Australian Tax Forum

Articles from the current issue:

• The inequitable history of superannuation law compels further reform

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  This article undertakes a historical examination of superannuation law reform and observes its resulting complexity through onstant tinkering. Australian governments over the years have adopted or ignored recommendations from various inquiries addressing superannuation reform. Major drivers of reform have included efficiency, flexibility, member protection, integrity, sustainability and equity that together support a sound system.

• Reforming and realigning Division 855 of the Income Tax Assessment Act 1997 to give better effect to its policy objectives

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  Despite Div 855’s clear policy objectives, its practical operation has experienced challenges that must be addressed so as to ensure Australia’s taxation arrangements continue to be seen as attractive for future foreign investment. Changes will be proposed to the “all or nothing” rule, the non-portfolio interests test and the author will propose the introduction of a new provision that would require specific adjustments to the taxable treatment of a transaction that satisfied the indirect Australian real property interest test. Proposals relating to the timing of the planned introduction to the changes to the principal asset test announced in the 2017 federal Budget will also be made.

• Corporate tax transparency reporting and Benford’s law

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  Corporate tax transparency reporting came about due to persistent concern surrounding corporations paying their “fair share” of tax, tax avoidance or minimisation behaviour, and opportunistic earnings management. However, concern has been raised over the reasonableness of what appears to be a simple disclosure regime. This study examines the reasonableness of the tax transparency disclosures utilising the Benford’s law phenomenon. The 2014–15 corporate tax transparency report is analysed for potential abnormal digit frequencies by comparing Benford’s distribution against the observed frequencies for total income, taxable income and tax payable.

• A road test of the luxury car tax concession: will it influence demand for low-carbon vehicles?

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  The Australian Government proposes to reduce greenhouse gas emissions from the road transport sector by phasing in regulatory fuel efficiency standards between 2020 and 2025. To meet the standards, global car manufacturers will be required to
  reduce their fleets’ average CO2 emissions by increasing the supply of low‑emitting, fuel‑efficient vehicles. The Australian Government states the luxury car tax (LCT) concession for fuel‑efficient vehicles is one of the adopted measures to encourage “households and businesses” to purchase more fuel‑efficient vehicles.

• Tax expenditure scholarship and analysis in China

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  In the last quarter of the 20th century, the concept of a tax expenditure budget emerged as the primary mode of analysis of concessions in tax laws in advanced economies. Under this approach, the fiscal cost of concessions is calculated and lost revenue is treated as the equivalent of revenue collected and then disbursed by the government as subsidies to those benefiting from the concessions. The concept initially attracted considerable academic interest in China, though scholarship was largely limited to translation of foreign materials and subject to some confusion, as some scholars concluded the use of tax expenditure budgets amounted to endorsement of concessions as a vehicle for economic development. By the end of the first decade of the 21st century, academic interest in the field had largely faded, but government interest, first at the national level and more recently and selectively at the provincial level, has grown and limited tax expenditure accounts have been prepared, albeit considering newly enacted concessions only.

  It remains possible that China will some day adopt a full tax expenditure budget analysis process. Before that can happen, tax expenditure accounts must be broadened to include previously enacted concessions still in force and, more importantly, a move must be made to the second step of tax expenditure analysis, namely, subjecting tax expenditures to the same rigorous analysis that direct subsidies receive, with appropriate changes to their design or their termination if it cannot be shown that the expenditures are effectively targeted and achieving desired outcomes.

• The age of the home worker – Part 2: Calculation of home occupancy expense deductions, deduction apportionment and partial loss of CGT main residence exemption

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  This article is related to, and builds on, an earlier article “The age of the home worker – part 1: deductibility of home occupancy expenses”. The earlier article identified the potential expenses incurred by home workers — home occupancy and home running expenses, and then provided an in‑depth discussion of the deductibility of home office occupancy expenses. This article deals with the measurement of deductions for home occupancy expenses, and in this, appropriate apportionment methodologies are analysed. The article also deals with the problematic question of the amount of the deduction for the home worker where the relevant occupancy expense is jointly incurred, with a partner, spouse or another party.

  The article also analyses the capital gains tax rule that partially withdraws the full main residence exemption where home occupancy expense deductions are available or are notionally available. Considerable complexity and anomalies arise under the exemption withdrawal rule where a dwelling is jointly owned.