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Manoeuvring the Maze: Tax Forum

Published on 24 May 2007 | Took place at Hilton Hotel, Sydney, NSW

With so many tax issues facing us at all levels from SME to Top 100, navigating a safe course is more challenging than ever. This convention was divided into three streamscovering:
- SME Issues - focussing on topics that affect practitioners working in corporate tax groups within businesses and with SME clients. It included practical sessions on structuring professional practices and succession planning and specific SME issues in the areas of contractors vs employees and planning for the new CGT small business concessions.
- Corporate Issues - focussing on issues relevant to practitioners with large business clients including issues with consolidations, employee share plans, corporate reconstruction and litigating with the ATO.
- Hot Topics - covering areas in the ever changing tax environment which are of significance to many practitioners, wherever they work.

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Individual sessions

Division 7A update

Author(s):  Gil LEVY

Since its introduction in 1997, Division 7A has become the focus of attention for anyone carrying on business through a company or trust. Whilst the provisions are relatively short, new issues continue to arise. This paper examines:

  • what are the common bug bears with Division 7A and where have people been going wrong?
  • what are the best structures to use to manage exposure to Division 7A?
  • how to use corporate beneficiaries for accumulating lifestyle assets
  • what are the recent developments by the ATO and Treasury?
Materials from this session:

Consolidations - some tips and traps

Author(s):  Geoff LEHMANN

This paper is a non-exhaustive journey through some of the traps embedded in the Consolidations regime and suggestions about dealing with them, including:

  • using a consolidated group as a bid vehicle
  • bad and doubtful debts of a joining entity - a legislative botch-up
  • deferred tax liabilities - complex on joining and double tax on exit
  • over-depreciation adjustment - it can apply again and again and again
  • the unrealised loss rules - three choices, but they’re a Hobson’s choice
  • at what time of the day does a group acquire a new member?
  • accrued liabilities on entry that are recognised later for tax.
Materials from this session:

Structuring professional practices

Author(s):  Yvette PIETSCH

The landscape has changed significantly for practitioners contemplating an appropriate structure for their professional practise. This paper reviews the questions which you should consider, including:

  • CGT changes announced in the budget: what impact these will have?
  • service trusts: how have they survived their broadside?
  • PSI regime: what are the implications
  • goodwill: what are the issues?
  • departure and arrival of 'partners': how do you cater for these?
Materials from this session:

Exiting a consolidated group

Author(s):  Justin CHERRINGTON

Many people anticipated that the consolidations regime would significantly simplify the disposal of subsidiaries but is this correct? This paper answers this question including:

  • can you achieve the clear exit?
  • impact of the funding agreement
  • CGT Event L5
  • Subdivision 716-A
  • impact of a claim under a Share Sale Agreement.
Materials from this session:

Privilege update: recent developments and current practice

Author(s):  Hugh PAYNTER

An understanding of the practical application of legal professional privilege and the concessions extended by the ATO to certain external accounting papers and board papers on tax risk, can be critical to the management of tax audits and disputes. It is important to understand:

  • when communications will be protected from production to the ATO, and how such protection may be lost
  • when and how to claim privilege
  • potential future developments in the law of privilege
  • common scenarios arising in tax audits/disputes in relation to privilege.
Materials from this session:

New Division 152 concessions

Author(s):  Spyros KOTSOPOULOS

This paper outlines the new small business CGT concessions, in particular:

  • what has changed post 1 July 2006?
  • are the concessions now better than before?
  • what shortcomings still exist in relation to the concessions?
  • what are the benefits of the significant individual test?
  • how many can access the concessions?
  • what are the additional conditions to be satisfied where an interposed entity sells shares in a subsidiary?
  • how do you manage the 90% test?
  • are the changes in the Exposure Draft going to impact these changes?
  • the manner in which the changes interact with the existing rules and identify intended and perhaps unintended costs and benefits
  • how the change to the definition of active asset impacts the future sale of assets used in past businesses
  • how the changes impact the application of the maximum net asset value test and the concept of the connected entity
  • the complications that arise for structures that have a discretionary trust
  • the impact for partnerships.
Materials from this session:

IFRS - have you not dealt with it?

