TAX TRAINING NOTES. Monthly tax training. June 2016

Transcription

1 TAX TRAINING NOTES Monthly tax training June 2016 Brown Wright Stein tax partners: Andrew Noolan E: P: Chris Ardagna E: P: Geoff Stein E: P: Michael Malanos E: P:

2 Brown Wright Stein Lawyers Level 6, 179 Elizabeth Street Sydney NSW 2000 P Cases AP Energy valuation of mining information Seven Network Royalties TBCL objecting against private ruling Legislation Progress of legislation Income Stream Review Final Report by Treasury ATO Materials LRBA arrangements and arm s-length terms extension of time for compliance Pharmacies claiming large GST refunds Voluntary disclosure offer SMSF and dividend stripping Property developers and trust arrangements Real property transfers reporting to ATO Non-concessional contribution lifetime cap ATO warns about itunes and Visa card scammers Cancellation of partnership and sole trader ABNs Tax professionals and ABNs as sole traders

3 About Brown Wright Stein Brown Wright Stein is a medium-sized commercial law firm based in Sydney. We provide legal advice in the following areas: Tax Dispute Resolution Corporate & Commercial Franchising Property Employment Estate Planning Elder Law Intellectual Property Corporate Governance Insolvency & Bankruptcy Our lawyers specialise in working with business owners and their business advisors, such as accountants, financial consultants, property consultants and IT consultants what we see as our clients' 'business family'. We develop long-term relationships which give our lawyers a deep understanding of our clients' business and personal needs. Over the years we have gained a unique insight into the nature of operating owner-managed businesses and the outcome is that we provide practical commercial solutions to business issues. At Brown Wright Stein, we believe in excellence in everything we do for our clients. It's this commitment that enables us to develop creative, innovative solutions that lead to positive outcomes. This paper has been prepared for the purposes of general training and information only. It should not be taken to be specific advice purposes or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained within. All rights reserved. No part of these notes may be reproduced or utilised in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without prior written permission from Brown Wright Stein Lawyers. These materials represent the law as it stood on 9 June Copyright Brown Wright Stein Lawyers Liability limited by a scheme approved under Professional Standards Legislation

4 1 Cases 1.1 AP Energy valuation of mining information Facts AP Energy Investments Limited, a Chinese investment company, acquired shares in Abra Mining Limited, a company incorporated in Australia, in On 3 December 2007 AP Energy sold its shares in Abra to Hunan Nonferrous Metals Holding Group Co. Ltd for Chinese Yuan CNY 65 million. On 12 September 2008, the ATO issued AP Energy with an assessment for the year ended 30 June 2008 that included a capital gain of AUD $6,017,467 in respect of AP Energy s disposal of its Abra shares to Hunan. AP Energy objected to assessment arguing that the shares in Abra were not taxable Australian real property (which term was introduced in relation to CGT events happening on or after 12 December 2006) and that any capital gain could be disregarded by AP Energy, as a non-resident taxpayer. A CGT asset is taxable Australian real property if it is: 1. real property situated in Australia (or a lease over such property); or 2. a mining, quarrying or prospecting right, if the minerals, petroleum or quarry materials are situated in Australia. Shares in an Australian company will be taxable Australian real property where, broadly: 1. the shareholder holds at least a 10% interest in the company; and 2. the market value of the assets of the company in which the shares are held that are taxable Australian real property exceeds the market value of assets that are not (the Principal Asset Test ). AP Energy held approximately 21% of the shares in Abra and accordingly there was no doubt that it failed the first test. The issue in dispute with the ATO was whether the shares in Abra were Taxable Australian Real Property and the Principal Asset Test was satisfied. The Tribunal noted that the Principal Asset Test required a separate valuation of each asset of the company to be undertaken. The Tribunal adopted the approach taken by Edmonds J in Resource Capital III LP v Commissioner of Taxation [2013] FCA 363 (the Resource Capital case) that mining information should be valued separately from the mining rights and was not taxable Australian real property. Whilst there was a dispute between the ATO and AP Energy as to the value of the mining information, the Tribunal accepted AP Energy s evidence on value. AP Energy had calculated the value of the 'mining information' using a sunk cost methodology. Accordingly, the Principal Asset Test was not satisfied as the value of the assets of Abra that were taxable Australian real property did not exceed the value of those assets (including the value of the mining information) that were not taxable Australian property. The capital gain made on the sale of the shares was to be disregarded. The Commissioner then appealed to the Federal Court and submitted that the market valuation methodology used by the Tribunal for the purposes of applying the Principal Asset test was done in error. Brown Wright Stein Lawyers 2016 page 4

