The Australian Accounting Standards Board (AASB) has approved new sustainability reporting standards aligning with mandatory climate reporting legislation. These standards create a framework for large Australian companies to disclose their sustainability practices.
Introduction
Following the passage of the legislation by the Australian Parliament, the AASB approved two inaugural sustainability reporting standards modelled after international guidelines and incorporate local legislation.
Climate first approach
Unlike the International Sustainability Standards Board standards, Australian sustainability standards have adopted a climate-first approach by making AASB S2 Climate-related Disclosures mandatory. Companies with reporting obligations must disclose key climate-related areas, including:
- governance and strategies
- risks and opportunities
- metrics and targets concerning emissions, covering direct emissions (Scope 1), energy consumption (Scope 2), and value chain emissions (Scope 3).
Additionally, AASB S2 incorporates changes mandated by legislation, including enhanced scenario analysis. Entities must disclose scenario analysis using at least both of the following scenarios:
- low warming scenario: global average temperature increase is limited to no more than 1.5 degrees
- high warming scenario: global average temperature increase exceeds 2.5 degrees.
Voluntary sustainability disclosure for other topics
AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information covers various sustainability topics including biodiversity and human capital and remains a voluntary standard. This approach contrasts from the ISSB standards which phase in additional issues from the second year after climate disclosures.
To assist companies in adopting the ISSB-based sustainability standards voluntarily, the IFRS Foundation has published guidance for preparers.
Audit requirements
With the publication of the accounting standards, we are one step closer to implementation. The first group of companies must start reporting for the financial year ending 31 December 2025. However, one key missing piece is the auditing standards, as the company’s financial auditor will audit the sustainability report. The Auditing Assurance Standards Board (AUASB) is currently consulting with stakeholders to determine the assurance rollout for climate-related disclosures. By 2030, all sustainability reports will be subject to audit.
Based on the most recent exposure draft, the proposed audit requirements will be phased in. In the first year of reporting, different content will be subject to varying assurance requirements:
- limited assurance over Scope 1 and 2 emissions for the first year, moving to reasonable assurance thereafter
- other areas of disclosure will gradually be subject to review or audit from the second year onwards.
How SW can help
To make sure you are prepared, SW can conduct a gap analysis and create a road map to guide you on your sustainability journey.
Our audit and advisory experts are well-versed in sustainability accounting standards and will guide your business through any Australian reporting developments.
Keep an eye out for our alerts on the finalisation of the sustainability reporting assurance standard.
Contributors
The ATO has released a draft Practical Compliance Guideline, PCG 2024/D2 (PCG) which outlines how general anti-avoidance rules apply to personal services income (PSI) earned through a personal services entity (PSE) operating as a personal services business (PSB).
The PSI rules were enacted to ensure that income derived by a PSE would be taxed to the individual earning the PSI. The PSI rules also limit the types of deductions an entity can claim in respect to income being derived from the personal services of an individual.
If certain conditions are met, the PSE may be treated as conducting PSB. In these cases, the PSI provisions are exempted and the income would not be taxed to the individual.
The PCG confirms the ATO’s position, as stated in Taxation Ruling TR 2022/3, that the general anti-avoidance provisions in Part IVA applies when a PSE conducts a PSB. Therefore, any tax benefit obtained from an arrangement would be ‘unwound’ despite meeting the PSI rules. This could impact any person operating a business through a company or trust structure in industries including:
- Sole practitioner consulting/ professional services (legal, accounting, engineering, IT etc)
- Constructions and building trades
- Medical (doctor, dentist etc) and
- Other business where income is mainly derived from personal efforts/exertion.
Two main types of arrangements
Specifically, the PCG addresses concerns around two main types of alienation arrangements:
Retention of profits arrangements
The PSE retains income rather than distributing it to the individual who performed the services. By retaining profits within the PSE, tax on that income is often deferred, allowing the income to be taxed at a lower corporate rate or retained for future use.
