Greenwoods & Freehills Weekly Tax Highlights - Fortnight Ended 15.1.10
Welcome to the first G&F Tax Highlights of 2010. This issue covers the period of time from 18.12.09 to 15.1.10. Class Ruling New Interpretative Decisions The Assistant Treasurer has announced that the Government intends to introduce legislation to reform the tax law as it relates to the requirements for CGT scrip-for-scrip roll-over relief in respect of takeovers and mergers approved under the Corporations Act 2001. The new laws will align the scrip-for-scrip roll-over requirements with the Corporations Act, to make it easier for takeovers and mergers regulated under the Corporations Act to qualify for the roll‑over. Consultation Paper – Reform of the Controlled Foreign Company Rules The Government has released the final report of the Australian Financial Centre Forum. The Government commissioned the report in September 2008, as part of its commitment to secure Australia's future as a leading financial services centre. The report's recommendations include the following: - Introduction of an Investment Manager Regime (IMR). The Government's press release states thatitwill consider the recommendations and respond "later in the year". TT-Line Company Pty Ltd v Commissioner of Taxation [2009] FCAFC 178 (18 December 2009): The Full Federal Court has unanimously held that a taxpayer was liable to GST on rebates received under a Commonwealth scheme. The Court found that the rebates were for the benefit of eligible passengers and not the taxpayer. In the Court's view the rebates were part of the consideration for the supply of ferry services and GST should be calculated on the fares before any rebate was deducted. AXA Asia Pacific Holdings Ltd v FCT [2009] FCA 1427: The Commissioner has appealed to the Full Federal Court. The Federal Court had allowed the taxpayer's appeal and held that it qualified for CGT scrip-for-scrip rollover on the sale of a subsidiary under a leveraged buy-out arrangement. Vidler v FCT [2009] FCA 1426: The taxpayer has appealed to the Full Federal Court. The Federal Court had affirmed a decision of the AAT that the sale of two blocks of vacant land by a taxpayer constituted taxable supplies because they did not satisfy the definition of residential premises. Bill Explanatory Memorandum Intro House Passed House Intro Senate Passed Senate Date of Royal assent / Act Number Description Carbon Pollution Reduction Scheme (Consequential Amendments)No 2 Bill 2009 22.10.09 Carbon Production Reduction Scheme, Income Tax And GST Treatment Customs Tariff Amendment (2009 Measures No 1) Bill 2009 [No 2] 22.6.09 22.6.09 23.6.09 13.8.09 27.8.09/74 Bill to increase the customs duty rate applying to certain alcoholic beverages Excise Tariff Amendment (2009 Measures No 1) Bill 2009 [No 2] 22.6.09 22.6.09 23.6.09 13.8.09 27.8.09/73 Bill to increase the excise rate applying to certain alcoholic beverages 21.10.09 16.11.09 17.11.09 2.12.09 14.12.9/132 Bill to increase the excise rate applying to certain alcoholic beverages 19.3.09 16.9.09 17.9.09 17.9.09 8.10.09/105 Tax Information Exchange Agreement: British Virgin Islands and Isle of Man 25.11.09 New Zealand Treaty, Belgian Protocol; Jersey Allocation of taxing rights Tax Agent Services (Transitional Provisions and Consequential Amendments) Bill 2009 24.6.09 27.10.09 29.10.09 29.10.09 16.11.09/114 Employee Share Schemes 25.6.09 7.9.09 8.9.09 10.9.09 18.9.09/88 R&D, Prescribed private funds, Demutualisation of friendly societies, Consolidation 21.10.09 16.11.09 17.11.09 2.12.09 14.12.09/133 Employee Share Schemes, Non-Commercial Losses, Lost Superannuation Tax Laws Amendment (Confidentiality of Taxpayer Information) Bill 2009 19.11.09 Disclosure and Secrecy Provisions Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2009 28.5.09 4.6.09 15.6.09 15.6.09 23.6.09/41 Medicare Levy and Medicare Levy Surcharge Tax Laws Amendment (2009 GST Administration Measures) Bill 2009 25.11.09 GST, 27.8.08 13.10.08 14.10.08 3.2.09 Removes Tax Deductibility of Political Donations, GST 16.9.09 29.10.09 16.11.09 26.11.09 4.12.09/118 GST, PAYG Instalments, Bushfire Appeal 25.11.09 CGT Cloning Exemption, Super Fund Mergers, DGR, Flood Victim Payments, Spirits Excise Rates
