Venue:

McKay Board Room
Level 10
Amungula Building
26 Narellan Street
Canberra

Date:

26 November 2008

Start:

9.30am

Finish:

4.00pm

Chair:

Michael D'Ascenzo

Secretariats:

Louise Jameson and
Geoff Besgrove

Contact:

Louise Jameson

Contact phone:

(07) 3119 9394

Gary Addison

CPA Australia

Brenda Berkeley

Treasury

David Butler

Tax Office

Steve Cane

National Tax and Accountants Association

Susan Cantamessa

Institute of Chartered Accountants in Australia

Annamaria Carey

Tax Office

Keith Clissold

Association of Taxation and Management Accountants

Lance Cunningham

National Institute of Accountants

Michael D'Ascenzo

Tax Office

Frank Drenth

Corporate Tax Association

Kevin Fitzpatrick

Tax Office

Mark Friezer

Law Council of Australia

Michael Hay

CPA Australia

Alexis Kokkinos

Institute of Chartered Accountants in Australia

Michelle de Niese

Corporate Tax Association

James O'Halloran

Tax Office

Michael Payne-Mulcahy

Taxation Institute of Australia

Ann Previtera

Institute of Chartered Accountants in Australia

Joan Roberts

Taxation Institute of Australia

Bruce Quigley

Tax Office

Heather Schache

Taxpayers Australia Incorporated

Chris Branson

Law Council of Australia

Grant Cathro

Law Council of Australia

Michael Dirkis

Taxation Institute of Australia

Bob Duncan

Association of Taxation and Management Accountants

Jennie Granger

Tax Office

Andrew O'Bryan

CPA Australia

Vicki Stylianou

National Institute of Accountants

Sue Williamson

Taxation Institute of Australia

Freda Chaloner

Head of Large Business Service of Her Majesty's Revenue Customs (HRMC), United Kingdom

Barbara Crook

Taxpayers Australia Incorporated

David Hartnett
Companion of the Order of the Bath (CB)

Permanent Secretary, United Kingdom

Frank Ng

Commissioner, Large and Mid-sized Business of the United States' Internal Revenue Service (IRS)

Kate Roff
(Items 9 and 10)

Tax Office

Association of Taxation and Management Accountants

ATMA

Corporate Tax Association

CTA

CPA Australia

CPA Australia

Institute of Chartered Accountants in Australia

ICAA

Law Council of Australia

LCA

National Institute of Accountants

NIA

National Tax and Accountants Association

NTAA

Taxation Institute of Australia

TIA

Taxpayers Australia Incorporated

TA

Action item

NTLG 0811/01
A discussion on the TIES process is to be included on the March 2009 NTLG meeting.

Action item

NTLG 0811/02
A workshop to discuss issues associated with the compliance program for 2009-10 is to be scheduled for February 2009 with relevant stakeholders. Members are invited to submit issues for consideration. This item is to be included on the agenda of the 27 March 2009 NTLG meeting.

Action item

NTLG 0811/03
A phone hook-up is to be arranged with interested members to discuss the issues associated with Division 7A loans and the part repayment prior to lodgment in more detail and determine the way forward.

Action item

NTLG 0811/04
Consideration is to occur to review the company tax return guide to include a prompt regarding loan repayments made prior to 30 June.

Action item

NTLG 0811/05
An explanation of the application of the amendment period for taxpayers is to be considered and members advised.

A governance report for this group was last provided to the NTLG at its June 2006 meeting by former Chair, Glenn Davies.

Issue 1.0

Fixed entitlement test for trust losses

Current status

After discussion with group members and the Public Rulings Panel, the Tax Office has concluded that, even on a purposive and contextual interpretation of the actual words used in the legislation, it cannot reach an interpretative position that would be aligned with industry expectations. The indefeasibility requirement as interpreted by the Tax Office is significant in that respect. The views of the Rulings Panel on this point were closely aligned with those of the Tax Office.

Regard must be had to the saving rule in subsection 272-5(2) and/or the discretion in subsection 272-5(3) to determine whether in a particular case a beneficiary may be considered to have a fixed entitlement.

In applying the discretion, the Tax Office would have regard to what the Office understands was the policy that underlay the provisions at the time they were enacted. The Commissioner would also have to apply the statutory tests having regard to the terms of the particular trust deeds and all the surrounding circumstances. Where, however, a trust is a unitized trust registered as a managed investment scheme under the Corporations Act 2001 with a single class of unit holders who deal with the responsible entity on an arm's length basis, the nature of the trust would be one that would weigh in favour of an exercise of the discretion.

It should also be noted that if a trust is said not to have fixed entitlements, that does not mean that its losses cannot be offset; other tests will be relevant in determining whether or not they can be.

The Tax Office has raised this issue with Treasury; the issue is also being considered by the Board of Taxation in its review of the taxation arrangements applying to managed funds.

It is not proposed to issue a general public ruling on this topic while Treasury is considering the issue.

This issue is not reflected in the Compliance program 2008-09. Although compliance activities can change if compliance risks emerge, we do not envisage active compliance activities being undertaken the year. However, if the Tax Office is asked to rule on a specific case in the context of a private ruling or class ruling, or the issue arises in an audit, then it has no alternative than to apply the law as it understands it to operate.

History of issue

The issue was raised at the March 2006 meeting of the NTLG. The Tax Office proposed to refer the issue to a new forum - the TCSG. The issue was first discussed by the TCSG at a meeting in May 2006.

The issue was presented to the June 2006 meeting of the Public Rulings Panel with a view to the possible publication of a ruling.

The views of the Panel were conveyed to the TCSG at its August 2006 meeting.

The Tax Office advised the TCSG at its November 2006 meeting that it could not reach an interpretative position that aligned with industry expectations.

Treasury advised?

Yes

Issue 2.0

Trust deed amendments arising from Australian International Financial Reporting Standards

Issue 2.1

Changes to trust's fixed termination date.

Current status

Resolved
Tax Office guidance material, Trust resettlements - AIFRS related amendments to trust deeds

Treasury advised?

Yes

Issue 2.2

Change to meaning of liabilities.

Current status

Resolved
Tax Office guidance material, Trust resettlements - AIFRS related amendments to trust deeds

Treasury advised?

Not specifically but Treasury have been advised of other Australian equivalents to the International Financial Reporting Standards (AIFRS) issues and have been present at group discussions on the point.

Issue 2.3

Change to the distributable income clause.

Current status

Resolved
Tax Office guidance material, Trust resettlements - AIFRS related amendments to trust deeds .

Treasury advised?

Yes

Issue 3.0

Fixed entitlement - determining entitlements to franking credits

Current status

After discussion with group members and the Public Rulings Panel, the Tax Office has concluded that, even on a purposive and contextual interpretation of the actual words used in the legislation, it cannot reach an interpretative position that would be aligned with industry expectations. The indefeasibility requirement as interpreted by the Tax Office is significant in that respect.

Regard must also be had to the discretion to determine whether in a particular case a beneficiary may be considered to have a relevant fixed interest.

In applying the discretion, the Tax Office would have regard to what the office understands was the policy that underlay the provisions at the time they were enacted. The Commissioner would also have to apply the statutory tests having regard to the terms of the particular trust deeds and all the surrounding circumstances. Where, however, a trust is a unitized trust registered as a managed investment scheme under the Corporations Act 2001 with a single class of unit holders who deal with the responsible entity on an arm's length basis, the nature of the trust would be one that would weigh in favour of an exercise of the discretion.

It should also be noted that in the absence of a fixed interest, other tests must be considered for determining an entitlement to a flow-through of franking credits.

The Tax Office has raised this issue with Treasury for its consideration as part of its review of the qualified person provisions.

It is not proposed to issue a general public ruling on this topic while Treasury is considering the issue.

This issue is not reflected in the Compliance program 2008-09. Although compliance activities can change if compliance risks emerge, we do not envisage active compliance activities being undertaken this year. However, if the Tax Office is asked to rule on a specific case in the context of a private ruling or class ruling, or the issue arises in an audit, then it has no alternative than to apply the law as it understands it to operate.

History of issue

The issue was raised at the March 2006 meeting of the NTLG where the Tax Office proposed to refer the issue to a new forum - the TCSG. The issue was first discussed by the TCSG at a meeting in August 2006. It was later discussed at the November 2006 meeting.

Treasury advised?

Yes

Issue 4.0

Absolute entitlement - TR 2004/D25 - effect of trustee indemnity on absolute entitlement

Current status

The Tax Office has raised with Treasury issues relating to absolute entitlement and in particular the problem areas of joint and multiple beneficiaries, and the trustee's indemnity. (The Tax Office has also raised with Treasury other issues involving bare trusts, including the fact that there is no flow-through of losses under the revenue provisions).

The question of absolute entitlement is also under consideration by the Board of Taxation in its review of the taxation of managed funds.

Taxation Ruling TR 2004/D25 will not be finalised or withdrawn while consultation with Treasury is ongoing. Tax Office was unable to accept the group's terms for finalising the ruling (no 'tax detriment' restructuring).

This issue is not reflected in the Compliance program 2008-09. Although compliance activities can change if compliance risks emerge, we do not envisage active compliance activities on this matter being commenced while it is being considered by Treasury. However, if the Tax Office is asked to rule on a specific case in the context of a private ruling or class ruling, or the issue arises in an audit, then it has no alternative than to apply the law as it understands it to operate.

The CGT absolute entitlement test was recently considered by Justice Lindgren in Kafataris & Anor v. Deputy Federal Commissioner of Taxation . His Honour's decision is broadly consistent with the views expressed by the Commissioner in draft Taxation Ruling TR 2004/D25 (although it should be noted that his Honour did not consider the relevance of the trustee's right of indemnity).

History of issue

The issue was raised at the March 2006 meeting of the NTLG where the Tax Office proposed to refer the issue to a new forum - the TCSG. The issue was first discussed by the TCSG at a meeting in May 2006. It was discussed at later meetings in August 2006 and November 2006.

At the August meeting the Tax Office discussed a submission from the Institute of Chartered Accountants in Australia (ICAA) in respect of a number of matters including that TR 2004/D25 be finalised to provide certainty. The TCSG members considered that the ruling should be finalised only on condition that taxpayers would not be disadvantaged in terms of capital gains tax (CGT) or other tax liabilities if they restructured to fit within its terms.

Members said that if the ruling could not be issued on that condition then it should not be finalised but that Treasury should again be made aware of the consequences to the investment fund industry of the view expressed in the draft ruling.

At the November 2006 meeting, the Tax Office advised that it had considered the proposal to finalise the ruling on a 'no detriment' basis but could not support it - if a restructure resulted in a CGT event the Tax Office could not ignore that event.

TCSG members supported a Tax Office proposal not to withdraw or finalise the ruling while it was in the process of discussing this issue with Treasury.