5 Issues 1. When undertaking a market valuation of assets that are taxable Australian real property and assets that are non-taxable Australian real property what is to be included as comprising the asset mining information? 2. In determining the market value of the asset mining information, is the sunk cost methodology the appropriate basis of ascertaining value? Decision The Court upheld the Tribunal's decision that 'mining information' should be valued separately from the 'mining rights' and should not constitute taxable Australian real property. What is to be included as comprising the asset mining information will depend on the circumstances of the case, including the activities of the company concerned. The Court also held that the sunk cost methodology was an appropriate basis of ascertaining value of the 'mining information.' The sunk cost method involved, broadly, taking the original costs, applying a discount for information in the public domain, and then inflating them to represent the costs of recreating the information in current dollars. The Commissioner had submitted that the Tribunal should have determined the value in accordance with the methodology outlined by the Full Court in the Resource Capital case. However, the Court held that it was open to the Tribunal to choose a market value of the 'mining information' on a sunk cost methodology basis as the Court in the Resource Capital case did not go as far as to reject any particular methodology for ascertaining the market value of 'mining information.' TRAP it was announced in the Budget that mining information would be treated as part of the value of a mine from 14 May 2013 when determining whether the Principal Asset Test was met. Although the ATO website suggests those changes passed Parliament ( they did not. TIP the law change that occurred on 12 December 2006 that introduced the concept of Taxable Australian Real Property also saw non-residents with shares in Australian private companies that did not after that date satisfy the Principal Asset Test escape taxation on their shares. Citation Commissioner of Taxation v AP Energy Investments Pty Ltd [2016] FCA 577 (McKerracher J, Perth) w Seven Network Royalties Facts In the period from 1996 to 2005, Seven Network Limited (Seven) and the International Olympic Committee (IOC), a resident of Switzerland, entered into a series of agreements for broadcasting rights to the Olympic Games. These agreements were ultimately clarified and restated under the Signal Utilisation Deed (SUD) dated 30 September 2005 entered into between the parties. Among other things, the SUD provided that Seven would have exclusive Australian broadcast rights for the Games and detailed fees of $97,742,609 for the ITVR Signal for use in connection with exclusive Australian Broadcasting during the Games Period. The ITVR Signal was used by Seven in its live television broadcasts in Australia for the Olympic Games in 2002, 2004, 2006 and Between March 2006 and August 2008, Seven, an Australian resident corporation, made payments totalling $122,178,261 to the IOC, a resident of Switzerland, pursuant to the SUD. Brown Wright Stein Lawyers 2016 page 5

6 The Commissioner contended that Seven was obliged to withhold part of the total payment of $122,178,261 on the basis that the payment was a royalty. Seven disputed this with respect to the $97,742,609 (Disputed Amount) payments made in relation to the ITVR Signal. Obligation to withhold royalties Section 128B(2B) of the ITAA 1936 provides that royalties that a non-resident derives from an Australian source (including a resident of Australia) are subject to withholding tax. Under s 6 of the ITAA 1936, a royalty is defined to include: any amount paid or credited... as consideration for: (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right;... (db) the use in connection with television broadcasting or radio broadcasting, or the right to use in connection with television broadcasting or radio broadcasting, visual images or sounds, or both, transmitted by: (i) satellite; or (ii) cable, optic fibre or similar technology. Under section (a) of Schedule 1 to the TAA 1953, an amount must be withheld by a resident entity from a royalty that it pays to the non-resident. Section 16-5 of the TAA 1953 further provides that the resident entity must withhold the amount of the tax when making the payment. Section of the TAA 1953 makes a contravention of s 16-5 a criminal offence; and s of that Act imposes administrative penalties for a contravention of s Section of the TAA 1953 provides for the remission of administrative penalties. The Commissioner issued Seven with 3 penalty notices (dated 6 June 2007, 31 October 2008 and 23 December 2009). Seven lodged an objection against each of these. Seven accepted that the Disputed Amount could fall within paragraph (db) of the definition of royalty and that s128b(2b) would apply but for the fact that Article 12 of the Swiss Treaty provided that the Disputed Payments were not royalties and the Swiss Treaty is a double tax agreement that is incorporated into Australian tax law and prevails over the provisions of the Assessment Acts. Section 17A(5) of the ITAA 1953 provides that s 128B of the ITAA 1936 has no operation if the relevant double tax agreement (in this case the Swiss Treaty) does not itself treat an amount as a royalty even though it would otherwise be a royalty as defined in s 6(1) of the ITAA In the income years in question, Art 12(3) of the Swiss Treaty provided that the term royalties means: payments (including credits), whether periodical or not and however described or computed, to the extent to which they are consideration for the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trade-mark, or other like property or right, or industrial, commercial or scientific equipment, or for the supply of scientific, technical, industrial or commercial knowledge or information, or any assistance of an ancillary and subsidiary nature furnished as a means of enabling the application or enjoyment of such knowledge or information or any other property or right to which this Article applies, or for the use of, or the right to use, motion picture films, films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, or for total or partial forbearance in respect of the use of a property or right referred to in this paragraph Brown Wright Stein Lawyers 2016 page 6