Author(s):  Debbie HANKEY,  Tracey RENS

This presentation discusses the potential flow-on income tax consequences arising from various A-IFRS requirements as well as providing an overview of the main accounting impact including:

  • observations from recent financial reporting disclosures
  • thin capitalisation
  • share capital tainting
  • dealing with intangibles and property
  • accounting within a tax consolidated group
  • corporate restructures and M&A
  • TOFA.
Materials from this session:

Handling a tax dispute - drafting the objection and negotiating a solution

Author(s):  Robert RICHARDS

From the receipt of an assessment that is not accepted through to the commencement of court or AAT proceedings can be a long time and cover many aspects including:

  • drafting an objection and providing additional information and/or evidence
  • arguing for mitigation of penalties
  • objection decisions - what to expect from ATO?
  • appeals - to AAT or Federal Court
  • preparation for an appeal
  • settlement agreements.
Materials from this session:

Update on Section 8-1

Author(s):  Mark FRIEZER

Section 51 has been one of the most litigated provisions of our tax legislation. In 1997 it was replaced by section 8-1. This paper covers how these provisions been interpreted and applied by the ATO and by the Courts since 1997 including consideration of:

  • general deductability - what has happened since 1997?
  • demarcation or boundary issues with the remainder of the legislation
  • timing of deductability issues
  • purpose and when it becomes relevant
  • how does all this fit with the consolidation regime?
Materials from this session:

Corporate reconstruction involving merger and demerger

Author(s):  Wayne PLUMMER

This paper is a consideration of the applicable tax rules in relation to corporate mergers and demergers particularly where you end up with a dramatically different structure including:

  • an 'up to the minute' review of the demerger and scrip-for-scrip rollover conditions
  • a discussion of interesting issues arising from transactions which involve a combination of merger, demerger and capital management aspects
  • a review of some of the recent corporate restructuring transactions.
Materials from this session:

Effective implementation of a tax plan

Author(s):  AH (Tony) SLATER

In many cases the taxpayer has critical problems in succeeding in their dealings with the ATO (or subsequently on appeal) because of aspects concerning the transaction that have been overlooked or incorrectly carried out when implementing the arrangement including:

  • the need to accurately identify the client’s objectives
  • can it be done?
  • correcting flaws including by rectification.
Materials from this session:

GST update: GST current issues

Author(s):  John DAVISON

Seven years after the introduction of GST, we are all still struggling with some fundamental concepts, such as supply and enterprise. Unless we understand what an enterprise is, or what a supply is, we cannot even start to determine what GST can be claimed or needs to be accounted for. This paper concentrates on these vital issues, with a brief introduction to:

  • GST fundamentals
  • tripartite supplies
  • GST accounting
  • deposits
  • deposits in practice
  • settlements
  • the BAS
  • complex areas
  • apportionment of input tax
  • property.
Materials from this session:

Tax consequences of employee share plans

Author(s):  Anthony WATSON

This presentation examines some of the more complex issues arising out of employee share plans and alternative arrangements. It looks at some of the issues arising from using interposed trusts and cross border issues, including:

  • share and option plans - position of the employee and company
  • issue, vesting and winding up of trusts
  • non-resident employers and non-resident employees.
Materials from this session:

TOFA for the everyday

Author(s):  Rodney FISHER

TOFA isn’t just for people who trade hybrid derivatives over pork bellies in Botswana. In fact, it will affect many common transactions by ordinary tax payers. This paper examines:

  • where TOFA will supercede current law
  • what happens to interest income and expense, borrowing costs and the rest?
  • how TOFA overlays current law and what that means
  • what the carve out for small business and individuals means, and how it will operate.
Materials from this session:

Trust distributions update

Author(s):  Andrew Noolan

Each time you distribute income or capital gains from a trust, there are tax issues to be considered. This paper covers the key issues, and the current unresolved issues, including:

  • does the ATO’s practice statement on the distribution of capital gains mean you can safely stream capital gains from a trust?
  • what can you do to ensure that the beneficiary you decide to distribute to is the beneficiary assessed by the ATO on the distribution?
  • can a trustee distribute income two months after the end of the financial year?
Materials from this session:

