Talking Tax – Issue 6

This week we’re talking tax about…

ATO updates

Power v DCT [2014] NSWCA 77 – Decision Impact Statement released

In Power v DCT, the NSW Court of Appeal unanimously dismissed an application by a company director to set aside a prior decision in which the director was liable for directors’ penalties of $1 million plus interest.

The penalties were imposed under a director’s penalty notice (DPN) which was issued under section 269-25 of the Taxation Administration Act 1953. The penalties related to several unpaid PAYG withholdings by the company. The director sought leave to appeal to the High Court, but leave was refused.

In its decision impact statement, the ATO says it believes the NSW Court of Appeal’s decision to dismiss the application is “plainly right” and is consistent with the Commissioner’s view and current procedures.

Competent Authority Arrangement between the United States of America and Australia

The ATO has released details of the arrangement which has been made between Australia and the United States known as the FATCA (Foreign Account Tax Compliance Act) Competent Authority Arrangement.

The intergovernmental agreement requires that certain information about US and Australian ‘Reportable Accounts’ be exchanged automatically pursuant to the Australia – US double tax agreement.  A reportable account is a bank account held with a financial institution, such as a deposit account which would earn at least $10 interest in a calendar year and unitholdings in investment funds, where the accountholder is an Australian resident or US resident.

ATO to send certainty letters to compliant taxpayers

The ATO is trialling a system where taxpayers are sent a ‘certainty letter’, confirming that their 2014-15 tax return is finalised.

The certainty letter indicates that no further review or audit will be conducted of the taxpayer’s return. The pilot system will be trialled with a sample of people who have straightforward tax affairs, lodged their return electronically or via a tax agent, and had a taxable income of under $180,000.

Certain other criteria also apply, including:

• income was only from salary or wages, Australian Government allowances and payments, gross interest and dividends;
• deductions claimed related only to work, interest or dividends, gifts and donations or the cost of managing tax affairs; and
• other factors, including the lodgement and compliance history of the taxpayer.

Not all taxpayers who ostensibly satisfy the criteria will receive a letter during the pilot of this program as the ATO has only sent the letters to a random sample of taxpayers who fit the criteria at this stage.

Tax White Paper will continue as planned

The Treasurer, Scott Morrison, has confirmed that the Tax White Paper will continue after the transition of the new Ministry being sworn in. The Treasurer added that the Government’s response to the financial system inquiry is close to completion and will be considered by Cabinet soon.

The Finance Minister, Mathias Cormann, also confirmed that the Mid-Year Economic and Fiscal Outlook is also due to be delivered in December as planned.

Case law

Roche v DCT [2015] WASCA

The Western Australia Court of Appeal has refused to grant a company director an extension of time to appeal a decision of the Western Australia Supreme Court, therefore dismissing the appeal.

The decision being appealed was of the Western Australia Supreme Court, which gave the Commissioner summary judgment for director’s penalties of $3.4 million plus $380,000 in interest. The penalties were imposed under section 269-20 of Schedule 1 to the Taxation Administration Act 1953.

The case concerned the liability of a ‘sleeping director’ for directors’ penalties, and whether the director in question took all reasonable steps to ensure the company complied with its obligations to remit the income tax withheld from employees’ salaries and wages to the Commissioner.

In dismissing the application for an extension of time to appeal, the Court of Appeal found there was no evidence to show that the director made any efforts to ascertain the true position of the company.