| Brought to you in association with Thomson Reuters | Your weekly tax update | 26 November, 2009 |
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Commissioner of Taxation on use of tax treaties In a recent speech, the Commissioner of Taxation, Mr Michael D'Ascenzo, spoke on the use of tax treaties. Mr D'Ascenzo said 'in general, tax treaties are not intended to provide ways to avoid paying tax altogether'. 'Some in the marketplace appear to have a view that by coupling various treaty concessions of different countries together they can obtain tax concessions that would not be available had the transaction or investment taken place directly between the place of source and the place of residence,' he said. The Commissioner of Taxation warned that such arrangements need to be carefully considered as they may come within the general anti-avoidance provision of the Tax Act where tax is sought to be avoided. The professional bodies are seeking further clarification of the Commissioner of Taxation's views on the role / use of tax treaties, particularly in light of the recent TPG Newbridge Myer case where court action was taken by the ATO at a very late stage in the transaction. Tax Bill (No 6) 2009 introduced The Tax Laws Amendment (2009 Measures No 6) Bill 2009 has been introduced into the lower House of the Federal Parliament (House of Representatives). It contains amendments to repeal the exception to CGT events E1 and E2 widely known as the 'trust cloning' exception. The Bill also provides a limited CGT rollover for the transfer of assets between trusts with the same beneficiaries each of which has the same interests in each trust. Other amendments relate to:
In introducing this Bill, the Minister for Competition Policy and Consumer Affairs indicated that it represented another instalment in finalising a raft of outstanding tax issues (some of which were inherited from the previous government) in the period before the Government considers the recommendations of Australia's Future Tax System review. Financial products and services: Ripoll report The Parliamentary Joint Committee on Corporations and Financial Services had tabled its report (the Ripoll report) into financial products and services and the collapses of Storm Financial and Opes Prime. The committee made 11 recommendations for legislative change which it believes would improve the quality of financial advice. The committee considers that a better regulatory framework for managing financial advisers' conflicts of interest is needed. The government said it will respond to the committee's report in conjunction with the Cooper Review, which is also looking at commissions and fee structures in superannuation. CPA Australia broadly supports the recommendations of this inquiry and also welcomes the government's decision for these to be further reviewed by the current Cooper Review. Upcoming consultations and meetings
Member enquiries or issues for these meetings should be sent to tax@cpaaustralia.com.au
Conduct of ATO litigation The ATO has released Practice Statement Law Administration PS LA 2009/9 which provides a comprehensive set of guidelines and policies for tax officers involved in litigation. The Practice Statement outlines the ATOs approach to litigation and its obligations as a Commonwealth litigant. Life insurance bonds issued by tax haven entities The ATO has released Taxpayer Alert TA 2009/17 which deals with life insurance bonds issued by tax haven entities. The ATO is concerned with life insurance bonds issued from tax haven entities (eg in Vanuatu) to Australian residents which are designed to circumvent the Australian tax payable under the foreign investment fund measures. The Commissioner of Taxation said he is concerned these arrangements may attempt to exploit the lack of transparency in tax havens. Income test changes: ATO to contact taxpayers The ATO has advised that, during the first half of December 2009, it will write directly to around 240,000 taxpayers whose latest income tax returns suggest they could be directly affected by the new income tests which came into effect from 1 July 2009. The ATO says tax practitioners may be contacted by recipients of these letters for assistance. Six new ATO IDs The ATO has released the following ATO IDs:
ATO website updates From the ATO website:
Confidentiality of taxpayer information Bill introduced The Tax Laws Amendment (Confidentiality of Taxpayer Information) Bill 2009 has been introduced into the House of Representatives. The Bill amends the secrecy and disclosure provisions applying to taxation information that are currently spread over many taxation law Acts and consolidates and standardises them into a single new framework in Sch 1 to the TAA. The amendments are proposed to generally apply to disclosures of protected information made on or after the day after Royal Assent to the Bill. Tax (2009 GST Administration Measures) Bill 2009 introduced The Tax Laws Amendment (2009 GST Administration Measures) Bill 2009 has been introduced into the House of Representatives. The Bill contains amendments relating to: four-year period for claiming input tax credits and fuel tax credits; Australian External Territory refund collection system; agency provisions; gambling activities; recovering overpaid refunds; and associate provisions. International tax agreements: New Zealand; Belgium; Jersey — Bill introduced The International Tax Agreements Amendment Bill (No 2) 2009 has been introduced into the House of Representatives. The Bill, among other things, proposes to give the force of law to the new Australia-New Zealand Convention, Second Protocol with Belgium, and Australia-Jersey Agreement. Budget private health insurance Bills re-introduced The government has re-introduced into the House of Representatives a package of Bills to give effect to the 2009 – 10 Australian Federal Budget changes to effectively income test the private health insurance rebate (and to effectively end the flat 30 per cent rebate) and to increase the Medicare Levy Surcharge for people earning over certain income amounts. The original Bills were defeated in the Senate in early September. The amendments are proposed to apply to income years starting on or after 1 July 2010.
