Tax Month – May 2012

M o r g a n’ s    T a x    M o n t h

– May 2012 Developments –

This is a collection of developments in Australian tax law and practice that occurred in May 2012 and which aims at being of relevance to tax lawyers.*

F John Morgan
A member of the Victorian Bar (www.FJMtax.com)

Table of Contents

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ACTS, BILLS AND ANNOUNCEMENTS

*2012-13 Federal Budget

Where to get Budget documents [B1]

Personal tax rates – no changes to already legislated resident rates to apply from 1 July 2012 [B2]

Non-resident tax rates to increase from 1 July 2012 [B3]

Standard tax deduction gets the chop [B4]

Discount for interest income not to proceed [B5]

Limit on ETP offset for “golden handshakes” [B6]

Medicare levy thresholds increased for 2011-12 [B7]

Means testing medical expenses offset [B8]

Company tax cut shelved [B9]

Companies to be allowed to carry-back $1m of losses 2 years [B10]

LAFHA concessions limited [B11]

FBT – airline transport benefits – valuation method to change from stand-by to market value [B12]

Bad debts – related party financing deduction denial [B13]

Tier 2 capital instruments – certain instruments to be treated as debt [B14]

Limited recourse debt to be clarified [B14]

Increase in MIT withholding rate from 7.5% to 15% [B15]

Tax Breaks for Green Buildings program not to proceed [B16]

Removal of CGT discount for non-residents [B17]

Application of scrip-for-scrip roll-over and Small Business Concessions to trusts, super funds etc [B18]

Revenue asset and trading stock roll-overs for interposing a company [B19]

Changes to compensation payments and insurance policy exemption [B20]

Minor changes to previously announced deceased estate amendments [B21]

Superannuation contributions tax to double to 30% for incomes above $300,000 [B22]

Higher concessional contributions cap for over 50s deferred to 1 July 2014 [B23]

No GST on Government appropriations [B24]

 

Acts & Bills

*Tax Laws Amendment (2012 Measures No 1) Bill 2012 – passed House of Representatives [A1]

*Tax Laws Amendment (2012 Measures No 2) Bill 2012 introduced to enlarge directors’ liability for company debts; and changes to the consolidation and TOFA rules [A2]

*Tax Laws Amendment (2012 Measures No 3) Bill 2012  – various (budget) changes – to ETP’s; Low Income Tax Offset; exempting carbon tax compensation; final withholding tax on non-resident seasonal workers [A3]

Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2012 – Bill to increase the Medicare Levy thresholds [A4]

*LAFHA (Living Away From Home Allowance) reform: draft legislation released [A5]

*Tax and Superannuation Laws Amendment (2012 Measures No 1) Bill 2012 – passes Lower House [A6]

*Tax Laws Amendment (Cross-Border Profit Transfer Pricing) Bill (No 1) 2012 was introduced – with culpable retrospectivity [A7]

*Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 was introduced – to increase the withholding tax on MITs from 7.5% to 15% [A8]

*Tax Laws Amendment (Income Tax Rates) Bill 2012 was introduced – to increase lower non-resident rates [A9]

*Legislative Instruments Amendment (Sunsetting Measures) Bill 2012 was introduced in the House of Reps – improvements on the existing 10 Year regime [A10]

Effective Life of Depreciating Assets – new Determination made to commence on 1 July 2012 [A11]

Revised 2012 PAYG withholding schedules made by the Commissioner and entered on the Federal Register of Legislative Instruments [A12]

Revised 2012 PAYG withholding schedule for back payments, commissions and bonuses etc – made and registered [A13]

*Deductibility of exploration expenditure on mining & petroleum extended to geothermal energy – draft legislation released [A14]

*Corporations Amendment (Phoenixing and Other Measures) Act 2012 – gets Royal Assent [A15]

Low income tax offset changes; new seniors and pensioners tax offset: regs amended [A17]

*Shipping reform Bills amended in House of Reps [A18]

 

Announcements

*Coastal shipping reform Bills: committee report released [A19]

*Part IVA expert roundtable announced – “tax benefit” definition to be ‘clarified’ [A20]

*Assistant Treasurer gets testy on Pt IVA and also retrospective legislation [A21]

*Coalition promises new ATO Second Commissioners from private sector [A22]

*Australian Charities and Not-for-Profits Commission commences 1 October 2012 but governance standards will not commence until 1 July 2013 [A23]

*FBT: airline transport benefits – valuation method changes: draft legislation to come [A24]

 

CASES AND APPEALS

High Court

 

Full Federal Court

*Cameron v FCT – PSI: Full Court confirms that “unrelated clients” and “business premises” tests failed [C1]

