G&F Weekly Tax Highlights - Week Ended 19.06.09

ATO Documents

Released 17.6.09

Final Taxation Ruling
TR 2009/3: Income tax: application of section 177EA of the Income Tax Assessment Act 1936 to non-share distributions on certain 'dollar value' convertible notes
Class Rulings
CR 2009/31: Income tax: scrip for scrip roll-over: acquisition of Anzon Australia Limited by ROC Oil Company Limited
CR 2009/32: Income tax: off-market share buy-back: Progen Pharmaceuticals Limited
CR 2009/33: Income tax: demerger of ImmuneTX Limited by Equatorial Coal Limited
Miscellaneous Tax Ruling
MT 2005/1PW1 - Partial Withdrawal: What is the tax treatment of an expense incurred by a superannuation fund that is paid by an employer or eligible person on behalf of a superannuation fund?
Withdrawn Taxation Ruling
TR 2005/24W: Income tax: deductibility of personal superannuation contributions
Goods and Services Tax Ruling
GSTR 2002/2A4 - Addendum: Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions
Superannuation Guarantee Determination
SGD 2003/7W: Superannuation guarantee: if a contribution to a fund is made by cheque, when is the contribution made?

Released 19.6.09

Interpretative Decisions
ATO ID 2009/40: GST and lease of vacant land after removal of a demountable dwelling used solely in connection with input taxed supplies
ATO ID 2009/41: Molecular filtration and wine
Withdrawn Interpretative Decisions
ATO ID 2001/159W: Rebatable superannuation pensions
ATO ID 2002/157W: Superannuation, retirement & employment termination: Eligible termination payment (ETP): ETP Post June 1983 Taxed Element included in taxable income
ATO ID 2002/478W: Superannuation, retirement & employment termination: Eligible termination payment (ETP) and Exempt foreign termination payments
ATO ID 2002/482W: Superannuation, retirement & employment termination: Eligible termination payment (ETP) used to acquire a business
ATO ID 2004/174W: Superannuation: Superannuation pension rebate
ATO ID 2004/189W: Taxable contributions and exempt pension income
ATO ID 2004/190W: Taxable contributions and exempt pension income
ATO ID 2004/191W: Rollovers - Taxable contributions for superannuation funds
ATO ID 2004/352W: Superannuation: exempt non-resident foreign termination payment
ATO ID 2004/562W: Foreign Income and Foreign Losses: income derived from trading shares on the United States stock exchange
ATO ID 2004/733W: Superannuation retirement & employment termination: definition of eligible non-resident non-complying superannuation fund

Government’s forward legislative work program

The Government has released its Forward Work Program for Tax Measures setting out the consultation process for announced tax measures, and indicating the remaining tax measures that it plans to introduce in the 2009 Winter Parliamentary sittings.

Tax cooperation agreements with Jersey

On 10 June 2009 the Governments of Australia and Jersey signed a Tax Information Exchange Agreement providing for the bilateral exchange of information on civil and criminal tax matters. The Governments also signed an Agreement for the Allocation of Taxing Rights with Respect to Certain Individuals and to Establish a Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments. This agreement allocates taxing rights over certain income derived by retirees, government employees and students, as well as providing a mechanism for the resolution of transfer pricing disputes.

Tax Cases

Spriggs v Commissioner of Taxation; Riddell v Commissioner of Taxation [2009] HCA 22 (18 June 2009): The High Court has held that two professional football players that derived income from playing as well as endorsement and promotional activities were entitled to a deduction under either positive limb of s.8-1 for management fees even though the fees were paid for the negotiation of new playing contracts. Notably, the High Court held that such playing contracts were revenue assets of the taxpayers on the basis that professional footballers enter into a number of such contracts in the course of their football business. As such, the management fees paid as part of obtaining new playing contracts were revenue expenses.

Commissioner of Taxation v Bargwanna [2009] FCA 620 (12 June 2009): The Federal Court (Edmonds J) has set aside a decision of the AAT that a fund was entitled to be endorsed as tax exempt under Subdivision 50-B. Edmonds J referred to the High Court’s decision in FCT v Word Investments Ltd (2008) 70 ATR 225 and found that s.50-60 requires a fund be applied for its stated purposes – not merely “substantially” or “principally” for those purposes. In this case, the fund’s trustees had misappropriated monies from the fund, which was not within the scope of fund’s stated purposes. Edmonds J found that although the monies were later paid back by the fund’s accountant, this did not remedy the prior misapplication of the monies for the purposes of s.50-60.

AAT Cases [2009] AATA 435, 436, 438 & 439: In four related cases the AAT has found that the Division 7A deemed dividend rules applied to purported “loans” made by private companies to their husband and wife shareholders/directors. The AAT found the ATO’s view of what constituted a “written agreement” for the purposes of s.109N in TD 2008/8 to be a correct statement of the law. The AAT found that the mere execution of a pro-forma written promise to repay an amount by the borrower is not a “written agreement” for these purposes, noting that here the documents were not even executed by the companies. In any event, the AAT found the sham doctrine could be applied on the basis that the documents were a mere attempt to circumvent Division 7A and were not intended to have practical effect.

Appeals update

Commissioner of Taxation v Lean [2009] FCA 490: The taxpayer has appealed to the Full Federal Court against the decision of Stone J at first instance. Stone J had found that the taxpayer was not entitled to a deduction under s.25-45 for $2.3m of misappropriated moneys that were included in his assessable income as a capital gain.

De Simone v Commissioner of Taxation [2009] FCA 446: The taxpayers have appealed to the Full Federal Court against the decision of Jessup J. Jessup J had found that the two taxpayer partners in a partnership were not entitled to deductions for their share of $12m borrowed by the partnership under a “tax effective investment scheme” arrangement to invest in a theatrical production.

Legislative Update

The following Bills have been passed by the House of Representatives and the Senate and now await Royal Assent:

Tax Laws Amendment (2009 Measures No 2) Bill 2009

Tax Laws Amendment (2009 Measures No 3) Bill 2009

Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2009

The House of Representatives disagreed with Senate amendments to the Tax (Political Contributions and Gifts) Bill 2008 and made amendments in place thereof. The Bill now goes back to the Senate.

Progress of Legislation

As at 19.6.09