Greenwoods & Freehills Weekly Tax Highlights 16.12.11

ATO documents

Draft Taxation Ruling
TR 2011/D7: Income tax: taxation of financial arrangements - application of subsections 230-30(2) and 230-30(3) of the Income Tax Assessment Act 1997 to gains and losses relating to exempt income or non-assessable non-exempt income

Draft GST Ruling
GSTR 2011/D5: Goods and services tax: GST treatment of care services and accommodation in retirement villages and privately funded nursing homes and hostels 

Class Rulings
CR 2011/107: Income tax: return of capital Multiplex Acumen Vale Syndicate Limited

GST Determination
GSTD 2011/4: Goods and services tax: are accommodation bond retention amounts or accommodation charges paid, by residents of an aged care facility covered by the Aged Care Act 1997, that is supplying GST-free services under subsection 38-25(1) of the A New Tax System (Goods and Services Tax) Act 1999, consideration for a GST-free supply?
 
Draft GST Determinations
GSTD 2011/D4: Goods and services tax: What is 'hospital treatment' for the purposes of section 38-20 of the A New Tax System (Goods and Services Tax) Act 1999? 

Addenda
GSTR 2006/10: Goods and services tax: insurance settlements and entitlement to input tax credits
GSTR 2006/9: Goods and services tax: supplies

Erratum
TR 94/14: Income tax: application of Division 13 of Part III (international profit shifting) - some basic concepts underlying the operation of Division 13 and some circumstances in which section 136AD will be applied.

Decision Impact Statements 
DIS: Commissioner of Taxation v Multiflex Pty Ltd
DIS: Badaoui & Konig and Commissioner of Taxation

The Business Tax Working Group has released an "Interim report on the tax treatment of business losses". The report outlines four possible options for reform, said to be intended to increase business productivity, while delivering tax relief to struggling businesses:

•      replacing the current continuity of ownership test (COT) and same business test (SBT) with less onerous integrity rules, such as a dominant purpose test;

•      allowing immediate loss refundability;

•      allowing losses to be carried back and offset against previous years’ profits; and

•      allowing losses that are carried forward to be uplifted by a benchmark rate (such as the 10-year Government bond rate).

The Business Tax Working Group’s final report on the tax treatment of losses is expected in March 2012.

Mitsui & Co (Australia) Ltd v FCT [2011] FCA 1423: The Federal Court (Siopis J) has upheld the Commissioner’s disallowance of an immediate deduction under s.40-80 of the 1997 Act in respect of part of the consideration the taxpayer paid for a 40% interest in a petroleum production licence. The taxpayer argued that part of the consideration was attributable to the right conferred by the licence to carry out exploration activities in the licence area. The issue was essentially whether the taxpayer had acquired, for Division 40 purposes, two separate depreciating assets by virtue of the fact that the holder of a production licence under the Petroleum (Submerged Lands) Act 1967 is entitled to both produce petroleum from the licence area as well as to explore for petroleum within the licence area. Siopis J reached the conclusion that the production licence itself constituted the depreciating asset, and the underlying rights could not separately constitute depreciating assets.