Greenwoods and Freehills Weekly Tax Highlights 5.10.07-12.10.07

12 October 2007

Print Version

Please note that Weekly Tax Highlights will not be issued next week. Instead we will be returning for the week of 2.11.07 with an edition covering the previous two weeks.

ATO Documents

Released 10.10.07

Class Rulings
CR 2007/93: Income tax: exchange of shares in Macquarie Bank Limited for shares in Macquarie Group Limited
Goods and Services Tax Determination
GSTD 2004/3: Goods and services tax: is a supply of rights to accommodation a supply of real property for the purposes of the A New Tax System (Goods and Services Tax) Act 1999?

Released 12.10.07

Interpretative Decisions
ATO ID 2007/189: Medical expenses: tax offset - payments for attendant assisting in employment duties
ATO ID 2007/190: Medical expenses: tax offset - payments for domestic services
Withdrawn Interpretative Decision
ATO ID 2001/742: Family Trust Election: Family of Deceased Test Individual
ATO ID 2003/813: Deemed dividend - FBT applies to a Division 7A excluded loan
ATO ID 2004/697: Family trusts - family trust elections - two family trusts with the same specified individual
ATO ID 2005/173: Family Trust Election: definition of family - step-child
ATO ID 2005/313: Family trust election: family - death of a family member

Federal Election

The Prime Minister has announced that the 2007 Federal Election will be held on Saturday, 24 November 2007. All Bills that had not passed when Parliament was dissolved have now lapsed and will need to be reintroduced and undergo the parliamentary process again. These bills include Tax Laws Amendment (2007 Measures No 6) Bill 2007 and Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2007.

Improving the Integrity of the Tax Consolidation Regime

Released 12.10.07

The Assistant Treasurer has announced that the Government will modify the tax consolidation regime to ensure that, when an entity joins a consolidated group or multiple entry consolidated group (MEC group) following a CGT rollover affecting the membership interests of the joining entity, the tax cost setting rules do not apply to uplift the tax costs of the joining entity's assets. The Assistant Treasurer said the amendments will improve the integrity of the tax consolidation regime by preventing companies from obtaining an inappropriate uplift in their tax costs in these situations.
Stop Press: The Assistant Treasurer has released a further announcement on 16.10.07 clarifying the start date of the new measures. "If an arrangement involves a listed company, the measure will apply where an intention to undertake a corporate action by takeover bid or scheme of arrangement is announced by either party to an approved stock exchange after 12 October 2007...If the arrangement involves an unlisted company, the measure applies to a corporate action by takeover bid or scheme of arrangement that is made to shareholders of the target company after 12 October 2007"

Superannuation Industry (Supervision) Amendment Regulations 2007 (No 5)

Released 8.10.07

These Regulations and accompanying Explanatory Statement amend the Superannuation Industry (Supervision) Regulations 1994 to support amendments being made by the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007. The regulations also act to amend certain gaps found in the legislation by APRA. The amendments which relate to changing from RSE licence and registration numbers to the ABN commence 12 months after the Amendment Act receives Royal Assent.

Appeals Update

French J in Lenzo v FCT [2007] FCA 1402: The Commissioner has appealed to the Full Federal Court. The Court had held that Pt IVA did not apply to a taxpayer's investment in a sandalwood plantation project in Western Australia. The Commissioner had argued that the investment had many of the hallmarks of a tax effective investment scheme.

Tax Cases

Balestra and FCT [2007] AATA 1845, 5 October 2007: The AAT has found that Part IVA applied to a taxpayer's investment. The Commissioner had disallowed the taxpayer's deductions and raised amended assessments under Pt IVA. The Tribunal determined that the scheme had been entered into solely for the purpose of obtaining a tax benefit.

Trail Bros Steel & Plastics Pty Ltd and FCT [2007] AATA 1850, 12 October 2007: The AAT has allowed deductions made by a family company to an employee welfare fund for the benefit of 2 employees. The employees were also the controllers of the company. The AAT dismissed the Commissioner's claims that PartIVA should be applied judging that if the payments were not made to the fund the company would have found a way to discharge its contractual obligations in a tax deductible manner in any event.

Progress of Legislation

As at 12.10.07

Bill	Intro House	Passed House	Intro Senate	Passed Senate	Date of Royal assent / Act Number	Description
International Tax Agreements Amendment Bill (No 1) 2007	29.3.07	7.8.07	8.8.07	9.8.07	3.9.07/136	Treaties with France and Norway
Tax Laws Amendment (2007 Measures No 4) Bill 2007	21.6.07	13.8.07	14.8.07	18.9.07 .	24.9.07/143	Foreign tax credit quarantining rules , Trustee beneficiary reporting, Family trust elections, Investment in instalment warrants by super funds, Simpler super, Deductible Gift recipients
Taxation (Trustee Beneficiary Non-disclosure Tax) Bill (No 1) 2007	21.6.07	13.8.07	14.8.07	18.9.07 .	24.9.07/144
Taxation (Trustee Beneficiary Non-disclosure Tax) Bill (No 2) 2007	21.6.07	13.8.07	14.8.07	18.9.07 .	24.9.07/145
International Tax Agreements Amendment Bill (No 2) 2007	21.6.07	11.9.07	12.9.07	13.9.07 .	24.9.07/146	Treaty with Finland
Superannuation Legislation Amendment Bill 2007	21.6.07	13.9.07	20.9.07	25.9.07	25.9.07/164	Commonwealth Superannuation
Tax Laws Amendment (2007 Measures No 5) Bill 2007	16.8.07	12.9.07	13.9.07	19.9.07 .	25.9.07/165	Taxation treatment of leasing and similar arrangements, company loss recoupment rules, statutory licence CGT,- marriage breakdown roll-over, trusts and stapled securities, excluded equity interest, ADIs, R&D, Film incentives, deductible gift recipients
Tax Laws Amendment (2007 Measures No 6) Bill 2007	13.9.07 NOW LAPSED			.		Carbon Sink Forests, Grants to Tobacco Growers, Deductible Gift Recipients.
Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2007	20.9.07 NOW LAPSED			.		Overhaul of tax rules for financial transactions

These notes are in summary form designed to alert clients to tax developments of general interest. They are not comprehensive , they are not offered as advice and should not be used to formulate business or other fiscal decisions.

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