In some cases, this results in the profits being distributed at a more advantageous time, or for the income to be used for non-commercial purposes, raising the risk of Part IVA being applied if the dominant purpose is to obtain a tax benefit through deferral.
Income splitting arrangements
This occurs when the income earned by the individual providing the personal services is diverted to associates (such as family members or related entities) rather than being fully allocated to the individual. It aims to reduce the overall tax by distributing income to entities at relatively lower tax rates, achieving a reduced overall tax rate or gaining other benefits such as spreading income across multiple taxpayers.
The ATO views these arrangements as higher risk under Part IVA, particularly if the income split is disproportionate to the value of the services provided by the associates.
Key takeaways
- The PCG introduces a two-part risk assessment framework categorising arrangements into ‘low-risk’ and ‘higher-risk’ using specific indicators.
- It provides 13 examples illustrating these indicators and guiding how different scenarios might be assessed. The ATO indicates that it will dedicate compliance resources towards higher-risk arrangements, particularly those involving significant income diversion or retention.
- The PCG is drafted to complement existing guidance materials and judicial decisions (such as Law Administration Practice Statement PS LA 2005/24) and does not provide extensive legal guidance on the application of Part IVA. It provides no substantive guidance on the ‘dominant purpose’ test for such alienation arrangements.
- The ATO suggested that a narrower scheme for Part IVA may be taken where a PSE is interposed for clearly commercial reasons (such as where the use of a PSE is a tender requirement).
- The PCG emphasises the importance of maintaining thorough and contemporaneous records. Notwithstanding the informal nature of family arrangements, proper documentation will be critical for demonstrating compliance and mitigating risks.
Low-risk arrangements
The following are features of low-risk arrangements:
- full attribution – when the entire PSI received by a PSE is affirmed as assessable income of the individual performing the services
- non–tax purpose – if a portion of income is retained or used by the PSE for non-tax reasons, such as providing a superannuation benefit or acquiring assets, and this is not done primarily to obtain a tax benefit
Higher risk arrangements
The following are features of a higher-risk arrangement:
- income splitting – arrangements where income is split with another entity, reducing or deferring tax that would otherwise be payable
- value mismatch – significant discrepancies between distributed income and value of the services provided
- retention in lower–taxed entities – substantial amounts of income retained in entities subject to lower tax rates
Key actions required
The PSI rules apply to various professionals including doctors, dentists, plumbers, electricians, carpenters, accountants and lawyers.
Taxpayers using PSEs to derive PSI must review their current arrangements to determine whether any income-splitting or profit retention practices positions them in the higher-risk category for Part IVA scrutiny.
- Review income-splitting or profit retention arrangements used within the PSE: If the arrangements primarily aim to gain a tax benefit, there is a higher risk of triggering Part IVA.
- Maintain comprehensive documentation of all transactions, decisions, contracts, and agreements involving the PSE: Detailed record-keeping is essential for justifying the rationale behind income-splitting or profit-retention decisions if reviewed by the ATO.
- Seek professional advice: Taxpayers unsure about their arrangement’s risk level or whether Part IVA applies should consult a tax professional to assess compliance and make necessary adjustments
How SW can help
Stakeholders have until 11 October 2024 to submit comments on the PCG before it is finalised.
Please reach out to an SW advisor to discuss the potential impact of the PCG on your business to mitigate any risks of current and future arrangements
Contributors
Explore the latest in the world of taxation in our Tax Chat webinar series. Join us for three engaging sessions on the most recent tax rulings, cases and key developments shaping the tax landscape.
During these sessions, our newest Tax Partners, Kirsty McDonnell and Vanessa Priest, will be discussing all things tax- including updates to legislations, tax rulings, tax cases and other tax news!
