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1. Green paper on carbon pollution reduction scheme released
As widely reported, the Government’s Carbon Pollution Reduction Scheme Green Paper was released by the Minister for Climate Change and Water, Senator Penny Wong, on 16 July.
In a press release, Senator Wong explained that the Green Paper sets out options and identifies the Government’s disposition and preferred positions on emissions trading and the support proposed to help households and businesses adjust to this economic transformation.
Senator Wong stated that: ‘At the heart of the Scheme is emissions trading in which the Government sets a limit on how much carbon pollution industry can produce, and then the Government sells permits up to that limit, creating an incentive to look for cleaner energy options’.
The Green Paper includes a Chapter 11 on both tax and accounting issues. As recommended in the institute and Ernst & Young joint report on taxation treatment of emission trading. The paper proposes that discrete provisions of the income tax law should be developed to deal with emissions permit acquisition, surrender and trading and suggests that this new regime would provide the same general outcomes as under existing legislation but reduce uncertainty and complexity. Some tax related preferred positions set out in the Green Paper for taxpayers carrying on a business or other income activity include:
- The cost of acquiring a permit would be deductible at the time the permit is acquired.
- If the permit is banked, the effect of the deduction would be deferred until the time the permit is surrendered or sold.
- Any proceeds received on the sale of a permit would be treated as assessable income.
- The effect of deferring a deduction for the purchase of a permit would be achieved through a rolling balance method, under which the value of permits held at the beginning and end of the income year would be taken into account. The Government does not yet have a preferred approach to valuing permits for this purpose.
- The value of free permits would be included in the taxpayer’s assessable income in the year the permits are received.
- The value of a cash grant given to a liable entity as assistance under the scheme would be included in their assessable income in the income year it is received.
- A penalty imposed under the scheme legislation, including one imposed on a liable party for failing to surrender sufficient eligible compliance permits, will not be deductible.
- Scheme transactions would be treated under the normal GST rules.
Readers should refer to Green Paper for full details of the proposed positions.
The Government has invited feedback on the Green Paper and submissions are due by 10 September 2008. A White Paper and exposure draft legislation are then expected to be released by December 2008.
As members are aware, the Institute has formed a Working Group on the Tax Treatment of Emissions Trading and is anticipating further involvement in consultation with Treasury and the ATO on tax aspects. The Institute will also be lodging a submission on the Green Paper. Member input is welcome and can be emailed to us at mailto:taxgroup@charteredaccountants.com.au by 22 August 2008.
The Green Paper (532 pages) can be downloaded from this webpage (also chapter by chapter) and there is also a summary report available.
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2. Review of the Legal Framework for the Administration of the Goods and Services Tax
Following the assistant treasurer’s press release, which was reported in Edition 22/2008 of the Tax Bulletin, the Board of Taxation (the Board) has released on 18 July 2008, an issues paper on the review of the legal framework for the administration of the GST .
The focus of the review is to be on streamlining and improving the operation of the GST, reducing compliance costs, and removing anomalies.
The Board welcomes submissions on the issues paper which is due on 15 September 2008. If you have any comments for incorporation into our submission, it would be appreciated if you could email to mailto:taxgroup@charteredaccountants.com.au by 22 August.
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3. Joint submission on Treasury Discussion Paper “Consolidation and TOFA Interactions”
On 14 July, the Institute, in conjunction with the Taxation Institute of Australia, lodged a joint submission on the Treasury Discussion Paper of 23 June 2008 entitled “Consolidation and TOFA Interactions” (Paper). The covering letter and detailed submission are available on the Institute website.
Our key comments on the Paper included the following:
- The proposed Division 230 rules should broadly align with the existing consolidation tax cost setting rules (not vice versa), as is the case for all other significant categories of assets.
- There is no sound policy reason for excluding deferred tax liabilities (DTLs) on financial arrangements from the consolidation tax cost setting process.
- Where the joining entity has chosen to apply Division 230 to pre-Division 230-commencement financial arrangements, further elaboration is required on the position of the joined consolidated group.
- The tax cost setting rules in proposed Subordinate Rule 1 produce inappropriate outcomes in terms of tax cost setting amounts, particularly where the joining entity has used the compounding accruals method.
We have met with the Department of Treasury on a number of occasions both before and after the release of the Paper. The Institute will be meeting with Treasury again in the near future to further workshop various issues relating to the submission as well as other TOFA issues.