7 In the Commissioner's Notice of Objection decision (dated 2 December 2011), the Commissioner maintained that the Disputed Amount was a royalty for the purposes of the Swiss Treaty. In the parties' statement of agreed facts, the nature of the ITVR Signal was expounded: Each Olympic Games had a host broadcaster who filmed the various sporting events and, from that filming, produced a digital signal that could be provided to other broadcasters (i.e. the ITVR Signal). Before the ITVR Signal left the control of the host broadcaster, the signal was split with the effect that two tandem signals were generated each containing identical images and sound. The host broadcaster recorded a signal as a protection copy and an identical signal was sent to a telecommunications carrier and, via it, to the international broadcasting centre, where international broadcasters, such as Seven, received the ITVR Signal. Each ITVR Signal was an encoded and combined digital signal, transmitted virtually instantaneously to each Olympic broadcaster. The transmission process from the host broadcaster to each Olympic broadcaster did not involve any recording or storage of the ITVR Signal. The ITVR Signal was received by Seven via copper coaxial cable: it was an electromagnetic force that transmitted data. There was no picture, image or sound recorded or permanently stored in the copper coaxial cable that transmitted the signal. No picture, image or sound could be recorded or permanently stored in the ITVR Signal. The signal was not tangible and did not give physical form to an image or sound. The ITVR Signal was a live signal. Upon receiving the ITVR Signal, Seven made a further recording of the signal and used the signal as recorded to create its own product. The ITVR Signal could not be broadcast to the Australian public in its raw form, but was the major ingredient in the broadcasts that Seven made. The ITVR Signal received by Seven was not taken from any recorded version. A national broadcaster such as Seven could also pay to have its own cameras and unilateral signals, including commentator positions, transmitted from a field of play. Before the Full Federal Court, the arguments of the parties were as follows: Copyright The Commissioner argued that the Disputed Amount was a payment for Seven's right to exercise within Australia the copyright rights that otherwise inhered in the owner or assignee of the copyright in the images and sounds from the field of play (Games Footage) (i.e. consideration for the use or right to use copyright in a cinematograph film). The critical determinant was whether the images comprising the Games Footage were embodied in an article or thing so as to be capable, by the use of the article or thing, of being shown as a moving picture (i.e., a cinematograph film ). The Commissioner argued that the copper cable, electrons and ITVR Signal were physical articles or things and that the Games Footage was embodied in them. These cinematograph films gave copyright protection to the images and sounds comprising the Games Footage under the Copyright Act. Even if it were not accepted that Seven paid for copyright in the ITVR Signal, the payment was consideration for the later-acquired copyright. Seven rejected these claims on the basis that they had paid for physical access to the ITVR Signals and not copyright or future copyright. Seven argued that it is not a royalty to pay someone for a right that one subsequently creates. Brown Wright Stein Lawyers 2016 page 7

