Background

Mr Morton was a retired farmer who owned land in Tarneit, Victoria, known as ‘Dave’s Block’. The land had been used for farming continuously for many years before it was rezoned from rural to residential use in 2010, making farming increasingly unviable. Mr Morton and his family wanted to get the best value for their land, so they hired a developer to divide it up, prepare it, and sell it as a residential estate.

They signed contracts with the developer, who was given broad control over financing, dividing the land, earthworks, marketing, and selling the land. The developer was responsible for all the costs and activities and was paid a fee based on a percentage of sales. Critically, Mr. Morton insisted that his land not be used as security for any development finance.

The land was subdivided into residential and commercial lots, and settlements occurred between 2019 and 2021. The Commissioner issued amended assessments, treating the sale proceeds as assessable income, on the basis that Mr Morton was either carrying on a property development business or had ventured the land into a profit-making scheme.

Mr Morton disagreed, arguing that the sales represented a one-off gain from selling something he owned, not regular income from business.

Legal issues

The Commissioner argued that the proceeds were assessable income on two alternative grounds under the Income Tax Assessment Act 1997:

• Mr Morton carried on a business of residential development, deeming the land trading stock
• the proceeds arose from a profit-making scheme under section 15-15.

Mr Morton argued that he had done no more than realise a long-held capital asset, by enterprising means.

The decision

The Full Court unanimously dismissed the Commissioner’s appeal, affirming the primary judge’s conclusion that Mr Morton was merely realising a capital asset.

The Court placed weight on the following factors:

No original profit-making purpose

Mr Morton acquired the land from his father in 1980 to farm, not to develop or sell. The decision to subdivide was driven by external forces — rezoning, rising rates and land tax, and the declining viability of farming.

Limited and passive involvement

Mr Morton played little active role in the development. He did not oversee the project, contribute to planning applications, organise finance, or manage construction. He did not even read the monthly reports the developer provided under the agreement.

Developer bore the commercial risk

The developer was solely responsible for all development costs and financing. Mr Morton’s land was not used as security — a condition he had insisted on from the outset. The Court found this to be a highly significant factor distinguishing realisation from business activity.

Developer acted independently, not as Mr Morton’s agent in a general sense

While the development agreement contained agency-type and power of attorney provisions, the Court found these were facilitative only and limited to enabling the developer to fulfil Mr Morton’s legal obligations, such as executing contracts of sale. They did not convert the developer’s activities into activities carried on by Mr Morton himself.

Scale alone is not determinative

The Court affirmed the well-established principle that the magnitude and the sophistication of a realisation alone does not convert it into a business or profit-making scheme.

Importantly, the Court looked beyond the legal form of the development agreement to its commercial substance — particularly who bore risk, who controlled the project, and whose business the development truly was.

Practical implications

The Morton case is a useful reference point for landowners and advisors navigating the capital/revenue boundary where subdivision is involved. It highlights that outcomes in subdivision cases remain highly fact-dependent. In particular, advisors should focus on:

• who bears financial risk, including funding and security arrangements
• the degree of the landowner’s control and involvement
• the commercial substance of the development agreement
• the landowner’s purpose at acquisition and at the time of subdivision.

The decision sits comfortably alongside earlier cases distinguishing mere realisation from development activity. It reinforces that even modern, large-scale subdivisions can remain capital on the right facts, for example where the landowner lacks development expertise, does not assume financial exposure, and does not exercise significant control over the project. The structure and substance of development agreements should be closely scrutinised.

How SW can help

The Morton decision confirms that tax treatment of land subdivision depends heavily on the specific facts and the terms of the development arrangements. Early and careful structuring of these arrangements is essential.

SW can assist by reviewing development agreements, assessing the risk and control profile of proposed arrangements, and advising on the appropriate tax treatment before transactions are committed to. Please contact your SW advisor to discuss further.

Contributors

Rahul Sanghani

Ned Galloway

Nicolas Hodge

The post Full Federal Court confirms capital treatment for subdivided farmland appeared first on SW Accountants & Advisors.

The ATO has indicated that even if your business satisfies the statutory Personal Services Income (PSI) rules and operates as a Personal Services Business (PSB), your overall tax position may still be classified as either a ‘higher’ or ‘lower’ risk arrangement. This means that compliance obligations extend beyond simply meeting the PSI criteria, as how your arrangements are structured could affect your risk of being audited. 