We wish to especially thank members of the Institute TOFA subcommittee, who provided significant input into the preparation of this submission.
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4. Submission - Inquiry into Tax Laws Amendment (2008 Measures No. 3) Bill 2008
On 7 July, the Institute lodged a submission with the Senate Standing Committee on Economics in relation to its inquiry into Schedule 1 (shareholder and unitholder rights) and Schedule 2 (restriction on GST refunds and time limits for recovery and refund of indirect tax) of the Tax Laws Amendment (2008 Measures No. 3) Bill 2008.
Members may recall Schedule 1 of the Bill proposes to restore the tax position prior to the decision of the High Court in McNeil’s case. The Institute played a key role in the confidential consultation leading up to this schedule being included in this Bill. We lodged a confidential submission on 24 April. The Institute strongly recommends that Schedule 1 of the Bill be passed expeditiously though noted that there are a number of further issues arising from the decision in McNeil’s case which could have been dealt with in the Bill to provide certainty to stakeholders.
The Institute is currently preparing a confidential submission on the draft Decision Impact Statement on McNeil’s case which we anticipate it to be lodged this Friday. In that submission we may also include recommendations for legislative changes to be considered by the Senate.
Members may also recall that Schedule 2 of the Bill proposes to amend the Taxation Administration Act 1953 to correct a deficiency in GST refund restriction provisions. This measure also addresses deficiencies in the four-year time limit on indirect tax and fuel tax credit related liabilities and entitlements to refunds related to indirect tax and fuel tax credits. The Institute submitted that the Bill and accompanying Explanatory Memorandum should be amended to correct drafting errors and give a better contextual basis for interpretation prior to passage of the Bill.
Submissions are confidential until made public by the Senate Committee, at which time it will be posted on our website.
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5. Submission - Inquiry into Tax Laws Amendment (2008 Measures No.4) Bill
Today, the Institute lodged a submission in relation to the inquiry by the Senate Economics Committee into Tax Laws Amendment (2008 Measures No. 4) Bill 2008 in regard to the proposed changes in Schedule 2 - Family Trusts. The Bill proposes to reverse two of the measures increasing flexibility for family trusts made by the previous government last year - one being reversing the ability to change the test individual in a family trust election in certain limited circumstances and the other being winding back of the definition of family group from the 2008-09 year. The intention of the Government to reverse these changes was confirmed in a Budget announcement by the Assistant Treasurer. The Institute does not support these changes.
Submissions are confidential until made public by the Senate Committee, at which time it will be posted on our website.
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6. Self-education expenses not deductible - Southwell-Keely and Commissioner of Taxation [2008] AATA 606
The Tribunal has affirmed the decision of the Commissioner to disallow the taxpayer’s claimed self-education expenses in the 2004 and 2005 tax years.
The self-education expenses were fees paid to a university in regard to studying for a degree in hotel management. The degree required 500 hours of practical experience, which was undertaken by the applicant at the Hotel Intercontinental, Sydney. He continued in various roles at the hotel beyond the requisite hours.
The applicant argued that the course of study was relevant to his progression at the hotel but conceded that it was not a condition of his continued employment. Furthermore, pay rises were based on ability and enthusiasm for the job rather than any formal qualification.
The Tribunal found that the applicant had not shown that the expense was incidental and relevant to the gaining of assessable income or was a loss or outgoing incurred in gaining assessable income. Rather the expenses were concerned with the getting of work in the future. As such no deduction was available under section 8-1 of the ITAA 1997.
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7. Interpretative Decisions
ATO ID 2008/107 - Capital allowances: business related costs - business proposed to be carried on
ATO ID 2008/108 Capital allowances: business related costs - business not proposed to be carried on
Withdrawn
ATO ID 2002/54 (Withdrawn) Repairs - Replacement of petrol storage (bowser) tank
ATO ID 2004/248 (Withdrawn) Investment in art by a Self Managed Superannuation Fund (SMSF)
ATO ID 2004/249 (Withdrawn) Investment in art by a Self Managed Superannuation Fund (SMSF) and its display
ATO ID 2004/250 (Withdrawn) Investment in art by a Self Managed Superannuation Fund (SMSF) - in-house asset.
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8. Taxation Determinations
TD 2008/20 - Income tax: where a taxpayer has supplied or acquired property under an international agreement and that gives rise to a debt interest or an equity interest as defined for the purposes of Division 974 of the Income Tax Assessment Act 1997, does Division 974 bear upon the characterisation to be adopted for the purposes of the application of Division 13 of Part III of the Income Tax Assessment Act 1936 to the transaction?
