Greenwoods & Freehills Weekly Tax Highlights - Week Ended 6.11.09

ATO Documents

Released 4.11.09

Class Ruling
CR 2009/62: Income tax: off-market share buy-back: Premium Investors Limited 
Product Ruling
PR 2009/57: Income tax: Gunns Plantations Walnut Project No. 3 - Late Growers
Draft Self Managed Superannuation Funds Determination
SMSFD 2009/D1: Self Managed Superannuation Funds: can a trustee of a self managed superannuation fund purchase a trauma insurance policy in respect of a member and still satisfy the sole purpose test in section 62 of the Superannuation Industry (Supervision) Act 1993?
 
Released 6.11.09

New Interpretative Decisions
ATO ID 2009/125: Disability superannuation benefit: roll-over - commencement of an account-based pension
ATO ID 2009/126: Assessability of interest income sourced in France received by an Australian resident individual
ATO ID 2009/127: Rebatable employer: meaning of 'non-profit association' - members include government bodies
ATO ID 2009/128: Capital allowances: tax break - substantially identical assets
ATO ID 2009/129: Capital gains tax: land vested in a statutory trustee for sale - CGT event A1
ATO ID 2009/130: Capital Allowances: depreciating asset - mining, quarrying or prospecting right
ATO ID 2009/131: GST and supply of potential residential land: subdivided from land on which a farming business was carried on that is not GST-free

Withdrawn Interpretative Decision
ATO ID 2004/347: Assessability of interest income sourced in France received by an Australian resident individual

Income tax law rewrites

Released 5.11.09

The Assistant Treasurer has released exposure draft legislation, and an associated explanatory memorandum, to rewrite the following provisions in the 1936 Act and move them to the 1997 Act:

• Part VI (collection and recovery);
• Schedule 2C (forgiveness of commercial debts);
• Schedule 2E (leases of luxury cars);
• Schedule 2G (farm management deposits); and 
• Schedule 2J (general insurance).

The rewrites are generally not intended to affect the operation of these provisions.

Appeals Update

Commissioner of Taxation v Bamford & Ors [2009] HCATrans 284 (3 November 2009): The High Court has granted both the taxpayers and the Commissioner special leave to appeal the decision of the Full Federal Court, which found that a capital gain made by a trust but distributed as trust income should be treated as income for tax purposes, and that the “proportionate view” should apply where a trust’s tax net income exceeds its accounting income.
  
St George Bank Ltd v Commissioner of Taxation [2009] HCATrans 286 (3 November 2009): The High Court has refused the taxpayer special leave to appeal the decision of the Full Federal Court, which found that interest payments made by the taxpayer were of a capital nature and therefore not deductible. The Full Federal Court’s decision now stands.

News Australia Holdings Pty Limited and Commissioner of Taxation [2009] AATA 750 (29 September 2009): The Commissioner has appealed to the Full Federal Court against the decision of the Administrative Appeals Tribunal (AAT). The AAT found that the taxpayer's dominant purpose in pursuing a restructure was to give effect to the relocation of the head company of the group to the United States and not to obtain a tax benefit. The AAT therefore determined that the Commissioner erred in applying Part IVA to deny the taxpayer the benefit of a capital loss that arose as a result of the restructure.

Westpac Banking Corporation v The Commissioner of Inland Revenue NZ High Court CIV 2005-404-2843 (7 October 2009): Westpac has announced that it will appeal the decision of the New Zealand High Court that upheld the Commissioner’s denial of deductions for funding and certain other costs under several preference share structured financing transactions undertaken by Westpac’s New Zealand branch (and its New Zealand resident subsidiaries) with offshore counterparties. 

Tax Cases

Commissioner of Taxation v Anstis [2009] FCAFC 154 (4 November 2009): The Full Federal Court has dismissed the Commissioner’s appeal, upholding the decision of Ryan J at first instance that education expenses incurred by the taxpayer whilst at university were allowable deductions. The expenditure was found to be deductible under s.8-1, on the basis that it was incurred in the course of gaining or producing the taxpayer’s assessable income, being Youth Allowance payments.

Russell v Commissioner of Taxation of the Commonwealth of Australia [2009] FCA 1224 (30 October 2009): The Federal Court has found that a New Zealand company was a “personal services entity” for the purposes of the personal services income (PSI) rules, despite being a non-resident. This meant that the taxpayer was taxed under the PSI rules in Australia, whilst the New Zealand company was also taxed in New Zealand. The taxpayer argued that the Australia/New Zealand treaty provided relief from tax under the PSI rules – in particular, that Article 7 meant that the income of the “enterprise” was taxable only in New Zealand. This argument failed – the Court found that the treaty did not provide relief for “economic” double taxation such as this, where two separate entities are taxed on the same income in two jurisdictions (as opposed to “juridical” double taxation where the same entity is taxed twice, for which treaty relief may be available).

Progress of Legislation

As at 6.11.09