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1. Family trust changes defeated in the Senate
On 3 September, Tax Laws Amendment (2008 Measures No.4) Bill 2008 was passed by the Senate with 2 amendments.
The amendments relate to the removal of Schedule 2 of the Bill which contained measures to reverse certain changes to family trust elections made by the former government last year. Namely, these measures proposed to:
- change the definition of ‘family’ to limit lineal descendants to children or grandchildren of the test individual or of the test individual’s spouse; and
- remove the ability for family trusts to make a one-off variation to the test individual specified in a family trust election (other than specifically in relation to the 2007-08 income year or a marriage breakdown).
The Institute is pleased that these changes were defeated in the Senate. Our advocacy efforts included a submission lodged in July this year in relation to the Senate Economics Committee’s inquiry into the Bill. On 12 August, representatives of the Institute appeared before the Senate Committee. The Senate Committee’s report was released on 26 August, recommending that the Bill be passed. But, the Coalition Senators did not share this view.
The other schedules remain intact in the Bill. The amended Bill now goes back to the House of Representatives for consideration of the Senate’s amendments.
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2. Tax Laws Amendment (2008 Measures No.3) Bill 2008 passed by the Senate without amendment
On 1 September, the Tax Laws Amendment (2008 Measures No.3) Bill 2008 was passed by the Senate without amendment. It now awaits Royal Assent. The Bill contains amendments to shareholder and unitholder rights (Schedule 1), as well as to the restriction on GST refunds and time limits for recovery and refund of indirect tax (Schedule 2).
The Institute lodged a submission on both aspects of the Bill and recommended that Schedule 1 of the Bill be passed, but noted that there are a number of other issues arising from the decision in McNeil’s case that could have been dealt with in the Bill to provide certainty to stakeholder. We also submitted that Schedule 2 of the Bill and its accompanying Explanatory Memorandum should be amended to correct drafting errors to give a better contextual basis for interpretation prior to it being passed. Unfortunately, most of these recommendations have not been taken up at this stage.
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3. Submission on the Review of the National Innovation System
On 3 September, the Chair of the Institute Tax Technical Committee, Ann Previtera (PwC), the Institute Tax Counsel, Ali Noroozi, and Linda Wang, represented the Institute at the NTLG meeting. Topics discussed at the meeting included:
- Ruling applications on trust cloning;
- Joint Committee of Public Accounts and Audit’s report and its recommendations;
- The definition of tax audit;
- The meaning of ‘fraud or evasion’ and the related Practice Statement Law Administration (PSLA 2008/6);
- Prior year losses – post Raftland case;
- Raftland case and sham;
- Taxation of trust distributions; and
- ATO’s investigation into the use of partnership of discretionary trusts.
In addition, updates were provided on the NTLG sub-committees governance report, General Anti-Avoidance Rules (GAAR), Public Ruling Steering committee, the Change Program and agricultural managed investment schemes.
A copy of the NTLG meeting agenda which contains the ATO’s responses is here. The formal minutes of the meeting will be published on the ATO website in due course and a link provided in the Tax Bulletin.
If you have any questions in relation to the issues discussed, please email the Tax Group.
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4. NTLG - Public Rulings Steering Committee meeting
A meeting (by teleconference) of the NTLG - Public Rulings Steering Committee was held on 2 September, at which Karen Smith represented the Institute. Matters discussed included:
- Status of the public rulings program including additions (such as five planned TDs on hybrid trust issues), withdrawn topics and rulings issued. The September monthly update of the program will be posted on the ATO website shortly;
- Escalation of ATO ID 2008/96 - on how costs incurred by the head entity of a consolidated group in order to sell one of its subsidiary member companies are dealt with for tax purposes - to a public rulings program;
- Role of the committee more generally in the escalation of ATO IDs - the ATO is open to the external committee members putting forward ATO IDs that they consider should be escalated to the program. The ATO also noted that the number of ATO IDs issued has been reducing; and
- R&D withdrawn income tax rulings – IT 2442, IT 2451 and IT 2552.
Members wanting more information on the above can email the Tax Group.
