Company tax reductions a no-brainer

Reductions in company tax rates are essential for Australia's long-term economic wellbeing, despite moves to the contrary at this week's ALP National Conference, CPA Australia has said.

Further details are available from the CPA Australia website.

Tax agent services: draft regulations released

The Australian Government has released for consultation exposure draft tax agent services regulations and explanatory material outlining in detail qualifications and relevant work experience requirements for registration as a tax agent or business activity statement (BAS) agent under the new tax agent services regime. The Assistant Treasurer, Senator Nick Sherry, said the draft regulations also set out the application fees for registration as a tax agent or BAS agent. Senator Sherry confirmed that the Australian Government is 'on track for a start to the full regime in early 2010'. Submissions are due by Wednesday 26 August.

Members who have any concerns with the requirements specified in these draft regulations are invited to draw them to our attention so they can be considered for inclusion in a CPA Australia submission to Treasury. Comments can be emailed to tax@cpaaustralia.com.au by Tuesday 18 August.

Special disability trusts: Australian Government seeks comments

The Australian Government has released for comment a consultation paper on proposed changes to the tax treatment of special disability trusts that were announced in the 2009 Australian Federal Budget. In the budget, the Australian Government announced it would:

• ensure that the unexpended income of a special disability trust is taxed at the relevant beneficiary's personal income tax rate, rather than automatically at the top personal tax rate plus Medicare Levy, with effect from the 2008 – 09 income year

• extend the capital gains tax (CGT) main residence exemption to include a residence that is owned by a special disability trust and used by the principal beneficiary of the trust as their main residence, with effect from the 2009 – 10 income year

Member comments are invited on these proposed reforms to the tax treatment of special disability trusts for inclusion in a possible CPA Australia submission to Treasury. As submissions are due by 31 August, we would appreciate comments emailed to tax@cpaaustralia.com.au by Monday 24 August.

Recent submission

CPA Australia has lodged a submission to the Board of Taxation on its current post-implementation review of the alienation of personal services income rules; a copy is available from the CPA Australia website.

Our Victorian Division is also hosting a member focus group, facilitated by Keith James FCPA, who is a member of the Taxation Board, to discuss issues relating to the review in Melbourne on Tuesday 11 August. Invitations to this event have recently been sent to all Victorian based practitioners.

Further details can be obtained by email to tax@cpaaustralia.com.au

Upcoming consultations and meetings

• ATPF meeting (7 August 2009)

• NTLG Consolidation Subgroup meeting (7August 2009)

• NTLG FBT Subcommittee meeting (13 August 2009)

• ATO Bookkeeper Advisory Group meeting (14 August 2009))

• ATO consultation on earnouts (14 August 2009)
  Treasury meeting on proposed tax consolidation amendments (20 August 2009)

• ATPF Accounting Working Group meeting (28 August 2009)

• ATPF Lodgment Working Group meeting (4 September 2009)

• Superannuation Consultative Committee meeting (8 September 2009)

• NTLG GST Subcommittee meeting (16 September 2009)

• NTLG meeting (17 September 2009)

Member enquiries or issues for these meetings should be sent to tax@cpaaustralia.com.au

Foreign investment screening rules relaxed: Treasurer

The Treasurer, the Hon. Wayne Swan MP, has announced changes to Australia's foreign investment screening regime. Mr Swan said the Australian Government will replace the four lowest thresholds for private business investment with the highest of these: a single threshold of 15 per cent in a business worth $219 million. The new unified threshold will be indexed on 1 January every year to keep pace with inflation. Mr Swan said the Australian Government will also abolish the requirement that foreign private investors notify it when establishing a new business in Australia valued above $10 million. Amending regulations are expected to be introduced in September. Note that some current requirements will remain.

Compensation for agency error: calls for improvement

The Commonwealth Ombudsman, Professor John McMillan, has released a report calling for improvements to the Government's scheme for compensating victims of deficient government advice, information or practices. Professor McMillan said the scheme applies to more than 100 Australian Government agencies, including the ATO, Centrelink and the Child Support Agency. The Ombudsman makes a number of recommendations to improve the scheme, one of which is the need for greater visibility of the scheme, 'so that the public knows they can ask to be compensated for government error'.

Five new ATO Decision Impact Statements

The ATO has released the following Decision Impact Statements:

• Romanin v FCT [2008] FCA 1532 — the Federal Court held that legal expenses incurred to recover amounts that were found to be income was deductible under s 8-1(1)(a) of the Income Tax Assessment Act 1997. The ATO noted it withdrew its appeal to the court. It says the taxpayer was entitled to a deduction under s 8-1 for the legal expenses he incurred in this case. The ATO says Taxation Determination TD 93/29 and ATO IDs 2002/656 and 2002/657 will need to be revised in accordance with the reasoning of the court.
  

