate an update to the Terms and Conditions and applies before and after its date of issue.
  • Addendum to Product Ruling PR 2020/12 Income tax:  taxation consequences for a customer entering into a Rural Products Prepayment Program with Elders Rural Services Australia Limited. It amends PR 2020/12 to expand the class of entities that rely on it by including entities covered by s 82KZM(1A) of the Income Tax Assessment Act 1936.
  • Product Ruling PR 2023/12 Challenger Guaranteed Annuity (Short Term). This ruling applies to specified entities in connection with an annuity purchased from 1 July 2023 until 30 June 2026.
  • Product Ruling PR 2023/13 UBS Structured Option and Loan Facility. This ruling applies to specified investors that enter into the scheme from 1 July 2023 until 30 June 2026.
  • Product Ruling PR 2023/14 National Australia Bank Tailored Equity Solutions Facility. This ruling applies prospectively from 9 August 2023, the date it is published. It applies only to the specified class of entities that enter into the scheme from 9 August 2023 until 30 June 2026, being its period of application. This ruling will continue to apply to those entities even after its period of application has ended for the scheme entered into during the period of application.

Latest Australian Tax Cases

  • R&D tax incentive – The Federal Court has dismissed the taxpayer’s appeal which considered the taxpayer’s entitlement to the research and development (R&D) tax incentive in relation to expenditure it incurred on supporting R&D activities that were conducted in China. R&D activity conducted for an R&D entity solely outside Australia will only qualify if it is covered by a finding in force under paragraph 28C(1)(a) of the Industry Research and Development Act 1986 (Cth) (“Overseas Advanced finding”). [T.D.S. Biz Pty Ltd v Commissioner of Taxation [2023] FCA 710, 29 June 2023.]
  • Ordinary time earnings – The Federal Court in has held unanimously that the meaning of ‘ordinary time earnings’ for the purposes of calculating annual leave payments should include penalties that an employee would have earned for working their ordinary hours, rather than just amounts paid at an ordinary rate of pay. [Target Australia Pty Ltd v Shop, Distributive and Allied Employees’ Association [2023] FCAFC 66, 10 May 2023.]
  • GST – The Administrative Appeals Tribunal (AAT) has held that a taxpayer who had not provided a valid notification of his entitlement to input tax credits within four years of the end of the relevant tax periods was not entitled to a goods and services tax refund. [Semmens v FC of T [2023] AATA 2060, 14 July 2023.]
  • Non-arm’s length income (NALI) – The AAT has held that the non-arm’s length income provisions did not apply to trust distributions of interest income that was derived from a series of loan agreements between related entities, which meant that the distributions were not precluded from being treated as exempt current pension income (ECPI). [BPFN v FC of T 2023 ATC [2023] AATA 2330, 28 July 2023.]
  • Capital gains tax (CGT) – The Full Federal Court has affirmed the view of the Commissioner, the AAT and the Federal Court that a retired partner’s capital gain from the disposal of goodwill in the partnership’s business was not reduced by his capital account shortfall; the offsetting of amounts owing against amounts owed on a partner’s retirement was an accounting “convenience” that did not result in a nil capital gain. [Hedges VFC of T 2023 ATC; [2023] FCAFC 105, 12 July 2023.]

 

If you would like more information or would like to discuss this tax update, please contact:

Cameron Allen

Office Managing Director

Tel: +61 (0) 3 9939 4488

Tel: +61 (0) 2 8226 8756

Email: cameron.allen@au.Andersen.com

MELBOURNE | SYDNEY

For any enquiries related to this update, contact us today.

The Andersen Australia tax team

This publication is the result of a collaboration between many members of the Andersen Australia Tax team. 

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