Government response to Inquiry into Tax Deductibility
The Government has released its response to the report produced by the House of Representatives Standing Committee on Economics’ inquiry into tax deductibility. The Government agreed that Treasury should, as a priority, provide a clear estimate of the cost of work-related expenses to Government revenue in order to properly inform policy. In accepting the recommendation, the Government noted that denying these deductions would likely result in lost revenue as individuals affected, and their employers, would likely adjust their behaviour in response to the changes.
In addition, the Australian Taxation Office (ATO) agreed with the Committee’s recommendation to review its compliance activity in relation to work related expenses, noting that it currently undertakes a range of activities to consider how compliance can be further improved. The ATO also agreed to continue with technological development and progress on pre-filling of returns to simplify taxpayers’ interaction with the tax system, with the eventual goal being to minimise, and ultimately remove, the need for taxpayers to amend pre-filled returns.
Review of the Identity-matching Services Bill
The Parliamentary Joint Committee on Intelligence and Security has commenced a review of the Identity-matching Services Bill 2018. The Bill, which does not amend taxation legislation, will enhance identity sharing for a range of national security, law enforcement, community safety and related purposes. It will also help to mitigate the impact of the ‘black economy’, and make it more difficult to use fraudulent identities to avoid legitimate taxation and other financial obligations.
Taxpayer fails to prove loans were made to companies
The Federal Court in Rowntree v Commissioner of Taxation FCA 182 has dismissed the taxpayer’s appeal, finding that the taxpayer had failed to prove that the challenged assessments concerning receipts from companies the taxpayer controlled were excessive. In particular, the taxpayer had failed to prove that he had made contracts for loans with the companies he controlled for which he did not create, or have a contemporaneous record.
Tribunal decisions on whether foreign employment income was exempt from tax
The Administrative Appeals Tribunal (AAT) has considered whether the taxpayer was exempt from Australian income tax on their foreign service income in the following cases:
- Coventry v Commissioner of Taxation  AATA 175. In this case, the Tribunal found that the taxpayer, an Australian public servant working on an aid project overseas, was exempt from income tax under section 23AG of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) in respect of salary and allowances. The Tribunal concluded that the taxpayer’s foreign employment income was exempt from income tax in Australia on the basis that the taxpayer was posted to Pakistan under the terms of the Development Agreement between the two countries, and covered by the definition of ‘Australian project personnel’ in the Agreement.
- PZTL v Commissioner of Taxation  AATA 461. The Tribunal affirmed the Commissioner’s decision and held that the taxpayer’s income was not exempt under section 23AG(1AA)(d) of the ITAA 1936, as the taxpayer’s period of continuous foreign service was not directly attributable to his deployment ‘by’ the Commonwealth or a Commonwealth, State or Territory authority, but rather was from his employment with an external government contractor.
Tribunal revokes taxpayer’s departure prohibition order
The AAT in Walsh v Commissioner of Taxation  AATA 235 has revoked a departure prohibition order, finding that the departure of the taxpayer from Australia will not make it less likely that his tax liability will be discharged either in whole or in part, or that the ability of the Commissioner to recover the tax will be impaired. The order had been in place for more than two and a half years, had not resulted in any contribution to the revenue, and the taxpayer had no assets to pay the tax debts.
Tribunal makes adverse findings: Overseas fund was not a super fund
The AAT in LLUN v Commissioner of Taxation AATA 3058 has made adverse findings against the taxpayers, a married couple involved in ‘complicated and confusing’ arrangements. The Tribunal addressed various issues in dispute, finding that the issued amended assessments were not out of time and could be amended by the Commissioner as there had been a positive finding of fraud or evasion. The Tribunal also identified that a Samoan fund was not a superannuation fund for Australian tax purposes, but a resident trust estate. As such, the taxpayers were presently entitled to a proportionate share of the income of the trust estate under section 97 of the ITAA 1936.