Greenwoods & Freehills Weekly Tax Highlights - Week Ended 16.10.09

ATO Documents

Released 14.10.09

Draft Taxation Ruling
TR 2009/D5: Income tax: capital gains: when a dividend will be included in the capital proceeds from a disposal of shares that happens under a contract or a Scheme of Arrangement
Final Product Rulings
PR 2009/51: Income tax: deductibility of interest incurred on borrowings in relation to Macquarie Fusion Funds - November 2009 Offer 
PR 2009/52: Income tax: ITC Diversified Forestry Project 2009 - Late Investors 
Draft Taxation Determinations
TD 2009/D12: Income tax: can Part IVA of the Income Tax Assessment Act 1936 apply to an asymmetric swap scheme?

Decision Impact statement

Released 14.10.09

Spriggs and Anor v Commissioner of Taxation [2009] HCA 22: The High Court unanimously held that two professional footballers were entitled to deductions for management fees paid for the renegotiation of their employment contracts with professional football clubs. The ATO's view is that in reaching this decision the High Court has recognised that, under certain circumstances, an individual can carry on a business that includes activities undertaken under an employment contract as an employee. In recognition of the High Court's decision the ATO will amend Taxation Ruling TR 2000/5: Income tax and fringe benefits tax: costs incurred in preparing and administering employment agreements, to clarify that it does not apply to taxpayers whose employment activities form part of the carrying on of a business.

Superannuation Disability Benefits - Announcement

Announced 13.10.09

The Minister for Financial Services, Superannuation and Corporate Law has announced an amendment to the tax law to provide transitional relief to complying superannuation funds for the deduction of insurance premiums for disability superannuation benefits (TPD benefits). The amendments will defer the application of the provisions in the tax law governing deductibility of insurance premiums for TPD benefits to 1 July 2011. From 1 July 2011, insurance premiums will only be deductible to the extent the policies have the necessary connection to a liability of the fund to provide TPD benefits to their members and not other types of insurance for which premiums are collected from their members.

Tax Cases

Handbury Holdings Pty Ltd v Commissioner of Taxation [2009] FCAFC 141 (9 October 2009): The Full Federal Court has rejected the taxpayer's appeal. The Court found that the debt which was extinguished as part of a debt for equity swap and which resulted in a subsidiary leaving its tax consolidated group, was required to be included in the Step 4 amount of the "exit ACA" calculation for the subsidiary, as set out in the table in s.711-20(1). This gave rise to a $16m capital gain from CGT event L5 at the time of the deconsolidation.

Legislative Update

International Tax Agreements Amendment Bill (No. 1) 2009: The Bill received  Royal Assent on 8.10.09 and becomes Act No. 105 of 2009.

Progress of Legislation

As at 16.10.09