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Status of Law reform
What's now law? What's pending? Status of Tax reform
General tax information Interpretative decisions Tax rulings Tax determinations| General tax information | |
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Capital gains tax update 2006-07 income year
The ATO have provided this link which provides an update on capital gains tax developments during the 2006/2007 financial year. |
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Continuation of reporting of employer contributions by superannuation funds
In February 2006 the Government announced that super funds must continue to report employer contributions and total contributions paid to all member accounts to ATO annually (including contributions for the financial year ending 30 June 2006). In this document the ATO outline the main changes to the reporting rules for contributions made on or after 1 July 2005, as well as information regarding requirements for funds winding up prior to 1 July 2006. |
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| Interpretative decisions |
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| The ATO have released a number of interpretative decisions since the last edition of Technically Advanced. The decisions of most relevance to financial advisers are: | |
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ATO ID 2006/269 - Deductions and Expenses: interest incurred on moneys borrowed by a sole trader to pay income tax The ATO have determined that a sole trader is entitled to a deduction for interest incurred on moneys borrowed to pay income tax (under section 8-1 of ITAA 1997). This supports Taxation Ruling IT 2582 which states the following:
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ATO ID 2006/279 - Income tax: Trust losses - fixed entitlement - beneficiaries of a deceased estate The ATO have determined that the residuary beneficiaries of a deceased estate have fixed entitlements to all of the income and capital of the estate, for the purpose of determining whether the trust constituted by the estate is a fixed trust under section 272-65 of Schedule 2F to the Tax Assessment Act 1936 (ITAA 1936). A trust is a fixed trust if persons have fixed entitlements to all of the income and capital of the trust (refer to section 272-65 of Schedule 2F to the ITAA 1936). Subsection 272-5(1) of Schedule 2F to the ITAA 1936 defines a fixed entitlement in a trust:
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ATO ID 2006/290 - Superannuation - Part IX taxation of superannuation entities: Deduction for superannuation funds for additional lump sum death benefits paid after the death of a fund member Section 279D of the ITAA 1936 allows a deduction to a superannuation payer when a death benefit payment to a dependant either directly, or via an estate, has been increased to the amount that would have been payable if taxable contributions in relation to the member had not been included in the assessable income of the fund. The Commissioner will accept the following method of calculating the notional payment reduction where the actual reduction cannot be calculated by the paying superannuation fund: Where: P is the number of days in component R that occur after 30 June 1988. R is the total number of days in the eligible service period that occur after 30 June 1983. C is the amount of the post-June 83 component of the 'actual payment' referred to in paragraph 279D(2)(b) calculated under section 27AA of the ITAA 1936 after excluding the actual, if any, insured amount for which deductions have been claimed under sections 279 or 279B of the ITAA 1936. |
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ATO ID 2006/297 - Income Tax: Deductibility of compound interest on a split loan facility A taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for compound interest incurred on funds borrowed, under a split loan facility, to acquire an income producing asset. The Commissioner, however, will exercise his discretion under Part IVA of ITAA 1936 to disallow the deduction otherwise allowable. |
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ATO ID 2006/298 - Income Tax: Deductibility of compound interest on a line of credit facility A taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for compound interest incurred on funds borrowed, under a line of credit facility, to acquire an income producing asset. |
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ATO ID 2006/303 - Income Tax: Superannuation: deductions for contributions made for eligible employees A director who holds a 50% interest in a company and is also an employee of the company, can claim a deduction under section 82AAC of the ITAA 1936 for the superannuation contributions the director made out of their own funds for other employees of the company for the 2004-05 income year. However, the director cannot claim a deduction under section 82AAC for the superannuation contributions they made for their own benefit. |
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ATO ID 2006/304 - Income Tax: Employer superannuation contributions: controlling interest A person who has a controlling interest in a company cannot claim a deduction under section 82AAC of the ITAA 1936 for superannuation contributions made by the company on behalf of eligible employees of the company for the 2004-05 income year. This is because the person did not make the contributions. |
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| Tax rulings |
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TR 2006/13 - Income tax: sale and leasebacks Sale and leaseback arrangements have a similar effect to providing finance to the original owner of the asset. Considered from this point of view, the discount rate at which the present value of the lease payments and the residual value equates to the cost of the asset to the lessor provides the notional interest rate implicit in the lease and often this rate is more attractive to the lessee than prevailing market debt interest rates. This may be possible in part because of tax deductions allowable to the purchaser as a result of the acquisition of the asset. |
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| Tax determinations |
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TD 2006/D44 - TD 2006/D44 (DRAFT ONLY) - Income tax: should a taxpayer who has incurred a tax loss or made a net capital loss for an income year retain records relevant to the ascertainment of that loss only for the record retention period prescribed under income tax law? A taxpayer who has incurred a tax loss or made a net capital loss (under section 995-1 of ITAA 1997) for an income year should, as a matter of prudence, retain records relevant to the ascertainment of that loss until the later of the following times:
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This information is of a general nature only and should not be relied upon, as it has been prepared without taking into account the objectives, financial situation or needs of any particular person. It is not intended to constitute investment, legal or taxation advice and should not be considered or relied upon as a comprehensive statement on any such matter. Before acting on the information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. Advance has endeavoured to ensure that the information contained in this communication is accurate, but to the maximum extent permitted by the law, disclaims all liability for errors or omissions. Information provided by third parties has not been independently verified and Advance is not in any way responsible for and does not guarantee the quality or accuracy of any such information.