Tax

The Federal Court of Australia has handed down a decision that is a salutary reminder to directors that, in any corporate tax planning, it is important not to miss the forest for the trees.

The Foreign Investment Review Board has today released a guidance note on the application of the tax conditions to foreign investments.

A new Bill was introduced into the Tasmanian House of Assembly on 17 August 2016. It proposes to, in respect of indirect acquisitions of land, change from a 'land-rich' model to a 'landholder' model; and provide a statutory regime for stamp duty exemptions for corporate reconstruction and consolidation.

The Treasurer has recently emphasised that the Government has the right to force a divestment of an asset if a foreign purchaser fails to comply with their obligations under the recently introduced FIRB tax conditions.

There have been recent tax changes which may encourage greater investment into the innovation sector. This may be of benefit to the higher education sector's efforts to commercialise its intellectual property and research output. The tax changes seek to encourage investment in particular types of entities that are directly involved in innovation or are investors in innovation.

Minter Ellison has created a simple resource to help organisations keep track of the major developments in the OECD's Action Plan on Base Erosion and Profit Shifting.

The 2016-17 NSW Budget was handed down yesterday. The key stamp duty outcomes are the confirmed abolition of certain business duties, mortgage duty and marketable securities duty, and the introduction of the 'surcharge purchaser duty' on foreign purchasers like those in Victoria and Queensland.

The most common and potentially costliest mistake arises from a misunderstanding that there is some inherent and inalienable entitlement to pass on GST to a customer. In short – there is no such right! This article will help you to avoid falling into a GST penalty claim.

The Australian Government enacted a Multinational Anti-Avoidance Law in December 2015, and the recent Federal Budget on 3 May 2016 proposed that a Diverted Profits Tax also be enacted. Both provisions impact upon large multinationals and their potential impact should be risk assessed by Boards.

On 3 May 2016, the Treasurer Scott Morrison delivered the 2016/17 Federal Budget. On 3 May 2016, the Treasurer Scott Morrison delivered the 2016/17 Federal Budget. The tax announcements in the Budget reflect a continuation of the major themes on taxation from the 2015/16 Budget, focussing on small business as a way to grow the economy, and on multinational tax avoidance.

The 2016-17 Federal Budget, delivered on 3 May, included a number of announcements affecting businesses operating across international jurisdictions, including a new Diverted Profits Tax and two new types of collective investment vehicles. Our team dissects those key issues and more, exploring their impact on businesses in Australia.

The recent Western Australian State Administrative Tribunal decision in the Alacer stamp duty case marks a departure from the generally accepted valuation methodologies of land and chattels (including mining tenements) for landholder duty purposes.

The Supreme Court of Victoria has handed down its first decision relating to the recently introduced 'economic entitlement' provisions of the landholder duty rules contained in the Victorian Duties Act.  The case, BPG Caulfield Village Pty Ltd v Commissioner of State Revenue provides important judicial guidance for investors and property developers dealing with Victorian land holding companies and trusts.

The Victorian 2016-17 Budget handed down on 27 April has confirmed the pre-announced significant increases to stamp duty and land tax surcharges for 'foreign purchasers' and 'absentee owners' of Victorian property. These are some of the changes that have been introduced into the Victorian Parliament under the State Taxation and Other Acts Amendment Bill 2016 (Vic).

On 22 April, the Senate Economics References Inquiry released Part II of its report on Corporate Tax Avoidance, ‘Gaming the System’. The report highlights increasing concern with the conduct of multinational companies ‘gaming the system’ through lack of transparency of their corporate tax structures and their unwillingness to be forthcoming with information about those structures not only to the Inquiry but also to the Commissioner of Taxation.

Yesterday, a number of news outlets reported on the investigation by the Australian Taxation Office of over 800 Australian clients of Mossack Fonseca, a Panamanian law firm. Given the ATO's previous offshore voluntary disclosure initiatives, taxpayers who have now come to the ATO's attention will likely face an investigation of amplified intensity.

The new 10% foreign resident capital gains tax withholding regime applies more broadly than many will expect, and both vendors and purchasers, whether Australian resident or not, will need to consider whether or not their transactions are affected.

Today, the Treasurer announced the implementation of a 'standard' set of tax-related conditions that will apply to foreign investment clearances. This announcement is significant from a foreign direct investment perspective as it likely requires additional or more detailed upfront tax structuring advice prior to submission of a FIRB application, as well as a higher level of engagement with the ATO on FIRB applications.

Late last year, the High Court handed down its decision in Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) [2015] HCA 48. The ATO has recently issued a Decision Impact Statement (DIS) setting out its view of the consequences of the High Court's decision.

On 13 November 2015 the Treasurer and Minister of Finance jointly announced that a new double tax treaty had been negotiated with Germany, replacing the 1972 agreement. The text of the new treaty evidences Australia's Treaty policy response to recommendations made by the OECD as part of the base erosion and profit shifting (BEPS) project. In this Alert we summarise the BEPS treaty proposals made by the OECD, and draw attention to Australia's response as evidenced in the new Australia/Germany Double Tax Treaty.

The High Court's decision in Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) held that, in the absence of an assessment, a liquidator is not required to retain funds from asset sale proceeds in order to meet a tax liability which could become payable as a result of a capital gain made on the sale. In doing so, the majority of the High Court affirmed the decision of the Full Federal Court and provided long awaited guidance to liquidators, receivers and administrators.

The outlook for Australia's corporate/M&A markets in 2016 is positive, with the increased deal volumes of 2015 likely to drive continued appetite for activity across most sectors in the next 12 months. Read our top 10 predictions for M&A in 2016.

The Chevron case (Chevron Australia Holdings Pty Ltd (CAHPL) v Commissioner of Taxation) concerned the transfer pricing implications of a Credit Facility Agreement between CAHPL and Chevron Funding Corporation Inc, a Delaware based, wholly owned subsidiary of CAHPL. The central issue in the case was whether interest charged by CFC to CAHPL under the Credit Facility exceeded the arm's length amount.

On 5 October 2015 the OECD issued its final paper on BEPS Action 12 Mandatory Disclosure Rules, Action 12 - 2015 Final Report (Paper). In this Alert we highlight the main issues and recommendations for taxation reform raised in the Paper.

The Australian Treasurer's BEPS Press Release on 6 October 2015 noted that the ATO is considering the costs and benefits for Australia of the mandatory disclosure rules recommended in the Paper. This is an area that may well result in reform in Australia potentially leading to further tax reporting for Australian taxpayers. For risk governance purposes, Boards should keep aware of the ATO's recommendations in relation to this Paper.

Action 4 addressed the use of excessive interest deductions on debt to related and third parties. The OECD recommended a new best practice rule to prevent base erosion and profit shifting. The recommended approach would cap interest deductions based on a fixed ratio to EBITDA. Relief would be provided to highly geared groups through a worldwide gearing test.

This is a marked difference to Australia's recently amended thin capitalisation rules, which operate based on a fixed debt/equity ratio. Any amendments to the thin capitalisation rules or interest deductibility rules will impact funding arrangements, as well as highly leveraged groups, including banking and finance providers and infrastructure entities.