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5. NTLG GST Sub-committee meeting
On 2 September, the chair of the Institute’s Indirect Tax Committee, Michael Evans (KPMG), and Norman Kang represented the Institute at the meeting of the NTLG GST Sub-committee. Key issues discussed included:
- The forms of ATO’s settlement deeds for GST disputes;
- Non-resident registration proof of identity;
- Correct format for a tax invoice in a building and construction industry;
- Reliance Carpet decision and forfeited security deposits;
- GST classification of food products listed on a database maintained by a third party;
- Brady King decision; and
- Review of rulings on commercial and residential premises.
For more details on the above issues or other topics discussed, please refer to the draft agenda which contains the ATO’s responses.
The updated ATO’s responses will be available once the draft minutes of the meetings are approved. They will be published on the ATO website and a link provided in the Tax Bulletin.
The next meeting will be held on 3 December 2008. If members have any issues they would like to raise, please email these to the Tax Group.
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6. Lodgment Working Group meeting
Susan Cantamessa and Frank Hills (Carthills) represented the Institute at a Lodgment Working Group meeting on 4 and 5 September. Matters discussed at the meeting included:
- 89% of requests for deferral of lodgement (which does not necessarily include deferral of payment) of income tax returns and 85% of requests for Activity Statements deferrals were granted in the year to 30 June 2008. The best means for requesting deferrals is through the ATO’s Tax Agent Portal. Self assessed deferrals are also available through the Portal.
- Patterns, trends and issues facing the ATO in assisting tax agents through Tax Agent Lodgement Assistance. This service is offered to Tax Agents who are having extreme difficulty in meeting their lodgement programme end dates. The types of assistance offered include alternative lodgement arrangements and waiving of penalties.
- Receivables policy has been completely rewritten and re-issued. It is said to be easier to read. It can be accessed from the ATO Home Page and is under “Policies and Guidelines”. A summary of the changes is shortly to be added to the web site;
- There are currently no changes proposed to the lodgement programme for next year (2009/10).
- Updated frequently asked questions have been written and are to be added to the “Lodgement Essentials” section of the ATO Tax Practitioners web site.
In addition, updates were provided on the Change Program, the pre-filling of tax returns project and the meeting of the Software Developers Consultative Group's July meeting,
Once the draft minutes of the meeting are approved they will be published on the ATO website and a link provided in the Tax Bulletin. If members would like any further information regarding the matters discussed at the meeting, please email the Tax Group.
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7. Statutory demands - AAT proceedings under Pt IVC of the Administration Act does not impede recovery - Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41
The High Court has allowed the Deputy Commissioner’s appeals against the three respondent group companies, thereby setting aside orders of the Supreme Court of Queensland (which had set aside the statutory demands). The matter for two of the respondents was remitted back to a Judge of the Supreme Court of Queensland for determination of the appropriate variation of the statutory demand.
The Deputy Commissioner served statutory demands on the respondent taxpayers in respect of debts due and payable for assessments and declarations of income tax, GST, interest and penalties. The taxpayers instigated review proceedings under the Taxation Administration Act 1953, and applied to the Supreme Court to set aside the statutory demands.
The High Court considered the interaction between the winding up of companies in Pt 5.4 (ss 459A 459T) of the Corporations Act 2001 (including provisions for the service of statutory demands on companies for payment of debts) and the provisions for the assessment and collection of income tax and GST. In short, s 459H(1) provides for the setting aside of a statutory demand where there is a genuine dispute about existence or amount of debt.
The High Court found that the ‘pendency of the AAT proceedings under Pt IVC of the Administration Act did not impede recovery of the tax debits in the meantime’, stating (at para 58):
‘The matter was explained, with respect correctly, by Williams J in Bluehaven Transport Pty Ltd v Commissioner of Taxation. The use by the Commissioner of the statutory demand procedure in aid of a winding up application is in the course of recovery of the relevant indebtedness to the Commonwealth by a permissible legal avenue. The phrase "may be recovered" in ss 14ZZM and 14ZZR of the Administration Act applies to the statutory demand procedure. That state of affairs places the existence and amounts of the "tax debts" outside the area for a "genuine dispute" for the purposes of s 459H(1) of the Corporations Act.’
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8. Decision Impact Statements
The ATO issued decision impact statements (DIS) on the following cases on 2 September:
- Colby Corporation Pty Ltd v Commissioner of Taxation where the Full Federal Court held that a contractor had not "purchased" fuel for use in a qualifying use under subsection 53(2) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA).
