Greenwoods and Freehills Weekly Tax Highlights - Week Ended 11.7.08

ATO Documents

Released 9.7.08

Notice of Withdrawal
Draft Taxation Determination
TD 2005/D17: Income tax: is an employee's deduction for the decline in value of a depreciating asset used for a taxable purpose affected by section 51AH of the Income Tax Assessment Act 1936, if they are subsequently reimbursed an amount for the cost of the asset by their employer? 

Released 11.7.08

New Interpretative Decisions
ATO ID 2008/106: Hire purchase agreement: notional sale - 'start of the arrangement'
Legislative Determination
Goods and Services Tax
RCTI 2008/1: Agricultural Producers

Draft Legislation - Thin Cap and IFRS

Released 11.7.08

Treasury has released draft legislation for consultation on the proposal  to amend the thin capitalisation regime to accommodate certain impacts arising from the 2005 adoption of Australian equivalents to International Financial Reporting Standards (AIFRS). These amendments are designed to allow entities to depart from the current accounting treatment in relation to certain intangible assets and to exclude deferred tax assets and liabilities and surpluses and deficits in defined benefit superannuation funds when doing their thin capitalisation calculations.

Released 9.7.08

The Tax Office has released a paper on the treatment of CGT Assets in relation to straddle contracts. The paper discusses the tax cost setting rules and how they apply when an entity contracts to sell or buy a CGT asset and that contract is not completed at the time the entity joins or leaves a consolidated group. The tax consequences that arise on completion of the contract are also considered.

Kennedy v Administrative Appeals Tribunal, Full Federal Court, 4 July 2008: The Full Federal Court has unanimously dismissed the appeal of a taxpayer, who had argued that the AAT had erred in not considering the "validity" of amended assessments issued to him. The Court confirmed that the AAT does not have the jurisdiction to determine "validity" of asessments. The taxpayer had argued that the Commissioner had issued the assessments in order to assist other government agencies in a seperate matter. 

Lilyvale Hotel Pty Limited v FCT [2008] FCA 1031, Federal Court, 10 July 2008: The Federal Court has affirmed the Commissioner's decision that a taxpayer was not entitled to a deduction  because the taxpayer did not satisfy the requirements of the same business test during the relevant test period. The deductions were for prior year losses incurred in a period, during which the taxpayer company had a change in shareholdings. This resulted in it failing the continuity of ownership test. 

Frisch and FCT, AAT Case [2008] AATA 462, 4 June 2008: A severely disabled taxpayer has been granted a deduction by the AAT for most of the expenses incurred to assist with her disability, whilst deriving income. The taxpayer had hired an assistant to provide personal care and to assist with various facets of her work, she herself was unable to physically accomplish. The taxpayer sought a private ruling. The Commissioner denied the claim in the resulting ruling. In the judgement handed down the AAT found that it was "at least arguable that the 'essential character' of the money spent was no more nor less than the payment of wages or in other words the acquisition for wages of services needed in order to enable the Applicant to derive her income". 

Progress of Legislation