Legal news
The Australian Taxation Office (ATO) updated its Practice Statement PS LA 2003/12 on 10 April 2014. The Practice Statement confirms that the Commissioner will not depart from the long-standing administrative practice of treating the trustee of a testamentary trust in the same way as a legal personal representative (LPR).
The Australian Taxation Office (ATO) has released a private binding ruling extract in which it found that a nil interest limited recourse borrowing arrangement (LRBA) loan triggered the non-arm’s length income rules.
The Board of Taxation released its Second Discussion Paper on Division 7A of the Income Tax Assessment Act 1936, on 25 March 2014.
Division 7A taxes notional distributions (by way of loans, payments or forgiven debts) from, private companies (which are taxed at the rate of 30%) to shareholders and associates (who are taxed at higher marginal tax rates) as unfranked “deemed dividends”. Division 7A also operates where private company assets are used by shareholders and associates, and where a trust has an unpaid present entitlement (UPE) owing to a private company (directly or indirectly through one or more interposed entities), and makes a payment or loan to, or forgives a debt owing by, a shareholder (or an associate of a shareholder) of the private company.
On 19 March 2014, the ATO issued its decision impact statement (DIS) on the AAT decision in Gutteridge & Anor v FC of T 2013 ATC.
In that case, a trust made capital gains from the sale of business assets and the taxpayers, Mr and Mrs Gutteridge, sought to apply the small business capital gains tax concessions when taxed on the capital gain. The Commissioner, in applying the $6 million maximum net asset value ("MNAV") test held that the trust was controlled by the taxpayers’ daughter who was the sole director and shareholder of the corporate trustee, and included the values of the assets held by a company also controlled by her on the basis that it was “connected with” the trust. As a consequence, the trust failed to satisfy the MNAV.
On 7 November 2013 the ATO released a Practice Statement (Practice Statement Law Administration 2013/5 (PS LA 2013/5)) which details the Commissioner’s policy (previously included in Chapter 35 of the ATO’s Receivables Policy) in relation to:
On 10 May 2013, the High Court of Australia refused the taxpayer special leave to appeal FCT v Greenhatch [2012] FCAFC 84; [2011] AATA 479.
Accordingly, prior to 1 July 2010 and the amendments made by TLAM No 5 2011, differential streaming of capital gains between trust beneficiaries was ineffective. The beneficiaries of any trust that has differently streamed capital gains will have an exposure to audit activity, amended assessments and penalties.
