The Board of Taxation is a non-statutory advisory body charged with contributing a business and broader community perspective to improving the design of taxation laws and their operation.
Ideas for better tax regulation
Updating tax laws for changes to accounting standards
There are a number of areas where the tax law has not been updated to reflect the impact of new accounting standards. Two areas that immediately come to mind are: 1. The new leasing standard AASB 16 brings most leases onto the balance sheet. The tax consolidation provisions, for example s705-56 of the Income Tax Assessment Act 1997, make specific modifications for finance leases. These may need to be extended to all leases recognised on balance sheet under the new standard. 2. The TOFA hedging provisions in Subdivision 230-E of the Income Tax Assessment Act 1997 in many areas mirror the requirements in AASB 139 for hedging instruments. This standard has now been replaced by AASB 9, which introduces new requirements for hedging, including in relation to the measurement of hedge effectiveness. The fact that the law has not been updated to reflect changes to accounting standards imposes significant compliance costs on taxpayers and creates uncertainty and in some cases, unfair or undesirable outcomes. This should be addressed as a matter of priority.
The borrowing cost threshold of $100 has not been changed for years. Back when this figure was set most borrowing costs were under that threshold. It should be raised to $1,000. It is cumbersome to have to keep schedules of borrowing cost amortisation.
Incorrect CGT small business entity requirement in 328-430
There appears to be a drafting error in subsection 328-430(1)(d)(ii) dealing with small business entity ['SBE'] rollovers. A SBE is defined in section 328-110 as an entity that has an aggregated turnover of less than $10 million, accordingly it should be possible to roll an asset into a SBE using Subdivision 328-G provided the SBE is either an affiliate of or connected with the transferor (assuming the other requirements in section 328-430 are met). The current wording of subsection 328-430(1)(d)(ii) however, requires the asset transferred to meet the requirements of subsection 152-10(1A) - which means that the transferee has to be a "CGT small business entity" (rather than an ordinary SBE). A "CGT small business entity" is defined in subsection 152-10(1AA) as an entity that would be a SBE under section 328-110 if the aggregated turnover test was done using a $2 million threshold - this much lower threshold means that many taxpayers will not be able to obtain relief under section 328-430 despite transferring assets to entites that are SBEs. This drafting error / gremlin can be corrected by amending subsection 328-430(1)(d)(ii) to add words like "if the references to 'CGT small business entity' in that subsection were instead references to a small business entity."
Meetings & events
- 8 Aug 2019 - Adelaide
- 12 Sep 2019 - Sydney
- 17 Oct 2019 - Perth
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The Board of Taxation is conducting public consultations in Melbourne (2 October), Sydney (3 October) and Perth (16… twitter.com/i/web/status/1…0 1
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