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ConTax Newsletter - September 2012

The Tax Institute's website is a comprehensive and easy to use online knowledge-base developed for the tax profession, and is one of the leading sites for tax related information and resources. Presentations and papers from Australia's leading tax professionals, handy links, breaking daily tax news and updates, convenient access to cases, rulings, legislation and submissions on tax policy, administration and technical matters are only a click away: www.taxinstitute.com.au

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As a Student Member, you have FREE access to the current volume of Taxation in Australia, The Tax Institute's monthly Member-only journal and FREE access to the daily TaxVine news service. Content on our website goes back until 1996 and includes over 50,000 items allowing you to source the best tax articles and achieve your best marks.

The global tax designation Chartered Tax Adviser (CTA) is now in Australia

Have your tax skills and expertise recognised globally

As recently announced, due to the esteem in which The Tax Institute's programs and the reputation of its members are held internationally, qualifying tax professionals may now be eligible to attain the globally recognised designation - Chartered Tax Adviser (CTA).

Already recognised in the UK, Europe and Ireland, tax professional bodies around the world are positioning the Chartered Tax Adviser as the global mark of excellence in taxation and the "go to" brand for the highest quality tax advice.

Membership requirements for prospective CTAs include a minimum of three years' tax relevant experience. Candidates must also pass the new CTA exam before being admitted.

This is an exciting opportunity for you to progress your career in tax. With this designation now in Australia, you could potentially find yourself with opportunities for you to expand your career internationally.

Find out more about the designation or view video highlights from the official launch event, as well as the full announcement and speeches.

Tax Careers Online

Tax Careers is a dedicated tax recruitment and online careers service within The Tax Institute website, open to all members, student members and tax professionals Australia wide.

The Tax Careers website offers a valuable and secure service to members and tax professionals within Australia who are currently looking for tax related jobs. The website brings together candidates and employers in an online environment.

Job seeker benefits include:

  • Search for job roles in tax from a range of sectors, job categories and in any location across Australia
  • No cost to job seekers
  • Secure online information exchange

To register your interest as a job seeker or to find out more information, visit Tax Careers now.

Feature Article - Negative Gearing: Should we move towards the United Kingdom system?

Contributed by Pasqualina Callea • Lecturer in Law • University of Adelaide

Abstract

Negative gearing is widely used by investors in Australia, as they are able to increase their wealth through borrowing. Although negative gearing is entrenched within our taxation system, many have called for its abolition. However, what they fail to appreciate is that negative gearing is attractive to taxpayers due to other tax policy measures in place, such as the immediate use of losses, the CGT discounting measures and the corporate imputation system.

The Australian government tried to restrict negative gearing, albeit on investment properties, with disastrous flow on effects after they reversed their position. The reasons for the reversal were based on unfounded evidence provided by various housing industry bodies and with the looming NSW state and federal elections, the political parties wanted to be re-elected.

However, what this article will also cover is that negative gearing is not the only driver of the housing market. Other factors such as interest rates, share market crashes, deregulation of the banking industry, job security and state taxes or a combination of these impact on the housing market. For example, low interest rates coupled with individuals with job security, and a deregulated banking industry, provides individuals with the confidence to borrow, and borrow larger amounts at lower rates.

Click here to read this article in full.

Sample Exam Questions

Contributed by: John Tretola, CTA University of Adelaide

John Tretola - B Com. (Adel); LL.B (with Hons)(Adel); G.D.L.P. (Law Soc.); M. Tax (UNSW); LL.M (Global Business Law) (La Trobe); CPA.

10 years experience in the Australian Taxation Office in audit related roles. Over 2 years experience in one of Adelaide's leading law firms in their tax and commercial division and over 2 years experience in an accounting firm as a senior tax accountant. Proprietor of a small tax agent practice since 2003.

Question 1:

Betty has a business selling fashion accessories. For the year ended 30 June 2012, she gives you the following figures (all GST exclusive):

  • Sales $460,000
  • Expenses $270,000
  • Net Profit $190,000
    (excluding depreciation)

The net profit shown of $190,000 does not include any depreciation expense.

Her closing written down value of assets as at 30 June 2011 was $60,000. These assets are all depreciated using the Diminishing value (DV) method at the rate of 25%.

She also tells you that on 1 June 2012 she purchased a machine that cost $36,000 (GST-exclusive) which is used exclusively for her business. This machine has a diminishing value depreciation rate of 20%.

Advise Betty what her taxable income would be for the year ended 30 June 2012 if she elected to enter the Small Business Entity system and compare that to what it would be if she did not enter the Small Business Entity system.

Question 2:

RST Development Pty Ltd is registered for GST and on 1 July 2006 acquires a block of land from Robert (who is not registered for GST and is not required to be registered).

RST Developments constructed a large house on this property and is proposing in 2012 to sell this house to Caroline. The following further information has been provided.

Acquisition cost of land $800,000
Stamp duty on purchase by RST $100,000
Construction costs (net of GST) $450,000
Sale Price $1,680,000

Required:

(a) Can RST Developments use the margin scheme on the sale of this house? Why or why not? Explain

(b) What will be the lowest GST liability on the sale of the house by RST Developments?

To see the full question and suggested solutions, click here.

