In August 2015, Part 1 of a 2 part series written by Sladen Legal's Renuka Somers and Ashleigh Eynaud was published in the Tax Institute’s Journal, Taxation in Australia.

It discusses some of the unresolved issues and complexities associated with the taxation treatment of trust unpaid present entitlements for Division 7A purposes and bad debt write-offs, despite the Australian Taxation Office’s attempts to address these matters in draft Taxation Determinations TD 2015/D4 and TD 2015/D5.

The Federal Treasury has released the Exposure Draft for the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill 2015: Small business restructure rollovers to amend the Income Tax Assessment Act 1997 to allow small businesses to defer gains and losses arising from the transfer of capital gains tax assets, depreciating assets, trading stock and revenue assets between entities as part of a restructure.

The proposed amendments attempt to provide greater flexibility for small businesses to change the legal structure through which they operate without triggering adverse taxation consequences.

From 9 November 2015, all dealings with Victoria’s Land Registry will require parties to satisfy strict verification of identity requirements (generally referred to as “VOI”). In addition, these VOI requirements also apply to persons who are given custody of a certificate of title.

The new requirements aim to reduce fraud by placing an obligation on conveyancing professionals to take reasonable steps to verify that a person signing a document is who they say they are and that they have the right to transact with the land.

On 28 October, 2015 Sladen Legal delivered a presentation on various topics in the area of Hot Issues in Structuring and Rewarding Employees.

Topics presented were:

• Professional Practices Structures – the ATO views and the law - Rob Jeremiah
• Superannuation and employees - Phil Broderick
• Employment risks in corporate and business restructures - Louise Houlihan
• The new employee share scheme regime – the promised land or a mirage? - Carlos Barros

In Alderton and Commissioner of Taxation (Taxation) [2015] AATA 807 (16 October 2015), the Administrative Appeals Tribunal (AAT) upheld the Commissioner’s decision to assess a trust beneficiary to tax on a distribution from the trust, despite her attempted disclaimer in November 2014 of “the entirety of any interest accrued by her in the past or which may accrue in the future in the income or corpus of the trust fund”, with such disclaimer to take effect from the date of settlement of the trust.

Failure to pay to an employee proper notice resulted in a HR Manager and the company she worked for being fined in the Federal Circuit Court in Adelaide.

The employee was paid some notice, but not the whole of the notice period required by the Fair Work Act. This underpayment resulted in the employee being underpaid $181.66 (two days’ notice) as a result. 

The HR Manager conceded in the hearing that she knew of the requirements to pay proper notice, but the company claimed confusion had arisen as a result of the interaction of the provisions of the workers compensation legislation in South Australia regarding termination of employment and the Fair Work Act.  The Federal Circuit Court did not accept this as a reasonable excuse, stating the company should have paid the notice as provided by the Act.

When people think of self managed superannuation funds (SMSFs) they mostly think of a vehicle to provide retirement benefits and their concessional tax treatment. In contrast, the asset protection benefit provided by SMSFs is often not considered.

This topic was addressed by Sladen Legal’s Phil Broderick, who delivered a presentation on SMSFs and Asset Protection, as part of the Television Education Network’s 3rd Annual Asset Protection Conference, on 15 October 2015.

Division 7A of the Income Tax Assessment Act 1936 can operate to deem a dividend to be paid by a private company that is a subsidiary member of an income tax consolidated group (subsidiary).

If a subsidiary makes a loan to a shareholder (of the Head Company of the tax consolidated group) or their associate in a manner that evokes the application of the “deemed dividend” provisions in s 109D, the relevant time for complying with the Division 7A provisions would be the “lodgment day” of the Subsidiary’s income tax return for the relevant financial year (s 109D(1)(b)) – however, a Subsidiary member of a tax consolidated group is not required to lodge an income tax return.

Australian-owned private companies are now exempt from public disclosure taxation rules, as the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 (the Bill) passed through the Senate yesterday.

The Bill amends the Taxation Administration Act 1953 to exempt Australian-owned private companies from the requirement that the Commissioner of Taxation publish information about a corporate tax entity with a total income equal to or exceeding $100 million for an income year.

The Senate has passed a number of amendments to the Fair Work Act 2009, however the Government has been unable to attract sufficient support from cross-benchers for several key proposed changes, which have now been omitted from the Fair Work Amendment Bill 2014.

