Greenwoods & Freehills Weekly Tax Highlights - Week Ended 11.9.09

ATO Documents

Released 9.9.09

Final Taxation Ruling
TR 2009/5: Income tax: trading stock - treatment of discounts, rebates and other trade incentives offered by sellers to buyers 
Final Class Ruling
CR 2009/47: Income tax: early retirement scheme - Mars Australia Pty Ltd 
CR 2009/48: Income tax: Orchard Industrial Property Fund Restructure: Orchard Management Limited and Orchard Industrial Property Fund stapling arrangement
CR 2009/49: Income tax: payments made by National Entitlement Security Trust to members
Draft Taxation Determination
TD 2009/D7: Income tax: where an Australian resident taxpayer includes its share of the net income of a partnership in its assessable income under section 92 of the Income Tax Assessment Act 1936, and the net income of the partnership (as determined in accordance with section 90 of that Act) includes Foreign Investment Fund (FIF) income of the partnership, will that taxpayer be entitled to a FIF exemption under subsection 519B(2) of that Act for any relevant proportion of their share of the partnership's net income? 

Released 11.9.09

Interpretative Decisions
ATO ID 2009/100: Complying superannuation fund: deductibility of premiums on 'whole of life policy' - subsection 295-465(1) of the ITAA 1997
ATO ID 2009/101: Capital Allowances: tax break - use of an asset merely for the purposes of reasonable testing or trialling
ATO ID 2009/102: Consolidation: second element of cost base of shares - blackhole expenditure
ATO ID 2009/99: Complying superannuation fund: deductibility of premiums on 'whole of life policy' - paragraph 279(1)(a) of the ITAA 1936

Withdrawn Interpretative Decisions
ATO ID 2001/489: Superannuation contributions surcharge assessment - calculation of a member's surchargeable contributions and adjusted taxable income
ATO ID 2001/516: Superannuation contributions surcharge assessment - calculation of a member's surchargeable contributions and adjusted taxable income
ATO ID 2002/606: Superannuation Contributions Tax: employer contract payment and the calculation of adjusted taxable income
ATO ID 2003/1006: Assessability of Japanese age pension paid to resident of Australia 
ATO ID 2004/239: Assessability of salary and wages received by an Australian resident working in Japan
ATO ID 2004/564: Capital Allowances: hold - assets attached to land by licensee
ATO ID 2004/771: Assessability of employment income derived by Australian resident individual working in Japan 
ATO ID 2004/772: Assessability of employment income derived by a dual resident of Australia and Japan from working in Japan

Decision Impact Statements

Released 10.9.09

Lilyvale Hotel Pty Ltd v Commissioner of Taxation: The Full Federal Court had found that the taxpayer met the requirements of the same business test for the purposes of being entitled to deduct prior year losses. The Commissioner concedes that the decision is a product of the application of established principles to particular facts and has stated that the outcome of the case is not expected to have significant implications for rulings which have been issued on the same business test.

WRBD v Commissioner of Taxation: The Administrative Appeals Tribunal found that a loss on the off-market disposal of convertible notes was not deductible under s.70B. The Commissioner has stated that the decision in this case is in accordance with  the ATO's established view on the interpretation of s.70B(4) and will be applied in any future case with similar facts.

Jacob Berghofer v Commissioner of Taxation: The Administrative Appeals Tribunal affirmed the Commissioner's decision that payments received by the taxpayer from a Queensland government scheme constituted part of his assessable income; however, the Tribunal held that the amounts were assessable as ordinary income and not as a bounty or subsidy. The Commissioner has no recourse to appeal the decision due to the favourable nature of the decision, however the Commissioner maintains that the payments received would be included in assessable income under s.15-10 of the Income Tax Assessment Act 1997 as bounties or subsidies received in relation to carrying on a business. The ATO will issue an addendum to Taxation Ruling TR 2006/3.

Tax Information Agreement with Singapore

Released 8.9.09

The Assistant Treasurer has signed a Protocol to insert a new Article 19 (Exchange of Information) into the DTA with Singapore. The text of the new Article 19 is available on the Treasury website.


Parliamentary Inquiry: Agribusiness Managed Investment Schemes

Released 7.9.09

The Parliamentary Joint Committee on Corporations and Financial Services has released its report: Inquiry into aspects of agribusiness managed investment schemes. The Committee highlighted the potential for market distortions to be caused by the current tax deductibility arrangements applying to non-forestry MIS investment. The Committee also recommended that the government amend the Corporations Act to require ASIC to appoint a temporary Responsible Entity when a registered MIS becomes externally administered or a liquidator is appointed and that ASIC require agribusiness MIS to disclose the qualifications and accreditation of third parties that provide expert opinions on likely scheme performance.

Appeals Update

Lawrence v Federal Commissioner of Taxation [2009] HCATrans 222 (4 September 2009): The High Court has refused the taxpayer special leave to appeal. The Full Federal Court had held that the taxpayer's assessable income was to include a distribution of profit by way of loans from two trusts.  

Malouf v Commissioner of Taxation [2009] HCATrans 216 (4 September 2009): The High Court has refused the taxpayer special leave to appeal. The Full Federal Court had held that the taxpayer's obligation to pay the balance of the purchase price under a contract for the sale of land was not incurred in the income year the contract was entered into.  

ConnectEast Management Limited v The Commissioner of Taxation [2009] HCATrans 220 (4 September 2009): The High Court has refused the taxpayer special leave to appeal. The Full Federal court had held that the taxpayer had not acquired the status of a "listed widely held trust".

Tax Cases

Commissioner of Taxation v Star City Pty Limited (No 2) [2009] FCAFC 122 (10 September 2009): The Full Federal Court has held that the Commissioner could not rely on s.226L of the Income Tax Assessment Act 1936 and s.284-145 of the Taxation Administration Act 1953  to impose 50% tax shortfall penalties on the taxpayer in relation to its unsuccessful claim for a deduction for the prepayment of rent. The Court held that the penalties could not be imposed, as s.226L required a finding that the taxpayer's 'subjective' purpose was to obtain a tax benefit and the judge at first instance had found, as an uncontested finding of fact, that the taxpayer's actual sole or dominant purpose was to be the successful bidder for the casino licence, and not to obtain any tax benefit.

Legislative Update

Tax Laws Amendment (2009 Measures No 4) Bill 2009 passed through the Senate on 10.9.09 and now awaits Royal Assent. The Bill was passed by the Senate without amendment.

Progress of Legislation

As at 11.9.09