Your Association at work - 3 May 2010 update

Meeting with the Tax Office

During March 2010, representatives of Taxpayers Australia and other professional associations met with the Tax Office regarding the new notice of assessment (NOA) and statement of account (SOA) formats which have been introduced.
The Tax Office noted significant criticisms which had been directed at both the NOA and SOA which included the increased number of pages, the lay- out of both documents and the lack of consistency in the timing of issue. Various draft revisions of the NOA and SOA were made available for comment by the participants with recommendations being made as to how improvements might occur. It would be unwise to anticipate any imminent changes being implemented by the Tax Office.

Teleconference with Tax Office

In issue 19 of The Taxpayer we alerted readers to the decision of the High Court in the Bamford case, in particular the rejection of the Commissioner's arguments as to the meaning of the term ‘income of the trust estate' in s97 ITAA36. As indicated in the editorial comment in issue 19, the decision of the court in Bamford was never going to resolve all of the issues relevant to the operation of Division 6 ITAA36.
However, a teleconference between representatives of the tax and accounting associations and members of the tax counsel network within the Tax Office was implemented to identify the implications arising from the decision and the Tax Office response.
Matters discussed included the approach to be adopted where trust deeds define ‘income' differently to that in Bamford, whether deeds could be amended without adverse implications and the retention or otherwise of Practice Statement PS LA 2005/1(GA) in light of the Bamford decision.
Whilst the Tax Office did not commit to any particular course of action during the course of the discussion, it is likely that it will:

• issue a document (perhaps an impact statement) indicating their intentions when interpreting the decision of the court, and
• confirm that PS LA 2005/1(GA) will at least remain in force for the balance of the 2010 income year.

The Tax Office appeared receptive to need for public comment by, at the latest, the end of May 2010.

Submission to Treasury: Income tax treatment of instalment warrants

During March 2010 the government issued a ‘proposals paper' regarding changes to the tax law as it applies to instalment warrants. Broadly, the intended legislation would treat:

• the owner of an instalment warrant over an exchange traded security as the owner of the security, and
• a superannuation trustee who enters into a limited recourse borrowing arrangement for the purpose of purchasing an asset, as permitted under subsection 67(4A) of the SIS Act, as the owner of the asset.

Our submission generally supports the thrust of the proposed legislation, whilst raising concerns as to limitations which may arise for SMSFs as a result of a concurrent announcement by the Minister for Financial Services, Superannuation & Corporate Law, which flagged an intention to legislate to ensure that only licensed financial services providers could offer borrowings such as instalment warrants to superannuation funds. Such action would remove the ability for an SMSF to fund an instalment warrant from related party borrowings.
A copy of our submission is available here.