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Tax in an Uncertain Economy

Published on 06 Nov 2008 | Took place at Swissotel, Sydney, NSW

This Annual Corporate Tax Intensive focused on the current "global economic crisis". We are all aware that the economy (both global and local) is causing problems. While business activity continues, there are also changes in the nature of transactions and the associated risks. This event covered the flow-on of these problems to corporate taxpayers.

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Individual sessions

Managing debt rights and obligations – Some key tax issues

Author(s):  Peter MCCULLOUGH

This paper covers:

  • payments received to induce the rescheduling or cancellation
  • payments made to induce the rescheduling or cancellation
  • impact on characterisation for debt/equity purposes
  • deferral of cash payment - Div 16E and new TOFA rules
  • cross border issues (does IWT or RWT apply?)
  • compounding of interest
  • payments under guarantees
  • suspended interest
  • ordinary income and CGT rules for recipient
  • possible application of the commercial debt forgiveness and other specific anti-avoidance rules
  • closing or selling the business and continuing to pay outgoings (Brown, Jones, Guest).
Materials from this session:

Specific dealings with ‘impaired’ debts

Author(s):  Joshua CARDWELL

This paper covers:

  • when can you write-off a debt as a bad debt?
  • originated debts
  • purchased debts
  • recapitalisation of any entity
  • recourse debt vs limited recourse debt (including events of default).
This paper also considers the implications for borrowers, lenders and refinanciers in respect of:
  • Section 6-5
  • Section 8-1
  • CGT provisions (including value shifting)
  • commercial debt forgiveness
  • traditional and qualifying security provisions
  • impact on carried forward losses
  • share capital tainting.

 

Materials from this session:

A series of case studies–A company struggling on the brink

Author(s):  Chris KINSELLA,  Gavin MARJORAM Follow the trials and tribulations of the good company Titanic Co as it seeks to deal with the rough conditions caused by the changing financial markets. This paper covers case studies illustrating issues including debt workouts, funding and capital issues and the impact of new and emerging law in this area.

Materials from this session:

GST in an uncertain economy

Author(s):  Ross STITT

GST consequences of managing rights, obligations and debts. This paper explores the GST issues that may be encountered in this environment including:

  • cancelled debts and bad debts
  • making guarantee payments
  • debt to equity swaps
  • litigation - court orders and out of court settlements
  • re-organising contractual obligations for consideration
  • terminating contracts - cancellation fees, liquidated damages and forfeited deposits
  • input tax credits for acquisitions relating to ceased activities.
Materials from this session:

Tax accounting in a loss situation

Author(s):  Tracey RENS,  Darren LEE

This paper explores the tax effect accounting and reporting obligations that may be encountered including:

  • what are the requirements of AASB 112?
  • recognition criteria for deferred taxes
  • issues surrounding intention/future expectations on disposals
  • impact of impairment/write downs
  • financial reporting requirements.
Materials from this session:

Administration, liquidation and receivership–The legal basics

Author(s):  Philip HOSER

This paper covers:

  • overview of the different insolvency regimes
  • administration
  • deeds of company arrangement
  • liquidation (winding up)
  • receivership
  • schemes of arrangement
  • inter-relationship of different insolvency regimes.
Materials from this session:

The perspective of the appointed representative

Author(s):  Barry KOGAN

This presentation covers:

  • in practical terms what happens when a receiver, an administrator or a liquidator is appointed?
  • how does it normally happen?
  • what are the expectations on the appointee?
  • what is the timing?
  • what is the cost?
  • what changes occur to the running of the company?
Materials from this session:

The income tax law background and implications

Author(s):  Jeremy HIRSCHHORN

This paper covers:

  • impact of appointment
  • issues during the administration
    • accessing pre-appointment losses
    • accessing interest deductions
    • non-cash tax events
    • tax funding agreements and group obligations.
  • issues on wrapping-up
    • what does a tax clearance mean?
    • effect of dissolution on other entities.
Materials from this session:

Cashed up and ready to take advantage of opportunities

Author(s):  Muhunthan KANAGARATNAM

This paper focuses on some specific issues including:

  • funding acquisitions and targets - finding the right mix and instruments
  • finding cash under mattresses - tax impacts on valuations and funding obligations
  • capitalising on debt
  • what are you buying? - protection from tax issues
  • stepping down on consolidation
  • impact on tax attributes
  • partial and creeping acquisitions.
Materials from this session:

The increased need for tax risk management in an uncertain economy

Author(s):  David L WILLIAMS,  Chris DOBSON

Drawing on past experiences in Australia and more recently in the USA and UK, this paper explores the impact a company's and government's typical responses to uncertain and down turning economies could have on a company's tax risk profile and tax risk management strategies, including:

  • cash flow pressures
  • business unit activities
  • financial reporting
  • risk tolerance levels
  • KPI pressures such as ETR
  • additional revenue authority pressures
  • what company boards and senior management should do to manage the inevitable additional risks and pressures.

 

Materials from this session:

Companies facing insolvency or other difficulties failing to pay taxes

Author(s):  Tim SHERMAN,  David ANDERSON

This paper focuses on personal liability consequences for public officers and other office holders of companies failing to pay taxes in various insolvency scenarios and considers:

  • administrative and penal sanctions under:
    • ITAA 1936
    • TAA 1953
    • Crimes (Taxation Offences) Act 1980
    • Criminal Code Act 1995 (Cth)
    • Crimes Act 1914 (Cth).
  • other issues for directors, senior executives and public officers.
Materials from this session:

Managing capital structure

Author(s):  Simon JENNER,  Andrew FOSTER

In uncertain times, managing capital structure can take on extra importance for companies. This paper explores the tools companies have been using to manage their balance sheet in uncertain times and the financial drivers for using those tools. The paper also covers the taxation implications of using those tools. This includes:

  • what the current issues and trends in managing capital are and what forms to use
  • when to return capital and in what form
  • when are dividend reinvestment plans appropriate.
Materials from this session: