ATO items for consultation — August and September 2022

10 Aug, 2022

The ATO has updated its ‘Planned consultation’ webpage to outline the items on which it plans to seek formal comment in August and September 2022.

These items will be released in the form of draft Determinations, draft Rulings, draft Practical Compliance Guidelines, draft Addendums or draft updates to existing Rulings and Determinations.

The list is subject to change.

Items for consultation in August 2022

Use of an individual’s image by related entities

The ATO will release a draft Determination which will set out the Commissioner’s preliminary view on how s. 6-5 of the ITAA 1997 applies to arrangements where an individual with fame establishes a connected entity and enters into an agreement with that entity granting it non‑exclusive use of their name, image, likeness, identity, reputation and signature. This draft Determination will update the view previously expressed in draft Practical Compliance Guideline PCG 2017/D11 Tax treatment of payments for use and exploitation of a professional sportsperson’s ‘public fame’ or ‘image’, which was withdrawn on 24 August 2018.

GST treatment of financial supplies

The ATO will release a draft Addendum to GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions to reflect changes in the GST law (e.g. changes to the GST legislation applicable to cross-border supplies, and in relation to digital currency), and contains some proposed changes to modernise parts of the Ruling.

Items for consultation in September 2022

Taxing US and UK resident financial institutions under US and UK taxation conventions

The ATO will release a draft update to TR 2005/5 Income tax: ascertaining the right to tax United States (US) and United Kingdom (UK) resident financial institutions under the US and the UK Taxation Conventions in respect of interest income arising in Australia. The draft update will clarify certain aspects of the second limb of the definition of ‘financial institution’ which is used in Australia’s double-tax conventions with the US and the UK.

Residency tests for individuals

The ATO will release a draft Taxation Ruling to provide the Commissioner’s preliminary guidance to individuals to enable them to self-assess their residency status.

The new guidance will consolidate the current rulings on the residency tests for individuals — IT 2650 and TR 98/17 — and add new guidance to reflect the changes in the interpretation of ‘place of abode’ since the decision in Harding v FCT [2018] FCA 837. These changes are intended to clarify the law regarding how taxpayers self-assess residency and reduce uncertainty and the need for further engagement with the ATO.

The Board of Taxation’s Review of the income tax residency rules for individuals, which was delivered to the Government in August 2017, makes 11 recommendations to Government. The Government has not yet taken a position on the recommendations.

Beneficiary’s share of the net income of a trust estate — present entitlement

The ATO will release a draft update to Taxation Determination TD 2012/22 Income tax: for the purposes of paragraph 97(1)(a) of the ITAA 1936 is a beneficiary’s share of the net income of a trust estate worked out by reference to the proportion of the income of the trust estate to which the beneficiary is presently entitled? The draft update will amend the Determination to take into account the decision in Lewski v FCT [2017] FCAFC 145 (Lewski).

In Lewski, the Full Federal Court held that amounts payable by a trust under two contracts for the purchase of an aged care facility and aged care business were incurred in the year in which the contracts were entered into and not at the completion date of the contracts despite certain future contingencies being contemplated in the agreements.

The Taxpayer was not presently entitled to a share of the income of two trust estates as:

    • the distributions were contingent on the Commissioner not amending the relevant trust’s net income
    • the Taxpayer’s purported disclaimers to her interests in the trusts were not effective as her husband had been acting as her agent and his knowledge, actions and inaction were attributable to her.

Car parking fringe benefits

The ATO will release a draft Addendum to TR 2021/2 Fringe benefits tax: car parking benefits following the decision by the Full Federal Court in FCT v Virgin Australia Regional Airlines Pty Ltd [2021] FCAFC 209.

In this case, the Full Federal Court considered the requirement in the car parking fringe benefit rules in s. 39A of the FBTA Act that the work car park must be ‘located at or in the vicinity of the primary place of employment’. The Court determined that for each employee of the Taxpayers, their ‘home base’ airport was their primary place of employment — however, an employee’s ‘home base’ may not necessarily be the predominant location from which their duties were performed.

TR 2021/2 will be amended to confirm the Commissioner’s views on the meaning of ‘primary place of employment’ for the purposes of the car parking benefit provisions in the FBTA Act.

In addition, the draft update to Chapter 16 — Car parking fringe benefits (on the ATO’s legal database) will be finalised to provide practical guidance on the application of the law, to complement TR 2021/2.

Commissioner’s discretion to determine that an entity does not control another entity

The ATO will release a draft Determination to set out the Commissioner’s preliminary view on the meaning of ‘control’ for the purpose of exercising the discretion under s. 328-125(6) of the ITAA 1997.

Section 328-125 outlines the meaning of ‘connected with an entity’ under the small business entity rules. Under s. 328-125(6), if the control percentage that a taxpayer holds in an entity is at least 40 per cent, but less than 50 per cent, the Commissioner may determine that the first entity does not control the other entity if the Commissioner thinks that the other entity is controlled by an entity other than, or by entities that do not include, the first entity or any of its affiliates.

GST and residential colleges

The ATO will release a draft Practical Compliance Guideline on GST and residential colleges. This draft Guideline is intended to replace the Residential Colleges GST Tool which will be discontinued from 31 December 2022. The draft Guideline will set out the Commissioner’s proposed compliance approach for universities and residential colleges supplying accommodation, meals, tertiary residential college courses and religious services to resident students, and claiming input tax credits.

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