The Full Court of the Federal Court has dismissed the taxpayer’s appeal in Breakwell v Commissioner of Taxation [2015] FCA 1471 and confirmed the earlier Administrative Appeals Tribunal decision to include an allegedly statute-barred loan of $1.1m in the calculation of the taxpayer’s net assets for the maximum net asset value (MNAV) test when determining the taxpayer’s eligibility for small business CGT concessions.

The taxpayer was the beneficiary and trustee of a family trust (ABFT), which was in turn the beneficiary of a unit trust (ETUT). In July 2007 the ETUT sold its finance broking business for $500,000. In its 2008 income tax return, the ETUT excluded the capital gain from the sale of the business by applying the small business CGT concessions.

An exposure draft and explanatory statement have been released for public comment with proposed amendments to the Private Ancillary Fund Guidelines 2009 and the Public Ancillary Fund Guidelines 2011.

The Private Ancillary Fund and Public Ancillary Fund Amendment Guidelines 2015 (amending guidelines) include a number of amendments, including to update the Private Ancillary Fund Guidelines 2009 to incorporate improvements in the later made Public Ancillary Fund Guidelines 2011, and to reflect the introduction of the Australian Charities and Not-for-profits Commission (ACNC).

The Final Report by the Productivity Commission (PC) was released yesterday. As expected, the PC did not recommend a complete overhaul of the workplace relations system.

The Full Federal Court has provided some welcome clarification as to what constitutes a unit trust when it upheld an appeal by the Commissioner of Taxation, in the decision of CoT v ElecNet (Aust) Pty Ltd (Trustee). In the original decision (discussed in a previous Sladen Snippet) the Federal Court found that a trust established for the purpose of assisting workers when they are retrenched was a unit trust, on the basis of the expanded definition of “unit” in the public trading trust rules.

On 22 October 2015, Rob Jeremiah delivered a presentation at the ‘Taxation Aspects of Estate Planning and Business Succession – The First Annual Symposium’ held in Melbourne by Television Education Network.

At this event, Rob presented a paper called ‘CGT Hotspots in Restructuring Trusts in Estate Planning,’ written by Sam Campbell, Will Monotti, Ashleigh Eynaud and himself.

The Government has released the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015 which, if enacted, will mean that, from 1 July 2016, the fact that self managed superannuation fund(s) (SMSFs) hold more than 20% of the units in a unit trust will not cause the unit trust to be a public trading trust.

The public trading trust rules result in a unit trust being treated as a company in certain ways (for example, it is taxed at the corporate rate and its distributions can be franked). These changes are to apply to existing unit trusts (that are public trading trusts) as well as unit trusts set up after 1 July 2016. 

The Full Federal Court dismissed the Commissioner’s appeal in Commissioner of Taxation v Devuba Pty Ltd [2015] FCAFC 168, confirming the earlier Administrative Appeals Tribunal (AAT) decision that the existence of a dividend access share (DAS) arrangement did not affect the taxpayer’s ability to apply the capital gains tax (CGT) small business concessions to a capital gain arising from the disposal of ordinary shares in the applicant company.

The primary issue considered in that case was whether the existence of the DAS caused the taxpayer to fail to meet the small business participation percentage (SBPP) of 90%.

The Australian Taxation Office (ATO) has confirmed that it will not take active steps to review non-commercial limited recourse borrowing arrangement (LRBA) loans prior to 30 June 2016.

Self Managed Superannuation Fund (SMSF) trustees are being encouraged to rectify their non-commercial LRBA loans by putting them on arm’s length terms by 30 June 2016. If that occurs then the ATO has confirmed that it will not actively review such non-commercial LRBA loans in prior years. Although not expressly stated on the ATO’s website, the ATO has indicated that such rectification does not need to be retrospective.

In September 2015, Part 2 of a 2 part series written by Sladen Legal's Renuka Somers and Ashleigh Eynaud was published in the Tax Institute’s Journal, Taxation in Australia.

It discusses draft Taxation Ruling TR 2015/D2 and the Australian Taxation Office’s proposed treatment of trust unpaid present entitlements for the purposes of the maximum net asset value test applicable to the capital gains tax small business concessions.

To help you navigate you through the silly season, the Employment, Industrial Relations & OHS team bring you this short yet comprehensive guide, Christmas Essentials.

Christmas Essentials will guide on what you need to know about public holiday trading, employing Christmas casual staff and avoiding the legal hangover from the office end-of-year party. 

Important amendments to the Fair Work Act 2009 have now come into effect, resulting in significant changes, particularly for employers.

Greenfields agreements - new process for negotiating

A new process for negotiating greenfields agreements has been established, whereby employers now have an obligation to bargain in good faith when involved in greenfields negotiations. This new process includes an optional six month negotiation timeframe. If the parties are unable to reach an agreement within six months, the employer may apply to the Fair Work Commission for a determination.

What do you say when a client asks you to own the intellectual property in the design work you create for them?  Do you take a step back aghast at their audacity?  Are you confused or suspicious as to what they are after and why?  Do you flat out refuse?  Or do you agree but don’t really understand what you have agreed to?

The Fair Work Commission (Commission) has upheld a company’s smoking ban following a challenge by the Construction, Forestry, Mining and Energy Union (CFMEU). Commissioner Tony Saunders held that the employer’s direction to ban smoking at its workplace, a complex which was comprised of two open cut mines and a coal handling and preparation plant (CHPP), was lawful and reasonable.

The ban meant that employees who wanted to smoke were required to drive 2.8km to the complex’s front gate to smoke.

The Lantern Legal Group, comprised of law firms Sladen Legal and Harwood Andrews, was recently nominated for the B Corp ‘Rookie of the Year’ award at the B Corp Champions Retreat in Portland, USA. This award acknowledges businesses that have actively contributed to the B Corp movement and made a positive impact in their communities over the past year.

Lantern Legal Group was the only Australian business to be nominated in this category, which includes well-known international businesses

In August 2015, Part 1 of a 2 part series written by Sladen Legal's Renuka Somers and Ashleigh Eynaud was published in the Tax Institute’s Journal, Taxation in Australia.

It discusses some of the unresolved issues and complexities associated with the taxation treatment of trust unpaid present entitlements for Division 7A purposes and bad debt write-offs, despite the Australian Taxation Office’s attempts to address these matters in draft Taxation Determinations TD 2015/D4 and TD 2015/D5.

The Federal Treasury has released the Exposure Draft for the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill 2015: Small business restructure rollovers to amend the Income Tax Assessment Act 1997 to allow small businesses to defer gains and losses arising from the transfer of capital gains tax assets, depreciating assets, trading stock and revenue assets between entities as part of a restructure.

The proposed amendments attempt to provide greater flexibility for small businesses to change the legal structure through which they operate without triggering adverse taxation consequences.

From 9 November 2015, all dealings with Victoria’s Land Registry will require parties to satisfy strict verification of identity requirements (generally referred to as “VOI”). In addition, these VOI requirements also apply to persons who are given custody of a certificate of title.

The new requirements aim to reduce fraud by placing an obligation on conveyancing professionals to take reasonable steps to verify that a person signing a document is who they say they are and that they have the right to transact with the land.

On 28 October, 2015 Sladen Legal delivered a presentation on various topics in the area of Hot Issues in Structuring and Rewarding Employees.

Topics presented were:

• Professional Practices Structures – the ATO views and the law - Rob Jeremiah
• Superannuation and employees - Phil Broderick
• Employment risks in corporate and business restructures - Louise Houlihan
• The new employee share scheme regime – the promised land or a mirage? - Carlos Barros

In Alderton and Commissioner of Taxation (Taxation) [2015] AATA 807 (16 October 2015), the Administrative Appeals Tribunal (AAT) upheld the Commissioner’s decision to assess a trust beneficiary to tax on a distribution from the trust, despite her attempted disclaimer in November 2014 of “the entirety of any interest accrued by her in the past or which may accrue in the future in the income or corpus of the trust fund”, with such disclaimer to take effect from the date of settlement of the trust.

Failure to pay to an employee proper notice resulted in a HR Manager and the company she worked for being fined in the Federal Circuit Court in Adelaide.

The employee was paid some notice, but not the whole of the notice period required by the Fair Work Act. This underpayment resulted in the employee being underpaid $181.66 (two days’ notice) as a result. 

The HR Manager conceded in the hearing that she knew of the requirements to pay proper notice, but the company claimed confusion had arisen as a result of the interaction of the provisions of the workers compensation legislation in South Australia regarding termination of employment and the Fair Work Act.  The Federal Circuit Court did not accept this as a reasonable excuse, stating the company should have paid the notice as provided by the Act.