12 May 2025 to 16 May 2025
Weekly Bulletin Contents
TAX
Monday 12 May 2025
No deduction for guarantee payment
In WCVB v FCT [2024] AATA 1259 the AAT ruled that proceeds of some $950,000 from a property sale transaction negotiated between one company and another company should be counted as assessable income of a third company (the taxpayer). The taxpayer has now been unsuccessful before the Federal Court in arguing that it was entitled deduction equal to that amount assessed to it in respect of a related payment it made to a financial entity. However, the Court found that the payment was made under a guarantee arrangement and therefore was on capital account and hence not deductible. (Charles Apartments Pty Limited v FCT [2025] FCA 461, 9 May 2025)
Decision to cancel GST credits upheld as no taxpayer entity
The ARTA has dismissed the taxpayer’s applications in a matter relating to its claim for GST input tax credits (ITC) of some $30m which had been cancelled by the Commissioner. The ARTA did so on the basis that the applications had no reasonable prospects of success as it could not be determined that the taxpayer entity – “a non-resident unincorporated association” – existed as an entity separate from the person behind it. The ARTA therefore found that there were no creditable acquisitions and no activities carried on by the alleged entity separate from the activities of the person that could be characterised as carrying on an enterprise. (Evans and FCT (Practice and procedure) [2025] ARTA 545, 6 May 2025)
Updated impact statement on Mylan Australia Holding Pty Ltd
The ATO has updated the decision impact statement in Mylan Australia Holding Pty Ltd v FCT [2024] FCA 253. In that case the Federal Court ruled that Pt IVA did not apply to a scheme in relation to deductions and carry forward losses relating to the acquisition of a global pharmaceutical business. The impact statement has been updated to clarify wording in paras 8, 10, 13, 16, 18, 20, 21, 23, 30, 32, 38, 43, 46 and 48. Also, additions have been made to footnotes 1, 40 and 59 to provide additional context.
Tuesday 13 May 2025
Requirement to lodge returns for 2024-25
Legislative Instrument F2025L00570 has been made. It specifies which persons are required to lodge an income tax return for the income year, and when a return must be lodged (ie by 31 October 2025 – unless they have a substituted accounting period). This includes a requirement for not-for-profit (NFP) self-review returns to be lodged. The instrument also deals with other lodgment requirements for franking returns, venture capital deficit tax returns, ancillary fund returns and trustees of self-managed superannuation funds.
Legislative Instrument F2025L00569 has also been made. It requires parents under a child support assessment to lodge an income tax return for the 2025 year by the required time, in the required form – unless: their taxable income for that income year was less than $29,842; and they received one or more Australian Government pensions, allowances or payments (listed in para 5(2)(b) of the instrument) for the whole of that income year.
ATO: Small business focus areas
The ATO has advised that to ensure all businesses meet their tax, super and registry obligations, it will take firmer action on those who knowingly do the wrong thing. In this regard, it said its focus areas (and the associated risks) are as follows:
- Business income is not personal income – risks: using business money and assets for personal benefit.
- Deductions and concessions – risks: non-commercial business losses; small business capital gains tax concession; small business boost measures.
- Operating outside of the system – risks: GST registration and income of taxi, limousine and ride-sourcing services; contractors omitting income.
Wednesday 14 May 2025
ATO: Prior year foreign currency rates for “odd”years
The ATO has released foreign currency exchange rates for foreign currency equivalent to A$1 for selected countries for 2022 to 2025 for “odd” years ending 31 March. They can be found here.
ATO: Managing SuperStream release authorities
The ATO has advised that it has found some common issues with SuperStream release authority lodgments which can result in processing delays. It has therefore offered some tips to help get lodgments right and ensure successful payments – including the following: lodge a Release authority statement (RAS) within 10 business days of receiving a release authority from us via SuperStream; Don’t overpay or make duplicate payments as this can lead to member refunds and an illegal early access to super; send a successful RAS with each payment as without this the ATO can’t allocate payments to the member.
