News & Tax Insights

Revenue laws are deliberately framed to advantage the revenue collector –the Tax Office.  In a recent case, Re Rasschta Coatings Pty Ltd as trustee for the Rasschta Coatings Trust and FCT (2015) AATA34 a business that was audited by the Tax Office could not produce financial records and source documents because they were all destroyed in the 2010/11 floods which inundated much of Brisbane. Did the Tax Office auditors view this situation compassionately?  No.  The undertook an analysis of deposits into the bank and the taxpayer’s bank account and issued GST assessments and tax assessments, together with penalties on the…

Currently, if you want to complain about the treatment you have received from the Tax Office, you can go to the Commonwealth Ombudsman.  This, in itself, has been a source of concern as there has been a perception that complainants do not get a fair hearing. Amendments, announced in the 2014/15 Federal Budget, have now been introduced into Parliament in the Tax and Super Bill (No. 7) 2014. These will result in the transferring of the tax investigative and complaint handling function of the Commonwealth Ombudsman to the Inspector-General of Taxation and merge that function with the Inspector General’s existing…

Do you manage your own SMSF?.  They are becoming very popular among savvy business people and high income earners because you can manage your own investments in the way you prefer. But take care to follow all the rules.  Penalties of extra tax and fines can be very heavy if you are caught breaching them.  You cannot consider monies and assets in a SMSF as if they were your own.  These investments are heavily regulated and must comply until you actually receive superannuation benefits. In a recent case (Olsen v Early Sunshine Pty Ltd and ors) before the Federal Court,…

Draft legislation, in respect of the matter which was originally announced by the previous Government in March 2010, has been released.  This will clarify the “look through tax treatment” which applies to superannuation investments which have been acquired using a limited recourse borrowing arrangement. Instalment Warrants and LRBAs are arrangements for assets (usually shares or property) which have been acquired using borrowings, where the security held by the lender is limited to that particular asset. The assets are usually held on trust until the borrowing is fully repaid.  However, for tax purposes, there is a “look through” treatment that treats…

The Second Commissioner of Taxation, Mr Andrew Mills, recently announced that a working group consisting of Tax Office, Treasury and professional officers had completed their consultations with a view to providing the Taxation Commissioner with “statutory remedial power”.  The proposal is to enable the Commissioner to vary the law (in favour of the taxpayer) where: The law produces outcomes which are inconsistent with the ascertainable policy intent of the law, and Where compliance costs for taxpayers are unnecessary or disproportionate. This is indeed an interesting and unusual project which, if legislated, would enable one man – the Commissioner of Taxation…

The Tax Office has issued a media release advising that it has used new powers available to it to recover $8 million of employee super entitlements from operators of labour hire companies in South Australia and Victoria. Phoenix behaviour involves using of companies and liquidating them to avoid paying liabilities, then setting up fresh companies to carry on the business. The Tax Office now has new powers, called Superannuation Guarantee Estimates (SGE) which enables it to issue director penalty notices to make directors personally liable before their companies are liquidated and responsibilities avoided. To do this, the Tax Office can…

The Australian Charities and Not-for-profits Commission (ACNC) has revoked the registration of 392 charities who have not completed and lodged outstanding Annual Information Statements. Charities have always operated successfully in Australia under State law with their taxation exemption status overseen by the Tax Office.  In its wisdom, the previous Labor Government decided to establish the ACNC and require all charities to register with this federal body at the risk of having their tax exempt status revoked. Each charity is required to lodge an Annual Information Statement and to provide financial statements, together with the legal establishment documents and much additional…

Valuations of assets and businesses are frequently needed for taxation purposes.  There might be transfers of assets between related individuals or companies, calculation of asset values to determine eligibility for small business concessions, valuations required when entering the consolidation process for wholly owned companies and so on. The Inspector General of Taxation has completed his review of the Tax Office’s administration of valuation matters and has identified inherent difficulties.  He has issued a 129 page report and made a number of recommendations to the Tax Office, most of which has been agreed to.  These attempts to prevent disputes from arising…

The Tax Office has issued a Practice Statement which provides details of its code of settlement for taxation and superannuation disputes which includes disputes involving tax debt. The Tax Office will consider settling disputes because it is obliged to administer the taxation system in an efficient and effective way and use “discretion and good sense”. The following factors are considered when deciding whether or not to settle: The relative strength of the party’s position; The cost versus the benefits of continuing the dispute; and The impact on future compliance for the taxpayer and broader community. Settlement would generally not be…

The Taxation Administration Act requires taxpayers paying royalties overseas to deduct withholding tax from those royalties. Seven Network Limited (Seven) made payments totalling $122 million to the International Olympic Committee (IOC) for the broadcasting rights to the Olympic Games. What was actually provided was the transmission by ITVR signal which, when received in Australia, were converted into the actual moving pictures. These payments were made by Seven during the period from March 2006 to August 2008.  In October 2005, Seven requested a private ruling on the matter.  Six months later, the Tax Office issued the ruling which stated that the…

In January, the Board of Taxation released its report on removing taxation impediments to the success and growth of small business.  This had been provided to the Government in August 2014 and the Government’s responses were attached. Those which were favoured by the Government and are in process included: Provision of guidance to applicants for an ABN as to how to show that they are intending to carry on a business and therefore eligible for an ABN. That the Tax Office review its employee contractor tool enabling business people to make the right decision. That the Tax Office should keep…

The provision by an Airline of Airline tickets to their own or other Airline’s employees or employees of travel agents, is a fringe benefit that previously came under the unwieldy name of Airline Transport Fringe Benefits.  This came under a separate category which was eliminated from 8 May 2012.  Now such fringe benefits come under the heading of either In-house Property Benefits or In-house Residual Fringe Benefits and they are taxed under the In-house Benefit rules. Details must be included under the Property or Residual categories in the Fringe Benefits Tax Return. Taxable value is calculated by first finding the…

A NSW couple has lost their Supreme Court case and have to pay land tax and penalties on a property that they considered their intended home for the four years from 2002 to 2006. The imposition of land tax is set out in the Land Tax Acts for each state or territory; it is a State tax, not a Commonwealth tax.  All of the states and territories have similar policies exempting your home from the tax.  However, you will pay land tax where you own a second home, holiday house, investment properly or other land. The land tax was levied…