This Alert focuses on Action 2 – Hybrid Mismatches, dealing with the OECD's proposals to neutralize tax benefits associated with instruments and entities which result in tax deductions in one jurisdiction and tax exemptions in another. The OECD's recommendations will lead to international action as well as domestic tax law changes, with Australia demonstrating its willingness to move early in implementing changes. For effective tax risk governance, it is important for multinational Boards to be aware of and to proactively respond to the OECD's recommendations.

On 5 October 2015, the OECD issued its final papers for each action item in the Base Erosion and Profit Shifting (BEPS) project.
The OECD's recommendations will lead to international action as well as domestic tax law changes. For effective tax risk governance, it is important for multinational Boards to be aware of and to proactively respond to the OECD's recommendations.

New tax avoidance and transparency laws have been introduced, and are proposed to be effective from 1 January 2016. These new will laws impact upon multinational groups, requiring multinationals to consider their tax risk profile and their risk governance policies.

Cameron Charlton, Matthew Glenn and Darren Sumich from our real estate team have written a comprehensive overview of the legal and regulatory frameworks governing the Australian property sector.

The immediate deduction for the cost of acquiring mining rights and mining information first used for exploration was removed for M&A acquisitions after 14 May 2013 by the Tax and Superannuation Laws Amendment (2014 Measures No.3) Act 2014 (2014 amendments). The 2014 amendments limited the availability of immediate deductions to those taxpayers carrying out mining exploration themselves, and otherwise provided that the costs of acquiring these rights would be depreciable over the shorter of its effective life or 15 years, assuming the 'first use' test was met. This had the anomalous and unintended effect of producing taxation consequences for farm-in farm-out (farm-out arrangements) and interest realignment arrangements which were previously tax neutral. On 16 September 2015, the Government effectively reinstated the tax neutral status of these arrangements with the enactment of the Tax and Superannuation Laws Amendment (2015 Measures No. 2) Act 2015 (No. 130 of 2015) ('the new law').

The interim report on corporate tax avoidance, released on 17 August 2015, made 17 recommendations in relation to evidence of tax avoidance, multilateral efforts to combat avoidance, the potential for unilateral action by Australia and the capacity of Australian Government agencies to collect corporate tax. The final report, which is due on 30 November 2015 will focus on transfer pricing with a secondary focus on excessive debt loading, P.E.s, exemptions from general purpose accounting requirements and the role of private accounting firms in tax avoidance.

The OECD has released a revised discussion draft of BEPS Action 7: Preventing the Artificial Avoidance of permanent establishment Status (Paper), which addresses Action 7 of the OECD's Base Erosion and Profit Shifting (BEPS) Action Plan.
In this Alert we highlight the major changes proposed in the Paper, and provide our comment on the potential impact of those changes.

Is New Zealand's tax regime as favourable as we think? Tax partner, Joanne Dunne looks at key cross-border issues and pitfalls to watch out for when tax planning in New Zealand.

On 3 April 2015 the OECD issued a public discussion draft, Strengthening CFC Rules (Paper).

We consider the key tax issues affecting business announced in the Budget, including further details on major announcements including multinational anti-avoidance provisions and GST on digital products and services.

The State Taxation Acts Amendment Bill 2015 (Bill) was introduced in the Victorian Parliament on Tuesday 5 May 2015 to implement the measures announced in Victoria's 2015/2016 budget for (among other things) new stamp duty and land tax surcharges for foreign purchasers and owners of land in Victoria.

Yesterday, Treasury finally released long awaited Exposure Draft legislation to specifically address the taxation treatment of earnout arrangements. While in draft and still subject to consultation (open until 21 May 2015), we now have a clear idea on how a commonly adopted transaction structure will be taxed.

GST is back on the agenda for the national conversation with the Treasurer confirming at the recent Council on Federal Financial Relations Meeting that GST will be charged on electronic imports into Australia. In this article we look at particular aspects of the approaches taken by South Africa and the EU and consider what lessons their experiences provide for Australia. We also examine whether Australia can impose an electronic services tax on non-residents that have no presence here, and how this could be enforced.

Decisions of the New Zealand courts in the Sovereign Assurance case considered the application of New Zealand’s taxation of financial arrangements (TOFA) rules to reinsurance treaties entered into by a New Zealand insurer. The New Zealand rules parallel Australia’s TOFA regime in Div 230 of the Income Tax Assessment Act 1997, and New Zealand cases therefore have relevance in Australia. This article first outlines New Zealand’s financial arrangements rules, and the facts and main holdings in Sovereign Assurance. The authors then compare New Zealand’s financial arrangements rules to the Australian TOFA rules and consider whether the result could have been different if it had been decided in Australia. The authors conclude that the case shows that even very longstanding arrangements which are commonly used by industry, such as reinsurance treaties, can lead to results under TOFA which may be unanticipated.

The final tranche of the Investment Manager Regime (IMR) concessions have at last been released for comment. These rules have been greatly anticipated and will provide much needed certainty for foreign funds and their investors once implemented.

In this article, partner Karen Payne and senior associate Vasuki Sivaloganathan outline some important tax-related tasks for your business this year. These cover things such as tax risk corporate governance policies and guides, Tax Sharing Agreements and Tax Funding Agreements, GST clauses, BAS compliance, Constitutions and Trust deeds, and FATCA registration.

This article sets out some high level issues to consider on a global M&A deal where the target is an Australian company or business or where downstream Australian subsidiaries are involved.

The Final Report of the Financial System Inquiry chaired by Mr David Murray was released on 7 December 2014. Here, we discuss key points arising from the Report and Mr Murray's speech to CEDA.

ASIC has now delivered an updated regulatory guide (new RG49) and two new class orders – one for listed bodies (CO 14/1000) and one for non-listed bodies (CO 14/1001).

A common misconception for higher education institutions is that tax is not an issue because they are charitable not-for-profits and therefore tax exempt. However, employment taxes still need to be on every institution's radar. PAYG tax withholding, fringe benefits tax, payroll tax and superannuation are relevant to all employers, even charitable ones, and the penalties for breaches can be severe.

On 16 September 2014 the OECD issued its paper on BEPS Action 15: Developing a Multilateral Instrument to Modify Bilateral Tax Treaties. This Alert outlines the OECD's proposal to develop a multilateral treaty as part of the OECD's response to BEPS issues.

On 16 September 2014, the OECD issued its Hybrid Recommendations to ensure the coherence of corporate income taxation at the international level in a document entitled, 'Neutralising the Effects of Hybrid Mismatch Arrangements' (Hybrid Recommendations). The Hybrid Recommendations deal with Action 2 of the OECD's wider, 15 point, Base Erosion and Profit Shifting Action Plan.

On 16 September 2014 the OECD issued its paper on BEPS Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances. This Alert summarises the main BEPS issues identified by the OECD and the way forward for taxation reform identified in the OECD paper.

On 16 September 2014 the OECD released an interim report on countering harmful tax practices in connection with Action 5 of its Action Plan on Base Erosion and Profit Shifting. This Alert summarises the key issues highlighted in the OECD's report.

On 16 September 2014 the OECD issued its paper on BEPS Action 1: Addressing the Tax Challenges of the Digital Economy. This Alert summarises the main BEPS issues identified by the OECD and the way forward for taxation reform identified in the OECD paper.

On 8 May this year, the federal government issued exposure draft legislation proposing changes to the thin capitalisation rules. When passed, these changes can result in higher taxes for multinationals if not managed appropriately. In this article, we summarise the current thin capitalisation rules and the proposed changes.

Foreign investors in Australian entities may be unaware that in some circumstances the Australian Taxation Office can assess them for Australian tax on gains made from the sale of their investment. This bilingual article describes in general terms when such Australian tax could arise, and, if an assessment does arise to a foreign investor - how to deal with it.

The deadline for employers to report share-based awards is approaching. The ATO is increasing its focus on ESS reporting compliance so employers should be aware of some of the traps, particularly if awards have been granted to internationally mobile employees.

The Full Federal Court decision in Hunger Project Australia has confirmed that an entity can be a 'public benevolent institution' without directly providing relief from poverty, sickness, disability, destitution, helplessness or other distress.

Significant changes to the current New South Wales stamp duty regime are expected following the introduction of the State Revenue Legislation Further Amendment Bill 2014 into the New South Wales Parliament on 29 May 2014 and the release of the New South Wales Budget on 17 June 2014.

The Full Federal Court decision in Commissioner of Taxation v Resource Capital Fund III LP1 (the RCF case) illustrates the challenge in applying domestic laws to reconcile cross-border mismatches in taxing hybrid entities. Partner Karen Payne discusses the precise nature of the hybrid mismatch challenge in the first edition of the Australian Taxation Law Bulletin.

The Australian Government released its 2014-15 Budget on 13 May. In amongst the broad discussions taking place nationally, Partners Karen Payne and Adrian Varrasso have highlighted a number of issues that will affect corporate Australia.

On 14 March 2014 the OECD issued a Discussion Draft Public Discussion Draft BEPS Action 6: Preventing the Granting of Treaty Benefits in inappropriate circumstances (Discussion Draft). Responses were due by 9 April 2014.

On 28 April 2014, Australia entered into an Intergovernmental Agreement with the United States of America to improve international tax compliance and implement the US Foreign Account Tax Compliance Act. Exposure draft legislation has also been released by the Australian Treasury which will give domestic effect to our obligations under the IGA.

In addition to the 191 Minter Ellison lawyers named in 2014 Best Lawyers Australia list, 23 of our partners have been singled out for an additional accolade – awarded the title of "Lawyer of the Year".

On 24 March 2014 the OECD issued a Discussion Draft on BEPS Action 1: Address the Tax Challenges of the Digital Economy as part of the OECD's 15 point Base Erosion and Profit Shifting (BEPS) Action Plan. Responses were due by 14 April 2014. In this Alert we consider the main issues and options for taxation reform raised in the Discussion Draft.

The federal government has proposed changes which will alter the requirements placed on higher education bodies, potentially impacting their tax status. The proposed exposure draft legislation includes restating the 'in Australia' special condition required to be met by income tax exempt entities and deductible gift recipients. These proposals need careful consideration by higher education entities

A Federal Court decision made the headlines recently, raising concerns as to how student accommodation should be treated for GST purposes. While in other news, a broader range of government funding received by public Australian universities may not be subject to GST thanks to changes to the appropriations exemption. With GST firmly in the spotlight, we look at the implications of both developments on the higher education sector.

To assist you in managing the tax risks of your organisation, we have created a quarterly update to discuss the issues that you may wish to raise with your Board during each reporting period, starting with Q3.

On 3 April 2014, the Full Federal Court issued its judgment in Commissioner of Taxation v Resource Capital Fund III LP overturning the Federal Court's judgment. This case is significant because the main issue it considers relates to the treatment of a partnership that is tax transparent in one jurisdiction and taxable in another, and the application of a double tax treaty.

The Tax Agent Services Act 2009 (TASA) has been amended, heralding significant changes to the way financial planners are regulated. Financial planners will need to understand the boundaries between providing purely financial product advice and a tax (financial) advice service, and to determine whether they need to register with the Tax Practitioners Board (TPB) as Registered (Tax) Financial Advisers from 1 July 2014.

The government has released a consultation paper on a proposed Exploration Development Incentive allowing junior exploration companies to renounce their exploration losses and 'distribute' this 'benefit' to their members in the form of a refundable tax offset - an Exploration Credit. The Incentive is intended to apply to expenditure made after 1 July 2014.

The federal government has released exposure draft legislation which restates the 'in Australia' special condition. This special condition must be met by entities accessing tax concessions such as income tax exemption and by entities which have deductible gift recipient status.

Last Friday, Justice Logan of the Federal Court handed down the much anticipated decision in Australian Building Systems Pty Ltd v Commissioner of Taxation [2014] FCA 116.

In the recent decision of Bondi Beachside Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCA 6 the New South Wales Supreme Court of Appeal has allowed the taxpayer's appeal against the earlier decision which in part affirmed a mortgage duty assessment issued under the Duties Act 1997 (NSW). If you have paid duty on the extension of a deferred note purchase financing arrangement, you may be entitled to a refund of the duty.

A further tranche of tax legislation to exempt 'IMR foreign funds' from Australian income tax has been released for public comment. Once enacted, this legislation will introduce an exemption from Australian tax for 'widely held' foreign funds and their investors. The IMR regime provides greater certainty to IMR foreign funds and investors around their Australian tax position. However, the key to accessing this certainty is in understanding and confirming that the IMR foreign fund is indeed eligible.

The Minister for Social Services, Kevin Andrews, confirmed that the federal government will move to abolish the Australian Charities and Not-for-profits Commission (ACNC), and replace it with a Centre of Excellence focused on education for not-for-profits, charitable bodies and for the community.

From January to December 2013, the ATO/Commonwealth achieved an approximately 75% success rate in tax litigation in the Federal Court, Full Federal Court and the High Court of Australia.

On 14 December 2013 the Assistant Treasurer announced the government's position in relation to the remaining 64 announced but unlegislated tax and superannuation reforms. Of the 64 measures that were subject to further consideration, the government has now announced that 16 measures will proceed and 48 measures will not proceed. Full details of the announcement are summarised in this Alert.

The Board of Taxation has released a Discussion Paper as part of its review and consultation on the arm’s length debt test (ALDT) in the thin capitalisation rules. The ALDT is one of three alternatives available to taxpayers to determine the maximum level of debt on which interest deductions may be claimed and is an alternative to the safe harbour threshold in the thin capitalisation rules.

A recent case has underlined the importance of a regular review of founding documents to ensure that those documents continue to meet your not for profit organisation's objectives and accurately reflect the activities that the organisation is carrying out.

On 7 November 2013, the Australian Taxation Office issued Practice Statement Law Administration 2013/5, outlining its policy on the collection of group tax liabilities from head companies of consolidated groups, subsidiary members and entities that have left the consolidated group.

On 6 November 2013 the government announced its position on 92 previously announced but unlegislated tax and superannuation measures. The announcement provides a timetable and process to implement (or abandon) previously announced reforms and will provide greater certainty for the business sector on the fate of some important tax measures.