Issues raised by TCSG members were also considered by the Public Rulings Panel in April 2006 and July 2006.

Treasury advised?

Yes

Issue 5.0

Application of PS LA 2005/1 (GA) to testamentary trusts

Current status

Resolved
Legislation introduced in Tax Laws Amendment (2007 Measures No.3) Act 2007 which received royal assent on 21 June 2007.

Issue 6.0

Trusts and consolidation

Issue

Taxing the net income of a trust that joins or leaves a consolidated group during an income year.

Current status

Draft guidance material has been prepared. This has been referred to the Consolidations Centre of Expertise for comment as the issues are primarily consolidation related.

History of issue

This issue was raised at the March 2006 meeting of the NTLG and referred to the TCSG for consideration as the group's priorities allowed.

A discussion paper was considered by TCSG at a meeting on 14 March 2007.The discussion paper was also considered at NTLG Consolidation Sub-group meeting on 28 June 2007. Possible interpretative positions discussed at meetings of a working group of that sub-group on 24 July 2007 and 23 November 2007.

The November discussions with the working party raised further possible interpretations to taxing the trust's non-membership period net income. In considering the alternative views raised, the Tax Office identified further possible interaction issues with the operation of the tax cost setting rules.

Further consultation on draft Tax Office guidance material is planned with the members of that working party.

Treasury advised

Yes
Minister for Revenue and the Assistant Treasurer announced changes to law 8 May 2007 - see The Treasury - Peter Dutton - Press Releases - 2007 - 050 08/05/2007 Improving the Income Tax Law for Consolidated Groups.

Issue 7.0

Cajkusic & Ors v. Commissioner of Taxation - decision impact statement

Current status

Resolved
The Decision Impact Statement Cajkusic & Ors v. Commissioner of Taxation (Cajkusic).

See related issue 13.

Treasury advised?

Yes

Issue 8.0

TR 2006/4

Issue

The application of Taxation Ruling TR 2006/4 in specific scenarios (including discretionary trusts) and the significance of the requirement that the beneficiaries and the effect of the terms of the trust must be the same.

Current status

The Tax Office has referred to Treasury the difficulties it faces in administering and tax practitioners' face in satisfying the trust cloning exception to CGT events E1 and E2. Many of those difficulties are outlined in a paper by Mr Glenn Davies entitled Some CGT aspects of 'trust cloning' - an ATO perspective , delivered at a Taxation Institute of Australia (TIA) seminar in Melbourne on 29 April 2008. Also, advice has been published in Trust cloning to alert practitioners to various issues discussed with members of the TCSG.

The Compliance program 2008-09 notes that the Tax Office will seek to identify trust cloning cases particularly those cases involving a permanent deferral of tax, such as where there is a claimed increase in the cost base of a transferred asset.

History of issue

The Tax Office raised with the TCSG its concerns about the application of the exception to CGT events E1 and E2 at a phone hook-up on 18 October 2007.This matter was further discussed with the group at Trust Consultation Sub-group minutes - 19 June 2008

Treasury advised?

Yes

Issue 9.0

Allocation of expenses

Issue

Managed funds have sought advice from the Tax Office regarding an appropriate method for apportioning indirect expenses against different types of trust income following the repeal of section 50 of the ITAA 1936.

Current status

Issue referred to business line.

This issue was discussed at a meeting of the TCSG on 18 February 2008.

Generally, members recognised that the former section 50 did not provide an appropriate basis for apportionment of indirect expenses.

Members considered that indirect deductions should generally be allocated on a reasonable basis (for example, rateably, but not necessarily only rateably) across components of assessable income - except where there are specific statutory rules to the contrary. However they did not consider that it was appropriate to require an amount to be offset against a net capital gain. There was some discussion as to how the base amount of any income component should be calculated - that is, should imputation credits and foreign tax credits be taken into account.

Members noted that this is not a matter relating solely to trusts and recommended that the Commissioner issue some guidance (possibly in the form of a practice statement) premised on reasonable allocation with some examples of what is reasonable. Members also recommended the Tax Office consider updating Taxation Ruling TR 92/13 to take into account the repeal of section 50.The group's recommendations have been referred to the Small and Medium Enterprises (S&ME) business line for assessment under the PTI process.

History of issue

This issue was referred to the TCSG from the 28 August 2007 meeting of the NTLG F&IS.

Treasury advised?

No

Issue 10.0

Tax file number withholding tax - distributions to non-residents

Issue 10.0

Tax file number (TFN) withholding tax (WHT) continues to apply to tax-free and tax deferred distributions to non-residents (for example, CGT discount capital gains) notwithstanding the recent amendments contained in TLAB 3.

Current status

This issue was referred to the TCSG from the 28 August 2007 meeting of the NTLG F&IS.

Other priorities have meant that this issue is yet to be considered by the sub-group.

Treasury advised?

No

Issue 11.0

ATO ID 2005/20

Issue

Concerns have been raised that the ATO ID is not limited to foreign investment fund (FIF) income but could apply in a broader range of cases.

Current status

This issue was referred to the TCSG from the 28 August 2007 meeting of the NTLG F&IS.

Other priorities have meant that this issue is yet to be considered by the sub-group.

Treasury advised?

Treasury is aware of the issue raised in the ATO ID. It is being considered by the Board of Taxation.

Issue 12.0

Interaction between the trust assessing and CGT provisions

Issue 12.1

Could the Tax Office confirm that the analysis in ATO ID 2003/231 in relation to 'assets without the necessary connection with Australia' will also apply to assets that are not 'taxable Australian property' in Division 855?

Current status

Issue referred to business line.

This issue was discussed at a meeting of the Trust Consultation Sub-group minutes - 18 February 2008 Members of the sub-group were generally of the view that if the approach in the ATO ID is correct, then it would apply equally in respect of Division 855.The issue has been referred to the LB&I for assessment under the PTI process.

History of issue

This issue was referred to the TCSG from the 14 November 2007 meeting of the NTLG Losses and CGT Sub-committee.

Treasury advised?

Yes

Issue 12.2

To determine whether paragraph 98(2A)(c) or 98(2A)(d) of the ITAA 1936 applies to a capital gain made by a trustee, it has to be determined whether the gain is attributable to a period when the beneficiary was a resident. Could the Tax Office give some guidance on determining the period to which a capital gain is attributable?

Current status

Issue referred to business line.

This issue was discussed at a meeting of the Trust Consultation Sub-group minutes - 18 February 2008

Members were generally of the view that a capital gain is attributable to the time when a relevant CGT event happens (rather than for example, the end of a trust's income year or the entire ownership period for an asset).

On this view, if a beneficiary is a resident when a CGT event happens to a trust asset (and the beneficiary later ceases to be a resident), the trustee will be assessed under subsections 98(2A) and (3) even though the taxpayer is a non-resident at the end of the income year and the gain is not Australian sourced.

The Chair referred this issue to S&ME for assessment under the PTI process.

History of issue

This issue was referred to the Trust Consultation Sub-group from the 14 November 2007 meeting of the National Tax Liaison Group Losses and CGT Sub-committee.

Treasury advised?

Yes

Issue 12.3

Does the section 855-40 Income Tax Assessment Act 1997 (ITAA 1997) exemption apply where a fixed trust distributes a capital gain to a discretionary trust, which in turn distributes the capital gain to a non-resident beneficiary?

Current status

Resolved
This issue was discussed at a meeting of the Trust Consultation Sub-group minutes - 18 February 2008 .Members were generally in agreement that section 855-40 does not have any application in these circumstances.

History of issue

This issue was referred to the TCSG from the 14 November 2007 meeting of the NTLG Losses and CGT Sub-committee.

Treasury advised?

Yes

Issue 13.0

Current status

The publication of the Decision Impact Statement Cajkusic & Ors v. Commissioner of Taxation has led to calls for further guidance on how to calculate the share of income to which a beneficiary is regarded as being presently entitled for the purposes of section 97 of the ITAA 1936.

The Tax Office is currently considering its position in respect of a range of issues which will be discussed with the sub-group at its next meeting. It is also test case funding an appeal by the taxpayer to the Full Court of the Federal Court from the decision of the Administrative Appeals Tribunal (AAT) in Bamford & Ors v. Commissioner of Taxation . It is hoped the decision on appeal will clarify the operation of section 97.

The Tax Office has briefed Treasury on this issue. The issue is also being considered by the Board of Taxation in its review of the taxation of managed funds.

The Compliance program 2008-09 notes that the Tax Office will seek judicial clarification of a number of trust issues including the effectiveness of clauses in trust deeds that seek to equate trust income with trust taxable income. While awaiting clarification, no active compliance activities specifically in relation to these issues will be undertaken. However, if such issues arise in the course of an audit prompted for some other reason, or if we are asked to provide a ruling on these issues, we will apply the law as we understand it to operate.

History of issue

This issue was raised at the Trust Consultation Sub-group minutes - 18 February 2008 and further discussed at the Trust Consultation Sub-group minutes -19 June 2008

Treasury advised?

Yes

Current status

Resolved
The decision impact statement for Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation .

History of issue

A draft decision impact statement was discussed at the Trust Consultation Sub-group minutes - 19 June 2008 . Members were invited to make submissions.

Treasury advised?

Yes

Action item

NTLG 0811/06
A copy of the draft practice statement relating to Division 6 matters is to be distributed to NTLG members in late December for comment by Friday 13 February 2009.

84764
84762
84731
84815
84766
84766
84835
84681
84788
84805
84848
84858
84823
84783

Active asset test.
Am I in business?
Assessability of workers compensation.
Body corporate assessable income.
Capital gains tax - main residence.
Capital gains tax - main residence - non resident - absence choice.
Capital gains tax - small business concessions.
Capital gains tax - subdivision of land.
Capital gains tax - small business concessions.
Compensation - Workcover.
Compensation payment.
Employee share scheme - cessation of employment.
Expenses - salary continuance policy.
Expenses - travel.

Action item

NTLG 0811/07
The Tax Office is to provide information on ATO ID process to members for dissemination through their respective associations.

Venue

High Court Special Leave

Topic

Professional sportspeople

Issue

Whether the expenditure connected with the making of an employment contract between a professional football player and a football club is deductible. Whether the High Court decision in Maddalena applies to the circumstances of the modern professional footballer who has income earning activities outside his employment.

Venue

Full Federal Court

Topic

CGT - pre-CGT tax treaties

Issue

This case challenges the Commissioner's view outlined in Taxation Ruling TR 2001/12 Income tax and capital gains tax: capital gains in pre-CGT tax treaties . The issue in the case was whether Australia's double taxation agreements, concluded prior to the time that Australia taxed capital gains on a comprehensive basis, deny Australia the right to tax the capital gains of enterprises of the other state under Australia's capital gains regime (Part IIIA of the ITAA 1936 or Part 3-1 of the ITAA 1997) in circumstances where Australia is denied the right to tax the business profits of such enterprises.

