28 April 2025 to 2 May 2025
Weekly Bulletin Contents
TAX
Monday 28 April 2025
A Letter from the Coalition
The Hon Luke Howarth MP has written to the Institute of Financial Professionals Australia (IFPA) outlining the Coalition’s plan to support financial professionals by reducing red tape, cutting costs, and strengthening the industry. Key commitments include fixing the CSLR, opposing Labor’s tax on unrealised super gains, and revitalising the advice profession.
Should the Albanese Labor Government respond to our enquiries, we will also publish their response to members in full.
Read the letter here.
Full Court dismisses taxpayer’s appeal in Pt IVA Merchant case
In a majority decision, the Full Federal Court has dismissed the taxpayers’ appeal from the decision in Merchant & Anor v FCT [2024] FCA 498 and thereby confirmed that Pt IVA and the dividend stripping provisions in s 177E of the ITAA 1936 applied to a scheme whereby capital losses were generated to offset a large capital gain made on the sale of a business by a family trust to an unrelated third party. The capital losses were generated by the sale of shares owned by the family trust to a related entity. The Full Court also dismissed the taxpayer’s appeal in respect of the application of the TOFA provisions in Div 230 of ITAA 1997 to expired rights to receive certain milestone payments under the agreement for the sale of the business to the third party. (Merchant v FCT [2025] FCAFC 56, 22 April 2025.)
Deputy Commissioner’s response to Bendel case enquiries
The ATO has released information in which Deputy Commissioner, Louise Clarke, expressed her thoughts on some common questions the ATO is hearing from private companies and their advisers, regarding the Bendel Div 7A case decision and court process. She strongly encourages taxpayers to review the ATO’s published Interim Decision Impact Statement, and to seek advice about their individual circumstances.
Taxpayer’s claim for reinstatement of application for review allowed
The AAT has reinstated an application for review by Tribunal of an objection decision that the taxpayer had withdrawn. The underlying dispute related to whether amounts included in the taxpayer’s assessable income and whether deductions claimed related to the taxpayer’s business or to the taxpayer personally. In allowing the taxpayer’s application for reinstatement, the ARTA found that it was “fair and just” to reinstate the matter in terms of s 9 of the Administrative Review Tribunal Act 2024 – noting that in terms of whether his substantive case had merit, his case was not “hopeless” and that a genuine issue has been raised. It also noted that a not unreasonable time had elapsed between the withdrawal of his objection and his application for reinstatement and that the Commissioner would not be disadvantaged by any reinstatement. (Haines and FCT (Practice and procedure) [2025] ARTA 461, 24 April 2025.)
Tuesday 29 April 2025
ATO: SMSF Auditors conducting in-house audits
The ATO has advised that SMSF auditors conducting in-house audits are still on its radar. It said that the term ‘in-house audit’ refers to an auditor who works for a firm, or network firm, that also provides services like accounting or administration to the same SMSF clients. The ATO said that since 1 January 2020, auditors have not been allowed to perform in-house audits unless: they don’t assume a management responsibility for the audit client; the other services provided are routine and mechanical; and the firm addresses any independence issues. The ATO also said that its risk assessment shows around 800 auditors might still be doing in-house audits.
PSLA 2007/6 re settlement of disputes updated
The ATO has updated Practice Statement Law Administration PS LA 2007/6 Guidelines for settlement of widely based tax disputes for technical accuracy and currency, and in line with current ATO style and accessibility requirements. In addition, Attachment 1 and 2 have been removed from the Ruling. The Ruling provides practical guidance for the settlement of widely based tax disputes including but not limited only to disputes involving taxpayers who have participated in tax planning arrangements (whether subject to the general anti-avoidance provisions or otherwise).
Wednesday 30 April 2025
Victorian man jailed for $2.4m fraud
The ATO has advised that a Victorian man has been jailed for 4 years and 7 months (with a non-parole period of 2 years and 7 months) for fraudulently obtaining over $2.4m in GST refunds, contrary to s 134.2 of the Criminal Code (Cth). In addition, he was ordered to make reparation of the amount of $2.4m. Between 1 March 2021 and 2 February 2022, the man lodged a total of 31 business activity statements (BAS), claiming his business had made nearly $30m worth of purchases. The ATO welcomed the result and said that it takes all levels and amounts of fraud seriously and that those who seek to gain an unfair advantage face the full force of the law.
ATO: Be aware of SMSF schemes
The ATO has warned that it has seen individuals be targeted by promoters to create an SMSF for inappropriate and illegal reasons. It also said these promoters often promise high returns or early access to super. The ATO warned that these schemes can be illegal and result in severe penalties. It also said that it is important to recognise the warning signs of unlawful tax and super schemes. The ATO therefore advised that investors do their own research (check before investing); don’t rush to make a quick decision; check ASIC’s financial advisers to make sure their adviser is licensed; know who they are dealing with and confirm their registration; if it sounds too good to be true it usually is; and request copies of all documents including such things as investment plans and read all documents before signing.
