Greenwoods and Freehills Weekly Tax Highlights - Week Ended 25.4.08

ATO Documents

Released 23.4.08

Class Ruling
CR 2008/30: Income tax: Commonwealth Bank of Australia - Perpetual Exchangeable Resaleable Listed Securities
Product Ruling
PR 2008/38: Income tax: Macquarie Eucalypt Project 2008
PR 2008/39: Income tax: Great Southern 2008 Renewable Fibre Project 

Released 23.4.2008

The Assistant Treasurer has announced that the Government will change foreign investment policy, to extend the timeframe for the development of vacant commercial land, from 12 months to 5 years. The change will be made to encourage new competitors to enter the market and to allow existing competitors to expand their business.

Full Federal Court decision in Cumins v DCT [2007] FCAFC 207: The High Court has refused the taxpayer special leave to appeal. The Full Federal Court rejected the taxpayer's argument that a bankruptcy notice was invalid because the Commissioner had overstated the amount owed by not deducting PAYG withholding credits.

Tax Cases

Taxpayer v FCT, AAT Case [2008] AATA 325, 18 April 2008: The Tribunal has found that interest payments made by the taxpayer to a trust were not allowable deductions due to the taxpayer not being presently entitled to a share of the income of the trust. The AAT did find that the accompanying penalty levied by the Commissioner was excessive as the taxpayer had sought professional advice and thus taken reasonable care. The Tribunal dismissed these penalties. However the Tribunal did find that a payment, made to a charitable trust by a company under the taxpayer's instructions, constituted an eligible termination payment and that due to recklessness on the part of the taxpayer, the penalty levied by the Commissioner on this amount should stand.

Fowler v FCT [2008] FCA 528, 21 April 2008: The Court has dismissed the taxpayer's appeal in a case involving the Personal Service Income (PSI) provisions. The taxpayer was sole director, shareholder and employee of a company. The taxpayer contracted labour to various companies and carried out the labour on their premises, using their equipment. The Court found that, under the PSI provisions, amounts derived from these contracts could be considered assessable income of the taxpayer despite the fact that it may have been contractually derived by another entity.

Bamford & Ors and FCT, AAT Case [2008] AATA 322, 18 April 2008: The AAT has found that deductions claimed by the taxpayers in their capacity as trusts of a family discretionary trust were rightly disallowed by the Commissioner. The taxpayers had claimed a contribution to an offshore superannuation fund as a deduction. The Tribunal also decided that, since the disallowance of the deduction resulted in the net income of the trust exceeding its accounting income, the proportionate view of  assessing beneficiaries should be applied. The Tribunal did note that, given the complexity of the law surrounding the issue, the penalty which had been applied to the taxpayers should be reduced from 40% to 20%.

Progress of Legislation

As at 25.4.08