• AAT Case [2008] AATA 896, Re Sanchez and FCT — the Administrative Appeals Tribunal (AAT) held that travel expenses incurred by a travel agent in respect of overseas travel were deductible under s 8-1 of the Income Tax Assessment Act 1997. The ATO says, based on the facts as found by the tribunal, the decision is consistent with established general principles of deductibility under s 8-1 in relation to expenses incurred by employees. The ATO's fact sheet, 'Travel agents - what travel expenses can I claim?', will be amended to take account of the decision in the case.
  

• AAT Case [2009] AATA 356, Re JHDY and FCT — there were a number of issues to be considered by the AAT in this case, in particular whether the taxpayer had omitted to return as assessable income profits from the promotion of subject schemes (via a family trust) and various distributions from the family trust. The ATO said that, once the tribunal accepted that the taxpayer was assessable in relation to the scheme profits, it was open to it on the evidence available to find that the profits were assessable to the taxpayer in the 2001 and 2002 years.
  

• AAT Case [2008] AATA 1162, Re Port of Portland Pty Ltd and FCT — the AAT held two breakwaters, but not a retaining wall, were items of plant of the taxpayer. The ATO said the decision applies established principles of law about what is plant to the particular facts of the case. It adds the decision was open to the tribunal on the evidence as presented.
  

• AAT Case [2009] AATA 83, Re Aitken & Anor and FCT — the AAT found that the receipts in question were the beneficial property of the company, rather than the taxpayers and were accordingly not dividends assessable under s 44 of the Income Tax Assessment Act 1936. The ATO said the AAT found the payments to the taxpayers were held by them on trust and used for the benefit of the company.

ATO IDs: 12 new; four withdrawn

The ATO has released the following IDs:

• ATO ID 2009/75: Foreign income tax offset (FITO): New Zealand Government superannuation pension
  

• ATO ID 2009/76: share capital tainting
  

• ATO ID 2009/77: dividends: non-share dividends and interest — superannuation fund for foreign residents — withholding tax
  

• ATO ID 2009/78: non-assessable and non-exempt income — dividends: non-share dividends and interest of a superannuation fund for foreign residents
  

• ATO ID 2009/79: dividends: non-share dividends and interest — foreign superannuation fund — withholding tax
  

• ATO ID 2009/80: immediate annuity as defined in s 995-1(1) of the Income Tax Assessment Act 1997
  

• ATO ID 2009/81: capital allowances: tax break — investment commitment time — depreciating asset subject to hire purchase agreement
  

• ATO ID 2009/82: life assurance company: calculation of passive income — ceases to carry on life assurance business before the end of the statutory accounting period
  

• ATO ID 2009/83: capital allowances: business-related costs — undivided amount of capital expenditure — several discrete matters — dissection of amount
  

• ATO ID 2009/84: capital allowances: business-related costs — amount incurred indifferently — most relevant business
  

• ATO ID 2009/85: employee share scheme: rights to acquire shares at a future time authorised by shareholders
  

• ATO ID 2009/86: CGT: trust split — appointing a new trustee — CGT event E1

The ATO has withdrawn the following IDs:

• ATO ID 2003/908: foreign tax credit: New Zealand government superannuation pension
  

• ATO ID 2006/164: foreign tax credits resulting from a mutual agreement procedure (MAP)
  

• ATO ID 2006/192: allocation of foreign tax credits
  

• ATO ID 2007/162: foreign tax credit: New Zealand tax incorrectly paid on pension income

ATO website updates

From the ATO website:

• Is your business tax-ready? — the ATO has designed this downloadable tool to help small businesses improve their tax practices
  

• Trustee beneficiary non-disclosure tax payment advice — this form is to be completed by the trustee of a closely held trust to advise the ATO of the amount of trustee beneficiary non-disclosure tax (TBNT) the trustee is liable to pay and to allow them to pay the TBNT
  

• Tax treatment of payments under financial claims scheme — this measure, re-announced in the 2009 Federal Budget, amends various Acts to ensure there are no adverse tax implications arising from a payment made by the Australian Prudential Regulatory Authority (APRA), or by a liquidator, under the financial claims scheme
  

• Non-profit news service no 0249 — addendum to GSTR 2006/9 GST: supplies — the ATO has highlighted to non-profit organisations that the Addendum to Goods and Services Tax Ruling 2006/9 further clarifies and gives examples of the existing ATO view on multi-party arrangements — specifically, Proposition 14 (third party payment arrangements) — including subsidy arrangements
  