Thursday 15 May 2025
Partner assessable on retirement distributions
A taxpayer has been unsuccessful before the ARTA in arguing that he was not assessable on partnership distributions of $62,602 made to him in the income years ended 30 June 2018, 2020 and 2021. The taxpayer claimed, among other things, that he did not ever physically receive the amount of $62,602 “in money or in kind” and that he was not in a position to negotiate the relevant Partnership Retirement Deed that gave rise to the amounts. However, the ARTA found that he had not discharged the onus of proving that the assessments were excessive. In doing so it noted that under a clause in the Partnership Retirement Deed, the taxpayer had agreed to return the taxation timing differences totalling $313,008 as taxable income in five tranches of $62,602 over the 30 June 2018 to 30 June 2022 financial years under the concessional arrangements offered by the Partnership, rather than having the $313,008 assessed in the 30 June 2017 financial year. (KRBM and FCT (Taxation and business) [2025] ARTA 556, 13 May 2025)
ATO warning re fake news about super changes
The ATO is warning the community about a proliferation of dodgy websites sharing fake news about changes to the superannuation preservation rules and withdrawal rules starting on 1 June. The ATO said the maximum preservation age (the age when you can access your superannuation savings on retirement) is 60 for anyone born from 1 July 1964. It also said that taxpayers who have questions about the legitimacy of tax information should refer to the ATO’s website or speak to their registered tax professional if they have one.
Tribunal affirms decision to disqualify SMSF trustee
The ARTA has affirmed the Commissioner’s decision to disqualify a person from acting as trustee of an SMSF (via being a director and a responsible officer of its corporate trustee). The person agreed that he had breached a clause of the trust deed (which prohibited loans or other financial assistance to a member of relative of a member) and that there had been numerous contraventions of the SIS Act. However, he argued against disqualification on compassionate grounds because he considered he should be given a ‘second chance’. However, the ARTA ruled that given the seriousness of the contraventions over a 6 year period and that he had ignored the repeated advice of the independent auditor in the past, that disqualification was the appropriate response. (Omibiyi and FCT (Taxation and business) [2025] ARTA 553, 12 May 2025)
FRIDAY 16 May 2025
Husband and wife taxpayers fail to prove assessments excessive
The ARTA has found that husband and wife taxpayers who ran a family jewellery business which dealt in the manufacture and sale of precious jewellery (as well as a related business in the husband’s own right) have been unsuccessful in discharging the onus of proving that assessments issued to them were excessive. The assessments increased their combined taxable incomes by some $2.5m over a 6 year period and imposed 75% shortall penalties for intentional disregard of the law – together with 20% uplift for some of the years in question. (CMYT JDRJ and FCT (Taxation and business) [2025] ARTA 551, 9 May 2025)
Draft GST instruments – wine equalisation tax; incapacitated entities
The following Draft GST instruments have been issued:
- Draft LI 2025/D4 Draft A New Tax System (Goods and Services Tax) (Correcting Wine Equalisation Tax Errors) Determination 2025. It allows you to correct a debit error or credit error (error) that relates to an amount of wine tax or wine tax credit that was made in working out your net amount for an earlier tax period in specific circumstances. You may correct the error by including the amount of the error from the earlier tax period, in working out the net amount for a later tax period. Comments due by 11 June 2025.
- Draft LI 2025/D5 Draft A New Tax System (Goods and Services Tax) (Choosing to Account on a Cash Basis – Representatives of Incapacitated Entities) Determination 2025. It allows representatives of incapacitated entities to choose to account on a cash basis under section 29-40 of the GST Act. Comments due by 11 June 2025.
SUPER & FINANCIAL SERVICES
Chalmers lists new Financial Services Minister’s priorities
The Federal Treasurer, Jim Chalmers, listed six priorities for the new Financial Services Minister, Dr Daniel Mulino, in a recent ABC radio interview.
