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09 Mar 1212 Incorporation of Professional Practices –Draft Tax Determinations Consultation

Last Friday, 2 March 2012, Mark Molesworth FTIA (BDO) and The Tax Institute’s Tax Counsel, Stephanie Caredes ATIA, attended a consultation meeting with the ATO, representatives from the professional bodies and representatives from the tax profession to discuss draft Tax Determinations TD 2011/D9 and TD 2011/D10 in relation to employee share schemes and the share buy-back rules (respectively) in the context of “no goodwill” incorporated professional practices. The discussion centred around the interpretation of IT 2540 in the context of incorporated professional practices, TD 2011/26, which considers the CGT implications of a disposal of a share in a “no goodwill” incorporated professional practice, and the issues included in the two draft Tax Determinations.

The ATO is seeking to extend the application of IT 2540 in the “post-incorporation” environment through the Tax Determinations. Discussion focused on reaching agreement between all the parties as to how they thought IT 2540 should actually be applied in the post-incorporation environment. Other issues discussed included the treatment of Everett assignments and the application of the market value substitution rule in the context of the two draft Tax Determinations.

The ATO was open to receiving further submissions from the professional bodies in relation to the draft Tax Determinations and therefore further consultation on the Tax Determinations is anticipated.

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