8 Other like property or right The Commissioner argued that the phrase went beyond traditional intellectual property rights because of the inclusion of the word plans in the category. As the IOC gave Seven a monopoly on the broadcasting of the Olympic Games in Australia, these monopoly rights were like property or other rights because they were functionally equivalent to the rights of a copyright holder Seven contended that the expression other like property or right had a well understood legal meaning, which should be applied, in the interests of certainty, particularly where, as here, the interpretative choice affected the operation of a provision under a double tax treaty. Issues Was the Disputed Amount a royalty within Art 12(3) of the Swiss Treaty? Decision The Court held that the Disputed Amount did not constitute a royalty as Seven's payment for access and exclusive permission could not be characterised as consideration for the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trade-mark, or other like property or right or for total or partial forbearance in respect of the use of [such] a property or right, for the purposes of Art 12(3) of the Swiss Treaty. Copyright The Court rejected the Commissioner's contention that the Disputed Amount was for the use or right to use copyright in a cinematograph film on the basis that the agreed facts made it clear the ITVR signal was not taken from a signal previously recorded and was not tangible. No cinematograph film was made because no first copy was made. Other like property or right The Court rejected the Commissioner's construction of the phrase as the phrase enumerates a class of rights (i.e. intellectual property rights). COMMENT The Swiss Treaty was amended with effect from October 2014 to include a provision similar to the section 6 definition of royalties, paragraph (db), but in the relevant income years covered in this case, the definition in Art 12(3) of the Swiss Treaty did not contain an equivalent paragraph). Citation Commissioner of Taxation v Seven Network Limited [2016] FCAFC 70 (Kenny, Perram And Davies JJ, Sydney) w TBCL objecting against private ruling Facts On 5 June 2013 the son of the applicants was killed in a motorcycle accident. At the time of his death he was 22 years of age and was employed as a pilot. The superannuation scheme of the employer of the son included a life insurance policy. In May 2014 the insurer paid the sum of $500,000 to the applicants (the parents) in their capacity as administrators of the estate of their son. On 11 August 2014 the parents made an application for a private ruling that the sum was not assessable income under section of the ITAA 1997 because they were each a death benefits dependant of their son. The applicants claimed they were dependants as they had a relationship of interdependency with their son. Brown Wright Stein Lawyers 2016 page 8

9 Section (1) of the ITAA 1997 provides that two persons have an interdependency relation where: 1. they have a close personal relationship; and 2. they live together; and 3. one or each of them provides the other with financial support; and 4. one or each of them provides the other with domestic support and personal care. Section (3) provides that the Income Tax Assessment Regulations 1997 may specify: 1. other factors to be taken into account in determining whether there is an interdependency relationship (s (3)(a)); and 2. circumstances where two persons have or do not have an independency relationship. The regulations provided for by this section are set out in regulations and of the ITAR1997. The private ruling lodged by the applicants provided as follows: A (the Deceased) died age 22 on 5 June 2013 in a motor-bike accident. The Deceased, who was employed at the time of his death as a pilot, was the only child of B and C (your clients). The Deceased, up to the time of his death, lived at home with your clients for most of his life. The only time that the Deceased did not live with your clients was during a two year period between 2007 and During this period the Deceased lived in Melbourne while he completed his pilot s course at Swinburne University. Your clients paid $40,000 towards the total cost of the Deceased's course, accommodation of $250 per week and living expenses of $1,000 per month while he lived in Melbourne. Over the years your clients bought the Deceased various items and paid for expenses which included, amongst other items, a computer, TV, pilot s gear and a motor vehicle. The Deceased also paid various expenses for your clients. At the time of the Deceased s death, the three members of the household (your clients and the Deceased) shared their living expenses (such as $350 per week for food, $850 for electricity per quarter, council rates of $3,000 per year and water charges of $1,600 per year) equally. Your clients provided the Deceased with domestic support in the form of preparing meals, doing laundry, cleaning, and a number of other tasks for the Deceased. In turn the Deceased helped your clients by performing tasks around the house. In relation to personal care, your clients and the Deceased provided each other with love, care affection and psychological assistance. At the time of the Deceased s death, your clients had just begun to convert their garage into a private living space for him. Approximately $1,000 was spent on the conversion prior to the Deceased s death and at least a further $7,000 was spent after the Deceased s death as work had already commenced and needed to be completed. Brown Wright Stein Lawyers 2016 page 9