Venue

Federal Court

Topic

Trusts

Issue

Whether beneficiaries are presently entitled to a 'share' of the income of a trust estate under section 97 of the ITAA 1936 and whether the terms of a trust deed can determine what constitutes 'income' of the trust estate for the purposes of section 97.

Venue

Federal Court

Topic

CGT Reduction Arrangements

Issue

There are two separate, but related, substantive issues in this litigation. Firstly, a dispute on the facts as to the amount of cost base that can be transferred between shares in two related companies under the provisions of Division 19A of ITAA 1936.Secondly, the application of the general anti avoidance provisions under Part IVA to a 'scheme' that resulted in a CGT cost base uplift (a CGT reduction arrangement).

In relation to the second issue the terms and conditions of a purely internal transaction between members of the same wholly owned corporate group were such that the provisions of Division 19A were triggered. This resulted in CGT cost base being 'transferred' from shares held by the parent company in one subsidiary into the shares of another subsidiary, thereby increasing the cost base of the shares in the second subsidiary. The internal transactions, and the disposal to the third parties, were all part of a series of pre-determined transactions.

The Tax Office has argued that in the absence of the scheme the indexed cost base of the second parcel of shares would not have been increased under Division 19A, and consequently there would have been a correspondingly higher capital gain upon the disposal of those shares to unrelated third parties.

Venue

Federal Court

Topic

GST - margin scheme

Issue

This matter concerns the valuation of partially completed units purchased 'off the plan' before 1 July 2000 and sold after 1 July 2000 for the purposes of the application of the margin scheme.

The issues are:

¦ whether the valuation certificates prepared for and on behalf of the taxpayer complied with the requirements of paragraph 5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Margin Scheme Valuation Requirements Determination No.2 (2000) for the purposes of determining the margin for the supply of the units in question pursuant to section 75-10(3)(b) of the GST Act, and

¦ in particular, did the valuation certificates not comply on the basis that the valuer did not have proper regard to the 'off-the-plan' sales contracts? Were the values effectively capped by the contract selling price?
 

Venue

Federal Court

Topic

Residential premises

Issue

The meaning of the residential premises 'to be used predominantly for residential accommodation' for the purposes of subsection 40-65(1) of the GST Act. The taxpayer claimed an input tax credit on the purchase of a house on the basis that it intended to use the land for development purposes.

Venue

Federal Court
AAT

Topic

Personal Services Income

Issue

The most significant issues in respect of the personal services income legislation in Part 2-42 of the ITAA 1997 relate to the results test in section 87-18 of the ITAA 1997 and the business premises test in section 87-30.

In relation to the results test, the issue which currently requires clarification is when does an individual or a personal services entity satisfy the results test for an income year. In particular, when is the income of that entity for producing a result?

Venue

Federal Court
AAT

Topic

General anti avoidance provisions

Issue

Clarification of the general anti avoidance provisions, in particular the application of Part IVA of ITAA 1936 and section 165 of the GST Act.

Venue

AAT

Topic

GST - taxable supplies that are partly GST-free or input taxed.

Issue

This case considers whether the applicant made a mixed supply for the purposes of section 9-80 of the GST Act.

Venue

AAT

Topic

Division 13

Issue

The application and interpretation of Division 13 ITAA 1936 which relates to transfer pricing under an international agreement. In particular, the extent to which the due making of a determination by the Commissioner under section 136AD as to whether arm's length consideration has been received or given is protected from curial examination in a tax appeal.

Matter

Futuris Corporation Ltd

Venue/date handed down

High Court (31 July 2008)

Outcome to Tax Office

Favourable

Case issue

Whether in proceedings other than those under Part IVC of the TAA, an assessment made under the ITAA 1936 that was subject to the protection of subsection 175 and subsection 177 of the ITAA 1936 was invalid in circumstances where the taxpayer had not made out the absence of an honest attempt by the Commissioner to exercise the power confided to him in making the assessment.

Section 175 protects the validity of an assessment, once made, from the consequences which might otherwise flow from a failure to comply with provisions of the ITAA 1936. Section 177(1) gives conclusive evidentiary effect to an assessment in proceedings outside the comprehensive statutory appeal procedure.
 

Matter

Neutral Bay Pty Ltd

Venue/date handed down

High Court (3 September 2008)

Outcome to Tax Office

Favourable

Case issue

Whether section 105-100 of the TAA has the effect, upon production of the relevant assessment or declaration, of obliging the court determining an application to set aside a statutory demand pursuant to section 459H of the Corporations Act to disregard any controversy as to the correctness of the assessment or declaration when determining whether there is a 'genuine dispute about the existence or amount of a debt'.

Whether the existence of proceedings under Part IVC of the TAA which are at least arguable and which would, if successful, have the consequence that the amount in respect of which a statutory demand is made would not be payable is, without more, sufficient to establish the existence of a 'genuine dispute about the existence or amount of a debt' for the purposes of section 459H of the Corporations Act.

Matter

Shane Day

Venue/date handed down

High Court (12 November 2008)

Outcome to Tax Office

Adverse

Case issue

Whether legal expenses incurred by a taxpayer in relation to disciplinary or other action by the taxpayer's employer, as a result of conduct otherwise than in the performance of the taxpayer's duties, are deductible pursuant to section 8-1 of the ITAA 1997.

Whether, in particular, such legal expenses:

¦ are incurred in gaining or producing the assessable income of the taxpayer within and for the purposes of section 8-1(1)(a) of the ITAA 1997, and/or

¦ are of a capital, private or domestic nature within and for the purposes of section 8-1(2) of the ITAA 1997.

Matter

Brady King

Venue/date handed down

Full Federal Court (26 June 2008)

Outcome to Tax Office

Adverse

Case issue

Whether the Commissioner can challenge a taxpayer's margin scheme valuation. Whether, in calculating the margin under Division 75 GST Act, the freehold interest is acquired at the date of contract, the date of possession or on the settlement date.

Whether the primary judge erred in deciding the matter on the basis that section 75-10(3) was not satisfied because the taxpayer did not hold the stratum units at the valuation date. That is, what was supplied had to be the same interest that was held at the valuation date.

Matter

Murdoch, Elizabeth

Venue/date handed down

Full Federal Court (28 May 2008)

Outcome to Tax Office

Adverse

Case issue

In this case, the taxpayer who was a life tenant under various family trusts released the trustees of those trusts from claims relating to alleged breaches of trust and received a payment of $85 million in return. The taxpayer had no interest in the capital of the trusts. The $85 million was paid out of capital. The issue is whether the amount is income.

Matter

AARI and ATTORI

Venue/date handed down

Federal Court (14 November 2008)

Outcome to Tax Office

Favourable

Case issue

This case considers the question of whether the taxpayer only derived income to the extent that it repaid its (limited recourse) loans to the syndicate lender and whether income they received should be tax exempt on the basis that they were scientific institutions, or alternatively, that they were scientific research funds.

Matter

BARM (Business and Research Management Ltd)

Venue/date handed down

Federal Court (14 November 2008)

Outcome to Tax Office

Favourable

Case issue

This case considers the question of whether the taxpayer only derived income to the extent that it repaid its (limited recourse) loans to the syndicate lender.

Matter

Greg Watson

Venue/date handed down

Federal Court (8 August 2008)

Outcome to Tax Office

Favourable

Case issue

Whether the amounts received by the Applicant under an income protection policy during the income year ending 30 June 2004 are assessable income 'from' his financial planning business activity for the purposes of either subsection 35-10(2) or section 35-30 of the ITAA 1997?

Matter

Victorian Women Lawyers Association

Venue/date handed down

Federal Court (27 June 2008)

Outcome to Tax Office

Adverse

Case issue

Whether a professional body serving the interests of its members can be considered a charitable institution or a public educational institution under section 23(e) ITAA 1936, section 50-1 and section 50-5 ITAA 1997; and whether the taxpayer can be considered a community service organisation and therefore exempt from income tax.

Matter

De Angelis

Venue/date handed down

District Court SA (14 August 2008)

Outcome to Tax Office

Adverse

Case issue

The extent to which the Commissioner can recover an overpaid refund, such as GST or an overpaid superannuation guarantee amount paid to a super fund; or a fraudulently obtained refund to a financial institution, under the administrative overpayments provisions. Whether the Commissioner, in order to impose the general interest charge (GIC) on the administrative overpayment, is required to issue a notice under subsection 8AAZN(2) of the TAA or whether the GIC may accrue under section 8AAZF where the debt is allocated to a running balance account and causes a running balance account (RBA) deficit debt.

Matter

Roche Products

Venue/date handed down

AAT (22 July 2008)

Outcome to Tax Office

Partly adverse

Case issue

These cases raise the following issues:

¦ whether the Commissioner has power to raise assessments by reference to a taxing power contained in double tax agreements pursuant to the International Agreements Act

¦ whether the Commissioner correctly made determinations pursuant to Division 13 ITAA 1936, and

¦ whether the Commissioner properly made determinations for the purposes of Division 13 by reference to the correct considerations.
 

Matter

Ya'el Frisch

Venue/date handed down

AAT (3 June 2008)

Outcome to Tax Office

Adverse

Case issue

Whether expenditure incurred by a taxpayer with a disability in employing an assistant to assist and attend to the taxpayer in or in relation to the taxpayer's disability while the taxpayer carries out their employment duties is expenditure incurred in gaining or producing assessable income deductible under section 8-1 of the ITAA 1997.

Venue/date heard

High Court

Case issue

Whether a body can have charitable purposes when it conducts profitable commercial activities.

Venue/date heard

Full Federal Court

Case issue

The taxpayers intend to invest in a managed investment scheme. Prior to the Tax Office's change of view in TR 2007/8 such contributions would have been deductible under section 8-1 of the ITAA 1997, assuming the scheme met the requirements for a product ruling to be issued, on the basis that the investor was carrying on a business. The Tax Office now considers that a more appropriate characterisation of these schemes is that the investor's contributions are capital as they obtain an income producing asset in the form of their interest in the scheme.

Venue/date heard

Full Federal Court

Case issue

Whether in the year of income that a contract for sale was entered into, investors in retirement village syndicates incurred only the deposit paid up-front or, as well, the balance of the purchase price which was not payable until the retirement village was completed and a certificate of completion issued.

Venue/date heard

Full Federal Court

Case issue

In this case, the taxpayer successfully bid for a casino licence from the NSW Casino Control Authority. As part of the licence, the taxpayer was required to lease land from the government on which to operate the casino. Under the arrangement, the taxpayer was to make a one-off payment of $253 million for the licence plus $120 million in prepaid rent covering the first 12 years rental. The Commissioner disallowed the taxpayer's claim for a deduction for the prepayment on the basis that the amount was a capital payment. Alternatively, Part IVA applied.

