Talking Tax – Issue 110

Case law

Eames and Commissioner of State Revenue [2018] WASAT 14

The State Administrative Tribunal of Western Australia (Tribunal) has determined that two individuals (Applicants) were not entitled to a two-year land tax exemption for construction of a private residence under section 24A of the Land Tax Assessment Act 2002 (WA)(LTAA).

This case serves as a warning for land owners intending to construct multiple residences, sub-divide the title and occupy one of the homes. Although this case turned on specific wording in the LTAA, similar wording is used in equivalent provisions in other States, so the exemption for constructing a principal place of residence could be denied for the same reason.

The Applicants, along with three other individuals, acquired two vacant properties in Western Australia in 2005. They then amalgamated the lots into one (Amalgamated Lot) and engaged a builder to construct a block of four apartments. Those apartments were to be used, in the case of the Applicants, as their respective private residences.

The Applicants applied for a partial exemption from land tax in respect of their portion of the Amalgamated Lot for the period in which the apartments were being constructed, being the 2014/15 and 2015/16 assessment years. Their claim for an exemption was under section 24A of the LTAA, which broadly provides that ‘private residential property’ is exempt for two consecutive years if the ‘private residence’ which forms part of the property is constructed during those years and completed within the second year.

The Commissioner of State Revenue denied the exemption on the basis that a ‘private residence’ did not form part of the property following construction.

The Tribunal affirmed the Commissioner’s decision that the requirements of this exemption were not satisfied. Specifically, the Tribunal’s view was that section 24A of the LTAA requires that a ‘private residence’, being a building fit to be occupied, must form part of the property.

There had been a cancellation of the Certificate of Title for the Amalgamated Lot prior to the occupancy permit being granted. This was done for the purpose of creating a strata plan for four apartments, two of which were to be occupied by the Applicants. However, the Tribunal held that the Amalgamated Lot never became a ‘private residence’ as it ceased to exist by the time the building was fit to be occupied by the owner. As such, the exemption for construction of a private residence could not be satisfied and the Commissioner’s decision was upheld.

ATO updates

ATO statement on corporate tax

The ATO has issued a statement on corporate tax in Australia, expressing that it wants the community to have trust and confidence that the ATO is taking action to ensure the largest companies are required to pay the right amount of tax on their Australian income and that most do so voluntarily.

The transparency of tax affairs has been made a priority by the release of corporate tax transparency data for the past 3 years. The most recent corporate tax transparency data was released in December 2017 and only reflects tax returns as lodged. Since 1 July 2016, the ATO has raised liabilities in excess of $5 billion against public groups and multinational corporations, not reflected in the released data.

In addition, with funding of $679.9 million over four years, the Tax Avoidance Taskforce (Taskforce) has been allowed to significantly expand its compliance approaches with large companies. The Taskforce’s compliance and enforcement results have benefited from the introduction of new laws, including the Multinational Anti-Avoidance Law and the Diverted Profits Tax, the strengthening of transfer pricing laws and the general anti-avoidance powers, and the sharing of country-by-country (CbC) reports between countries. From 15 February 2018, the ATO began receiving the first substantial tranche of CbC information from multinational companies.

Legislation and government policy

Tax consolidation bill has passed the House of Representatives

The Treasury Laws Amendment (Income Tax Consolidation Integrity) Bill 2018 (Bill) has progressed through the House of Representatives without amendment on 28 February 2018 and now moves to the Senate. The Bill seeks to amend the Income Tax Assessment Act 1997 to make a number of amendments to unintended tax outcomes of the income tax consolidation regime.
The legislative changes proposed in the Bill are based on recommendations made by the Board of Taxation in its review of the consolidation regime.

The amendments were discussed in detail in Talking Tax Issue 108.

NSW Exemption or Refund from Surcharge for New Home Development by Australian Based Corporations that are Foreign Persons

State Revenue Legislation Amendment (Surcharge) Act 2017 has commenced as of 5 March 2018.

This Act makes amendments to the Duties Act 1997, the Land Tax Act 1956 and the Land Tax Management Act 1956 to provide for an exemption from foreign surcharge duty and land tax payable in respect of residential land in NSW. The exemption applies where a corporation that is incorporated in Australia is a “foreign person”, as defined in section 104J of Duties Act 1997 (because of the people who have a substantial interest in it), and the land is used for the construction of new homes or is subdivided and sold for the purposes of the construction of new homes.

Please contact us if you have incurred foreign surcharge duty and/or land tax on the development of new homes in NSW as the corporation may be entitled to a refund.

The transparency of tax affairs has been made a priority by the release of corporate tax transparency data for the past 3 years. The most recent corporate tax transparency data was released in December 2017, and only reflects tax returns as lodged. Since 1 July 2016, the ATO has raised liabilities in excess of $5 billion against public groups and multinational corporations, not reflected in the released data.

In addition, with funding of $679.9 million over four years, the Tax Avoidance Taskforce (Taskforce) has been allowed to significantly expand its compliance approaches with large companies. The Taskforce’s compliance and enforcement results have benefited from the introduction of new laws, including the Multinational Anti-Avoidance Law and the Diverted Profits Tax, the strengthening of transfer pricing laws and the general anti-avoidance powers, and the sharing of country-by-country (CbC) reports between countries. From 15 February 2018, the ATO began receiving the first substantial tranche of CbC information from multinational companies.

Goods and Services Tax: Valuable Metals Market Value Determination 2018

The Deputy Commissioner of Taxation has made a Goods and Services Tax: Valuable Metals Market Value Determination 2018 (Determination) dated 21 December 2017 applying to entities required to establish the market value of valuable metal contained in a good for the purposes of the valuable metal threshold.

The Determination, constituting an instrument, sets out the method to calculate the market value of valuable metal for the purposes of working out whether the market value of a taxable supply exceeds the valuable metal threshold (for GST purposes).

Under the Determination, the market value is determined by using the following formula (the terms of each component are defined in the Determination) at the date of supply:

(weight of valuable metal) x (spot price of the valuable metal at that date)

This Determination is relevant for Division 86 of the GST Act which requires that, under certain circumstances, the GST on a taxable supply of goods consisting wholly or partly of gold, silver or platinum is ‘reverse charged’ so that the recipient of the supply is liable for the GST on the supply instead of the supplier.


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