Withdrawals
TD 93/192W Income tax: does employment, for the purposes of subsection 27A(1), include time spent as a partner for the purpose of calculation of the eligible service period in relation to an eligible termination payment made in consequence of the termination of a person's employment?
TD 94/35W Income tax: during the course of a year of income, may the Commissioner of Taxation refund to an employer excess tax instalment deductions (TIDs) paid by the employer under the pay-as-you-earn (PAYE) arrangements, where the excess TIDs, mistakenly, were not made in accordance with the rates prescribed?
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9. Class Rulings
CR 2008/47 Income tax: early retirement scheme - Charles Sturt University
CR 2008/48 Income tax: Scrip for scrip roll-over: merger of Centro Shopping America Trust with Centro Retail Trust
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10. Self Managed Superannuation Fund Rulings
SMSFR 2008/1 Self Managed Superannuation Funds: giving financial assistance using the resources of a self managed superannuation fund to a member or relative of a member that is prohibited for the purposes of paragraph 65(1)(b) of the Superannuation Industry (Supervision) Act 1993
SMSFR 2008/2 Self Managed Superannuation Funds: the application of the sole purpose test in section 62 of the Superannuation Industry (Supervision) Act 1993 to the provision of benefits other than retirement, employment termination or death benefits
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11. Recent ATO publications
Booklets and publications
eLink 26/08 - Bulletin to inform tax practitioners of the most recent updates to ato.gov.au including a lead article titled 'Tax Agent Portal mail'. Issued on 9 July 2008.
eLink 25/08 - Bulletin to inform tax practitioners of the most recent updates to ato.gov.au including a lead article titled 'The Lodgment Program 2008-09'. Issued on 3 July 2008.
Administration
Lodgment deferral requests granted for returns due 3 June - Broadcast sent on 17 July 2008 to advise tax agents that all of their lodgment deferral requests, submitted on time, for clients' 2007 income tax returns due on 3 June 2008 have been granted.
Pre-filling initiatives - e-tax - Pre-filling is a service provided by the Tax Office that makes it easier for you to complete your tax return.
PAYG
2008 PAYG withholding payment summary annual report - lodgment concession for closely held businesses - Broadcast sent on 14 July 2008 to advise tax agents of the eligibility criteria for the 2008 PAYG withholding payment summary annual report - lodgment concession for closely held businesses.
Superannuation
Activity statements and super contributions due for the June quarter - The Tax Office today reminded businesses that June quarterly activity statements and super contributions are due by Monday, 28 July 2008.
Self managed superannuation fund statistical report - Statistics around the self managed superannuation fund market will be made available by the Tax Office every quarter. The contents of this report have been determined following valuable feedback from the superannuation industry.
SuperUpdate July 2008 - SuperUpdate is a monthly electronic newsletter issued to those working in the superannuation industry. It includes information about superannuation issues and changes in the administration of Australia's superannuation system
Using ordinary time earnings to calculate the super guarantee - From 1 July 2008, you must use ordinary time earnings as defined in the super guarantee law, to calculate super guarantee contributions for your employees. This document explains how to calculate the super guarantee using ordinary time earnings.
FBT
Fringe benefits tax - exemption for eligible work-related items - The government will tighten the current fringe benefits tax (FBT) exemption for certain work-related items (including laptop computers, personal digital assistants and tools of trade) by ensuring the exemption only applies where these items are used primarily for work purposes. The measure reduces the FBT concession and tax expenditure for work-related items.
Fringe benefits tax - meal cards - The government will tighten the fringe benefits tax (FBT) exemption that applies to property consumed on an employer's premises by excluding meals under a salary sacrifice arrangement. The measure reduces the FBT concession and tax expenditure associated with property provided on the employer's business premises.
Minutes
NTLG-ATO-Public Rulings Steering Group – Minutes of the 4th meeting held on 13 June 2008
Non-Profit
Non-Profit News Service No. 0207 - Superannuation change fairer for employers - Jul 2008. Changes to the superannuation guarantee late payment offset will provide fairer treatment for non-profit organisations who make late superannuation guarantee contributions.
Division 7A
Division 7A - benchmark interest rates - For the purposes of Division 7A, the benchmark interest rate for an income year is the Indicator Lending Rates - Bank variable housing loans interest rate last published by the Reserve Bank of Australia before the start of the income year.