• Minimum pension relief for self-funded retirees — the ATO noted that relief for self-funded retirees from the minimum payment requirement for account-based pensions has been extended
  

• Completing your FHSA payment variation advice — this form must be completed by first home saver account (FHSA) providers (or their nominated supplier) to advise the ATO if they cannot accept payments for one or more first home saver accounts listed in a remittance advice issued by the ATO or pay the full amount due from one or more first home saver accounts listed in a recovery notice issued by the ATO
  

• Consumer price index rates have been updated to include June 2009 quarter figure

Foreign exchange rates — July 2009

The ATO has released the average foreign exchange rates for July 2009. Rates for selected countries include: Europe — 0.5821; Hong Kong — 6.3128; Japan — 77.7639; New Zealand — 1.2676; UK - 0.5015; US — 0.8189.

Debate of Bills in Federal Parliament

Federal Parliament is due to commence its spring 2009 sittings on Tuesday 11 August. The draft legislative programs for both Houses show debate on Bills as follows.

House of Representatives

Tuesday 11 August – Thursday 13 August:

• Tax Laws Amendment (2009 Measures No 4) Bill 2009
  

• Higher Education Support Amendment (2009 Budget Measures) Bill 2009
  

• Veterans Affairs Legislation Amendment (Budget Measures) Bill 2009

Monday 17 August – Thursday 20 August:

• Tax Agent Services (Transitional Provisions and Consequential Amendments) Bill 2009
  

• International Tax Agreements Amendment Bill (No 1) 2009

Senate

Tuesday 11 August:

• Carbon Pollution Reduction Scheme Bill 2009 and accompanying Bills

Wednesday 12 August:

• Excise Tariff Amendment (2009 Measures No 1) Bill 2009 [No 2] and the Customs Tariff Amendment (2009 Measures No 1) Bill 2009 [No 2]
  

• Fairer Private Health Insurance Incentives Bill 2009, the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009, and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge — Fringe Benefits) Bill 2009

Legislation proposed for introduction in Federal Parliament

The following Bills are proposed for introduction in Federal Parliament in its 2009 spring sittings (which are scheduled to run from 11 August to 26 November):

• Taxation Laws (Transfer of Provisions) Bill 2009 — proposes to rewrite provisions from the Income Tax Assessment Act 1936 to the Income Tax Assessment Act 1997
  

• Tax Laws Amendment (2009 Measures No 5) Bill 2009 — proposes to amend the provisions dealing with representatives of incapacitated entities, and provide a CGT rollover for capital losses arising to complying super funds that merge with non-small complying super funds
  

• Tax Laws Amendment (2009 Measures No 6) Bill 2009 — proposes to amend the GST treatment of cross-border transport services, restrict the eligibility of the entrepreneurs' tax offset through the introduction of a family income test, refine the company loss recoupment rules to recognise multiple classes of shares, thin capitalisation amendments, foreign currency rules amendments, and abolish the CGT trust cloning exception
  

• International Tax Agreements Amendment Bill (No 2) 2009 — proposes to give the force of law to the revised treaty with New Zealand and amend the demerger relief provisions in relation to dual-listed companies

Government's superannuation review: panel appointments announced

The Minister for Financial Services, Superannuation and Corporate Law, The Hon. Chris Bowen, has announced the appointments of Meg Heffron and Ian Martin as part-time members of the Australian Government's review into the governance, efficiency, structure and operation of Australia's superannuation system.

APRA succeeds in action to recover assets of failed super fund

APRA has announced that it has been successful in the South Australian Supreme Court in recovering assets for members of the failed Harts Australia Staff Superannuation Fund. APRA said the matter involved a dispute over a mortgage given to the fund, which forced APRA to take legal action on behalf of the fund's acting trustee in order to sell the property and recover the assets.

The following rulings were released by the ATO on 5 August:

• PR 2009/43: FEA Plantations Project 2009 Post 30 June Investors — Woodlot Option 1
  

• PR 2009/44: FEA Plantations Project 2009 Post 30 June Investors — Woodlot Option 2
  

• PR 2009/45: FEA Plantations Project 2009 Post 30 June Investors — Woodlot Option 3
  

• PR 2009/46: FEA Plantations Project 2009 Post 30 June Investors — Woodlot Option 4
  

• PR 2009/47: FEA Plantations Project 2009 Post 30 June Investors — Woodlot Unit 5
  

• Product Ruling PR 2009/48: Macquarie Eucalypt Project 2009 (post 30 June 2009 Growers)
  

