Question:
Channel Seven takes on the Tax Office and wins
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 Taxation Administration Act requires taxpayers paying royalties overseas to deduct withholding tax from those royalties.
Seven Network Limited (Seven) made payments totalling $122 million to the International Olympic Committee (IOC) for the broadcasting rights to the Olympic Games.
What was actually provided was the transmission by ITVR signal which, when received in Australia, were converted into the actual moving pictures.
These payments were made by Seven during the period from March 2006 to August 2008. In October 2005, Seven requested a private ruling on the matter. Six months later, the Tax Office issued the ruling which stated that the payments were royalties and therefore subject to 10% withholding tax. Because Seven had failed to deduct withholding tax, it could not claim tax deductions for the payments.
The Tax Office also issued three penalty notices due to the failure to deduct withholding tax.
Seven took the Tax Office to the Federal Court which, in a lengthy judgement, found in favour of Seven by holding that the payments for the transmission of the ITVR signal was data and not itself, visual images or things, until converted into visual images or things after receipt.
Royalties are defined in Article 12(3) of the Australia-Switzerland Double Tax Agreement. These extend to the right to use copyright or other like property or right. This could include a moving picture or cinematograph film, however this is not what was provided. To be such a film, the aggregate of the visual images must first be embodied in the article or thing. That does not occur in the ITVR signal which was provided in return for the payments. The film occurred after the data stream was converted by the receiving device, such as a television receiver in Australia.
Accordingly, the court held that the payments made by Seven to IOC were not royalties and accordingly, Channel 7 was not liable to withhold any amount to cover tax nor liable for any penalties.
WTB 2015/24
Seven Network Limited v FCT
Taxation Administration Act, Schedule 1, Section 12-280
Andrew and Tony Lovett
12 February 2015
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