News & Tax Insights

The Chinese Government has significantly tightened monetary policy this year leaving China’s private sector, state–owned business sector, iron ore traders, massive low–income housing scheme and railways all short of cash. If China hits the brakes too hard, will it damage Australia’s exports of coal and iron ore with flow-on effects to the mining sector’s investment pipeline? The Financial Review reports on how the credit squeeze in China has led to shortages of electricity, capital and labour with major manufactures of electrical appliances not being able to supply up to 30% of orders. When the Global Financial Crisis hit two years…

In March 2010 the Government released a proposal called SuperStream to introduce an industry wide electronic data and payment transfer system for superannuation funds but excluded self-managed super funds from the scheme. A super fund professionals’ association has now called for self-managed super funds to be included. The Financial Review in a recent report estimates that: + 38% of employers use only cheques to pay super contributions; and + 22% of employers use a combination of cheque and electronic payments. Peter Burgess of the SMSF Professionals Association of Australia said SuperStream will reduce the time it takes to roll over…

The Government has released a consultation paper proposing that where someone breaches their concessional contributions cap (deductable employer or self-employed super contributions) by up to $10,000 and for the first time, they can have the excess refunded to them and pay personal tax at their marginal tax rate on the excess. When the previous coalition Government removed tax from super benefits paid to people over 60 years of age they also introduced the concessional contributions cap initially at $50,000 for people under the age of 50 and $100,000 for those over 50 (for the period from the 2008 to 2012…

A case before the Tribunal was been ruled against the Tax Office finding that the taxpayer did in-fact conduct a share-trading business during the 2008 financial year (presumably allowing losses on the sale of shares on revenue rather than capital account) despite the taxpayer having a full-time position as a CEO, not selling many shares in that year, not having a formal business plan nor place of business and choosing to hold stocks that delivered reliable dividends. Although the taxpayer was the Chief Executive of a services company he was able to spend two hours each day trading shares in…

The Tribunal has found against the Tax Office which contended an engineering contractor was an Australian tax resident between 1997 and 2002 despite working in the Czech Republic, Turkey, South Africa, USA, Germany, Thailand and China and making his home in the Philippines. He left Australia in 1997 and did not include his foreign income in his Australian income tax returns for those years because he believed he had become a non-resident. The Tribunal said he was not a resident because: + He started selling is home in Australia in 1997 and was eventually successful in doing so in 1999;…

Subject to executive and legislative sign off, the Swiss and German Governments have agreed on a deal to impose tax on undisclosed Swiss bank accounts held by Germans. A similar deal between Switzerland and the UK is pending. The agreement provides: + Existing undisclosed bank account funds will be taxed in Switzerland with a withholding tax between 19 and 34 percent (depending on how long the funds have been hidden and the rate of capital gain); + The final withholding tax on future investment income and capital gains will be matched against the German flat-rate withholding tax of 26.375%; +…

During August, the Tax Office said that it had stopped over 49,000 tax returns which, in total, claimed around $190 million of refunds because they believe that there were overstated claims or that the return was potentially fraudulent. The returns were stopped to verify information such as payment summaries from employers and there are 12,000 reviews about to commence. Of the tax returns held up, 22,000 were prepared and lodged by registered tax agents seeking refunds of $98 million dollars. Where information becomes available to the Tax Office and they can verify the return they will progressively release the assessment…

A change to the Tax Act purportedly to allow streaming of capital gains and franked dividends became law at the end of June this year. The practical implication of the new law is that trust distribution minutes generally need to be finalised by 30 June to effectively stream franked dividends from discretionary trusts. Over the last 18 months there have been 2 significant cases about interpretation of tax laws for trust beneficiaries: Bamford and Colonial First State. Following these cases, the Tax Office took a new position that trustees of discretionary trusts could not stream components of income to particular…

The Tax Office has released a determination announcing the benchmark interest rate for Division 7A loans to be 7.8% for the 2012 financial year. TD 2011/20, NTAA Voice 206, p17

The Tax Office has released a determination announcing the luxury car limit of $57,466 for the 2012 year which is unchanged from the previous year. TD 2011/18, NTAA Voice 206,p17

Each year the Australian Securities and Investments Commissions (ASIC) reviews and indexes their charges for various services in regulating companies. Here are some fee changes for the 2012 financial year: + Annual review fee for a proprietary limited company up from $218 to $226.50; + Application for registration of a new proprietary limited company up from $412 to $426; + Change of company name up from $340 to $351; and + Application for the voluntary deregistration of a company up from $34 to $35. NTAA Voice 206,p12

The Tax Office has published a document titled Key events for Australia shareholders 2010 – 11 which contains links to class rulings about demergers, share buy-backs, creation of new stapled securities and returns of capital for key listed Australian shares and units. The key events for the 2011 year include: + Arrow Energy Limited: group demerger + Woolworths Limited: off-market share buy-back + Suncorp-Metway Limited: exchange of shares in Suncorp-Metway Limited for shares in Suncorp Group Limited + Westfield Group: restructure - capital distribution and dividend - creating a new stapled security + CSR Limited: - return of capital +…

A draft bill was released in August giving better protection for seniors taking on reverse mortgage loans and capping the bank’s recovery amount to the true market value of the property mortgaged. Where someone has retired they may be asset rich and income poor. They may own their home outright but have limited income on a Government pension. Over the last decade, banks have offered reversed mortgages where the pensioner can borrow significant funds, secured by mortgage over their house and not repay the money until the house is sold or they pass on. Interest compounds and is collected also…

The Rule of Law Institute of Australia has called for the Accountant’s Concession to be replaced with a form of tax advice privilege between the accountant and client to be made into law. The Accountant’s Concession provides guidelines to Tax Officers to protect confidentiality of certain tax advice correspondence between accountants and their clients. This concession has been criticised because Tax Office can ignore it (e.g. this was significant issue in the Paul Hogan matters). The current concession is contained in the Tax Office Access and Information Gathering Manual and it originated in 1989. In contrast, legal professional privilege applies…