The passed amendments are significant and include:

• establishing a new process for negotiation of greenfields agreements by extending good faith bargaining to the negotiation of these agreements and providing an optional six month negotiation timeframe for the parties to reach agreement (following which an employer can apply to the Fair Work Commission (Commission) for approval of its agreement);
• providing new requirements to prevent employees from taking protected industrial action unless bargaining has commenced (either voluntarily or because a majority support determination has been made);
• imposing an obligation on employers to discuss with employees a refusal to grant an extension to unpaid parental leave.

This month we unveil our new quarterly newsletter from the Employment, Industrial Relations & OHS team, Employment Essentials.

Employment Essentials will be reporting on topical issues in HR and bringing you the latest updates in employment law. Plus much more.

A typical Self Managed Superannuation Fund (SMSF), being the classic “mum and dad” SMSF, generally transitions pretty smoothly through the lifecycle of its members. This includes the accumulation of assets in the growth/accumulation stage and managing benefit payments through the pension stage. It also usually transitions smoothly on the death of the first with the ability to pay a death pension to the survivor.

However, there is one event that can create significant transition issues for SMSFs, being the death of the surviving spouse, particularly in instances where the fund holds lumpy assets such as real estate.

The Victorian Civil and Administrative Tribunal (VCAT) has found that a confectionary company directly discriminated against a 63 year-old production worker when it dismissed him because of a disability, and has ordered the company to pay him $20,000 compensation for the shock caused by the dismissal.

The worker had been employed by the company for almost 30 years and had previously suffered chronic “tennis elbow” (which had arisen as a result of his employment but had fully resolved at the time of dismissal). Relying upon a medical report that warned the company the condition could flare up if he maintained his regular duties, the company terminated the employee’s employment effective immediately.

The draft legislation of the Government’s proposed new tax system for managed investment trusts proposes that super funds (and other exempt entities that are entitled to a refund of excess imputation credits) be excluded from the 20% tracing rule for the public trading trust rules.

The Workplace Relations Management Plan (WRMP) requirements under the Building Code 2013 (Code) have been amended to include a requirement that principal contractors have a fitness for work policy to manage alcohol and other drugs in the workplace.

Amongst other things, the policy must include:

• detection methods;
• substances tested;
• a requirement for frequent and periodic random testing of the workforce; and
• an outline of how workers affected by drugs and alcohol will be counselled, assisted and disciplined.

The Federal Court has handed down another civil penalty decision for breaches by self managed superannuation fund (SMSF) trustees of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

In the case of the Deputy Commissioner of Taxation (Superannuation) v Ryan [2015] FCA 1037 the Federal Court fined the two trustees of an SMSF $20,000 each for breaching the sole purpose test, the prohibition against providing members with financial assistance, the in-house asset rules and the requirement to make investments on an arm’s length basis. This was as a result of the SMSF lending to the members over $200,000. Most of these loans were never paid back to the SMSF ultimately leaving the SMSF with about $6,000 in assets. In addition, the members were disqualified as trustees.

The income tax look-through treatment for limited recourse borrowing arrangements (LRBAs) is now law with the Tax and Superannuation Laws Amendment (2015 Measures No 2) Act 2015 receiving royal assent on 16 September 2015. This means that, effective from 1 July 2007, a super fund under a LRBA will generally be treated as the owner of an asset bought under the arrangement for income tax purposes (including for capital gains tax purposes). This includes that the bare trust under an LRBA does not need a tax file number and does not need to lodge a tax return.

Swisse, one of Australia’s biggest wellness companies has reported a sale of its 83% share to a Hong Kong based company for $1.67 billion.

Their secret to success?

Hard work, dedication, focus and commitment to delivering quality and safety in their products.

There’s something else…

The Australian Taxation Office (ATO) has published guidance on penalties that could apply for deficient valuations. Valuations for income tax purposes of assets such as real property, shares in companies and units in unit trusts, are relevant in a number of contexts, including the capital gains tax provisions, the maximum net asset value test, the market value substitution rule, the GST Margin Scheme, and for assets held in self-managed superannuation funds.

The ATO warns that taxpayers who undertake their own property valuations or use valuations from unqualified people may be liable to pay administrative penalties where the valuations later prove to be deficient.

Powerful business figure, Janet Dore, has been appointed as chair of the Lantern Legal Group, parent company of Sladen Legal.

Janet, who last month ended a seven-year tenure as chief executive of the Transport Accident Commission (TAC), will bring high-level organisational experience to the firm. In her role at TAC she was responsible for the successful implementation of a six-year strategy to achieve a $600m reduction in liabilities.