 

Federal Court

 

Federal Magistrates Court

 

Administrative Appeals Tribunal (AAT)

*Re Lake Fox Limited and FCT – FBT: employee private health insurance not an exempt as work-related medical screening or preventative health care under s58M [C2]

 

Other Courts & Tribunals

 

Appeals

Sent v FCT – Taxpayer appeals to Full Federal Court the decision that bonuses paid into an executive share trust were derived as ordinary income [C3]

 

COMMISSIONER’S PUBLICATIONS

 

Decision Impact statements

*Allen’s Asphalt case – ATO’s view on “reasonably arguable” penalties [R1]

Re The Retirement Village company and FCT – (DIS) – Deductibility of capital appreciation payments re retirement village operator [R2]

 

Rulings

*MT 2012/3 – reduction of administrative penalties for voluntary disclosures [R3]

*TR 2012/D3 – Capital allowances: open pit mine improvements [R4]

*TR 2012/D4 – Meaning of “employer” for DTA purposes – the ‘short-term visit exception’ under the Income from Employment Article [R5]

 

Determinations

*TD 2012/9 – FBT: car parking threshold for 2012 is $7.83 per day [R6]

TD 2008/29 & 31 – Application of ‘consolidation rules’ to sale and purchase transactions that span entry or exit from Consolidated Group following 2010 Measures No. 1 Bill [R7]

 

Class Rulings

CR 2012/27 Early retirement scheme for BlueScope Steele Ltd [R8]

CR 2012/28-31 – Redundancy; PAYG; early retirement; sport grants [R9]

CR 2012/32 – Westpac Convertible preference shares produce dividends taxed as such [R10]

CR 2012/33-34 – CGT scrip-for-scrip rollover; transfer payments are termination payments [R11]

CR 2012/35-37 Assessable income for umpires; CGT scrip-for-scrip rollover for Aurecon; luxury car [R12]

 

ATO Interpretive Decisions (ATOIDs)

 

Practice Statements

*PS LA 2012/1 replaces PS LA 2003/10 (Management of priority technical issues) and PS LA 2004/4 (Referral of interpretative issues to Centres of Expertise) [R13]

 

Tax Alerts

*TA 2012/2 – NZ foreign trust arrangements: ATO warning [R14]

 

Other Commissioner news

*ATO now reports tax litigation data & trends in ‘Your case matters 2012’ [R15]

Wickenby: ATO reports that a second man has been charged with conspiring to dishonestly cause loss to the Commonwealth [R16]

Company directors sentenced under Project Wickenby [R17]

*1500 Tax prosecutions to date this year – 30 with jail terms and 5 under Project Wickenby [R18]

*ATO reminds trustees to make resolutions by 30 June this year (no 2 month extension any more) and document specific entitlements by 30 June for franked dividends and 31 August for capital gains [R19]

ATO releases a guide on who has to complete the ‘International dealings schedule’ in 2012 returns [R20]

*ATO to write to tax agent clients about private health insurance rebate [R21]

ATO taxable payments reporting – factsheet for building and construction industry [R22]

ATO issues Default Assessment Guide – including warning procedure; calculation of the taxable income; and 75% penalties [R23]

Streamlined TaxPack to appear this year [R24]

2011-12 trust changes: interview with ATO senior tax counsel [R25]

 

GST DEVELOPMENTS

Legislation (GST)

*GST treatment of taxes, fees and charges: draft regs released, which extend the grandfathered operation of the last Determination until 30 June 2013 [G1]

GST ‘financial supply’ provisions: regs amended to treat HP as taxable; extend RITC’s to life insurance etc; modify RITC’s for trustees; clarify guarantees [G2]

 

Cases (GST)

 

Rulings & Other things (GST)

*GSTR 2012/2 – GST and financial assistance payments from Government (replacing GSTR 2000/11) [G3]

 

GST Announcements (Other)

 

SUPERANNUATION DEVELOPMENTS

Legislation (Super)

Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 – was passed by the House of Reps [Su1]

SuperStream data and payment standards: Bills introduced [Su2]

Confusion over super changes for those earning over $300,000 – Coalition [Su3]

SMSFs: valuation of assets; separation of assets; insurance strategy – draft SIS regs released [Su4]

 

Cases (Super)

FCT v Interhealth Energies Pty Ltd as Trustee of the Interhealth Superannuation Fund (No 2) – SMSF trustee ordered to pay compound interest for breach of enforceable undertaking [Su5]

 

Rulings (Super)

*SMSFR 2012/1 – SMSFs and limited recourse borrowing arrangements [Su6]

Winding up an SMSF: when to close bank account?

