Australia-Bermuda Tax Information Exchange Agreement Comes Into Force

Tax Information Exchange Agreement (TIEA) between Australia and Bermuda came into force on 20 September 2007.‘This is the first TIEA to come into force, and represents a significant step in Australia's efforts to prevent offshore tax evasion and avoidance.’  It has effect from 1 January 2006 with respect to serious tax evasion and, from 1 January 2008, for all other matters covered by the Agreement.

A copy of this TIEA is available from the Australian Treaties Database, which can be accessed through the Department of Foreign Affairs and Trade website at www.dfat.gov.au.

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Superannuation Guarantee Compliance Made Simpler for Small Business

Government announced on 2nd October changes that will mean employers who make a late Superannuation Guarantee (SG) payment do not pay the same amount twice.The changes to the law will take effect from the date of Royal Assent of the amending legislation.  From Royal Assent, employers will be able to use the offset, including employers who have already been assessed with the SG charge and which remains unpaid at Royal Assent.

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Taxation of Financial Arrangements (TOFA)

On 20th September a Bill was introduced into Parliament dealing with the tax treatment of financial arrangements.  This Bill, will modernise the accruals and realisation rules as they apply to financial arrangements. The Bill will also introduce four new elective regimes which will improve efficiency and reduce compliance costs of Australian businesses.

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Thin Capitalisation: Application of Accounting Standards

On 12th September Government announced changes to the thin capitalization rules in the income tax legislation to address some of the adverse impacts of the adoption of Australian equivalents to International Financial Reporting Standards (AIFRS).Under the thin capitalisation rules, entities are required to use accounting standards to value assets, liabilities and equity capital.  Differences between AIFRS and the previous accounting standards (known as AGAAP) resulted in the thin capitalisation positions of some entities being substantially affected.

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Australians With Terminal Illness Will Be Able To Draw Super Tax Free

On the 11th September 2007 the Government exempted people with a terminal illness who access their superannuation under the age of 60 from the tax on their lump sum benefit. Until the legislation passes into law, the Government has asked the Commissioner of Taxation to consider changing the rate at which superannuation funds are required to withhold from payments to people in these situations.

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ATO Taxpayer Alert TA 2007/5

Arrangements designed to avoid the operation of Division 7A through the use of a Corporate Limited Partnership

The Tax Office is seeking to review arrangements that attempt to circumvent the application of Division 7A of Part III the Income Tax Assessment Act 1936 (ITAA 1936) through the use of what is claimed to be a Corporate Limited Partnership ('CLP').

Various examples are noted in the alert.

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Temporary reprieve by ATO to address some Div 7A problems

The Tax Office has released amendments to the application of Division 7A of the Income Tax Assessment Act which will only apply until 30th June 2008. In general terms, if a company has made a payment to a shareholder or has ‘forgiven’ a debt that a shareholder or associate owes the company, the company may be taken under Division 7A to have paid a dividend (unless of course, a loan agreement exists between the two parties). This ‘dividend’ is generally considered to be an unfranked dividend.

These new amendments, provide the Commissioner with a discretion to provide relief where deemed dividends have arisen because of an honest mistake or inadvertent omission. While the concept of an honest mistake is the subject of some discussion clients should consider their positions .

Under these amendments, if corrective action has been taken on or before 30th June 2008 (in respect of the 2001-02 to 2006-07 income years) then it is expected that the Commissioner will exercise his discretion to disregard a deemed dividend that may have occurred during these income years. All private companies are urged to review any possible debt transactions that have occurred between the company and a shareholder or associates over the past 5 years to determine whether further action is required.

Please contact your nearest Sothertons office if you would like further clarification or assistance with taking advantage of concessions which may be available.

Anti-money laundering: New tool

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has released a self assessment questionnaire to assist reporting entities in meeting obligations under the Anti-money Laundering and Counter-terrorism Financing (AML/CTF) Act 2006.   

The comprehensive outline of the requirements of the AML/CTF Act and rules also provides a timeline for compliance. It will be an indispensable tool for reporting entities under the first tranche of the AML/CTF legislation to track their compliance and assist them in managing and reducing money laundering and terrorism financing risk. For a self assessment questionnaire please follow the link

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