Venue/date heard

Full Federal Court

Case issue

The case concerns the question of whether the commercial debt forgiveness provisions apply in the circumstances, and if so, the calculation of the 'notional value' of the debt forgiven and hence the 'net forgiven amount'.

Venue/date heard

Full Federal Court

Case issue

The operation of the petroleum resource rent tax (PRRT) and in particular whether hedging against assessable receipts being less than expected produces deductible expenditure where the hedge makes losses. Litigation on this issue has arisen because of a sustained period in which crude oil prices consistently exceeded expectations, so that some taxpayers have only losses in years open to amendment from hedges based on crude oil prices. To what extent are hedge gains and losses relevant to PRRT calculation?

Venue/date heard

Federal Court

Case issue

This case considers the issue of whether the taxpayer is entitled to claim a deduction in the 2001 year income for losses transferred to it pursuant to section 170-20 of the ITAA 1997. However, in determining this issue, the company group is seeking to have determined in this proceeding the issue of losses previously disallowed by the Commissioner in relation to which amended assessments are yet to be issued. The case also raises Part IVA issues.

Venue/date heard

Federal Court

Case issue

In this case, the taxpayer, an excise licensed entity, commenced declaratory proceedings in the Federal Court regarding the operation of the Excise Act 1901 and the Excise Tariff Act 1921. At issue is whether excise is payable on intermediate refined product used by an excise licensed entity to power refineries in which it manufactures or produces excisable petroleum products.

Venue/date heard

Federal Court

Case issue

This case considers the question of whether the taxpayer only derived income to the extent that it repaid its (limited recourse) loans to the syndicate lender.

Venue/date heard

Federal Court

Case issue

This case considers the Commissioner's view on the application of pre-CGT double tax agreements as expressed in TR 2001/12 (income tax and capital gains tax: capital gains in pre-CGT tax treaties). The taxpayer objected to an original assessment including the gain made on the sale of an Australian resident subsidiary in assessable income.

Venue/date heard

Federal Court

Case issue

This case considers the meaning of 'commercial residential premises' and 'residential premises to be used predominantly for residential accommodation' for GST purposes. In particular, whether supplies of strata titled hotel units by the taxpayer by way of lease are taxable supplies of commercial residential premises or input taxed supplies of residential premises, in circumstances where the management lot which includes the hotel's reception is sold to a different although related entity of the recipient of the leases of hotel units. The case will examine the 2005 amendments to the GST Act following the Marana Holdings case.

Venue/date heard

Federal Court

Case issue

The extent to which a capital amount paid to a partially owned third tier subsidiary of a holding company can be included in the calculation of the reduced cost base on the disposal of the holding company's shares, in that the capital amount was paid for the 'purpose' of enhancing the value of the holding company's shares and was reflected in the state or nature of the holding company's shares at the time of their disposal.

Market segment

Cases on hand

% of total

Large Business (Annual turnover over $250m)

300

16.8

Small/Medium Enterprise (SME) (Annual turnover $2m - $250m)

301

16.8

Micro Enterprise (Annual turnover under $2m) and Individuals (MEI)

218

12.2

Excise

9

0.5

GST

206

11.5

Superannuation

66

3.7

Mass marketed schemes (including Employee Benefit Arrangements)

672

37.5

Other

18

1.0

Total

1790

100%

Court venue

Cases on hand

% of total

Small Taxation Claims Tribunal (STCT)

29

1.6

Administrative Appeals Tribunal (AAT)

1400

78.2

Federal Court (Single Judge)

311

17.4

Full Federal Court

27

1.5

High Court

12

0.7

State Local/Magistrates Courts Tribunals

11

0.6

Total

1790

100%

Action item

NTLG 0811/08
A list of draft rulings expected to issue in the 8 December to 9 January period is to be forwarded to members.

Action item

NTLG 0811/09
Chair and secretariat details are to be included in future NTLG sub forum reports.

Action item

NTLG0809/01
Information to assist applications for private rulings in relation to CGT exceptions and the transfer of assets between trusts is to be provided to members for dissemination within their associations.

Refer agenda item 2 - September 2008 meeting.

Status

Finalised

Outcome

Email sent to members on 16 September 2008 with wording from TCN for inclusion into their association newsletters with information on private binding rulings (PBRs) in relation to CGT exceptions and the transfer of assets between trusts.

Action item

NTLG0809/02
Appropriate consultation between Tax Office and external members will occur to address the issue of additional guidance on fraud or evasion situations.

Refer agenda item 5 - September 2008 meeting.

Status

Finalised

Outcome

Consultation with members has occurred. As a result, officers have been reminded of all appropriate processes including the need for escalation, oversight and clear communication with tax-payers on these matters.

Action item

NTLG0809/03
Members are to be advised of progress of the advice or guidance product in respect of employee share schemes.

Refer agenda item 6 - September 2008 meeting.

Status

Ongoing

Outcome

A PTI has been raised in respect of this matter. PTI process is underway and members will be advised once finalised.

Action item

NTLG0809/04
A copy of the Division 6 discussion paper is to be provided to NTLG members for comment by the end of September.

Refer agenda item 7 - September 2008 meeting.

Status

Finalised

Outcome

The discussion paper was distributed to members on 9 September 2008. Submissions are under review and will be discussed further at the TCSG meeting in 1 December 2008.

Action item

NTLG0809/05
Clarification is to be provided to NTLG sub-groups and committees regarding the sharing of discussion papers with members.

Refer agenda item 7 - September 2008 meeting.

Status

Finalised

Outcome

Clarification regarding the distribution of discussion papers has been forwarded to forum secretariats and included in the community of practice handbook.

Action item

NTLG0809/06
Members are to be advised of the breadth of the draft ruling on section 73CA.

Refer agenda item 13 - September 2008 meeting.

Status

Ongoing

Outcome

On 12 September 2008 members were invited to provide comments. Comments have been received and are under review.

Action item

NTLG0809/07
Members are to be advised of managed investment scheme (MIS) test case hearing by the Full Federal Court once it is available.

Refer agenda item 15 - September 2008 meeting.

Status

Finalised

Outcome

This issue directly relates to existing action item NTLG0503/04 managed investment schemes. To reduce the risk of duplication, NTLG0503/04 will continue to monitor issues associated with the Full Federal Court's decision. A communication strategy has been developed to advise members of the outcome.

Part A

Contains responses to action items for consideration to be finalisation at the 26 November 2008 meeting. There were 13 items put forward for consideration as completed. Those items are included below.

Part B

Contains the ongoing action items.

Part C

Contains the standing agenda items.

Item

NTLG0809/01

Description

Information to assist applications for private rulings in relation to CGT exceptions and the transfer of assets between trusts is to be provided to members for dissemination within their associations.

Outcome or resolution

Finalised
Email sent to members on 16 September 2008 with wording from TCN for inclusion into their association newsletters with information on PBRs in relation to CGT exceptions and the transfer of assets between trusts.

Item

NTLG0809/02

Description

Appropriate consultation between Tax Office and external members will occur to address the issue of additional guidance on fraud or evasion situations.

Outcome or resolution

Finalised
Consultation with members has occurred. As a result, officers have been reminded of all appropriate processes including the need for escalation, oversight and clear communication with tax payers on these matters.

Item

NTLG0809/04

Description

A copy of the Division 6 discussion paper is to be provided to NTLG members for comment by the end of September.

Outcome or resolution

Finalised
The discussion paper was distributed to members on 9 September 2008. Submissions are under review and will be discussed further at the TCSG meeting in 1 December 2008.

Item

NTLG0809/05

Description

Clarification is to be provided to NTLG sub-groups and committees regarding the sharing of discussion papers with members.

Outcome or resolution

Finalised
Clarification regarding the distribution of discussion papers has been forwarded to forum secretariats and included in the community of practice handbook.

Item

NTLG0809/07

Description

Members are to be advised of MIS test case hearing by the Full Federal Court once it is available.

Outcome or resolution

Finalised
This issue directly relates to existing action item NTLG0503/04 managed investment schemes.

To reduce the risk of duplication, NTLG0503/04 will continue to monitor issues associated with the Full Federal Court's decision.

A communication strategy has been developed to advise members of the outcome.

Item

NTLG0806/06

Description

The FBT sub-committee will consider the meaning of the phrase 'primarily for the use in the employee's employment' as it will apply for the purposes of the amended provision at their August 2008 meeting.

Outcome or resolution

Finalised ATO Interpretive Decision ATO ID 2008/127 issued 3 October 2008 which sets out the Tax Office position in respect of 'primarily for the use in the employees' employment'.

Issues concerning new section 58X of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), including the issue raised at the NTLG on 17 June 2008, were discussed at length at the FBT Sub-committee meeting held on 14 August 2008.Members of the FBT Sub-committee submitted four agenda items for discussion at that meeting concerning the new section 58X, including requests for the Tax Office to provide guidance in relation to the meaning of the phrase 'primarily for use in the employee's employment'.

The Tax Office also provided a short position paper to members at the meeting for the purposes of discussion and progression of the issues raised.

As a result of the discussion, the Tax Office issued ATO Interpretive Decision ATO ID 2008/127 Fringe Benefits Tax Exempt Benefits: work related items - primarily for use in the employee's employment , issued 3 October 2008, which sets out the Tax Office position in relation to this particular issue.

Sub-committee members are satisfied this issue has been fully addressed.

Item

NTLG0806/07

Description

NTLG members are to be advised of the progress of the alternative dispute resolution (ADR) checklist.

Outcome or resolution

Finalised
The ADR checklist has now been incorporated into business as usual practices.

An ADR intranet site is available to all staff and provides links to policy, procedure and other useful information and links in relation to ADR and dispute resolution generally. The checklist has been placed on the ADR intranet site as a resource for staff.

The checklist and the ADR Law Administration Practice Statement 2007/23 were provided to our external legal service providers on 27 August 2008 to inform them of our approach in relation to ADR and to ensure that the recently updated requirements in the Attorney-General's Legal Services Directions [Appendix B: Model Litigant Obligation] are known to them and followed.

All employees in Legal Services Branch were provided with a copy of the checklist on 27 August 2008 and have been advised that the litigation checklist provides a practical understanding of the Tax Office's approach to ADR in litigation.

As previously advised a dispute resolution/ADR network comprises representatives from each business line and will be lead by an ADR 'champion' and principal litigator in the Legal Services Branch. One of the responsibilities of representatives from each business service line on the network is to distribute relevant ADR information within their business line. The checklist was forwarded to the network representatives on 15 September 2008 so that they could distribute this to relevant staff.

Case management system are being enhanced and to accommodate the new processes.

