Contact     |     Membership     |      Student Page     |     Taxation Institute Website

On behalf of the Taxation Institute, we extend a warm welcome to our new Student Members who have joined the Institute in Semester 2. Student Members receive free access to an abundance of valuable resources including:

• Access to the Taxation Institute website which includes the current year’s edition of Taxation in Australia providing you with the latest news, rulings, ATO developments, product information and tips
• Access to TaxVine – Member-only e-newsletter containing the latest news, rulings, technical updates and Member commentary
• Discounted Member rates to attend Taxation Institute seminars and events plus FREE attendance at a selection of exclusive events (see below)
• Networking opportunities with leading tax professionals
• Key knowledge directly related to your studies and relevant to the workplace
• Added credibility, respect and relevance to your tax studies

Looking for the next step in your taxation education? Foundation Tax is the answer!

Foundation Tax has become the mandatory tax compliance course for graduate accountants and lawyers, cadets and bookkeepers.

Modules focus on developing skills required to complete common tax compliance tasks such as:

• Applying relevant tax legislation
• Completing PAYG and BAS statements
• Understanding tax consequences of business structures
• Calculating FBT, CGT and GST.

Learning from experienced tax practitioners will give you the knowledge you need to be successful in the tax profession.

The next study period for the Taxation Institute’s Foundation Tax course closes on 10 March 2009.

Free Member Benefits: Enrolment in Foundation Tax includes full Affiliate Member benefits for the duration of the course and until the end of the quarter after the course conclusion.

Exemptions: Candidates who successfully complete Foundation Tax will gain one (elective) subject exemption in the Bachelor of Taxation at the Australian School of Taxation (Atax) at the University of New South Wales.

To enrol today or for more information go to www.taxeducation.com.au.

Yours sincerely,

Noel Rowland               Janet Adams
CEO                              Membership Manager

Introduction

The growth on the internet of virtual worlds such as Second Life has resulted in the establishment of virtual communities in which members run businesses and carry on trade. Data suggest that there is substantial investment in such virtual world business activities and there are facilities to exchange world currencies for virtual world currencies (such as Linden Dollars in Second Life). Revenue authorities have firmly indicated their stance that income from such activities will be taxed. This fairly heroic approach is faced with considerable practical and legal difficulties. This article explores some of the challenges involved in taxing activities undertaken in the virtual world.

Importance

The importance of the issue considered may not seem great to the many of us who do not normally engage with Virtual Worlds but it is a burgeoning area of entertainment and the sums involved are not insignificant. One commentator has noted that the game Everquest had a gross national product of US$135 million in a 2001 study.1 Another commentator has explained that

“The number of active subscribers to virtual worlds is more than 5 million and within these virtual worlds, computer rendered characters…engage in all sorts of real world activities, including sales and exchanges of property and services.”2

Macrae reports that there are an estimated 30 million.3 This scale, coupled with the fact that the numbers continue to grow, makes the implications for the tax systems of the world obvious to the reader. They are obvious also to some revenue authorities.

To read this article in full, please click here

Dr Michael Walpole BA LLB, GradDip Tax (Natal) PhD (UNSW) FTIA is an Associate Professor and Associate Dean (Education) at ATAX at the University of New South Wales. Michael has completed a PhD on the Taxation of Goodwill which has resulted in a number of articles and papers on the taxation of intangible property.

Michael joined Atax in 1994, prior to which he was a senior lecturer in taxation in the Postgraduate Taxation Program of the School of Law, University of Natal. Before academic life, Michael was a tax consultant with Ernst & Young and prior to that a solicitor in private practice. In 2008 Michael is Academic Visitor, Faculty of Law, Oxford, and a Visitor at the Oxford Centre for Business Tax.

Michael has co-authored several books including Understanding Taxation Law and Compliance Cost Control. Michael has also written and presented many papers on his research topics to practitioner and academic audiences in Australia and overseas. He is co-editor of the eJournal of Taxation Research and he is also author and co-author of a number of articles on taxation compliance costs especially psychological costs of taxation compliance.

