CPA Tax Update

Tax expenditures statement released by Treasury

Treasury has released the Tax Expenditures Statement for 2011, providing details of concessions, benefits, incentives and charges provided through the tax system to taxpayers by the Australian Government.

The statement reports that total measured tax expenditures as a proportion of gross domestic product peaked in 2007–08 at 10.7 per cent before falling to 8 per cent in 2010–11. In dollar terms, total measured tax expenditures in 2010–11 are estimated at around $112 billion. Treasury says the largest tax expenditures in 2011 were for owner-occupied housing, followed by superannuation, and tax concessions related to goods and services tax.

The tax expenditures statement is released annually by Treasury to ensure transparency between the government’s direct expenditure and indirect expenditures via the tax system.

Superannuation roundtable – consideration of reforms

The government has announced that a "superannuation roundtable" will consider how to improve superannuation concessions and provide more options in the post-retirement (or drawdown) phase.

The roundtable will first consider compliance cost issues regarding to the proposed $50,000 concessional contributions cap for individuals aged 50 and over who have less than $500,000 in superannuation, which would apply from 1 July 2012. The roundtable will then examine retirement income products to expand options in the retirement drawdown phase (such as annuities and appropriate offsetting savings).

A representative of the Joint Accounting Bodies (of which CPA Australia is a member) will attend the roundtable.

ATO Consultative Forums calendar

The 2012 calendar is available (PDF) on the ATO website.

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Tax News

PAYG and FBT processing system issues

The ATO advises that, following the upgrade of its processing system for pay as you go (PAYG) and fringe benefits tax (FBT) instalments, some technical issues have been identified regarding the "Tax Agent", "BAS Agent" and "Business" portals. Some users have received "technical error" massages when attempting to view or lodge activity statements or view the integrated client account. The ATO is working on a solution and will keep taxpayers updated

ATO IDs: four new; three withdrawn

The ATO has issued the following interpretative decisions (IDs):

• ATO ID 2012/4: Income tax: Capital works: Your area – assignee of that lessee's lease
• ATO ID 2012/5: Income tax: Research and development: Building expenditure
• ATO ID 2012/6: Goods and services tax: GST and representative of an incapacitated entity acting as both supplier and recipient of the representative's administration services
• ATO ID 2012/7: Goods and services tax: GST and liability for a supply made by an incapacitated entity prior to the appointment of a representative

The ATO has withdrawn the following IDs:

• ATO ID 2002/19: Goods and services tax: GST and remuneration of administrator
• ATO ID 2002/86: Goods and services tax: GST and liability where consideration is received for a supply made by an incapacitated entity prior to the appointment of a representative
• ATO ID 2003/463: Income tax: Capital allowances: Meaning of "value of property" where a hire purchase agreement ends

ATO website updates

• Capital allowances: frozen pre-prepared meals and selected snacks – draft effective lives – comments are due by Friday 2 March
• Consumer price index rates
• Draft Personal Tax Advisory Group minutes, 3 November 2011 – issues discussed include: debt collection, aggressive tax planning, and new instructions for paper tax returns
• Fringe Benefits Tax and entertainment
• Fringe benefits tax minutes, November 2011 – issues discussed include: the living-away-from-home allowance, credit card processing fees, and car parking fees
• Law Administration Practice Statements Program
• Public rulings program
• Payments from worker entitlement funds – fact sheet for individuals
• Questions and answers for superannuation funds – to prepare for superannuation reforms
• Tax-exempt body entertainment fringe benefits – guide for tax-exempt employers

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Tax rulings

The following rulings were released by the ATO on Wednesday 1 February:

• Draft TD 2012/D2: Income tax: Capital gains: for the purposes of paragraph 115-228(1)(a) of the Income Tax Assessment Act 1997 can a beneficiary of a trust estate be reasonably expected to receive a share of the net financial benefit referable to a capital gain made by the trust estate in an income year if the fact that the capital gain that was made is not established until after the end of the income year?
• CR 2012/6: Income tax: Return of capital, acquisition of new interests and stapling of securities to form a new stapled security: Centro Australia Wholesale Fund
• CR 2012/7: Income tax: Return of capital, acquisition of new interests and stapling of securities to form a new stapled security: Centro DPF Holding Trust
• CR 2012/8: Income tax: Return of capital, acquisition of new interests and stapling of securities to form a new stapled security: Centro Retail Group
• CR 2012/9: Income tax: Return of capital: Centro Properties Group
• Erratum to TD 2007/28: Income tax: What is a "present legal obligation" of a private company for the purposes of subsection 109Y(2) of Division 7A of Part III of the Income Tax Assessment Act 1936?

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Cases

Liabilities not related to assets

In AAT Case [2012] AATA 45, Re Bell and FCT, the Administrative Appeals Tribunal (AAT) found that various liabilities of the trust as a connected entity or affiliate of the taxpayer could not be taken into account because the liabilities either did not "relate" to a relevant asset as required or were excluded "contingent" liabilities. Therefore, the AAT ruled that the taxpayer failed the "maximum net asset value test" for the purposes of accessing the capital gains tax small business concessions.

SMSF non-compliance upheld

In AAT Case [2012] AATA 44, Re Trustee for the R Ali Superannuation Fund, the AAT upheld a non-compliance notice issued to a self-managed superannuation fund (SMSF) for regulatory breaches in respect of loans made to a related company.