ATO warns compliance action on non-lodger SMSF trustees The ATO has advised that it is implementing a new approach for SMSF trustees who, despite having been sent previous reminders, have still not lodged their SMSF annual income tax return. The ATO said it had recently sent letters directly to these funds and their trustees. The ATO said in the new year, it will work with tax practitioners and these trustees to ensure the lodgment of outstanding returns. ATO website updates on superannuation From the ATO website:
The following rulings were released by the ATO on 25 November:
GST test case on 'commercial residential premises' In South Steyne Hotel Pty Ltd & Ors v FCT, the taxpayers were largely unsuccessful before the Full Federal Court in appealing the decision at first instance in South Steyne Hotel Pty Ltd & Ors v FCT [2009] FCA 13. The case dealt with the character of supplies that were made in relation to 83 serviced apartments that were separately leased, but were collectively managed by a management company as a serviced apartment business. The Full Court upheld three out of four counts of the decision of the Federal Court. In relation to the one count in which the taxpayers were successful in overturning, the Full Court held the sale of individual service apartments by the taxpayer was GST-free because the sale was a supply of going concern, even though a clause in the sale contract provided an alternative classification of the supply. Input tax credits and second-hand goods In LeasePlan Australia Limited v FCT, the Federal Court held a corporate taxpayer was entitled to input tax credits for the acquisition of second-hand goods. In the course of its ordinary business, the taxpayer purchased, leased, managed and sold second-hand motor vehicles. GST credits and cash back promotions In AAT Case [2009] AATA 854, Re The Electrical Goods Importer and FCT, the AAT affirmed that a taxpayer was not entitled to GST credits on cash back promotions it undertook. Main residence exemption disallowed for rental period In AAT Case [2009] AATA 890, Re Caller & Anor and FCT, the AAT upheld the Commissioner of Taxation's decision to allow for husband and wife taxpayers only a partial exemption from capital gains tax on their main residence under s 118-185 of the ITAA 1997. In doing so, the Tribunal rejected the taxpayers' contention that, despite them having leased the property for a period after acquisition, they had moved into the dwelling 'by the time it was first practicable' to do so, for the purposes of satisfying the condition in s 118-135 of the ITAA 1997 for claiming the full main residence exemption under s 118-110 of the ITAA 1997. The Tribunal also affirmed the terms 'first practicable' and 'first possible' are not synonymous for the purposes of the main residence exemption. Employee incentive plan: contributions income of taxpayer In AAT Case [2009] AATA 869, Re Confidential and FCT, the AAT determined that a contribution of $22,000 made to an employee incentive share trust plan on behalf of a taxpayer was assessable income of the taxpayer, and that part of another contribution of $339,000 was a deemed dividend in the taxpayer's hands.
New South Wales: Revenue legislation Bill receives Assent The State Revenue Legislation Further Amendment Bill (No 2) 2009 (New South Wales) has received Assent as Act No 91 of 2009. The Bill passed all stages of the NSW Parliament without amendment. The Bill makes various amendments to the Duties Act 1997 (NSW) relating to landholder duty. The Bill also amends the Payroll Tax Act 2007 (New South Wales) to provide for a new method of determining the jurisdiction in which wages are liable for payroll tax. The New South Wales Office of State Revenue has released information explaining the amendments.
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'What to do if the regulator comes knocking' (Law firms are offering emergency services to clients in the event of a raid by a regulator) AFR [p 1], Wed 25.11.2009 'Guarantee exposes tax cheats' (The Tax Office has revealed that, during October 2008, it noticed a spike in transactions involving money coming into Australia ) AFR [p 1], Wed 25.11.2009 'Property pitfalls to avoid' (Warning for SMSFs investing in property and businesses to review investment strategy) AFR [p 31], Wed 25.11.2009 'Deductions for financial advice costly' (Comment that the Government may not make financial advice tax deductible) AFR [p 54], Wed 25.11.2009 'Taxman right to act on TPG' (Letter to the Editor re Tax Office's recent action and scope of CGT exemption for foreign residents) AFR [p 59], Wed 25.11.2009 'New ASIC powers in planning reform' (A Federal Parliament Committee has called for ASIC to be given powers to close down rogue companies and weed out incompetent or unlawful advisers) AFR [p 1], Tue 24.11.2009 '"Treaty shopping" a taxing topic' (Tax experts say proving tax avoidance via the use of interposed entities in treaty countries would be challenging) AFR [p 12], Tue 24.11.2009 'BHP faces ATO appeal' (The Tax Office has appealed against a Federal Court decision re deductions under bad debt provisions) AFR [p 12], Tue 24.11.2009 'Brown presses for trading tax' (Report that the British Prime Minister will propose a global levy on financial transactions) AFR [p 14], Tue 24.11.2009 'Report pushes duty of care' (The Ripoll report recommends that