5 minute tax updates: 24-28 August 2020

PSI “unrelated clients test” not met for services provided via intermediary
Appeal made on proceeds from share disposal as ‘taxable property’
SAN misuse mailout about to hit SMSF trustees
Annual return for a client’s SMSF is more than for income tax
Draft PCG on related party cross-border financing seeking practitioner feedback

Franchise arrangements and capital outgoings decision appeal
Accredited e-invoicing service provider list updated
Alert issued on multiple entry consolidated groups avoiding capital gains tax

ATO updates the FBT rules in face of COVID-19 conditions
R&D tax incentive bill report from Senate committee is deferred again

PSI “unrelated clients test” not met for services provided via intermediary
The Full Federal Court has allowed the Commissioner’s appeal against the Federal Court decision on the application of personal services income (PSI) rules. It held that the “unrelated clients test” was not satisfied, as services procured through an intermediary were not a “direct result” of the making of offers or invitations to the public. The FFC held that the provision of services must be the “direct result” of making offers or invitations to satisfy the unrelated clients test. It was offers or invitations operating directly on the client that were relevant, not those which operated on an intermediary.

Appeal made on proceeds from share disposal as ‘taxable property’
The taxpayer has appealed to the Full Federal Court against the decision of Peter Greensill Family Co Pty Ltd (as trustee) v FC of T. In this case, it was held that the distribution of capital gains, made from disposing shares that were not “taxable Australian property”, by its resident trustee to its non-resident beneficiary was assessable to the trustee.

SAN misuse mailout about to hit SMSF trustees
The ATO has announced that the annual SMSF auditor number (SAN) misuse mailout (for the 2019 income year) will commence in early September 2020. The mailout aims to identify instances of SMSF auditor details being incorrectly reported on the SMSF annual return (SAR), or where the SAR is being lodged prior to audit completion. SMSF auditors will once again be issued a client list asking them to confirm they conducted the audit. Its last mailout confirmed 832 instances of SAN misuse connected to 832 funds and 230 tax agents.

Annual return for a client’s SMSF is more than for income tax
The ATO maintains that the SMSF annual return (SAR) is more than an income tax return, as it is also used to report super regulatory information, member contributions and pay the SMSF supervisory levy. As such, the due date is more important to be sure of, as the trustee is required to appoint an approved SMSF auditor not less than 45 days before the return is due. For newly established funds, the due date will be 31 October 2020, but for already established SMSFs, this will be 28 February 2021.

Draft PCG on related party cross-border financing seeking practitioner feedback
The draft schedule 3 of PCG  2017/4DC2, ATO compliance approach to taxation issues associated with cross-border related party financing arrangements and related transactions, is available for feedback, which the ATO is encouraging, until 14 October 2020. This is especially the case where you may have clients with cross border interest-free loan arrangements with related parties.

Franchise arrangements and capital outgoings decision appeal
In the case of Mussalli & Ors v FC of T, it was held that certain upfront payments made upon entering into lease and licence agreements of franchise restaurants were not deductible as they were outgoings of capital or of a capital nature. The taxpayer has appealed in the FFC against the decision.

Accredited e-invoicing service provider list updated
The ATO has added to the list of e-invoicing service providers that have completed the Australian Peppol Authority accreditation process and are trusted to operate in the network. The organisations have been accredited for one or two types of services that work together as part of the Peppol e-invoicing network.

Alert issued on multiple entry consolidated groups avoiding capital gains tax
A taxpayer alert has been issued by the ATO, TA 2020/4, which warns about arrangements which appear to be designed to avoid the inclusion of capital gains in the assessable income of Australian-resident entities upon the disposal of their assets (underlying assets). The arrangements involve an internal restructure within a multiple entry consolidated (MEC) group to enable the underlying assets to be disposed of by way of an eligible tier-1 (ET-1) company (directly or indirectly owning the underlying assets) leaving the MEC group.

ATO updates the FBT rules in face of COVID-19 conditions
Your business clients may provide their employees with benefits they do not usually provide because of COVID-19. This includes paying for items that allow employees to work from home. Faced with the unusual working situation that COVID-19 has created, the ATO has felt compelled to adjust the approach taken regarding the taxing of fringe benefits

R&D tax incentive bill report from Senate committee is deferred again
The presentation of the Senate Economic Legislation Committee’s report on the inquiry into the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 has been extended again. This time it has been pushed back from 24 August 2020 to 12 October 2020.

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