ATO Documents
Released 8.1.10
New Interpretative Decisions
ATO ID 2010/1: Definition of child for purposes of section 295-485 of the Income Tax Assessment Act 1997
ATO ID 2010/2: Capital allowances: holder of an intangible depreciating asset - mining, quarrying or prospecting right
ATO ID 2010/3: Continuity of foreign service: consequence of taking maternity leave
ATO ID 2010/4: Consolidation: multiple entry consolidated group - special conversion event
ATO ID 2010/5: Complying superannuation fund: deduction for increased amount of superannuation lump sum death benefit
ATO ID 2010/6: GST and decreasing adjustments for supplies arising from terminated hire purchase agreements with underlying securitisation arrangements
ATO ID 2010/7: Self managed superannuation funds: tax treatment of futures contracts
ATO ID 2010/8: Non-Portfolio Dividend exemption to a distribution received by a limited partner from a Corporate Limited Partnership
ATO ID 2010/9: Capital gains tax: scrip for scrip roll-over - Delaware limited partnerships
Released 13.1.10
CR 2010/1: Income tax: treatment of payments received under the Murrumbidgee Catchment Management Authority Lower Murrumbidgee EcoTender program
Notice of Withdrawal
Taxation Determination
TD 2004/2: Income tax: capital gains: is reflection in the 'value' of an asset sufficient to constitute reflection in its 'state' or 'nature' for the fourth element of cost base and reduced cost base (subsections 110-25(5) and 110-55(2) of the Income Tax Assessment Act 1997 and what are the implications of this issue for a shareholder that makes a non-scrip share capital contribution to a company?
Released 15.1.10
ATO ID 2010/10: GST and bill of exchange not honoured at maturity
ATO ID 2010/11: GST and bill of exchange as consideration for a supply
ATO ID 2010/12: Excise: home consumption - delivered - periodic settlement permission
ATO ID 2010/13: Excise: home consumption - delivered - prepaid entry
ATO ID 2010/14: Capital Allowances: cost - computer software - annual licence fees
ATO ID 2010/15: Payments by a life insurance company to correct unit pricing errors
Withdrawn Interpretative Decisions
ATO ID 2002/1031: Tax Losses-Continuity of Ownership Test (COT) and application of 'saving rule'
ATO ID 2002/646: Trust loss provisions - carry-forward losses of deceased estate
ATO ID 2002/746: Trust - liability for Family Trust Distribution Tax on distribution to superannuation fund
ATO ID 2002/748: Superannuation Fund - liability for Family Trust Distribution Tax on a distribution outside the family group.
ATO ID 2003/119: Transfer of tax loss: written agreement - change to the amount of tax loss
ATO ID 2003/120: Transfer of net capital loss: written agreement - change to the amount of assessable net capital gain
ATO ID 2003/121: Transfer of net capital loss: written agreement - change to the amount of net capital loss
ATO ID 2003/123: Group company loss transfers: valid transfer agreement - single document with multiple agreements
ATO ID 2003/124: Group company loss transfers: valid transfer agreement - single document with multiple agreements
ATO ID 2003/164: Family trusts: interposed entity elections - entities owned by family members
ATO ID 2003/174: Trust Losses: Pattern of distributions and prior year losses of non-fixed trust
ATO ID 2003/199: Capital gains tax: CGT discount and small business concessions - disposal of active asset by non-resident
ATO ID 2003/21: Group company loss transfers: companies wholly-owned by the same individuals
ATO ID 2003/236: Interposed Entity Elections: trust in respect of which the relevant Family Trust Election was made ceases to exist
ATO ID 2003/273: Commercial debt forgiveness: commercial debt - 'exception provision' - section 51AD of the Income Tax Assessment Act 1936
ATO ID 2003/277: Group company loss transfers: wholly-owned group - company not a member of the group for the whole test period
ATO ID 2003/278: Group company loss transfers: net capital loss - gain company incorporated during the application year
ATO ID 2003/294: Commercial debt forgiveness - applying total net forgiven amount - partnerships and partners.