Federal Court has no jurisdiction to entertain appeal

In Grapsas v FCT [2011] FCA 1465, a taxpayer whose objections against notices of assessment for over $220,000 were ruled invalid by the Commissioner of Taxation on the basis that he was bankrupt at the time and therefore had no standing to object to them, has been unsuccessful in his application to the Federal Court to appeal against the Commissioner's decision.

Appeals update

The taxpayer has appealed to the Full Federal Court against the decision in Mitsui & Co (Australia) Ltd v FCT [2011] FCA 1423. The Federal Court had dismissed the taxpayer's appeal and upheld the Commissioner's disallowance of a deduction in relation to a petroleum production field.

Both the Commissioner and the taxpayer have appealed to the Full Federal Court against the decision in
Howard v FCT (No. 2) [2011] FCA 1421. The Federal Court had held that a damages award received by the taxpayer was not assessable income as it was held in trust for a company. The court also dismissed the taxpayer's appeal and held that trust distributions he received from a non-resident trust were assessable under section 97 and section 99B of the Income Tax Assessment Act 1936.

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CPD

Risk management webinar

Find out what’s required under APES 325 Risk Management for Firms, and how you can establish effective risk management principles and processes by using ISO 31000:2009.

Fringe benefits tax essentials

Understand the elements of fringe benefits tax, salary packaging, and employee allowances in this workshop series.

Islamic finance webinar

Join presenters from the Global University of Islamic Finance as they discuss the essential principles of Islamic finance and how they are relevant to your business.

Newcastle convention 2012

Tailored specifically to accounting, finance and business professionals in the Newcastle and Hunter Valley region, this event will cover how to build a resilient and ”recession-proof” business.

Tax update series

Keep up-to-date on the latest changes and developments in tax legislation with these regular updates.

Transition to Excel 2010 webinar

Have you recently made the move to Microsoft ® Excel 2010? Go beyond the basics by unlocking Excel 2010’s most useful tips and tricks.

More training and events

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CPA Library

Access Thomsons Reuters online resources

Titles available for February include: ASIC Working Guide for Accountants, Guide to Financial Risk Management, XYZ Model Financial Accounts, Tax Archive, and the XYZ Audit Manual.

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Tax Press

Australian Financial Review

'Spending switch hits GST take' (Report that taxpayers are spending more on GST-exempt services, thereby reducing the Government's GST collections) AFR [p 3], Wed 1.2.2012

'Why asset selection is vital for property success' (Article on investing in property by DIY super funds) AFR [p 25], Wed 1.2.2012

'We need to talk about longevity' (Article about the use of deferred annuities) AFR [p 32], Wed 1.2.2012

'ABA backs tax stance' (Report the Australian Bankers Association backs the Treasurer's stance in ruling out a financial transactions tax in Australia) AFR [p 46], Wed 1.2.2012

'Hogan loses tax case bid' (Report that a taxpayer loses privilege claim to keep secret summaries of financial and business advice) AFR [p 3], Tue 31.1.2012

'Sarkozy commits to finance tax' (Report that France plans to impose a financial transactions tax starting in August 2012) AFR [p 10], Tue 31.1.2012

'Round table push for tax breaks' (Report that the new Superannuation Roundtable will push for greater tax breaks on retirement products) AFR [p 35], Tue 31.1.2012

'Super funds will fight to preserve tax concessions' (Report on the Government announcement of the creation of a superannuation roundtable to discuss super tax breaks) AFR [p 1], Mon 30.1.2012

'Directors may avoid liability' (Article on the personal liability of directors draft legislation released by the Government) AFR [p 7], 28-29 January 2012

'Share class can affect tax outcome' (Article on the CGT effects of restructuring a company) AFR [p 22], 28-29 January 2012

'Abundant when redundant' (Article on the tax implications of a redundancy payment) AFR [p 26], 28-29 January 2012

'Offsets key in DIY wind-up' (Article on the costs and tax implications of winding-up a SMSF) AFR [p 28], 28-29 January 2012

'Make Queensland low-tax state again' (Business leaders call for Qld to be 'low-tax' state ahead of upcoming state election) AFR [p 1], Fri 27.1.2012

'ASIC: just 3pc of financial plans good for clients' (ASIC surveillance shows only 3 per cent of financial plans prepared by advisers were 'good' for clients) AFR [p 3], Wed 25.1.2012

The Australian

'Push for budget review of tax breaks on super' (Calls for review of tax breaks for super following Treasury figures re tax concessions for superannuation) AUSTRALIAN [p 6], Wed 1.2.2012

'Concessions figures writ large' (Comment on Treasury's tax expenditure statement re tax concessions for superannuation) AUSTRALIAN [p 6], Wed 1.2.2012

'Hogan film files "open to scrutiny"' (Report the Federal Court has made a decision concerning taxpayers' claim for legal professional privilege over certain documents) AUSTRALIAN [p 7], Tue 31.1.2012

'Think tank on super' (The Government has announced a superannuation roundtable to work on more options for retirement incomes) AUSTRALIAN [p 1], Mon 30.1.2012

'Financial planners fail ASIC's secret tests' (Opinion on the changes for the financial sector from the FoFA reforms) AUSTRALIAN [p 36], Wed 25.1.2012

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