This article was written by Renuka Somers for the Tax Institute’s Journal, “Taxation in Australia”, and published in April 2014.

This article discusses the complexity associated with a trust satisfying the maximum net asset value test for the purposes of accessing the capital gains tax (CGT) small business concessions, where it is unclear whether an unpaid present entitlement would be classified as a liability relating to the CGT assets of the trust.

This article discusses some of the taxation and trusts issues encountered when structuring family law settlements. Managing these issues appropriately through careful planning and the preparation of appropriate documentation can ensure the best financial and taxation outcome for clients

The Tax and Superannuation Laws Amendment (2014 Measures No 6) Bill 2014 (the Bill) was introduced to Parliament on 30 October 2014.

Schedule 1 of the Bill seeks to amend the Income Tax Assessment Act 1997 to extend the CGT roll-over relief afforded under certain replacement asset roll-overs to revenue assets and trading stock.

Proposed amendments to the employee share scheme provisions for start-ups.

On 14 October 2014, the Honourable Bruce Billson, the Honourable Tony Abbott and the Honourable Joe Hockey issued a media release titled "Encouraging employee share ownership and entrepreneurship".

The position of the Government in respect of the application of the employee share scheme (ESS) provisions to start ups has been long awaited, with it being seen as fundamental to the innovative nature of start-up companies, and the need to ensure that they retain a work environment that fosters new ideas.

A recent case in the Administrative Appeals Tribunal (Pope v FC, known as Pope’s Case) is of interest to taxpayers and their advisers, with respect to the characterisation of unpaid trust entitlements (UPEs) as loans.

In this case, Deputy President Hack characterised amounts previously distributed to the taxpayer, Pope, from the Pope Family Trust, and remaining unpaid as being debt at the time, that the amounts were written off by the Pope as being bad. Pope had previously included the UPEs in his assessable income in the income years in which the distributions were made and sought to obtain a deduction for those UPEs when they were irrecoverable from the Trust.

A reminder that voluntary disclosures pursuant to the Australian Tax Office’s (ATO) “Project DO IT” initiative must be made before 19 December 2014. Having regard to the difficulties often encountered and the general time frames required to obtain necessary information sourced from offshore third parties, the time to prepare for, and draft, voluntary disclosures taxpayers considering making a voluntary disclosure pursuant to the Project DO IT program would be well advised to consider their eligibility for the Project DO IT initiative and begin their disclosure preparation as soon as practicably possible.

New guidelines released by the Australian Taxation Office (ATO) will assess tax compliance risks associated with the allocation of profits from professional services firms operating in the accounting, architectural, engineering, financial services, legal and medical professions.

This paper was presented by Rob Jeremiah at the 2nd Annual Trusts and Companies Taxation Symposium Television Education Network, held on 7 August, 2014.

The paper focuses on dealing with situations where non-compliance with of Division 7A of the Income Tax Assessment Act 1936 has been discovered, and understanding the operation of the Commissioner of Taxation’s discretion to disregard Division 7A. The paper considers the interplay of making a voluntary disclosure and requests to apply the Commissioner’s discretion and the application of the Alternative Dispute Resolution and the Australian Tax Office’s Internal Facilitation process.

On 30 July 2014 the Australian Taxation Office issued Taxation Ruling TR 2014/5 (previously released in draft form as TR 2013/D6) to address the tax effect of private companies paying money or transferring property to shareholders or their associates, in order to satisfy Family Court orders made pursuant to section 79 of the Family Law Act 1975.

The Options Paper, Australia’s Charities and Not-for-profits has been released to seek feedback on proposed arrangements for charities in Australia following the Government’s planned repeal of the Australian Charities and Not-for-profits Commission (ACNC). The Government’s proposed arrangements attempt to balance reducing the administrative burden of reporting obligations with the need for public accountability.

The Victorian State Revenue Office has recently released General Information Bulletin GEN 2/14 in relation to recent duty and land tax changes that received Royal Assent on 17 June 2014. Of particular note is the change to the area defined as “Greater Melbourne” for the purposes of the Primary Land Tax Exemption.

With 30 June fast approaching, it is time to review and plan the 2014 financial year trust distributions.

To help you prepare for June 30, here’s a summary of our recommendations as to the action you should take.

Sladen Legal can now assist GST groups with Indirect Tax Sharing and Funding Agreements.

There are multiple complex taxation laws governing GST Groups. Therefore, it is crucial to have the appropriate documentation in place to clearly define (and be able to determine) each member’s rights and obligations, and thereby avoid any adverse tax consequences.

As one of Victoria’s leading law firms, with a long standing record of providing specialised legal services to family business groups, we have identified the need for a dedicated tax consolidation practice to enable us to guide our clients and their advisors through every stage of the tax consolidation process. 

A reminder that with 15 May 2014 (being the due date for lodgement of the 2013 FY income tax return for most trusts) fast approaching, it is time to review prior year unpaid present entitlements (UPEs) owing from trusts to private companies and ensure that appropriate documentation is in place prior to that date.

This article discusses the complexity associated with a trust satisfying the maximum net asset value test for the purposes of accessing the capital gains tax (CGT) small business concessions where it is unclear whether an unpaid present entitlement (UPE) would be classified as a liability relating to the CGT assets of the trust.

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.