Greenwoods & Freehills Weekly Tax Highlights - Week Ended 3.9.10

ATO Documents

Released 1.9.10

Class Rulings
CR 2010/46: Income tax: capital gains tax: conversion of Abalone Fishermen's Co-operative Limited to a company registered under the Corporations Act 2001
Product Rulings
PR 2010/18: Income tax: capital gains tax consequences for a Beneficiary of an Insurance Trust Deed
PR 2010/19: Income tax: tax consequences of investing in Westpac Deferred Purchase Agreements - Westpac Maximiser Series 2 

Released 3.9.10

New Interpretative Decisions
ATO ID 2010/153: Assessability of Malaysian Government service pension derived by an Australian resident
ATO ID 2010/154: Assessability of Netherlands pensions derived by an Australian resident
ATO ID 2010/155: Employee Share Scheme: assessability to an employer of the option exercise price paid by an employee

Withdrawn Interpretative Decisions
ATO ID 2009/72: Employee Share Scheme: assessability to an employer of the option exercise price paid by an employee

Appeals Update

Commissioner of Taxation v  BHP Billiton Finance Limited [2010] FCAFC 25 (17 March 2010): The High Court has refused the Commissioner special leave to appeal against the decision of the Full Federal Court. The Full Federal Court held that the taxpayer, the internal financier for the BHP Billiton group, was entitled to bad debt deductions for $2bn in loans to other group members that were written-off following the failure of mining projects.

SNF (Australia ) Pty Ltd v Commissioner of Taxation [2010] FCA 635 (25 June 2010): The Commissioner has appealed to the Full Federal Court. The Federal Court (Middleton J) held that transfer pricing determinations made by the Commissioner could not stand, because the taxpayer had satisfied the burden of proving that it paid arm’s length consideration for products acquired from related overseas suppliers.

Citigroup Pty Limited v Commissioner of Taxation [2010] FCA 826 (9 August 2010): The taxpayer and the Commissioner have separately appealed to the Full Federal Court. The taxpayer is appealing the decision of the Federal Court (Edmonds J) that Part IVA applied to deny foreign tax credits it claimed for Hong Kong profits tax it paid on the gross proceeds of stripping and selling the interest coupons on bonds. The Commissioner is appealing the Court’s decision that the taxpayer was not liable for GIC on the difference between the tax liability on the date the tax was due and the date of the amended determinations.

M W McIntosh  Pty Limited v Commissioner of Taxation [2009] FCAFC 88 (28 July 2009): The taxpayer has been refused special leave to appeal to the High Court. The Full Federal Court held that the Commissioner did not have the power to extend the time in which a taxpayer can lodge a choice to form a consolidated group under s.703-50(3).  

Futuris Corporation  Limited v Commissioner of Taxation [2010] FCA 935 (31 August 2010): The Federal Court (Besanko J) has found that Part IVA did not apply to a scheme under which the value shifting provisions increased the taxpayer’s cost base for its shares in a subsidiary by $83m, thereby reducing the capital gain realised when it then sold the subsidiary. The taxpayer wanted to sell its building products division, the assets of which were held through two subsidiaries. Broadly, in order to effect the sale, one of the subsidiaries became wholly-owned by the other; however, the shares were transferred at a discount of $83m, which triggered the value shifting provisions and increased the cost base of the shares in the acquiring subsidiary by the same amount. The Court found that there was no “tax benefit” because the reasonable counterfactual was that the taxpayer would have sold the business by some other means that also would not have resulted in the purported tax benefit of $83m being included in its assessable income.

RCI  Pty Ltd v Commissioner of Taxation [2010] FCA 939 (1 September 2010): The Federal Court (Stone J) has found that Part IVA applied to a scheme which reduced the taxpayer's capital gain derived from the disposal of its shares in James Hardie Holdings Inc. The Court agreed with the Commissioner that a tax benefit arose under a scheme involving a s.23AJ non-assessable non-exempt dividend being paid to the taxpayer which reduced the value of the shares and therefore the capital gain the taxpayer made on their subsequent disposal. The Court then found that the taxpayer had entered into or carried out the scheme for the dominant purpose of obtaining that tax benefit.

As At 3.9.10