Session details
Webinar 1
Date
Wednesday 10 April 2024
Location
Online nationally – via Zoom webinar
Time
12.00pm – 1.00pm (AEDT)
9.00am – 10.00am (Perth)
11.00pm – 12.00pm (Brisbane)
Webinar 2
Date
Wednesday 12 June 2024
Location
Online nationally – via Zoom webinar
Time
12.00pm – 1.00pm (AEDT)
9.00am – 10.00am (Perth)
11.00pm – 12.00pm (Brisbane)
Webinar 3
Date
Wednesday 10 July 2024
Location
Online nationally – via Zoom webinar
Time
12.00pm – 1.00pm (AEDT)
9.00am – 10.00am (Perth)
11.00pm – 12.00pm (Brisbane)
Webinar 4
Date
Thursday 17 October 2024
Location
Online nationally – via Zoom webinar
Time
12.00pm – 1.00pm (AEDT)
9.00am – 10.00am (Perth)
11.00pm – 12.00pm (Brisbane)
Expert speakers
Discover the latest in sustainability reporting through our Sustainability Reporting webinar series. Join us for three insightful sessions exploring the newest trends and advancements in the field.
During the session, our experts will provide insights and actionable knowledge that will empower your organisation to navigate the evolving landscape of sustainability reporting:
- Session 1: Getting Ready for Sustainability Reporting
- Session 2: Carbon reporting
- Session 3: Sustainability Reporting Standards
Session details
Webinar 1 | Getting Ready for Sustainability Reporting
Date
Wednesday 26 March 2025
Location
Online nationally – via Zoom webinar
Time
1.00pm – 2.00pm (AEDT)
10.00am – 11.00am (Perth)
12.00pm – 1.00pm (Brisbane)
Session 2 | Carbon Reporting
Date
Wednesday 11 June 2025
Location
Online nationally – via Zoom webinar
Time
1.00pm – 2.00pm (AEDT)
10.00am – 11.00am (Perth)
12.00pm – 1.00pm (Brisbane)
Session 3 | Sustainability Reporting Standards
Date
Wednesday 22 October 2025
Location
Online nationally – via Zoom webinar
Time
1.00pm – 2.00pm (AEDT)
10.00am – 11.00am (Perth)
12.00pm – 1.00pm (Brisbane)
Expert speakers
John Dorazio
Director
SW
Short stay booking platforms and owners of short stay accommodation should be aware of the new tax commencing from 1 January 2025.
On 27 August 2024, the Victorian Government released the Short Stay Levy Bill 2024 (Vic). The Bill introduces a levy of 7.5% on booking fees for providers of short stay accommodation from 1 January 2025. This follows the Government’s announcement in September 2023 to introduce a levy as part of its Housing Statement.
The policy aims to increase the supply of long-term rental housing, with revenue from the levy helping to fund Homes Victoria to build social and affordable housing across Victoria (25% of funds are set to be invested in regional Victoria).
The levy
The levy of 7.5% of the total booking fee (including GST) will be payable for each short stay of less than 28 days in Victorian premises that are short stay accommodation.
The levy will be imposed on all bookings made from 1 January 2025. The levy does not apply to a short stay booking made before 1 January 2025, regardless of whether the short stay is completed on or after 1 January 2025.
Short stay accommodation
Short stay accommodation covers any accommodation other than the principal residence of an owner or renter, commercial residential premises (e.g. hotel, motels, caravan parks etc) and certain care and support facilities.
Premises with more than one use can also qualify as short stay accommodation. The levy will be imposed on the part of the property used as short stay accommodation.
Who will be impacted?
Online and offline booking platforms, owners or renters of short stay accommodation are liable for the levy.
The liability for the levy will arise on the completion of a short stay.
Lodgement and registration obligations
Providers of booking platforms, owners or renters accepting bookings for short stays must apply to the Commissioner for registration and lodge returns every calendar year to pay the short stay levy.
Returns must be lodged every 3 months for persons whose total relevant booking fees in a year are $75,000 or more.
Planning and development
Owners’ Corporations can ban short stays in their strata scheme.
There will also be changes to planning systems to allow local councils the power to regulate short stay accommodation.