The guidance addresses the application of the general anti-avoidance provisions of Part IVA to the alienation of personal services income.  

High-risk arrangements and the PCG 

The ATO has flagged that taxpayers whose arrangements are deemed ‘high risk’ under the guidelines outlined in the ATO’s Practical Compliance Guide (PCG 2025/5) need to take proactive steps to move to ‘low risk’ arrangements.  

This transition should occur before 30 June 2027. Failure to do so may result in the ATO allocating compliance resources to investigate these arrangements under Part IVA of the Income Tax Assessment Act, which addresses schemes intended to avoid tax. 

Reviewing your Personal Services Business 

Every business that generates income from providing personal services should carefully review its arrangements. The aim is to ensure compliance with the ATO’s expectations and to reduce exposure to potential audits or compliance action. Taxpayers are encouraged to assess their current structures and take steps to shift towards ‘low risk’ arrangements well before the 2027 deadline. 

Industries impacted 

The guidance is relevant to all industries where trading through companies or trusts is common. It particularly affects professionals who derive income from their personal services, including doctors, architects, accountants, lawyers, engineers, IT consultants, and tradespeople such as electricians and plumbers. Essentially, any business structure used to allocate income from personal work could be subject to scrutiny under PCG 2025/5. 

How SW can help 

SW can assist by reviewing your existing arrangements and providing guidance on how the ATO may view them in light of PCG 2025/5. Our expertise can help you identify areas of risk and implement changes to strengthen your compliance position, giving you confidence that your business is prepared for any potential ATO scrutiny.

The post ATO and income splitting – this time its personal appeared first on SW Accountants & Advisors.

Join us in Sydney for our in-depth Pillar Two seminar, delivered by SW tax experts Daren Yeoh (Partner and Corporate & International Tax Director), Kirsty McDonnell (Tax Director), Antony Cheung (Associate Director). This interactive session will provide practical guidance on the OECD’s Global and Domestic Minimum Tax regime, equipping in-scope groups with the latest updates, compliance considerations, and real-world insights to help navigate the evolving global tax landscape.

This seminar will explore the following topics:

• Quick recap of the Pillar Two requirements
• Update on recent developments including the political understanding between the G7 Group and the US Government and the European High Court of the undertaxed profits rule
• Issues specific to the non-for-profit and funds management sector
• Implications for financial reporting and financial audits
• The impact of Australia being a jurisdiction subject to the undertaxed profits rule
• Key considerations for performing the Transitional Safe Harbour Calculations
• Case study walkthrough to assist with preparing for Pillar Two implementation including lodgements of Pillar Two Returns
• ATO public update on domestic forms

SW Speakers

Daren Yeoh
Partner and Corporate & International Tax Director

Kirsty McDonnell
Director, Tax

Antony Cheung
Associate Director, Tax

The post Practical Guidance on Complying with the Global and Domestic Minimum Tax (Pillar Two) Regime appeared first on SW Accountants & Advisors.

Our expert will provide you with topical content of relevance as well as an update on what’s new in tax effect accounting, including information about the following topics:

• Key tax matters to consider in your TEA calculations
• Calculation of tax balances
• Equity accounted entries
• Impact of application of new Accounting Standards
• Business combinations
• Tax accounting for tax consolidated groups
• Accounting for tax uncertain tax treatments

SW Speaker:

Daren Yeoh
Partner and Corporate & International Tax Director

The post Tax Effect Accounting Seminar appeared first on SW Accountants & Advisors.

Our expert will provide you with topical content of relevance as well as an update on what’s new in tax effect accounting, including information about the following topics:

• Key tax matters to consider in your TEA calculations
• Calculation of tax balances
• Equity accounted entries
• Business combinations
• Tax accounting for tax consolidated groups
• Accounting for tax uncertain tax treatments

Session details    

• Date          Thursday 28 November 2024
• Time          9.30 – 10.30am (AEDT)
• Delivery    Online (Zoom)

Your speaker:

Andrew Wu
Manager
SW

The post Tax Effect Accounting webinar appeared first on SW Accountants & Advisors.

Our online seminar will be delivered in an interactive format with SW expert Daren Yeoh, Tax Director, Antony Cheung, Senior Tax Manager and Yang Shi, Tax Director. Our speakers will equip you with invaluable insights into the latest developments in corporate and international income tax.

This seminar will explore the following topics:

• Updates on Corporate and International Income Tax: Stay ahead with in-depth discussions on recent changes, including revisions to the thin capitalisation regime, debt creation rules, Pillar 2 implications, and nuances in dealing with intangibles.
• Impactful Changes to Dividend Franking Rules: Gain clarity on how recent amendments may affect dividend franking rules, ensuring you’re well-prepared for any forthcoming adjustments.
• Analysis of Develops in Case Law and ATO rulings: Delve into notable developments in case law and ATO Rulings to enhance your understanding of current legal precedents and their implications for corporate tax practices.

Event details

Date

Tuesday 26 March 2024

Location

Online (Zoom)

Time

9.30am – 10.30am AEDT

SW Speakers

Daren Yeoh
Partner and Corporate & International Tax Director
SW

Antony Cheung
Senior Tax Manager
SW

Yang Shi
Tax Director
SW

Contact us

If you have any queries or would like more information, please contact the Marketing team via marketing@sw-au.com.

The post Corporate Tax Update appeared first on SW Accountants & Advisors.

Our online seminar was delivered in an interactive format with SW expert Daren Yeoh, Partner and Corporate & International Tax Director.

This seminar covered the following topics:

• Who will be impacted by Pillar Two
• When will Pillar Two apply in Australia
• Implications for Australian headquartered groups
• Implications for Australian subsidiaries and permanent establishments of foreign MNEs
• Steps to apply Pillar Two
• Implications for accounting for income taxes
• Simple calculation examples

SW Speaker

Daren Yeoh
Partner and Corporate & International Tax Director
SW 

Contact us

If you have any queries or would like more information, please contact the Marketing team via marketing@sw-au.com.

The post OECD Pillar Two GloBE rules – Global and domestic minimum tax seminar appeared first on SW Accountants & Advisors.

This year our online seminar was delivered in an interactive format with SW expert Daren Yeoh, Tax Director. Daren provided an update on the latest in accounting for income taxes in 2023.

This seminar covered the following topics:

• Key tax changes to take into account in your TEA calculations
• Calculation of tax balances
• Equity accounted entries
• Impact of application of new Accounting Standards
• Business combinations
• Tax accounting for tax consolidated groups
• Accounting for tax uncertain tax treatments.

If you are looking to automate your tax effect accounting processes look no further than CTS for Corporates.  For details please go to: Complete Tax Solutions(CTS) or contact Daren on dyeoh@sw-au.com.

CTS for Corporates automatically:

• calculates the current and deferred tax balances
• generates the journals required to be posted
• generates the comprehensive AASB 112 compliant disclosure notes to be incorporated into the financial statements.

This means that the complex tax effect accounting is simplified, with the hard work being done for you.

In addition your tax return can be automatically generated and lodged.

SW Speaker

Daren Yeoh
Partner and Corporate & International Tax Director
SW 

Contact us

If you have any queries or would like more information, please contact the Marketing team via marketing@sw-au.com.

The post Tax Effect Accounting seminar appeared first on SW Accountants & Advisors.

In the 2020-21 Federal Budget, the Government announced an increase to the small business entity turnover threshold from $10m to $50m, allowing greater access to certain concessions including the shorter 2-year period of income tax assessment review. Broadly, this limits the Commissioner’s period to amend a return unless fraud or evasion occurred.

The Income Tax Assessment (1936 Act) Amendment (Period of Review) Regulations 2022 (the “Amending Regulations”) will amend the Income Tax Assessment (1936 Act) Regulation 2015 to exclude certain entities with “particularly complex tax affairs or significant international tax dealings” from the shortened 2-year period to a 4 year period.

The regulations were issued in draft form in August 2022 and the final version is largely unchanged, other than “providing more certainty to when the period of review would apply to entities that engaged in certain activities”.

SMEs excluded from shorter review period

Exceptions for certain taxpayers already existed that excluded entities from the 2 year review period, allowing the Commissioner to amend for 4-years after the notice of assessment is issued.

Arm’s length dealings

This exception has now been expanded to remove the requirement that one of the parties was already subject to the 4-year review period. It has also been expanded to apply – not just where the parties are not dealing at arm’s length – but also where:

• the transaction results in an amount of $200,000 or more being included in or allowable as a deduction of any of the parties, or
• the transaction involves CGT events where the sum of the proceeds from the CGT events is $200,00 or more.

Additional SMEs excluded from the 2-year review period

The list of SME exceptions to the 2-year period of review has been expanded to entities:

• where the sum of their foreign sourced assessable income, and that of their affiliates and associated entities is at least $200,000
• that are Australian foreign controlled or non-resident entities
• subject to the Diverted Profits Tax or Multinational Anti-Avoidance Law in the assessment year
• with at least 10 connected or affiliated entities
• that have claimed a Research and Development (R&D) tax offset for an income year or may be entitled to certain related deductions, recoupments, and adjustments
• that have claimed CGT relief under the following roll-over provisions:
  • Division 615 business restructure
  • Division 125 demerger
  • Subdivision 126-B companies in the same wholly owned group
• that have disregarded a capital gain/loss due to the operation of Division 855-10 (relating to foreign residents).

General tax assessment review rules

Subject to certain exceptions, the Commissioner may amend a tax assessment within 2 years of a notice of assessment for:

• an individual
• a company that is a small or medium business entity
• a person (in the capacity of a trustee of a trust estate) for a year of income if the trust is a small or medium business entity.

For other entities, the Commissioner may amend an assessment:

• within 4 years after the day on which notice of the assessment is provided to the taxpayer
• at any time if there has been fraud or evasion
• at any time to give effect to a decision on a review or appeal, or
• as a result of an objection made by the taxpayer or pending a review or appeal.

Date of effect

The amendments are now in operation, which means they apply to assessments for an income year if the assessment is made after 9 December 2022 and relates to income years starting on or after 1 July 2021.

How SW can help?

Reach out to your SW contact or the team here if you would like more information about how your tax assessment review period could be impacted.

Contributors

Tanya Bester

The post SMEs excluded from shorter Income Tax Assessment review appeared first on SW Accountants & Advisors.

In the 2021 Federal Budget, the former Government announced that it was providing $1.9m to build an online system to enhance the transparency of income tax exemptions claimed by Not-for-profits (NFPs).  From 1 July 2023, NFPs’ seeking to maintain their income tax exempt status will be required to lodge an online Annual Self-Review Form. This is part of the ATO’s recently revised guidance on the games and sports income tax exemption for not-for-profit clubs under Tax Ruling 2022/2.

SW has liaised with the ATO and can confirm that this announcement is still expected to be implemented.

Annual Self-Review Form

The ATO has confirmed the following details:

Lodgement timing

The first return will need to be lodged for the 2023–24 income year, with those clubs with a 30 June year end being the first required to lodge. This means the earliest anyone will be required to submit a return is 1 July 2024.

Who is required to lodge?

Only self-assessing income tax exempt entities (e.g. sporting clubs) with an active ABN are required to lodge a return under the new self-assessing reporting arrangements. For those clubs applying the principles of mutuality as to their income tax obligations, there is no change to existing income tax return lodgement processes.

Entities that do not hold an active ABN, will not be required to lodge a return or satisfy ongoing ABN registration requirements.

Are there additional obligations?

The two additional obligations for ongoing ABN registration are:

• the obligation to comply with income tax return lodgement requirements, and
• the obligation to update the accuracy of details on the Australian Business Register (ABR), annually.

It is intended that the return for self-assessing income tax exempt entities will collect the information required to satisfy the new ABN requirements, without the need for these entities to provide further information.

What information does the Annual Self-Review Form need to include?

The return is not an income tax return but rather a form containing the information that a club would ordinarily use for self-assessing eligibility for income tax exemption on a yearly basis.

The form needs to satisfy three elements:

1. Entitlement to income tax exemption
2. Basis for entitlement (category), and
3. Whether all requirements are being met.

How to prepare for the new reporting regime

There are 3 things your club can do to prepare for the new reporting regime:

1. Update your contact details with the ATO. It’s an ABN registration requirement to keep your contact details current and it also means you’ll receive important information about your tax and super obligations.
2. Use the ATO worksheets to review your eligibility for an income tax exemption.
3. Stay informed.

How can SW help?

If you would like to discuss how to best prepare for the new Annual Self-Review reporting regime and/or broader eligibility for income tax exemptions, please contact us.

Contributors

Alice Mulvogue

The post Clubs – Update on new self-review requirement for income tax exemption appeared first on SW Accountants & Advisors.