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Vic 1st Annual Tax Forum

Published on 10 Oct 2013 | Took place at Park Hyatt, Melbourne, VIC

    The relevance of the tax profession is stronger than ever. Fiscal issues have been prominent in the mainstream news over the past year – whether it be references to the tax affairs of high net worth individuals, the Minerals Resource Rent Tax, the carbon tax or governmental concerns about leakages to the revenue base attributable to base erosion and profit shifting. The ability for our profession to play a role in the broader community is at an all-time high.
    The Vic 1st Annual Tax Forum delivered on a range of topics relevant to these times. It covered:
  • Sustainability of our tax system and the case for major reform
  • The tax bastion
  • The transparency - Are we entering a new age?
  • R&D and other incentives - Are you making the most of them?
  • Inheriting an international client
  • The international tax developments including the International Dealings Schedule
  • Cloud computing - understanding the tax implications
  • Small business CGT concessions - Keeping out of harms way
  • Transfer pricing - The new landscape
  • Stamp duty - Hot topics arising from the introduction of the Victorian landholder regime
  • Tax consolidation for SMEs
  • What's hot in super
  • Reportable tax positions and active compliance developments
  • The accidental property developer
  • Alternative dispute resolution
  • Leveraging social media and your portable devices to enhance your practice
  • When the tax man comes knocking
  • Post-election update on the future taxation landscape
  • Div 7A - How to fix up a mess
  • M&A tax update
  • Evidence: Defending your position
  • Estate planning
  • Developments in legal profession privilege
  • Employee share schemes - Current trends and issues
  • Cases and rulings for SMEs - An update
  • Cases and ruling for large corporates - An update
  • Part IVA: The new framework

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Individual sessions

Sustainability of our tax system and the case for major reform

Author(s):  Roger BEALE

After 22 years of continuous economic growth, Australia faces major challenges as our population ages and the resources boom declines. Current modelling suggests that retention of current policies will result in governments at all levels sliding into growing deficits. Another shock like the global financial crisis could see us with European scale debt within a decade. This presentation by a prominent Australian economist and former senior governmental adviser puts the case that comprehensive reform in our tax structure is critical to securing growth, productivity increases, supporting an aging community and ensuring resilient government budgets.

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The trust bastion

Author(s):  Graeme HALPERIN

Trusts are supposed to be a protective barrier for family assets. This barrier is under threat from:

  • the family law decision in Kennon v Spry (2008)
  • the company law decision in Richstar Enterprises Pty Ltd v Carey (2006)
  • credit loan accounts and unpaid trust entitlements
  • the creation of beneficial interests in the course of estate planning
  • bad practices in the administration of trusts.

This paper examines and evaluates each of these threats in practical contexts,including the scope they create for a family trust of another family member to be dragged into matrimonial property disputes, for a trust to be dragged into a beneficiary’s tax dispute and for inheritance claims to turn into trust disputes.

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The transparency - Are we entering a new age?

Author(s):  Tony STOLAREK,  Frank DRENTH

On 4 February 2013, the Assistant Treasurer, David Bradbury, announced a new and somewhat radical initiative for highlighting the identities of multinational corporate groups who pay little tax in Australia. These controversial measures have simultaneously triggered support and opposition from different parts of ourcommunity. This paper takes a deep dive into the issues that emerged from Bradbury’s initiative, including:

  • where are we at, and what is proposed?
  • global response by governments to BEPS concerns about risk to tax base. 
  • where did this come from and what does it mean for multinational corporations (MNCs)?
  • does the legally correct amount of tax necessarily equal the morally correct amount of tax? If not, what amount should be paid?
  • naming and shaming – the court of public opinion
  • balancing taxpayer privacy against the public interest
  • role of OECD – pronouncements to address changed MNC business environment and platforms
  • G20 announcements and collaboration
  • impact of increased transparency and reporting on how much tax is being paid and where
  • Australian Government response – Treasury SPG working group and mid-year report
  • managing this new environment – challenges for MNCs.
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Inheriting an international client

Author(s):  Chris WOOKEY

What issues do you need to watch out for when you’ve taken on a new client who has relocated to Australia? How do you treat their offshore investments? Can you improve the tax treatment of their accumulated wealth? This practical case study highlights issues such as:

  • ‘onshoring’ accumulated wealth
  • loans from offshore (yes, Div 7A can apply)
  • accruals (CFC) taxation of foreign entities’ income
  • dealing with offshore retirement savings
  • maintaining ownership of a foreign business.

