Notice of Rulings, Notice of Addenda, Notice of Withdrawals

Overview

The Commissioner of Taxation, Chris Jordan, issued several rulings and determinations under the authority of the Commonwealth of Australia. The Income Tax Assessment Act 1997 (Cth) was enacted to regulate the imposition of income tax and other related taxes. The 2018 rulings and determinations, as well as amendments to previous rulings, aim to provide clarity on the tax treatment of specific financial transactions and schemes. These include Rulings CR 2018/1, CR 2018/2, and CR 2018/3, which address the tax implications of acquiring preference shares in Bendigo and Adelaide Bank Limited, IMB Limited, and Bank of Queensland respectively, as well as Taxation Determination TD 2017/26 which explains when dividend equivalent payments under employee share schemes are assessable as income. Additionally, amendments to previous rulings and determinations have been made to provide further clarification on the GST status of certain food products and the tax treatment of vendor liabilities assumed by the purchaser of an enterprise. These rulings and amendments were issued by the Commissioner to provide certainty to taxpayers and ensure the consistent application of the law.

Scope and Application

The Commissioner of Taxation, Chris Jordan, has issued several rulings, determinations, and addenda under Australian income tax law, each applying to specific entities or transactions, within a defined timeframe. Rulings CR 2018/1, CR 2018/2, and CR 2018/3 outline the Commissioner's position on particular financial schemes involving Bendigo and Adelaide Bank Limited, IMB Limited, and Bank of Queensland, respectively. These rulings apply to entities participating in these schemes from 1 July 2017 to 30 June 2027 or 30 June 2018, as specified, and continue to apply to those entities throughout the term of the ruling. Taxation Determination TD 2017/26 addresses the assessability of dividend equivalent payments under employee share schemes for payments made on or after 1 January 2018. The various addenda amend existing rulings and determinations to include updated information, such as the GST status of food products or the assumption of vendor liabilities in enterprise purchases, applying from specific dates. Additionally, certain rulings and determinations have been withdrawn and replaced with new draft determinations, effective from specified dates.

Key Provisions

The Commissioner of Taxation has issued several rulings and determinations under the Commissioner of Taxation Act 1963, which are now available for practitioners to reference in their work. These include CR 2018/1 (paragraph 4) which pertains to the income tax consequences of converting preference shares in Bendigo and Adelaide Bank Limited, applying from 1 July 2017 to 30 June 2027. CR 2018/2 (paragraph 4) outlines the Commissioner’s stance on the income tax treatment of off-market share buybacks by ordinary shareholders of IMB Limited, with applicability from 1 July 2017 to 30 June 2018. Similarly, CR 2018/3 (paragraph 4) details the income tax implications for investors in Bank of Queensland's BOQ Capital Notes, from 1 July 2017 to 30 June 2018. TD 2017/26 (paragraph 4) provides clarification on when dividend equivalent payments made under employee share schemes are assessable as income, effective from 1 January 2018. These rulings and determinations offer guidance to taxpayers on specific transactions and arrangements, ensuring they comply with the relevant provisions of the Income Tax Assessment Act 1997. The rulings and determinations impose specific obligations on the entities and individuals they govern. For example, entities that entered into the schemes outlined in CR 2018/1, CR 2018/2, and CR 2018/3 must ensure they follow the Commissioner's position on the income tax treatment of these transactions. Similarly, under TD 2017/26, employers must assess dividend equivalent payments as income when they are paid to employees participating in share schemes from 1 January 2018 onwards. These obligations necessitate that affected entities keep accurate records and provide necessary disclosures to the Commissioner of Taxation to comply with the provisions of the Income Tax Assessment Act 1997. Breaches of the provisions outlined in the rulings and determinations may result in various penalties and consequences. Under the Income Tax Assessment Act 1997, penalties for non-compliance can include substantial fines and, in some cases, criminal charges. For instance, knowingly providing false or misleading statements can attract penalties up to $1,100 per offence for individuals and up to $5,500 per offence for entities. Additionally, failure to disclose assessable income correctly can result in interest charges and additional tax liabilities. The Commissioner also retains the right to pursue legal action to recover penalties and interest, and in severe cases, to prosecute for tax evasion or fraud, which can lead to imprisonment. The Commissioner has also issued amendments to existing rulings and determinations to update the application of the law. For example, the Addendum to CR 2013/15 (paragraph 4) amends the Leighton Holdings Limited Equity Incentive Plan, effective from 1 January 2018. Similarly, GSTR 2004/9, GSTR 2006/9, and GSTR 2009/2 have been amended to reflect changes in the GST consequences of enterprise purchases, supplies, and partitioning of land, effective from 20 December 2017. These amendments ensure that taxpayers are aware of the most current tax obligations and can adjust their practices accordingly. The Commissioner has also withdrawn IT 2385, effective from 13 December 2017, and replaced it with draft Taxation Determination TD 2017/D4, effective from the same date. This withdrawal and replacement ensure that taxpayers are provided with the most accurate and updated guidance on deductibility of interest expenses incurred by beneficiaries of discretionary trusts.