ATO updates

ATO withdraws Interpretative Decision 2003/1024

On 26 August 2016, the ATO withdrew ATO ID 2003/1024 in respect of the capital gains treatment of declaration of trust over shares subject to a winding up. The interpretative decision previously advised that:

“provided the owner of a share in a company in administration creates a trust over the share by declaration or settlement, then a CGT event occurs and the capital loss can be claimed.”

Guidance on the issue contained in the withdrawn ATO ID can instead be found in Taxation Determination TD 2004/13.

ATO issues new Class Ruling – CR 2016/60

The ATO has issued class ruling 2016/60 in response to SPARQ Solutions Pty Ltd, which sought the Commissioner’s approval to implement an early retirement scheme in accordance with section 83-180 of the Income Tax Assessment Act 1997 (ITAA 1997). The scheme they sought to implement was the ‘SPARQ Solutions Early Retirement Scheme 2016’ (Scheme).

The purpose of the Scheme was to reduce SPARQ’s work force in line with its funding cuts by providing an incentive to employees who met the eligibility criteria to retire early. The class of employees to whom the Scheme applied were all SPARQ’s permanent full-time and part-time employees who occupied a position that was to be backfilled by a ‘reform-affected employee’. A ‘reform-affected employee’ is an employee who occupies or who has occupied a position that is determined to be no longer required by SPARQ. However, employees aged 65 and over have been excluded from the Scheme. Participation in the Scheme was entirely voluntary.

The Commissioner ruled that the Scheme is an early retirement scheme for the purposes of section 83-180. More specifically, the Commissioner determined that:

  • All SPARQ employees within a class approved by the Commissioner could participate in the Scheme (s 83-180(a))
  • SPARQ’s purpose in implementing the Scheme was to rationalise or re-organise the employer’s operations in a way approved by the Commissioner (s 83-180(b))
  • The Scheme was approved by the Commissioner prior to its implementation (s 83-180(c)).

Accordingly, so much of the payment received by an eligible employee that exceeds the amount that could reasonably be expected to be received by the employee in consequence of voluntary termination of their employment will be an early retirement scheme payment. In addition, so much of the early retirement scheme payment as falls within the threshold calculated in accordance with section 83-170 is not assessable income, nor is it exempt income.

Legislation and government policy

Duties Amendment (Landholder and Corporate Reconstruction and Consolidation) Bill 2016 (Tas)

On 17 August 2016 the amending Bill had its first reading in Parliament.

The amending Bill proposes to replace the former ‘land rich’ regime with the landholder duty framework to be consistent with all other jurisdictions. For the purposes of section 61 of the Duties Act 2001 (the principal Act) a landholder includes a private unit trust scheme that has a total unencumbered value of $500,000 or more.

As a consequence of the amendments, the provisions would include listed companies and public unit trust schemes under the principal Act.

Furthermore, the amending Bill would allow taxpayers to apply for an exemption where a corporate group undertakes a genuine internal reorganisation for the purpose of improving efficiency. Since 2013, the only relief to taxpayers has involved the Treasurer exercising a discretion to provide ex gratia relief.

The proposed amendments expand the concept of a landholder and intend to provide immediate relief to a taxpayer to be consistent with other jurisdictions.

Revenue Legislation Amendment Act 2016 (ACT)

The ACT government has passed the Revenue Legislation Amendment Act 2016 (Act), which amends the following taxation legislation:

  • the Duties Act 1999 (Duties Act)
  • the Rates Act 2004 (Rates Act)
  • the Taxation Administration Act 1999 (TAA).

The purpose of the amending Act is to improve the Territory’s revenue collection system for taxpayers and administrators by making a number of minor and consequential amendments to improve the quality of the tax legislation and simplify administrative processes.

Specifically, the Act amends the Duties Act by substituting and removing a number of definitions. Further, the Act amends the Rates Act by specifying 1 January as the base date for unimproved value determinations and amending Division 5.2 of the Rates Act to remove references to the owner’s intention. Finally, the Act amends the TAA by giving authorised valuers a dedicated power of entry in order to enter properties to conduct valuations. It also increases the amount of penalty tax that can be incurred for obstructing or hindering an authorised valuer, to be in the same manner as authorised officers.

The amending Act makes a number of legislative improvements to remove ambiguity around the relevant date for land tax value determinations. If a taxpayer hinders or obstructs an authorised valuer during a valuation then penalty tax on a tax default at 90% may apply, if the valuation is undertaken for the purpose of determining a tax liability and not for any other purpose.

The amending Act commenced on 1 September 2016.

This article was written with the assistance of Cameron Forsyth, Law Graduate.