- Clark v Commissioner of Taxation where the Full Federal Court held that a South Australian magistrate was 'a judge of a court of a State' for the purposes of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997.
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9. Taxation Ruling – Erratum
TR 2008/6ER - Erratum - Petroleum resource rent tax and income tax: treatment of geosequestration expenditure and receipts
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10. Taxation Determination - Withdrawal
TD 94/85W - Income tax: is a taxpayer entitled to a deduction under subsection 59(1) or any other section of the Income Tax Assessment Act 1936 when an item of plant is sold by an agent of the taxpayer and the proceeds of sale are misappropriated by the agent?
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11. Draft Determination
TD 2008/D12 - Income tax: is the deductibility of compound interest determined according to the same principles as the deductibility of other interest?
The Institute will be preparing or co-ordinating the preparation of a submission to the ATO in respect of this Draft Taxation Determination. If you have any comments please e-mail them to us at Tax Group by 23 September 2008.
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12. Draft Superannuation Guarantee Ruling
SGR 2008/D1 - Superannuation guarantee: payments made to sportspersons
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13. Class Rulings
CR 2006/123A1 - Addendum - Income tax: Henderson Group plc - return of capital
CR 2007/9A1 - Addendum - Income tax: capital gains: demerger of Tower Australia Group Limited by Tower Limited
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14. Product Rulings
PR 2008/4A2 - Addendum - Income tax: TFS Sandalwood Project 2008 - pre 30 June 2008 Growers
PR 2008/23A1 - Addendum - Income tax: Piangil Grower Project – 2008
PR 2008/25A1 - Addendum - Income tax: Macquarie Almond Investment 2008 - Early Growers (to 15 June 2008)
PR 2008/38A1 - Addendum - Income tax: Macquarie Eucalypt Project 2008
Withdrawal
PR 2007/77W - Withdrawal - Income tax: NTT Mahogany 2006-2008 (2008 Growers)
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15. Legislative Determination
Adjustment notes – waivers - WAN 2008/1 - Corporate Card Statements legislative instrument
Signed on the 27th day of August 2008
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16. ATO Interpretative Decisions
ATO ID 2008/116 - GST and credit card surcharge for payment of an Australian tax, fee or charge
ATO ID 2008/117 - Permanent establishment of a US Limited Liability Company
ATO ID 2008/118 - Excise: synthetic hydraulic fluid
ATO ID 2008/119 - Excise: ethylene glycol
Withdrawals
ATO ID 2001/697 (Withdrawn) - Excise - Collections - Petroleum - Liability to Pay Excise on Synthetic Hydraulic Fluid.
ATO ID 2006/76 (Withdrawn) - Excise: collections - petroleum - liability to pay excise duty on ethylene glycol
ATO ID 2003/93 (Withdrawn) - Assessability of recoupment of legal costs
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17. First Home Saver Accounts (Further Provisions) Amendment Bill 2008; First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 introduced
The Government has introduced into Parliament First Home Saver Accounts (Further Provisions) Amendment Bill 2008 and First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 on 4 September.
The First Home Saver Accounts (Further Provisions) Amendment Bill 2008 (FHSA (Further Provisions) Bill) implements further aspects of the Government’s First Home Saver Accounts (FHSA) policy. It deals with a number of areas, including the secrecy and the exchange of information, the operation of the unclaimed money scheme and amendments to taxation laws. This Bill contains 4 schedules and their respective commencement dates are:
- Amendments to Schedule 1 apply from 1 October 2008;
- Amendments to Schedule 2 apply from the day after Royal Assent;
- Amendments to Schedule 3 apply from 1 July 2009; and
- Amendments to Schedule 4 are contingent on the commencement of Schedule 1 to the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008
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The First Home Saver Account Providers Supervisory Levy Imposition Bill 2008 (FHSA Supervisory Levy Bill) introduces a framework for imposing a levy on FHSA providers to provide funding for the Australian Prudential Regulation Authority (APRA) to carry out its supervision of financial institutions which offer FHSAs. The Bill applies from 1 July 2009.
The Explanatory Memorandum to the Bills is available here.