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Tax Careers - Coming soon

Tax Careers, our new recruitment and careers website for all tax graduates and professionals is coming soon. Hosted by the Taxation Institute of Australia and open to all student members and tax professionals Australia wide, Tax Careers is a recruitment and careers website offering job seekers direct access to a targeted network of tax recruiters and employers. Search for jobs Post your resume Communicate with recruiters Apply for jobs online We will be inviting you to upload your resume for a chance to win a fabulous prize. Look out for Careers at www.taxinstitute.com.au.

Question 1 by Dr Michael Walpole FTIA

An individual, non-business taxpayer is aggrieved that the ATO has selected her for an audit despite her having always relied on a highly reputable tax agent to ensure her tax returns were completely accurate. The reason given by the ATO is that, over the last 10 years, she has consistently reported considerable dividend income but never reported any net capital gains. This looked unusual to the ATO’s audit case selectors.

Both the taxpayer and her tax agent consider satisfying the ATO’s auditors will be a simple matter. This is because, as her records clearly demonstrate, to date none of her investments have involved the realisation of capital gains or losses. However, since the taxpayer believes her tax returns have been completely accurate, she considers that she is being “picked on” unfairly and the ATO should reverse its decision to audit her.

In preparation for his retirement, Ian proposes to start a small business of goat farming just outside Kingaroy. It is projected that the goat farming business will be generating losses for at least the first five years of operation. In about 6 years time [2014] it is likely that Ian will need to attract an outside investor to inject more equity into the goat farming business to expand its operations. Ian’s old school friend, Josephine, has indicated that she is interested in investing up to 50 per cent of the required extra capital in 2014.

Answer each of the following four Questions, explaining your reasoning in each case.

1. Is this a matter for either a review by the Administrative Appeals Tribunal or an appeal to the Federal Court? What would you advise her?
2. Is the ATO’s ‘Taxpayers Charter’ of use to this taxpayer?
3. Could either the Inspector General of Taxation or the Tax Ombudsman’s Special Advisor on Taxation be of help?
4. Is this a situation where either the Administrative Decisions (Judicial Review) Act 1997 or Section 75 of the Constitution might provide routes for her preventing the audit?

Question 2 by Nidal Danoun FTIA

Mary Baker has recently purchased a new apartment in North Sydney after she decided to sell her existing apartment in Parramatta and move closer to the city. In order for Mary to afford the new purchase she sold some shares and other assets. Mary has approached you for advice in relation to the following assets she sold in the financial year 2007-2008:

• Apartment in Parramatta that Mary was living in for the entire ownership period. The apartment was purchased for $160,000 (plus purchase costs of $2,000) in December 2002 and sold in February 2008 for $250,000 (selling costs $3,500).
• Personal boat purchased in September 2004 for $25,000 and sold in February 2008 for $15,000.
• Coin collections purchased in January 2006 for $200 and sold in December 2007 for $350.
• NAB shares purchased on October 10, 2006 for $25,000 and sold on November 8, 2007 for $29,300 (purchase and selling costs of $100).
• BHB shares purchased on November 22, 2007 for $10,000 and sold on June 19, 2008 for $13,500 (purchase and selling costs of $100).
• A diamond ring inherited from Mary’s grandmother in July 2002, previously acquired by her grandmother in February 1980 for $6,000 with a market value at the time her grandmother died of $26,000. Mary sold the ring to a jeweller for $29,000.

Advise Mary on her Capital Gains Tax (CGT) liability for the financial year 2007-2008.

To see the full set of questions and their suggested solutions, please click here.

Nidal Danoun is a lecturer at Macquarie University in the areas of Financial Planning, Finance, Accounting and Tax. He is also a regular presenter at various seminars in the areas of financial services and financial planning. Nidal is also the Principal Director of Prosperity Financial Services a financial Planning and accounting consultancy practice. He is a Certified Financial Planner (CFP) and a CPA Financial Planning Specialist (FPS).

Nidal holds a master of Commerce in Accounting and Finance, and a Diploma in Financial Planning. Nidal has had over 10 years experience in the financial service industry. Nidal sits on several finance, tax and financial planning committees. He sits on the Institute of Taxation education committee, he also chairs the CFP2 taskforce education committee and he is the subject expert for CFP2 and CFP4. He is also an assessor for the CPA, The Financial Planning Association (FPA) and the Securities Institute of Australia (SIA).

