14 December, 2017
This Indirect Tax Bulletin outlines recent Australian indirect tax developments which may affect your business.
What you need to know
| Relevant Area | At a glance |
| Land tax – refunds – costs | In North West Melbourne Recycling Pty Ltd v Commissioner of State Revenue (Vic) (No 2) [2017] VSC 726, the Commissioner was ordered to pay costs on an indemnity basis due to failing to address an obviously critical legislative provision in refusing refunds. |
| Fringe benefits tax – definition of "taxi" | The ATO released a discussion paper, TDP 2017/2, which considers whether the definition of "taxi" should include uber vehicles for the purposes of FBT. |
| Land tax and stamp duty – exemption |
The State Revenue Legislation Amendment (Surcharge) Act 2017 (NSW) provides an exemption to the stamp duty surcharge and land tax surcharge in respect of residential land acquired and owned by foreign owned corporations, where the land is used for the purpose of constructing new homes. |
North West Melbourne Recycling Pty Ltd v Commissioner of State Revenue (Vic) (No 2) [2017] VSC 726
Summary
Due to failure to address an obviously critical provision of the Taxation Administration Act 1997 (Vic) (TAA), and the unreasonable rejection of a prior offer of compromise made by the taxpayer, the Commissioner was ordered to pay the taxpayer's costs on an indemnity basis.
Background
As discussed in a previous Ashurst publication, the Victorian Supreme Court, in North West Melbourne Recycling Pty Ltd v Commissioner of State Revenue (Vic) [2017] VSC 647, held that amounts paid pursuant to incorrect land tax assessments could be refunded, notwithstanding that the plaintiff had not objected to the assessments.
Critically, in making its submissions, the Commissioner failed to address two pivotal provisions of the TAA, being section 19(2) and section 19(2A).
Further, prior to this decision, an offer of compromise under Order 26 of the Supreme Court (General Civil Procedure) Rules 2015 was made by the taxpayer, and was not accepted by the Commissioner.
Decision
The offer made by the taxpayer constituted a discount of 15% from the taxpayer's total claim. Given the taxpayer's strong case, this was not an offer to capitulate, but rather it represented a genuine compromise by the taxpayer in the circumstances. Therefore, the failure by the Commissioner to accept the offer was unreasonable.
The Supreme Court of Victoria made a special costs order that the plaintiff be entitled to have its costs paid by the Commissioner on an indemnity basis.
ATO Discussion Paper – Fringe Benefits Tax – Definition of "Taxi"
On 27 September 2017, the Commissioner released TDP 2017/2 – Fringe Benefits Tax – Definition of Taxi.
By way of background, under section 58Z of the Fringe Benefits Tax Assessment Act 1986 (Cth), no FBT is payable by employers in respect of travel undertaken by their employees in a "taxi":
- to or from the employee's place of work; or
- otherwise due to illness of the employee.
The issue for consideration in the discussion paper is the definition of "taxi". The ATO's current view is that this exemption is "limited to travel in a vehicle licensed by the relevant State or Territory to operate as a taxi".
However, in Uber B.V. v Commissioner of Taxation [2017] FCA 110, the Federal Court held that, for the purposes of GST, the effective definition of "taxi" included Uber vehicles.
The central question the discussion paper considers is whether this decision of the Federal Court should also apply in the context of FBT.
It seems likely that the ATO will extend the definition of "taxi" in the FBT context. However, we still await the release of the ATO's final view on this issue.
State Revenue Legislation Amendment (Surcharge) Bill 2017 (NSW)
The State Revenue Legislation Amendment (Surcharge) Act 2017 (NSW) was enacted on 30 November 2017.
This Act amends the Duties Act 1997 (NSW), the Land Tax Act 1956 (NSW) and the Land Tax Management Act 1956 (NSW).
Most significantly, the Act provides an exemption to both the stamp duty surcharge and the land tax surcharge in respect of residential land acquired and owned by a developer that is an indirectly foreign owned Australian corporation.
The exemption is available where:
- land is used for the construction of brand new homes and the land is sold without the home(s) having been used or occupied (other than as a display home); or
- land is subdivided and sold for the purpose of constructing brand new homes.
In order to obtain a refund, an application must generally be made within 12 months after the completion of the sale or the issue of a subdivision certificate and no later than 10 years after completion of the transfer of the land to the indirectly foreign owned Australian corporation.
For further information, please contact:
Geoffrey Mann, Partner, Ashurst
geoffrey.mann@ashurst.com
