Australia: legislation and case law update
14 September 2012
Posted by: SAIT Technical
By Taxvine (Tax Institute Australia)
GST regs expand definition of "credit union"
A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No 4)was made on 30 August 2012 and registered on the Federal Register of Legislative Instruments on 3 September 2012 as Select Legislative Instrument 2012 No 215.
The regulation amends the A New Tax System (Goods and Services Tax) Regulations 1999 to expand the definition of "credit union" to also include those that were listed by the Australian Prudential Regulation Authority as a credit union at 1 July 2011, and have subsequently rebranded (or will in the future) as a bank while retaining their mutuality.
AAT finds "special circumstances" for excess super contributions - Longcake
The AAT has held that "special circumstances" existed for the purposes of the exercise the discretion provided in s 292-465 of ITAA 1997, and has held that excess superannuation contributions made in respect of the taxpayer by his employer in the 2009-10 income year be allocated instead to the 2008-09 income year: Longcake and FCT  AATA 576(AAT, Groom AO DP, 30 August 2012).
No business of primary production - Nelson
The AAT has held that the taxpayer was not carrying on a business of primary production during the 2004-2009 years of income, in which he made numerous improvements to his 500 acre property but derived no income: Nelson and FCT  AATA 579(AAT, McCabe SM, 30 August 2012).
High Court grants special leave in share buyback case - Consolidated Media
On 17 August 2012, the High Court (French CJ and Heydon J) granted the Commissioner special leave to appeal against the decision of the Full Federal Court in Consolidated Media Holdings Ltd v FCT  FCAFC 36(20 March 2012).
The issue in the case is whether a payment of $1,000,000,000 made by Crown Melbourne Limited ("Crown") to the taxpayer for the buy-back of shares in Crown held by the taxpayer was a dividend for the purposes of s 159GZZZP ITAA 1936. If so, it was fully rebatable under the former s 46 ITAA 1936. If not, it gave rise to an assessable capital gain of $402,461,564.
The payment was debited to a new account in Crown's books entitled "Share Buy-Back Reserve Account" and it was the only entry in that account. If this account comprised part of Crown's "share capital account", the payment could not be a dividend. At first instance, Emmett J held that the "Share Buy-Back Reserve Account" was part of the account kept by Crown of its share capital within the meaning of the former s 6D ITAA 1936. The taxpayer successfully argued before the Full Federal Court that the account was not part of Crown's share capital account as ordinarily understood nor was it an account to which the former s 6D applied.
The appeal is likely to be heard in October 2012.
FCT v Consolidated Media Holdings Ltd  HCATrans 186(17 August 2012)
Taxpayer a resident of Australia while working in Oman - Boer
The AAT has held that the taxpayer was a resident of Australia while working in Oman because his admitted domicile was Australia and he did not have a permanent place of abode outside Australia during that time.
The AAT held that he had no apparent ties to Oman beyond the fact that his employment required him to live, sleep and eat there for a number of consecutive days, after which time he left Oman and invariably returned to Australia, where the majority of his possessions were located: Boer and FCT  AATA 574(AAT, Hack SC DP, 30 August 2012).
Taxpayer a resident of Australia while working in Dubai - Sully
The AAT has held that the taxpayer was a resident of Australia while working in Dubai because, although not a resident within the ordinary meaning of the word, his domicile was in Australia and had not established a permanent place of abode in the United Arab Emirates, or anywhere else in particular: Sully and FCT  AATA 582(AAT, McCabe SM, 31 August 2012).
Decision Impact Statement - JCZC
The ATO has issued a Decision Impact Statementin relation to the decision of the AAT in JCZC and FCT  AATA 348; 2012 ATC 1-045.
The case concerned whether the taxpayer's position on a shortfall amount under the income tax law (arising from a disallowed claim made for deductions in relation to a yacht) was not reasonably arguable, and whether that amount also resulted from recklessness by the taxpayer or its agent.
The AAT refused to allow the taxpayer to withdraw a concession that the claim was not reasonably arguable. However, the AAT held that neither the taxpayer nor his tax agents were reckless in relation to the making of the claim.
The Decision Impact Statement states that the ATO accepts that it was reasonably open to the AAT, on the evidence before it, to find that neither the taxpayer nor his tax agents, had acted recklessly in relation to the claim for the relevant deductions in relation to the yacht.
Decision Impact Statement - Mount Pritchard
The ATO has issued a Decision Impact Statementin relation to the decision of the Full Federal Court in Mount Pritchard v FCT (2011) 169 FCR 549;  FCAFC 129; 2011 ATC 20-288.
The case concerned a taxpayer who was challenging the validity of assessments and seeking to require the Commissioner to assess in accordance with a private binding ruling that had been issued to the taxpayer.
The Commissioner ruled that the taxpayer was exempt from income tax because the arrangement as defined in the private ruling was a club established for the promotion of sport. Hence, Item 9.1(c) of s 50-54 of ITAA 97 applied.
Subsequently, the Commissioner issued assessments to the taxpayer for the years ended 30 June 2006 and 30 June 2007, on the basis that the arrangement as defined in the private ruling was not the same arrangement that was actually carried out by the taxpayer. Accordingly, the Commissioner argued that he was not bound by the private ruling.
The taxpayer objected to the assessment for the year ended 30 June 2006 on the ground that the Commissioner was bound by the ruling and thus he did not have the power to make an assessment for the 2006 income year. The objection was disallowed and the taxpayer applied to the AAT under Part IVC of the Tax Administration Act 1953 for a review of the Commissioner's objection decision.
In the meantime, the taxpayer also applied to the Federal Court for judicial review of the Commissioner's decision, on the ground of jurisdictional error.
The Full Court held that no error has been shown in the process of assessment going to jurisdiction. Further, where the taxpayer contends that the Commissioner is bound by a private ruling, the Full Court held that the taxpayer can proceed to have heard its arguments in Part IVC proceedings, and if successful in arguing that the private ruling should be applied, will demonstrate that the 2006 assessment is excessive.
The Commissioner agrees.
Decision Impact Statement - The Applicant
The ATO has issued a Decision Impact Statementin relation to the decision of the AAT in The Applicant and FCT  AATA 174; 2012 ATC 1-043.
The case concerned whether certain outgoings claimed by the taxpayer to be deductible rental expenses were in fact incurred in the course of deriving rental income.
The AAT held that only some of the claims made by the taxpayer were deductible, as the other claims could not be substantiated. The Decision Impact Statement states that the case was decided on its facts and will not have any impact on any existing or future litigation proceedings.