Australia: legislation and case law update
30 September 2012
Posted by: SAIT Technical
By Taxvine (The Tax Institute Australia)
Delay to commencement of Australian Charities and Not-For-Profits Commission
In media release No 2012/108, issued 21 September 2012, the Assistant Treasurer and Minister Assisting for Deregulation, David Bradbury, announced that the proposed 1 October 2012 date for the commencement of the Australian Charities and Not-for-profits Commission (ACNC) will be delayed.
Legislation to establish the ACNC passed the House of Representatives last week. The bill has moved to the Senate but is not expected to be debated and voted on until some time in October 2012. The ACNC will commence shortly after legislation passes Parliament.
Address by Logan J to TTI - "Mission accomplished? - a perspective on Part IVA"
On 6 September 2012, Justice Logan, a judge of the Federal Court, gave an addressentitled "Mission accomplished? - a perspective on Part IVA of the Income Tax Assessment Act 1936" to The Tax Institute's Queensland Corporate Tax Retreat, held at Hyatt Regency, Sanctuary Cove, Gold Coast.
His Honour's address included remarks on the Government's proposed amendments to Part IVA and, in particular, amendments to the concept of tax benefit to eliminate the "do nothing" counterfactual or alternative postulate. He said:
"In business, doing nothing is always an opportunity cost. Not to do nothing may, in given circumstances, entail a breach of a director's duties. In cases involving schemes to which corporations are a party and as Part IVA presently stands, both in examining whether there is a tax benefit and in examining purpose actions which would manifestly entail a breach of a director's duties under s 180 of the Corporations Act are, I suggest, unlikely to give rise to a reasonable expectation that they would occur. Modifying s 177C in a way which would eliminate a "do nothing" postulate would be therefore be a major change to the present anti-avoidance regime.
Whether or not so to do is a matter for the value judgment of Parliament. It would be unfortunate if that value judgment were based on the flawed premise that cases in which the Commissioner's use of Part IVA failed inevitably point to a deficiency in the legislation, as opposed, perhaps, to a deficiency in case selection. At least in hindsight, Peabody and Eastern Nitrogen are examples of that."
Decision Impact Statement - Atlantis Holdings ATF Bruce James Lyon Family Trust
The ATO has issued a Decision Impact Statementin relation to the decision of the New South Wales Supreme Court in Atlantis Holdings Pty Limited in its capacity as trustee of the Bruce James Lyon Family Trust  NSWSC 112(22 February 2012).
The case concerned the Commissioner's challenge to an application brought by a trustee under s 63 of the Trustee Act 1925 (NSW) for judicial advice in circumstances where the trustee had lodged objections against an assessments made by the Commissioner.
Rein J held that the application should be dismissed on the basis that the trustee was not actually seeking advice as to what it should do (as contemplated by s 63) but rather was seeking a determination of the key issues in its dispute with the Commissioner. His Honour noted such a determination was not within the purview of s 63 and it would be inappropriate to provide judicial advice on the matters sought.
The Decision Impact Statement states that "the Commissioner views the decision as confirmation that Part IVC proceedings are the appropriate mechanism for challenging the correctness of an assessment. In appropriate cases, the Commissioner will seek to challenge proceedings commenced by a taxpayer under provisions equivalent to s 63 of the Trustee Act that agitate the very issues that are central to the correctness or otherwise of an assessment that will be the subject of Part IVC proceedings."
Capital gain was "special income" of super fund - SCCASP Holdings
The Federal Court (Logan J) has held that a net capital gain, comprising a trust distribution to which the trustee of a superannuation fund was presently entitled, being "statutory income" within the meaning of s 6-10 of ITAA97, was derived by the trustee as "special income" for the purposes of s 273(6) of ITAA36.
The taxpayer's arguments that the amount had not been "derived" and that the decision of the Full Federal Court in Allen (Trustee), in the matter of Allen's Asphalt Staff Superannuation Fund v FCT  FCAFC 118(7 September 2011) was distinguishable, were rejected. It was held in the Allen case that s 273 applied to "statutory income".
Logan J said at para 55:
"Where a beneficiary of a trust estate is not under any legal disability and is presently entitled to a share of the income of the trust estate, the effect of s 97 is, materially, that the assessable income of that beneficiary includes so much of that share of the net income of the trust estate as is attributable to a period when that beneficiary is a resident. That is so whether or not that share has been received, applied or dealt with by or on behalf of that beneficiary. It is enough that the beneficiary is presently entitled to that share."
SCCASP Holdings as trustee for the H&R Super Fund v FCT  FCA 1052(26 September 2012).