Greenwoods & Freehills Weekly Tax Highlights - Week Ended 23.10.09

23 October 2009

ATO Documents

Released 21.10.09

Product Rulings
PR 2009/53: Income tax: TFS Sandalwood Project 2009 (Post 30 June 2009 Growers)
PR 2009/54: Income tax: 2004 Swan Hill Almond Grower Project (for 2004 Growers only)
Addenda
TD 2009/18: Income tax: does the term 'real property' in paragraph 855-20(a) of the Income Tax Assessment Act 1997 include a leasehold interest in land?
PR 2007/71: Product Rulings System

Released 23.10.09

New Interpretative Decisions
ATO ID 2009/110: Self Managed Superannuation Funds: exchange traded options - tax treatment of premiums receivable
ATO ID 2009/111: Self Managed Superannuation Funds: exchange traded options - tax treatment of premiums payable
ATO ID 2009/112: Capital Gains Tax: beneficiary's share of trust net income includes trust capital gain - deduction for beneficiary's contribution to a complying superannuation fund
ATO ID 2009/113: Capital allowances: tax break - expenditure in respect of the construction
ATO ID 2009/114: Excise: street sweeper with a GVM of less than 4.5 tonnes carrying out public road maintenance
ATO ID 2009/115: Taxation of financial arrangements: identification of arrangement - facility agreement
ATO ID 2009/116: Remuneration or other income for personal (including professional) services in relation to the tax treaty with Singapore
ATO ID 2009/117: Capital Allowances: tax break - asset not part of a set
Withdrawn Interpretative Decisions
ATO ID 2002/413: Retirement Income Entities - Arm's length loan
ATO ID 2002/612: Excise - Collections - General - Meaning of 'ship's stores'
ATO ID 2003/246: Foreign Tax Credits: distributions from a USA Limited Liability Company
ATO ID 2005/28: Assessability of professional income received by an Australian resident as a consultant to an international organisation in Japan
ATO ID 2005/303: Assessability of allowances received by an Australian resident from undertaking research in Japan
ATO ID 2005/352: Assessability of income derived by a Japanese resident company from activities in Australia
ATO ID 2005/48: Excise: removal of waste
ATO ID 2006/24: Assessability of salary and wages received by a dual resident paid by a Japanese employer to undertake research in Australia
ATO ID 2009/10: Definition of beer: hops

Tax Agent Regulations

Announced 23.10.09

The Government has released the proposed final form of the Tax Agents Services Regulations 2009. The regulations have been changed to meet concerns raised by various stakeholders during the consultation process. The key features of the new regulations include:

maintaining the existing ability for individuals with academic qualifications in law to seek registration as a tax agent, even if they have not completed the additional practical legal training course required to practice law;

providing the new national Tax Practitioners Board (the Board) with greater flexibility in determining which additional courses a specialist tax agent service provider is required to complete in order to be eligible for registration – this ensures that individuals whose registration is limited to providing services in a narrow area of the taxation law, such as quantity surveyors, are not required to complete courses that are of limited or negligible value;

providing the Board with greater flexibility in the types of organisations it is able to recognise for the purposes of the regulations;

confirming that Recognised Tax Agent Associations are not intended to exist exclusively for tax agent or BAS agent members as it is realistic for professional associations to seek to represent a wider group;

replacing the term 'Recognised Professional Associations' with 'Recognised Tax Agent Associations' to better reflect the full suite of associations represented across tax agent services;

providing the Board with the discretion to recognise Recognised Tax Agent Associations that do not meet the voting requirements or do not have the requisite number of members having regard to the purpose and intent of the tax agent services regime, to ensure that a broader range of organisations can seek to be recognised by the Board;

confirming that if a Recognised Tax Agent Association's registration is terminated by the Board, the Board will have full discretion to delay the termination of an tax or BAS agent's registration so as to give them sufficient time to seek membership of an alternative association; and

ensuring that Recognised Tax Agent Associations are not prevented from offering voting membership to individuals with substantial experience in providing tax agent services and individuals who have academic legal qualifications, but who may not have completed the additional practical legal training required to practice law.

Discussion Paper: Extending TFN withholding to closely held trusts

Released 22.10.09

Treasury has released a discussion paper entitled Extending the Tax File Number (‘TFN’) Withholding Tax Requirements to Closely Held Trusts and Family Trusts. The discussion paper outlines the 2009-10 Budget measure to extend the current TFN withholding arrangements to closely held trusts, including family trusts, in order to ensure that the assessable distributions to beneficiaries of those trusts align with the amounts included by those beneficiaries in their tax returns.

Superannuation Review Issues Paper: Phase Two: Operation and Efficiency

Released 16.10.09

The Super System Review Panel has released an issues paper entitled Phase Two: Operation and Efficiency - Issues Paper. Key issues discussed in the paper include:

fees and charges;

comparability of funds;

use of technology;

competition; and

administrators and complexity.
The closing date for submissions on the paper is 14 December 2009.

Tax Cases

Commissioner of Taxation v Tasman Group Services Pty Ltd [2009] FCAFC 148 (22 October 2009): The Full Federal Court has confirmed that the commercial debt forgiveness rules applied to the forgiveness of loans made by a Japanese parent company to an Australian subsidiary. The Court dismissed the taxpayer's argument that the debts were a form of equity given that it was unlikely that they would ever be repaid. Further, since the subsidiary used the funds to pay expenses and earn assessable income, the Court found that the debt was of a commercial nature. The Court also found that the Judge at first instance had erred in identifying the debt as an asset that the parent company used in carrying on a business through a permanent establishment in Australia, which would have had the effect of excluding the "assumption of solvency" rule in determining the forgiven amount.

YXFP and Commissioner of Taxation [2009] AATA 805 (21 October 2009): The Administrative Appeals Tribunal has confirmed the Commissioner's view that the sale of a property was not a GST-free supply of a going concern as the taxpayer had failed to meet the requirement under s.38-225 of the GST Act that both supplier and recipient agree in writing that the supply is of a going concern. The Tribunal also disallowed a deduction claimed by the taxpayer for trading stock and refused to remit the 25% shortfall penalties for failure to take reasonable care.

Legislative Update

Tax Laws Amendment (Budget Measures No. 2) Bill 2009, the associated Income Tax (TFN Withholding Tax (ESS)) Bill 2009 and the accompanying Explanatory Memorandum were introduced into Parliament on 21.10.09. The Bills contain amendments to the taxation of employee share schemes. The Budget Measures Bill also tightens the application of the non-commercial losses rules for individuals with an adjusted taxable income of more than $250 000, and requires superannuation providers to transfer the balance of lost members' accounts to the Commissioner of Taxation in certain circumstances. For a detailed analysis of the changes to the employee share scheme regime please click here.

Progress of Legislation

As at 23.10.09

Bill	Explanatory Memorandum	Intro House	Passed House	Intro Senate	Passed Senate	Date of Royal assent / Act Number	Description
Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009	EM	14.5.09	4.6.09	15.6.09	.		Carbon Production Reduction Scheme, Income Tax And GST Treatment
Customs Tariff Amendment (2009 Measures No 1) Bill 2009 [No 2]	EM	22.6.09	22.6.09	23.6.09			Bill to increase the customs duty rate applying to certain alcoholic beverages
Excise Tariff Amendment (2009 Measures No 1) Bill 2009 [No 2]	EM	22.6.09	22.6.09	23.6.09			Bill to increase the excise rate applying to certain alcoholic beverages
Income Tax (TFN Withholding Tax (ESS)) Bill 2009	EM	21.10.09					Bill to increase the excise rate applying to certain alcoholic beverages
International Tax Agreements Amendment Bill (No. 1) 2009	EM	19.3.09	16.9.09	17.9.09	17.9.09 .	8.10.09/105	Tax Information Exchange Agreement: British Virgin Islands and Isle of Man
Tax Agent Services (Transitional Provisions and Consequential Amendments) Bill 2009	EM	24.6.09					Employee Share Schemes
Tax Laws Amendment (2009 Measures No 4) Bill 2009	EM	25.6.09	7.9.09	8.9.09	10.9.09	18.9.09/88	R&D, Prescribed private funds, Demutualisation of friendly societies, Consolidation
Tax Laws Amendment (Budget Measures No. 2) Bill 2009	EM	21.10.09					Employee Share Schemes, Non-Commercial Losses, Lost Superannuation
Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2009	EM	28.5.09	4.6.09	15.6.09	15.6.09 .	23.6.09/41	Medicare Levy and Medicare Levy Surcharge
Tax Laws Amendment (Political Contributions and Gifts) Bill	EM	27.8.08	13.10.08	14.10.08	3.2.09 .		Removes Tax Deductibility of Political Donations, GST
Tax Laws Amendment (2009 Measures No 5) Bill 2009	EM	16.9.08			.		GST, PAYG Instalments, Bushfire Appeal

These notes are in summary form designed to alert clients to tax developments of general interest. They are not comprehensive , they are not offered as advice and should not be used to formulate business or other fiscal decisions.

Liability limited by a scheme approved under Professional Standards Legislation.