The Full Federal Court handed down its appeal decision in MBI Properties Pty Limited v Commissioner of Taxation [2013] FCAFC 112 on 18 October 2013, regarding the GST consequences arising from the sale of leased residential property as a going concern.

A series of announcements on taxation have tightened the rules for multinational companies who second employees to Chinese affiliates. Christian Pellone argues that the announcement is indicative of a general policy shift towards increased tax scrutiny of foreign MNCs operating in China.

On Friday 18 October the Full Federal Court handed down the latest decision (MBI Properties Pty Limited v Commissioner of Taxation [2013] FCAFC 112) in the long running GST saga associated with the South Steyne Development at Manly Beach. In a surprise move, the court allowed the taxpayer's appeal by accepting that the application of the going concern concession to the sale of a leased residential building did not trigger a Division 135 adjustment for the purchaser.

The government has released a discussion paper concerning the employee share scheme administrative and tax arrangements for start-up companies. This is the first major tax policy announcement for the ESS since the 2009 reforms and reflects the government's commitment to growing a robust start-up sector through a review of the regulatory regime.

The Australian Taxation Office has emphasised for many years the role of directors in managing tax risks and ensuring compliance with tax laws. A number of recent developments reiterate that, and provide further evidence of the need for directors to be involved in tax matters. This article appeared in the July 2013 edition of AICD, VICdirector.

On 19 July 2013 the Organisation for Economic Cooperation and Development released its much anticipated Action Plan on Base Erosion and Profit Shifting. The BEPS Action Plan sets out the actions required to counteract the methods of base erosion and profit shifting used by multinational companies, initially identified in its February 2013 report Addressing Base Erosion and Profit Shifting.

The Australian Taxation Office has issued its annual compliance program, 'Compliance in focus 2013-14', setting out the areas it will focus on in its investigations and reviews throughout the coming year. The compliance program can help you determine the likelihood of being subject to scrutiny by the Australian Taxation Office.

The Australian Government has announced significant changes to Australia's thin capitalisation rules which will affect both inbound and outbound investment. Significant changes are also proposed to deny interest deductions for some outbound investment. These changes will significantly impact multinational entities in the banking, private equity, resources and infrastructure sectors, leaving them with little time to prepare.

Despite the recent political chaos and leadership crisis, the Australian Parliament has passed significant reforms to Australia's GAAR (Part IVA of the Income Tax Assessment Act 1936) on 25 June 2013 - Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013. We consider the GAAR amendments will have a material impact on how boards and their risk committees should best manage tax risk (especially the potential application of the anti-avoidance rules) for material transactions.

Employers should be aware that the due date for reporting employee share scheme interests is fast approaching. Where required by the tax laws, ESS Statements must be given to employees by 14 July and ESS Annual Reports must be given to the Australian Taxation Office by 14 August.

Hamish Wallace (Special Counsel, Tax) has contributed the Australian chapter of the first edition of Global Legal Insights – Corporate Tax. The guide, published by Global Legal Group, highlights current market and industry trends, tax developments and reforms over the last 12 months in 27 countries.

The State Revenue Legislation Amendment Bill 2013 introduced into the New South Wales Parliament on 29 May 2013, proposes to amend the Duties Act 1997 (NSW) to clarify the position that duty will be imposed on the transfer of a mining tenement or land subject to a mining tenement. The amendments proposed by the Bill will provide that the rights under all mining tenements are interests in land for stamp duty purposes.

A further tranche of tax legislation to exempt eligible foreign funds ("IMR foreign funds") from Australian income tax has been released for public comment. Karen Payne's article, published in the May issue of Bloomberg BNA's Tax Planning International Review, assesses the proposals. 

The State Revenue Legislation Amendment Bill 2013 inserts new provisions into the Duties Act 1997 (NSW) which are designed to ensure that certain transactions involving nominations under options to purchase land are subject to duty in the same way as transfers of options to purchase land. The new provisions will have a retrospective effect and apply to nominations made on or after 1 July 2013 under existing option agreements.

Minter Ellison is at the forefront of developments in the complex, dynamic and highly regulated financial services sector. Our financial services team members are active participants in key services industry associations, contributing to the policy debate and providing input on regulatory change. Here, some of our leading practitioners analyse and comment on the latest tranche of regulations, proposed reforms and reports that are laying the foundations for a stronger financial services sector in Australia.

The announcement of the Australian Federal Budget on 14 May 2013 by the Treasurer, Wayne Swan did not contain any new changes to the taxation of superannuation, but did confirm a number of changes announced before the Budget (and in last year's Budget), ending pre-Budget speculation. There have been many recent announcements and reforms in this area. A 'state of play' summary has been prepared to provide a snap-shot of the current rules for taxing superannuation contributions.

In this Budget brief, we have discussed the government's Budget proposals as they impact on relevant industry sectors, and have included details of the Opposition's views (if any) on each proposal.

In this Budget brief, we have discussed the government's Budget proposals as they impact on the mining, energy & resources industry and investors in that industry, and have included details of the Coalition's views (if any) on each proposal.

On 18 April 2013, Treasury issued exposure draft legislation, an explanatory memorandum and draft designation rules to provide a tax loss incentive for nationally significant designated infrastructure projects. To access the tax loss incentive the project vehicle must meet certain requirements to be a designated infrastructure project entity, and the project must be determined a designated infrastructure project by the Infrastructure Coordinator.

The proposed statutory codification of the definition of 'charity' and the inclusion of a statutory 'public benefit' test may impact professional organisations currently endorsed as charities. Clients within these entities should consider their current constitutional documents in light of the proposed changes.

On 8 April 2013, the federal government issued the Charities Bill 2013 and the Charities (Consequential Amendments and Transitional Provisions) Bill 2013, introducing a statutory definition of 'charity' and 'charitable purpose' for the purposes of all Commonwealth legislation.

A further tranche of tax legislation to exempt eligible foreign funds from Australian income tax has been released for public comment. This legislation (once enacted) will extend the Investment Manager Regime (IMR) exemption, to apply from 1 July 2011 (for the 2011- 2012 and later income years).

The Australian Taxation Office has indicated it will withdraw its controversial draft taxation ruling for stapled groups - TR 2012/D5 'Income tax: debt and equity interests: when is a public unit trust in a stapled group a connected entity of a company for the purposes of paragraph 974-80(1)(b) of the Income Tax Assessment Act 1997'.

This is a discussion on the purpose of the Foreign Account Tax Compliance Act and it's potential impact on foreign financial institutions. John Mosley and David Pratley analyse the issues for US and European markets, and highlight the potential risks and conflicts with Australian law.

On 1 March 2012 the Government announced that it was considering amendments to counter perceived weaknesses with Part IVA of the Income Tax Assessment Act 1936 (Cth) (ITAA36), Australia's general anti-avoidance rules (GAAR). This followed high profile losses by the Australian Taxation Office in the Courts.  On 16 November 2012, the detail of the proposed reform to the GAAR was announced. On Wednesday the Government introduced into parliament the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013 (Part IVA Bill) which follows the Exposure Draft released on 16 November last year.

