Legal news
On 23 November 2022, the Australian Tax Office (ATO) released Taxation Ruling TR 2022/3, finalising its views on personal services income (PSI) and personal services businesses (PSB).
In the recent Victorian Civil and Administrative Tribunal (Tribunal) decision in Lavender Rain Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2022] VCAT 1264 (Lavender Rain) the primary production land tax exemption for urban zoned land was denied on the basis that the land owning company operated a number of businesses, including the entering into a property development agreement.
On 19 September 2022, Justice Thawley of the Federal Court handed down his decision in BBlood Enterprises Pty Ltd v FCT [2022] FCA 1112 (BBlood), the most recent decision on section 100A of the Income Tax Assessment Act 1936. The Australian Taxation Office (ATO) was successful in arguing that section 100A applied.
The recent Federal Court decision of Minerva Financial Group Pty Ltd v Commissioner of Taxation [2022] FCA 1092 (Minerva) signifies that the Federal Commissioner of Taxation (Commissioner) can successfully scrutinise a trustee’s discretion under the general anti-avoidance provisions (Part IVA).
In the recent decision of Signium Pty Limited and FCT [2022] AATA 2824, the Administrative Appeals Tribunal (Tribunal) upheld super guarantee (SG) assessments issued by the Commissioner of Taxation (Commissioner) and refused to remit Part 7 penalties further.
The taxpayer operates a small pig farming business. The business is run by a general manager, and at relevant times it employed two or three people.
The ATO conducted an audit of the taxpayer’s SG obligations and issued 16 SG charge assessments for quarters ending 30 September 2013 to 31 March 2017. The Commissioner also issued a Part 7 penalty assessment of 200% of the SG charge (Part 7 penalties are automatically incurred under Part 7 of the Superannuation Guarantee (Administration) Act 1992 (SG Act) for failure to lodge SG charge statements within the relevant timeframe).
The taxpayer disagreed with the ATO’s calculation of the shortfall amounts on the SG charge assessments. However, the Tribunal accepted the ATO’s calculations as they were more thorough than those provided by the taxpayer. The taxpayer asked the Tribunal to remit the shortfall interest component of the SG charge, but the Tribunal declined, noting that the Commissioner has no discretion under the SG Act to remit the shortfall interest component.
The Part 7 penalties were remitted to 35% during the review process, and the Commissioner agreed that a further 25% remission was appropriate. The taxpayer argued that the penalties should be reduced further due to various factors including the general manager’s age, his health conditions, the impact of COVID-19, drought in 2018-2019, bushfires in 2019 and flood in 2021, all of which put the business under considerable pressure. However these factors all arose after the relevant quarters which were the subject of the audit, and therefore did not impact on the taxpayer’s ability to comply with its SG obligations at the relevant time. Accordingly, the Tribunal was not persuaded to remit the Part 7 penalties further.
Key takeaways from this decision:
While a taxpayer should confirm the accuracy of the calculations making up an SG charge assessment, and cross-reference these with their own records, a taxpayer cannot argue for remission of the shortfall interest component, as the Commissioner has no discretion in this regard;
Part 7 penalties are incurred automatically under the SG Act at 200% of the SG charge for late or non-lodgement of SG charge statements. The Commissioner has discretion to remit Part 7 penalties with regard to various mitigating factors. Where the taxpayer is arguing that these factors impacted on the taxpayer’s ability to comply with its SG obligations, it is key to show a nexus between these factors and the quarters in question.
Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au
Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au
Jan Oh
Graduate Lawyer
T +61 3 9611 0158
E joh@sladen.com.au
In a joint media statement on 22 August 2022, The Hon Stephen Jones MP, Assistant Treasurer, Minister for Financial Services and The Hon Dr Andrew Leigh MP, Assistant Minister for Competition, Charities and Treasury confirmed that the Government is to commence consultation on a framework for the regulation of crypto assets.
The Victorian Court of Appeal’s decision in Owies v JJE Nominees Pty Ltd [2022] VSCA 142 (Owies) will surprise many trustees of discretionary trusts and their advisors. Effectively, the Court found that the decision of the corporate trustee (controlled by the parents of the family) of a discretionary trust not to properly consider two of their children (who were estranged from them), when making annual distributions from the trust, was voidable (and potentially void).
We wrote about Draft Taxation Determination TD 2022/D1 (Draft TD) on Division 7A and unpaid present entitlements (UPEs) here. On 12 July 2022, the Australian Taxation Office (ATO) finalised the Draft TD as Taxation Determination TD 2022/11 (Final TD).
Draft Taxation Determination TD 2022/D1 sets out the Australian Taxation Office’s (ATO) views on when an unpaid present entitlement (UPE) with a corporate beneficiary is a loan for the purposes of Division 7A of the Income Tax Assessment Act 1936. We wrote about TD 2022/D1 here.
Taxpayers using cryptocurrency in their businesses, including as a means of paying expenses such as staff or contractors or as a means of deriving income through investments, mining or trading, is becoming more common. After a particularly volatile year for the values of cryptocurrency many taxpayers may have significant gains or losses associated with their cryptocurrency transactions.
As discussed here, one of the key superannuation announcements in the May 2021 budget was the removal of the minimum $450 threshold for super guarantee purposes.
Both federal and state tax legislations contain different tax rules for different forms of trusts. The recent Victorian Civil and Administrative Tribunal (Tribunal) decision of Sharlin Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2022] VCAT 378 has provided much-needed clarity and insights into relevant considerations to determine whether a hybrid unit trust is a unit trust or a discretionary trust for the purpose of the land tax exemption for primary production land (PPL).
The oft-debated question as to whether the development, subdivision and sale of land constitutes the mere realisation of a capital asset in an enterprising way has once again been considered in the Administrative Appeals Tribunal (AAT) case of Ian Mark Collins & Mieneke Mianno Collins ATF The Collins Retirement Fund and Commissioner of Taxation (Taxation) [2022] AATA 628 (Collins)
