20 MAY 2022
Car limit for 2022-2023
The car limit for capital allowance purposes for 2022–23 has increased to $64,741 (up from $60,733 for 2021–22).
The car limit is used, among other things, in s 40-230 of ITAA 1997 to work out the first element of the cost of certain cars to which the car limit applies.
20 MAY 2022
Synthesised text of tax treaty with Malaysia
The ATO has issued a synthesised text for the application of Australia’s tax treaty with Malaysia signed on 20 August 1980 as amended by the First Amending Protocol signed on 2 August 1999, the Second Amending Protocol signed on 28 July 2002 and the Third Amending Protocol signed on 24 February 2010 (the Agreement) as modified by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) signed by Australia on 7 June 2017 and by Malaysia on 24 January 2018.
The synthesised text is to help in the understanding of the application of the MLI to the Agreement and it does not constitute a source of law.
Source: Synthesised text of the MLI and the Agreement between the Government of Australia and the Government of Malaysia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income as amended by the First Amending Protocol, the Second Amending Protocol and the Third Amending Protocol, ATO website, 20 May 2022, accessed 20 May 2022.
9 MAY 2022
Warning against fraudulent GST claims
The ATO has warned the public not to invent fake businesses to fraudulently claim false GST refunds.
The ATO has identified a recent spike in suspicious refunds. The fraud involves offenders inventing fake businesses and Australian Business Number (ABN) applications, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.
Through Operation Protego, the ATO is investigating around $850 million in potentially fraudulent payments made to approximately 40,000 individuals, with the average amount fraudulently claimed being $20,000. The ATO is working with financial institutions who have frozen suspected fraudulent amounts in bank accounts.
Source: ATO, ATO warns community: do not engage in GST fraud, [media release], 6 May 2022
9 MAY 2022
Margin scheme applied separately to freehold interests in land supplied under a single contract
The Federal Court has held, for the purposes of the margin scheme, that where there was a supply of several freehold interests in land under a single contract that each supply was a separate supply.
Facts
The taxpayer was a state-owned corporation that purchased, sold and developed real property. It owned a number of lots, each with a separate Certificate of Title, that it intended to sell as a single piece of land to a developer to build residential premises, effectively creating a new suburb. The lots were grouped together for the purpose of preparing 2 contracts of sale with 12 lots being the subject of Contract B1 and 4 lots (Lots L, M, N and P) the subject of Contract B2. These lots had all been held by the State of New South Wales since before 1 July 2000. The lots were previously owned by the NSW Land and Housing Corporation (LAHC) and were transferred from LAHC to the taxpayer on 1 January 2002.
On 5 November 2015, the taxpayer entered into a put and call option agreement with a purchaser for the acquisition of lots the subject of Contracts B1 and B2. The taxpayer subsequently applied for a private ruling from the Commissioner about the operation of a specific margin scheme provision (s 75-10(3), Item 4) in the GST Act in relation to the transfer of the lots. In particular, the taxpayer was concerned whether, for the purposes of Div 75 of the GST Act, there was one supply of all lots the subject of Contract B2 or single supplies of each of Lots L, M, N and P.
After receiving an unfavourable ruling, namely that the sale of the freehold interests in Lots L, M, N and P pursuant to Contract B2 would be a single supply, and having its objection to the ruling disallowed, the taxpayer lodged an appeal against the objection decision.
The Commissioner contended that the Federal Court had no jurisdiction to entertain the appeal as there was no “matter” that could be the subject of the Court’s jurisdiction. The basis of this contention was that s 114 of the Constitution prohibited the Commonwealth imposing “any tax on property of any kind belonging to a State”. The Commissioner further contended that he was not authorised to either issue the private ruling or make the objection decision and that these had been done as a “courtesy” to provide guidance to the taxpayer. The Commissioner described the document issued to the taxpayer in response to its application for a private ruling as a “purported” private ruling.
The taxpayer contended that the Commissioner had the power to issue assessments of notional GST and that these assessments created real and enforceable liabilities. Further, irrespective of whether there could be an assessment of notional GST, s 14ZZ of the Taxation Administration Act 1953 (TAA) created a substantive right in a taxpayer dissatisfied with an objection decision to seek relief from the court.
In relation to the application of the margin scheme to its proposed sale of land the taxpayer submitted that s 75-5(1)(a) of the GST Act provided separate treatment for any taxable supply of real property made by selling a freehold interest in land. It claimed that, even if was possible for a supply of multiple freehold interests to be a single supply under the basic rules, s 75-5(1)(a) (contained in the special rules) treated separately each supply made by selling a “freehold interest in land”. It did not matter to the operation of the special rules that the supply of the particular freehold interest to which the provisions were directed might be part of a larger supply for the purpose of the basic rules.
The Commissioner submitted that the “supply” made by the taxpayer was the sale of all 4 lots, namely the entirety of the freehold interests making up what was referred to as Property B2. In the Commissioner’s view, the “substance and commercial reality” was that the 4 lots were to be sold in a single transaction with an indivisible purchase price to one purchaser, as a development site for a new suburb.
Decision
The Federal Court allowed the taxpayer’s appeal. It said that the voluntary inclusion by the taxpayer of notional GST in a GST return resulted in an assessment that gave rise to a debt to the Commonwealth, which was enforceable by the Commissioner. The taxpayer had a real interest in knowing how much notional GST to include, voluntarily, in its GST return.
The court held that the Commissioner’s private ruling and objection decision were not “purported” or undertaken as a matter of courtesy. They were each authorised by, and made in accordance with, the statutory scheme. The taxpayer exercised its right to appeal to the Federal Court under Pt IVC of the TAA and the court had jurisdiction to hear and determine the taxpayer’s appeal.
There were 3 circumstances in particular that established the existence of a “matter”: (a) item 4 in the table to s 75-10(3) of the GST Act expressly applied to the taxpayer; (b) the TAA gave the taxpayer a right to seek a ruling about how a provision of the GST Act applied to it or would apply if it took identified steps; and (c) the taxpayer was “dissatisfied” with the ruling given.
In addition, the court said that s 75-10(3)(a) did not indicate that the identification of the “supply” under s 9-5 was the necessary starting point for the purpose of determining the application of Div 75. The policy and context of the margin scheme set out in Div 75 (as part of the “special rules”) was different from the context of the general provisions contained in the “basic rules”. The focus of Div 75, in so far as it applied to selling freehold interests in land, was on the sale of individual interests in land.
According to the court, the better construction of s 75-5(1)(a) was that it contained a special rule applicable where there had been a supply by selling a particular freehold interest in land and the supplier and recipient had agreed that the margin scheme was to apply. Where that had occurred, the margin was calculated by reference to the particular freehold interest that was sold. It applied whether or not that particular supply, made by selling a freehold interest in land, was part of a larger supply.
Source: Landcom v FC of T 2022 ATC ¶20-827, [2022] FCA 510, 9 May 2022.