Greenwoods and Freehills Weekly Tax Highlights - Week Ended 2.5.08

ATO Documents

Released 30.4.08

Taxation Determinations
TD 2008/8: if a private company makes a loan to a shareholder or their associate in an income year and the loan has not been fully repaid, what elements of the loan agreement need to be in writing for the purposes of paragraph 109N(1)(a) of Division 7A of Part III of the Income Tax Assessment Act 1936?
TD 2008/9: Income tax: are amounts mistakenly paid as salary or wages to employees (or as income support payments or worker's compensation amounts to persons), to which they are not beneficially entitled, but are obliged to repay, 'ordinary income' under section 6-5 of the Income Tax Assessment Act 1997?
TD 2008/10: Fringe benefits tax: where an employer recognises they mistakenly paid to their employee an amount that the employee is not legally entitled to, but is obliged to repay, and afterwards allows the employee time to repay the amount, is there a 'loan benefit' under subsection 16(1) of the Fringe Benefits Tax Assessment Act 1986?
TD 2008/11: Fringe benefits tax: where an employer mistakenly pays to their employee an amount that the employee is not legally entitled to, but is obliged to repay, does the employer's subsequent waiver of that obligation constitute a 'debt waiver benefit' under section 14 of the Fringe Benefits Tax Assessment Act 1986?
Class Rulings
CR 2008/31: Income tax: demerger of Autogen Research Pty Ltd by ChemGenex Pharmaceuticals Ltd
CR 2008/32: Income tax: capital gains: establishment of Asciano Finance Trust and demerger of Asciano Ltd by Toll Holdings Ltd
CR 2008/33: Income tax: capital gains: demerger of Mercury Mobility Ltd by Cellnet Group Ltd 
Product Rulings
PR 2008/40: Income tax: tax consequences of investing in ABN AMRO Self Funding Instalment Warrants TL3SZZ Series 2006 Product Disclosure Statement - cash applicants and secondary market purchasers
PR 2008/41: Income tax: tax consequences of investing in ABN AMRO High Leverage Instalment Warrants TL3IZA-IZC Series 2006 Product Disclosure Statement - cash applicants and secondary market purchasers
PR 2008/42: Income tax: Cool Climate Apricot Project - 2008 Growers 
PR 2008/43: Income tax: Rewards Group Teak Project 2008
Draft Self Managed Superannuation Fund Ruling
SMSFR 2008/D3: Self Managed Superannuation Funds: business real property for the purposes of the Superannuation Industry (Supervision) Act 1993 
Addenda
Income Tax Rulings
IT 333: Expenditure on spare parts and consumable stores. Whether deduction allowable on usage basis or in year of purchase 
IT 363: Mining company: application of Division 330 to principal and sub-contractors engaged in mining operations 
Taxation Determination
TD 2003/28: Income tax: capital gains: does CGT event E4 in section 104-70 of the Income Tax Assessment Act 1997 happen if the trustee of a discretionary trust makes a non-assessable payment to: (a) a mere object; or (b) a default beneficiary? 

Released 2.5.08

ATO ID 2008/61: Withholding Tax Exemption: interest and dividends paid by an Australian resident and received by a Dutch Stichting as unitholder in an Irish Common Contractual Fund
ATO ID 2008/62: Assessable Income: application of the business profits article to a Dutch Stichting that is a unitholder in an Irish Common Contractual Fund
ATO ID 2008/63: Assessable Income: Irish Common Contractual Fund - residency for the purposes of the Irish Agreement

Released 1.5.08 

The Treasurer has announced, during a radio interview, that the Federal Government intends to tighten the laws surrounding the use of  executive share option schemes to avoid paying tax. The Treasurer said there has been a loophole in the system "where those with the shares who are predominately higher incomes earners and people who've accumulated shares or rights through their company, have been able to avoid paying their fair share of tax".  No further details on the proposed measures have been forthcoming.

Tax Cases

Metlife Insurance Ltd v FCT [2008] FCA 568, 29 April 2008: The Federal Court has found that the Commissioner was within his rights to issue an amended assessment under Section 170(10AA) of the ITAA 1936. The amended assessment applied to an additional capital gain made by the taxpayer from the sale of a business and was issued four years after the relevant time. The taxpayer's argument, that the assessment could only be issued under the relevant section if the section was triggered by a change in circumstances after the original amendment had been made, was considered by the Court to be invalid. The Court found that no such restriction existed within the provision.

ConnectEast Management Ltd v FCT [2008] FCA 557, 29 April 2008: The Federal Court has held that an unlisted widely held trust did not qualify to be treated as a listed widely held trust under the trust loss measures. The trust was seeking to have the 'higher status' of its parent trusts applied. The matter hinged on the nature of the ownership of the trust. The Court decided that the provisions only applied to a trust which was wholly owned by a trust of higher status and that since the trust in question was collectively owned by a number of other trusts it had not acquired the status of a listed widely held trust.   

Malouf v FCT [2008] FCA 497, 22 April 2008: The Federal Court has held that a taxpayer's residual payment for a contract of a sale of  land was incurred during the income year the contract was entered into and not during the year of payment of the residual amount. In coming to this decision the Court closely examined the meaning of 'incurred' and, after examining previous judicial treatment of the word, determined that the taxpayer's payment of the residual amount should be considered to have been incurred in the 1999 income year. This was despite the fact that the residual payment was made fourteen days after the completion of phase 1 of the retirement village project as specified in the contract.

Progress of Legislation

As at 2.5.08