Thursday 1 May 2025
ATO: Manage your business’ day-to-day transactions
The ATO has released some tips to help small businesses stay on top of their tax obligations and make financial decisions based on there business’ circumstances. These include: keeping an eye on upcoming expenses, and regularly updating books and reconcile your accounts; setting aside the GST you collect (eg transfer it into another bank account within the business to keep it separate from your cash flow); setting PAYG withholding and super aside, so you’ll have the funds available when payments are due; and avoid the last-minute rush and schedule time in your calendar to prepare your business activity statement (BAS).
CPI for the March 2025 quarter
The Australian Bureau of Statistics has released the Consumer Price Index (CPI) number for the March 2025 quarter. It is 140.7 (being 139.4 for the December 2024 quarter). Note: The CPI number is used for the indexation of the CGT improvement threshold car limit, various superannuation amounts and dependant tax offsets.
FRIDAY 11 April 2025
Letter to the Commissioner
On 24 April, the Institute of Financial Professionals Australia (IFPA) wrote to Mr Rob Heferen, Commissioner of Taxation, regarding a recent Tribunal decision involving a disallowed meal expense claim by a long-distance truck driver (Shaw’s case).
In IFPA’s letter to the Commissioner, IFPA stated it believes this case warrants a review of the ATO’s administrative approach, potentially through the exercise of the Commissioner’s general powers of administration. We highlighted that many truck drivers—and their advisers—misunderstand section 900-50 of the ITAA 1997, believing that written evidence is unnecessary when claims are within the ATO’s published reasonable meal expenditure caps.
Our full position is detailed in the advocacy section of our website.
Australian DTAs modified by MLI tax treaty
The ATO has released the synthesised texts for the application of the Double Tax Agreement between Australia and a range of countries (below) – as modified by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “MLI”) signed by Australia and those countries. These texts were prepared by the ATO and represents its understanding of the modifications made to the Agreements by the MLI. The relevant countries are: Denmark, India, Indonesia, Ireland, Korea, Netherlands, New Zealand, Norway, Russia, Singapore, Slovakia, South Africa and Thailand. See ATO website, here.
SUPER & FINANCIAL SERVICES
NCC Misstep Leads to Code of Ethics breach
The Financial Services and Credit Panel (FSCP) has disciplined a financial adviser for breaching Code of Ethics Standard 5 – Best Interest and the Value of Diligence when advising on non-concessional contributions (NCC).
Breaches of Standard 5 – Best Interest is an emerging theme. Since the beginning of 2024 over 80% of all Code of Ethics breaches were a breach of Standard 5. This standard requires that –
All advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances.
You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.
In this instance the adviser recommended a client make an NCC without considering the client was already in a three-year bring forward period. The client consequently exceeded the NCC cap.
The client had the option to:
- withdraw the excess amount together with associated earnings and have associated earnings added to their amended income tax assessment, or
- have the excess NCC taxed at 47%
The FSCP ordered the adviser to hire an independent financial services compliance expert to audit their next 10 pieces of superannuation contribution advice.
Institute of Financial Professionals Australia (IFPA)
In the last twelve months about half the Code of Ethics breaches recorded on ASIC’s FSCP register related to superannuation strategy errors. A consistent theme across these breaches is the failure to act in clients’ best interests under Standard 5 of the Code of Ethics. Advisers should ensure they fully understand and correctly apply complex super rules and verify clients comprehend both the benefits and the potential risks or costs of their advice.
PBR provides timely reminder to avoid last minute PDCs
In a recent PBR, the ATO reconfirmed that a tax deduction can only be claimed in the year the super fund receives the personal contribution which may not align with when the funds left the bank account.
The situation involved an individual who transferred funds to their super fund on 28 June 2023, but funds were not received by the super until 1 July 2023. As per section 290-150(3) you can deduct the contribution only for the income year in which you made the contribution. Paragraph 13 of TR 2010/1 confirms that if funds are transferred electronically to the superannuation provider, a contribution is made when the funds are credited to the superannuation provider’s account.
IFPA comment
The ruling emphasis’ the need for advisers to ensure personal super contributions are not left to the last minute. It is important to allow sufficient time for the contribution to be received by the super fund.
Advisers should also remind clients of the importance of adhering to notice of intent (NOI) timeframes to avoid missing out on a deduction. NOIs should be submitted to their fund before the earlier of:
- Lodging their tax return
- 30 June of the following year
- Making a withdrawal, rollover or commencing a pension