News and Insights

Wisewould Mahony offers a full suite of commercial legal services including M&A, private equity capital raising, financial services, tax, asset protection, estate planning, IT, IP, property and employment, with lawyers in both Melbourne and Geelong.  The following is a brief outline of some current issues that may also affect some of you or your clients. 

Windfall Gains Tax on Rezoned land

If you or your clients own land in Victoria that has recently been rezoned or have purchased land that they anticipate will be rezoned in the future, they may be liable to pay the new windfall gains tax (the WGT). The WGT was introduced under the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) and commenced on 1 July 2023.

What is the WGT? 

The WGT is a tax on the value uplift of land caused by the rezoning of that land (the WGT event). The value uplift is calculated as the difference between the capital improved value of the land prior to the WGT event and the capital improved value of the land after the WGT event. For example, if land valued at $500,000 in an Industrial Zone is rezoned to a Residential Zone on or after 1 July 2023, and the value of that land increases to $5,000,000 as a result, the value uplift of the land will be $4,500,000.

Could your small organisation be a significant global entity?

In 2015, the Australian Government established a regime targeting entities known as Significant Global Entities (SGEs) with the introduction of the Tax Laws Amendment (Combating Multinational Avoidance) Act (the Act). Under the regime, SGEs are subject to reporting obligations and increased administrative penalties. Since the commencement of the Act, there have been amendments that have expanded the scope of entities categorised as SGEs. At first glance, if your client has annual global income less than AUD 1 billion, you may not consider them to be subject to these obligations, however, if it has an overseas parent entity, there’s a chance it may still be an SGE. To avoid potential penalties under the taxation law, it is necessary to ascertain whether your client is an SGE and make a voluntary disclosure to the Commissioner if an error has occurred. Read more.

ATO spotlight on professional firm profits

Following the recent Senate inquiry into the professional firms’ standards of ethical conduct, the ATO has renewed its focus on income splitting arrangements of owners of professional firms. Owners (traditionally partners) of professional firms have been known to redirect their ownership interest (and therefore their income from their professional services) to an individual or associated entity, significantly reducing their personal tax liability as a result. These arrangements are commonly referred to as Everett Assignments. In recent years, the ATO has become increasingly concerned with the risk that income earned by professional firms is not appropriately taxed to the individuals providing the services to the firms.

Practical Compliance Guideline 2021/4 (the Guideline), effective from 1 July 2022, outlines the ATO’s approach to ensuring compliance regarding the distribution of profits or income from professional firms in the assessable income of its individual professional practitioners (IPPs). The Guideline also serves as a guide for IPPs to assess the risk of their arrangements and anticipate the ATO’s compliance treatment.

The Guideline can be used by IPPs who satisfy two ‘Gateways’, the first being that their arrangement has a commercial rationale and the second being that it does not contain any high-risk features such as an arrangement covered in a Taxpayer Alert, the admission of an individual who is not an owner or equity holder as a partner of the partnership, or where the arrangement is more akin to an employment or contractor arrangement.

Eligible IPPs can use the Guideline to assess the level of risk of their arrangement by calculating their score for each risk factor, thereby determining their overall level of risk. This in turn will determine the level of compliance resources that the ATO will dedicate to reviewing the IPP’s arrangement. Read more.

If any of these matters raise issues you would like to discuss, please give us a call on (03) 9629 8333, or email any of our lawyers or enquiries@wisemah.com.au.