 |
|
| How can we help? |
 |
| Contact us |
 |
|
|
|
|
|
|
|
|
Welcome to the September edition of BDO Kendalls' Tax News. This month we highlight a number of recent decisions and take a look at the new Australia/Japan tax treaty, the 2008-09 Compliance Program, and an upcoming review of the Australian taxation system.
| | | |
|
Review of taxation system commences
|
  |
In the 2008-09 Budget, the Government announced a comprehensive review of the Australian Taxation System. Read more |
|
New Australia/Japan tax treaty
|
|
The International Tax Agreements Amendment Bill (No. 1) 2008 was recently introduced into Parliament and contains a modernised tax treaty between Australia and Japan. Read more |
|
Guidance on dividend exemptions
|
|
The ATO has issued two Tax Determinations dealing with the exemption from tax of certain dividends paid by a non resident to a resident company Read more |
|
Company reinstated for Part IVA
|
|
The Federal Court has ordered that a company should have its registration reinstated so that the Commissioner could make a Part IVA determination against the company Read more |
|
|
|
2008-09 Compliance Program
|
The Commissioner of Taxation recently released the ATO’s 2008-09 Compliance Program. The publication of the Compliance Program is part of the ATO’s policy of a more open and transparent Read more | | | |
|
Tax Design Review Panel
|
|
In February this year, the Government established a Tax Design Review Panel to examine ways to reduce delays in the enactment of tax legislation Read more |
|
Issuing shares for assets/services
|
|
The Commissioner has released Taxation Ruling TR 2008/5, which deals with the tax consequences for companies of issuing shares in return for the acquisition of assets (such as trading stock, depreciable assets and other capital assets) or services.
The broad principle espoused in the Ruling is that when a company issues shares as consideration for the acquisition of an asset, the provision of the shares is neither a loss nor outgoing of the company. Therefore, it is not deductible to the company, regardless of the character of the assets or services acquired, or their intended use. This means that where shares are issued in return for the acquisition of say trading stock, the company will not get a deduction under the trading stock provisions for the acquisition of the stock.
The exception to this is where the vendor disposed of the trading stock outside the ordinary course of its business (for example, on a sale of the entire business to the purchaser). In this situation, the purchaser will have a deemed cost for the trading stock equal to the amount included in the vendor’s assessable income as a result of the disposal.
A further exception is where the purchaser has incurred a loss or outgoing to acquire assets (for example, it has entered into a contract to acquire the assets of a business from a vendor, including trading stock) and it sets off its obligation in satisfaction of an independently arising obligation of the vendor to subscribe for shares in the purchaser (for example, by the vendor subsequently agreeing to accept payment by way of subscription for shares in the purchaser instead of cash). In this situation, the purchaser will obtain tax deductible costs in the trading stock that it acquires.
Where the asset being acquired is a depreciating asset, the depreciation provisions operate such that the cost of the asset will be deemed to be the market value of the shares issued to the vendor. Therefore, the depreciating asset will be attributed a cost which can be written off over time.
Where the asset being acquired is subject to the CGT provisions, the cost base of the asset will also be equivalent to the market value of the shares provided to the vendor.
BDO comment
The Ruling highlights the difference in taxation treatment that can arise where shares are issued in exchange for different types of assets. Where otherwise deductible amounts are expended (such as for the acquisition of trading stock), but are paid for by the issue of shares, a tax deduction will generally not be allowed.
Contrast this with the situation where cash is paid for trading stock and therefore a deduction is allowable. Structuring the acquisition via the 2 step process mentioned above (offsetting obligations) may also ensure that a deduction is available.
The Ruling also clarifies the CGT position in relation to where shares are issued in exchange for assets acquired. In a previous Ruling, the Commissioner had provided that the issue of shares is not ‘property given’ for the purposes of the cost base rules. Therefore, there would be no cost base ascribed to the acquired assets in this situation previously. This Ruling now provides that the issue of shares is ‘property given’ for cost base purposes.
|
|
'Climate Ready Grants' program
|
|
The ‘Climate Ready’ program is a competitive based grants program delivered by AusIndustry. It aims to encourage growth and successful innovation Read more |
|
|
|
|
