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Corporate Tax Transparency Code

Sounding Board

Ideas for better tax regulation

  • Borrowing Costs

    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."

  • 152-70 - How can a Trustee hold a legal and equitable interest?

    There is an apparent disconnect between the language of Item 1 in section 152-70, which requires an entity to hold a legal and equitable interest in the shares in a company, and Example 1.2 in the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 7) Bill 2006 - which introduced this section. While Example 1.2 evidences a clear policy intention that a Trust (via its Trustee) can hold a direct small business participation percentage in a company, the actual language of Item 1 in section 152-70 requires the Trustee to hold a legal and equitable interest in the shares in a company - which the Trustee would not seem able to do, as it holds the shares on behalf of the beneficaries. It would be preferable if this issue could be put beyond doubt by amending subsection 152-70(2) by adding (say) the following words "and regard a Trustee as holding both the legal and equitable interests in shares in the company."

Meetings & events

  • 8 Aug 2019 - Adelaide
  • 12 Sep 2019 - Sydney
  • 17 Oct 2019 - Perth