Item

NTLG0806/08

Description

Processes associated with tax practitioner forum minutes are to be reviewed and reinforced.

Outcome or resolution

Finalised
The processes surrounding the publishing of tax practitioner consultative forum minutes have been reviewed and modified by the Tax Practitioner Community of Practice in consultation with forum secretariats and the Tax Office web publishing area. It is expected that modifications to existing internal practices will improve the time taken to have forum minutes published.

It has been reinforced to forum secretariats that accurate, draft minutes of meetings should be available for review by their members as soon as possible following a meeting. It has also been stressed that forum minutes are to be published on the Tax Office's website once these draft minutes have been reviewed by members and appropriate clearances have been provided.

Item

NTLG0803/01

Description

Members are to be advised of the results of further analysis of response times associated with private binding ruling requests.

Outcome or resolution

Finalised
Current Tax Office systems cannot readily identify whether tax officers are waiting until close to the end of the service standard timeframe to request additional information from a taxpayer resulting in extensions of time to process the ruling. In May 2008 NTLG members were invited to provide examples of where it is believed this may have happened. At this stage no examples have been received. In June 2008, a message was sent to all Tax Office Interpretative Assistance staff reminding them of the timeframes and circumstances in which they should request additional information from a taxpayer.

This item is now considered finalised.

In August 2008 the Second Commissioner of Compliance was advised accordingly.

Item

NTLG0706/04

Description

Members were invited to forward information on identified gaps associated with the McNeil case to the secretariat by 2 July 2007.

Outcome or resolution

Finalised
Legislation dealing with the outcome of McNeil's case was introduced in Schedule 1 to the Tax Laws Amendment (2008 Measures No.3) Bill 2008 on 29 May 2008. The Tax Laws Amendment (2008 Measures No.3) Act 2008 (Act No.91 of 2008) has been passed by the parliament and received royal assent on 20 September 2008.

This issue links directly to NTLG0709/04 'Forex and McNeil'. NTLG0706/04 should be finalised to reduce the risk of duplication. Issues and updates relating to 'McNeil' will be tracked against NTLG0709/04.

Item

NTLG0706/12

Description

The identified un-actioned issues associated with Black hole expenditure are to be considered for action, plus the need for a public ruling.

Outcome or resolution

Finalised
No request for a public ruling on the subject has been submitted by members since invited to do so at the September 2008 meeting.

Discussions continue with Treasury on the purpose or object of several of section 40-880's provisions. The Tax Office continues, however, to provide private rulings on the application of section 40-880.

The Tax Office considers this issue to be finalised.

Item

NTLG0612/07

Description

Treasury is to provide an update on the progress of Treasury issues associated with the TIMs Sub-committee.

Outcome or resolution

Finalised
This issue links directly to NTLG0612/06 TIES. NTLG0612/07 should be finalised to reduce the risk of duplication. Issues and updates relating to both TIMS and TIES will be tracked against NTLG0612/06.

Item

NTLG0612/16

Description

A further update will be provided on the legal practitioners project to the NTLG at the March 2007 meeting.

Outcome or resolution

Finalised
The Legal Practitioner Working Party minutes - 25 July 2008 from the inaugural meeting were published on our website. The next meeting of the Legal Practitioners Working Party will be held on 8 December 2008.The legal practitioners relationship project has now been incorporated as business as usual.

Any future issues raised by legal practitioners as intermediaries will be addressed by the Legal Practitioners Working Party.

Issue no.

Agenda item 3

Issue/application

Cash economy benchmark

Presentation provided on the cash economy benchmarks.

Members asked how will the cash economy benchmarks be applied under the pending tax agent services exposure draft, for example what would happen if an agent had several clients that did not align with the benchmarks, would the agent be audited?

The Tax Office advised that under the tax agent service exposure draft the definition of 'professional code of conduct' will be further clarified in the Explanatory Memorandum (EM). How it will be applied will be a matter for the National Tax Practitioners Board.

Members agreed that they were all keen to review the final guidelines and move into the development stage on how the bill will be applied on a day-to-day basis.

The Tax Office also advised that the cash economy benchmarks are to be used as a guide and are not used by the Tax Office as a trigger for an audit. Benchmarks are only used during an audit in exceptional circumstances, that is, when the taxpayer refuses to provide any information during an audit.

Eleven new benchmarks to be released by December 2009. Members suggested engaging tax practitioners when building benchmarks, not just industry associations.

Tax Office is developing a personal living expenses (PLE) guide, scheduled to be released in early 2009.

Members confirmed their broad support and endorsement for the benchmarking approach applied by the Tax Office. This is based on the Tax Office maintaining its current views of when benchmarks are used.

Status

Action items
Tax Office to involve tax practitioners with the development of the benchmarks.

Tax Office to consider expanding www.ato.gov.au to include industry description of the benchmarked industries so practitioners could identify (for example, roof tilers from floor tilers).

Issue no.

Agenda item 4

Issue/application

Small Business Assistance Program

Tax Office provided a presentation on the Small Business Assistance Program. The program's objectives are to increase small business owners' confidence with tax, making compliance as easy as possible and minimise costs.

A key achievement of the program is the Free electronic calendar for small businesses available on www.ato.gov.au

Members asked if the calendar could be promoted more widely to tax practitioners through relationship managers and tax agent magazines. Practitioners can then get their clients to include key lodgment dates reminders.

Members commented the terminology used, for example, 'minimise compliance costs' is interpreted as how to pay less tax. Members recommended focusing on promoting and educating small businesses on the practical tools available such as www.ato.gov.au and the portal.

Status

Action items
Tax Office to promote the electronic small business calendar more widely to tax practitioners.

Tax Office to prepare a Small Business Assistance Program 'kit' for practitioners, including helpful tools and services.

Issue no.

Agenda item 5

Issue/application

Centrelink

Guest speakers from Centrelink provided information and led discussions on the following:

¦ the proposed changes to the Commonwealth Seniors Health card from 1 July 2009

¦ progress update on the 2007-08 compliance budget initiatives

¦ changes to Family Tax Benefit (FTB) from 1 July 2009, and

¦ contacting Centrelink.

Tax Office will provide Centrelink with the lodgment dates and information on the lodgment working program.

Centrelink will continue regular engagement with tax practitioners through Tax Office forums.

Centrelink and the Tax Office will present information on what the agencies have developed together.

Status

Action items
Centrelink to confirm proof of identity procedures for inbound calls.

Centrelink to feedback to their policy area:

¦ the short time frame clients and tax practitioners are given to provide information before the client's benefits are ceased, and

¦ review if extensions can be provided for lodgment of information requests.

Centrelink to investigate if a direct line can be established for tax practitioners.

Issue no.

Agenda item 7

Issue/application

Simplified super and tax free payments

Members alerted the Tax Office that some superannuation funds are issuing incorrect payment summaries that would result in beneficiaries returning income which is not assessable and thus paying tax which is not correctly due.

The Tax Office advised it will be making direct contact with the relevant funds advising them of their error and asking them to make the necessary changes before the end of the current financial year.

Funds will be asked to contact affected beneficiaries to inform them of the error in this year's payment summaries.

Status

No further action required

Issue no.

Agenda item 10

Issue/application

Partnerships and trust distribution project

Tax Office provided information on the progress of the project.

Response to the mail out for phase 1 has resulted in a significant number of responses. As a result, phase 1 has been extended and this will delay phase 2.

The second phase takes place after the tax practitioner has had sufficient time to review their client's returns. In the absence of a response, an audit letter will be sent to the taxpayer. The letter identifies the discrepancy and invites response if the information is incorrect. An amended assessment will be issued with penalty and interest applied if the taxpayer does not respond.

A second letter will go out to tax practitioners again telling them that clients are about to be notified of the audit.

Members questioned the dates the phase 2 letters are issued around the Christmas/New Year period when many businesses shutdown. Member recommended either not issuing the letters between December 2008 and January 2009 or extending the due date to respond.

Tax Office also invited members to assist in co-designing strategies to effectively manage incorrect reporting issues identified including development of targeted partnership and trust return form completion support products. Regional Tax Practitioner Working Groups (RTPWG) will also be invited to participate.

Status

Action items
The Tax Office to review the response period for the phase 2 letters.

Tax Office to engage ATPF and RTPWG members in co-designing strategies to effectively manage incorrect reporting issues identified including development of targeted partnership and trust return form completion support products.

Issue no.

Agenda item 12

Issue/application

New Service Delivery Model

Presentation provided on the New Service Delivery Model.

This service will be rolled-out during the next few months and invitations to register for this service will be sent in stages to 500 tax agents by 31 December 2008.

The four regions are:

¦ Western Australia/South Australia/Northern Territory

¦ Queensland

¦ New South Wales/Australian Capital Territory, and

¦ Victoria/Tasmania.

The new service allows tax practitioners:

¦ direct and personalised access to a senior tax officer

¦ the opportunity to discuss exceptional technical issues which may reduce the need for tax agents to write to the Tax Office for advice, and

¦ to further develop a professional-to-professional relationship with the Tax Office.

This will increase our understanding of local practices.

Status

No further action required.

Issue no.

Agenda item 15.1

Issue/application

Proof of identity procedures for third party representatives

Following on from several discussions with ATPF, CTA, bookkeeping and legal professions, members were advised a hybrid approach will be implemented whilst a full risk review is undertaken.

The hybrid solution will consist of the third party representatives having to provide two pieces of personal information (not Tax Office specific), and some information on the entity (Tax Office specific). Members were advised it will be some time before the hybrid solution is implemented as we need to update scripting and train the call centre staff.

A member did question the idea of someone providing personal information that may be known by someone in their office (for example, address or date of birth) and suggested introducing corporate key processes like ASIC.

Status

Action item
Tax Office to communicate the hybrid approach through to the ATPF.

Issue no.

Agenda item 15.2

Issue/application

Digital certificates and portability using a USB stick

The Chair and members acknowledged the good work of the ATPF in bringing this about.

Tax Office advised that Tax Agent Portal (the portal) password access will be disabled on 30 November 2008. Portal access will be restricted to digital certificates from that date.

A broadcast will be sent out to all agents who are still registered.

Status

Action item
Professional Associations to inform their members that the portal password access will be disabled on 30 November 2008.

Issue no.

Agenda item 16

Issue/application

Other business

The Tax Office will conduct essential maintenance over the Christmas/New Year period that will require all computer systems and applications to be shut down.

All our systems and services including the portal, electronic lodgment service, telephone services and the Tax Office website will be unavailable from 4.00pm EDST on Wednesday 24 December 2008 until 9.00am EDST on Monday 5 January 2009. In addition, there may also be some disruption to services from 19 December and after 5 January.

We will be communicating information about this shut down to tax professionals, taxpayers and other stakeholders over the coming weeks.