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12. Senate committee hearings on a range of tax measures
The Senate Standing Committee on Economics has begun a series of hearings on a range of tax measures relating to the following tax related Bills:
- Schedules 1 and 2 of the Tax Laws Amendment (2008 Measures No. 3) Bill 2008 referred by Senate on 18 June 2008 for report not before 18 August 2008. Submissions were due on 7 July 2008. A hearing will be held in Canberra on 11 August 2008.
- the Tax Laws Amendment (2008 Measures No.4) Bill 2008 referred by Senate on 26 June 2008 for report by 27 August 2008. Submissions are due today. Information on committee hearings are yet to be announced.
- the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008 referred by the Senate on 18 June for report not before 26 August 2008. Submissions were due on 7 July 2008. Hearings had been conducted in Perth and Brisbane on 15 and 17 July respectively and will be held in all other capital cities, finishing in Hobart on 8 August 2008.
- the Tax Laws Amendment (Luxury Car Tax) Bill 2008, A New Tax System (Luxury Car Tax Imposition—General) Amendment Bill 2008, A New Tax System (Luxury Car Tax Imposition—Customs) Amendment Bill 2008 and A New Tax System (Luxury Car Tax Imposition—Excise) Amendment Bill 2008 referred by the Senate on 18 June for report not before 26 August 2008. Submissions were due on Monday, 7 July 2008. Hearings will be held in Adelaide on 22 July, Sydney on 31 July and in Melbourne on 6 August 2008.
Further information on inquiries into these tax measures and related Bills are available on the Senate website.
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13. Submissions on the Revised Exposure Draft Tax Agent Services Legislation
Treasury has received 41 submissions in response to the Revised Exposure Draft Tax Agent Services Legislation and Explanatory Materials. The Institute, jointly with CPA Australia and National Institute of Accountants lodged a submission in this regard on 30 June, as reported in Edition 25/2008 of the Tax Bulletin. Our joint submission was among one of the twenty-two public submissions received by Treasury which were now released and available on Treasury website. The other 19 submissions are confidential.
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14. ATO data matching program of marine vessels
The ATO has advertised in Commonwealth of Australia Gazette No.GN28 on 16 July of its data matching program, called the Marine Vessels Data Matching Project. The ATO will request and collect details of individuals or entities who registered a marine vessel with the following bodies:
- NSW Maritime Authority
- Maritime Safety Queensland
- Marine and Safety Victoria
- Marine and Safety Tasmania
- Department for Transport, Energy and Infrastructure (Safety and Regulation Division) (SA)
- Department for Planning and Infrastructure (Marine Safety) (WA)
These will be electronically marched with certain sections of the ATO data to identify non compliance with lodgment and payment obligations under taxation laws. Records relating to approximately 160,000 persons or entities will be matched.
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Chartered Accountants New Employees Taxation Workshop
Throughout July and August in Sydney, Brisbane, Melbourne, Adelaide and Perth. This intensive two day workshop will provide new employees with the taxation skills and understanding needed to improve productivity in the early stages of employment.
Chartered Accountants Tax Seminars for Practice
Throughout August and September in Sydney and Melbourne. Minimise risk and optimise the benefit for your business or your clients with two 3 hour seminars held in Sydney and Melbourne on GST, CGT and income tax for property transactions and Buying & Selling a business.
Chartered Accountants Tax Atlas Series
A reference tool that assists in identifying key issues, understanding of key concepts and provisions. Available now: Tax & Wealth Creation; FBT & Salary Packaging; Small Business CGT Concessions.
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On ATO's new identification program since July 2008
One member writes:
Today I had the privilege of experiencing ATO's new identification program. I had to call up for a BAS deferral. Instead of providing TFN/address/bank account for the company I work for, I was told I have to prove my own identify (which is fine by me) effective 01/07/08. After providing my personal TFN, address and DOB, the ATO officer asked for the refund/payment amount of my last assessment. How do they expect people to remember that? Fair enough if you are an individual calling up for your own tax affairs. I offered to provide my bank account number used for tax refund, but unfortunately I was one of the unlucky one who had to pay last year. Bank Account is only good if you receive a refund in the latest assessment.
After that I called the ATO feedback line, the ATO officer basically said from now on you just have to bring in your personal Notice of Assessment from the ATO to work should you decide to talk to the ATO.
This requirement is just absolutely unrealistic and ridiculous!
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Disclaimer
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