Greenwoods & Freehills Weekly Tax Highlights - Week Ended 12.3.10

ATO Documents

Released 10.3.09

Addenda 
TD 93/126: Income tax: once commissioned plant has been handed over to its owner, is the expenditure incurred by a company in bringing the said plant into a fully operational state, deductible under subsection 51(1) of the Income Tax Assessment Act 1936 ?
TD 92/174: Income tax: capital gains: how does subsection 118-170(1) of the Income Tax Assessment Act 1997 interact with section 118-145 of that Act?
Notices of Withdrawal
TD 58:  Income tax: capital gains: is a principal residence exemption available where a dwelling is owned by a family company or family trust?
IT 2518:  Income tax: Foreign Tax Credit System - interest derived from a transaction directly related to the active conduct of a trade or business
IT 2523: Income tax: Foreign Tax Credit System: application of subsection 51(6) and section 79D to quarantine 'current year foreign losses' where the taxpayer does not derive any foreign income in the year of income
IT 2556: Income tax: Foreign Tax Credit System - denial of underlying tax credit to corporate unit trusts and public trading trusts
IT 2597: Income tax: Foreign Tax Credit System: foreign loss quarantining - meaning of 'foreign source'
IT 2598: Income tax: Foreign Tax Credit System: treatment of export market development grants and relevant expenses for purposes of foreign loss quarantining
TD 2004/29: Income tax: can section 79D of the Income Tax Assessment Act 1936 operate to limit deductions available under Division 10B or Division 10BA of Part III of the Income Tax Assessment Act 1936?
TD 92/183: Income tax: as a result of the New Zealand government's decision to impose a tax on the income of superannuation funds from 1 April 1990, what amount should be included as assessable income by an Australian resident in receipt of a pension paid out of these funds?
TD 95/43: Income tax: capital gains: is a sum obtained by a taxpayer under a trauma insurance policy an exempt capital gain under subsection 160ZB(1) of the Income Tax Assessment Act 1936 ?

Released 11.3.10

Decision Impact Statements
National Mutual Life Association of Australia Ltd v Commissioner of Taxation
Lawrence v Commissioner of Taxation
Commissioner of Taxation v Paul Andrew Burness & Anor (As Trustee for the Property of Robert Bottazzi, A Bankrupt)
De Simone v Commissioner of Taxation
St George Bank v Federal Commissioner of Taxation

