The last quarter has been filled with movements on the tax front, largely owing to changes announced in the Budget, ongoing developments in relation to previously announced changes (such as Part IVA and transfer pricing reform) and more recently announced Board of Taxation reviews into problematic areas, such as a review of Division 7A and separate entity treatment for permanent establishments.

These announcements represent a mixed bag for our members. The Budget announcements winding back many of the previously announced tax reforms following the release of the Henry review such as the introduction of the standard deduction and a cut in the company tax rate represented a disappointing step away from important tax reform measures. Conversely, the Government’s announcement of the introduction of a limited carry-back of revenue losses is broadly a step in the right direction that will assist thousands of small to medium enterprises in tough economic circumstances.

More recently, at The Tax Institute's 5th Annual Tax Forum in May, we were very pleased to have the Assistant Treasurer, the Hon David Bradbury MP announce a post-implementation review by the Board of Taxation into the impact of tax laws on deemed dividend payments by private companies (i.e. Division 7A) in his keynote address.

This announcement represented a welcome and overdue recognition of the many ongoing problems with the application of Division 7A that our members have dealt with since the introduction of the Division. In addition to the myriad other issues with the application of Division 7A provisions, the ongoing problems caused by the ATO’s ruling on unpaid present entitlements make this area of the tax law ripe for reform.

The Tax Institute congratulated the Government on this announcement. The experience that the tax profession has had with these provisions will form invaluable input to this review. We will ensure that the scope of the review will be appropriately wide ranging and will allow extensive, open, public consultation on all aspects of Division 7A.

Deepti Paton is Tax Counsel at The Tax Institute

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.