Question:
Bruton Holdings: Court rebuffs Tax Office on costs
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
The Full Bench of the High Court has overturned hard-ball tactics on costs by the Tax Office in a case known as Bruton Holdings.
There are provisions in the Corporations Act that allow a corporate trustee to be reimbursed for its expenses from the trust fund. Bruton Holdings Pty Ltd was the trustee of Bruton Educational Trust. In February 2007 Administrators were appointed to the company. From that point on it automatically vacated the position of trustee but continued to hold the trust assets as a bare trustee.
In April that year the winding up of the company was resolved. In May, the Tax Office issued a garnishee notice to the solicitors for the company requiring them to pay around $450k of the trust’s money to the Tax Office.
Bruton Holdings sought a declaration at the Federal Court against the notice and was successful. The Tax Office appealed to the Full Bench of the Federal Court and had the initial decision overturned. Bruton Holdings was then successful in being granted special leave to appeal to the High Court which then further overturned the Full Court decision and reinstated Bruton Holdings relief from the garnishee notice.
The Tax Office then instigated a dispute on to costs for the legal proceedings arguing that since Bruton Holdings was functioning as a bare trustee it had no place to institute the initial legal proceedings. The cost matter,ended back at the Full Court which decided that Bruton Holdings was properly acting to protect the trust fund even though it was now a bare trustee. Hence it had a right to be indemnified for its costs from the trust fund.
Commissioner of Taxation vs. Bruton Holdings Pty Ltd (in liquidation) (No 2) [2010] FCA998, Tax Office Decision Impact Statement