The priorities mentioned by Chalmers were:
Managing global uncertainty
Improve productivity
Building more homes
Rolling out the tax cuts
Providing cost of living help
Manage inflation
Institute of Financial Professionals Australia (IFPA) comment
The Institute of Financial Professionals Australia (IFPA) intends to engage with Dr Mulino at the earliest opportunity to discuss our reform priorities. These include consulting on the Division 296 tax, enhancing the affordability and accessibility of financial advice by amending the Delivering Better Financial Outcomes reforms, and enabling accountants to provide strategic and structural superannuation advice in relation to their clients’ tax affairs. We also aim to address issues with the Compensation Scheme of Last Resort. More broadly, we are seeking a reduction in unnecessary regulatory burdens, greater efficiency in compliance processes, and policy settings that reflect the unique challenges faced by small and medium-sized enterprises.
Tribunal affirms decision to disqualify SMSF trustee for multiple breaches
The Administrative Review Tribunal (ART) upheld the disqualification of an individual as an SMSF trustee for repeated SIS Act breaches.
The applicant, a director of the corporate trustee Omibiyi Pty Ltd, admitted to 117 contraventions between 2017 and 2023, involving super withdrawals totalling over $121,000 to pay a personal mortgage. The applicant explained that the amounts used to pay the mortgage were a loan from the SMSF to the member.
The withdrawal and subsequent member loan breached several SIS provisions including:
Lending to members (s 65)
Sole purpose test (s 62)
In-house asset rules (ss 83, 84)
Arm’s length investment requirements (s 109)
In addition, annual returns were lodged late for multiple financial years. This resulted in contraventions to s 35D(1) – Trustees obligation to lodge returns.
The ART upheld the disqualification due to the severity of the contraventions. Financial hardship was deemed no excuse for breaching member loan prohibitions (s 65).
IFPA comment
The ART’s decision highlights the severity of the contraventions. Auditors must report contraventions resulting from an event – being any action or inaction by trustees causing or potentially causing a breach. The criteria in ‘Completing the Auditor/Actuary Contravention Report’ can assist when determining which contraventions must be reported.
Three ATO Tips for Managing SuperStream Release Authorities
The ATO has provided guidance on how to successfully lodge release authorities via SuperStream.
These include:
- Submit the Release Authority Statement (RAS) within 10 business days of receiving a release authority from the ATO via SuperStream
- Avoid overpayments or make duplicate payments to prevent member refunds and illegal early access to super
- Send a successful RAS with each payment as without this the ATO can’t allocate payments to the member.
ATO debunks super preservation age
The ATO is urging Australians to ignore misleading rumours circulating online about changes to superannuation preservation and withdrawal rules.
Deputy Commissioner Emma Rosenzweig has set the record straight: if you were born on or after 1 July 1964, your super preservation age which is the age at which you can access your super upon retirement is 60. No recent changes have been made to this rule.
If individuals are unsure whether super or tax information is accurate, they are encouraged to check the official ATO website or speak to their adviser or registered tax professional to get the facts.
Technical help desk question of the week
Question
My client is a member of an SMSF who was recently injured and is now totally and permanently disabled (TPD). The SMSF received $500,000 in TPD insurance proceeds from the insurer. The SMSF had been claiming a deduction on insurance premiums expenses.
Should the insurance proceeds be treated as assessable income to the SMSF?
Answer
No, the insurance proceeds are not assessable income to the SMSF, and the fund will not pay tax on the payment. The member may need to pay tax upon making a super withdrawal depending on their age.
Background
Under CGT rules, TPD insurance proceeds received by an SMSF are exempt from tax under section 118.300(1) items 5 and 7. The SMSF is entitled to a statutory deduction on TPD premiums under s 295-460.
When a super fund receives insurance proceeds from a claim, the CGT provisions determine whether the payment is taxable to the SMSF. This is because the trustee’s rights under the policy (being the policy owner) are considered a CGT asset. CGT event C2 occurs when an insurance payout is made and those rights have come to an end. However, any capital gain on a life policy is disregarded under s 118-300 where the owner is a super fund.
Super withdrawals by SMSF members age 60 or over are tax-free. Withdrawals by members below age 60 under the disability condition of release may be taxed.
For more information, please see our article, ‘Owning Insurance in Super Part 3’, which can be found in our March/April edition of Outlook.