Legal news
The concept of “present entitlement” within the meaning of section 97 of the Income Tax Assessment Act 1936 and validity of a “disclaimer of entitlement of income” were considered by the Full Federal Court in the recent case of Lewski v Commissioner of Taxation [2017] FCAFC 145 (Lewski) that illustrates the importance of having trust law and taxation law concepts properly aligned. Lewski was an appeal from a decision of the Administrative Affairs Tribunal.
The recent Full Federal Court cases of Bazzo v FCT [2017] FCAFC 139 illustrates the importance of drafting in agreements and, in particular, agreements with revenue authorities.
On 18 September 2017, the Government released for public consultation exposure draft legislation to amend the Income Tax Rates Act 1986 to confirm that companies that earn predominantly passive income will not be eligible for the lower company tax rate.
On 14 September 2017, the Government released for public consultation exposure draft legislation to implement the announcement in the 2017 Budget that from 1 January 2018 the CGT discount for eligible resident investors in qualifying affordable housing to 60% (from 50%). The change is part of the government’s policy to encourage increased investment in affordable rental housing.
On 14 September 2017, the government introduced to the Parliament the Treasury Laws Amendment (2017 Measures No. 6) Bill 2017 (the Bill) that includes amendments to the A New Tax System (Goods and Services Tax) Act 1999. The Government announced these changes in the 2017 Budget on 9 May 2017.
The Australian Taxation Office (ATO) published the final version of the Practical Compliance Guidelines (PCG) 2016/16, which provides guidance in relation to what will be considered by the Commissioner when exercising his discretion to treat an interest in the income or capital of a trust as being a fixed entitlement and by extension whether a trust is a fixed trust for the purposes of the tax law.
As previously discussed in this forum, changes to the Wine Equalisation Tax (WET) Rebate eligibility criteria and cap reduction were announced in December 2016 by the Turnbull Government. These reforms received assent on 23 August 2017 and bring significant changes to the entitlement to the WET producer rebate.
Practical Compliance Guideline (PCG) 2017/13 confirms the ability for a sub-trust arrangement using the 7-year option 1 investment agreement to be converted into a compliant loan, as described under section 109-N of Income Tax Assessment Act 1936 (ITAA 36). The ability to refinance UPE for an additional 7 years may be advantageous to taxpayers that would otherwise have been required to repay such arrangements by either 30 June 2017 or 30 June 2018.
As part of the Victorian State Budget, a number of stamp duty changes have been proposed, many of which have received significant media attention (including the abolition of the off the plan duty concession for investors, the abolition of stamp duty for some first home buyers, and the removal of the blanket duty exemption for transfers between spouses).
There is some good news and some bad news with the ATO’s release of Practical Compliance Guide PCG 2017/6. The good news is that spouses in receipt of death benefit pensions may commute their death benefit pensions in excess of the transfer balance cap back into accumulation before 1 July 2017. The bad news is that this concession does not apply to non-spouses and won’t apply after 30 June 2017.
It was announced as part of the 2017 Federal Budget that from 1 July 2018, purchasers of “newly constructed residential premises” or “new land subdivisions” will be required to remit GST directly to the Australian Taxation Office as part of settlement. Details have not yet been provided on how this measure will be implemented or operate.
