Draft law to support Government’s affordable housing agenda

The Government has released exposure draft legislation to implement further elements of its housing affordability plan including:

·       Increasing the capital gains tax (CGT) discount to 60 per cent from 1 January 2018 for residents investing in eligible affordable housing if they hold the investment either directly or indirectly through certain trusts, for at least three years.

·       Amending the law so that from 1 July 2017, managed investment trusts (MITs) can hold affordable housing for the purpose of deriving long-term rent. The draft legislation also clarifies that MITs will be able to construct or develop the affordable housing property.

·       Consistent with current MIT withholding tax rules, eligible foreign residents will generally be able to take advantage of a reduced withholding tax of 15 per cent on investment returns from affordable housing, including income from capital gains. However, this concessional rate will not apply to capital gains income derived from selling affordable housing held for less than 10 years.

·       An integrity measure applies from 4:30pm AEST on 14 September 2017, providing that a MIT cannot acquire investments in residential property, except where it is affordable housing or commercial residential premises. MITs currently holding residential property will be provided with a transitional period until 1 October 2027.

Refer to our TaxTalk Alert which considers the proposed measures in further detail.

Consultation on legislative framework for Asia Region Funds Passport and Collective Investment Vehicles

The Australian Government recently sought comment on the proposed core legislative frameworks to give effect to the Asia Region Funds Passport and the Corporate Collective Investment Vehicle (CCIV) regime.

The Passport is a common framework of coordinated regulatory oversight to facilitate the cross border issue of managed investment funds, whilst the CCIV regime will offer an internationally-recognisable investment vehicle which can be readily marketed to foreign investors, including through the Passport.

The draft legislation for the CCIV does not cover taxation of the vehicle or its investors - these rules are expected to follow shortly.

ATO’s practical guidance on fixed trusts

The Australian Taxation Office (ATO) has released Practical Compliance Guideline PCG 2016/16 which deals with fixed entitlements and fixed trusts. Being treated as a ‘fixed trust’ has important tax implications, including the ability for certain trusts to carry forward and utilise tax losses from year to year. This Guideline discusses factors the Commissioner will consider when determining whether to exercise his discretion to treat a trust as a fixed trust.

Importantly, the PCG sets out a ‘safe harbour compliance approach’ to allow certain trusts to manage their tax affairs as if the Commissioner has exercised his discretion. Refer to our TaxTalk alert for further details.

Proposed remedial power for small business restructure roll‑over

The ATO has released CRP 2017/D2: Draft Taxation Administration (Remedial Power - Small Business Restructure Roll-over) Determination 2017. This draft determination, once finalised, will ensure that no direct income tax consequences arise from the transfer of depreciating assets undertaken as part of a transaction that otherwise qualifies for the small business restructure roll-over relief.

This modification will most commonly apply where the restructure involves the transfers of depreciating assets by the trustees of trusts to beneficiaries, by companies to shareholders, and other associated persons. In the absence of the modification, such transfers could give rise to assessable income in the hands of the transferee. Comments are due 3 October 2017.

Reforms to address illegal phoenixing

The Government has announced a pac

In addition to the DIN, the Government will consult on implementing a range of other measures to deter and disrupt the core behaviours of phoenix operators, including

Consultation on Tax Expenditures Statement

Treasury has released a consultation paperon the Tax Expenditures Statement (TES). The consultation is part of a review of the presentation and contents of the TES in response to a House of Representatives Committee on Tax and Revenue inquiry into the publication. The purpose of the consultation is to ensure the contents of the TES publication provides a strong and relevant contribution to the public debate on tax policy. Comments can be made until 16 October 2017.

Commissioner not prohibited from recovering accruing GIC

The Full Federal Court inBazzo v Commissioner of Taxation [2017] FCAFC 139has dismissed the taxpayers’ appeal, finding there was no basis or reason to construe the terms of the deeds of agreement with the Commissioner of Taxation in relation to taxation debts to extend the restraint to any other liability arising after a specific date. The Federal Court held that the Commissioner was not prohibited by the deeds of agreement from recovering accruing General Interest Charge (GIC) after the date specified in the Deed.

Federal Court dismisses application for judicial review of GIC decision

The Federal Court in Pintarich v Deputy Commissioner of Taxation [2017] FCA 944 has dismissed the taxpayer’s application for judicial review of a decision by the Deputy Commissioner to grant partial remission of the imposed GIC. The taxpayer argued the Deputy Commissioner had made an earlier decision to remit the GIC in full. The Court found that an earlier letter from the ATO stating a ‘payout figure’ did not purport to be the communication of a decision relating to the GIC remission application, and as such the decision to only partly remit the charge should stand.

ATO’s Corporate Plan for 2017–18 and beyond

The ATO has released its Corporate Plan for the period 2017–18 to 2020–21. The corporate plan describes how the ATO proposes to administer the tax and superannuation systems, and sets out the framework in which it will operate and monitor its day-to-day operational performance and achieve its longer term strategic intent.

Some strategic objectives highlighted in the plan include the following:

·       Individuals’ risks – develop mitigation strategies to address emerging individuals’ risks such as work related expenses.

·       Assurance – obtain independent advice through a range of channels, including external scrutineers, the General Anti-Avoidance Rules Panel and independent assurance of settlements.

·       Justified trust – implement a program to increase confidence in the level of assurance overall taxpayers’ affairs.

·       Tax gap analysis – use insights from analysis of tax gaps to ensure fairness in the tax system and inform future changes to client experiences.

·       Dispute resolution – provide earlier and more open engagement to prevent disputes and litigate the right disputes.

·       Public advice and guidance – improve public advice and guidance to provide taxpayers with greater certainty.

·       Pre-emptive advice – tailor and increase ATO use of proactive advice and information.

·       Single Touch Payroll – streamline business reporting obligations to align with payroll events.

·       Technology platforms – modernise and improve the ATO’s technology platforms, to ensure they meet expectations of the community and ATO staff.

Government calls for submissions to inform next Federal Budget

The Federal Government is inviting submissions from individuals, businesses and community groups on their views regarding priorities for the 2018-19 Federal Budget. Submissions are due 15 December 2017.