This paper also provides participants with valuable tips and traps so they can understand when Australian tax issues are likely to arise for their clients.

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Cloud computing - Understanding the tax implications

Author(s):  Frank PUTRINO,  Brendan Rynne

E-Commerce and cloud computing are dominating discussion groups but what are the tax impacts for your business? This paper looks at the key tax issues arising from these arrangements now and in the future. Issues covered include:

  • source of income in an e-commerce environment
  • application of the permanent establishment concepts
  • characterising payment as for services or royalties
  • how e-commerce impacts upon residency.
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Stamp duty - Hot topics arising from the introduction of the Victorian landholder duty regime

Author(s):  Gabrielle Deal,  Nika Dharmadasa,  Geoff MANN

The recent introduction of landholder duty regimes in many of the Australian states and territories, including Victoria, has widened the revenue base and increased the range of circumstances in which duty liabilities can arise for entities.This paper outlines some of the biggest issues to emerge from the new regime so you will know what to look out for.

Topics covered include:

  • anti-avoidance or blatant revenue raising?
  • public company takeovers and listed landholder duty
  • IPOs and listings duty on conversion from private to public
  • the nature of land holdings and how the base has been broadened
  • development agreements imposing duty by economic entitlement
  • duty on leases and the lack of certainty law versus practice and tenants’ fixtures.
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Tax consolidation for SMEs

Author(s):  Neil LAMB

Given the on-going uncertainty with respect to the taxation of trusts and increasing compliance costs of operating trust structures traditionally utilised by many family “groups”, there is renewed focus on tax consolidation for SME clients. This paper addresses why you would consider adopting the complex tax consolidation rules for certain SME clients and how to steer your way through these complexities.

It covers:

  • a brief introduction to tax consolidation and the current state of play
  • migrating current structures (eg rollovers of trusts or partnerships to companies, and the interplay between the inherited history and single entity rules)
  • forming a consolidated group – the value proposition (advantages and disadvantages of the ACA calculation, including the loss of pre-CGT status and step-up in cost base of depreciable assets)
  • accounting for tax consolidated groups – anintroduction to UIG 1052
  • distributions to investors (treatment of dividends,loans etc)
  • introducing new funding and investors
  • leaving a consolidated group (eg CGT event L5and clear exit)
  • succession planning.
Materials from this session:

What's hot in super

Author(s):  Daniel BUTLER,  David Oon

What are the key five strategies that tax advisers must be abreast of for 2013 and beyond? With recent legislative changes, previously adopted strategies may now prove risky for clients and practitioners alike. Advisers must keep ahead of the wave of change to ensure they don’t miss considerable opportunities for,and implement strategies that are detrimental to, their clients. This paper examines:

  • what is required to claim contributions for directors inpassive investment entities?
  • undertaking property development and improvements in an SMSF is risky business – what is currently on the ATO’s radar?
  • recent experiences with limited resource borrowing arrangements (aka SMSF borrowing)
  • what’s hot and what’s not with current pension strategies – including the extension of the pension exemption for non-auto reversionary pensions
  • some key aspects of the CGT rules and how they impact on super strategies, especially obtaining $1.315M rollover relief under Div 152 and avoiding getting hit up badly with excess contributions tax.
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Reportable tax positions and active compliance developments

Author(s):  Judy MORRIS

This presentation includes an outline of the ATO’s perspective on the reportable tax position data received during the 2011-12 pilot and the 2012-13 lodgment season. This will be the first year that most higherc onsequence taxpayers should have completed the form. The presentation covers:

  • real-time compliance activity such as the prelodgment compliance review
  • the ATO’s perspective on the reportable tax position schedule
  • the new ATO independent review process for largemarket taxpayers
  • possible future directions.
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The accidental property developer

Author(s):  Ben Payne

In this paper, Ben discusses the tax issues that arise for the one-off or backyard property developer including:

  • when to register for GST, and other GST implications
  • application of margin scheme provisions and getting it right
  • profit-making undertakings, and venturing property into a development (but not trading stock) andv aluations etc
  • interplay between CGT and GST
  • whether the gain is on capital or revenue account, eg repeat “backyard” subdividers and developers whouse the main residence CGT exemption.
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Alternative dispute resolution

Author(s):  Terry MURPHY,  Judy SULLIVAN

This presentation deals with the following practical issues that need to be considered by taxpayers and their advisers when considering the use of alternative dispute resolution (ADR):

