Tax Facts

Tax Facts contains news and alerts relating to tax practice, for the benefit of accountants and other professionals in public practice. Please click on the links below for recent issues. You may also like to peruse Tax Facts by topic category - topics are listed below to the right.

Please note that the information provided in Tax Facts is of a general nature only and should not be acted upon without specific advice based on the precise facts and circumstances of a particular taxpayer.

If you do not already receive Tax Facts direct from us but would like to, please subscribe by entering your details to the right of this message.

Subscribe to Tax Facts

Subscribe to: Tax Facts Mailing List
  • No aggregation of separate transfers for Qld duty

    For Qld duty purposes, s30 of the Duties Act 2001 provides that ‘transactions must be aggregated and treated as a single dutiable transaction’ if they ‘together form, evidence, give effect to or arise from what is, substantially 1 arrangement.’ And the section specifies that all relevant circumstances (including those listed in the section) must be taken into account in determining whether there is substantially 1 arrangement.

    Section 30 creates practical difficulties for taxpayers, particularly since it is difficult to be definitive in various situations as to whether or not aggregation should apply. In a recent decision in the Queensland Civil and Administrative Tribunal, it was held that the Commissioner of State Revenue was wrong to aggregate 2 separate transfers to different groups of beneficiaries under a testamentary trust.

    The decision is noteworthy because the transferor was the same for each of the transfers – namely, the trustees of the trust. And whether any parties to any relevant transactions are the same, is one of the circumstances that must be taken into account for the purposes of s30 (the 2 groups of transferees were also cousins in this case). The Tribunal nevertheless held that there were 2 separate transactions, separately negotiated, not conditional on each other in any way and not with any intention for the properties to be used by the respective transferees for any common purpose. The circumstances were also a bit easier for the taxpayers since there was no relationship between any prices for the separate transactions – the transfers were trust distributions so no negotiations in relation to price had been necessary. (Rawlings v Commissioner of State Revenue [2015] QCAT 10)

    ... Read More

    23 Feb 2015

    Topic: State Taxes

  • Transfer of land for JV was a CGT event

    The Full Federal Court has dismissed the taxpayer's appeal against the assessment of tax on the transfer of land for the purposes of a joint venture, of which the taxpayer was a party. The Full Court agreed with the primary judge that the transfers, to give effect to a deed of trust and joint venture agreement, amounted to a settlement for the benefit of the taxpayer and other parties in the joint venture. Consequently, CGT event E1 happened.

    What occurred in this case proved disastrous for the taxpayers involved. In addition to the adverse tax outcome, the Victorian Court of Appeal previously held that stamp duty applied to the land transfers and the High Court refused to grant special leave to appeal from that decision. It is a good reminder of the complexity and high risks of tripping up (on one or more of income tax, duty and GST) when one tries to alter ownership interests in property, particularly where matters of trusts law are involved. (Taras Nominees Pty Ltd v C of T [2015] FCAFC 4)
    ... Read More

    23 Feb 2015

    Topic: CGT

  • More taxpayer success on personal residency

    Following on from the May 2014 decision of the AAT in Re Dempsey and C of T [2014] AATA 335, a taxpayer has succeeded, in even more stark circumstances than in Dempsey's case, in arguing that he was not a resident of Australia in the 2011 year of income, prior to 29 April 2011 when he permanently returned from working overseas.

    This is an interesting decision since, unlike Mr Dempsey who was a single man, the taxpayer in this case was married with 4 children. And he stayed at the family home with them in Perth for the period of 62 days in aggregate during the 2011 year of income when he was in Australia before returning permanently on 29 April 2011. However, there was evidence from both the taxpayer and his wife that their marriage was strained, the Tribunal referring to the relationship as ‘fractured’.

    This is a further decision against the Commissioner's traditional reliance on a ‘continuity of association’ test in relation to the tax residency of an individual taxpayer. In rejecting the Commissioner's argument that Perth was the taxpayer's base, the Tribunal said that:

    ‘Mr M’s work ties outweighed his family ties, even though he financially supported his family by sending the bulk of his income to the joint bank account held with his wife in Australia. Mr M ordered his lifestyle around his work commitments.'

    (Re The Engineering Manager and C of T [2014] AATA 969)
    ... Read More

    23 Feb 2015

    Topic: Income Tax

  • SMSFs - no "payment" of benefits by journal entries

    In 2 recent interpretive decisions, the Commissioner has expressed the view that the transfer of benefits by journal entry from the account of a deceased member will not amount to the payment of a superannuation death benefit or satisfy the requirement for benefits to be cashed. The hypothetical facts in both interpretive decisions are the same – an intended transfer of benefits in an SMSF by journal entry, from the account of a deceased member to the member's spouse. (ATO Interpretive Decisions 2015/2 and 2015/3)
    ... Read More

    23 Feb 2015

    Topic: SMSFs

  • Part IVA applied to scheme to access CGT concessions

    The AAT has agreed with the Commissioner that Part IVA applied to a scheme carried out to enable access to the small business CGT concessions on the sale of a business. The Tribunal was not satisfied that the steps in the scheme contributed to the taxpayers’ asserted motive of asset protection – saying in the context of considering penalties that it ‘did not come anywhere near "reasonably arguable"’ that Part IVA did not apply.

    The facts are complex but, in very general terms, related to steps taken on 28 June 2005 to enable the net asset value test ($5M at the time) to be satisfied for the sale of the business, which occurred on 1 July 2005 for a price of approximately $8M. The steps on 28 June 2005 included capital distributions to unit holders from accumulated funds in a unit trust forming part of the group and the rearrangement of loans within the taxpayer group. In arguing that there was no ‘tax benefit’ for the purposes of Part IVA, the taxpayers ironically argued – though unsuccessfully – that the scheme had not been effective in enabling the $5M net asset value test to be satisfied. But the taxpayers were partially successful on other aspects – the Commissioner conceded that amended assessments for several of them were out of time and that assessments issued to several corporate beneficiaries could not be supported under Part IVA, since it was unreasonable to expect that discount capital gains would have been distributed to corporate beneficiaries apart from the scheme.

    The circumstances of this case illustrate the importance of continually monitoring the ability of business clients to access the small business CGT concessions on a sale of the business, including on transfer to family members as part of succession arrangements. Access to the concessions is an all or nothing matter and reasonable steps can be taken before the business and wealth of a particular business family grows to a point where it is no longer possible to access the small business concessions. And, plainly, steps taken shortly before a sale will always be subject to more scrutiny and will inevitably create a much higher Part IVA risk. (Track v C of T [2015] AATA 45)
    ... Read More

    23 Feb 2015

    Topic: CGT/Income Tax