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Free Seminar Opportunities
For more information on Taxation Institute seminars, visit our website www.taxinstitute.com.au to view brochures for our events	Limited FREE registrations are now available for selected Taxation Institute events for Student Members. To find out about FREE event opportunities, please contact your local state office or email studentmembership@taxinstitute.com.au

Name: George Samaras FTIA
Employer: The Argyle Partnership Lawyers, Sydney
Position: Taxation and Superannuation Lawyer

I started my career as a student working at Economos & Co Chartered Accountants from 1997 to 2000. Studying LLB/BCom(Acc), I then decided that I wanted to increase my exposure to a variety of areas of law and gained employment in suburban law firm, Smith Monti Legal, where I worked as a Law Clerk for a year.

After my time at Smith Monti Legal I decided that Tax Law was the field for me. I scanned the Law Society and Taxation Institutes’ websites and narrowed down who I wanted to work for. My aim was to work for a tax law specialist. I gained employment with N Panos & Associates, advising in the areas of taxation, superannuation and business law and remained in that employment for over five years.

In 2006 I enrolled to obtain my Master of Laws, undertaking mainly taxation units. Some time later, my career took its next step and led me to the city were I worked for my University Lecturer, Michael Binetter and his Partner, Greg Vale, at Binetter Vale Lawyers, advising in taxation and superannuation law.

Whilst being cautious not to move around too much, I decided to take another opportunity from the beginning of 2008, and I now find myself at The Argyle Partnership Lawyers, still advising in taxation and superannuation law and really enjoying it.

Describe your current role:

My role involves working closely with accountants, financial planners and private business owners to help them deal with taxation, superannuation and succession planning issues for them or their clients.

The issues that generally arise are rarely isolated or confined to one area. By that I mean that a particular advice might involve consideration of trusts law, asset protection issues, succession planning as well as being aware of the taxation consequences that flow from particular transactions. Clients quite often have difficulty articulating or even knowing what the issues are and sometimes only work on an outcomes basis. My work quite often involves explaining all the options and all the consequences to a client and allowing them to decide what suits.

My work also involves working with a range of skill based teams both within the firm and outside the firm from other practices that don’t necessarily have tax as a focus area.

From within our firm, the teams that I work with include the property law team, the commercial transaction team, the commercial litigation team, and the family law team working together to find solutions for clients and provide tax advice on particular issues.

Another part of my work also involves managing taxation disputes for clients and assisting them during an audit or investigation. It can be very daunting for clients when the ATO or the Office of State Revenue comes knocking on the door, and without proper advice as to their rights and obligations they can cause a lot of problems for themselves, unintentionally.

The final part of my work involves networking and marketing. This is not a compulsory part of my job, but it is something I enjoy doing.

Describe your Taxation Institute committee involvement:

I have been a member of the Taxation Institute Membership Committee for some time now. I have been chairing the Taxation Institute’s Hurstville Quarterly Breakfast Club since 2003, as well as having previously prepared and presented the Tax Update there. I intend to increase my participation with the Taxation Institute as I enjoy meeting with other tax professionals and sharing knowledge.

What are your career highlights:

A very exciting time for me was working on a Federal Court Tax case with Queens Counsel and another prominent Barrister both with superior Tax and Trust law knowledge. The whole matter went on for a few years, from the lodgment of an objection with the ATO, then preparing for and going through the Federal Court disputing the Commissioners decision, and through to the decision being handed down by the Federal Court Judge. As a result of the case, the legislation was changed. It was satisfying to know that I participated in a change of the law.

Why did you join the Taxation Institute?

I decided fairly early in my career that a key ingredient to becoming a successful tax lawyer was to talk and listen to, get to know, associate with, and work with other tax professionals who are good at what they do. The Taxation Institute is always giving me that access. Membership also offers other benefits such as the blue journal and other valuable resources including the Institute library services.

What advice can you give graduates?