  • why is the ATO focused on ADR, and what is in it for taxpayers?
  • how does ADR fit in to the existing audit, objection and review process?
  • what does ADR mean and how does it work?
  • how do taxpayers prepare for ADR to get the best outcome, and what are the downsides?
  • examples of ADR in practice.
Materials from this session:

When the tax man comes knocking

Author(s):  Ross BURNS

This presentation examines the tools and tactics the ATO may use to recover unpaid tax liabilities. Ross Burns, the ATO’s Director of Complex and Strategic Recovery, discusses some case studies based on real-life encounters. The cases, involving large corporate entities and well-heeled individuals will highlight the tactics that the ATO might employ to recover tax debts that would not be recovered by a “bull in a china shop” approach. Along the way, he also highlights some of the more exotic recovery tools which are available to the Commissioner of Taxation and the sometimes novel ways in which they are employed.

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Division 7A - How to fix up a mess

Author(s):  Michael PARKER

Practitioners continue to encounter Div 7A errors and omissions, many of which are “inherited” from another tax agent.This presentation considers:

  • practical ways to deal with Div 7A errors, including applying for the Commissioner’s discretion in s 109RB
  • what are the risks if practitioners “fix up” the error but fail to notify the ATO or seek discretion unders 109RB?
  • whether taxpayers can self-correct if they miss a repayment
  • how to prevent UPEs from becoming a problem, including the more obscure Subdivs EA and EB issues that can arise where a quarantined UPE remains in existence
  • the Board of Taxation’s report of its review of Div 7Awhich was provided to the government in June 2013.
Materials from this session:

Evidence: Defending you position

Author(s):  Daniel McINERNEY

Effective gathering and management of evidence is fundamental to defending a taxpayer’s position in the course of any audit or dispute with the Commissioner of Taxation. In an environment where the Commissioner is gathering evidence with increasing sophistication, taxpayers need to carefully consider the status and maintenance of evidence supporting key positions at the time of execution of significant transactions, and at each stage of any later dispute with the Commissioner. This paper addresses some of the steps involved in effective and efficient evidence management, including:

  • identifying the forms of evidence required to supportpositions adopted
  • managing digital and non-digital records
  • effectively using opinion evidence provided by experts
  • closing gaps and obtaining contemporaneous statements from relevant personnel
  • obtaining relevant tax technical advice.

The paper also considers standards of evidence required at different stages of a dispute and examines some recent examples where evidence retained was the critical difference between the taxpayer ultimately succeeding or failing.

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M&A tax update

Author(s):  Paul ABBEY

Each year the M&A market throws up new and novel transactions and new twists to old problems. This presentation canvasses the most interesting merger and acquisition transactions of the past 12 months and the tax issues that arose. Transactions covered in this session include:

  • a summary of recent corporate mergers, acquisitionsand divestments in the public arena over the last year
  • novel funding techniques and their consequences
  • other specific features of this M&A activity that is of broader interest and application
  • the associated rulings and advice provided by the ATO.
Materials from this session:

Estate planning

Author(s):  Rob JEREMIAH,  Amanda MORTON

In the 2011–12 Federal Budget, the government announced that it would amend the CGT provisions relating to deceased estates to ensure that they function properly. This includes legislating the current ATO practice of allowing a testamentary trust to distribute an asset of a deceased person without triggering a CGT liability.These proposed changes, together with the removal of the LITO in relation to the unearned income of minors, has brought into focus the continued use of testamentary trusts and their income tax and asset protection benefits.

This paper examines:

  • the fundamentals of wills, probate and testamentary trusts
  • the taxation of testamentary trusts (including whether income must be distributed each year)
  • excepted trust income and distributions to minors
  • adding to the corpus of a testamentary trust 
  • the asset protection benefits of testamentary trusts including:
    • beneficiaries, appointors, powers and limitations of testamentary discretionary trusts
    • the use of capital protected trusts and their taxation and duty consequences
    • how to grant a lifetime occupation right without creating a life interest.
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Developments in legal professional privilege

Author(s):  Toby KNIGHT

A recent UK Supreme Court judgment has confirmed that the common law right to claim legal privilege over legal advice attaches solely to advice provided by legal professionals, and can only be extended to other professionals by legislative enactment. The Commissioner of Taxation provides for some exceptions when exercising his statutory right to access taxpayers’ documents allowing certain documents prepared by external tax advisers, who are not legal practitioners, to remain confidential.

