5 minute tax updates: 13-17 January 2020

Automatic deferrals available
Folding money burnt by bushfire? All may not be lost
TPB help for bushfire affected practitioners
Victorian bushfire response
NSW help for bushfire-affected citizens
Payments to support volunteer firefighters
New way to view tax accounts on ATO site
Claims for SG contributions through SBS clearing house at year-end allowed in same year
Transition to retirement changes
Disaster relief bone fides
Some Victorian property-related tax obligations due soon
AAT decision on trust distribution puts “constituent documents” in spotlight
Another precedent signpost along the Division 7A highway
Double tax agreement tie-breaker provisions applied
Tool storage building asset deemed ineligible for CGT concession on sale
LCT and ITC claims rejected by ATO given green light by AAT
Net asset value test disputed in small business CGT concession case
A second amended assessment does not necessarily cancel a judgment on the first
Foreign exchange rates update
“Drop-shipping” and GST

Automatic deferrals available
Lodgments and payments may be eligible for automatic deferral in certain postcodes. If you or your clients’ business or residential address is in one of the identified bushfire affected postcodes on the ATO’s dedicated Bushfires 2019–20 page, the ATO says that you do not need to apply for these deferrals.

Folding money burnt by bushfire? All may not be lost
The RBA has reminded taxpayers and their advisers that should they end up with damaged cash (banknotes) due to fire events, that they should not automatically assume the banknotes have been rendered worthless. Your clients may be able to redeem some value from burnt notes.

TPB help for bushfire affected practitioners
The Tax Practitioners Board has pledged to assist practitioners in affected areas by reviewing its registration and re-registration processes for those in affected areas identified by the ATO (see above). However the TPB also says that practitioners not in affected postcodes should still contact the TPB should circumstances also affect their ability to function.

Victorian bushfire response
If your client has been affected by the Victorian bushfires, the State government says it doesn’t want them to worry about their state taxes. It has announced a range of tax relief measures.

NSW help for bushfire-affected citizens
The NSW government has made several concessions available for its citizens who are affected by bushfire. Concessions may be available for fines and fees, duties, payroll tax, grants, objections and more.

Payments to support volunteer firefighters
The office of the Prime Minister has announced that volunteer firefighters will receive financial support from the government for loss of income where they have been called out for extended periods of service.

New way to view tax accounts on ATO site
As part of the ATO’s “Activity statement financial processing project”, it has consolidated tax accounts into one system and made a number of improvements to make it easier for practitioners to view their clients’ accounts in the new “Online services for agents” system. This is a significant change that will improve the practitioner experience when dealing with the ATO. Find out more here.

Claims for SG contributions through SBS clearing house at year-end allowed in same year
There has been some confusion about the deductibility of SG contributions paid by an employer before year end, but not received by the super fund until after year end, with payments made through the small business superannuation clearing house. With respect to this, the ATO has release draft PCG 2019/D8, which looks at the conditions required to retain deductibility for an employer that used the clearing house to make super contributions prior to year end but the payment was not received by the fund until after the 30 June cut-off. Technically, the amount is not tax deductible until the year that the superannuation fund has received the payment. But now the ATO confirms that a deduction would be allowed if payment is before 30 June, all relevant information is included, and payment is not dishonoured.

Transition to retirement changes
Practical compliance guideline PCG 2017/3 outlines the ATO’s compliance approach for certain APRA regulated super funds (including exempt public sector schemes), pooled super trusts (PSTs) and life insurance companies facing practical difficulties in complying with recent legislative amendments affecting various TRIS products.

Disaster relief bone fides
For a fund to be eligible for endorsement as an Australian disaster relief fund, the disaster must meet various legal requirements. To aid legitimate efforts from taxpayers, the ATO has a list of the disasters meeting these legal requirements.

Some Victorian property-related tax obligations due soon
The State Revenue Office in Victoria reminds landowners that notifications for vacant residential land tax and the absentee owner surcharge are due by 15 January 2020. If your client made a notification last year, they only need to make a new one if circumstances have changed.

AAT decision on trust distribution puts “constituent documents” in spotlight
The Administrative Appeals Tribunal has decided (Trustee for the Whitby Trust and Others and Commissioner of Taxation) that the distribution minutes of a trustee for four years of income were not effective to distribute the income to the named beneficiaries. The AAT decided the minutes were ineffective because the constituent documents of the corporate trustee were not followed, resulting in no evidence that a meeting of the corporate trustee had occurred. Further, the trust had guardians appointed, but it was a requirement of the deed that guardians needed to approve distributions, for which there was no evidence.