 

Announcements etc (Super)

APRA released authorization and other documents for transition to ‘MySuper’ funds or products next year [Su7]

*Australian superannuation funds seek relief from US FATCA rules which require the funds to collect data on members, identify US Taxpayers, and withhold 30% tax from Members who don’t comply [Su8]

 

CARBON TAX

Further Clean Energy Bills Introduced to Parliament

 

MINERALS & PETROLEUM RENT RESOURCE RENT TAX

 

BOARD OF TAXATION

Board of Taxation to review Div 7A – post implementation after summit said it was a ‘thorny’ issue – simplify whilst maintaining integrity? [BT1]

*Board of Taxation to investigate the OECD approach of attributing profit to ‘permanent establishments’ – the ‘functionally separate entity approach’ [BT2]

 

 

INSPECTOR-GENERAL OF TAXATION

 

TAX PRACTITIONERS BOARD & LEGISLATION

Civil penalty ($150,000) against unregistered tax agent [TPB1]

Kolya v Tax Practitioners Board – Federal Court refuses stay of decision to reject tax agent registration [TPB2]

*Tax agents regime – regulations registered to extend deferral in applicaton to financial planners – until 30 June 2013 [TPB3]

Tax Practitioners Board invites Agents to Update their PI insurance details [TPB4]

*Dale Boucher not to seek reappointment as TPB Chairman [TPB5]

 

 

STATE TAXES

Legislation (State)

ACT: land rent lease – Duties Amendment Bill 2012 awaits notification [St1]

ACT: Duties (Landholders) Amendment Bill 2012 – introduced into the ACT Legislative Assembly [St2]

NT: Budget Bill introduced [St3]

Qld bill introduced to – Increase the payroll tax threshold; and Reinstate transfer duty home concession [St4]

Victorian Duty: landholder and other amendment Bills introduced [St5]

 

Cases (State)

Chief Comr of State Revenue v Sayden Pty Ltd ATF Griffin Property Unit Trust (RD) – NSW land tax: c.riteria for fixed trust not satisfied – Commissioner wins appeal [St6]

A & A Palk v Chief Comr of State Revenue – NSW land tax: bee breeding not dominant use, so primary production exemption denied [St7]

Pharmos Nominees Pty Ltd v Comr of State Taxation – SA conveyance duty payable on agreement to distribute amounts in priority to other beneficiaries [St8]

Fenton v Chief Comr of State Revenue – NSW land tax: no continuous use, so PPR exemption denied [St9]

Sheedy & Anor v Chief Comr of State Revenue – NSW land tax: vacant land PPR concession revoked by sale, so assessments affirmed [St10]

Burdinat & Anor v Comr of State Revenue – WA land tax: PPR exemption allowed despite short-term lease [St11]

 

Rulings (State)

Vic payroll tax: contractors – 90-day exemption: Revenue Ruling revised [St12]

 

Other (State)

Vic Budget 2012-13: duty exemption for grants of Crown land abolished [St13]

NT Budget 2012-13: abolition of stamp duty on non-land business property deferred [St14]

*WA Budget 2012-13: payroll tax rebate for small businesses [St15]

Tasmanian Budget 2012-13 – some tax increases [St16]

*SA Budget 2012-13: stamp duty announcements; payroll tax exemption for trainees [St17]

ACT Taxation Review and the Government response released [St18]

 

 

OTHER DEVELOPMENTS

*Business names registration on new national register: regs amended [O1]

*Business names registration – availability of names: Determination made [O2]

National Business Names Registration system began 28 May and minor technical changes made to regs [O3]

Privacy Amendment (Enhancing Privacy Protection) Bill 2012 was introduced in the House of Reps [O4]

*Exposure Draft of Financial Planning Standard for Accountants to be re-issued for not less than 30 days [O5]

New Significant Investor visa to be introduced – targeting migrants who could make an investment of at least $5m in the Australian economy [O6]

2011-12 tax return forms, schedules and accompanying guides released [O7]

 

 

THE END

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*NB: I have gathered these articles from various sources for the purposes of study and teaching and I have acknowledged the sources. None of this publication should reproduced in breach of copyright belonging to the acknowledged source. The headings to the articles are often mine (and shouldn’t necessarily be attributed to the publisher).

Source Abbreviations: ‘EDTN’ = Electronic Daily Tax News, published by CCH; ‘LTN’ = Latest Tax News published by Thomson Reuters; ‘WTB’ = Weekly Tax Bulletin, published by Thomson Reuters; ‘Taxvine’ is the weekly publication by the Tax Institute of Australia; TaxBar = Melbourne Tax Bar Association Newsletter at www.vicbar.com.au / Members / Bar Associations / Tax.