The Federal Court has just handed down the latest decision (MBI Properties Pty Ltd v Commissioner of Taxation [2013] FCA 56) about the GST treatment of the supply of an apartment within the Sebel Manly Beach development, which has been the subject of a series of cases more widely known as South Steyne. This decision illustrates the need to carefully consider the risks before applying the popular GST going concern concession.

An outline all of the requirements that must be satisfied by a trust in order to qualify as an MIT and be eligible for the MIT tax concessions.

On 17 December 2012 Treasury released a Consultation Paper on minimum governance standards for entities registered with the Australian Charities and Not-for-profits Commission (ACNC), as well as draft Regulations and an Explanatory Memorandum on financial reporting obligations and annual information statements for such entities. The ACNC is also going to be offering direct consultation at road show events to explain these proposals, and the timing and venue of those events will be outlined in due course on the ACNC website. Written submissions on both proposals must be made by 15 February 2013.

The charity and not-for-profit sector officially has a new regulator, as the Australian Charities and Not-for-profits Commission Act 2012 and the Australian Charities and Not-for-profits Commission (Consequential and Transitional) Act 2012 both received Royal Assent on Monday 3 December 2012.

On 16 November 2012 the Assistant Treasurer issued an Exposure Draft and Explanatory Memorandum proposing changes to Australia's general anti-avoidance rule (GAAR). In this alert we discuss the concerns that are being addressed by the proposed reform, outline the proposals made in the Exposure Draft and EM and their practical implications

Legislation to establish the Australian Charities and Not-for-Profits Commission has today been passed by the Senate with 34 government amendments, which have now been referred back to the House of Representatives for concurrence.

The Inspector-General of Taxation (IGT), Mr Ali Noroozi, recently announced his new work program (for 2012/2013 and beyond) for improving tax administration in Australia. This follows an extensive community consultation process.

The Australian Taxation Office has issued its compliance program for 2012-13. The compliance program is produced annually and sets out the areas the Australian Taxation Office will focus on in the year ahead.

New tax rules for living away from home (LAFH) benefits, including living away from home allowances (LAFHA), received Royal Assent last week, and apply from Monday 1 October 2012. The Australian Taxation Office has released a draft Taxation Determination TD 2012/D8 which sets out how it will determine the 'reasonable' gross cost of food for employees on assignment and transitional rules for the FBT year ended 31 March 2013.

The High Court has issued its much anticipated judgment as to whether Qantas is liable to pay GST on forfeited fares and on fares where the customer failed to claim an available refund for an unused ticket.

Based on the changes implemented on 1 March 2012, this discussion looks at the Part IVA scheme and potential tax benefit resulting from its creation, including an analysis of the so-called 'do nothing' alternative postulate.

On 16 July 2009, the Australian and New Zealand Governments entered into the Trans-Tasman Retirement Savings Portability Arrangement (Arrangement).

The Arrangement was stated as having the intention of enhancing a seamless trans-Tasman labour market by providing the ability for retirement savings to be transferred between an Australian complying superannuation fund and a New Zealand KiwiSaver scheme, with minimal compliance and administration costs. The Arrangement is subject to a number of restrictions, as outlined in the Arrangement document.

The Australian Taxation Office (ATO) has released two draft Tax Determinations relevant to the sale of assets in the course of a receivership. These express the view that receivers have an obligation to retain sufficient funds from the gross sales proceeds to pay tax 'which is or will become due' on such asset sales. This applies even if no tax assessment has yet been issued. This obligation is said to 'take precedence' over obligations to secured creditors.

The Assistant Treasurer has announced that because the legislation to establish the Australian Charities and Not-for-Profits Commission (ACNC) had not been passed in the house, and the Senate will not resume until 9 October, the start date of the ACNC will no longer be 1 October 2012

This morning, the Senate passed the Bill containing the proposed living-away-from-home (LAFH) tax changes without further amendment. It is expected the Bill will receive Royal Assent in coming days, so the new tax rules for LAFH concessions should apply on schedule, from 1 October 2012.

Last week's State Budget included the announcement of several duty and royalty changes. Also last week the Queensland Government passed the Fiscal Repair Amendment Act 2012 which will apply duty to direct and indirect transfers of interests in resource exploration tenements, increase the top marginal duty rate and expand the definition of 'land'.

The Australian Government recently released draft legislation which proposes to restrict the ability of taxpayers to claim refunds of overpaid GST. This will be particularly important for anyone considering undertaking a residential development or selling land under the margin scheme, as it will mean that any overpayment of GST as a result of incorrectly applying the margin scheme will potentially be lost forever (whereas under the current rules, the supplier at least has an opportunity to seek a refund of that overpaid GST).

You should be aware of the risk of incorrectly calculating the margin GST payable on each lot when involved in developments with a residential component. This alert explains the proposed changes.

On 23 August 2012, the Government introduced into the House of Representatives the Australian Charities and Not-For-Profits Commission Bill 2012 to establish the Australian Charities and Not-For-Profits Commission (ACNC) as a regulator of charities registered with it from 1 October 2012. The ACNC's regulatory powers are expected to be expanded over time to regulate other not-for-profit entities.

To be entitled to income tax exemption (ITE) and deductible gift recipient (DGR) status, most entities (other than specifically endorsed DGRs and ITE entities prescribed as exempt under regulations) need to satisfy special 'in Australia' conditions - including having a physical presence, making governing decisions and expending certain funds in Australia, and being a not-for-profit entity.

The Australian Government on 21 August 2012 introduced amendments to its proposed reform of the LAFHA tax concessions. This new round of amendments flows from the public consultation by the House of Representatives Standing Committee on Economics. The main changes are to keep LAFHA within the FBT regime, and extend the 'fly-in' concessions to 'drive-in' arrangements and employees who do not maintain a home in Australia.

On Wednesday 15 August 2012 the House of Representatives Standing Committee on Economics released a report on draft legislation to establish the Australian Charities and Not-for-Profits Commission (ACNC). The report recommends that the draft legislation be passed subject to a number of amendments being made. Therefore, at this stage, the ACNC is expected to commence operations on 1 October 2012.

The Government today released for public comment an exposure draft of the Personal Liability for Corporate Fault Reform Bill 2012 (Liability Reform Bill). This release is the third and final step in the Government's response to the Directors' Liability Reform Project, a Council of Australian Governments (COAG) initiative to harmonise the approach of all Australian jurisdictions to personal criminal liability for corporate fault. The COAG initiative included establishing a set of principles to apply across legislation when considering provisions which provide for personal liability for corporate fault.

A draft ruling issued by the  Australian Taxation Office ('Income tax: debt and equity interests: when is a public unit trust in a stapled group a connected entity of a company for the purposes of paragraph 974-80(1)(b) of the Income Tax Assessment Act 1997) will significantly impact the tax consequences for past and present capital raisings for stapled groups

On 29 June 2012 legislation that amends the director penalty regime in the Taxation Administration Act 1953 (Cth) received royal assent. The amendments include extending the regime to cover the superannuation guarantee charge, changing the way the ATO can collect tax under the regime and changes to the available defences among others.

On 27 June 2012, the Australian Taxation Office released its final tax ruling, setting out the circumstances in which the ATO considers that a franked distribution may be made by a company. The position adopted is broadly consistent with its previous draft ruling, with additional clarification on the areas of uncertainty raised during the consultation process.

The State Taxation Acts Amendment Act 2012 received Royal Assent on 27 June 2012 and makes changes to the Duties Act 2000.

The new living away from home allowance (LAFHA) tax legislation was introduced into Parliament on 28 June 2012. While the legislation is generally consistent with previous announcements, there are several important changes that taxpayers need to be aware of.

In this Australian Tax Brief we summarise the key aspects of the FIN48 and IMR exemptions, and analyse some of the core requirements – including what is an IMR foreign fund and what IMR income is not subject to Australian tax.

In recent years the Australian Taxation Office (ATO) has increased its level of audit and review activity. It has also introduced new tax risk reporting requirements. The ATO have for many years emphasised the role of the Board in managing tax risks. Now is an opportune time for your Board to review the existing corporate governance policies to ensure that the management of tax risk is effective. Our Tax Brief provides some guidance on what the ATO expect from the Board and what actions the Board can take to appropriately manage tax risks.

On 1 October 2012 the Australian Charities and Not-for-Profit Commission will assume responsibility for determining charitable status from the Australian Taxation Office. We summarise the key findings of the progress report issued by the ACNC Implementation Taskforce arising from the community consultations and public submissions.

In prior years trustees had until 31 August to complete distribution resolutions for the year ended 30 June. In the wake of recent court decisions the Australian Taxation Office (ATO) has scrapped this concession. This year resolutions must be completed by 30 June, which is less than 14 business days time!

In the NSW Budget handed down today, Treasurer Mr Mike Baird announced a range of revenue measures that are expected to increase state revenue by $392 million in the four years to 2015-16. He also announced that the planned abolition of certain duties had been deferred for 12 months arising from a steep fall in GST revenue.

In May 2011, the Administrative Appeals Tribunal (AAT) decided in Re The Retirement Village Company and FCT [2011] AATA 298, that a retirement village operator could claim a tax deduction for exit payments (which included a 'capital appreciation sharing payment') made under resident contracts (and which had been acquired as part of the acquisition of the retirement village).

The Australian Taxation Office (ATO) has now issued a Decision Impact Statement on the AAT decision, which broadly seeks to limit the application of the AAT decision to the particular facts.

Given the ATO does not appear to accept that the AAT decision has precedential value, we recommend the ATO seek a test case to provide the retirement village sector with some certainty on these important tax and commercial issues.

A new Division 815 – Cross-border transfer pricing is to be inserted into the Income Tax Assessment Act 1997 (ITAA 1997). The new Division :

1. ensures that the treaty transfer pricing rules are able to be applied independently of existing 'domestic' transfer pricing rules and should provide a separate assessment authority. An express reference to the treaty transfer pricing rules is to be included in the ITAA 1997; and
2. requires the arm’s length principle to be interpreted as consistently as possible with relevant guidance issued by the Organisation for Economic Cooperation and Development (OECD) - by providing direct access to OECD guidance material when interpreting Australia's enacted transfer pricing rules; and
3. clarifies how the transfer pricing rules will interact with Australia's thin capitalisation rules.

On 8 May, 2012 the Australian Federal Treasurer announced the Federal Budget for the year commencing 1 July 2012, including a number of tax changes to living away from home allowances, employment termination payments and the tax treatment of 'concessional' (deductible) superannuation contributions. This Tax Brief sets out a summary of the main tax changes for executives, expatriates and employers.

Treasurer Wayne Swan handed down the 2012 – 2013 Federal Budget on 8 May 2012. Find out what it means for corporate Australia, executives and employees as well as resident and non resident investors.

On 18 April the government released for public comment exposure draft legislation for the Tax Laws Amendment (2012 Measures No. 2) Bill 2012: Companies' non-compliance with PAYG withholding and superannuation guarantee obligations. The draft legislation proposes amendments to the current regime in the Taxation Administration Act 1953 (Cth) which imposes personal liability on directors for certain unpaid company tax in some circumstances. Those existing rules are known as the director penalty regime.

The Government has released for public comment exposure draft legislation, the Tax Laws Amendment (2012 Measures 3 No. 4) Bill 2012: tax exempt body "in Australia" requirements. Its purpose is to restate and standardise the special conditions for deductible gift recipient (DGR) entities in Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) andincome tax exempt (ITE) entities in Div 50 of the ITAA 1997.  The proposed legislation also introduces a standardised definition of the term 'not-for-profit' that will apply for the purposes of all federal tax legislation and also for legislation being drafted regarding registration of entities as a charity with the Australian Charities and Not-for-profits Commission.

As part of the 2011-2012 State Budget, the Victorian Treasurer announced that Victoria will adopt a 'landholder' duty model to replace the 'land rich' duty model from 1 July 2012. The Victorian State Revenue Office has now released an Exposure Draft of the Duties Amendment (Landholder) Bill 2012 (Bill) which contains the proposed landholder duty model. This Alert sets out the key stamp duty changes to be made by the Bill if it is enacted in its current form.

The Australian Taxation Office (ATO) has issued a draft ruling (Taxation Ruling 2012/D1) setting out its view on what is 'income of the trust estate' under Division 6 of Part III of the Income Tax Assessment Act 1936 (Cth) and related provisions. The ATO ruling suggests that 'notional income amounts' (such as franking credits, some TOFA gains and losses and attributed foreign income) are excluded in determining what is the income of the trust in any income year. This seemingly 'new requirement' creates more uncertainty than it resolves, in particular because it would require that any accretion or depletion of trust property (including unrealised amounts) should be characterised and attributed to either income or capital of the trust. Based on the ATO views, trustees may need to revisit their trust deed definition of 'income of the trust' and in particular how the deed deals with notional amounts of income and expense to ensure an appropriate allocation of the taxable income of the trust. The draft ruling, when finalised, will apply both before and after the date of issue (that is, in practice it will have retrospective operation). Submissions close on 11 May, 2012.

The ATO has recently released two Interpretative Decisions, ATO ID 2012/21 and ATO ID 2012/22 (ATO IDs) regarding the GST treatment of fees and charges payable to government agencies. They illustrate how various taxes, fees and charges that were previously exempt from GST may become subject to GST following the new 'principle-based' rules.

On 29 March 2012 the High Court unanimously upheld the decision of the Commissioner of Taxation to disallow an application for endorsement of the 'Kalos Metron Charitable Trust' as a charitable trust fund. The decision provides High Court authority regarding the general duties of trustees for the proper administration of charitable trusts both under general law and for the purpose of meeting the special condition in section 50-60 of the ITAA 1997 for income tax exemption.

The government has announced that it will extend the start date for implementation of the tax reform measure Better Targeting for Not-For-Profit Tax Concessions to 1 July 2012. The legislation was originally intended to apply from 1 July 2011.  The reason given for the extension is to satisfy concerns from the not-for-profit (NFP) sector about the need for further consultation.

The State Revenue Legislation Amendment Bill 2012, introduced into the New South Wales Parliament on 28 March 2012, makes significant changes to the corporate reconstruction exemption (CRE) from stamp duty in New South Wales with effect from 1 July 2012.  In general, the CRE exempts transfers of property between entities of a corporate group from stamp duty, provided certain requirements are met.

The new provisions (now incorporated into the Duties Act 1997 (NSW) remove some existing requirements, potentially expanding the application of the CRE. However, they also impose additional requirements relating to the avoidance of duty and other taxes.

On 21 March 2012 Treasury issued final Regulations that will apply from 1 July 2012 to businesses in the building and construction industry. The Regulations listed as Taxation Administration Amendment Regulation 2012 (No 1) are applicable for the purposes of Division 405 of the Taxation Administration Act 1953 (Cth) and will require those businesses to report to the Australian Taxation Office payments made to all? contractors that provide building and construction services.

Proposed reforms to Division 269 of the Taxation Administration Act 1953 (Cth) (TAA) could extend the potential personal liability on directors to include a company's failure to pay the superannuation guarantee charge, and in some instances, to affect the ability for directors and/or their associates (such as family members) to claim tax credits under the PAYG rules where a company had failed to pay the relevant taxes.

The proposed reforms also involve the removal of the director penalty notice requirement for the Australian Taxation Office under Division 269, instead imposing an automatic director liability if the company had not paid the relevant tax within three months of its due date.

These reforms are still being considered by the government, and have been controversial – particularly the removal of the director penalty notice and the potential for tax impacts upon associates of directors.

A second exposure draft of legislation to introduce an Investment Manager Regime (IMR) to Australia was released by the Minister for Financial Services and Superannuation, the Hon Bill Shorten MP on 7 March 2012. In this Australian Tax Brief we summarise the key objectives of the IMR and analyse some of the core requirements – including what is an IMR foreign fund and what IMR income is not subject to Australian tax.

The Australian Government has announced that it will defer the start date for the Australian Charities and Not-for-profits Commission (ACNC) to 1 October 2012. Originally, it was intended to be 1 July 2012.

The Australian Government has released a consultation paper seeking public views on the proposal to introduce uniform national fundraising regulation.  Under the proposed regime the regulated activity and regulated entity would be broadly defined, and specific exemptions would apply to limit fundraising regulation to those activities and entities that should be regulated for policy reasons.  In this Alert, we discuss the key features of the national regulatory framework and other important issues tabled in the consultation paper.

Immediately prior to Christmas 2011, Treasury issued draft Regulations that are proposed to apply from 1 July 2012 to businesses in the building and construction industry. The draft Regulations are applicable for the purposes of Division 405 of the Taxation Administration Act 1953 (Cth) and will require those businesses to report to the Australian Taxation Office payments made to contractors that provide building and construction services. Submissions on the draft Regulations are due by 20 January 2012.

The Australian Taxation Office released on 21 December draft taxation ruling TR 2011/D8 which sets out the circumstances in which the ATO considers a distribution, made by a company in accordance with section 254T of the Corporations Act and the company's constitution, may be franked.

REFORM AGENDA: All not-for-profit and charitable organisations will be affected by the reform program announced by the Australian Government.

Minter Ellison has made a submission to Treasury on the Treasury Consultation Paper 'A Definition of Charity'. The submission includes some general comments on the proposed reforms and addresses a number of specific questions raised by Treasury in its consultation paper.

The Victorian Parliament has introduced a significant change to the timing of stamp duty payments which may have cash-flow consequences for purchasers and developers of land in Victoria, and for acquirers of interests in Victorian landholding entities and the landholding entities themselves.

The Australian government has now announced (16 December 2011) the third and final element of an Australian investment manager regime (IMR).  The IMR will include a tax exemption for widely held foreign funds making portfolio investments in Australian securities (including listed securities) and so will provide greater certainty for FIN 48 disclosure purposes.  The government's proposed reforms will be backdated to 1 July 2011. 

The government also expressed its support for most of the recommendations made by the Board of Taxation in its report Review of an Investment Manager Regime as it relates to foreign managed funds.  We outline the recommendations and the other features of the proposed IMR regime in this alert.

The announcement means income, gains or losses, which have an Australian source, from portfolio interests or financial arrangements of a foreign managed fund, will be excluded from the calculation of the fund's taxable income (and that of its non-resident investors).

The Federal Government has issued draft legislation changing the GST treatment of new residential premises constructed under development arrangements with government entities. On 23 November 2011, the Tax Laws Amendment (2011 Measure No.9) Bill 2011 was introduced as announced by the Assistant Treasurer earlier this year.

The Government has released a Consultation Paper seeking public views on the introduction of a standardised principle based governance framework for all not-for-profit (NFP) entities.  The rules will overhaul existing governance rules for all NFP entities and will require a review of their existing constituent documents for compliance with the new rules.  The rules will  be administered by the Australian Charities and Not-for-Profits Commission  (ACNC) when it commences operations on 1 July 2012. 

Exposure draft legislation and explanatory material to rewrite and reform the rules on the buy-back of shares and non-share equity interests was released on 20 October 2011 for public comment.  These reforms implement recommendations made by the Board of Taxation in its June 2008 report Review of the taxation treatment of off-market share buy-backs. We review the current rules and discuss the key changes proposed in the draft legislation.

On Tuesday, 29 November 2011, as part of its Mid-Year Economic and Fiscal Outlook 2011-12, the Federal Government announced a package of changes intended to raise A$11.5 billion in new revenue and savings.

The Australian Government announced in the 2010-11 Budget that it would phase down the rate of interest withholding tax (IWT) for financial institutions from 2013-14.  This measure has now been deferred by one year to 2014-15 (saving the Budget A$70 million in each of 2013-14 and 2014-15).

The Australian Tax Office has issued a ruling regarding the acquisition of certain exchange traded commodity securities that are traded on the ASX. The ruling indicates that gains on disposal by the relevant investment trust will not be on capital account. On this basis, concessions that apply to capital gains would be denied.

The government has released a Consultation Paper on a proposed introduction of a statutory definition of 'charity'. The proposal will affect many not-for-profits and foundations that seek concessions (such as federal tax concessions), and forms a part of the wider regulatory reform of the not-for-profit sector signalled in the May Budget for the 2012 income year.

Two recent Federal Court decisions have significantly narrowed the ability of the Commissioner of Taxation to apply his discretion to withhold GST refunds. Accordingly, taxpayers who have outstanding GST refunds now have the opportunity to seek the release of these refunds in a timely fashion.

On 1 November 2011, the State Council of the People's Republic of China's Decision on amending the Provisional Regulations of the People's Republic of China on Resource Tax (Decision) will take effect. The Decision increases taxes on the sales of certain resources and extends certain existing resources tax nationwide.

The Federal Government has recently announced proposed GST changes which will directly affect property developers. As part of its draft legislation, the Government proposes that developers' sales of new residential premises which are constructed under a development lease arrangement, will be treated as taxable supplies and not input taxed supplies. The ATO has also announced that it will release GST refunds to developers for GST overpaid in margin scheme transactions.

As part of the 2011-2012 State Budget, the Victorian Treasurer announced that Victoria will adopt a 'landholder' duty model to replace the 'land rich' duty model from 1 July 2012. Overall, the proposed landholder duty model represents a broadening of the duty base that currently exists under the incumbent model. A landholder duty model is currently employed in all Australian jurisdictions except Victoria and Tasmania.

