The Tax Specialist

Articles from the current issue:

• Has the ATO created a demergency?

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  This article considers the ATO’s views on the meaning of the term “restructuring” in the context of the demerger tax rules. As explained in the article, the ATO’s interpretation is inconsistent with the long line of Australian and English cases that construe the related words “reconstruction” and “reorganisation”, the evident (and express) object of the demerger tax rules, the context in which the term appears and the broader structure of the tax legislation. Despite the evident deficiencies in the ATO’s views, the practical reality for public market demerger transactions is that the ATO’s interpretation of the law is, for all intents and purposes, the law. The need for legislative intervention is clear, and the ongoing review by the Board of Taxation of capital gains tax roll-overs provides an opportune setting for independent review and rectification.

• The increasing use and threat of section 100A

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  Section 100A of the Income Tax Assessment Act 1936 (Cth) was enacted in 1978 to deal with a specific form of tax avoidance referred to as “trust stripping”. Subsequent judicial comments have suggested, however, that the provisions potentially have broader reach. Nevertheless, s 100A does not apply to “ordinary family or commercial dealings” and the ATO has indicated it is preparing a draft taxation ruling that will set out the Commissioner’s preliminary views on that expression. This article suggests that, given the way in which family business and investment structures have developed over the last 40 years, a significant number of dealings — that regularly take place in 2020 between family members in relation to private companies and trusts — should be treated as “ordinary family dealings” for s 100A purposes. Section 100A should be used to prevent tax avoidance and not legitimate tax planning in a family context.

• Corporate tax residency – There’s no Australian tax payable … is there?

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  This article looks back at the historical development of the corporate residency rules including some consideration of the old line of authority (eg Malayan Shipping v FCT) and the newer decisions (eg Bywater Investments Ltd v FCT). This is followed with analysis as to where we are currently at (especially TR 2018/5) and, most importantly, where we might be going in this space. In doing so, the key risk areas are identified and assessed, the central importance of board minutes is considered as is the critical impact of technology, and the interface with treaties, transfer pricing, capital gains tax and the controlled foreign rules is evaluated.

• Tax challenges of the digital economy – A review of the OECD’s proposed new approach

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  This article critically examines the three proposals associated with the revised profit allocation and nexus rules contemplated by the OECD’s Inclusive Framework to address the challenges of the digital economy. The article broadly identifies the merits and limitations of these proposals and, where appropriate, offers recommendations to address clear deficiencies. In summation, the article reconciles that, while the proposals broadly serve their primary objective, further revisions are required to ensure that the implementation of any proposal is capable of consistent application across global businesses and jurisdictions.