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04 Dec 09 On the Business tax break and chattel mortgages

MEMBER 47 writes:

"Well it's official - the ATO are a disgrace. With the investment allowance about to expire, last week I dusted off my notes in respect of the rules for this incentive. One of my staff was quoting from the ATO's "Guide to small business and general business tax break" he printed on 4 November 2009. My copy was printed on 1 July 2009 and on comparing the two copies, we came to an interesting realisation - the copy printed in July was 17 pages long, the one printed in November was 21 pages long!! So where did these extra four pages come from during the past five months??

One of the really disturbing issues for me was that the November copy outlines that if you finance the acquisition of an asset with a Chattel Mortgage (CM), it needs to be an "equitable" CM not a "legal" one. The July 2009 copy does not make this distinction. Once again, the ATO are making the rules up as they go and I find it an absolute disgrace that we did not know this technical distinction before July 2009. I will bet that once the ATO rolls out its tax break audits, they will point to the current version which clearly makes the distinction, leaving a lot of practitioners dumbfounded as to why they didn’t advise clients to get an equitable CM pre June 2009. I think it will leave a lot of practitioners open to being sued by clients subsequently denied the tax break by the ATO.

The ATO will argue that they are merely clarifying the law as to how it stands, but I ask how on earth were we supposed to advise our clients to get an equitable CM if we didn’t know this pre June 2009?? Most finance brokers did not know this either, and are only NOW clarifying with financiers whether the CM documentation will stand up!!

I am fortunate to have kept a copy of the July 09 version so my clients have a reasonably arguable position, but I ask the Taxation Institute for some help on this issue, as a lot of clients are going to be caught out."

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