RECENT DEVELOPMENTS BULLETIN, JANUARY 2007

ACCOUNTING

1. The International Accounting Standards Board (IASB) released IFRS 8 Operating Segments which is applicable for financial years beginning on or after 2009, but earlier application is permitted. It requires an entity to adopt the “management approach” to report on the financial performance of its operating segments . Explanations are required how the segment information has been prepared. Charter February
   
   
2. The AASB has released an updated version of AASB 1048 Interpretation and Application of Standards, applicable for financial years ending on or after 31 December 2006. Charter February
   
   
3. The AASB issued ED 151 Australian Additions to and Deletions from IFRs – available on website http://www.aasb.com.au. Charter February
   
   
4. The International Accounting Standards Board (IASB) has published a discussion paper providing guidance on the meaning of fair value as it is used in IFRS and providing a consistent basis for its measurement. Charter February
   
   
5. An article in Charter February page 64 deals at length with the requirements of AASB 7 Financial Instruments: Disclosures. Much of the disclosure requirements deal with risk and how management is dealing with it. Charter February
   

SOCIAL SECURITY

The government will extend the assets test exemption period of principal home sale proceeds from 12 to 24 months for pensioners who have not been able quickly to rebuild or repair homes affected by disasters. Thomson Weekly Tax Bulletin (WTB) 12/1

SUPERANNUATION

Taxpayers who have made superannuation non-concessional contributions above $1m between 10 May 2006 and 6 December 2006 must apply to the Tax Office before 30 June 2007 to withdraw such excess contributions without penalty. WTB 5/1

CAPITAL GAINS TAX

1. The Tax Office advised that, as a general rule, any alienation of a water right would be subject to the capital gains tax provisions, although in some circumstances the proceeds may constitute ordinary income. The Tax Office website contains a range of information on this subject. WTB 12/1 .
   
   
2. The recent Tax Office pronouncements on service entities have caused some professional practitioners to consider incorporating their practices, if this is allowed. The CGT implications are covered in a front page article in CCH Tax Week (T/W) 18/1
   
   
3. The Tax Office website contains a worksheet for investors who owned shares in Alinta Ltd at the time of the merger between AGL and Alinta in October 2006, including how to record the new CGT cost base of their new shares in Alinta. WTB 5/1 and 19/1 and T/W 25/1 There is also a worksheet for the takeover of Patrick by Toll. WTB 5/1
   
   
4. The Tax Office has released a Questions and Answers Guide on the CGT consequences of some common legal transactions (eg conveyancing, administration of estates, family law transfers, compensation etc.). Also, the Tax Office has released a CGT checklist of questions for tax agents to ask their clients to clarify CGT implications of various transactions and dealings. WTB 5/1

PAY-ROLL TAX

From 1 November 2006, Victorian pay-roll tax exemptions are available to businesses which have employees who are away from work as volunteer firefighters or responding to other emergencies. WTB 12/1

INCOME TAX

1. The general interest charge for January to March 2007 has been amended to 13.37 per cent. WTB 12/1 and T/W 11/1
   
   
2. The Tax Office has proposed for discussion purposes, four selection criteria for selecting Division 7A audit cases. They are listed in WTB 25/1 , par 113.
   
   
3. Draft Taxation Ruling TR 2007/D1 provides guidelines on how the Commissioner is to use his discretion to determine that it would be unreasonable for the non-commercial loss deferral rules to be applied. WTB 25/1
   
   
4. On 3 January, the Government released for public comment, a second exposure draft Bill on the taxation of “financial arrangements”. The term, “financial arrangement”, is defined and five timing methods for determining the tax treatment of gains and losses are described. These are elective fair value, elective foreign exchange retranslation, elective hedging, accruals, and realization. “Broadly, gains from having or ceasing to have a financial arrangement are assessable, and losses are deductible.” A comprehensive article on the subject appears at par 76 of WTB 19/1 and par 105 of WTB 25/1
   
   
5. The government has announced new arrangements for the taxation of investments in forestry managed investment schemes (MISs). With effect from 1 July 2007, investors in MISs will be entitled to upfront deductibility for all expenditure, provided at least 70 per cent is expenditure directly related to developing forestry. T/W 11/1 and WTB 5/1
   
   
6. The Tax Office website contains family tax benefit (FTB) tax claim instructions for 2005-06, and both the short and long claim forms. WTB 5/1 .

NOTE – The above summaries of information contained in publications and other material received by WHK Day Neilson should not be relied upon without prior reference to the firm, as often the context in which an item appears needs to be understood.