financial planners act in their clients' best interest as fiduciaries) AFR [p 47], Tue 24.11.2009 'FPA warns costs will increase' (The Financial Planners Association has urged the Government to review all retail client compensation mechanisms) AFR [p 47], Tue 24.11.2009 'Planners face crackdown on licences, standards' (Predictions of likely recommendations to come from the Ripoll report) AFR [p 1], Mon 23.11.2009 'Super rules still confusing' (Calls for clarity re the accountants exemption in giving super advice) AFR [p 47], Mon 23.11.2009 'Ripoll lost last chance for reform' (Speculation that Ripoll inquiry will take a soft line on financial planner remuneration and qualifications) AFR [p 47], Mon 23.11.2009 'Financial advice won't get full rebate' (Report that full tax deductibility for financial planning advice is not likely soon) AFR [p 3], Mon 23.11.2009 'Capital gains ruling hits family home' (Main residence CGT exemption denied as taxpayers had not moved in 'by the time it was first practicable' to do so) AFR [p 4], Mon 23.11.2009 'Agents' motives at odds with tax simplification' (Claim that tax agents have an incentive to make it appear to clients that completing tax returns is very complex) AFR [p 6], Mon 23.11.2009 'D'Ascenzo warning on treaty abuse' (Tax Commissioner warns about treaty shopping) AFR [p 8], Mon 23.11.2009 'Proliferation of tax laws rings alarm' (Growth of tax laws is alarming; claim the Tax Office has too much discretion to apply the laws) AFR [p 8], Mon 23.11.2009 'Report poses yet more questions' (Disquiet about uncertainty of more possible tax changes re super) AFR [p 44], Mon 23.11.2009 'Foreign investors demand intervention in tax row' (Claim that foreign investors have approached Government to raise concerns of the Tax Office's approach to a recent company float) AFR [p 4], Fri 20.11.2009 'Big four firms tip more hiring ahead' (Big four accounting firms hope sustained improvement in economy will allow lift in graduate intakes) AFR [p 5], Fri 20.11.2009 'Tough rules force financial planners back to school' (The Financial Planning Association will propose new educational expectations for financial planners) AFR [p 1], Thur 19.11.2009 'ATO's offshore tax net could widen' (Comment that recent moves by the Tax Office against a foreign private equity investment firm could affect other cross-border structures - formal Tax Office ruling expected) AFR [p 5], Thur 19.11.2009 'UBS flushes out secrets' (Report that more that 14,700 US taxpayers had disclosed secret foreign bank accounts under an amnesty for tax evasion) AFR [p 13], Thur 19.11.2009 'Funds says numbers won't work, even with rebate' (Report that super funds and institutional investors have shunned the Government's national rental affordability scheme) AFR [p 50], Thur 19.11.2009 'Commissions move wins applause' (Report that the financial planning industry has welcomed the recommendations of the Ripoll Report) AUSTRALIAN [p 41], Wed 25.11.2009 'Pension payment mistakes can cost a tax exemption' (Trustees of self-managed superannuation funds should ensure the minimum pension amount is paid to members each year to avoid losing the tax exemption for income relating to their current pension liabilities) AUSTRALIAN [Wealth, p 8], Wed 25.11.2009 'Taxman still after BHP over $2.2bn bill' (Report the Tax Office has appealed to the Full Federal Court against the decision of the Federal Court in which a taxpayer was allowed a deduction for bad debt) AUSTRALIAN [p 20], Tue 24.11.2009 'ATO battle may affect advocacy 'charities'' (Report that Aid/Watch has sought leave to appeal to the High Court against a Federal Court judgment re charity status) AUSTRALIAN [p 3], Mon 23.11.2009 'Brown urges Rudd to close tax havens' (Report that the Australian Greens will put a motion to the Senate 'deploring' the use of offshore tax shelters) AUSTRALIAN [p 24], Mon 23.11.2009 'We're losing a super chance' (Article calling for consolidation of super funds) AUSTRALIAN [p 24], Mon 23.11.2009 'Corporate tax burden spurs call for action' (A global tax survey has ranked Australia at 47) AUSTRALIAN [p 4], 21-22 November 2009 'ATO action vexes investors' (Report on foreign investors' concern re Tax Office's response to a private equity firm and its proceeds in the Myer float) AUSTRALIAN [p 4], 21-22 November 2009 'Botched tax raid will only cost us foreign investment' (Comment re Tax Office's response to a private equity firm and its proceeds in the Myer float) AUSTRALIAN [p 25], 21-22 November 2009 'Don't milk the mining cash cow too dry' (Opinion that any measures to be introduced by the Government to tax minerals production should not erode the risk-reward equation) AUSTRALIAN [p 21], Fri 20.11.2009 'ATO poses risk to local deals' (Fall out from the decision of the Tax Office to treat the profits from the Myer float as income rather than as capital gains) AUSTRALIAN [p 21], Thur 19.11.2009 'UBS "stable" but turnaround way off' (Article which notes that 14,700 US taxpayers have disclosed their holding in banks around the world to avoid criminal prosecution) AUSTRALIAN [p 27], Thur 19.11.2009 'Small business a "soft target"' (The president of the ACCI has urged the Government not to remove tax concessions for small business) AUSTRALIAN [p 29], Thur 19.11.2009
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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