Greenwoods & Freehills Weekly Tax Highlights - Week Ended 18.12.09

This will be the last instalment of the Weekly Tax Highlights for 2009. G&F would like to take this opportunity to wish all of our readers a Merry Christmas and a Happy New Year. Weekly Tax Highlights will resume in early January 2010.

ATO Documents

Released 15.12.09

Taxpayer Alert
TA 2009/19: Uncommercial offshore superannuation trusts

Released 16.12.09

Draft Taxation Rulings
TR 2009/D6: Income tax: the interaction of Division 820 of the Income Tax Assessment Act 1997 and the transfer pricing provisions in relation to costs that may become debt deductions, for example, interest and guarantee fees
TR 2009/D8: Income tax: Division 7A loans: trust entitlements 

Taxation Determinations
TD 2009/20: Income tax: where the net income of a partnership (determined in accordance with section 90 of the Income Tax Assessment Act 1936) includes Foreign Investment Fund (FIF) income, will an Australian resident taxpayer which is assessable on its share of the net income under section 92 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?
TD 2009/21: Income tax: to obtain a deduction under section 25-90 of the Income Tax Assessment Act 1997 for a cost in relation to a debt interest does the taxpayer have to actually derive a dividend to which section 23AJ of the Income Tax Assessment Act 1936 applies in the same income year as that in which the cost is incurred?

Taxation Determinations
TD 2007/D20: Income tax: where there is no excess debt under Division 820 of the Income Tax Assessment Act 1997 can the transfer pricing provisions apply to adjust the pricing of costs that may become debt deductions, for example, interest and guarantee fees?
TD 2009/D17: Income tax: treaty shopping - can Part IVA of the Income Tax Assessment Act 1936 apply to arrangements designed to alter the intended effect of Australia's International Tax Agreements network?
TD 2009/D18: Income tax: can a private equity entity make an income gain from the disposal of the target assets it has acquired? 

Goods and Services Tax Determinations
GSTD 2009/D2: Goods and services tax: are there GST consequences where a land owner engages the services of an associate to arrange construction of residential premises for lease under an arrangement described in Taxpayer Alert TA 2009/5? 

Draft Miscellaneous Taxation Ruling
MT 2009/D1: Miscellaneous tax: restrictions on GST refunds under section 105-65 of Schedule 1 to the Taxation Administration Act 1953 
 
Class Rulings
CR 2009/74: Income tax: return of capital: Biota Holdings Limited
CR 2009/75: Income tax: early retirement scheme - Mercedes-Benz Australia/Pacific Pty Ltd
CR 2009/76: Income tax: Victorian Department of Education and Early Childhood Development

Notices of Withdrawal
TD 2007/D20W: Income tax: where there is no excess debt under Division 820 of the Income Tax Assessment Act 1997, can the transfer pricing provisions apply to adjust the pricing of costs that may become debt deductions, for example, interest and guarantee fees?
GSTR 2002/5DAW: Draft Addendum Withdrawal Goods and services tax: when is a 'supply of a going concern' GST-free?

Released 17.12.09

Practice Statement
PS LA 3187 (draft): A practical 'rule of thumb' approach for the transfer pricing of interest payable by a taxpayer on a cross-border related party loan

Released 18.12.09

New Interpretative Decisions
ATO ID 2009/154: Interest withholding tax - in substitution for interest
ATO ID 2009/155: Beneficiary of a managed investment trust
ATO ID 2009/156: Capital allowances: quasi-ownership right over land - meaning of lease
ATO ID 2009/157: Non-portfolio dividends: returns on redeemable preference shares - debt interests
ATO ID 2009/158: Application of Article 4(5)(d) of the Australia: Japan tax treaty - permanent establishment in Singapore of a Japanese resident company
ATO ID 2009/159: Employer's fringe benefits taxable amount: change in employer's status from endorsed public benevolent institution to a hospital
ATO ID 2009/160: Consolidation: tax cost setting rules - acquisition of a consolidated group
ATO ID 2009/161: Consolidation: treatment of transactions of an offshore branch of a subsidiary member of a consolidated group with other members of the group under the single entity rule

