Tax Newsletter

Index (September 2009)

M o r g a n’ s    T a x    M o n t h

- September 2009 Developments -

This is a collection of developments in Australian tax law and practice that occurred in September 2009 and which aims at being of relevance to tax lawyers.*


F John Morgan
A member of the Victorian Bar

29 October 2009.

Table of Contents




Acts & Bills

Abolishing the capital gains tax trust cloning exception and providing a roll-over for fixed trusts – Exposure Draft Released 2.9.09 [A1]

*TOFA amendments [A2]

*Company losses carry forward changes: exposure draft legislation [A3]

*Tax Laws Amendment (2009 Measures No 4) Bill 2009 passed both houses – R&D Offset, PPF’s, available fractions [A4]

*Tax Laws Amendment (2009 Measures No 5) Bill 2009 – GST and incapacitated entities, PAYGi based on TOFA, no withholding tax on Cwth bonds [A5]

Resale royalty right for visual artists - bill introduced [A6]

Private Ancillary Fund Guidelines 2009 [A7]

Australia/Finland DTA – mutual assistance in tax collection article commences operation on 1.9.09 [A8]

International Tax Agreements Amendment Bill (No 1) 2009 – passed – agreements with British Virgin Islands and Isle of Man [A9]

Australia elected chair of Global Forum on Transparency and Exchange of Information for Tax Purposes [A10]

US/Switzerland tax information exchange protocol – Swiss secrecy crumbles [A11]

G20 Summit: tax transparency and international cooperation in tax matters - the era of banking secrecy is coming to an end [A12]

Convention on Mutual Administrative Assistance in Tax Matters to be revised – worldwide effort to fight tax avoidance [A13]


Announcements etc

*Agribusiness managed investment schemes - Parliamentary report recommends keeping existing deductions but quarantining them to income from same MIS [A14]

Tax Information Exchange Agreement with Singapore [A15]

Div 7A measure to treat non-commercial use of company assets as a dividend – post consultation details released [A16]

*Taxation of employee share schemes – draft transitional provisions released: 1.7.09; old rules win tie-breaker; deferral straddling 1.7.09 under new rules [A17]

New R&D tax credit to apply from 1.7.10- Consultation paper released before legislation early next year [A18]




High Court

*Malouf v FC of T – HC refused special leave from FFC decision that the balance of retirement village purchase price was not ‘incurred’ prior to settlement [C1]

*Lawrence v FC of T – HC refused special leave from the FFC decision that a scheme have the effect of dividend stripping [C2]

*ConnectEast Management Limited v FC of T – HC refused special leave from FFC decision that trust losses could not be used [C3]


Full Federal Court

Lui v FC of T - Departure authorisation certificate refused [C4]

*FC of T v Star City Pty Ltd (No 2) - Imposition of penalties lifted [C5]

Commonwealth Bank of Australia v DFC of T – the Savings Bank Integration Act did not allow a boost to the cost of depreciable assets on consolidation [C6]

*FC of T v Aid/Watch Incorporated - Political activities preclude tax exempt status – Court couldn’t say if the aid priorities for which it lobbied benefited the public [C7]


Federal Court

Shu Uan Eao v FC of T - Inadequate translation of evidence [C8]

Egglishaw v Australian Crime Commission - Operation Wickenby summons issued by ACC upheld [C9]

FC of T v Burness (atf the property of Bottazzi, a bankrupt) – power to remit shortfall penalties unconfined and AAT’s remission because of GIC burden ok [C10]


Federal Magistrates Court


Administrative Appeals Tribunal (AAT)

Mezrani & anor v FC of T - Tax shortfall penalty reduced from 50% to 25% because of death of accountant and family member [C11]

Case 11/2009 - Loans to director assessable as income [C12]

*News Australia Holdings Pty Ltd v FC of T - Part IVA did not apply to complicated global restructuring which would only proceed if there was no tax cost [C13]


Other Courts

*Baldwin v ASIC - Directors liability for PAYG - reregistration of company [C14]






Decision Impact statements

Berghofer v FC of T 2008 ATC ¶10-066 – amounts assessable as ordinary income rather than as a bounty or subsidy [R1]

WRBD v FC of T (Case 3/2009) 2009 ATC 1-007 – loss on Harris Scarfe convertible notes denied ‘traditional securities’ deduction under a controversial interpretation [R2]

Lilyvale Hotel Pty Ltd v FC of T 2009 ATC ¶20-094 – same business test passed despite taxpayer moving to running the hotel itself [R3]

Sonntag v FC of T 2008 ATC ¶10-000 – AAT’s partial remission of the penalty open on the facts [R4]

Finerty v DFC of T [2008] FCA 1136 – tax shortfall penalty imposed under Part VII of ITAA36 in respect of default assessments in error [R5]



*TR 2009/5 – Trade incentives, when derived by buyer, incurred by seller and their application to trading stock [R6]



TD 2009/D8 - Deductibility of costs relating to a debt interest – s23AJ dividend needn’t be paid in the same year as the s25-90 deduction is claimed [R7]

TD 2009/D9 - Product ruling not affected by change in MIS responsible entity (eg. receiver) [R8]

TD 2009/D10 – disposal or termination of an interest in a non-forestry managed investment scheme outside the taxpayer’s control does not reverse deductions [R9]

TD 2009/D11 - Payment received on winding up a non-forestry managed investment scheme is not necessarily ordinary income [R10]


Class Rulings

ATO Interpretive Decisions (ATOIDs)

Practice Statements


Tax Alerts


Other Commissioner news

GIC and SIC Rates – 10.3% and 6.3% [R11]

Capital allowances: effective life review of solar electricity generation assets [R12]




Legislation (GST)


Cases (GST)

Queensland Harvesters Decision Impact Statement – failure to hold invoices not only prevented claiming ITC’s but also resulting in PAYG withholding obligations [G1]

*Waverley Council – Decision Impact Statement - a credit card fee was part of the consideration for the main supply and taxable when it was taxable [G2]

*Travelex Limited v FC of T - Supply of foreign currency not GST-free – not a supply of rights for use outside Australia (majority decision) [G3]


Rulings & Other things (GST)

*GST Administration Reforms – second consultation paper released – rulings regime; grouping rules; adjustments reform; going concerns; farmland [G4]




Legislation (Super)

Lost members’ superannuation accounts - Exposure draft released – balances less than $200 have to be transferred to the Commonwealth [Su1]


Cases (Super)

Purcell v APS Chemicals Superannuation Pty Ltd – SCT erred in law by upholding the decision not to pay a disability benefit as there was no evidence [Su2]

*Clarke v FC of T – Superannuation Surcharge tax on members of state parliament unconstitutional [Su3]

Case 10/2009 - Dividends paid to super fund were ‘special income’ – price fund paid for the shares only 10% of the value of the underlying public company shares [Su4]


Rulings (Super)

TD 2009/D7 – Complying Super Fund’s partnership income from FIF is not exempt [Su5]


Announcements etc (Super)



Board of Taxation is inviting submissions to its review of the taxation of employee share scheme arrangements








Legislation (State)


Cases (State)

*Alcan (NT) Alumina Pty Ltd – Land rich duty included leases (nearly expired) but not options to renew - per definition excluding options [St1]

*Acemount Pty Ltd v Sunlong Holdings Pty Ltd  - Stamp Duty (WA): Unstamped contract admissible [St2]

Tasty Chicks Pty Ltd - NSW Payroll tax  – taxpayer provided services to a partnership but couldn’t be grouped as it was not owned by the partnership [St3]


Other (State)

Evidence of value discussion paper (Tas) [St4]

Economic effects of payroll tax [St5]



OECD: transfer pricing guidelines [O1]

Public hearing on tax treaties with Belgium and Jersey - Federal Parliament’s Treaties Committee [O2]




*NB: I have gathered these articles from various sources for the purposes of study and teaching and I have acknowledged the sources. None of this publication should reproduced in breach of copyright belonging to the acknowledged source. The headings to the articles are often mine (and shouldn’t necessarily be attributed to the publisher).

Source Abbreviations: ‘EDTN’ = Electronic Daily Tax News, published by CCH; ‘LTN’ = Latest Tax News published by Thomsons; and ‘Taxvine’ is the weekly publication by the Tax Institute of Australia; Greenfields = Greenfields Financial Services; TaxBar = Melbourne Tax Bar Association Newsletter at / Members / Bar Associations / Tax



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