The Tax Specialist

Articles from the current issue:

• NSW “just and reasonable” exemption: Analysis and practical application

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  Section 163H of the Duties Act 1997 (NSW) grants a discretion to the Chief Commissioner of State Revenue to exempt from landholder duty acquisitions where a strict application of the provision would not be “just and reasonable” in the circumstances. However, despite being a part of the NSW revenue landscape for almost 30 years, and despite the phrase “just and reasonable” being the subject of judicial consideration on a number of occasions, the exemption is not well understood by many practitioners. This article attempts to address this deficiency with a brief discussion of the provision’s legislative history, consideration of the most relevant decisions, and practical issues to keep in mind when preparing a submission to Revenue NSW.

• New Zealand’s anti-hybrid rules: Do you have an issue?

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  Like Australia, New Zealand has enthusiastically adopted a range of measures in response to the OECD’s recommendations concerning base erosion and profit shifting. Of these, the New Zealand reform that is most complex and has the greatest potential to result in unintended outcomes is the introduction of anti-hybrid rules. New Zealand’s anti-hybrid rules were enacted in June 2018 with application to income years commencing on or after 1 July 2018. This article highlights some of the differences in tax treatment between the New Zealand and Australian tax systems that may give rise to a hybrid mismatch, before considering a series of practical examples illustrating how the anti-hybrid rules may affect a range of common arrangements. As the examples illustrate, although both New Zealand’s and Australia’s anti-hybrid measures are based on the same OECD recommendations, the rules differ
  in important respects and may produce unexpected consequences in some cases.

• Will the covered sovereign entity please stand up?

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  The parameters of the doctrine of sovereign immunity — the principle on which one state can be considered immune from the territorial jurisdiction of another — have been difficult to define in the Australian income tax context. In what circumstances should a foreign government be exempt from Australian tax on the income it derives from an Australian investment? At what point does it become reasonable for the Australian Government to impose tax on such income? Effective from 1 July 2019, we now have a codified set of rules dealing with the extent to which a state can rely on the doctrine of sovereign immunity for Australian income tax purposes. This article explores the doctrine of sovereign immunity as it has evolved in Australia for income tax purposes, and the policy shift behind the recent codification of those rules.

• Employee share schemes and corporate transactions

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  This article considers the employee share scheme (ESS) tax issues that arise in the context of corporate transactions. The focus of the article is on demerger transactions, but the core principles are generally applicable to other corporate transactions, including takeovers, divestments and initial public offerings. While it should be possible to achieve sensible tax outcomes for employees, there are a number of traps and counterintuitive rules that companies need to be aware of when planning for the transaction. The first part of the article explains the core ESS rules that are likely to come into play on a demerger transaction. The second part of the article considers the consequences of a demerger on ESS interests in the form of rights to acquire shares. The third part of the article briefly considers the consequences of a demerger on ESS interests in the form of beneficial interests in shares. The fourth part of the article considers the interplay between ESS interests and shareholders’ entitlement to CGT roll-over relief and the demerger dividend exemption.