Update - Tax measures spring clean
In November last year the Government announced that it would address a backlog of 92 unlegislated tax measures. 64 of those measures were referred for further review and in December of last year the Government announced the outcome of that review. 16 of the 64 measures will now proceed while the rest will either not proceed or have been put on hold.
Measures that will proceed
Capital gains tax treatment of earn out arrangements
'Look through' treatment of earn out arrangements has been on the agenda since May 2010. The amendments are designed to simplify the sale of business assets by treating additional payments under earn-out arrangements as part of the cost base of an asset for the buyer, and part of the sales proceeds from an asset for the seller.
We explore these changes in more detail in the upcoming Autumn issue of Lawlerlink.
Strengthening the rules governing access to scrip-for-scrip rollover relief
The ATO has long been concerned that arrangements could be put in place which allowed taxpayers to eliminate a capital gain by using convertible notes or options as replacement interests for shares in a restructure. New rules will tighten access to scrip-for-scrip rollover relief in this respect.
Income tax treatment of instalment warrants
Investors in instalment warrants will be treated as the owner of the underlying asset for tax purposes. This means that there is no CGT event at the time of the final instalment.
Replacement of the GST going concern exemption
The proposal to replace the GST free going concern and farm land exemption with a reverse charge mechanism will proceed. Under a reverse charge arrangement the purchaser self-assesses GST in place of the vendor if applicable and claims an input tax credit in the same period. There may be stamp duty implications for the purchaser.
Simplification of 'Connected with Australia' GST provisions
A supply by a non-resident which is connected with Australia is generally subject to GST. Proposals to limit the application of the 'connected with Australia' provisions should limit the number of non-residents drawn into the Australian GST system.
In addition, several of the measures that will proceed resolve outstanding issues relating to superannuation, providing greater certainty to an industry which has been subject to constant change over recent years.
Measures that will not proceed include:
The Research & Development tax incentive
This measure would have allowed the R&D offset to be provided in quarterly instalments.
Capital gains tax relief for taxpayers affected by natural disasters
The proposed measures were designed to make it easier for taxpayers to participate in government replacement asset programs.
Changes to the tax treatment of related party bad debts
Plans had been announced to provide symmetry between the tax treatment of bad debts between related parties debtors and creditors. Debtors would only have been entitled to a bad debt deduction where the corresponding amount had been included in the creditor's assessable income.
The Government has also stated that it will not proceed with the measure to 'better target' not-for-profit concessions, but instead will explore simpler alternatives to address the issues raised.
Protection for taxpayers
Finally, as previously announced, the government is continuing to develop legislative measures to ensure protection for taxpayers who have self-assessed in accordance with measures which will not proceed.
For more information or if you have any concerns about any of the above, please contact our specialist Taxation team.