ATO ID 2003/306: Commercial debt forgiveness - net forgiven amount - loss transfers between a group of related companies
ATO ID 2003/333: Group company loss transfers: valid transfer agreement - income company not a group member during the loss year
ATO ID 2003/334: Continuity of ownership test: transfer of shares received by a beneficiary of a deceased estate to a fellow beneficiary of the same estate
ATO ID 2003/596: Life Insurance Company: foreign tax credits relating to the share of the company's trust income derived from segregated exempt assets
ATO ID 2004/245: Family trusts: family trust election - family control test
ATO ID 2004/246: Trust losses: scheme to take advantage of deductions (income injection test) - bad debts
ATO ID 2004/376: Commercial debt forgiveness - creditor company is group member with deductible revenue losses
ATO ID 2004/456: Capital gains tax: Demerger - cost base of new interest in demerged entity - no CGT event happened to pre-CGT original interest
ATO ID 2004/457: Capital gains tax: Demerger - CGT status of new interest - no CGT event happened to pre-CGT original interest
ATO ID 2004/538: Capital Gains Tax: small business concessions - small business CGT affiliate - permanently separated spouse
ATO ID 2004/566: Capital Gains Tax: discount capital gain - lease surrender receipt by lessor
ATO ID 2004/57: Capital gains tax: Sale of shares in demerged non-resident company by resident shareholder - reduction of capital gain by amount of assessable dividend
ATO ID 2004/601: Capital gains tax: fourth element of cost base and reduced cost base - costs incurred for the removal of restrictive covenants
ATO ID 2004/641: Capital gains tax: testamentary gift of property to a deductible gift recipient
ATO ID 2004/665: CGT small business concessions: active asset - discretionary trust - connected entity - beneficiary control test
ATO ID 2004/95: Capital gains tax: Subdivision 122-A rollover: shares transferred from current shareholders
ATO ID 2004/950: Capital gains tax: main residence exemption: interaction between the 'absence' rule and the 'first use to produce income' rule - dwelling used to produce income for more than six years
ATO ID 2004/969: CGT small business concessions: retirement exemption: eligible termination payment (ETP) roll-over - transfer of property
ATO ID 2004/970: Capital Gains Tax: small business concessions - connected entities - control of discretionary trust with tax loss - nomination of controllers
ATO ID 2005/110: Capital Gains Tax: small business concessions - maximum net asset value test - non-resident's worldwide assets
ATO ID 2005/198: Capital Gains Tax: scrip for scrip roll-over - significant stake
ATO ID 2005/225: Fixed trust - foreign resident beneficiary - capital gain disregarded when CGT event for fixed trust estate happens prior to 21 March 2005
ATO ID 2005/239: Capital Gains Tax: demerger - original interests in the head entity of a demerger group
ATO ID 2005/347: Capital gains tax: capital improvements - cost base used in determining whether improvement is a separate CGT asset
ATO ID 2005/44: Capital Gains Tax: small business concessions - active asset test - cessation of relevant business
ATO ID 2006/154: Capital Gains Tax: cost base - costs of hiring furniture and ornaments
ATO ID 2007/154: Fuel Tax Credit: eligibility - grader with GVM greater than 4.5 tonnes
ATO ID 2007/203: Excise: home consumption - delivered - prepaid entry
ATO ID 2007/207: Excise: home consumption - delivered - periodic settlement permission
Exposure Draft - Tightening the Non-Commercial Loan Rules
Released 4.1.10
Treasury has released an Exposure Draft: Tightening the Non-Commercial Loan Rules and Explanatory Memorandum. The Exposure Draft proposes amendments to prevent shareholders and their associates from avoiding tax on distributions and benefits that they receive from private companies. Broadly, the changes will extend the meaning of “payment” to include a lease, licence or other right to use an asset (other than an actual transfer of property, which is already covered). The Exposure Draft also proposes a number of other technical amendments to strengthen the non-commercial loan rules to ensure that they operate in accordance with their original policy intent, and to prevent their circumvention by the use of corporate limited partnerships.