Recent Tax Cases of Interest

Young Practitioner Profile

YTP Adrian Cartland - ConTax 2012

Name: Adrian Miles Lawrence Cartland
Employer: Donaldson Walsh Lawyers
Position: Senior Associate
Member Since: April 2007

When I studied law at University I always knew that I wanted to work in the Commercial world. Upon doing an intensive Tax Law subject I was fascinated by the complexity and the opportunity for tax planning and realised that this is how I wanted to specialise and spend my professional career.

I began my career at a large commercial firm in a tax technical role, which was the role that I had wanted to start in, and mainly provided advices on transactions and structuring.

A couple of years later, after a downturn in work due to the Global Financial Crisis, I sought out a new position and got the opportunity to work as the offsider to the tax and commercial law specialist Dr Campbell Rankine. As of 1 August 2012 Dr Rankine has merged his practice (Campbell Rankine) with the South Australian commercial law firm Donaldson Walsh Lawyers. Dr Rankine, myself and three colleagues joined Donaldson Walsh Lawyers as part of the merger.

Describe your current role

I work on complex and cutting edge tax structuring, as well as applying the same critical legal reasoning to resolving disputes and drawing bespoke documentation. I work within a larger team of tax experts, and in addition to bouncing ideas off of experienced colleagues I also supervise and mentor a couple of junior solicitors.

Describe your Tax Institute committee or contributing involvement

I am a member of the Tax Institute Membership Committee

What are your career highlights?

There have been many. A couple I particularly recall include:

  • Assisting a client who had been wrongfully treated by their family and friends, and who was left with no-one else to turn to. The specific circumstances of that client meant an initial superannuation advice merged into assistance on a multitude of other legal issues. Helping someone in such difficult circumstances and seeing them regain control of their affairs was very rewarding; and
  • Winning the National Golden Gavel competition as "the Taxinator" (awarded by the Law Council of Australia)- and giving a five-minute Arnold Schwarzenegger impersonation. That was a lot of fun!

Some other notable moments have included a client who owned a chicken shop giving me a cooked chicken as an extra thank you for saving him 10 years of GST, and the first time I knew something that my (very experienced) boss did not!

Why did you join The Tax Institute?

The Tax Institute is an excellent forum for tax professionals to get the tax training that is required practice, network with their peers, and take leadership roles within the profession. Accordingly it is essential that anyone who is a tax practitioner, in whole or in part, is a member of the Tax Institute.

What advice can you give to graduates?

The most important thing is to work out what you want to do with your life. I was fortunate that I figured out early on that I wanted to work in tax law. If you are motivated and determined to succeed in an area then potential employers can see that and find it a very attractive quality. It is also self-satisfying to work in something that you enjoy.

Graduates should also understand that their first role might not be their 'dream job' and that they might have to make lateral moves throughout their career in order to get where they want to be.

Who or what inspires you?

I am particularly inspired by people who are driven to achieve in their chosen area, while maintaining their humility and humanity. One example is Warren Buffett, probably the most successful investor of all time, who works still (at 81) because of his passion and, despite wealth of up to $62 billion, lives in the same relatively modest family home he has had since 1958. In 2006 he made the largest charitable donation of all time to another foundation, giving away 83% of his wealth to the Bill and Melinda Gates Foundation. Although unlikely I will ever achieve to the level he has, I find his character attributes an inspiring model.

What do you do to unwind?

I play the piano (mainly Jazz and classical), ride a motorbike, spend time with friends and family and train in Karate and Ju Jitsu.

Favourite holiday destination

Queensland - it is close, sunny, and I have lots of friends there.

Social media for tax professionals

Social media is changing how we communicate. Want some hints and tips on how you can use social networks to enhance your business and your professional development? Read on.

What is social media?

Social media is an umbrella term that encompasses any media, generally online, that facilitates social networking – the interaction and sharing of content and user experiences.

You’ve probably heard of things like blogs, Facebook, Twitter and LinkedIn. And chances are you’re like 62% of Australians1 and are using these networks, probably on a daily basis. But did you know that social media can be used to enhance your career and even your professional practice?

How can it benefit my career?

By building an online presence using social media, you can raise your professional profile. Social media, like other forms of networking, is a valuable way to build your connections and reputation within your industry. By expanding your network, you will open yourself up to new career and business opportunities.

Join the conversation, engage with others, build your following and come to be considered an authority in your industry.

How will people know where to find me?

The fastest and most effective way to promote your social media accounts is to first and foremost connect with other professionals and businesses in the tax profession. Join the conversation and followers will come.

Additionally, you can link to your accounts from your website, email signature and include the web addresses on your business cards.

How do I get started?

Signing up to Twitter, Facebook and LinkedIn is the easy part. What happens once you’ve got your profile set up? Do you need a social media strategy? How do you use each network and how do you make sure you’re using the right network for your business or industry?

In the coming months, we’ll feature articles on getting started with each of these social networks and give you tips on how they can be used to enhance the way you do business.

New to social media?

Connect with The Tax Institute and join the conversation.

Special offers from our Business Alliance Partners

The Tax Institute has negotiated special rates on your behalf with our Business Alliance Partners including CCH Australia, Thomson Reuters and Brewer Morris recruitment.

To access these special deals, please visit our website and have your member log in details handy.

Feedback

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