10 TAL Superannuation and Insurance Fund paid a benefit $500,000 to the Deceased s Estate in May The Commissioner ruled that based on the facts outlined in the private ruling, the parents were not death benefits dependants of the son. The parents objected against the ruling and the objection was disallowed. The parents then lodged an application for review of the objection decision to the Administrative Appeals Tribunal. During the proceedings in the AAT, the parents introduced additional material in support of their position that they were death benefit dependants. Issue 1. Were the parents death benefit dependants? 2. Could the AAT consider the additional material? Decision Deputy President Dr P McDermott in the Tribunal held that the ATO had rightly considered that the applicants were not death benefit dependants on the material included in the private ruling. Deputy President McDermott noted that the facts comprising the scheme did not satisfy the requirements in the ITAA 1997 or the ITAR Accordingly, based on the facts in the private ruling, the appropriate decision was that the applicants were not death benefit dependants. In relation to the additional material submitted by the applicants, Deputy President McDermott noted the following statement of Logan J in Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231: On a review of an objection decision in respect of a private ruling, the Tribunal is not permitted to redefine the arrangement as stated by the Commissioner in his ruling. Put another way, the Tribunal may not itself engage in a fact finding exercise. Rather, the Tribunal must form its own view as to how a taxation law applies to an arrangement it takes as a given. Deputy President McDermott considered that the additional information was materially different from the scheme to which the private ruling related and therefore he could not have regard to it. Deputy President McDermott considered that the appropriate order was to remit the matter to the Commissioner to request that the applicants make a further private ruling. COMMENT the decision re-affirms the important of ensuring the scheme set out in a private ruling set out the full extent of the arrangements. It also highlights that objecting and then appealing against a ruling decision can mean that you are limited in what can be introduced as evidence to support your case. Citation TBCL and Commissioner of Taxation (Taxation) [2016] AATA 264 (DP McDermott, Brisbane) w Brown Wright Stein Lawyers 2016 page 10

11 2 Legislation 2.1 Progress of legislation With the issue of the writs for the Federal election, the following tax-related Bills that have lapsed: Title Superannuation Legislation Amendment (Trustee Governance) 2015 (Lapsed on 17 April 2016) Tax and Superannuation Laws Amendment (2015 Measures No 3) 2015 (Lapsed on 19 April 2016) Tax and Superannuation Laws Amendment (2016 Measures No 2) 2016 (Lapsed on 17 April 2016) Tax Laws Amendment (Tougher Penalties for Country-by-Country Reporting) 2016 [No. 2] Treasury Legislation Amendment (Repeal Day 2015) 2015 (Lapsed on 17 April 2016) Introduced House Passed House 16/9 20/10 9/11 27/5 17/6 18/6 17/3 2/5 12/11 16/3 16/3 Introduced Senate Passed Senate Assented 2.2 Income Stream Review Final Report by Treasury In 2014 Treasury commenced a review of the minimum withdrawal amounts for account-based pensions; and the regulatory barriers currently restricting the availability of relevant and appropriate income stream products in the Australian market. On 3 May 2016 Treasury issued its Final Report following this review. The recommendations made in the Report are as follows: A. Recommendations on minimum withdrawal rules 1. The current annual minimum drawdown requirements are consistent with the objective of the superannuation system to provide income in retirement and should be maintained. 2. The Australian Government Actuary should be asked to undertake a review of the annual minimum drawdown rates every five years and advise the Government to ensure that they remain appropriate in light of any increases in life expectancy. 3. Any other changes to the minimum drawdown amounts should only be considered in the event of significant economic shocks and based on further advice from the Australian Government Actuary. B. Recommendations on development of alternative income stream products 4. An additional set of income stream rules should be developed which would allow lifetime products to qualify for the earnings tax exemption provided they meet a declining capital access schedule. 5. The alternative product rules should be designed to accommodate purchase via multiple premiums but additions to existing income stream products should continue to be prohibited. 6. SMSFs and small APRA funds should not be eligible to offer products in the new category. 7. A coordinated process should be implemented to streamline administrative dealings with multiple government agencies. w Review Brown Wright Stein Lawyers 2016 page 11