Press Release – CGT scrip-for-scrip rollover
Released 6.1.10
The press release indicates that the Government will release an exposure draft in the coming months.
Released 5.1.09
Treasury has released a Consultation Paper: Reform of the Controlled Foreign Company Rules. The consultation paper has been prepared to elicit industry comment on the high-level design of the reformed CFC rules. For a detailed analysis of the proposed changes, please refer to G&F's recent Tax Brief on the subject.
Report - Australia as a Financial Centre
Released 15.1.10
- The uncertainty about the “choice” issue in the context of Offshore Banking Units (OBUs) be resolved, if necessary by legislative amendment.
- The list of eligible OBU activities in Division 9A, be updated and regularly reviewed.
- A streamlined process for vetting new OBU applications be put in place, including a requirement that an application be approved or denied within 6 months of its receipt.
- That the Treasurer request the Board of Taxation to review the scope for legislating for a broader range of tax flow-through collective investment vehicles.
- The restrictions on Venture Capital Limited Partnership qualification be examined to see if they are all necessary and consistent with the Government's objective of developing Australia as a leading financial centre.
- Remove withholding tax on interest paid on foreign-raised funding by Australian banks, including offshore deposits and deposits in Australia by non-residents.
- Remove withholding tax on interest paid to foreign banks by their Australian branches.
- Remove withholding tax on financial institutions' related party borrowings.
- Remove the LIBOR cap on the deductibility of interest paid on branch/parent funding.
- That the Treasurer refer to the Board of Taxation the question of whether any amendments to existing tax laws are necessary in order to ensure that Islamic finance products have parity of treatment with conventional products.
- That all state taxes and levies on the insurance sector be removed.
Tax Cases
British American Tobacco Australia Services Limited v Commissioner of Taxation [2009] FCA 1550 (21 December 2009): The Federal Court has dismissed the taxpayer's appeal and upheld a Pt IVA determination made by the Commissioner in relation to the global merger of the taxpayer and another company. The Court found that the taxpayer entered into a scheme in relation to the sale of several subsidiary brands that was structured for the purpose of tax avoidance. The sale of the brands had been mandated by the ACCC prior to the merger.
Meridien Marinas Horizon Shores Pty Limited v Commissioner of Taxation [2009] FCA 1594 (24 December 2009): The Federal Court has found that a supply of berths by a taxpayer did not constitute a supply of commercial accommodation. The taxpayer's argument, that it supplied commercial accommodation because under each lease and the rules of the marina a lessee had the right to occupy the whole or any part of a berth, was dismissed by the Court.
Gerard Cassegrain and Co Pty Limited and Anor and Commissioner of Taxation [2010] AATA 12 (12 January 2010): The AAT has held that the Commissioner had overstated assessable income in an amended assessment issued to the taxpayer. The Commissioner had argued the taxpayer was partly liable for tax on the disposal of an asset for CGT purposes and had issued an amended assessment accordingly. The Tribunal has remitted the matter back to the Commissioner to enable further amended assessments.
Appeals Update
Progress of Legislation
As at 15.1.10
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