Every day the calls from business, industry and academia grow louder for the October Tax Summit to address the rate and base of GST.  While the Treasurer has steadfastly refused to incorporate GST into the summit's terms of reference, it is increasingly obvious that any meaningful tax reform must involve consideration of the GST.

On 15 August 2011 the Queensland Government, responding to community concerns about competing land uses, announced a set of interim measures to restrict coal, mineral and gas exploration in urban areas.

On 23 August 2011, the new Research and Development (R&D) Tax Credit law passed the Senate. This simplified tax credit scheme applies to activities and expenditure in income years commencing on or after 1 July 2011.  The former R&D tax concession continues to apply to activities and expenditure conducted in prior income years.

Australian tax reforms for foreign funds

Today, the Federal Government released for public comment the exposure draft of its proposed legislation for the carbon pricing mechanism (CPM). Submissions on the draft legislation are due by Monday, 22 August.

The Federal Government's long-awaited Climate Change Plan, announced on 10 July 2011, incorporates a range of mechanisms and initiatives:

• a Carbon Pricing Mechanism (CPM); 
• substantial funding for renewable and clean energy;
• energy efficiency initiatives; and 
• assistance packages for certain entities that will be affected by the CPM.

Although important elements of the Climate Change Plan are identified and discussed below, this news alert focuses primarily on the Government's proposals for the CPM.

The tax rate has been reduced from 30% to 7.5% on distributions of certain income and gains from Australian 'managed investment trusts' (MITs) to residents of Singapore, the Cayman Islands, the Bahamas and five other jurisdictions. The reduced rate applies to 'fund payments' which commonly relate to a MIT's net rental income and capital gains on Australian real estate.

The Commissioner of Taxation has released a tax ruling (MT 2011/1) which makes major changes to how the penalty and interest regimes apply to GST (and certain other tax) liabilities of State and Territory government bodies.

On 17 June 2011, the Queensland Parliament passed the Community Ambulance Cover Levy Repeal and Revenue and Other Legislation Amendment Bill 2011 (Qld)

On 10 June 2011 the Australian Government released the Minerals Resource Rent Tax (MRRT) Bill 2011 as exposure draft legislation for public consultation and comment. The MRRT is to apply from 1 July 2012 to the mining of iron ore and coal in Australia.

FBT reforms mean changes for salary packaging cars.

In this edition of Australian Tax Brief, we look at:

• Australian investors in foreign funds - new foreign source income rules
• New rules for taxing trusts

The Australian Government has announced that it intends as an interim measure to amend the Income Tax Assessment Act 1936 (the Tax Act) to:

1. align the concept of 'income of the trust estate' (ie distributable income) with the tax law concept of 'net income of the trust estate' (ie taxable income), and
2. ensure that franked distributions (including the attached franking credits) and capital gains can be streamed to specified beneficiaries.

The Assistant Treasurer released an Exposure Draft (on 17 February 2011) of the proposed new Foreign Source Income Deferral rules (the Exposure Draft).

The Exposure Draft sets out the proposed reforms for:

• Australia's Controlled Foreign Company (CFC) rules, and
• new integrity measures (following the repeal of the Foreign Investment Fund rules) in the form of Foreign Accumulation Fund (FAF) rules. 

Australia to introduce Investment Manager Regime tax exemption for foreign funds

Fin 48 certainty for foreign fund managers

Private equity tax rulings

Comments and submissions in respect of the new system of taxation for managed investment trusts (MITs).

This proposed tax is one of the most significant proposed legislation impacting on the resources sector. We outline the technical design issues associated with the minerals resource rent tax and discuss the potential outcomes and implications for industry.

Australian managed investment trusts (MITs) (as defined for tax purposes) are eligible for the following important tax concessions:

• MIT withholding – that is, a concessional rate of withholding tax applies to 'fund payments' made to foreign investors who are tax resident in a country that has an information exchange agreement with Australia [refer our previous Tax Brief on MIT withholding]; and
  
  
• MIT capital account safe harbour - that is, the MIT may elect to apply the capital gains tax (CGT) provisions as the primary code for taxing gains and losses on the disposal of eligible assets (namely a share in a company, non-share equity, a unit in a unit trust, land - including an interest in land and a right to acquire or dispose of any of these assets) [refer our previous Tax Brief on MIT capital account safe harbour].

Government announces new mining tax regime

Non resident investors in Australian managed investment trusts (MITs) are subject to a final withholding tax on fund payments made by the MIT. Fund payments exclude payments of interest, dividends, royalties, capital gains and amounts not from an Australian source. These amounts are subject to separate tax rules and withholdings. Typically fund payments therefore include rental income and other Australian sourced income derived by the MIT.

Australian Governments' response to the recommendations contained in the Johnson Report

A new tax system for Managed Investment Trusts (MITs) will commence on 1 July 2011. The specific tax regime will provide greater certainty to MITs (access to a capital account safe harbour treatment for equities, legislated character flow through and simplified investor distribution and attribution of taxable income models) but will be accompanied by additional reporting and disclosure requirements.

Resource Super Profits Tax & other tax reforms for Australian Resource Projects

The Australian Government is committed to developing Australia as a leading regional financial services centre. Tax uncertainties and the scope of the Australian tax system have been identified by the Australian Financial Centre Forum (the 'Forum') as a significant restraint on cross-border business – refer to Australia as a financial centre: Building on our strengths (the 'Johnson Report').

Australian Governments' response to recommendations contained in Board of Taxation Report

Eligible managed investment trusts (MITs) may elect to apply the capital gains tax (CGT) provisions as the primary code for taxing gains and losses on the disposal of eligible assets (namely a share in a company, non-share equity, a unit in a unit trust, land - including an interest in land and a right to acquire or dispose of any of these assets). The election must be made (in the approved form) during the first year that a trust qualifies as a MIT. Where an election is not made in that first year then a deemed revenue treatment applies to certain assets. Accordingly, it is critical to determine when the trust first qualifies as a MIT. The election once made is irrevocable. The Bill [Tax Laws Amendment (2010 Measures No.1) Bill 2010] was introduced to the Australian Parliament on 10 February 2010 and is expected to pass before 31 March 2010 (the close of the autumn sitting).

Capital account safe harbour for Australian Managed Investment Trusts

Draft Taxation Determinations TD 2009/D17 and TD 2009/D18 – 'treaty shopping' and 'private equity'.

Following the recent actions taken by the Australian Taxation Office to freeze the bank accounts of the private equity firm TPG, the Commissioner of Taxation has released two draft Taxation Determinations. The draft TDs are focused on the private equity sector of the financial investment industry.

Recent Australian Tax Reforms and implications for Australian Resource Projects post The Henry Review

Capital account safe harbour for Australian Managed Investment Trusts

Submission on Managed Investment Trusts

Foreign investors will no longer be entitled to claim a deduction for interest and other costs incurred against income arising from their investments in Australian Managed Investment Trusts (MITs), following the introduction of a final withholding tax regime for MITs.

This article takes an in depth look at Part IVA, with reference to supporting case law, and discusses the interpretation and potential issues affecting taxpayers.