ATO Releases – Rulings/Determinations
Tax Telegraph, December 2012
Taxation determination (TD)
Sets out the Commissioner’s preliminary view that income tax is not required to have been assessed before an agent or trustee has an obligation under section 254 of the ITAA 1936 to retain sufficient money to pay tax which is or will become due as a result of their agency or trusteeship.
Sets out the Commissioner’s preliminary view that a receiver who is an agent of the debtor is required by paragraph 254(1)(d) of the ITAA 1936 to retain from the sale proceeds that come to them in the capacity of agent sufficient money to pay tax which is or will become due as a result of disposing of a CGT asset.
Decision Impact Statements (DIS)
A Decision Impact Statement (DIS) has been released by the ATO on the Full Federal Court’s decision in Commissioner of Taxation v Noza Holdings Pty Ltd  FCAFC 43. The Full Federal Court held that the taxpayer was entitled to a deduction under section 25-90 of the ITAA 1997 for $170 million of a $220 million dividend payment on redeemable preference shares (RPS) made by the taxpayer by way of endorsement of a promissory note. Essentially, the issue was whether a debt was created on declaration of the dividend – and therefore whether the dividend on the RPS had been incurred for the purposes of section 25-90 of the ITAA 1997 – even if there were insufficient profits to pay the dividend.
The Full Federal Court agreed with the decision at first instance that even if there were insufficient profits to pay the dividend, a debt arose upon declaration of the dividend by the operation of section 254V(2) of the Corporations Act 2001 as a liability capable of legal enforcement. Accordingly, an outgoing was incurred for the purposes of section 25-90 of the ITAA 1997.
The DIS indicates that it is the ATO’s view that the application of section 25-90 of the ITAA 1997 in a given case will require a consideration of the terms of the relevant instruments to determine if, and when, they give rise to an amount being incurred. In addition, although the Full Court found that the word ‘income’ in section 25-90(1)(a) of the ITAA 1997 is a reference to income at general law and the test is therefore conducted by reference to the character of the receipt in the hands of the recipient, the DIS notes that the ATO considers that an amount also has to satisfy the definition of a ‘dividend’ under section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for it to satisfy all of the requirements of section 25-90 of the ITAA 1997.
The DIS also notes that the ATO considers that if an amount is not income at general law or not a ‘dividend’ as defined under section 6(1) of the ITAA 1936, it will not satisfy the requirements of section 25-90 of the ITAA 1997 and no deduction will be available for an outgoing incurred in deriving that amount.
A Decision Impact Statement has been released on the AAT’s decision in Linfox Australia Pty Ltd and Commissioner of Taxation  AATA 517. In that case, the AAT held that the amount of the fuel tax credit for fuel acquired by the taxpayer for use in a refrigeration unit in a refrigerated trailer travelling on a public road is not reduced by the road user charge. The AAT decided that fuel acquired was not "fuel to use, in a vehicle, for travelling on a public road" (emphasis added) for the purposes of section 43-10(3) of the Fuel Tax Act 2006.
The ATO is of the view that the AAT’s reasoning leads to the conclusion that this phrase in section 43-10(3) only covers fuel that is used in a vehicle for the purpose of propelling that vehicle on a public road, or for a purpose that is “incidental” to propelling that vehicle on a public road (which in the ATO's view would include fuel used for such purposes as air conditioning for the comfort of a driver who must be present in the vehicle in order for it to be propelled). Accordingly, the road user charge will only apply to such fuel.
The DIS reflects the ATO’s view that it does not matter whether the fuel is located in the main fuel tank for the vehicle’s engine or whether it is located in a separate tank. The DIS notes the ATO’s intention to revise Fuel Tax Ruling FTR 2008/1 to reflect the AAT’s reasoning, adding that the revision may affect road transport operators that use fuel in a vehicle travelling on a public road for a purpose other than the propulsion of that vehicle including, for example, cement mixers. The ATO intends to consult with stakeholders on reasonable methods of apportionment.
ATO Interpretative Decisions (ATO IDs)
- Section 109F of the Income Tax Assessment Act 1936 (ITAA 1936) operates to deem a private company to have paid a dividend to a deceased's legal personal representative in circumstances where a private company is taken to have made an amalgamated loan to a shareholder who dies before the amalgamated loan is repaid, and the private company forgives that loan while the shareholder's estate is in administration.
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