Private equity

Author(s):  Joshua CARDWELL,  Melanie EARL,  Deepti SATHE

Australia is currently in the midst of what has been described as a private equity frenzy. This activity is being generated by both international private equity firms and also local funds. This paper is designed to provide an insight into some of the structural and funding arrangements used in the industry, including:

  • common private equity ownership and funding arrangements
  • management incentive plans
  • managing the divestment process.
Materials from this session:

CGT for non-residents

Author(s):  Vanessa PRIEST

The changes to capital gains tax for foreign residents narrows the range of assets on which a foreign resident is subject to Australian CGT. This paper covers:

  • the types of assets on which a foreign resident may be liable to Australian CGT
  • the circumstances that must exist before an interest held by a foreign resident in those assets will come within Australia’s CGT regime
  • the integrity measures introduced to ensure that CGT will nonetheless apply to certain non-portfolio interests in interposed entities
  • tricks and traps of the new measures.
Materials from this session:

Succession planning

Author(s):  Jo-anne HOTSTON

Often the most overlooked area of running a business - what happens when one co-owner dies or wants to leave the business? What are the key things you need to do to provide for succession planning with arm’s length business partners or with intergenerational family transfers, including:

  • tax issues for trading stock, depreciable assets, CGT assets
  • buy-out by co-owners
  • income tax issues for off market buy backs of shares
  • intergenerational transfers
  • use of insurance policies, buy sell agreements and use of put and call options, timing of CGT event under contract, conditions precedent to formation.
Materials from this session:

Taxation implications of capital management

Author(s):  Gary HOWARD

This paper covers a broad range of income tax issues concerning capital management as they impact companies and trusts, including:

  • dealing with the ATO on buy-backs, returns of capital etc
  • use of hybrid capital
  • recent and proposed law changes.
Materials from this session:

Case studies - forex

Author(s):  Tim KYLE

The foreign exchange rules remain a mystery to many advisors. This paper examines, through a series of case studies, the anomalous and inconsistent outcomes that can arise when applying these rules to common financing methods including:

  • foreign currency denominated loans and RPS
  • AUD denominated loans coupled with a foreign currency swap

The case studies also consider certain issues arising from investing in foreign currency denominated investments, including:

  • dividend hedging
  • investments that are subject to “calls”.
Materials from this session:

Structuring for Outbound Investments

Author(s):  Les SZEKELY This paper is aimed at giving non listed corporate groups who are expanding offshore an awareness of the tax implications of adopting various structures.
We will consider:

  • What are the key tax considerations when deciding as to whether you use branch v corporate?
  • What is the significant difference between a corporate entity and a non corporate entity (e.g. a trust) going overseas?
  • What is the difference where you have an overseas investment structured as a trust?
  • How does funding the outbound investment impact the tax leakage arising when you expand overseas?
Materials from this session:

Recent Developments in International Tax

Author(s):  Lee BURNS This session examines the implications of some of the recent legislative developments as well as Australian and international proposals for reforming international tax, including:

  • Proposed reform of CFC and FIF measures
  • Capital gains of non-residents
  • International implications of the Redundant Provisions Act
  • Recent exchange of information treaties
  • Developments in arbitration clauses in treaties
Materials from this session:

New CGT Rules for Non-Residents and Temporary Residents

Author(s):  John FAUVET This session will explore the practical implications of the recent developments in capital gains tax for Non-residents and temporary residents investing or carrying business in Australia, including:

  • Overview of the new CGT rules
  • What is “taxable Australian property”?
  • Interaction with Australia’s double tax agreements
  • Who is a temporary resident?
  • Foreign income exemption for temporary residents
  • Deemed disposal rules
Materials from this session:

The Operation of the GST Anti-Avoidance Provisions Following the Decision in VCE

Author(s):  Mark L ROBERTSON VCE is the first case on GST avoidance. This paper will examine how it compares to and contrasts with Part IVA including:

