Legislation Tax Policy

Announced but unenacted… a bit of clarity

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In November the government announced (see it was not going ahead with caping self education deduction (limiting section 8-1 makes no sense), limiting the tax exemption on super pensions (impossible to calculate), removing section 25-90 (let the big end of town suffer) and repealing the statutory rate (pure politics in this – this is a concession that just has to go now that we will make no cars in Australia – see They annouced they would go ahead with phasing out the net medical expense offset (see and but a withholding event on capital gains (see

Well they have finalised the list of what they are and are not going to do (see and these are the highlights…

Going ahead

  • Re‑states and clarifies the “in Australia” special conditions for income tax exempt entities and deductible gift recipients to ensure that the relevant entities operate principally in Australia. Every DGR needs to review where they do their activities…
  • Treats earn out payments as part of the value of the business asset for CGT purposes. This just means earn outs work with the Division 152 Small Business CGT Concessions…
  • Treats an investor in an instalment warrant as the owner of the underlying asset for tax purposes. Everyone did it this way so there is no real change here…
  • Replaces the GST free concessions for the supply of going concerns and farm land supplied for farming with a reverse charge mechanism. This will kill all those crazy GST ideas – most of which ignore Division 135 or changes made to the margin scheme in 2007. This is a very good idea…
  • Introduces penalties for promoting schemes designed to obtain the illegal release of superannuation benefits. This also gives the ATO flexible and cost‑effective penalty options to deal with SMSFs that breach the law. These were in a Bill before the last election so should come back very soon…
  • Amend the “connected with Australia” rules in the GST Act to reduce the number of non‑residents who are “unnecessarily” drawn into Australia’s GST system… lets see what they actually do here…

Not going ahead

  • Allows the R&D refundable tax offset to be provided in quarterly instalments. Waste of breath…
  • Ensures that if a lender claims a deduction for writing off a debt, then the borrower would recognise a similar amount of income.
  • The Government will not proceed with the measure to ‘better target’ not-for-profit tax concessions at this stage, but will explore simpler alternatives to address the risks to revenue.
  • Ensures that trust deed clauses cannot be used to prevent excess amounts from being counted as contributions.
  • GST change of use, vouchers, tri partite arrangement and a series of other changes. It looks like the Board of Tax review of GST was not overly well received as it only got one main change up – Reverse charged going concerns.
  • Prescribes rules for the acquisition and disposal of certain assets between SMSFs and related parties.
  • Makes rollovers to SMSFs a ‘designated service’ under the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006, requiring super funds to introduce additional checks and safeguards.
  • Requires funds to notify members whether contributions have been received, either quarterly or six monthly (to alert members about unpaid superannuation).
  • Implements the recommendations of the Board of Taxation’s 2008 report on modifying the  taxation treatment of off‑market share buy backs.

So it looks like not much exciting is going to change. Reverse charging supplies of going concerns is a classy idea. We are already acting like the earn out and instalment warrant stuff is law. The Super penalties were already law so we were ready for them…

I hope the guys in the treasury who draft the laws have something to do in their spare time as the 92 announcements they are working on just dropped to 34 and some of these (six by my count) are already drafted…

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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