Released 12.3.10

New Interpretative Decisions
ATO ID 2010/56: Assessable income: derivation of income - spread betting
ATO ID 2010/57: Entity specific matters: trusts - whether a Managed Investment Scheme is a Unit Trust for the purposes of Division 6C of Part III of the Income Tax Assessment Act 1936
ATO ID 2010/58: Capital Allowances: capital works - construction expenditure - preliminary expense
ATO ID 2010/59: Functional currency choice: amounts borrowed/lent in a non-AUD currency which later becomes the 'applicable functional currency'
ATO ID 2010/60: Functional currency choice: amounts borrowed/lent in a non-AUD currency other than the one which later becomes the 'applicable functional currency'
ATO ID 2010/61: Employee share scheme: real risk of forfeiture - minimum term of employment and good leaver provisions
ATO ID 2010/62: Employee share scheme: whether interests in a corporate limited partnership are ordinary shares
Withdrawn Interpretative Decisions
ATO ID 2001/383: Superannuation Contributions Tax - Surcharge for a member of a defined benefits superannuation scheme, converting from a defined benefit to an accumulation benefit
ATO ID 2001/458: Superannuation contributions tax- Request for Approval of Another Method for Surcharge Calculations, where provisions exist in the Trust Deed of the Fund to grant discretionary benefit increases.
ATO ID 2002/1101: Capital Gains Tax consequences of a demerger for a demerging entity
ATO ID 2002/1102: Capital Gains Tax consequences of a demerged entity
ATO ID 2002/1109: Capital gains tax - CGT asset - part of an asset.
ATO ID 2002/126: Capital gains tax: main residence exemption: dwelling acquired by trustee of deceased estate
ATO ID 2002/172: Income Tax: Capital gains tax: roll-over to a wholly owned company
ATO ID 2002/248: Capital gains tax - goodwill on the disposal of a sole practice
ATO ID 2002/257: Capital gains tax - change from an incorporated association to a company
ATO ID 2002/322: Superannuation, retirement and employment termination: Compensation payments. Capital gains tax exemption not applicable to eligible termination payments (ETPs)
ATO ID 2002/360: Income Tax: Capital Gains Tax: shareholder claiming the CGT discount on capital component of a dividend
ATO ID 2002/361: Capital Gains Tax: rollover into wholly-owned company
ATO ID 2002/487: GST and delivery of grain to a cooperative before 1 July 2000 when payment not received until later
ATO ID 2002/739: Capital gains tax: Making a choice and Small business roll-over
ATO ID 2002/740: Capital gains tax: Extension of time to choose small business roll-over
ATO ID 2002/743: Capital gains tax - time of disposal where there is a dissolution of a club and acquisition of that club's assets by another club from the liquidator
ATO ID 2002/771: Capital gains tax: Demerger of foreign company - cost base of shares received - Australian resident shareholder
ATO ID 2002/785: Capital gains tax: Small business relief - active asset - poker machine entitlement
ATO ID 2002/792: Capital Gains Tax: Extension of time to choose small business retirement exemption
ATO ID 2002/796: Capital Gains Tax: sets of Personal Use Assets - Floor Tiles
ATO ID 2002/891: Capital gains tax - Choice - scrip for scrip roll-over
ATO ID 2002/892: CGT - Extension of time to choose scrip for scrip roll-over
ATO ID 2002/894: Capital gains tax - capital loss - beneficiary wanting to claim loss made by discretionary trust
ATO ID 2002/911: Capital gains: partners contribute property to the partnership capital
ATO ID 2003/1002: Energy Grants (Credits) Scheme: fishing operations - catching of fish for sale to pet stores and aquariums
ATO ID 2003/1003: Energy Grants (Credits) Scheme: fishing operations - coral
ATO ID 2003/26: CGT: Small business concessions - Extension of time for active asset test
ATO ID 2003/323: Capital Gains Tax: Demerger - proportionate ownership test - unequal proportions
ATO ID 2003/336: Capital Gains Tax: Cost base for share investor - incidental costs
ATO ID 2003/353: Capital Gains Tax: compensation payment received for cessation of allowance
ATO ID 2003/355: Capital Gains Tax: compensation payment received for cessation of allowance
ATO ID 2003/378: Capital gains tax: main residence exemption - marriage breakdown
ATO ID 2003/43: Application of Division 6C: Public trading trust - unit trust
ATO ID 2003/48: Capital Gains Tax: CGT discount-non complying superannuation fund 
ATO ID 2003/5: Capital Allowances - CGT event K7
ATO ID 2003/509: Group company loss transfers: wholly-owned group - transfer agreement made prior to income company lodging its tax return
ATO ID 2003/533: Deducting tax loss - saving rule - capital gain made in respect of an equity interest
ATO ID 2003/538: Deducting tax loss: saving rule - value of taxation benefit from tax loss
ATO ID 2003/749: Capital gains tax: small business 50% reduction - trustee assessed under section 99A of the Income Tax Assessment Act 1936 
ATO ID 2003/769: Capital gains tax: transfer of partnership assets to wholly-owned company - calculation of number of pre-CGT and post-CGT shares 
ATO ID 2003/773: Capital gains tax: cost base - non income producing property - travel costs - cents per kilometre method
ATO ID 2003/789: CGT: fourth element of cost base or reduced cost base - expenditure by lessee to restore premises at end of lease
ATO ID 2003/802: Capital gains tax: CGT discount - discount capital gain distributed by corporate unit trust to unit holder 
ATO ID 2003/804: Capital gains tax: property held on trust - absolute entitlement - pre-CGT asset
ATO ID 2003/809: Commercial debt forgiveness - PAYG withholding taxation debt owed to the Commonwealth
ATO ID 2003/81: Capital gains tax: C&W Optus (Optus) - SingTel takeover: acquisition date of SingTel shares where Optus shares were compulsorily acquired
ATO ID 2003/822: Capital gains tax: date of disposal - Xstrata Holdings Pty Ltd takeover of MIM Holdings Ltd
ATO ID 2003/823: Capital gains tax: CGT event G3 - Harris Scarfe Holdings Ltd (in liquidation)
ATO ID 2003/83: Capital gains tax consequences of a demerger on the cost base of a share acquired by a shareholder in a demerged company
ATO ID 2004/50: Excise: accounting for excisable goods for the purposes of section 60 of the Excise Act 1901
ATO ID 2004/555: Company bad debts: company unable to show continuity of ownership test satisfied for any period
ATO ID 2004/687: Group company loss transfers: choice to deduct tax losses - limitation on amount transferred
ATO ID 2004/810: Company tax losses: deduction of tax loss from net exempt income where total deductions exceed total assessable income
ATO ID 2004/964: Continuity of Ownership Test: listed public company - requirement that exactly the same shares or interests must continue to be held
ATO ID 2006/156: Company tax loss: whether the Commissioner can be prevented from disallowing all of a tax loss following an income injection
ATO ID 2006/36: Company losses: continuity of ownership test - same persons must control the voting power or company must carry on same business
ATO ID 2008/96: Consolidation: capital gains tax - tax cost setting amount - cost base and reduced cost base - incidental costs - business capital expenditure- paragraph 40-880(5)(f)