12 3 ATO Materials 3.1 LRBA arrangements and arm s-length terms extension of time for compliance In our April 2016 tax training notes we reported on Practical Compliance Guideline PCG 2016/D5 which considered the application of the non-arm's length income (NALI) provisions in section of ITAA1997 and how they apply to limited recourse borrowing arrangements. PCG 2016/D5 set out a number of requirements that, if met, would result in the ATO regarding the arrangement to be on arm slength terms so that the ATO would not challenge whether the arrangements resulted in NALI being generated. Trustees had up until 30 June 2016 to ensure their LRBA arrangement met the requirements. On 30 May 2016 the ATO announced that it was amending PCG 2016/D5 to allow SMSF trustees until 31 January 2017 to ensure that any LRBAs that their fund has are on terms consistent with an arm's length deadline, or alternatively are brought to an end if they want to avoid active compliance action in relation to the 2015 or earlier income years. w Pharmacies claiming large GST refunds The ATO has announced that pharmacies may be able to claim unusually large GST refunds if they purchase certain Hepatitis C medicines that have recently been listed on the Pharmaceutical Benefits Scheme. The ATO has set out suggestions to ensure that such refunds are processed promptly as follows: ensuring the taxpayer's contact details (including their tax agent's details) with the ATO are up to date; ensuring that all BASs that are outstanding or overdue have been lodged; ensuring that the taxpayer has provided the ATO with a valid Australian financial institution account; ensuring that business industry code describing the client s main business activity, which for pharmacists is Chemists or Pharmacy Operation (42711), has been properly disclosed on the BAS. The ATO notes that reporting the correct code will assist it in prioritising GST refund claims for pharmacies affected by this issue. The ATO has noted that it may need to call taxpayers or agents to discuss the refund claims and that it will assist if the taxpayer or agent has the following information accessible: tax invoices supporting the GST purchases reported on the BAS in particular any large or unusual expenses that may have impacted on the claim (e.g. purchase of Hepatitis C medicines); proof of payment (such as a bank statement) for GST purchases if the taxpayer accounts for GST on a cash basis; a list of the client s GST transactions for the period. The ATO notes that taxpayers who report GST quarterly may wish to change to monthly to enable the refund to be processed sooner and minimize the impact on their cash flow. A taxpayer who can choose to account on a cash basis (their business and any of its associated entities have an aggregated turnover of less than $2 million) and who has has chosen to operate on a cash basis may wish to consider moving to an accruals basis to enable them to claim the GST refund prior to earlier. The ATO notes that accruals taxpayers can claim the GST refunds before actual payment where: Brown Wright Stein Lawyers 2016 page 12

13 the taxpayer's wholesaler issues them with a document that notifies them that they are liable to make a payment for the order; and the document (or another document) issued by the wholesaler meets the requirements of a valid tax invoice. ATO reference TA 2016/5 w Voluntary disclosure offer SMSF and dividend stripping In November 2015, the ATO invited to self-managed super fund (SMSF) trustees who may have implemented a dividend stripping arrangement substantially similar to the one described in Taxpayer Alert 2015/1 to make voluntary disclosures to correct the tax position from such arrangements. The voluntary disclosure program ended on 15 February The ATO has indicated that it is satisfied with the response to the program but that it still considers there a number of SMSF trustees who it believes have dividend stripping arrangements in place who did not take up the offer. The ATO notes that it recognises that some SMSF trustees will still consider that their arrangements are appropriate and that they have acted in accordance with advice they have received. The ATO encourages trustees who are uncertain whether their arrangements are appropriate to engage with the ATO and highlight that penalty remission may be available (although it appears not full remission). w Property developers and trust arrangements The ATO has announced that it is continuing its focus on trusts developing and selling properties as part of their normal business. The ATO notes that when these developed properties are sold, some trusts incorrectly claim a 50% capital gains tax discount. The ATO will continue to target arrangements that display the following characteristics: clients have experience in either developing or selling property (or experience in the industry) and establish a new trust to acquire property for development and sale; circumstances surrounding the arrangement are inconsistent with the stated purpose of developing the property as a long term investment; the development is advertised as available to purchase before completion or is sold soon after completion; the trustee claims the 50% capital gains tax discount on the sale of the property. The ATO encourages taxpayer to check such trust arrangements and make a voluntary disclosure if required. w Real property transfers reporting to ATO From 1 July 2016, State and Territory revenue collection agencies need to collect and report information about all transfers of freehold or leasehold interests in real property located in the State or Territory. Brown Wright Stein Lawyers 2016 page 13

14 For each transaction, the report will include: property details including land title information, property address and other descriptors; transactional information including transfer price, contract date and settlement date; identity data of the purchaser/transferee and vendor/transferor including: o o o name, address and date of birth for individuals; name, address and ABN for non-individuals; foreign identity details. w Non-concessional contribution lifetime cap The Institute of Chartered Accountants, in its Taxation News newsletter dated 30 May 2016 advised that the ATO has indicated that it is looking to to assist super fund members in determining whether they will meet the non-concessional contribution lifetime $500,000 cap, if legislated. The ATO has indicated that it can calculate the non-concessional contribution amount for all superannuation fund members (from 1 July 2007 to 30 June 2015) where individuals and superannuation funds have met their lodgment obligations. The contact details to obtain the amount for members are: Tax Practitioners (Fast Key Code 4 4) or via the portal; Individuals w hnvev5t1robsisinqioiizl3vlwlarszrozwt1sffnmtbosvo4qzv1snflek9vufdhvhnnvtzwwgd5 TXJJNEhCVy9HM0RxeVdvNjlkaUYrWWpncnhhYTdSS3JWTEdZdHFlVTU4SHlxaHAzd1VvM040ZUxJeU FXVWdmND0ifQ%3D%3D 3.7 ATO warns about itunes and Visa card scammers The ATO has issued a warning about itunes and Visa card scams in relation to alleged taxation debts. The ATO noted that in April 2016, the ATO receives 8692 phone scam reports in relation to the fake ATO tax debt scam with 58 reports mentioned the scammer demanding payment by itunes and 26 people paid $174,830 to the fraudsters. The ATO noted that it would never seek to collection tax debts via gift or pre-paid cards. The ATO also noted that if the person calling you is rude and aggressive, threatening police or legal action if you don t do something immediately, then it s not the ATO. w Cancellation of partnership and sole trader ABNs The ATO has announced that the Registrar of the Australian Business Register (ABR) will soon start cancelling the ABNs of partnerships where there is evidence they are no longer carrying on an enterprise. ABNs will be cancelled if an income tax return or activity statement has not been lodged for the last two years. Where an ABN is cancelled, a letter will be sent to the tax agent with a reason and a phone number to call to reinstate the ABN if taxpayer doesn t agree with the cancellation. Brown Wright Stein Lawyers 2016 page 14

15 The ATO notes that if a tax agent's client's ABN is cancelled and the agent doesn't receive a letter, it could mean the client's contact details are not up-to-date on their ABN record. Partnership ABNs will not be cancelled if they are: registered with Australian Charities and Not for Profits Commission a not-for-profit a non-reporting member of a GST or income tax group The ABN will also not be cancelled in cases where a known associate of the partnership has lodged an income tax return or business activity statement and declared business income or expenses. w Tax professionals and ABNs as sole traders The ATO as announced that the Registrar of the Australian Business Register has found some tax professionals run their business through a company or trust, but also have an ABN as a sole trader. The Registrar intends to cancel these sole trader ABNs. Letters notifying of the intention to cancel will be sent to approximately 200 tax professionals where no evidence has been found to support a business is being carried on under the sole trader ABN. AUSkey and GST registrations associated with the ABN will also be cancelled. If an AUSkey is still required, you will need to apply for another one and link it to the ABN of your trading business. w Brown Wright Stein Lawyers 2016 page 15

16 Monthly tax training June 2016 About Andrew Noolan Andrew Noolan joined Brown Wright Stein Lawyers as a partner in Andrew specialises in providing tax and commercial advice to accountants, lawyers and their clients when they have transactional tax issues or disputes with the ATO or the Office of State Revenue. He assists in preparing tax rulings and objections and running AAT matters. E: ajn@bwslawyers.com.au P: (02) His focus is on tax issues relevant to small to medium enterprise clients, including and not limited to income tax; CGT; FBT; GST; and NSW duty. Andrew also provides tax training to a number of accounting firms such as in-house training or via Skype to allow them to keep on top of tax changes relevant to their practices, some of his tax notes can be found here. He is also a regular presenter for the Taxation Institute of Australia. For a number of years, he has papers presented for the Chartered Accountants of Australia and New Zealand, CPA Australia, NSW State Legal Conference and course materials authored. Brown Wright Stein Lawyers 2016 page 16