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18. Legislation update
Luxury Car Tax Bills defeated in the Senate
On 4 September, the Tax Laws Amendment (Luxury Car Tax) Bill and the following related Bills:
- A New Tax System (Luxury Car Tax Imposition – Customs) Amendment Bill
- A New Tax System (Luxury Car Tax Imposition – Excise) Amendment Bill
- A New Tax System (Luxury Car Tax Imposition – General) Amendment Bill
have been defeated in the Senate.
On 5 September, the Commissioner, Michael D’Ascenzo, received advice from the Government that it intends to reintroduce the proposed Luxury Car Tax Bills. As a result, the ATO has reissued previous advice, reiterating how the proposed luxury car tax will apply to vehicles delivered after 1 July 2008 (refer to item 23: Recent ATO Publications).
This package of 4 luxury car tax Bills were introduced on 26 May, to amend the luxury car tax legislation to increase the tax rate from 25% to 33%.
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19. House of Representatives’ draft legislation program – 15 to 18 September
The House of Representatives has released its draft legislation program for the period 15 to 18 September. It is expected to resume debate on the following tax related Bills:
- Tax Laws Amendment (Political Contributions and Gifts)
– 15 September
- First Home Saver Accounts (Further Provisions) Amendment; First Home Saver Account Providers Supervisory Levy Imposition – 17 September
- Tax Laws Amendment (2008 Measures No.4) (consideration of Senate’s amendments) – 18 September
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20. Legislative Instruments
Taxation Administration Amendment Regulations 2008 (No. 3) were registered on the Federal Register on 2 September. The Regulations amend the Taxation Administration Regulations 1976 to establish the framework to allow the Commissioner to charge an applicant the cost of a valuer to make or review a valuation under subsection 359-40(4) of the Act.
As part of a private ruling, the Commissioner refers a valuation to a valuer. The Regulations allow the Commissioner to charge the applicant an amount equal to the amount the Commissioner was charged for the valuer making or reviewing the valuation.
Under the Regulations, the Commissioner is required to provide an estimate of the charge to the applicant up front. The valuation will not commence until the estimated amount has been paid. If the final cost of the valuation differs from the estimate provided by the Commissioner, the applicant is either charged or refunded the difference, as applicable.
These Regulations commence on the day after they are registered.
Members may recall that on 10 June 2008, the Institute lodged a submission, “Valuations conducted for private rulings”, with the Treasury.
The Explanatory Statement is here.
The related ATO facts sheet is here and the ATO’s publication, “Market valuation for tax purposes”, is here.
A New Tax System (Goods and Services Tax) Act 1999 Waiver of Tax Invoice Requirement (Visa Purchasing Card) Legislative Instrument (No. 2) 2008 was registered on the Federal Register on 2 September.
The determination allows Visa Purchasing Card cardholders to claim input tax credits without holding a tax invoice in certain circumstances.
This instrument commences on 1 October 2008 and applies to tax periods commencing on or after that date. This instrument will not apply retrospectively.
The Explanatory Statement is here.
A New Tax System (Goods and Services Tax) Act 1999 Waiver of Tax Invoice Requirement (Corporate Card Statements) Legislative Instrument (No. 1) 2008 was registered on the Federal Register on 2 September.
The determination allows corporate credit and charge card holders to claim input tax credits without holding a tax invoice in certain circumstances.
This instrument commences on 1 October 2008 and applies to tax periods commencing on or after that date. This instrument will not apply retrospectively.
The Explanatory Statement is here.
A New Tax System (Goods and Services Tax) Act 1999 Waiver of Adjustment Note Requirement (Corporate Card Statements) Legislative Instrument (No. 1) 2008 was registered on the Federal Register on 2 September.
The determination allows corporate credit and charge card holders to claim decreasing adjustments without holding an adjustment note in certain circumstances.
The Explanatory Statement is here.
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21. Recent ATO publications
Booklets and publications
Countries that have a tax information exchange agreement (TIEA) with Australia - Provides a list of participating partners that have a tax information exchange agreement with Australia.
Tax information exchange agreements - Discusses the role of tax information exchange agreements whereby participating partners can commit to eliminate harmful tax practices.
Tax Office update on luxury car tax - Tax Commissioner Michael D'Ascenzo today received advice from the Government that it intends to reintroduce the proposed luxury car tax bill.