Australia-Chile Double Tax Agreement Agreement 

On 10 March 2010, the Governments of Australia and Chile signed a new Double Taxation Agreement. The provisions of the Agreement include: 

- reductions in source-country withholding taxes on certain cross-border payments of dividends, interest and royalties;
- rules to determine when an enterprise or an individual of one country may be taxed on its activities abroad;
- an agreed basis for determining the allocation of profits within a multinational company to reflect the pricing that would be adopted by independent parties. These rules are an important tool in dealing with international profit shifting through transfer pricing;
- rules that ensure that profits derived from the operation of ships and aircraft in international traffic are generally taxed only in the country of residence of the operator. Also, income derived by crew members from employment exercised aboard an aircraft operated in international traffic is only taxable in the cabin crews' country of residence;
- rules for the taxation of income, profits or gains from the alienation of property;
- provisions that ensure that pension and retirement annuities are taxed only in the country of residence of the recipient;
- a general obligation for both countries to relieve double taxation on cross-border income by permitting tax paid under the other country's laws, and in accordance with the proposed Treaty, to be allowed as a credit against tax payable under their own laws;
- mechanisms through which the Australian and Chilean administrators may by mutual agreement resolve tax disputes and relieve double taxation;
- rules to protect nationals and companies of one country from tax discrimination in the other country;
- a framework to provide for the full exchange of taxpayer information; and
- special rules to preserve the application of existing tax arrangements between Chile and Australian companies under the provisions of the Chilean legislation DL 600 (Foreign Investment Statute).

The Treaty will take effect in four stages. The withholding tax provisions will apply on income derived on or after the first day of the second month following entry into force, the fringe benefits tax provisions will apply to fringe benefits derived on or after 1 April in the year following entry into force, provisions relating to other taxes will apply to income derived in the year beginning 1 July following entry into force and the administrative provisions will apply upon entry into force of the agreement.

Orica Ltd v Commissioner of Taxation [2010] FCA 197 (10 March 2010): The Federal Court has held that a 1998 income tax year amended assessment which was issued to the taxpayer for a net capital gain of $264.5m from the disposal of distribution rights was excessive. The Court, on the basis of expert testimony, held that the market value consideration for the disposal (or release) of the rights was considerably less than the figure arrived at by the Commissioner of Taxation. The Court, in reaching this decision, found that the taxpayer owned the distribution rights for various pharmaceutical products. The Court dismissed the taxpayer's argument that the distribution rights had been previously sold to a third party and that the taxpayer was not therefore liable for the tax levied on the distribution rights.

The Tax Laws Amendment (2010 Measures No 1) Bill 2010 was passed by the House of Reps on 10 March 2010 without amendment.

Tax Laws Amendment (2009 Measures No 6) Bill 2009, Tax Laws Amendment (2009 GST Administration Measures) Bill 2009 and Tax Laws Amendment (2010 GST Administration Measures No 1) Bill 2010 all passed the Senate and now await Royal Assent.

As at 12.3.10