Withdrawn Interpretative Decisions
ATO ID 2002/1082: Interposed Entity Elections (IEE) - Multiple Elections
ATO ID 2003/1114: CGT small business concessions: controlling individual - different income and capital beneficiaries
ATO ID 2003/1129: Capital gains tax: rollover relief - transfer of asset to company in same wholly-owned group during the period commencing 30 June 2003 and ending just before the first day of the originating company's first income year that commences after 30 June 2003
ATO ID 2003/1137: Capital gains tax: shares - non assessable payment
ATO ID 2003/364: Group company loss transfers: unsigned transfer agreement
ATO ID 2003/365: Group company loss transfers: net capital loss of loss company - assessable income of income company
ATO ID 2003/366: Group company loss transfers: transfer of net capital loss and tax loss to offset capital gain
ATO ID 2003/70: Transfer of net capital loss - application of net capital loss
ATO ID 2003/71: Transfer of losses - deductibility of prior year losses
ATO ID 2003/74: Commercial Debt Forgiveness - debt relating to exempt income
ATO ID 2004/404: Capital gains tax: cost base: adjustment for capital works expenditure deducted
ATO ID 2004/6: Employee share scheme: capital gains tax - cost base modification of share acquired from exercise of qualifying right 
ATO ID 2004/7: CGT small business concessions: active asset - intangible asset used in a connected entity's business
ATO ID 2004/788: Capital Gains Tax: becoming an Australian resident - assets having the necessary connection with Australia - private company shares
ATO ID 2004/946: Capital gains tax: marriage breakdown rollover - transfer of asset from company to individual under court order
ATO ID 2006/73: Capital gains tax: marriage breakdown rollover - transfer of asset from one self managed superannuation fund to another

Review of the Alienation of Personal Services Income rules

Released 16.12.09

 The Board of Taxation has released its review into the alienation of personal services income rules (which were introduced in 2000). The Board's key findings were that:  

(i) the rules have gone some way to achieving their intention of improving integrity and equity in the tax system, however in the Board’s view their impact has been inadequate; and

(ii) their efficacy has been diminished by the difficultly taxpayers have in applying the rules, together with a limited level of compliance activity by the ATO.

(v) clarifying who is affected by the rules; and

(vi) introducing a deemed labour income approach which would focus on distinguishing that part of an entity’s income that is derived from an individual’s labour from the part that is a return on its business assets or capital.

Exposure Draft – Forestry Managed Investment Scheme amendments

Released 18.12.09 

The amendments are proposed to apply retrospectively from 1 July 2007.
 
Exposure Draft – Repeal of the FIF regime

Released 18.12.09 

Treasury has released an exposure draft of the Tax Laws Amendment (Foreign Source Income Deferral) Bill (No. 1) 2010, containing proposed amendments to repeal the FIF and deemed present entitlement rules, as recommended by the Board of Taxation following its review of Australia’s anti-foreign source income tax-deferral regimes.

Exposure Draft – Thin capitalisation amendments: AIFRS and ADIs

Released 17.12.09 

Treasury has released an Exposure Draft: Thin Capitalisation (AIFRS and ADIs): Modification of the Rules in Relation to the Application of Accounting Standards and an accompanying Explanatory Statement. The exposure draft contains proposed amendments to adjust for some of the impacts of the 2005 adoption of the Australian equivalents to International Financial Reporting Standards (AIFRS) on the thin capitalisation position of authorised deposit taking institutions (ADIs). The proposed amendments will clarify how treasury shares, the business insurance asset known as 'excess market value over net assets', and capitalised software costs should be treated for thin capitalisation purposes.

Exposure Draft – GST administration

Released 14.12.09 

(i) clarifying the input tax credit attribution rules; and
(ii) introducing GST adjustments for third party payments.

Tax information exchange and allocation of taxing rights agreements with Samoa and Aruba

Released 16.12.09 

Treasury has announced that the Governments of Australia and Samoa have signed a Tax Information Exchange Agreement and an Agreement for the Allocation of Taxing Rights with Respect to Certain Income of individuals and to Establish a Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments.

Treasury also announced that the Governments of Australia and Aruba have signed a Tax Information Exchange Agreement and an Agreement for the Allocation of Taxing Rights with Respect to Certain Income of individuals and to Establish a Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments.

Legislative Update