This paper covers:

  • an overview of when privilege applies
  • circumstances in which privilege is waived
  • how the accountants concession operates
  • how to deal with ATO questions requesting documents that may be privileged.
Materials from this session:

Employee Share Schemes - current trends and issues

Author(s):  Andrew CLEMENTS

This paper examines:

  • the new rules in practice and associated “teething” issues of the 2009 changes
  • what is now required for a “real risk of forfeiture”?
  • what about “good leavers” and associated issues?
  • the indeterminate right rule – friend or foe?
  • plans outside Division 83A – some issues and challenges
  • common ESS plans – some issues and challenges
  • challenges for not listed entities
  • what is happening with options and share purchase plans?
  • interaction with international share and option plans
  • reporting and withholding rule and other ATO compliance requirements in practice
  • reform agendas.
Materials from this session:

Cases and rulings for SMEs - an update

Author(s):  Melanie BAKER

This paper provides an overview of significant cases and rulings of interest to practitioners advising in the SME sector. This material covered includes:

  • the latest cases to consider the availability of the CGT small business oncessions, such as Bell v FCT [2013] FCAFC 32?
  • tribunal decisions that provide further examples of how to distinguish between employees and contractors
  • the ATO’s most recent publications dealing with dividend access sharearrangements
  • any new developments with trusts.
Materials from this session:

R&D and other incentives - Are you making the most of them?

Author(s):  Damon Cantwell

Australia appears to offer fewer tax-related incentives than many of our Asian neighbours. However, it is easy to understate and under-claim the incentives that are on offer in Australia. At the forefront of these incentives isthe Research and Development (R&D) tax offset regime but there are many other incentives and concessions available to corporates. Some of these are directed toward particular industries or market areas, for policy purposes,whereas others potentially have much broader application.This paper takes a deeper dive into the R&D incentives before summarising a number of the otherf ederal government incentives currently on offer.

This paper covers:

  • the new modifications to the R&D incentive
  • who benefits and who loses?
  • the new instalment system how to manage risk,maximise cash flow benefits and get your systems and processes right
  • practical issues from the latest R&D related ATO IDs and Public Rulings – what have we learnt regarding the new R&D regime?
  • an overview of other grants and incentives on offer in Australia, including the Clean Technology Program, ARENA, Commercialisation Australia and the Innovation Precinct Program.
Materials from this session:

Transfer pricing - The new landscape

Author(s):  Cameron Smith

Two tranches of significant reforms have recently been made to the Australian transfer pricing rules. This presentation addresses a number of important issues through the eyes of a private practitioner, a large corporation,and a senior ATO officer, including:

  • the government’s and taxpayers’ perspectives on this reform
  • what stays the same?
  • what are the changes?
  • case study examples
  • how does the Commissioner intend to apply his broad and significant powers?
  • what are we seeing in practice from the ATO’s profit-shifting compliance focus?
Materials from this session:

Cases and rulings for large corporates - An update

Author(s):  Carmen MCELWAIN,  Rimma Miller,  Daniel Slater

This paper provides an overview of significant cases and rulings of interest to practitioners advising in the corporate sector. In particular, the material covered includes recent High Court cases and significant ATO taxation rulings including:

  • Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16(1 May 2013)
  • Commissioner of Taxation v Consolidated Media Holdings Ltd [2012]HCA 55 (5 December 2012)
  • Mills v Commissioner of Taxation [2012] HCA 51 (14 November 2012)
  • Commissioner of Taxation v Qantas Airways Ltd [2012] HCA 41 (2 October 2012)
  • TR 2012/5 – Income tax: s 254T of the Corporations Act 2001 and the assessment and franking of dividends paid from 28 June 2010
  • TR 2013/D2 – Income tax: commercial software developers: derivation of incomefrom agreements for the right to use proprietary software and the provision of related services.

It also reflects on the ATO’s focus on alternative dispute resolution (ADR) and the new independent review process.

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Part IVA - The new framework

Author(s):  Sue WILLIAMSON

This presentation looks at:

  • how the new Part IVA will apply in practice?
  • whether Part IVA can apply to any decision that results in less tax payable (eg a decision to sell shares instead of assets)?
  • the ATO’s approach to public and private rulings on the new provisions
  • what you need to be doing differently as a result of the amendments including identification of alternate postulates, defence file strategies and board briefings
  • a variety of case study examples that compare the old Part IVA conclusions to possible outcomes under the new provisions.
Materials from this session: