Greenwoods & Freehills Weekly Tax Highlights - Week Ended 30.10.09

ATO Documents

Released 28.10.09

Product Rulings
PR 2009/55: Income tax: Arafura Pearl Project 2010
PR 2009/56: Income tax: Rewards Group Premium Vineyard Project 2009 Late Growers (Pre 31 December 2009)
Draft Taxation Determinations
TD 2009/D13: Income tax: does a failure to plant trees intended to be established under a forestry scheme affect the timing of deductions for expenditure on seasonally dependent agronomic activities where section 8-1(1)(b) of the Income Tax Assessment Act 1997 and section 82KZMG of the Income Tax Assessment Act 1936 have previously been ruled to be satisfied?
TD 2009/D14: Income tax: does failure to plant all the trees intended to be established under a forestry managed investment scheme covered by Division 394 of the Income Tax Assessment Act 1997 mean that no deduction is allowable under Division 394 in respect of a participant's initial contribution to the scheme?
TD 2009/D15: Income tax: will a deduction remain allowable under subsection 394-10(1) of the Income Tax Assessment Act 1997 where a CGT event happens in relation to a participant's forestry interest in a forestry managed investment scheme within 4 years after the end of the income year in which the participant first pays an amount under the scheme (subsection 394-10(5) of that Act)? 
TD 2009/D16: Income tax: will a deduction remain allowable under section 8-1 of the Income Tax Assessment Act 1997 where a CGT event happens in relation to a taxpayer's interest in a section 82KZMG of the Income Tax Assessment Act 1936 forestry managed investment scheme within 4 years after the end of the income year in which the taxpayer first incurred expenditure under the agreement?

Released 30.10.09

New Interpretative Decisions
ATO ID 2009/118: Excise: meaning of tobacco plant
ATO ID 2009/119: Refund of deposit: received by a purchaser as an assessable recoupment
ATO ID 2009/120: Tax cost setting amount: leaving time - tax cost setting amount of membership interests that also constitute liabilities under accounting standards
ATO ID 2009/121: Tax cost setting amount: leaving time - membership interests that also constitute liabilities under accounting standards
ATO ID 2009/122: Excisable goods: waste sump oil recycling 
ATO ID 2009/123: Foreign termination payment
ATO ID 2009/124: Lump sums received from foreign superannuation funds by Australian residents: relevant periods under subsection 305-75(3) of the ITAA 1997

Withdrawn Interpretative Decisions
ATO ID 2008/105: Excise: meaning of tobacco

Tax Information Agreement with the Cook Islands

Announced 28.10.09

The Government has announced that Australia and the Cook Islands have signed an Agreement for the Exchange of Information with Respect to Taxes. The Agreement provides for exchange of information on request in both criminal and civil tax matters. At the same time the signatories also announced an Agreement for the Allocation of Taxing Rights with Respect to Certain Income of Individuals and to Establish a Mutual Agreement Procedure in Respect of Transfer Pricing Adjustments. This Agreement will allocate taxing rights over certain income derived by retirees, government employees and students and provide a mechanism to help resolve transfer pricing disputes.

Tax Case

Commissioner of Taxation v Trail Bros Steel & Plastics Pty Ltd [2009] FCA 1210 (28 October 2009): The Federal Court has allowed the Commissioner of Taxation's appeal against the AAT's finding that Part IVA did not apply to the relevant scheme. The Commissioner had disallowed tax deductions claimed by the taxpayer for monies it had contributed to an employee welfare fund on behalf of its employees. The Commissioner was of the view that the dominant reason for the contributions was to obtain a tax benefit and therefore the arrangement was subject to Part IVA. The Commissioner subsequently imposed penalties on the taxpayer. The Federal Court found that there was an error of law in the AAT's finding that the taxpayer was entitled to the deduction and that Part IVA did not apply to the arrangement. In particular, the Federal Court found that the AAT's use of the alternate postulate test set out in s.177C(1)(b) was erroneous as there was no evidence that the taxpayer would have found another way to make the payments in a manner which would result in a tax deduction. The matter has now been remitted back to the AAT.   

Legislative Update

Tax Agent Services (Transitional Provisions and Consequential Amendments) Bill 2009 has passed all stages of the parliamentary process and now awaits Royal Assent.

Tax Laws Amendment (2009 Measures No 5) Bill 2009  has been passed by the House of Representatives. 

Progress of Legislation

As at 30.10.09