New passive income test for lower corporate tax rate

05-Dec-2017

The Federal Government has recently introduced a Bill into Parliament to ensure that companies with more than 80% passive income will not qualify for the reduced company tax rate. Under the Bill’s changes to the Income Tax Rates Act 1986, calculations of a business’s “passive income” would include:         Distributions by corporate tax entities (other than non-portfolio dividends); Franking credits attached to such distributions; Non-share dividends; Interest; Royalties; Rent; Gain on qualifying securities; Net capital gains; and ..

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Consultation paper: combating phoenix activities

22-Nov-2017

The Federal Government has released a consultation paper proposing company and tax law reforms to combat phoenix activities. Phoenix activities involve stripping assets from a company that’s in debt and transferring them to another company to avoid paying the first company’s liabilities – that is, the new company “rises from the ashes” of the old one. The government is considering a range of ways to combat this type of activity, including setting up a hotline for phoenix reporting, adding phoenixing to the offences specifically prohibited under the Corporations Act 2001, making..

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Further guidance for tax losses via a new “similar business” test

11-Oct-2017

    The ATO has released a draft guideline on how they will apply the new “similar business test” to supplement the existing “same business test” used for testing whether a company can utilise an earlier year tax loss. The draft guideline says the similar business test will operate in a way that is comparable to the same business test, and that the overall business of a company must satisfy the similar business test to access losses. The focus remains on the identity of a business, as well as continuity of business activities to generate assessable income...

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Federal Court rules on arrangement to avoid PAYG deductions

25-Sep-2017

The Federal Court has dismissed the taxpayers’ appeals against an Administrative Appeals Tribunal (AAT) decision. The AAT had ruled against one of the taxpayers (a company as trustee of a trust) concerning an alleged sham arrangement, input tax credits denied, GST shortfall penalties, a penalty for not withholding and remitting pay as you go (PAYG) tax amounts, and certain income tax deductions. Two additional taxpayers (a couple) were also unsuccessful before the AAT in a consequential matter – amended assessments had increasing their taxable incomes due to an increase in trust income and..

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Tax assistance for people affected by Cyclone Debbie

01-May-2017

The ATO has said it will fast-track refunds for people affected by extreme weather and flooding associated with Tropical Cyclone Debbie and ex-Cyclone Debbie in Queensland and New South Wales, and will allow extra time for those taxpayers and their agents to lodge income tax returns and activity statements. Tax Commissioner Chris Jordan said taxpayers do not need to apply for a deferral or a faster refund. “If your business or residential address is in one of the identified affected postcodes it will happen automatically”, Mr Jordan said. “We understand that for many people their tax ..

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Payment was assessable as “deferred compensation”

26-Dec-2016

The High Court has unanimously dismissed a taxpayer’s appeal and held that payments of US$160 million made to him pursuant to an incentive “profit participation plan” after termination of his employment was income according to ordinary concepts. In particular, the Court found that the payments were “deferred compensation” for the services the taxpayer performed in his employment. At the same time, the Court dismissed the taxpayer’s claim that the amount was assessable as a capital gain on the basis that it did not represent the proceeds for the future right to receive a proportion..

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Companies held to be resident and liable to tax in Australia

01-Dec-2016

In a long-running saga, the High Court has unanimously dismissed the appeals of four corporate taxpayers. The Court confirmed the taxpayers were Australian residents for income tax purposes, and therefore liable to tax in Australia on the profits they made from share trading activities on the Australian Stock Exchange. In making this decision, the Court rejected the taxpayers’ contention that because Justice Perram had in the first case found that the directors of each taxpayer were resident abroad, and because meetings of those directors were held abroad, then Justice Perram and the Full Fe..

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GST and Countertrade Transactions

01-Dec-2016

The ATO has issued a Practical Compliance Guideline which sets out the Tax Commissioner’s compliance approach, in the context of GST, to entities that enter into countertrade transactions as part of carrying on their enterprise. “Countertrade” refers to the direct exchange of things by one entity for things provided by another entity, and does not include transactions where any of the consideration is monetary. Each entity to a countertrade makes a supply and an acquisition. The Commissioner is aware of various practical problems in the context of these transactions and notes that the..

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SMSF related-party borrowing arrangements

01-Nov-2016

The ATO has issued a taxation determination (TD 2016/16) concerning whether the ordinary or statutory income of a self managed super fund (SMSF) would be non-arm’s length income (NALI) under the tax law, and therefore attract 47% tax, when the parties to a scheme have entered into a limited recourse borrowing arrangement (LRBA) on terms which are not at arm’s length. The ATO has also updated a practical compliance guideline (PCG 2016/5) which sets out the Commissioner’s “safe harbour” terms for LRBAs. If an LRBA is structured in accordance with the guideline, the ATO will accept t..

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Primary producer income tax averaging

01-Nov-2016

Legislation has been introduced in Parliament that proposes to allow primary producers to access income tax averaging 10 income years after choosing to opt out, instead of the opt-out choice being permanent. The Federal Government says this will assist primary producers, as averaging only recommences when it is to their benefit (ie they receive a tax offset) and they can still opt out if averaging no longer suits their circumstances. The changes are proposed to apply for the 2016–2017 income year and later income years. TIP: Primary producers have to meet basic conditions to be eligible f..

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