FOI request - individuals and businesses - This freedom of information (FOI) request is for individuals or businesses seeking access to documents from the Australian Taxation Office.
Demergers 2006 Tower Australia Group Ltd demerger - Demergers 2006 Tower Australia Group Ltd demerger.
eLink 32/08 - Bulletin to inform tax practitioners of the most recent updates to ato.gov.au including a lead article titled 'Check your clients' eligibility for fuel tax credits'. Issued on 20 August 2008.
Foreign exchange rates - List of daily, monthly and annual foreign exchange rates. Updated to include monthly and daily rates for August 2008.
Rulings and valuations
Ruling & law essentials - The information below details the different types of rulings, and how to find legislation and determinations.
Supporting document requirements for private rulings - Determining or confirming the value of a thing - Provides details of the information you should provide to us when you apply for a private ruling about the value of a thing.
Administration
Portal maintenance schedule - Scheduled downtime for 2008.
Reporting, lodgment and administration - Information on lodgment, reporting and administrative obligations for self managed superannuation funds may be found here.
Superannuation
Super and us mob - The Australian Securities and Investments Commission (ASIC) and the Tax Office have released a publication to help Aboriginal and Torres Strait Islander employees better understand superannuation
New to a SMSF - As a trustee you have many responsibilities, the information on these pages is provides information on what you need to know. More detailed information will progressively be added to the site in the coming months.
For approved auditors - Approved auditors play a very important role in the self managed superannuation fund market. There have been changes to the way approved auditors do their role recently.
For trustees of self managed super funds - Being aware of your responsibilities and obligations as a trustee of a self managed fund is very important. Remember, you are solely responsible for the running and performance of the fund.
Forms statements and instructions for SMSFs - All information on forms and instructions for self managed super funds may be found here.
News and latest changes for SMSFs - The latest news for self managed super funds, information on lodgment, reporting and administrative obligations for self managed superannuation funds may be found here.
Thinking about a self managed super fund? - Self managed superannuation funds can be a great way to invest for your retirement, but they are not for everyone. You should take your own personal circumstances into account before making a decision to go it alone.
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Chartered Accountants Buying and Selling a Business
Throughout September in Sydney and Melbourne. Minimise risk and optimise the benefit for your business or your clients with this 3 hour seminar on Buying & Selling a Business.
Chartered Accountants Tax Seminars for Practice
Seminar one - GST, CGT and Income Tax for Property Transactions
Seminar two - Buying and Selling a Business
Throughout September in Brisbane, Adelaide and Perth. Attend one seminar or both with GST, CGT and Income Tax for Property Transactions and Buying & Selling a Business scheduled on the same day for your convenience.
Chartered Accountants Technical Conference
Throughout October in Sydney and Melbourne. Addresses the latest legislation changes and technical details in separate streams for business and practice. The need–to–know updates that will make a difference to your growth.
Chartered Accountants Managing the Payroll Function Workshop
Throughout November in Sydney, Melbourne, Adelaide, Perth and Brisbane. Legislative changes resulting from the Federal Budget have impacted payroll, be able to confidently deal with the myriad of issues affecting you.
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Help us to improve the bulletin by sharing your tax issues and experiences that might be of interest to other members. Responses should be emailed to taxgroup@charteredaccountants.com.au
Disclaimer
The Institute has created and maintains this tax bulletin as a service to its members and the community. While some of the information provided is about legal issues and legislation, it is not legal advice. The Institute does not expect or invite any person to act or rely on any statement, view or opinion expressed in this bulletin, and readers should make and rely on their own inquiries in making any decisions or giving any advice.
The Institute accepts no responsibility for any errors or omissions contained in this bulletin, and disclaims all warranties with regard to the information at this bulletin, including all implied warranties of merchantability and fitness for a particular purpose. In no event shall the Institute be liable for any loss or damage arising out of or in connection with the use of this bulletin or the information contained in it, including special, indirect or consequential loss or damage, and whether such loss or damage arises in contract, negligence, tort, under statute, or otherwise.
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Any information provided to the Institute in connection with this bulletin shall be provided by the submitter and received by the Institute on a non-confidential basis. The Institute shall be free to reproduce, use, disclose and distribute this information to others without limitation.
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