Status

No further action required.

Issue no.

Action item 1/28Jun07
(agenda item 2 of the 12 June 2008 meeting)

Issue/application

Tax Sharing Agreements (TSA) and the clear exit provisions.

Status

Chapter 35 of PS LA 2006/11 ATO Receivables Policy has been expanded to clarify some of the Tax Office views expressed therein. The revision issued in September 2008.

Outcome - action to date

This issue and other possible legislative changes were discussed with Treasury in July 2008 and again in October. The administrative approach to mitigating the effects of this particular issue appears to be minimising impacts. There have been few practitioner enquiries. Please refer to the revised Chapter 35 of the ATO Receivables Policy for a comprehensive discussion of all known or anticipated tax sharing agreement issues.

Issue no.

Action item 2/28Jun07
(agenda item 3 of the 12 June 2008 meeting)

Issue/application

Single entity rule/intra-group assets and third party interactions (NTLG Consolidation Sub-group issues (17.19 and 17.20).

Status

This issue will be considered as part of single entity rule (SER) project. No further products will be issued in the near future, but the Tax Office will be working with Treasury to consider possible solutions. Members were asked to forward any additional intra-group asset and SER issues for consideration.

Outcome - action to date

The Tax Office has discussed this issue with Treasury and also at the sub-group meeting held on 12 June 2008. An update on the progress of the project will be provided at the next meeting to be held on 26 February 2009.

Issue no.

Action item 5/28Jun07
(agenda item 2 of the 12 June 2008 meeting)

Issue/application

Trust joining and leaving a consolidated group during an income year (NTLG Consolidation Sub-group issue 17.22).

Status

Issue discussed at the meeting held on 12 June 2008.

Outcome - action to date

Draft Consolidation Reference Manual material is being considered.

Issue no.

Action item from agenda item 5/28Jun07
(agenda item 2 of the 12 June 2008 meeting)

Issue/application

Division 705-C for non-consolidated groups (NTLG Consolidation Sub-group issue 17.08).

Status

Subsequent to the sub-group meeting, this ruling topic was withdrawn from the Public Rulings Program. It will be considered as a part of ongoing discussions with Treasury.

Outcome - action to date

Issue discussed at the meeting held on 12 June 2008. Members were requested to provide examples/scenarios where they think subdivision 705-C should apply. No examples have been received.

Issue no.

Action item from agenda item 13/28Jun07
(agenda item 2 of the 12 June 2008 meeting)

Issue/application

Straddle contracts (NTLG Consolidation Sub-group issue 14.01a).

Status

On 3 July 2008 a technical discussion paper entitled 'Treatment of assets identified in relation to straddle contracts' setting out the draft Tax Office views on the issue was released on the Tax Office website.

Outcome - action to date

Draft Taxation Determinations Draft Taxation Determination TD 2008/D9 , Draft Taxation Determination TD 2008/D10 and Draft Taxation Determination TD 2008/D11 were published on 25 June 2008.

Issue no.

Agenda item 5/12Jun08

Issue/application

Trade debts and potential double taxation (ATO ID 2005/211) (NTLG Consolidation Sub-group issue 17.18).

Status

ATO ID 2008/110 issued on 8 August 2008 addresses the issues in part (i). The issues in part (ii) will be considered as a part of ongoing discussions with Treasury.

Outcome - action to date

Issue was discussed at the meeting held on 12 June 2008. The issue will be considered as part of ongoing discussions between the Tax Office and Treasury in relation to the consolidation regime.

Issue no.

Agenda item 6/12Jun08

Issue/application

The implications for consolidations of the view expressed in the recently released Draft Taxation Ruling TR 2007/D10, Capital gains tax consequences of earnout arrangements (NTLG Consolidation Sub-group issue 17.21).

Status

A technical discussion paper regarding effect of subsection 705-65(5B) having regard to TR 2007/D10 was distributed at the 12 June 2008 meeting.

Outcome - action to date

Technical paper was discussed at the 12 June 2008 meeting. A member asked whether payments made as a result of standard earnout arrangements to which subsection 705-65(5B) does not apply would be deductible under section 40-880. An update will be provided at the next meeting.

Issue no.

Agenda item 7/12Jun08

Issue/application

The treatment of convertible notes on entry and exit. (NTLG Consolidation Sub-group issue 17.17).

Status

Analysis is being done on the interaction between the entry and exit cost setting rules and the accounting standards and the debt/equity rules. Results to be conveyed to the sub-group and Treasury.

Outcome - action to date

Accepted as a priority technical issue at the 21 November 2007 meeting.

Issue was discussed at the 12 June 2008 meeting.

The issue will be raised with Treasury.

Issue no.

Agenda item 4/12Jun08

Issue/application

Foreign hybrids

Status

Some preliminary analysis has been conducted on this issue. The Tax Office is continuing to look at this issue. An update will be provided at the next meeting.

Outcome - action to date

Issue was discussed at the 12 June 2008 meeting.

Issue no.

1

Issue/application

ENCO

Status

The status of this issue is ongoing with consideration proceeding of the issues raised in the ENCO discussion paper and examples provided to the sub-group by members.

Outcome - action to date

Submissions on the ENCO discussion paper from professional bodies represented on the sub-group are under consideration. Discrete aspects of ENCO are being addressed. Three action items were agreed at 16 June meeting.

6. The Tax Office to further develop formal guidance on whether 'obligation' in ITAA 1997 section 974-135 is confined to a legal obligation. A draft TD issued on 1 October 2008 as TD 2008/D14 .
 

7. Relevance of economic compulsion in the debt test: external members of the sub-group have prepared a draft paper summarising their views on this issue to be circulated to the sub-group after the 16 June meeting, subject to the external members' agreement. External members to test and illustrate the issues to be considered by practical examples.
 

8. Limited recourse in the debt test: subject to external members' agreement, external members' views to be circulated to the sub-group after the 16 June meeting. External members to provide examples of actual arrangements which could be provided for the sub-group's further discussion. Tax Office to then consider these materials and develop formal guidance.
 

Issue no.

2

Issue/application

Foreign exchange (Forex) issues:

¦ Announced and not yet enacted amendments.

¦ Law changes identified but no government announcement.

¦ Other items on the Forex issues register.

Status

No further action by the sub-group at this stage pending Treasury consideration of Tax Office and industry views.

Outcome - action to date

The Tax Office has advised Treasury of the sub-group's views of the priority of outstanding Forex issues.

Issue no.

3

Issue/application

Debt/equity - section 974-80 of the ITAA 1997.

Status

No further action by the sub-group at this stage pending Treasury consideration of Tax Office and industry views.

Outcome - action to date

The Tax Office had released a discussion paper in 2007 on section 974-80 for public comment. By agreement, the paper was withdrawn in September 2007 after consultation and approaches to Treasury by the professional bodies.

The Tax Office has provided formal advice to Treasury.

External members were advised at the 16 June meeting in response to a question raised that, although the discussion paper was withdrawn, the Tax Office has not resiled from the views in the paper.

Action item

Action item 160608-1
Chair to ascertain what if any further discussions have taken place concerning deferred purchase agreements and CGT.

Status

Advice issued to members on 17 June 2008.

Action item

Action item 160608-2
NIA to circulate issues paper of the discussions of the subgroup's external members for approval of the external members and submit the paper to the secretariat.

Status

Awaiting submission.

Action item

Action item 160608-3
Secretariat to ascertain whether the NTLG FSI Sub-group has examined (or may examine) the issue of application of the functional currency rules to trusts.

Status

The secretariat of the NTLG FSI Sub-group advised that his sub-group has not examined the issue of application of the functional currency rules to trusts nor has this issue yet been raised by members of that sub-group.

Action item

Action item 160608-4
Property Council of Australia (PCA) representative to forward to the secretariat a copy of PCA's further Treasury submission for circulation to the sub-group members.

Status

Copy of PCA's further submission to Treasury received by the secretariat and distributed to sub-group members.

Action item

Action item 160608-5
Tax Office to advise on progress of public ruling on revenue capital distinction for managed investment funds.

Status

Advice issued to members on 17 June 2008.

Action item

Action item 270208-6
Tax Office to consider whether it would be appropriate to provide public guidance on the implications of ATO Interpretative Decision ATO ID 2007/197 and ATO Interpretative Decision ATO ID 2007/198 : if proceeds of sales of 'borrowed' shares that are trading stock are brought into account in a year before shares are acquired to replace the 'borrowed' shares, is the deduction for purchases only allowed in the later year? What is the timing of accounting for profit if the 'borrowed' shares that are sold are not trading stock, but are revenue assets?

Status

Tax Office actively considering the issues.

Action item

Action item 270208-2.2
Members to consider relevance of economic compulsion in the debt test and illustrate the issues to be considered by practical examples, including, where possible, full facts, circumstances, documentation and text of the examples.

Status

Awaiting submissions from external members.

Action item

Action item 270208-2.3
Members to consider relevance of limited recourse in the debt test and illustrate the issues to be considered by practical examples, including, where possible, full facts, circumstances, documentation and text of the examples.

Status

Awaiting submissions from external members.

Issue no.

FSISC 0905/7.7

Issue/application

Foreign hybrids - guidance on various issues concerning interpretational and operational aspects of the foreign hybrids regime. Division 830 ITAA 1997

Status

In progress

Outcome - action to date

Four PTIs: 984, 1005, 1006 and 1007 are currently in progress dealing with foreign hybrid issues raised within the sub-group.

Two PTIs: 1005 and 1007 are being dealt with through the release of TDs.

One PTI: 1006 is being dealt with through the release of a taxation ruling.

A fourth PTI: 984 dealing with a general administration matter is to be dealt with by other guidance advice to be determined.

Issue no.

FSISC 1104/08

Issue/application

Availability of section 23AJ ITAA 1936 exemption through a chain of foreign entities where one of those entities is a foreign partnership or trust TD 2007/D14 and TD 2007/D15.

Status

Finalised

Outcome - action to date

The final versions issued on the 13 August 2008 as Taxation Determination TD 2008/24 and Taxation Determination TD 2008/25 .

Issue no.

FSISC 0906/04

Issue/application

Section 768G ITAA 1997 regarding interposed partnerships and the participation exemption, TD 2007/D6.

Status

Finalised

Outcome - action to date

The final version issued on the 13 August 2008 as Taxation Determination TD 2008/23 .

(An erratum issued on 10 September 2008 to correct a minor wording omission. Taxation Determination TD 2008/23ER - Erratum ).

Issue no.

FSISC 0408/06

Issue/application

Foreign income tax offsets (FITO) issues.

Status

In progress

Outcome - action to date

Due to unforseen circumstances this issue was not discussed during the telephone conference in July; however we did ask our members to advise us regarding the problems they were encountering. This will be a major item at our next meeting in November.

