Taxation in Australia

Articles from the current issue:

• Taxing issues: August - What happened in tax?

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  The following points highlight important federal tax developments that have occurred during August 2016.

• Alternative assets insights: Investment manager regime - Observations one year in

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  The third and final element of the investment manager regime (IMR) has been legislated for more than a year now. It is important that foreign funds perform a robust analysis regularly to confirm that they actually qualify for the concession.

• Superannuation: Automatically reversionary pensions and super reform

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  The $1.6m balance cap proposal adds another layer of complexity to understanding whether an automatically reversionary pension (ARP) is still an appropriate SMSF succession planning strategy.

• Tax education: Understanding tax law

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  Duces’ experiences confirm that legal knowledge base leads to a deeper understanding of tax.

• President's report: The future of tax is sooner than you think

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  Tax Institute president Arthur Athanasiou briefly considers how artificial intelligence will affect the tax system of the future. It’s a topic that practitioners must come to grips with now!

• A matter of trusts: Real life examples of problematic variation clauses

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  Trust deed variation clauses vary from trust to trust — this article gives examples of some of the problematic ones we’ve seen.

• CEO's report: A busy time for your Institute

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  The Tax Institute will be active in the coming months with a range of events and key enrolment dates for our education programs.

• Large withholders and DPNs - A bridge too far?

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  Under the current administrative practice of the Australian Taxation Office (ATO) in relation to the PAYG withholding rules, an entity which is a large withholder according to those rules cannot notify the Commissioner of Taxation of amounts withheld unless it pays those amounts to the Commissioner at the same time. The consequence is that, if the entity is a company and a liability is not paid, the company’s directors run the risk of receiving a director penalty notice (DPN) for the amount of any unpaid liability.

  This article considers the interaction between the general obligations for a company that is a large withholder to withhold, notify and pay under the Taxation Administration Act 1953 (Cth) (TAA), and the DPN provisions in the TAA. It also considers the ATO’s current administrative practice, and why that practice may be flawed . The article also examines a recent Supreme Court decision which considered these issues.

• Tax cases: The right to silence and the Commissioner

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  Will a civil proceeding involving the Commissioner of Taxation be stayed pending the resolution of a related criminal proceeding?

• The economic impact of a corporate tax rate cut in Australia

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  The Henry Review’s final report, Australia’s Future Tax System – Report to the Treasurer (2009) recommended reduction of the corporate income tax rate from 30% to 25% in the short to medium term with the timing subject to economic and fiscal circumstances. This paper considers how such a reduction will impact the Australian economy, including its impact on revenue, regional tax competition and the disparity between the corporate income tax and personal income tax regimes. The authors conclude that the reduction will necessitate trade-offs between the principles of a good tax system, including horizontal equity and simplicity. The reduction would produce a significant gap in government revenue. While some economic gains are expected, there remains uncertainty as to when and how much this will cover the loss of revenue and how any shortfall may be funded.

• Mid market focus: GST changes – It is more than a “Netflix” tax

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  Much was made in the media about the new “Netflix” tax. Less so its arguable retrospectivity, or whether a foreign supplier is now carrying on an enterprise in the indirect tax zone.

• MNAV test: asset and liability issues

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  The one test in the small business capital gains tax (CGT) concessions which causes most taxpayers concern and generates most reviews by the Australian Taxation Office is the maximum net asset value (MNAV) test under s 152-15 of the Income Tax Assessment Act 1997 (Cth). This test provides that the net value of the CGT assets of an entity is calculated as the sum of the market values of the entity’s CGT assets less the liabilities of the entity that are related to the assets and less certain provisions.

  This article examines the working of the MNAV test in detail. The article considers the net value of CGT assets, the meaning of market value, cash in hand as a CGT asset, statute barred loans, assets with partial private use, the existence of a liability just before the CGT event, the related liability issue, contingent liabilities, and whether liabilities should be GST inclusive or exclusive.

• Tax tips: CGT choices: some points

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  The CGT provisions contain an array of choices that are available to taxpayers and it is important to understand the circumstances in which a choice may be made.

• Contents

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  regulars:

  • 114 president’s report
  • 115 CEO’s report
  • 117 tax counsel’s report
  • 118 taxing issues
  • 123 tax tips
  • 126 mid market focus
  • 129 tax education
  • 131 member profile
  • 152 a matter of trusts
  • 154 superannuation
  • 157 tax cases
  • 159 alternative assets iInsights
  • 162 calendar
  • 164 cumulative index.

• Whose sham to prove? - Millar in the Full Federal Court

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  In Millar v FCT (4 July 2016), the Full Court of the Federal Court found that a loan transaction was a sham. The result was that tax had been avoided through fraud or evasion, and the taxpayers were liable to pay an administrative penalty for intentional disregard of the tax law. The decision addresses two substantive legal issues. The first is the meaning of the term “sham” as used in Australian law and the elements comprising that concept. The second is whether interest that has been capitalised can be considered “paid” for withholding tax purposes. In addition, the court was required to consider the manner in which a taxpayer can discharge the onus of proof in taxation litigation and the statutory interpretation principles that apply when construing legislative provisions that have been rewritten. This article considers the decision and its implications in detail.

• Mandatory disclosure – Is this necessary in Australia?

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  In this month’s column, tax counsel Stephanie Caredes discusses the necessity of the mandatory disclosure rules.

• Member profile: Rebecca James

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  This member profile covers Rebecca James.