• CR 2009/39: scrip-for-scrip: acquisition of Ingena Group Limited by UXC Professional Solutions Pty Limited
  

• CR 2009/40: payments assigned to representative public dentists who are employed by community health services to provide public dental services under the Medicare Teen Dental Plan
  

• Withdrawal of the following rulings as they are no longer current:
  

  • TR 2001/6: deductibility of commercial website expenditure
    

  • PR 2009/29: AIL Almond Grower Project — Miralie: 2009 Growers (to 15 June 2009)
    

  • PR 2009/42: 2009 AIL Red Ironbark Project

  • Erratum to PR 2009/14: Macquarie Eucalypt Project 2009 (pre 1 July 2009 Growers)

GST assessments upheld

In AAT Case [2009] AATA 574, Re Hutson and FCT, the AAT upheld GST net amounts assessed by the Commissioner of Taxation against a trust. The taxpayer was one of three trustees of the trust. The trust provided management and administrative services to a related company (i.e. a service trust). After considering the meaning of a taxable supply, the tribunal held the trust made taxable supplies to the company within s 9-5 of the GST Act. Based on the evidence presented before the tribunal, it found the supplies were in the course of an enterprise carried on by the trust.

GST: adjustments and change in creditable purpose

In AAT Case [2009] AATA 569, Re GXCX and FCT, the AAT varied a taxpayer's GST liability upwards due to a change in creditable purpose of the items in respect of which the taxpayer had earlier claimed input tax credits. The taxpayer was the representative member for GST group. One of the members carried out a residential development of 91 apartments. Upon completion of the development, 69 apartments had been sold. The taxpayer decided that the remaining apartments would be rented out and eventually sold when the market conditions improved. Therefore, an adjustment event arose under Div 129 of the Goods and Services Tax Act. Accordingly, the taxpayer amended its business activity statements to increase its GST liability by $53,063. However, the Commissioner of Taxation formed the view the adjustment should be $211,197. The tribunal found the taxpayer's calculations were incorrect. However, prior to the hearing, the Commissioner of Taxation had revised his calculations to $137,140. Accordingly, the tribunal gave effect to that calculation.

Taxpayer fails to get ATO records of her name changed

In AAT Case [2009] AATA 559, Re Avery and FCT, the AAT affirmed the Commissioner of Taxation's decision to refuse to amend a taxpayer's personal records. The taxpayer sought to have all ATO records of her name corrected so as to use her full name, including her two middle names. The taxpayer sought the change in view of her concerns over identity theft, particularly as assessments were issued to her using the abbreviated form of her name. In order to be successful in her application, the AAT had to be satisfied that, in terms of ss 48 and 50 of the Freedom of Information Act 1982, her personal information on ATO records was either 'incomplete, incorrect, out-of-date or misleading' and that it was appropriate to exercise the discretion to amend the records. However, the AAT found that this was not the case, despite the records using two forms of her name.

Business activity statements

BAS advanced (claim up to 8 CPD hours)

Get the latest updates in BAS reporting and GST and cover advanced topics such as luxury car tax and the margin scheme.

Program information — Melbourne, Perth, Sydney

BAS — fundamentals (claim up to 8 CPD hours)

Learn the basic BAS calculations and cover everything from the forms available, GST instalments and corrections to basic tips.

Program information — Brisbane, Melbourne, Perth, Sydney

Other programs

Business essentials on demand — SkillsNet

Make your working day more efficient with SkillsNet's diverse range of courses and get instant access to learning — when and where you want.

Program information — online

Financial investigations and forensic accounting (claim up to 8 CPD hours)

Increase your own or your team's contribution to financial discussions as you build a working knowledge of the fundamental recording and reporting principles revealed in this program. Learn how to read documents such as balance sheets, statements of comprehensive income and cash flow statements.

Program information — Melbourne, Perth, Sydney

More training and events

For information on other CPA CPD activities being held throughout Australia please visit the training and events section on our website and use the search facility. To register click onto the activity you wish to attend and follow the prompts.

Trusts in tax planning

The use of trusts in tax planning, and what happens when perpetuity runs out, is covered in the July edition of Sound education in taxation CD. Other topics include bad debt write-offs and commercial debt forgiveness, latest tax cases and tax rulings.

Reserve a copy from CPA Library.

