Talking Tax – Issue 148

Single entity rule confirmation from the ATO

On 30 January 2019, the ATO issued TR 2004/11A1 as an Addendum to ruling TR 2004/11 on the interaction of the tax consolidation ‘single entity rule’ in the context of applying the tax anti-avoidance provisions contained in Part IVA of the Income Tax Assessment Act 1936 (Tax Act) (Addendum).

Specifically, the Addendum clarifies the Commissioner of Taxation’s view following the Full Federal Court decision in Channel Pastoral Holdings Pty Ltd v FCT (2015) FCR 162.

Broadly, the Addendum confirms that where a tax benefit within the meaning of Part IVA is obtained by an entity, in connection with a scheme that includes, as a step, an entity, not being a subsidiary member of a consolidated group, becoming a subsidiary member of a consolidated group, the Commissioner can make a determination for that entity and give effect to that determination by including an amount in its assessable income, notwithstanding the single entity rule.

Property developer exempt from Victorian foreign purchaser additional duty

VCAT has found in favour of a foreign-owned property developer (SWT), exercising its discretion to determine that the foreign purchaser additional duty (FPAD) was not payable on SWT’s acquisition of residential property. South Wharf Towers Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2019] VCAT 64 clarifies the meaning of ‘residential property’ for FPAD purposes and illustrates the weighting of various factors VCAT will take into account in deciding whether an exemption should apply.

Foreign-owned developers in Victoria should be comforted by VCAT’s willingness to grant an exemption despite SWT being entirely owned by a Hong Kong registered company.

SWT objected to the SRO’s assessment of $5.1 million in duty (including $1.8 million in FPAD) on its purchase of a site in Docklands with a permit to develop two side-by-side apartment buildings in 2016 (Property). At the time, the rate of FPAD in Victoria was 3% (now 7%).

FPAD applies on top of ordinary duty where a ‘foreign purchaser’ acquires ‘residential property’, as defined in Duties Act 2000 (Vic) (Duties Act).

Although SWT accepted it was a ‘foreign purchaser’, it argued that the development it intended to construct would not satisfy the definition of ‘residential property’. In particular, the Property would ‘include a substantial podium top space offering a vast array of resort-style resident amenities, retail outlets, 778 parking bays and 400 bicycle bays’. SWT submitted that the definition of ‘residential property’ was ‘taken directly from the definition of 'principal place of residence' and, as such, ‘clearly only contemplated individual homes’.

Alternatively, SWT asked the Tribunal to exercise its discretion under section 3B(2) of the Duties Act to treat its owner as not having a controlling interest in SWT, with the effect that SWT would not be a ‘foreign purchaser’ (Discretionary Exemption).

The Commissioner’s view was that the definition of residential property does not ‘state that the building must be used in its entirety as a place of residence by a single person’; rather, ‘it is enough that the building – ie, the proposed residential towers that [SWT] intends to build – “may lawfully be used as a place of residence” by as many people as the planning laws permit to use and occupy the built premises’.

VCAT agreed with the Commissioner and found that the Property was a ‘residential property’. VCAT held this was consistent with the plain and ordinary meaning of the definition, and reflected concepts common to planning and construction law.

VCAT also rejected SWT’s argument that FPAD cannot have been intended to apply to developers; rather, it will take into account as a relevant consideration ‘whether the amount of housing stock that is supplied by the entity to the Victorian market is significant’.

Nevertheless, VCAT weighed up the following factors - set out in the Duties Act and the Treasurer’s Guidelines - to ultimately find that SWT ought to be exempt from FPAD pursuant to the Discretionary Exemption:

  • the nature and degree of ownership and control the person has in the corporation;
  • the practical influence the person exerts to determine or influence the outcome of decisions about the corporation's financial and operating policies;
  • any practice or behaviour of the person affecting the corporation's financial or operating policies;
  • impact on the economy;
  • competition;
  • impact on the community;
  • satisfaction of Foreign Investment Review Board requirements;
  • character of the controlling interest or substantial interest; and
  • independence of management.

Townsville flooding: register as a DGR to provide relief

Following the Queensland Government’s declaration of the recent Townsville floods as a disaster, it is now possible to establish an Australian disaster relief fund (ADRF) to provide relief to affected communities.

The ATO has issued a reminder that to receive tax-deductible donations, ADRFs must be endorsed by the ATO as a deductible gift recipient (DGR). This means ADRFs must be (or be operated by) a registered charity or an Australian government agency.

For information or assistance in setting up an ADRF or other charitable fund, please contact Frank Hinoporos or Todd Bromwich.


Emma Woolley

Partner & Head of Family Office Advisory

Karl Rozenbergs

Partner and Co-Lead Health & Care

Ben Hamilton

Partner & Technology and Digital Economy Co-Lead

James Deady

Partner & Technology and Digital Economy Co-Lead

Eugene Chen

Partner & Head of China Practice

Oliver Jankowsky

Partner & Head of International Practice

John Bassilios

Partner & Fintech and Blockchain Lead

Matthew Curll

Partner & Insurance National Practice Leader

Melanie Smith

Director – Business Development, Marketing and Communications

Natalie Bannister

Partner & Commercial National Practice Leader

Nathan Kennedy

Partner, Head of Pro Bono & Community and ESG Co-Lead

William Moore

Partner & Head of Private Clients Advisory

Mark Dessi

Partner & Energy Leader

James Bull

Special Counsel & Frank Lab Co-Lead

Melanie James

People & Culture Manager

Jacqui Barrett

Partner & Head of US Desk

Lauren Parrant

Senior People & Culture Advisor

Melinda Woledge

Marketing & Communications Manager

Jasmine Koh

Senior Associate & Frank Lab Co-Lead

Alison Choy Flannigan

Partner and Co-Lead Health & Care

Jordon Lee


Geoff Benson


Meg Lee

Partner & ESG Co-Lead

John Gray

Partner, Technology & Digital Economy Co-Lead and NSW Government Co-Lead

Harvey Duckett


Luke Denham


Billie Kerkez

Manager – Smarter Recovery Solutions

Jemima Whiteman


Bradley White


Sarah Khan


Audrey Leahy

Special Counsel & Head of Irish Desk

Nicole Tumiati

Partner & Retail & Consumer Goods Leader

Marie Mitilineos


Gloria Tam


Peter Jones

Senior Commercial Counsel

Eden Winokur

Partner & Head of Cyber

Jennifer Degotardi

Partner & NSW Government Co-Lead

Sheldon Fu


Claire Bourke


Silvana Brcina


Daphne Schilizzi


Andrew Banks


Isabella Urso


Jessica Liu


Amelia Spratt


Lisa Ziegert

Director – Client Solutions

Luke Raams


Emma McDonald


Carl Ayers


Maddison Reznik

Senior Associate & Trade Marks Attorney

Rebecca Dodd


Ruby Hunt

Pro Bono & Community Co-ordinator

Rachel Bonic


Samantha Frost


Emma Bechaz


Matt Dolan


Luke Hefferan


Michelle Harradine


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