Showing posts from July, 2012

LAFHA & Transfer Pricing Committee Hearings

It was another busy week with The Tax Institute appearing before two separate Parliamentary Committee hearings into important tax changes.

Living Away From Home Allowance

On the morning of Thursday 26 July, Elizabeth Lucas ATI (Grant Thornton) joined me and Tax Counsel Deepti Paton ATI in appearing before the House of Representatives Standing Committee on Economics.  The Committee was holding a public hearing for its inquiry into the provisions of the Tax Laws Amendment (2012 Measures No. 4) Bill 2012, specifically around the Living Away From Home Allowance changes.

We argued that as the Bill represents a change in policy intention underpinning the LAFH rules, rather than a mere countering of exploitation of the current rules, this should be clearly stated in the Explanatory Memorandum. Also, the tax treatment of LAFH allowances should be determined either in the context of the income tax laws, or the FBT laws, but not both (as is currently the case under the Bill).  Clarification arou…

Transforming Tax Technical Decision Making Initiatives (or TTTDM for short)

I was recently invited by the Taxation Office to take part in consultation on measuring the effectiveness of their "Transforming Tax Technical Decision Making Initiatives" (which goes by the delightful acronym "TTTDM"). The objective of the TTTDM process is to bring technical decision making upfront, engaging tax technical experts much earlier in the process (particularly in regard to tax audits and private ruling requests).

This is an initiative to be applauded, but like all administrative processes, it requires some objective performance indicators to measure whether the change is working. This is where practitioners come in. At the end of an audit or finalisation of a private ruling request, practitioners receive a client feedback questionnaire. The questions will be modified to allow the Taxation Office to extract meaningful feedback to measure whether the TTTDM process has been successful.

The project is very important in ensuring that the huge cost of managin…

ATO Compliance Program and loss carry-back discussion paper

The press last week was dominated by two issues in the tax space - the ATO's 2012-13 Compliance Program and the release of Treasury's Discussion Paper on "Improving access to company losses". Both of these matters are of significant interest to members.

ATO Compliance Program addresses concerns for 2012-13

The press has been much-enamoured with discussions on which industries ended up on the ATO’s “hit-list” this year. However, aside from the headlines, there were many matters of significant interest to members in this year’s compliance program.

Examples include the ATO’s focus on:

improving timely lodgmenttax agents fulfilling their own lodgment obligations“inappropriate” outcomes in the context of trusts, division 7A, consolidation and other areas of the tax lawthe new “trusts taskforce” being set-up in the context of Project Wickenby.
The ATO’s 2012-13 compliance program represents a welcome effort by the ATO to set out areas of concern and focus for the upcoming in…

Chartered Tax Adviser – an overwhelming response

The response from members and others in the industry around the launch of the new Chartered Tax Adviser designation in May has been overwhelmingly positive. The news was covered by media outlets like the Australian Financial Review and BRW and a considerable buzz has been generated on social media, including Facebook, Twitter and LinkedIn.

Our membership team has been flooded with calls from members looking to upgrade to Chartered Tax Adviser (CTA) status, as well as from non-members expressing their interest. You would have received communication about your options regarding CTA in the mail. If you haven’t already, please ensure you respond to this as soon as possible to take advantage of the unique opportunity before the due date.

Don’t forget that in order to gain advanced standing for the new Chartered Tax Adviser Exam, qualifying applicants will need to apply before 30 September 2012.

Continuing professional development

2012 is passing by quickly, but there are still plenty of opp…

Transfer pricing and LAFHA updates

Two particular areas of focus last week in the world of tax policy and advocacy have been changes to: transfer pricing; and the living away from home allowance.

Transfer pricing

The legislation containing the transfer pricing changes announced in November last year has passed the House of Representatives, but before it is considered by the Senate, the Economics Legislation Committee will be inquiring into the Bill.

As The Tax Institute has consistently argued, tax professionals have grave concerns about the use of retrospective legislation to effect tax changes. It is our strongest view that legislative changes should not apply retrospectively except in very specific circumstances and after thorough public consultation.

Where the Government considers a deviation from this principle is warranted, it should be thoroughly consulted upon and explained, including in relation to the anticipated impact on revenue. Increasingly we are seeing the Government use revenue concerns as a reason to e…

Simplification: Is there hope on the horizon?

Just further on my report from last Friday—"Simplification: Has the trust been broken?"—the trust beneficiary reporting rules which commenced in the 2011 income year are not well understood by practitioners and will lead to unpleasantries in the future. This is particularly a problem when trustees change agents. It cannot be assumed that the previous agent has made a TFN report or that the transitional provisions related to the 2011 trust return operate to cover all beneficiaries.

This all sounds like doom and gloom. But there is hope on the horizon albeit a little further away than we might first have anticipated. It is expected that a revised time line for the Div 6 rewrite project will be released soon and it would not be surprising to find that practical reform is at least 2 years away. The problem with the reform is that it appears wedded to the notion of "following the money".

On page 20 of this month's Taxation in Australia journal you will find an artic…

Shining a light on lost tax reform

There were plenty of tax change last week: the start of a new financial year; the carbon tax; the minerals resource rent tax; income tax threshold and rate changes; and changes to small business concessions, to name but a few.

But what of the tax changes that seem almost lost in the mists of time - the announcements that have been shoved to the back of the policy cupboard? Now is a good time to take stock of some of the Government's outstanding tax promises and changes that are out of sight and mostly out of mind - these include:

Earnouts and instalment warrant changes;Review of elections in income tax;Creation of a Tax System Advisory Board to oversee ATO management;Creation of a Tax Studies Institute;Investigating a tax advice privilege;Board of Taxation's review into Tax Design Review Panel recommendations;Board of Taxation's review into the tax treatment of Islamic Finance products; and
The Tax Institute will continue to speak with the Assistant Treasurer and The Treasu…

Simplification: Has the trust been broken?

Many readers will be aware that your President is a keen student of trust law and the taxation of trusts in particular. As matters have developed since the decision of the High Court in C of T v. Bamford [2010] HCA 10 and the introduction of streaming rules for capital gains and dividends, I get the feeling that we are slipping into the abyss.

The pressure on practitioners has never been greater. The need to deal with trust resolutions before 1 July 2012 has placed extraordinary pressure on advisers to anticipate the accounting outcome of a year’s trading and shape trust distributions according to that anticipation along with the Taxation Office looking over their shoulder. There is no doubt that some practitioners will make mistakes, having been forced to abandon their more practical approach of earlier years to comply with the strict letter of the law, whatever it may be. This situation is untenable.

The very recent decision of the Full Federal Court in C of T v. Greenhatch [2012] F…

Working together during Tax Time 2012

Last week saw the continuation of the very busy workload for many members in the lead-up to 30 June, with the rush to make trustee resolutions and clients seeking last minute tax advice on end of year financial decisions. Many members will have also closed out the books on their own business as of 30 June, providing a chance to take stock of the tough income year just gone by.

And so to the beginning of the next lodgement season; as in previous years, The Tax Institute will be working closely with both members and the ATO throughout Tax Time 2012 to ensure that any problems with systems and processes are brought to the ATO's attention as soon as possible.

Division 7A

Earlier last week The Tax Institute had the opportunity to meet with members of the Board of Taxation to discuss the upcoming Division 7A review. Members may recall that the Assistant Treasurer announced the review at The Tax Institute's Annual NSW Tax Forum in May this year.

With Division 7A being such a bugbear f…