Details of these changes are yet to be finalised.
How SW can help
Online platforms such as Airbnb and property owners offering short stays should consider the impact of the provisions outlined in the Bill and their reporting and payment obligations in early 2025.
SW can assist in determining whether your premises will be subject to the levy and with registering and lodging returns.
Please contact our SW advisors for more information on how this may impact you.
Contributors
The Administrative Appeals Tribunal (AAT) ruled that jockeys racing for various NSW horse racing clubs are employees under the Superannuation Guarantee (Administration) Act 1992 (SGAA), requiring each club to make super contributions on riding fees paid to the jockeys.
This decision is reflected in 5 separate applications by 5 horse racing clubs (Armidale Jockey Club, Australian Turf Club Ltd, Clarence River Jockey Club, Grenfell Jockey Club Ltd, and Illawarra Turf Club) on assessments issued by the ATO about superannuation guarantee charges (SGC) from 30 September 2009 to 30 June 2014.
The AAT accepted the ATO’s argument that the horse racing clubs were liable for SGC regarding the payments made to jockeys as the payments fall under section 12(8) of the SGAA. This section applies to individuals who are paid to participate in the performance or presentation of sport, music or other artistic activities.
Other racing clubs across the country may face similar superannuation liabilities for jockeys if they are legally liable to make the payment to the jockeys for similar activities. Additionally, it could have broader implications for other sports and industries with similar payment structures.
Facts of the cases
In 2020, the ATO issued notices of assessment for SGC to all 5 clubs on the basis that jockeys who participated in horse races conducted by the clubs between 2009 and 2014 were employees of the clubs.
The central issue was whether the jockeys were “employees” of the racing clubs under the SGAA. The clubs argued that the jockeys were either independent contractors or employees of the horse owners or trainers, asserting that the clubs should not be responsible for their superannuation.
Section 12(3) and 12(8) of the SGAA
The AAT examined sections 12(3) and 12(8) of the SGAA to determine the employment status of the jockeys. Section 12(3) defines an employee as someone who works under a contract that is wholly or principally for their labour. The tribunal rejected the clubs’ argument that this section applied, pointing out the absence of formal contracts between the jockeys and owners or trainers that would establish a labour-based relationship.
However, the AAT found that section 12(8) did apply. This section states that a person paid to perform or participate in a sport is deemed an employee of the entity liable to make that payment. Since the racing clubs were responsible for paying the jockeys’ riding fees, they were deemed to be the employers for superannuation purposes.
Role of NSW Local Racing Rule LR72
A critical factor in the tribunal’s decision was the interpretation of NSW Local Racing Rule LR72. This rule obligates racing clubs to pay jockeys’ riding fees directly, with the fee amounts set by Racing NSW. The AAT confirmed that LR72 created a direct payment obligation for the clubs, leading to the application of section 12(8) of the SGAA. The clubs’ argument that they were merely intermediaries paying on behalf of owners or trainers was rejected, as the rule placed the liability for payment on the clubs themselves.
Decision
The AAT considered that the racing clubs failed to sufficiently evidence the existence and contents of any contracts between the jockeys and the owners/trainers. Instead, the evidence suggested that jockeys are engaged on a race-by-race ad hoc basis.
It was determined in each of the matters that section 12(8) of the SGAA was the most appropriate provision to apply between the clubs and the jockeys as it was not possible to determine the common law employer of the jockeys based on the evidence.
The AAT further found that the SGAA does not contemplate multiple employers for one activity and the use of the term “the person” as opposed to “a person” in section 12(8) means that only one person can be liable at a time for payment of the same performance.
Implications for the racing industry
Beyond the immediate financial impact on the five clubs involved, many other racing clubs across the country may face similar superannuation liabilities for jockeys if they are legally liable to make the payment to the jockeys for similar activities. The decision reinforces the obligation of racing clubs to treat jockeys as employees under the SGAA, potentially leading to substantial superannuation contributions and increased administrative burdens for these clubs.
While this ruling specifically addresses the racing industry, it may have broader implications for other sports and industries with similar payment structures. The definition of “employee” in Section 12(8) includes individuals engaged in various types of activities, such as performers, presenters, service providers, and media production workers, who are paid for their participation or services. This ensures that these individuals are considered employees for superannuation purposes in certain circumstances, obligating the paying entities to make the necessary contributions.
Thus, any organisation compensating individuals to perform or participate in sports, entertainment, or media production could be scrutinised under section 12(8) to determine if they have similar superannuation obligations. This could set a precedent for interpreting deemed employment relationships where traditional notions of employment are unclear, potentially leading to broader implications across multiple industries.
How SW can help
This decision highlights the expansive nature of the provisions of the SGAA, emphasising the importance of having clear contractual terms that set out who is liable for any payments made for sporting, entertainment or artistic performances.
SW can help you implement appropriate measures and make necessary disclosures about SGC and other employment tax obligations—contact your SW advisor to discuss how this decision affects you and your business.
Contributors
Dive into the latest developments in financial reporting with our webinar series. From accounting standard changes to regulatory updates, gain insights to navigate the complexities of reporting effectively in today’s ever-evolving financial landscape.
Our experts will provide you with topical content of relevance as well as an update on what’s new in financial reporting, including information about the following topics:
- Accounting standard changes and EDs
- International Financial Reporting Interpretations Committee update
- Key focus areas for 30 June reporting
- ASIC update
- Sustainability standards
- Other regulatory changes
Please note that we will host two session this year, the details for both sessions are below.
Session 1
Date
Tuesday 14 May 2024
Location
Online nationally – via Zoom webinar
Time
1.00pm – 2.00pm (AEST)
11.00am – 12.00pm (Perth)
Session 2
Date
Thursday 14 November 2024
Location
Online nationally – via Zoom webinar
Time
1.00pm – 2.00pm (AEDT)
12.00pm – 1.00pm (Brisbane)
10.00am – 11.00pm (Perth)
Expert speakers
The ATO has sought special leave to appeal to the High Court, following the decision in Full Federal Court (by a 2 – 1 majority) in PepsiCo, Inc v Commissioner of Taxation [2024] FCAFC 86, which overturned the single decision that ruled in favour of the Commissioner’s position.
The High Court decision when released, is significant to Multinationals with commercial arrangements with third parties, given the ATO’s focus on royalties and intangibles arrangements and its position on ‘embedded royalties’. Furthermore, this is the first case to consider the application of Diverted Profit Tax (DPT), a punitive tax of 40% targeting Multinationals engaging in artificial arrangements to transfer profits offshore.
While the majority found that payments under the two exclusive bottling agreements (EBAs) were between arm’s length parties and not royalties, all three judges agreed that even if the payments were for use of intellectual property (IP), the amounts ‘did not come home’ to Pepsico. This was because the nominated related entity supplying the concentrate is the creditor that SAPL (as a debtor) owed the obligation, not PepsiCo. The majority also determined that as the payments did not comprise of a royalty component, DPT, being the second issue considered, would not have applied to the arrangement.
In its media release, the ATO has indicated practical guidance is being developed for publication in late 2024 to illustrate its view as set out in the draft ruling.
Besides seeking special leave, the ATO also announced deferring the finalisation of draft ruling TR 2024/D1 (discussed here), relating to character of payments under software arrangement pending the outcome of the High Court proceeding.
Key findings
Regardless of the outcome from the special leave application and given the lack of unanimous decisions, there is little doubt scrutinising intangible arrangements by the ATO to identify any ‘embedded’ royalties is here to stay.
It is evident that the way a commercial agreement is being drafted is critical, from both the FFC’s majority and minority judgements, which ultimately can still be interpreted differently. Nevertheless, the Court has focused on the contractual terms of EBAs, with the majority substantially emphasising that the parties were dealing at arm’s length and engaged in extensive bargaining which resulted in the terms of the EBAs.
The Court also expects the Commissioner and taxpayers when putting forward their position, providing qualitative and quantitative evidence to support the economic and commercial substance of the arrangement.
Background
In summary, the relevant facts of the case are as follow:
- PepsiCo and Stokely-Van Camp (SVC) are both US tax residents and the respective owners to a portfolio of trademarks and designs to the Pepsi and Gatorade brands.
- The companies entered into separate EBAs with Schweppes Australia Pty Limited (SAPL) to manufacture, bottle and package beverages in the Pepsi/Gatorade brands.
- The EBAs expressively stipulated that SAPL would only pay for the concentrate and did not explicitly provide for any payment of royalty for the right to use the relevant IPs. However, the EBAs implicitly and explicitly allowed the use of the relevant trademarks and intellectual properties.
- Under the EBAs, SAPL would purchase beverage concentrate from PepsiCo/SVC (or a related entity) according to formulas, specifications, etc provided to produce drinks for retail sale. From January 2018, such concentrate was purchased from a nominated Singapore entity CMPL through PBS, an Australian subsidiary of PepsiCo.
- As there were no royalties under the EBAs, no withholding tax was paid in Australia.
The Commissioner contended that:
- Royalties were ‘embedded’ within the payments made by SAPL and subjected to Article 12 of the United States – Australia Double Tax Agreement. Accordingly, PepsiCo and SVC were liable for royalty withholding tax (RWHT) under s128B of the Income Tax Assessment Act 1936 of $3.6m.
- Alternatively, one of the principal purposes in carrying out the scheme was to obtain a tax benefit (i.e. not liable for RWHT) such that DPT would apply. In this scenario, the tax liability pursuant under Part IVA would be $28.9m.
Federal Court – single judge
During the trial, Justice Moshinsky concluded that:
- RWHT was payable on the implied use of PepsiCo’s trademarks and IP, otherwise SAPL would be unable able to package and sell beverages under PepsiCo’s and SVC’s brands. It also would not have made any payments if not for the use of IP.
- The nomination of PBS as a seller of the concentrate constituted a direction to pay, but PepsiCo/SVC remained beneficially entitled for the purposes of Article 12 of the US DTA
- DPT provisions would apply in the alternative position as PepsiCo/SVC obtained a tax benefit by not being liable to Australian RWHT and reducing their US tax on income. This arose from the disconnect between the legal form and economic substance of the EBAs, where payments covered concentrate and licence of trademarks. and other IPs.
Full Federal Court decision
First issue
The majority (Justice Perram and Jackman) rejected the Commissioner’s argument (i.e. no royalties) on the basis that:
- The EBAs were commercially negotiated contracts between third parties and there was no dispute as to the reasonableness of the contracts.
- The Commissioner oversimplified the arrangement that only SAPL benefited from the granting of the licence and ignored any restrictions placed on SAPL’s entitlement to use the trademarks and other IPs (i.e only using the trademarks for the purpose of selling the beverages and nothing else).
- The licence for the use of trademarks and other intellectual properties were not granted to SAPL for free, as the rights did not exist in insolation. Instead, such rights were intertwined with SAPL’s obligations to distribute the beverages.
- There was no payment on direction since there was no antecedent monetary obligation owed by PepsiCo/SVC. As a related entity (i.e. PBS) was nominated as the seller in the EBAs, it was clear that PepsiCo/SVC would not be selling the concentrate and only contractually bound to ensure the quality of concentrate supplied.
Justice Colvin in dissent, made the following observations:
- Consideration stated in an agreement may not be required to separate into components corresponding different aspects because there was no commercial need to do so. Similarly, an amount calculated based on reference to pricing per unit of product supplied does not necessarily mean consideration is only paid for that product and nothing else. Circumstances known to the parties could resolve the ambiguity.
- The EBAs were between PepsiCo/SVC and SAPL and should SAPL fail to purchase and/or pay under the agreements, PepsiCo would be the entity suing the breach, not the nominee.
- The EBAs were properly construed as agreements to bottle, sell and distribute branded products, not agreements for the supply of concentrate. Accordingly, the payments made were partly in consideration for the use of trademarks which SAPL was licensed to use and supported the notion of an embedded royalty.
- After PepsiCo nominated a related entity as the seller and the Nominee supplied the concentrate, PepsiCo/SVC no longer had beneficial entitlement to the income and thus not subject to RWHT.
Second issue
As the majority determined payments did not comprise of any royalty, this meant that Justice Moshinsky’s decision in the first instance that DPT could not apply (due to royalty issue taking priority) was incorrect. Accordingly, the FFC needed to consider the application of Part IVA.
The majority found that there was no postulate that was a reasonable alternative to the scheme (i.e. entering into EBAs on terms without a royalty component), as:
- Much of the Commissioner’s position and the opinions expressed by the expert witnesses called upon by both the Commissioner and PepsiCo were based on the assumption that payments for the concentrate included a component for royalties. However, there was no evidence (as concluded in the first issue) supporting the assumption that there was a royalty.
- Notwithstanding the IP was quantified and the parties were independent, there were no inquiries or analysis into the economic substance of the arrangement and the benefits to PepsiCo / SVC. At paragraph 51, the Judges stated that:
In this case, the Commissioner’s scheme case begs the question of why the concentrate price should be understood as including a royalty. Establishing that the licence of the intellectual property was valuable is only half of the necessary inquiry. The missing other half involves the concentrate price and all of the other burdens and benefits flowing from the EBAs.
On the basis that the payment for concentrate did consist of an embedded royalty, Justice Colvin concluded a tax benefit was obtained from entering into the EBAs, where a reasonable alternative postulate was for the royalty to be paid to PepsiCo/SVC as the owners IPs instead of the nominee.
How SW can help
Our experts can assist with assessing and advising how this ongoing tax case may affect your existing and prospective cross-border arrangements and proactively engage with the ATO to deal with potential disputes.
Reach out to your SW advisor for support from our Corporate Tax team.
Contributors
We are seeing an ever-increasing number of scams. According to the Australian National Anti-Scam Centre over 21,000 scams were reported in just the month of July 2024, totalling over $25M in losses. Around 80% of reported scams are via e-mail.
We are aware of scammers targeting myGov accounts for ATO scams.
The ATO have provided some hints on what to look out for:
- Do not click on any links in a message asking you to login to a government service such as myGov. The Australian Taxation Office (ATO) recently removed all hyperlinks in unsolicited outbound SMS. So, if you have received such a message containing a link claiming to be from the ATO, it is a scam.
- Be careful of requests for personal or financial information, especially if they claim to be urgent or time sensitive. The ATO will never ask for passwords, account numbers, or other sensitive data via email, SMS or by phone.
- Avoid downloading or opening attachments in suspicious emails. They can infect your computer and compromise the security of sensitive business information that can be stolen and later used to commit fraud.
- Look out for unusual transactions or interactions on your accounts. If you are ever unsure if the contact is legitimately from the ATO, do not engage with it and contact the ATO to verify it on 1800 008 540. You can also look at the ATO scam alerts.
There are also resources available at the Australian Government National Anti-Scam Centre and ScamWatch including The Little Book of Scams.
SW Accountants and Advisors encourages all clients to be alert for potential scams and to reach out to your advisor at SW should you have concerns.
“At SW we are dedicated to safeguarding our systems and client data. In an era where scams are becoming more sophisticated and frequent, protecting your personal information is paramount. If you receive any suspicious communications, always verify their authenticity before taking any action.”
– SW’s Chief Information Officer, Michael Fugaro
The Victorian Court of Appeal has dismissed the taxpayers Oliver Hume’s appeal and affirmed the Commissioner’s decision to impose landholder duty.
