RECENT DEVELOPMENTS BULLETIN, JULY 2007

CORPORATIONS LAW

From 2005-06, the thresholds for large proprietary companies have been raised to $25 million revenue (previously $10m) and $12.5 million assets ($5m).   The number of employees threshold remains at 50.   Companies which possess at least two out of the three thresholds are large proprietary companies and must prepare audited financial statements unless granted exemption.   Charter and In the Black, August

TRUSTS

An informative article appears in Taxation in Australia 1 July on lost trust deeds .   When a deed is lost, the trustee’s powers will then be limited to those provided under the relevant Trustee Act.   An order may be sought from the Court to reinstate the trust deed.   Any other action is likely to be legally ineffective and dangerous.   Taxation in Australia 1 July

LAND TAX

1.   Changes have been made to section 77 of the Duties Act 2000 to ensure that, “ when a trustee acquires interests in the same land rich shareholder in different capacities , the trustee will be considered a separate person in respect of each capacity”.   Vic Revenue Office General Information Bulletin July

2.   The Victoria Court of Appeal has upheld a decision that the trustee of 11 separately constituted discretionary trusts and one unit trust connected with the one family was liable for land tax on an ‘aggregate’ basis for land owned by all the trusts.   Thompson Weekly Tax Bulletin 6/7

CAPITAL GAINS TAX

Tax Laws Amendment (2007 Measures No 3) Bill broadly allows the trustee of a resident testamentary trust to choose to be assessed on a net capital gain to the extent to which it would otherwise be included in the assessable income of a beneficiary who does not have a vested interest and indefeasible interest in it.   Taxation in Australia July .

GOODS AND SERVICES TAX (GST)

1.   The AAT reduced the administrative penalty from 25 per cent to 15 per cent for claiming $207,502 GST input tax credits to which the taxpayer was not entitled.   However, in another case, a 50 per cent penalty was imposed for false and misleading statements in the taxpayer’s BAS which would have resulted in a refund of $83,011.   WTB 6/ 7    

GOODS AND SERVICES TAX (GST) CONT’D

2.   The AAT held that GST was payable when a food supplier put together a package containing GST-free food (coffee) along with   promotional items including cups/mugs, containers, alarm clocks, radios and cricket balls.   The promotional items were branded with the food supplier’s name and were marked “free”.   The decision emphasizes the need for care when promotional items are mixed with GST-free food products .   WTB 27/7  

INCOME TAX

1.   Tax agents can discuss special arrangements for clients unable to meet tax obligations because of the effects of the drought .   WTB 6/7

2.   The Division 7A Benchmark interest rate for 2007-08 is 8.05 per cent.   WTB 6/7

3.   ATO ID 2007/144 states that a family investment company can claim a deduction for superannuation contributions made for the benefit of directors of a company which only owns passive investments, provided the directors are entitled to be paid for their services.   WTB 13/7

4.   WTB 20/7 contains a comprehensive schedule of the status of Federal and State Tax and Related Bills

5.   Taxation Ruling TR 2007/4 states, inter alia , that a resident beneficiary assessed on trust income is entitled to claim foreign tax credit in respect of foreign income included in the trust income, together with their other foreign income, provided foreign tax has been paid or deducted at source in respect of that foreign income.   WTB 20/7

6.   From 1 July 2007 , gifts of $2 or more to the Shrine of Remembrance Restoration and Development Trust are deductible from 1 July 2007 to 30 June 2009 .   WTB 27/7

7.   Taxation Ruling TR 2007/6 provides guidelines on the Commissioner’s discretion not to apply the non-commercial loss deferral rule where it would be unreasonable.   WTB 27/7

8.   Practice Statement PS LA 2007/20 explains how the ATO will apply the new discretion under Division 7A.   The Statement is available from the ATO’s website.

9.   The Taxation Laws Amendment (2007 Measures No 3) Bill removes the debit to the franking account when a deemed dividend arises under Division 7A after 30 June 2006 .   Taxation in Australia , 1 July

NOTE – The above summaries of information contained in publications and other material received by WHK Day Neilson should not be relied upon without reference to the firm as the context in which the item appears often needs to be understood and the process of summarizing may cause   important connotations to be distorted.