Articles and Technical Papers
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These are articles written by John Jeffreys that members of my website can use to promote their business. Members may send these articles to clients, use them on their websites, put them in a newsletter or any other use. Members have full licence to use the articles as they wish without any acknowledgement of John Jeffreys as the author or of John Jeffreys Tax Pty Ltd.
Some of the articles are technical papers which may not be suitable for sending to clients.
To access an article, note the article number in blue. Then click on the ‘Go To Articles’ button (you will need to be signed in). On the linked page, click the button with that number.
058
Morton v Commissioner
The Federal Court decision in Morton v Commissioner of Taxation [2025] FCA 336 has clarified when land sale proceeds are taxed as income versus capital. The Court held that a long-held pre-CGT farming block sold via a developer agreement retained its capital nature, with the landowner not carrying on a business nor engaging in a profit-making scheme. This case offers valuable guidance for rural and semi-rural landowners seeking to preserve favourable tax outcomes when dealing with development offers.
057
Allocation of Profits in Professional Firms – PCG 2021/4
PCG 2021/4 sets out the ATO’s compliance approach to profit allocations within professional services firms, focusing on situations where individual professional practitioners (IPPs) receive disproportionately low income relative to the value of their personal services. The guideline outlines gateway tests and a risk assessment framework to determine the likelihood of ATO scrutiny. While falling in the green zone may reduce risk, this does not amount to legal protection—firms must still document their rationale and review arrangements annually.
056
Division 7A – Interposed Entities – 7 short examples
This article explains how Subdivision E of Division 7A can apply when private companies use interposed entities—like trusts or other companies—to indirectly provide financial benefits to shareholders or their associates. Through seven practical examples, it highlights the ATO’s focus on economic substance over legal form and the risk of deemed dividends even when transactions appear compliant on paper. Accountants advising business groups with complex structures should take note.
055
Merchant v Commissioner of Taxation
The Merchant v Commissioner of Taxation case is a sharp reminder that even seemingly routine tax planning can trigger the ATO’s general anti-avoidance rule, Part IVA. Although the transactions — including a market-value sale to a super fund and intra-group debt forgiveness — were technically compliant, the majority of the Full Federal Court held that they were entered into with a dominant purpose of obtaining a tax benefit. This case underscores the importance of documenting genuine commercial reasons for related-party transactions, particularly within family groups using trusts, companies, or superannuation funds.
054
Division 7A – Interposed Entities – Interaction of Section 109R with Subdivision E
This article highlights the interaction between section 109R and the interposed entity provisions in Subdivision E of Division 7A. It explains how the ATO may disregard loan repayments if they are effectively funded by the same private company—even through multiple entities—leading to unexpected deemed dividends. The piece warns accountants to watch for circular funding arrangements and to carefully document the source of repayments to avoid falling foul of these rules.
053
Division 7A – Interposed Entities – General
This article explains how Subdivision E of Division 7A can trigger a deemed dividend when funds from a private company pass through interposed entities, like trusts or companies, to shareholders or their associates. It highlights key traps, including that normal commercial dealings and existing loan agreements may not prevent Division 7A from applying, and provides practical steps for small businesses to manage their risk.
052
Division 7A – Interposed Entities – Guarantees
Loans guaranteed by a private company can accidentally trigger Division 7A, resulting in a deemed unfranked dividend even where the company doesn’t lend directly. Recent ATO guidance highlights risks where funds are channelled through other entities — including banks — with a guarantee by a private company. Accountants should review any loan guarantees carefully to manage Division 7A exposures.
051
SNA Group – Service Fees
The Federal Court decision in S.N.A. Group Pty Ltd v Commissioner of Taxation [2025] FCA 240 confirms that service fees between family-controlled entities can still be deductible, even without formal contracts, if they are genuine, linked to income production, and commercially reasonable. However, the case highlights the risks of informal arrangements and underscores the importance of proper documentation and setting fair charges to withstand ATO scrutiny.