News & Tax Insights

In contrast to the usual non-application of tax on distributions of cash representing trust capital, the Tax Office has issued an Interpretative Decision applying tax to a new Australia resident beneficiary of a non-resident trust. The Trust had derived foreign source income, accumulated it as trust capital and paid that corpus amount (comprising previous income) to the beneficiary.   The first limb of Section 99B of the 36 Tax Act creates a tax obligation for the beneficiary when trust property is paid to, or applied for the benefit of a trust beneficiary subject to reductions in the second limb of…

The burden of new charity regulations could lead to smaller not-for-profit organisations closing up and turn civic-minded people away from involvement in philanthropic organisations. Draft legislation to intensify regulation of charities was released in December last year together with a consultation paper which focuses on implementing the new rules.   In the 2011/12 Budget (announcements in May 2011), the Government spruiked reform of the not-for-profit sector and allocated $50 million to establish The Australian Charities and Not-For-Profit Commission (the Commission) with the following objectives: + Establishing a national “one-stop-shop” regulator for the not-for-profit sector... to remove the complex regulatory arrangements…

Dividends can only be paid from profits according to a new draft ruling released by the Tax Office. This contradicts recent changes by Treasury to the Corporations Act.   For many, many decades, the law about dividends required that they could only be paid from profits that were retained by the company. This was prescribed in the Corporations Act and also a key aspect of company law, as defined by the Courts.   Recently, Treasury and the Parliament amended the relevant section of the Corporations Act to require that dividends could not be paid unless: + The excess of the…

Valuers should check their calculations and supporting evidence particularly for profit and risk ratios, market interest rates, comparable sales and development costs on real property valuations according to a new Tax Office Issues Paper released in January.   Valuations are used extensively in tax for CGT and GST purposes. There are recent cases where disputes over valuations have lead to taxpayers being defeated in the Tribunal on small business CGT concession matters.   The Tax Office says it has consulted the Australian Property Institute and the Australian Valuation Office in drafting the paper.   Where a property transaction is involved…

380 “deep law experts” maybe redeployed from the Tax Office Tax Counsel Network and Centres of Expertise to front line areas to lift the level of expertise in complex and international tax matters for field and advice staff.   Tax Office Second Commissioner Jennie Granger said that many more taxpayers had complex affairs with sole traders trading internationally over the internet and individuals moving in and out of Australia for work. International tax was no longer a speciality solely required for large multi nationals.   She further argued that the Tax Office “cannot apply commercial settlement approaches” when it is…

To receive the $726 per child Family Tax Benefit Part A supplement, parents will need to ensure their child is fully immunised at one, two and five years of age unless they have registered as a conscientious objector to immunisation.   There has been increased pressure on parents and it is already mandatory to have your children immunised (or register your conscientious objection) to receive the Child Care Benefit and the Child Care Rebate.   High income earners will not receive the Family Tax Benefit Part A in any case due to income thresholds.   The new arrangements will replace…

Unused ABNs will be cancelled by the Tax Office where their records indicate that the taxpayer is not carrying on an enterprise.   Over 50% of ABNs are held by individuals and the Tax Office will review Tax Returns and other records that they hold and where it appears that the individual has ceased or never carried out the enterprise they will cancel the ABN but there is a right to object to the cancellation decision.   If an ABN is cancelled, then any GST, luxury car tax, fuel tax credit or PAYG withholding registration will also be cancelled.  …

The Tribunal has confirmed 75% shortfall penalties on a company and its sole director for not lodging returns in the 2005 income year.   The Tax Office can impose a monetary penalty based on a percentage of the underlying tax obligation for lack of care.   In this case, the director had personal tax of $13,497 due and a penalty of $10,535. The company had $86,760 of tax and a penalty of $65,070.   The director argued that returns could not be lodged due to a breakdown in the relationship with their former accountant and also because he suffered a…

The Tribunal has affirmed the Tax Office decision to deny claims for fuel tax credits by a sawmilling business due to lack of records and dubious evidence from one of the taxpayers.   Apparently, there was a contra arrangement for the supply of diesel fuel for the sawmill. However, there were insufficient reliable records that the fuel was regularly supplied in return for cut timber.   The Tax Office imposed 75% penalties on top of refusing the claim for the fuel tax credits.   All businesses that claim fuel tax credits (in their quarterly BAS) should take note of the…