The Victorian Court of Appeal recently handed down its unanimous decision in Oliver Hume Property Funds v Commissioner of State Revenue [2024] VSCA 175. The Court determined that the acquisition of 99.99% of the issued shares in a landholder by investors was based on a widely distributed information memorandum (IM), which constituted substantially one arrangement. The Commissioner’s assessment of landholder duty was subsequently upheld.
Key Takeaways
- The appeal emphasises that capital raising in entities that have land holdings require appropriate duty advice to prevent adverse and unintended duty consequences
- It is equally important that consideration is given to the drafting of the transaction and fund raising documents to prevent the rise of unintended duty outcomes.
- The decision reinforces that determining whether the ‘associated transaction’ rules apply will depend on the particular facts and circumstances of each case.
- It’s uncertain whether the State Revenue Office (SRO) will continue to apply the administrative practice expressed in DA.057 which provides that the Commissioner would not view a genuine public offer under a product disclosure statement (PDS) as an associated transaction. In the original decision, the court held that the Commissioner’s concession in the ruling has no force in law. The SRO has yet to comment on the Appeal decision and its impact on their current ruling and administration of these provisions.
- Many other states have similar (but not identical) concepts as “associated transaction”. Thus, this issue must be considered carefully for all States, not just Victoria.
- It remains unclear at this stage whether there will be a further appeal.
- We call upon the Victorian Government to amend the legislation to ensure that genuine public offers under a PDS or an Information Memorandum are not considered associated transactions. The Victorian property industry is being crippled by red tape and taxation. This exemplifies poorly drafted legislation that has unintended consequences that must be fixed.
Case background
For details of the factual background, please refer to our previous article.
Under the landholder duty provisions of the Duties Act 2000(vic), a person makes a relevant acquisition if:
The person acquires an interest in a landholder:
- that is of itself a significant interest in the landholder or
- that amounts to a ‘significant interest’ in the landholder when aggregated with other interests in the landholder acquired by all or any of the following:
- the person
- an associated person
- any other person in an ‘associated transaction’
Landholder duty is payable on a relevant acquisition. The case concerns what constitutes an ‘associated transaction’.
Oliver Hume sought leave to appeal against VCAT’s decision, which upheld the Commissioner’s assessments on a question of law. Leave to appeal was sought on the following grounds:
- VCAT erred in considering that each investor is bounded by the statutory contract constituted by the applicant’s constitution.
- VCAT erred in considering that the investors and the applicant shared the common objective of having the shareholders as members and as providers of equity.
- VCAT erred in the interpretation of s 78(1) in that the definition of ‘associated transaction’ was satisfied even though the investors subscribed for their shares independently of one another.
- VCAT should have found that the share acquisitions were not “associated transactions” because the investors had no connection beyond wanting equity in the applicant. Each investor applied separately and independently for shares under the applicant’s IM.
We have listed Oliver Hume and the Commissioner’s submissions in Appendix A below.
The Court’s Decision
The court asserted that although the arguments put forward by Oliver Hume had merit, the appeal was dismissed due to several interconnecting factors which demonstrated a ‘oneness’ suggesting an associated transaction. The factors included:
- The acquisitions were interconnected because no individual acquisition could go ahead under the terms of the IM unless the required $1.8 million was raised.
- The acquisitions could not be described as independent of each other notwithstanding the fact that each investor may not have met or even communicated with the others.
- The investors bound themselves to the constitution, joining a single land development project with an entrenched management structure.
- The acquisitions occurring on the same day and in the same way to transform the shareholding in the landholder from being 100% owned by Oliver Hume to 99.99% owned by private investors.
The court’s decision was based on the particular facts and circumstances of the case. However, the factors above are not dissimilar to many other capital raising arrangements.
How SW can help
Should you have any questions on what this decision means for you and your business, please reach out to your SW contact. We recommend that duty advice is sought before undertaking any capital raising for property acquisitions.