Thinking | 26 August 2015

Talking Tax – Issue 2

Key developments

Rossi v FC of T

In this case, the ATO issued a garnishee notice to a bank and to a company, on the basis that the Taxpayer owed the Commissioner $6,422.00 in unpaid income tax. The Taxpayer applied to the AAT for the garnishee notice decision to be reviewed, and argued that the Tribunal had jurisdiction to consider his application. The issue was whether the ATO's decision to issue a garnishee notice is a reviewable decision, and therefore, whether the AAT has jurisdiction to review that decision.

The AAT stated that not every decision of the ATO is a 'reviewable objection decision' pursuant to section 14ZZ(1)(a)(i) of the Taxation Administration Act 1953 (TAA). On that basis, the AAT determined that nothing in Subdivision 260-A of the TAA enables the Taxpayer to object to the decision to issue the notice to a third party. As a result, the Commissioner could not make an objection decision and the Taxpayer was unable to apply to the AAT for review of the Commissioner's decision.

However, the AAT indicated that the Taxpayer would have been able to object to the Commissioner's earlier decisions regarding the amount of tax the Taxpayer was required to pay. If this had occurred, the Commissioner would have made an objection decision. This would have been a reviewable decision by the AAT.

ATO v Liquidators — The tables are turned, 18 August 2015

Commissioner of Taxation v Warner [2015] FCA 659 was recently decided by the Federal Court of Australia.

In this case, the Federal Court confirmed that the ATO’s coercive powers requiring a taxpayer to produce documents and information prevail over section 486 of the Corporations Act 2001 (Cth). Section 486 provides that a Court order must first be obtained before a creditor is authorised to inspect the books of a company.

Hall & Wilcox released a client update on this case, which is available here.

Senate committee report on corporate tax avoidance — Part 1: You cannot tax what you cannot see, 19 August 2015

On 19 August 2015, the Senate Economics References Committee released an interim report on corporate tax avoidance and aggressive minimisation, titled 'Part 1: You cannot tax what you cannot see.'

Hall & Wilcox released a client update on the Senate Committee report on corporate avoidance. Our recent client update is available here

ATO updates

Withdrawal of charities ruling, 19 August 2015

The ATO withdrew Taxation Ruling TR 2000/1, which covered the endorsement of income tax exempt charities. The Commissioner's view regarding the endorsement of registered charities as income tax exempt is available here.

Addenda to rulings, 19 August 2015

The Commissioner has issued addenda to the following rulings:

Taxation Ruling TR 1999/1: The addendum reflects the changes in the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013.
Taxation Ruling TR 2013/3: The addendum removes from the meaning of feedstock input expenditure the inclusion of goods/materials consumed during R&D activities.

Legislation

Foreign acquisitions and takeovers Bills introduced, 20 August 2015

The following Bills have been introduced into the House of Representatives:

Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015

This Bill amends the Foreign Acquisitions and Takeovers Act 1975.The Bill gives the ATO responsibility for the regulation of foreign investment in residential real estate. This will provide stronger enforcement and compliance with the rules. The Bill also introduces civil penalties and has made criminal penalties stricter, ensuring foreign investors do not achieve a profit by breaking the rules. Finally, the Bill also enables screening thresholds for investing in Australian agriculture to be lowered. This ensures significant investments are scrutinized.

Register of Foreign Ownership and Agricultural Land Bill 2015

This Bill introduces a register of foreign ownership of agricultural land to be controlled by the ATO. This will require foreign individuals to register information about their current holdings, acquisitions and disposals of Australian land.

Foreign Acquisitions and Takeovers Fees Imposition Bill 2015

This Bill introduces fees on all applications for foreign investment. This will ensure Australian taxpayers do not have to fund the system and will give the ATO and Treasury additional resources to aid in service delivery.

Together, these Bills strengthen Australia's foreign investment framework by encouraging foreign investment and will apply from 1 December 2015.

Tax and Superannuation Laws Amendment (2015 Measures No 4) Bill 2015

This Bill has been introduced into parliament. It:

removes the exemption for overseas employment income of an Australian government agency employee;
amends Subdivision 124-M of the ITAA 1997 to improve the CGT scrip for scrip roll-over; and
increases the account balance threshold for transferring small lost member account balances.

Notably, the amendments to Subdivision 124-M of the ITAA 1997 include:

not making available roll-over relief when an acquiring entity issues either debt or equity to a entity that is not part of a wholly-owned group;
no longer disregarding capital gains arising on settlements of debts owned, as part of a scrip for a scrip acquisition by an acquiring company to a parent company;
variations, rights, and options that affect membership interests and rights to be considered in the significant and common stakeholder tests;
cost base allocation rules to apply irrespective of whether debt is owed or equity issued to the group's parent company or another group member;
amendments to restructure provisions applying to companies to now apply to trusts.

These amendments apply to CGT events that occur after 7:20 pm on 8 May 2012.

Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 has been introduced into Parliament

This Bill ensures that personal security and privacy of the owners of Australian-owned private companies is not affected when the ATO publicly discloses information.

Under section 3C of the Taxation Administration Act 1953, the ATO has a duty to disclose taxpayer information through publishing tax information. Specifically, if a corporate tax entity reports $100 million or more in total income, the Commissioner has a duty to publish the entity's name, ABN, total income, taxable income and income tax payable. Section 3C applies from 2013/2014, with the Commissioner expected to release its first publication late this year.

The Bill amends section 3C to exempt Australian-owned private companies. However the exemption only applies to companies that are a resident private company, do not have more than 50% foreign shareholding and is not a wholly-owned subsidiary of a foreign-corporate group. The amendments apply to publications that occur on or after the day after Royal Assent is given.

Omnibus Repeal Day (Spring 2014) Bill 2014

The Senate resolved to pass amendments to this Bill that were previously not passed by the House of Representatives. The Bill is to return to the House of Representatives. The Bill reduces the regulatory burden placed on individuals, businesses and the community that are not the subject to specific Bills. It also repeals redundant provisions in Commonwealth Acts and redundant Acts.