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Corporate Tax Transparency Code Register

A message from the Chair

Implementation of anti-hybrid rules now available

Tax Transparency Code now available

Sounding Board

Ideas for better tax regulation

  • Absolute entitlement

    If a beneficiary is absolutely entitled to a trust asset, they, rather than the trustee, are required to return any capital gain, or claim any capital loss from a CGT event that happens to the asset. A common example that illustrates the significance of this concept is that of a nominee who holds shares on behalf of a principal. If the principal directs the nominee to sell the shares, the principal returns the capital gain, not the nominee. "Absolute entitlement" is therefore an important concept in the CGT rules. But recent Court decisions have created considerable uncertainty about when a beneficiary will be absolutely entitled to an asset, indeed, whether a beneficiary can ever be absolutely entitled to an asset. In Oswal v FCT [2013] FCA 745 the Federal Court held that if the trustee has a power of sale over a trust asset, a beneficiary cannot be absolutely entitled to the asset. If this decision is correct, it would mean that beneficiaries are almost never absolutely entitled to trust assets, because Trustee legislation in all Australian jurisdictions now gives trustees a power of sale, unless such power is expressly excluded. The Court also held that a beneficiary is not absolutely entitled to an asset if the trustee has properly incurred liabilities in connection with the administration of the trust. A further unresolved issue is whether beneficiaries who are jointly entitled to an asset can be absolutely entitled to an asset. The Commissioner of Taxation issued a draft ruling TR 2004/D25 regarding the meaning of "absolutely entitled to a CGT asset as against the trustee of a trust" many years ago. The preface to the ruling still states that the Tax Office is consulting with Treasury in relation to absolute entitlement and in particular the problem areas of joint and multiple beneficiaries and the trustee's indemnity. The draft ruling takes the view that multiple beneficiaries cannot be absolutely entitled to an asset, unless the asset is "fungible", that is, an asset that is one of many that are identical and exchangeable, such as shares of the same class in the same company. The Federal Court has held that beneficiaries cannot be absolutely entitled jointly to land (see Kafataris v DCT (2008) 172 FCR 242), but the position in relation to fungible assets is uncertain. The law should be amended to make it clear that a beneficiary can be absolutely entitled to an asset notwithstanding that the trustee has a power of sale or that the trustee has incurred liabilities in administering the trust. The position of multiple beneficiaries should also be clarified, preferably by allowing beneficiaries who have joint ownership of an asset to be jointly absolutely entitled to the asset as against the trustee.

  • Superannuation Guarantee Ruling SGR 2009/2 - Update to OTE

    There seems to be some outdated exclusions as to what is included as OTE 1. Make-up payments for Jury Service are not included in OTE for SG purposes, disadvantaging employees when they are compulsorily attending Jury service (Para 37. An employee may receive 'top-up payments', such as those made while serving on jury duty or with defence reserve forces, that make up some or all of the difference between any amount the employee is receiving for performing such service and the ordinary time rate of pay he or she would earn if not performing such service. Top-up payments of this kind are not OTE as they are excluded from being 'salary or wages' in the SGAA by Regulation 7AD of the SGAR: see paragraph 59B of this Ruling. 2. Exclusions under paragraph 57A: a. salary or wages of less than $450 paid to an employee in a month. This disadvantages the lower paid workers, potentially increasing the need for government support in their 'golden' years. b. salary or wages paid to a part-time employee who is under 18 years of age The effect of compounding is well known. Early start to savings will reduce the drain on the public purse. With the prevalence of payroll software adn the recent introduction of SuperStream, the administrative burden of making the payments has been greatly reduced. 3. Paid Parental Leave and other ancillary leave (34. However, payments made while a worker is on paid parental leave or other kinds of ancillary leave are not OTE as these types of leave payments are excluded from being 'salary or wages' in the SGAA by Regulation 7AD of the Superannuation Guarantee (Administration) Regulations 1993 (SGAR): see paragraph 59B of this Ruling. ) For equity purposes, especially in the case of employees taking military leave, or who are emergency service volunteers (e.g. SES, fire brigades), they are being penalised for giving their time to the community. Link to SGR 2009/2

  • Excess Superannuation Tax

    The Board has received the following suggestion during the course of its consultations. The current provisions around excess superannuation tax are bureaucratic and cumbersome especially for non-executive directors with the decision to include death and disability insurance in the superannuation contributions cap. Many persons will inevitably be in breach of the cap, especially those receiving multiple group certificates. For a 60 year old, death and disability premiums may be 20-25,000 themselves. They will receive an amended assessment 2 years after the event requiring them to transfer funds out of the fund, together with an earnings adjustment plus penalty. The ATO assessments have a very high error rate and result in considerable cost and professional fees to comply. Surely a system could be introduced to cash out the superannuation guarantee obligations by a single adjustment notice where the recipient knows that they will be over the limit. The Board is interested in getting the thoughts of the Sounding Board community on this issue. Do people share a similar concern? Do people have an example that they could share where they may be in breach of the cap?

Meetings & events

  • 7 Dec 2017 - Melbourne
  • 19 Oct 2017 - Perth
  • 14 Sep 2017 - Sydney