  • Differences between Division 165 and Part IVA
  • What is a reasonable alternative postulate?
  • When is a GST benefit "attributable" to a choice, application or election?
  • Does the principal effect test add anything to the dominant purpose test?
  • Is subjective motive relevant?
Materials from this session:

Superannuation Update – Current Issues in the Contributions Phase

Author(s):  Hugh TAYLOR Simplified superannuation is evolving into reality - this session will review the current and recently enacted rules affecting the timing and ability to make  superannuation contributions in the 2007 and future years, including:

  • Explanation of new terminology
  • Opportunities and limits up to 30 June 2007
  • New rules from 1 July 2007 and potential consequences
  • Impact on self-employed, Government co-contributions and contribution splitting
  • Recent ATO guidance and statements
Materials from this session:

Litigating with the ATO – What You Need to Know

Author(s):  David RUSSELL Not every taxpayer who has a dispute with the ATO will take their dispute to the courts. It is important to understand what is involved in the process to be able to make commercially rational decisions in relation to tax disputes including:

  • PS LA 2007/1
  • Defining the issues
  • Particulars in cases
  • Discovery
  • Funding under the test case program
Materials from this session:

Applying for and Obtaining a Private Binding Ruling – Key Tips

Author(s):  Frank O'LOUGHLIN This session will cover:

  • The right timing for lodging the PBR
  • Have you identified the best people in the ATO?
  • When to talk to the ATO – before lodgement or during their consideration?
  • What to include
  • What documents matter and how they should be provided
  • How to best present your client’s case deal with contrary arguments
  • How to keep the lines of communication open without being a pest
  • Should you prepare a draft of the ruling for the ATO?
  • When you might get a priority ruling and when you might not
Materials from this session:

Superannuation Update – Current Issues in the Pensions Phase

Author(s):  Graeme COLLEY The simplification of superannuation provides a greater level of control and flexibility in the drawdown stage. This arises from the abolition of the compulsory cashing rules and the introduction of the new style of pensions from 1 July 2007. As we approach the end of this financial year there are a number of strategies that must be considered to decide whether those currently in superannuation are able to gain the greatest advantages in the lead up to 1 July. This session will address the features of the new style pensions and advantages that may be available to you or your client as a result of the changes. The session will include:

  • Impact of the new style pensions
  • Whether to crystallise or consolidate pre 1 July 2007
  • Long term considerations for superannuation drawdowns
  • Estate planning and the new style pensions
  • Aged care consideration and the use of superannuation
  • Boosting exempt components under the new rules
Materials from this session:

Do You Have the Appropriate and Right Documents?

Author(s):  Sue WILLIAMSON,  Rebecca SAINT Getting a settled and consistent policy relating to the preparation of documents is essential including:

  • Record keeping obligations
  • Do the documents you keep stack up?
  • Do in-house transactions stack up?
  • Computer records
  • The effect of the Consolidations regime
  • Management of directors’ minutes
  • Understanding the importance of third party records/evidence, eg financiers
  • Understanding the expectations of the ATO
  • Contemporaneous documents should disclose facts, not fairy tales
  • Evidential aspects
Materials from this session:

Changes to Bankruptcy Rules

Author(s):  Anastasia TSEKOUROS Significant changes to the Bankruptcy Act will mean greater powers to trustees to claw back assets transferred to related entities and third parties. These changes will impact on asset protection strategies and wealth accumulation strategies for high net worth individuals. This session will focus on:

  • Changes enacted by the Bankruptcy Legislation Amendment (Anti-Avoidance) Act 2006
  • Changes to apply from July 2006 upon enactment of the Bankruptcy Legislation Amendment (Superannuation Contributions) Bill 2006
  • Recent decisions in the area of bankruptcy and what they mean for clients
  • The scope of legal professional privilege in the context of advice given by advisors on asset protection strategies
Materials from this session:

Superannuation Developments for Corporates

Author(s):  Robert DEUTSCH At a time of significant change in superannuation there is a separate corporate perspective to consider including:

  • Contributing to foreign funds
  • Contributing in respect of expatriates
  • Salary sacrifice
  • Bonus arrangements
  • Deductible contribution limits
  • Impact of making non-deductible contributions
  • SGC issues
Materials from this session:

Applications to the AAT for review of an objection decision

Author(s):  David J WILLIAMS The AAT deals with nearly 3,000 tax matters annually and yet pursuing a tax matter through the AAT is quite a different process to litigation in the Federal Court. Hear an insider’s perspective on:

  • The benefits and disadvantages of using this Forum for the review of a taxation matter
  • The workings of the AAT process
  • How to get the best results in bringing a matter before the AAT and how to avoid the pitfalls
Materials from this session:

Contractor vs Employee - What are the Hidden Issues?

Author(s):  Denis BARLIN This session will consider some more commonly 'overlooked' issues which arise when dealing with the employee/independent contractor question. It will deal with a few of the key issues that arise when seeking to identify whether an individual is an 'employee' or an 'independent contractor' for the purposes of:

  • PAYG withholding
  • Superannuation
  • Workers compensation
  • Payroll tax
The “independent contractor” regime, which came into effect on 1 March 2007 will also be considered.
Materials from this session:

Withholding Tax and the Consequences of Failure to Withhold

Author(s):  Peter B STINSON The Tax Administration Act 1953 imposes obligations on companies making particular types of payments to non-residents. It is important not to overlook these obligations because they have significant consequences including:

  • Loss/deferral of deductions
  • Impact on franking credits available
  • Administrative sanctions
  • Penal sanctions
Materials from this session:

Self assessment post ROSA

Author(s):  Peter WHITE,  Michael WALPOLE

The Review of Income Tax Self Assessment (ROSA) has resulted in many significant changes in our self assessment system - but has it fixed everything? This paper identifies the significant changes as a result of ROSA and the things that have not changed, with a view to guiding practitioners in securing certainty for their clients:

  • ROSA overview
  • changes to time lines and what hasn’t changed
  • getting certainty after ROSA - what kind of assessment is this?
  • exceptions to the time lines - where is the certainty?
  • dealing with rulings after ROSA
  • self assessment in a consolidations environment
  • what problems persist and how to resolve them.
Materials from this session:

Remuneration plans

Author(s):  Gary FITTON

Remuneration planning is the process of delivering remuneration in a form that is flexible, effective and tailored to suit the needs and preferences of individuals (i.e. employee/contractors). This paper covers:

  • application to all labour arrangements for all types of organisations
  • common benefits arrangements
  • the interplay of FBT, income tax and CGT provisions
  • integrating remuneration planning into the remuneration strategies of the organisation
  • employee and management buy out and buy in
  • managing remuneration planning in SMEs in the light of the Slade Bloodstock Case
  • opportunities of employee equity arrangements arising out of the decision of the Indooroopilly Case.
Materials from this session:

Tax aspects of exploiting IP

Author(s):  Paul WELCH

Practitioners are constantly facing questions regarding the treatment of intangible property for tax purposes. This paper is designed to equip the audience with an understanding of the different forms of intangible property and their interaction with the capital allowance, CGT, black hole and other provisions contained in the tax law.

  • The different forms of intellectual property
  • The issues that fall outside the capital allowances regime
  • Planning issues (eg asset protection and income splitting)
  • Exploitation of intangibles
  • Special deduction rules
  • Special CGT rules
  • Black holes.
Materials from this session:

Tax audits

Author(s):  Robyn SCHOFIELD

An audit raises a number of conflicting issues which need to be carefully managed and there is a fine line to be drawn between cooperating with the ATO and protecting a taxpayer’s interests. Some of the issues this paper considers are:

  • dealing with ATO requests for information
  • settlement opportunities and issues
  • collection issues.
Materials from this session:

TOFA for corporates - practical aspects and action plan

Author(s):  Chris KINSELLA,  Gavin MARJORAM

This paper addresses how corporates should be responding to the most recently announced TOFA changes. In particular, it focusses on addressing:

  • the potential impact of these changes on key business transactions
  • the different decisions and choices taxpayers can make and what factors should be taken into account
  • development of a practical action plan in response to these proposed changes.
Materials from this session: