Talking Tax – Issue 146

GST consequences for couriers as independent contractors

In Qian v FCT, the AAT has confirmed that couriers who supply their own vans may be ‘carrying on an enterprise’ as independent contractors and liable for GST. This case shows how the tax implications of labour hire arrangements will be largely determined by the relevant facts.

To determine whether the taxpayer should be registered for GST and entitled to input tax credits under Part 2 of the A New Tax System (Goods and Services Tax) Act 1999, the AAT asked whether the taxpayer was an independent contractor ‘carrying on an enterprise’, or merely an employee.

The AAT upheld the ‘conventional’ view that a transport contractor who supplies their own vehicle will be an independent contractor. It considered the following factors relevant to determining whether a courier is an independent contractor:

• the taxpayer’s responsibility for the provision and operation of the van;
• the van’s character as a commercial transport vehicle;
• the possibility of the taxpayer’s income and profit being influenced by his own endeavours and efficiency; and
• the company had no real control over, and was not involved in, the taxpayer’s work.

The ATO, relying on the bicycle courier case Hollis v Vabu [2001] 207 CLR 21, unsuccessfully argued that the taxpayer was an employee due to the company’s provision of certain equipment, their ‘take it or leave it’ payment rates and work allocation, and the requirement to wear the company’s uniform. The AAT ultimately found these factors less persuasive than the taxpayer’s factors and distinguished Hollis.

Qian v FCT 2019 ATC 10-487, [2019] AATA 14

Case summary: High Court rules on assessing the value of stamp duty regarding the value of company assets

In case you missed it, in December the High Court handed down an important decision, with implications for calculating a company’s assets for stamp duty purposes.

The Placer Dome case provides two key takeaways:

• when calculating a company’s assets under the Stamp Act 1921 (WA), ‘ordinary principles of valuation’ (subtracting the value of non-land assets from the value of the total property) should be used; and
• legal goodwill is different to the accounting concept of goodwill: it is derived from sources which add value to the business by attracting custom.

The case concerned a $15.3 billion acquisition of a gold mining company, Placer, by a larger gold mining company, Barrick. This transaction attracted $54 million in stamp duty because Placer’s land was assessed as comprising over 60% of its assets, as required by Part IIIBA of the Stamp Act.

Barrick disputed the duty assessment, relying on a ‘discounted cash flow’ accounting method to argue that Placer’s assets were mostly goodwill, and less than 60% land.

The Commissioner, whose approach the High Court preferred, instead used the ‘ordinary principles of valuation’ (subtracting the value of non-land assets from the value of the total property) to assess the value of company assets.

The High Court also found that Placer’s goodwill was non-existent, and set out several helpful principles defining legal goodwill as:

• derived from sources which add value to the business by attracting custom;
• non-existent outside of the business which created it, and cannot be severed from it;
• different to the accounting concept of goodwill; and
• not including (in the context of this case and the statutory context of Part IIIBA) every fact or matter that adds value to a business.

Commissioner of State Revenue v Placer Dome Inc [2018] HCA 59

Practice note: new guidance on calculating and substantiating home office expenses

On 16 January 2019, the ATO updated its guidance on calculating and substantiating home office running expenses and electronic device expenses. If you or your clients claim tax deductions for home offices or devices, it’s important to get up to date with these changes.

The new version of Practice Statement PS LA 2001/6 has been significantly rewritten with key changes including:

• emphasising that the taxpayer must actually incur the expense;
• emphasising that there must be a real connection between the taxpayer’s income-producing work and the use of the home office or device;
• removal of the requirement for income-producing use to be substantial and not merely incidental;
• increasing the cents per hour rate for home office running expenses to 52 cents per hour (up from 45 cents per hour), effective from 1 July 2018;
• new guidance on the type of evidence and records that should be kept;
• new guidance on claiming up to $50 for all devices where work usage is incidental and detailed records are not kept; and
• explicitly listing the decline in value of furnishings and cleaning expenses as examples of home office running expenses.

Div 293 super tax assessments on the rise as extra 44,000 taxpayers hit

Following the reduction of the high-income threshold from $300,000 to $250,000, the ATO has assessed more than 44,000 taxpayers for Division 293 tax on their super contributions for 2017-18.

Division 293 tax imposes an extra 15% on concessional super contributions made by high income earners (those whose combined income and contributions are greater than $250,000).

For many taxpayers, Division 293 might apply for the first time due to a one-off event in 2017-18 such as a termination payment, a capital gain, or salary sacrificing to your super fund. It’s important to be aware of how Division 293 might affect you.

Have your say on sharing economy and CCIV reforms: consultations open now

Two important Federal Government consultations are currently open for responses:

• the proposed reporting regime for the sharing or ‘gig’ economy, closing 22 February 2019; and
• changes to the tax treatment of Corporate Collective Investment Vehicles (CCIV), which proposed to align CCIVs with attribution managed investment trusts, closing 28 February 2019.

We’d be pleased to assist you with drafting and submitting a response. Please contact Anthony Bradica to engage in the consultation process.