Greenwoods & Freehills Weekly Tax Highlights - Week Ended 4.9.09

ATO Documents

Released 2.9.09

Final Class Ruling
CR 2009/46: Income tax: ABB Grain Ltd Scheme of Arrangement and Proposed Special Dividend
Notice of Withdrawal
Product Ruling
PR 2007/8: Income tax: Ginseng Australia Project No. 1 (Early Growers) 

Released 4.9.09

Interpretative Decisions
ATO ID 2009/95: Income tax: assessability of service income received by a non-resident of Australia and East Timor from the Joint Petroleum Development Area
ATO ID 2009/96: Capital Works - reclaimed land - structural improvement
ATO ID 2009/97: Definition of trading stock: meaning of 'for purposes of...exchange'
ATO ID 2009/98: Producer rebate: pooling of grapes from which wine is manufactured
Withdrawn Interpretative Decision
ATO ID 2004/906: Assessability of service income received by a non-resident of Australia and East Timor from the Joint Petroleum Development Area

TOFA Technical Refinements

Released 4.9.09

The Assistant Treasurer has announced, via press release, a number of amendments to the income tax law relating to the Taxation of Financial Arrangements (TOFA). The amendments seek to clarify the interaction between the new TOFA regime and existing tax legislation. Full details of the proposed amendments are contained in the attachment issued with the press release.  

Draft Legislation: Company Losses

Released 4.9.09

Treasury has released draft legislation and an accompanying draft explanatory memorandum dealing with company losses. The proposed laws will implement changes to the company loss recoupment rules intended to improve the operation of the "continuity of ownership test" where a company has an unfixed share structure. Under the current rules, companies which have shares on issue with unequal rights to dividends, capital distributions or voting power may technically fail the continuity of ownership test, even though there is no significant change in underlying beneficial ownership during the test period. The proposed amendments will allow a company which fails the continuity of ownership test because it has shares with unequal rights to dividends, capital distributions or voting power to reapply the test by disregarding debt interests and secondary classes of shares. If the company still fails, the test can be further applied by fixing the dividend and capital rights of the principal class of shares.

Draft Legislation: PAYG instalments and TOFA 

Released 4.9.09

Treasury has released draft legislation and an accompanying draft explanatory memorandum dealing with PAYG instalments and TOFA . The proposed laws address a number of issues arising out of amendments to the PAYG instalment provisions contained in the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009.

Draft Legislation: Trust Cloning Exemption exception abolished

Released 4.9.09

Treasury has released draft legislation and an accompanying draft explanatory memorandum which will remove the capital gains tax (CGT) trust cloning tax concession, but provide for a limited CGT roll-over for the transfer of assets between "fixed" trusts.

Tax Cases

Clarke v Commissioner of Taxation [2009] HCA 33 (2 September 2009): The High Court has unanimously found that the superannuation contributions tax (surcharge) is constitutionally invalid with respect to the entitlements of a former South Australian MP under three parliamentary superannuation schemes. The Court found that the surcharge legislation went beyond the powers of the Commonwealth by interfering with the State of South Australia's ability to exercise its powers to fix the remuneration of the State's legislators.

FFWX and Commissioner of Taxation [2009] AATA 657 (1 September 2009): The AAT has dismissed the taxpayer's argument that dividends paid to a superannuation fund, of which the taxpayer was trustee, should not be classified as special income. The Commissioner had argued that as the dividends arose from shares which had been obtained at a non-arms length price they should be classed as special income and issued amendments accordingly. The AAT agreed that as the shares could not be separated from the arising income, represented by the dividend payments, the dividends should therefore be treated as special income.

Progress of Legislation

As at 4.9.09