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13 May 09 Review of the Anti-Tax-Deferral Regimes

In a media release issued on 12 May 2009, the Chairman of the Board of Taxation, Richard Warburton, welcomed the Assistant Treasurer's announcement in the 2009-10 Budget that the Government supports all but one of the recommendations in the Board of Taxation's report on its review of the foreign source income anti-tax-deferral regimes.

The Board's key findings are:

1. The CFC provisions be retained as the primary set of rules designed to counter tax deferral arrangements. The CFC provisions be modernised by updating the definitions of what constitutes active and passive income together with the removal of the base company income rules.
  • The existing exemptions within the CFC rules are retained and additional exemptions be introduced in certain circumstances for complying superannuation entities.
  • A choice of attribution methods apply (the branch-equivalent calculation, market value, and deemed rate of return methods) where taxpayers are required to include attributable income in their assessable income.
  • The CFC provisions are rewritten in the Income Tax Assessment Act 1997 (ITAA 1997).
2. The foreign investment fund (FIF) provisions are repealed and replaced with a specific anti-roll-up fund measure targeting accumulation funds that reinvest interest-like returns.
3. The deemed present entitlement rules are repealed.
4. The transferor trust rules are retained with amendments to enhance their effectiveness and improve their integrity.

For a copy of the Board's media release, No 24, 12 May 2009, go here.

For a copy of the Board's report, go here.

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