1. Every role I have been in has been different, and each place of employment has presented different opportunities. You need to learn what you can from others and you need to look for the opportunities to do so.
2. Patience. Don’t focus too much on who is paying the most when you first start out. Look for where you will learn the most and be guided the most. It is important to respect what you do and learn from those who no more than you. The money will come soon enough. You will find you will not only be valued more with time in your current employment as you learn more, but also amongst your peers, generally and in the market for your services as an advisor in tax or your chosen area and as an employee.
3. The importance of Reading. If you want to be better than others and be paid more as time goes on, you need to read, the Blue Journal, the Red Journal, TaxVine, other professional papers, eg. The Thompson Weekly Tax Bulletin, InTax Magazine from Thompson. Find a routine and be regular in your reading.
4. Always monitor what others are doing and do not isolate yourself from others in your profession. The Taxation Institute will give you plenty of opportunity to stay in touch.

Who or what inspires you?

I am inspired by people who work hard and get results. I am inspired by people who are willing to ‘give it a go’. I am motivated by the idea that one day I can be financially secure and support my family.

What do you do to unwind?

I spend time with my wife going out for a nice meal or watching a movie at home. I also don’t mind to going on short weekend trips which help me to relax for a bit and keep me focused and motivated.

Favourite holiday destination:

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Structured Education Program
Essential tax education for all tax professionals Foundation Tax >> Applied Tax >> Advanced Tax
Accountants: Applied Tax provides exemptions into both the CA and CPA Programs giving you the flexibility to choose either of those programs for your professional qualification. Lawyers: Applied Tax is an excellent course to develop your tax specialisation! As a graduate of the Advanced Tax course and a regular sponsor for staff in the Foundation Tax course I am familiar with the training methodology of the Taxation Institute of Australia. We feel this methodology is better for our staff who are given the opportunity to develop both their business writing and verbal communication skills. To enrol today or for more information go to: www.taxeducation.com.au	Cindy McDonald Advanced Tax Graduate and Sponsoring Employer

Some Recent Cases of Interest

• Aid/Watch Incorporated v FC of T [2008] AATA 652
• WR Carpenter Holdings Pty Ltd v FC of T [2008] HCA 33
• FC of T v Futuris Corporation Ltd [2008] HCA 32
• Watson v DFC of T [2008] FCA 1173
• Brady King Pty Ltd v C of T [2008] FCAFC 118

Legislation

Places to locate legislation include the following sites:

• Austlii - Federal and State legislation
• ComLaw - Official Australian Government site
• ATO - Exhaustive site for tax and superannuation and related legislation; Includes EM’s and Second Reading speeches
• Federal Parliament - Bills, EM’s and Second Reading speeches; No Acts (go to ComLaw for these)

ATO

www.ato.gov.au

This website is extremely useful for students and practitioners and will reward your efforts to become familiar with the contents and how they are arranged.

• Public Rulings, Determinations etc.
• ATO Interpretive Decisions
• NTLG Minutes
• Tax, superannuation and related legislation. Also includes EM’s and Second Reading speeches

Journals

• Taxation in Australia
• The Tax Specialist
• Australian Tax Forum

The Treasury and Ministry Websites

• Treasury
• The Hon. Wayne Swan - Treasurer
• The Hon. Chris Bowen – Assistant Treasurer & Minister for Competition Policy & Consumer Affairs
• The Hon. Nick Sherry – Minister for Superannuation & Corporate Law

Related websites

• Taxation Institute of Australia
• ATO
• Board of Taxation
• Austlii
• ComLaw
• Treasury: Ralph Review
• Treasury: Review of Income Self Assessment
• Inspector-General of Taxation
• Federal Parliament - Canberra

Education Websites

You may have access to one or more of these sites via your educational institution – it’s a good idea to check this out.

• Thomson - Subscription needed for access
• CCH - Subscription needed for access
• LexisNexis - Subscription needed for access

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Various special offers from the Taxation Institute’s Business Alliance Partners are available to Student Members. Please click here to see special offers from Thomson, HSBC and more.

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We welcome your feedback about ConTax and the receipt of proposed content contributions (i.e articles) for future editions.Click here to contact ConTax.

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