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ATO Releases – Rulings/determinations

Tax Telegraph, September Issue

ATO Releases – Rulings/determinationsSingaporean resident company receiving Australian sourced royalties

ATO ID 2012/67

Royalty payments from Australian resident companies to a Singaporean resident company for the use of, or the right to use, copyright in respect of literary works are included in assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) as ordinary income from an Australian source.

Goods and services tax: tax invoices

GSTR 2012/D3

This Draft Ruling sets out the minimum information requirements for a GST ‘tax invoice’; explains when a document is in the approved form for a tax invoice; examines the circumstances when a document for a supply can be treated as a tax invoice even though it does not meet all of the tax invoice requirements; and explains how the threshold for low value transactions applies such that a tax invoice is not required. It also includes a summary, at Appendix 2, of the circumstances where the Commissioner has determined that an input tax credit is attributable to a tax period without the recipient of the supply being required to hold a tax invoice.

Goods and services tax: making a taxable supply of second-hand goods by way of lease before making a taxable supply of the goods by way of sale

GSTD 2012/6

When an entity acquires second hand goods and makes a taxable supply of the goods by way of lease before making a taxable supply of the goods by way of sale (or exchange), both taxable supplies are taken into account in quantifying and attributing input tax credits under sections 66-10(1) and 66-15(1) of the GST Act 1999.

Decision impact statements:

Commissioner of Taxation v Byrne Hotels Qld Pty Ltd [2011] FCAFC 127

The ATO has released an Interim Decision Impact Statement on the Full Federal Court decision in Commissioner of Taxation v Byrne Hotels Qld Pty Ltd [2011] FCAFC 127(11 October 2011). The Full Court held that real estate agent commission fees and legal fees payable on settlement of the taxpayers contract of sale of its hotel business and land, constituted ‘liabilities’ under section 152-20 of the ITAA 1997 for the purposes of the maximum net asset value test (MNAV test) in the CGT relief provisions for small business. The Court found that as contingent assets can be included in the net CGT asset value calculation, then liabilities should be matched to assets and contingent liabilities included as liabilities.  

The ATO notes that it will review TD 2007/14 “What 'liabilities' are included in the calculation of the 'net value of the CGT assets' of an entity in the context of subsection 152-20(1) of the Income Tax Assessment Act 1997”  in which the Commissioner takes the view that the term ‘liabilities’ extends to legally enforceable debts due for payment and to presently existing obligations to pay either a sum certain or ascertainable sums and does not extend to contingent liabilities, future obligations or expectancies.

Hopkins and Anor and Commissioner of Taxation [2012] AATA 324

The ATO has released a Decision Impact Statement (DIS) on the AAT’s decision in Hopkins and Anor and Commissioner of Taxation [2012] AATA 324. In that case, the taxpayers (a father and son) were the directors of a trustee company of a family trust and also beneficiaries of the trust.  The family trust was the sole unit holder of a unit trust. The tax returns for the 2004 and 2005 income years of the family trust showed that the family trust had made distributions to specific beneficiaries (including the taxpayers).  

In 2009, the Commissioner issued amended assessments increasing the taxable incomes of the taxpayers as a result of the denial of a deduction in the calculation of the net income of the unit trust.  The Commissioner treated the disallowed deduction as having been distributed to the beneficiaries in the same proportions as the original distributions. It was held that neither of the taxpayers was presently entitled to receive the income of the family trust before the end of the relevant income years. This was on the basis of evidence which indicated that no valid resolution by the trustee of the family trust had been made regarding the distribution of income from the family trust before the end of the relevant income years. Under the terms of the trust deed, in that event, the default appointment clause in the trust deed operated to provide that all 46 primary beneficiaries of the family trust (including the taxpayers) were presently entitled to the distributable income in equal shares. Therefore, it followed that amended assessments, which increased the amount of trust distributions received by the taxpayers from a family trust, were excessive.

The DIS notes that the ATO agrees with the Tribunal’s decision that the amended assessments were excessive. However, the DIS also notes that although not considered by the AAT, the Commissioner maintains the view that what must be determined in analogous situations is whether the trustee's original calculation of the income of the trust was in accordance with the trust deed. If the original calculation was in accordance with the trust deed, the Commissioner does not accept that it is open to a party (not a beneficiary of that trust) to later argue that the trustee should have calculated the trust income in a different manner.

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