Issue no.

3.1

Issue/application

Action item 100507/28 - forward compliance arrangements (FCAs).

FCAs and annual compliance arrangements were discussed and members were advised that the Tax Office would welcome enquiries from employers seeking to enter into one of these compliance arrangements in relation to FBT.

Status

Members were advised that enquiries could be directed to either the chair or the secretariat of the forum.

Outcome - action to date

Completed

Issue no.

3.2

Issue/application

Action item 20080508/29 - revoking a 50/50 split election.

Whether a prior year FBT assessment can be amended to reflect the Tax Office's change of view on associated minor benefits as set out in Taxation Ruling TR 2007/12 where an employer has previously made an election in respect of meal entertainment expenditure.

Status

The minute's record that as a general position a choice or election once made cannot be revoked unless revocation is specifically provided for under legislation.

Outcome - action to date

Completed

Issue no.

6

Issue/application

Taxpayer Alert TA 2008/13 and Taxpayer Alert TA 2008/14 - members requested further information regarding the issue of the alerts.

Status

Tax Office provided members with a prepared briefing note which provided the background and context to the Tax Office concerns articulated in the alerts.

Outcome - action to date

The sub-committee will be kept informed of the progress of the resolution of the issues raised in the taxpayer alerts.

Issue ongoing.

Issue no.

7

Issue/application

Meaning of 'primarily for use' in the employees employment. The issue was raised at the NTLG on 17 June 2008 and four agenda items concerning new section 58X of the FBTAA were discussed at length. The Tax Office provided a short position paper to members at the meeting for the purposes of discussion and progress.

Status

Response provided in the published minutes.

Outcome - action to date

ATO Interpretative Decision A TO Interpretative Decision ATO ID 2008/127 Fringe benefits tax, Exempt benefits: work related items - primarily for use in the employee's employment, issued on 3 October 2008.

Completed

Issue no.

1.38 and 1.39

Issue/application

Issues involving property intended for sale that is rented out pending sale.

Status

Discussion paper.

Outcome - action to date

Draft Ruling Product being prepared for issue on 17 December 2008.

Issue no.

1.42

Issue/application

Implications of decision impact statement for Debonne Holdings Ltd v. Federal Commissioner of Taxation [2006] AATA 886.

Status

Risk assessment.

Outcome - action to date

PTI proposal has been approved and changes to GSTR 2002/5 are being considered.

Issue no.

1.44

Issue/application

Partitioning of real property.

Status

Final ruling being prepared.

Outcome - action to date

Final ruling considered at October 2008 panel. Further consultation expected on a related issue regarding new residential premises.

Issue no.

1.46

Issue/application

Residential premises - revision of GSTR 2000/20 commercial residential premises.

Status

Awaiting member comment.

Outcome - action to date

Consultation on priority issues complete. Issues to be considered by Public Rulings Panel in February 2009.

Issue no.

1.47

Issue/application

New residential premises and section 9-30(4) GST Act.

Status

Ruling addendum in progress.

Outcome - action to date

Addendum to GSTR 2003/3 being finalised.

Issue no.

1.50

Issue/application

Margin scheme determination - valuation issues.

Status

Legislative determination proposal being considered.

Outcome - action to date

Draft legislative determination being developed for consultation.

Issue no.

1.51

Issue/application

Full Federal Court decision in Brady King v. Federal Commissioner of Taxation [2008] FCAFC 118.

Status

Awaiting decision.

Outcome - action to date

Matter now referred back to first instance Judge. Hearing 29 October 2008, currently awaiting decision.

Issue no.

4.5

Issue/application

Proof of identity for non resident registration.

Status

Changes implemented.

Outcome - action to date

Response provided to wash-up issues.

Issue no.

4.6

Issue/application

Retrospective GST registration cancellation.

Status

Publications being reviewed.

Outcome - action to date

Review of relevant forms and publications continuing in consultation with members.

Issue no.

6.10

Issue/application

Changes to 'Belvedere' example in Financial Supplies Ruling GSTR 2002/2 - potential ruling topic.

Status

Scoping workshop completed.

Outcome - action to date

Workshopped with industry in October 2008, further workshop to occur.

Issue no.

7.3

Issue/application

Requirements for issuing recipient created tax invoices and opportunities to more easily meet these requirements.

Status

Awaiting member comment.

Outcome - action to date

Draft revised determination text circulated September 2008 to members for comment.

Issue no.

9.10

Issue/application

In specie distributions and associates rule in Division 72.

Status

Comments period closed.

Outcome - action to date

Final determination on 'course or furtherance of enterprise' expected to issue during December 2008.

Issue no.

9.13

Issue/application

Taxable supplies and third party consideration.

Status

Litigation and addendum.

Outcome - action to date

Test case funding application approved. Addendum to GSTR 2006/9 being prepared.

Issue no.

9.14

Issue/application

High Court decision in Federal Commissioner of Taxation v. Reliance Carpet Co [2008] HCA 22.

Status

Impacted rulings being revised.

Outcome - action to date

Addendums being prepared for GSTR 2000/28 (standard land contracts) and GSTR 2006/2 (security deposits).

Issue no.

12.13

Issue/application

GST alternative dispute resolution pilot.

Status

Pilot continuing.

Outcome - action to date

Pilot to be finalised end November 2008.

Issue no.

13.19

Issue/application

Practice statements on application of four year time limits on collecting GST debts and refunds.

Status

Draft practice statement being revised; draft MT ruling issued for comment.

Outcome - action to date

Draft MT on section 105-55 TAA issued 29 October 2008. Draft practice statement on section 105-50 expected to issue late November 2008.

Issue no.

13.28

Issue/application

Federal Court decision in KAP Motors Pty Ltd v. Federal Commissionerof T [2008] FCA 159.

Status

Decision being implemented.

Outcome - action to date

Decision impact statement being updated to reflect the treatment of the GST refunds for income tax purposes.

Issue no.

14.8

Issue/application

Publication of EANnet GST classification decisions.

Status

System specification.

Outcome - action to date

Continuing to work through data security issues with GS1 Australia.

Issue no.

2006/6 - 5.0, 2007/11 - 3.2 and 2008/6 - 3.1

Issue/application

Application Dick Smith case.

Status

Progressing

Outcome - action to date

A draft TR together with a short discussion paper dealing with the scope of the draft TR was presented at the September 2008 Rulings Panel meeting. The draft is currently being revised in accordance with panel recommendations. The TR is due for publication on 26 November 2008.

Issue no.

2007/11 - 12.0, 2007/11 - 13.0, 2007/11 - 25 and 2008/6 - 3.3

Issue/application

Draft Taxation Ruling TR 2007/D10 - CGT consequences of earnout arrangements.

Status

Progressing

Outcome - action to date

The Rulings Panel discussed the draft TR at its 25 July 2008 meeting. The draft was considered again at the 15 August 2008 Rulings Panel meeting and at an out of session meeting of the Rulings Panel was held on 23 September 2008. A further out of session meeting will be held in mid November 2008 at which issues still outstanding are to be finalised.

Issue no.

2007/11 - 26.0 and 2008/6 - 3.4

Issue/application

Carry forward tax losses, discount capital gains and CGT event E4.

Status

Awaiting further information.

Outcome - action to date

Following discussion, members were asked if they could provide examples which illustrated practical interpretative problems. Members undertook to provide examples and these will be discussed at the November meeting.

Issue no.

2008/6 - 6.0

Issue/application

Company losses and the 'reasonable grounds' test in paragraph 166-275(c).

Status

Awaiting further information.

Outcome - action to date

Following discussion, members were asked if they could provide further examples in relation to the 'reasonable grounds' test which illustrated emerging issues. Members undertook to provide examples and these will be discussed at the November meeting.

Issue no.

2008/6 - 9.0

Issue/application

Small business CGT concessions - active asset test and the rent exclusion.

Status

Awaiting further information.

Outcome - action to date

Following discussion, a member offered to provide examples of emerging issues for possible inclusion in to the 'Advanced Guide to CGT Concessions for Small Business'. These examples will be discussed at the November meeting.

Issue no.

2008/6 - 14.0

Issue/application

Interaction of section 70-95 (trading stock where there has been a change of use) with the capital gains rules.

Status

Awaiting further information.

Outcome - action to date

Following discussion, a member offered to provide examples of emerging issues to support further discussion. These examples will be discussed at the November meeting.

Issue/application

Section 67(4A) borrowings (instalment warrants)

Status

Ongoing

Outcome - action to date

The Tax Office, Australian Prudential Regulation Authority (APRA), Treasury and superannuation industry representatives have been working together to address a number of technical regulatory issues (some of which were outlined in Taxpayer Alert 2008/5 ) concerning the new instalment warrants/borrowing provisions (subsection 67(4A) of the Superannuation Industry (Supervision) Act 1993 (SIS Act). The provisions allow a superannuation fund to borrow money to acquire an asset where the borrower's rights are limited to recourse against the asset.

The Tax Office has published guidance on several regulatory issues in Instalment warrants and super funds - questions and answers format on www.ato.gov.au This question and answer is being updated as the regulatory issues are resolved.

Issue/application

Powers of Attorney

Status

Ongoing

Outcome - action to date

Draft Taxation Ruling TR 2008/D5 Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997 (the residency ruling) has been issued.

This draft ruling explains that the residence of a superannuation fund is to be determined having regard to the location of the fund's central management and control.

In considering where management and control is located, it may be necessary to consider the effect of the grant of enduring powers of attorney. This often occurs when a member of a self-managed superannuation fund is residing outside Australia.

As the use of powers of attorney is not limited to those residing outside Australia, the Tax Office has decided against dealing with powers of attorney in the draft ruling. However, Tax Office has developed a discussion paper on the subject for consideration by the Superannuation Technical Sub-group. At the June meeting the Tax Office outlined the two positions articulated in the discussion paper and the purpose of the exception to the requirements for a fund to be an SMSF, which is contained in subsection 17A(3) of the SIS Act. It is clear that the exception recognises certain non-members can act as a trustee of a SMSF without the fund losing it status as a SMSF. It is also clear that the exception for trustees as holders of powers of attorney is not limited to trustees who have gone overseas.

Members of the NTLG Superannuation Technical Sub-group were invited to provide written comments on the paper by mid-July. One direct response was received from an NTLG sub-group member and the discussion paper has been mentioned in a recent technical article prepared for the TIA. Comments have supported the second position outlined in the discussion paper.

Internal processes have commenced to provide a formal ATO view on this issue.

Issue/application

Current Pension Liability

Status

Ongoing

Outcome - action to date

The Tax Office is considering a range of issues relevant to the exemption including the extent to which concepts used in the ITAA 1936 have been appropriately translated into the ITAA 1997 having regard to the differences in concepts used between the two Acts. The Tax Office has discussed a number of such issues with Treasury and is now preparing a discussion paper based on those issues for which an interpretive view can be expressed and identifying issues that require legislative clarification.

