Talking Tax – Issue 147
Banking royal commission: unclear tax treatment for payouts
The Tax Institute has warned of uncertain tax implications for refunds and compensation payouts resulting from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
For tax purposes, a compensation payment generally takes the character of the payment that it substitutes. Accordingly, a compensation payment that substitutes assessable income will generally be taxed as such.
Compensation payments can also be taxed under the capital gains tax provisions, and may be subject to specific exemptions under those provisions.
Given that compensation payments made as a result of the Royal Commission have been made in respect of a number of matters, it may be difficult to apply the relevant tax principles with uniformity.
While a class ruling could be sought by one of the Big 4 banks on this issue, until such time as this occurs each case will need to be considered individually.
Have your say on initial coin offerings
Treasury has released an Issues Paper as part of its review into Initial Coin Offerings (ICOs). Submissions are due by 28 February 2019.
ICOs generally involve the creation of digital tokens, and their acquisition by consumers in exchange for cryptocurrency or official currency like US dollars. Feedback from industry has been that the application of traditional tax principles to the steps involved in an ICO, and post-ICO, is unclear, and it is difficult to find tax advisors that understand the technology, the ICO process and the application of traditional tax principles.
The Issues Paper seeks submissions on the opportunities and risks posed by ICOs, the appropriateness of Australia’s regulatory framework, how to boost Australia's competitiveness, and tax and GST implications for issuers and token holders.
The tax questions considered in the Issues Paper are as follows:
- Does the current tax treatment pose any impediments for issuers in undertaking capital raising activities through ICOs? If so, how?
- Is the tax treatment of tokens appropriate for token holders?
- Is there a need for changes to be made to the current tax treatment? If yes, what is the justification for these changes?
If you are considering making a submission and require assistance, please contact Adam Dimac, Joni Pirovich or Anthony Bradica.
Small business instant asset write-off: Govt to increase to $25,000
In a welcome announcement, the Federal Government stated last week that it will increase the instant asset write-off for small businesses with an aggregated turnover of less than $10 million from $20,000 to $25,000.
Assets valued at $25,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
For information about how your business can benefit from the instant asset write-off, contact Anthony Bradica, Andrew O’Bryan or Michael Parker.
‘Sufficient influence’ examined for CFCs in BHP Billiton case
A recent decision by the Full Federal Court in FCT v BHP Billiton Limited  FCAFC 4 has explored the meaning of ‘sufficiently influenced’ in section 318 of the Income Tax Assessment Act 1936 (Cth).
This decision reverses the AAT decision in MWYS and FCT  AATA 3037.
Broadly, a company will be ‘sufficiently influenced’ by another entity if the company (or its directors) is accustomed, is under an obligation, or might reasonably be expected to act in accordance with the directions, instructions or wishes of another entity.
In the case at hand, it was accepted by the parties that the relevant BHP entities which were part of the dual listed company (DLC) structure acted with a common purpose in accordance with the terms of the DLC arrangement. However, the relevant question was whether this amounted to the exercise of ‘sufficient influence’, or whether the exercise of ‘sufficient influence’ required the imposition of one entity’s wishes on the other.
The majority found in favour of the Commissioner, and stated that:
If the purpose or object is assessing closeness of association in order to assess the appropriateness of attribution of income, s 318(6)(b) can be seen to be wide enough to include circumstances of mutually advantageous decision-making by parties as equals acting in accordance with the direction, instructions and wishes of each other for the common economic goal of operating a single economic entity. In my respectful view, there is no reason in the text, structure or purpose of Part X to limit the operation of ss 318(2)(d)(i) and (6)(b) to a unidirectional analysis of influence or control.
Although the decision was made in the context of a specific DLC arrangement, there may be broader implications for stapled groups which share the same features.
For assistance in interpreting how this decision might apply to you, contact Anthony Bradica.
Tasmania extends first homebuyer and pensioner duty concessions
Three significant housing initiatives in Tasmania have been extended to 30 June 2019:
- 50% concession on property transfer duty for first home buyers of established homes with a property value of $400,000 or less;
- 50% concession on property transfer duty to eligible pensioners who sell their existing home and downsize to a new home valued at $400,000 or less; and
- the one-year land tax exemption for short-term accommodation properties converted to long-term rentals.
For more information, contact Joel Benjamin or Jim Koutsokostas.
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