New foreign investors beware: Co-operate with the Tax Office or be forced to sell-up

Foreign companies investing in Australia will have new obligations to co-operate with the Tax Office, and if they don’t keep the tax man happy they could face prosecution, fines and potentially be forced to divest the asset, according to Treasurer Morrison’s media release on 22 February. Significant foreign investment into Australia requires approval by the Foreign Investment Review Board (FIRB) and approvals can have conditions applied.  The investor is required to comply with those conditions or face sanctions.  The approval requirements depend on a number of factors including: Whether the investor is a foreign Government; The type of investment (agricultural, […]

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Foreign owners of agricultural land: Register now

Foreign agricultural land owners must notify the Tax Office if they hold agricultural land, acquire new agricultural land or dispose of agricultural land.  The new registration requirement came into force from July 2015 and all existing holdings must be registered by 29 February 2016. The requirement applies to all “foreign persons” and includes an Australian citizen living permanently overseas that may be considered a foreign person as they are not ordinarily residing in Australia.  Foreign persons also includes foreign companies and trustees. Where there are multiple owners of an agricultural land holding, each foreign owner has an obligation to register.  […]

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Allocation of Franking Credits by Trustees

A recent Federal Court decision has made it abundantly clear that franking credits must be allocated to beneficiaries in the same proportion as the relevant dividends. The trustee of the Thomas Investment Trust had resolved to distribute the net income in proportions to an individual and a company. In a second resolution it resolved to distribute the franking credits in different proportions. The trustee then sought and obtained directions from the Supreme Court of Queensland that franking credits were to be dealt with by the trustee and could be distributed to beneficiaries in accord with those trustee resolutions. However in a later hearing the superior […]

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Can’t claim $20k loss: Share trading not a business

In a tough decision, the Tribunal has refused a $20k deduction for losses in share trading activities for a casual childcare educator in the 2011 tax year (Devi v FCT [2016 AATA 67]). In that year, the taxpayer earned $40k in childcare wages working between 25 and 30 hours per week and commenced trading shares using $60k of savings and a $40k margin loan. 71 purchases of bank, mining and smaller company shares were made to a value of $380k.  37 sales to a value of $315k were made.  Most transactions took place in the first half of the year. […]

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Netflix tax before Parliament

At the moment, internet supplies of movies, music, apps, games, eBooks, other digital products and services such as consultancy and professional services made by a foreign supplier are generally exempt from GST. In line with previous Government Budget announcements, legislation has been introduced to Parliament to apply GST to these digital supplies when they are made to an Australian consumer. Under the new law, the supplier or the digital platform, will have a limited and simplified GST registration and will remit GST on a quarterly basis but not be able to claim any input tax credits. The new law will […]

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Appeal lost: Foreign companies were tax residents of Australia

The Full Bench of the Federal Court declined an appeal by multiple foreign companies against an assessment based on them being Australian tax residents. The foreign companies included: Hua Wang Bank Berhad (offshore bank incorporated in Samoa); Bywater Investments Limited (incorporated in the Bahamas); Chemical Trustee Limited (incorporated in the UK); and Derrin Brothers Property Limited (incorporated in the UK). Documents provided in evidence indicated that all of the companies were ultimately owned and controlled by an accountant based in Sydney.  Each company made profits buying and selling ASX listed shares.  If they were non-resident and the shares were held […]

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Fringe benefits tax rules tightened for not-for-profits

Currently, employees of certain not-for-profits can salary sacrifice entertainment benefits.  If they do so, no FBT is payable by the employer nor does it have to be reported.  Those not-for-profits which are not exempt, but rebateable, would receive a partial FBT rebate. The 2015/16 Budget included a provision for this benefit to be substantially reduced.  From 1 April 2016, there will be a separate, single, grossed-up cap of $5,000 for salary packaged meal entertainment and entertainment facility leasing expenses provided to employees of public benevolent institutions, health promotion charities, public and not-for-profit hospitals and public ambulance services. The charges are […]

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Personal services business and the results test

You will avoid attributed personal services income and be operating a personal services business if you can satisfy the results test.  This is set out in Section 87-18 of the Income Tax Assessment Act 1997. In a recent case (Prasad Business Centres Pty Ltd v FC of T AAT (2015) AATA 411) the Administrative Appeals Tribunal confirmed the Tax Office’s decision not to provide a personal services business determination as requested. The Tribunal held that the results test was not satisfied because: The relevant contract remunerated the principal only for time he spent working on certain projects; Whilst the contract […]

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