Another precedent signpost along the Division 7A highway
The AAT has held, in Wing and Commissioner of Taxation [2019] AATA 5547, that a taxpayer was assessable on a deemed dividend under Division 7A Part III ITAA 1936. The taxpayer was paid $500,000 by a company that was interposed between another company that had sold a business and claimed the small business CGT concessions. The company that made the capital gain paid money to the interposed company which, in turn, paid an amount to the taxpayer. Section 109T of Division 7A was applied.

Double tax agreement tie-breaker provisions applied
The Federal Court has decided in Pike v Commissioner of Taxation that a person who was a dual resident of Australia and Thailand was treated as a resident solely of Thailand. Accordingly, he was not liable to pay tax in Australia on his salary earned in Thailand. The court applied the tie-breaker provisions in the Australia/Thailand DTA and determined that the taxpayer’s closer economic relations were with Thailand despite the fact that his family lived in Australia and he visited them regularly.

Tool storage building asset deemed ineligible for CGT concession on sale
The Federal Court has overturned (in Commissioner of Taxation v Eichmann) a decision of the AAT and held that an individual’s property that was used for storing tools and equipment of an associated trust’s business was not an “active asset” for the purposes of the small business CGT concessions. Although concluding that the asset was used in the business for storage, the use to which the property was put was preparatory to the undertaking of activities in the “ordinary course of the business” needed to be an active asset. As a result, the taxpayer was unable to utilise the small business CGT concessions on the sale of the property.

LCT and ITC claims rejected by ATO given green light by AAT
The Administrative Appeals Tribunal has decided (Skourmallas and Commissioner of Taxation) to allow a taxpayer input tax credits of $19,809 and a Luxury Car Tax decreasing adjustment of $45,843 in relation to the acquisition of an Audi R8 Coupe for $263,750. The ATO argued that the taxpayer was an unreliable witness, however the AAT rebutted this view and said that the way in which a person communicates should not be confused with the issue of whether a person was an unreliable witness. It held that despite the small scale of the taxpayer’s business and the fact that it was operated from his home, the taxpayer was conducting a business of motor car trading.

Net asset value test disputed in small business CGT concession case
This case, heard in the AAT, is perhaps the final chapter in the long running dispute Andrew Miley has had with the ATO (Miley and Commissioner of Taxation [2019] AATA 5540) over whether he could access the small business CGT concessions. The ATO said he could not because he failed the maximum net asset value test. The case concerned the valuation of shares held by the taxpayer in a private company. The taxpayer argued that the shares should be valued at an amount that was less than what he actually received for the disposal of the shares. While the AAT found in favour of the Commissioner, it also held that no administrative penalty should apply as the taxpayer had a reasonably arguable position. This case is discussed in this week’s Quick Tax video.

A second amended assessment does not necessarily cancel a judgment on the first
A taxpayer has failed to obtain a stay of execution of judgment in favour of the ATO on the basis that the ATO had issued a second set of amended assessments. The taxpayer (see Commissioner of Taxation v Bosanac) claimed that the first set of assessments were therefore rendered incorrect. The Federal Court dismissed this argument.

Foreign exchange rates update
The ATO has released the average foreign exchange rates for the month of December 2019 for converting foreign income into Australian dollars. It has also released the average and nearest actual foreign exchange rates for the calendar year ended 31 December 2019 for converting foreign income into Australian dollars.

“Drop-shipping” and GST
If your business clients use “drop-shipping” for their business, GST will apply to sales of low-value imported goods valued at $1,000 or less. Drop shipping refers to the sale of goods located overseas at the time of the sale and sent directly to consumers in Australia from an overseas source, such as the manufacturer, wholesaler or warehouse. The ATO says Australian retailers should treat these sales the same as other domestic sales and apply GST at the point of sale. Relevant guidance can be found in Law Companion Ruling LCR 2018/3 When is a re-deliverer responsible for GST on a supply of low value imported goods?

NOTE: Readers should note that a typographical error led to an incorrect tax rate being published in the 2019-20 Tax Summary. In the table of tax rates for companies, on page 270, the base corporate tax rate for 2019-20 should read 27.5%, not 27%. All other figures in the table are correct.

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