Australian Financial Review

'Australia opens doors to capital' (Claim that one in five foreign investors who buy Australian assets and companies will no longer have to seek permission from the Foreign Investment Review Board) AFR [p 3], Wed 5.8.2009

'Obtain valuation to avoid auditing issues' (Article on tax and super issues with setting up a DIY fund which contains a rental property and commencing a transition to retirement pension) AFR [p 33], Wed 5.8.2009

'Sherry raises bar for tax agents and bookkeepers' (The Australian Government has released tax agent services draft regulations re qualification and registration requirements) AFR [p 7], Tue 4.8.2009

'Hobby-farm levy may do wider harm' (Report that farmers, thoroughbred breeders, and others, have criticised the Australian Government's proposed non-commercial loss rule changes) AFR [p 8], Tue 4.8.2009

'Tax agents' rules' (The Australian Government has released draft tax agent regulations re qualification and work experience requirements) AFR [p 8], Mon 3.8.2009

'Trust decision prompts appeal' (The ATO has appealed to the High Court re Full Federal Court decision in Bamford's case) AFR [p 9], Mon 3.8.2009

'BoQ franchises angry at tax slug' (Report that several bank franchises face unpaid payroll tax bills following a change in Queensland payroll tax rules) AFR [p 44], Mon 3.8.2009

'New rules for super' (Opinion on recent industry concerns re superannuation) AFR [p 46], Mon 3.8.2009

'Blueprint for long-term, radical reform' (Article on possible Henry tax recommendations — company tax, small business cash flow, retirement, housing, etc) AFR [p 52], Mon 3.8.2009

'Simple advice a win for super industry' (Opinion re ASIC's relief for funds to provide simple advice) AFR [p 55], Mon 3.8.2009

'Business dismayed by company tax cut veto' (Industry response to Labor party resolution to oppose cuts to company taxes) AFR [p 7], 1 – 2 August 2009

'Our own super man' (Profile on Jeremy Cooper, who has been tasked to head the review into the country's superannuation system) AFR [p 24], 1 – 2 August 2009

'Is super still the pot of gold?' (Article that super investors face new challenges — covers salary sacrificing into super, tips and traps, reduced super caps) AFR [p 37], 1 – 2 August 2009

'When a super fund breaks the rules' (Article on a self-managed superannuation fund breaching the in-house asset rules and losing its tax concessional status) AFR [p 43], 1 – 2 August 2009

'Arm's length the only way to involve family in loans' (Article on a son lending money to his father who is a non-member trustee of the son's single member fund) AFR [p 43], 1 – 2 August 2009

'Labor rejects tax breaks for business' (Report that a Labor Party resolution has ruled out company tax cuts) AFR [p 1], Fri 31.7.2009

'Tax liabilities for directors' (Letter to the Editor: clarification that directors are not personally liable for unpaid company tax except in extreme cases but are liable for failing to remit PAYG withholding amounts) AFR [p 56], Fri 31.7.2009

'Slow economy and red tape hit philanthropic funds' (Opinion that moves to force prescribed private funds to distribute at least 15 per cent of their wealth annually will make the funds unviable over the long term) AFR [p 11], Thur 30.7.2009

'GST review: views sought' (The Board of Taxation is seeking comments on its review of the application of GST to cross-border transactions) AFR [p 14], Thur 30.7.2009

'UBS not alone in Swiss inquiry' (According to court papers, US prosecutors are widening their investigation into Swiss banks re alleged offshore tax evasion services) AFR [p 15], Thur 30.7.2009

The Australian

'Swan lowers barriers for investment' (The Australian Government proposes to relax rules re foreign investment screening) Australian [p 24], Wed 5.8.2009

'Mistakes on your tax return can be costly' (Article on tax return traps eg interest income, dividends, depreciation, capital gains, motor vehicles, education tax refund, self-education expenses) Australian [Wealth, p 5], Wed 5.8.2009

'How to fix cracks in a nest egg' (Strategies to rebuild retirement savings eg transition to retirement, working longer, calculating drawdowns, investments outside super) Australian [Wealth, p 6], Wed 5.8.2009

'Break the rules and you may pay dearly' (Article on super and taxation — warning that breaking the rules may mean paying ordinary tax on super) Australian [Wealth, p 8], Wed 5.8.2009

'UBS, Swiss settle US tax fraud case' (Report that a Swiss bank has agreed to settle a tax evasion probe with the US authorities) Australian [p 28], Mon 3.8.2009

'Rich rush to reveal past tax evasion' (Report that the US tax authority has been inundated with requests from US taxpayers to come clean on undeclared income from overseas accounts) Australian [p 30], 1 – 2 August 2009

'Financial planners urge reform' (Report that the Financial Planning Association has called on the Government to tighten licensing requirements and tax incentives to boost investor confidence in financial planning industry) Australian [p 5], Fri 31.7.2009

CPA Australia seeks your input on issues it should take up on the members' behalf. If you would like to contact us please email us at tax@cpaaustralia.com.au.

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