IFSA has submitted a discussion paper to the NTLG Superannuation Technical Sub-group. The paper highlights a number of policy issues for discussion with the sub-group, Tax Office and Treasury.

Issue/application

Total Permanent Disability (TPD)

Status

Ongoing

Outcome - action to date

The Tax Office is currently developing a discussion paper for the December 2008 NTLG Superannuation Technical Sub-group meeting.

Rulings program item

Draft Self Managed Superannuation Funds Ruling SMSFR 2008/D2

Title (abbreviated)

Self Managed Superannuation Funds: the application of subsection 66(1) of the Superannuation Industry (Supervision) Act 1993 to contributions of assets to a self managed superannuation fund by a related party of that fund.

Status

Draft published on the 2 April 2008. Final publication date expected to be February or March 2009).

Rulings program item

Draft Self Managed Superannuation Funds Ruling SMSFR 2008/D3

Title (abbreviated)

Self Managed Superannuation Funds: business real property for the purposes of the Superannuation Industry (Supervision) Act 1993.

Status

Draft published 30 April 2008. Final ruling expected to be published 28 January 2009.

Rulings program item

Draft Self Managed Superannuation Funds Ruling SMSFR 2008/D1

Title (abbreviated)

Unpaid Trust Distributions

Status

Draft published 19 March 2008. Final ruling due for publication 17 December 2008.

Rulings program item

Draft Self Managed Superannuation Funds Ruling SMSFD 2008/D1

Title (abbreviated)

Death Benefit Nominations

Status

Draft determination published 10 September 2008. Comments received 10 October 2008. Final ruling due for publication February 2009.

Rulings program item

Draft Superannuation Guarantee Ruling SGR 2008/D1

Title (abbreviated)

Superannuation guarantee: payments made to professional sportspersons.

Status

Draft ruling published 3 September 2008. Final ruling due for publication 4 March 2008.

Rulings program item

Draft Self Managed Superannuation Funds Ruling SMSFR 2008/D4

Title (abbreviated)

The meaning of 'borrow money' or 'maintain an existing borrowing of money for the purposes of section 67 of the SIS Act.

Status

Draft Ruling published 17 September 2008. Final ruling due for publication 25 March 2009.

Rulings program item

SMSFR

Title (abbreviated)

Meaning of 'in house asset' for the purposes of section 71 of the SIS Act.

Status

Draft ruling due for publication 5 November 2008.

Rulings program item

Draft Taxation Ruling TR 2008/D5

Title (abbreviated)

Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997.

Status

Final ruling due for publication 3 December 2008.

Rulings program item

Update of OTE and Salary and Wages Rulings.

Title (abbreviated)

SGR 94/1 - Earnings Base, SGR 94/4 - Ordinary Time Earnings, and SGR 94/5 - Salary or Wages to be updated.

Status

Draft ruling due for publication 5 November 2008.SGR 94/1 withdrawn with effect from 30 July 2008.

Rulings program item

Contributions Ruling

Title (abbreviated)

Income tax: what is a superannuation contribution, how is a contribution made, when is a contribution made.

Status

Draft ruling due for publication February 2009.

Issue no.

04/010307

Issue/application

Business restructures

Status

Ongoing

Outcome - action to date

The final version of the business restructure discussion paper has been prepared but not been released to industry as yet. As requested by the Commissioner, a brief to Counsel has been requested with regard to whether Division 13 or treaty Article 9 confers a 'reconstruction power', and whether Article 9 authorises the making of transfer pricing adjustments separate from Division 13. This Counsel advice is in the early stages of being prepared.

Issue no.

2/010307

Issue/application

Guarantee fees

Status

Ongoing

Outcome - action to date

A discussion paper on this topic was released to NTLG TP members in June 2008. The original time frame for accepting comments was 15 July, but given the complexity of the issue was extended to 31 August 2008. A total of 11 submissions on the discussion paper were received and comments have been collated.

To progress this issue a financial services industry experts working group is being formed. The purpose of this working group is to consider the complex issues raised by the discussion paper regarding the practices and operation of financial markets. The terms of reference for this group have been drafted but not formally signed off yet.

Issue no.

1

Issue/application

Develop appropriate information products to clarify certain definitions in the TB legislation.

Status

Progressing

Outcome - action to date

Obtain a Tax Office view so that greater clarification can be provided.

August Panel

28-29 August 2008

September Panel

25-26 September 2008

October Panels

16-17 October 2008 and 30-31 October 2008

August 2008

Issue no.

ID 1459

Issue/application

Income tax: tax treaty applications of the ships and aircraft article to leasing profits.

The ruling issued in draft form as TR 2008/D3 on 9 April 2008 (considered by the panel in March and June 2007).

The panel considered the comments received on the draft ruling including whether to:

¦ include additional material in the ruling to clarify the meaning of the undefined term 'ship'

¦ deal with issues surrounding 'ancillary activities', and

¦ include additional examples in the ruling.

The panel considered that the overall approach in the ruling was correct and suggested some minor changes.

Outcome - action to date

The ruling issued on 22 October 2008 as Taxation Ruling TR 2008/8 .

Issue no.

ID 2702

Issue/application

Income tax: deductibility of superannuation contributions.

¦ The Panel considered the following issues:

¦ The relationship between a contribution to a superannuation fund and an increase in the capital of that fund.

¦ Whether a contribution can be made by a promissory note.

¦ The circumstances in which a value shift might be treated as a contribution.

¦ The proposed date effect of the ruling.

Outcome - issue to date

The draft ruling is being amended to take into account panel discussions and is scheduled to issue on 11 February 2009.

Issue no.

ID 2755

Issue/application

Income tax: for the purposes of subsection 974-135(1) of the ITAA 1997 is the term 'obligation' intended to be confined to a legal obligation only?

The following key issues were discussed:

¦ The definition of a 'scheme' and the relationship to the definition of 'arrangement'.

¦ Whether a party who has a right or an option is under an 'effective obligation'.

¦ The practical difficulties caused by 'limited recourse loans'.

Outcome - action to date

The draft TD issued on 1 October 2008 as Draft Tax Determination TD 2008/D14 .

Issue no.

PTI 1036

Issue/application

Goods and services tax: multiparty arrangements.

The panel considered the following key issues:

¦ Whether 'consideration for a supply' can be provided for more than one supply.

¦ Where there are contractual obligations, these may suggest there is a supply for consideration.

¦ Where the facts suggest a different outcome, there is a need to look outside the contractual obligations.

Outcome - action to date

An Addendum to Goods and Services Tax Ruling GSTR 2006/9 has been drafted taking into account Panel discussions and was forwarded to the Panel for out-of-session comment.

September 2008

Issue no.

ID 2221

Issue/application

Miscellaneous tax: penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard.

The ruling issued in draft form as MT 2008/D1 on 14 May 2008 (considered by the panel in February 2008).

The Panel considered the revised ruling, including comments received on the draft, and suggested changes of a very minor nature.

Outcome - action to date

The ruling issued on 12 November 2008 as Miscellaneious Taxation Ruling MT 2008/1 .

Issue no.

ID 2222

Issue/application

Miscellaneous tax: shortfall penalties: administrative penalty for taking a position that is not reasonably arguable.

The ruling issued in draft form as MT 2008/D2 on 14 May 2008 (considered by the panel in February 2008).

The panel considered the revised ruling; including comments received on the draft, and suggested changes of a very minor nature.

Outcome - action to date

The ruling issued on 12 November 2008 as Miscellaneous Taxation Ruling MT 2008/2 .

Issue no.

ID 2223

Issue/application

Miscellaneous tax: shortfall penalties: voluntary disclosures.

The ruling issued in draft form as MT 2008/D3 on 14 May 2008 (considered by the panel in February 2008).

The panel discussed the revised ruling, including comments received on the draft and considered:

¦ Whether voluntary disclosures about a shortfall amount in relation to a taxable importation result in a reduction in penalty (a literal reading of the provisions might lead to a conclusion that it does not).

¦ The date of effect of the final ruling where an entity had been informed of a review.

Outcome - action to date

The ruling issued on 12 November 2008 as Miscellaneous Taxation Ruling MT 2008/3.

Issue no.

ID 2506

Issue/application

Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of ITAA 1997.

The ruling issued in draft form as Draft Taxation Ruling TR 2008/D5 on 4 June 2008 (considered by the panel in February 2008).

The panel considered the revised ruling including these issues raised during the comments period:

¦ The residency requirement of the active member test in subsection 295-95(3) of the ITAA 1997.

¦ Whether the revised ruling provides sufficient guidance on the trustee legislation in each state and territory.

¦ The interaction between the definition of 'Australian superannuation fund' and the requirements in the SIS Act for a fund to qualify as complying.

Outcome - action to date

The ruling is being amended to take into account the panel discussion.

The ruling is scheduled to issue on 10 December 2008.

Issue no.

ID 2713

Issue/application

Income tax: capital gains tax: consequences where a dividend forms part of the conditions of a disposal of shares.

The panel discussed:

¦ the application of the Dick Smith decision in relation to the CGT provisions and the payment of a dividend

¦ the meaning of 'agreed sum'

¦ whether the payment of a dividend can constitute a CGT event (D1 or C2)?

Outcome - action to date

The draft ruling is being amended to take into account the Panel discussion.

The draft ruling is scheduled to issue on 28 January 2009.

Issue no.

ID 2771

Issue/application

Fuel tax: entitlement under section 41-5 of the Fuel Tax Act 2006 to a fuel to tax credit in a vehicle or equipment hire arrangement.

The panel discussed the following key issues:

¦ te alignment of the terms 'vehicle', 'equipment' and 'acquire' with Fuel Tax Ruling 2007/1

¦ whether the GST concepts of 'in the course or furtherance' assist in determining when fuel is acquired

¦ the need for the ruling to provide more context and direction about the terms 'sale' and 'licence'

¦ the need for the ruling to provide principles to assist taxpayers in determining their entitlement to a fuel tax credit in their particular hire arrangement.

Outcome - action to date

The meaning of 'use' is to be dealt with in a separate fuel tax determination.

Fuel Tax Ruling FTR 2007/1 to be amended to draw on GST concepts in relation to when fuel is acquired.

The ruling is being amended to take into account the panel discussion and is scheduled to issue on 3 December 2008.

October 2008

Issue no.

ID 1203

Issue/application

Goods and services tax: general law partnerships and the margin scheme.

The ruling issued in draft form as Draft Goods and Services Tax Ruling GSTR 2008/D2 on 11 June 2008 (considered by the panel in July and October 2007).

The panel considered the revised ruling and discussed the issues raised during the comments period for the draft ruling including: