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 This standard has now been replaced by AASB 9, which introduces new requirements for hedging, including in relation to the measurement of hedge effectiveness.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.