Bills Digest no. 159 2006–07
Tax Laws Amendment (2007 Measures No. 3) Bill
2007
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Schedule 1: Distributions to entities
connected with a private company and related issues
Schedule 2: Superannuation contributions
transitional non-concessional contributions caps
Schedule 3: Capital gains of testamentary
trusts
Schedule 4: Taxation of superannuation
benefits of deceased military and police personal.
Schedule 5: Thin capitalisation
Schedule 6: Repeal of dividend tainting
rules
Schedule 7: Clarification of
the interest withholding tax exemption
Schedule 8: Forestry managed investment
schemes
Schedule 9: Non-resident trustee
beneficiaries
Schedule 10: Distributions to foreign
residents from managed investment trusts
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Tax Laws
Amendment (2007 Measures No. 3) Bill 2007
Date introduced:
10 May 2007
House: House of Representatives
Portfolio: Treasury
Commencement:
New sections 1 to 3 comment on Royal Assent.
The operative provisions have different commencement dates. Some
are effectively retrospective. Commencement dates for each
schedule, or provisions within schedules, are noted in the
discussion of the relevant schedule in this Digest
To make necessary
amendments to the following Acts:
- Income Tax Assessment Act 1936
- Income Tax Assessment Act 1997
- Fringe Benefits Tax Assessment Act 1986
- Income Tax (Transitional Provisions) Act 1997,
and
- Taxation Administration Act 1953.
This Bill contains a wide variety of measures.
Consequently, relevant background, position of various interest
groups and political parties, pros and cons and financial
implications of each measure contained in this Bill will be given
at the commencement of each section.
While each of the measures enacted by this
Bill have already been separately announced, the Minister for
Revenue and Assistant Treasurer, The Hon. Peter Dutton MP,
collectively announced all the measures on 10 May
2007.(1)
The proposed changes in Schedule
1 of this Bill are to Division 7A of the
Income Tax Assessment Act 1936 (ITAA36).
Under Division 7A, amounts
paid, lent or forgiven by a private company to certain associated
entities (including individuals) are treated as dividends (i.e. are
deemed to be dividends), unless they come within specified
exclusions. These provisions apply to non-share equity interests
and non-share dividends in the same way that it applies to shares
and dividends.
The dividends so paid are then taxed as
ordinary income in the hands of the recipient. In these
circumstances a private company s franking account is also
debited.
The provisions apply where the recipient of
the payment, loan or forgiven amount is:
- a shareholder
- an associate of a shareholder, or
- a former shareholder or former associate where a reasonable
person would conclude that the amount is paid, lent or forgiven
because of that former status.
For these purposes, associate has the meaning
provided in existing section 318, which covers a broad range
of entities that are associates of natural persons, companies,
partnerships and trustees.(2)
When a payment is made it is deemed to be a
dividend payment. The original purpose of Division
7A was to ensure that private
companies will no longer be able to make tax-free distributions of
profits to shareholders (and their associates) in the form of
payment or loans . In particular, the Division was intended to
ensure that all advances, loans and other credits (unless they come
within specified exclusions) by private companies to shareholders
(and their associates), are treated as assessable dividends to the
extent that there are realised or unrealised profits in the
company. In addition, debts owed by shareholders (or associates)
which are forgiven by private companies are treated as dividends.
(3)
The proposed changes generally reduce the
severity of the penalties associated with Division
7A where such distributions are deemed to have been
made.
The government s intention to change the
provision of Division 7A ITAA36 was announced in
the Minister for Revenue and Assistant Treasurer s media release
no. 89 of 6 December 2006.
The Taxation Institute welcomed the proposed
changes when they were first introduced. They considered that the
proposed measures correct significant inequities in the way that
Division 7A ITAA36 operated.(4) There
has been no significant press comment on these particular
measures.
On one hand the proposed measures could be
seen as a watering down of the current rules protecting the
integrity of the tax system as it applied to distributions from
small business.
However, the current penalties could also be
seen as excessive and unwarranted. Therefore the proposed changes
could also be seen as correcting significant inequities in the
current tax law applying to small business.
Further, the proposed changes will reduce the
likelihood that a taxpayer might accidentally cause a deemed
dividend to occur. This will reduce tax compliance costs for a
private company.
The Explanatory Memorandum to this Bill notes
that the financial impact of these particular changes are
unquantifiable but are expected to be small.(5)
Division 7A deals with loans
and other payments made to an entity. Under existing section 470 an
entity can be a person, partnership, trustee or company.
Item 3 of Schedule
1 inserts new subsection 109D(4A). The
purpose of section 109D is to allow so much of a
loan made during a financial year, that remains unrepaid and
un-converted to a loan under paragraph 109D(3)(c)
at the company s lodgement day for its tax return for that year, to
be treated as a dividend paid to an entity and taxed
accordingly.
Under the proposed change, if a payment from a
private company is formally converted to a loan before that company
s lodgement day, then it is treated as a loan for tax purposes, and
the un-repaid amount at lodgement day is not classed as a dividend
paid to the entity.
Items 3 and
4 reduce the amount of a deemed dividend paid to
an entity in a year where they have failed to make the required
repayments in that year.
Under the current section
109E if an entity who has received an amalgamated loan
from a private company fails to make the required minimum yearly
repayments to that private company calculated under
subsection 109E(6), the deemed dividend paid to
the entity is the outstanding balance of the loan and is taxed
accordingly.
An amalgamated loan is simply the total of all
un-repaid loans made by the private company to an entity with the
same term and would cause the private company to be taken to pay a
dividend.(6) Where the amount of the outstanding
amalgamated loan is large, the tax impost is also potentially very
large.
The impact of items 4 and
5 is to allow the amount of the deemed dividend
raised in these circumstances to be the difference between the
amount actually repaid, and the amount that should have been repaid
in that particular year not the amount of the outstanding loan.
Loans that meet the minimum interest rate and
maximum term criteria under section 109N ITAA36 do
not trigger a deemed dividend. Briefly these criteria are:
- for a loan secured by a registered mortgage over real property
for not more than 25 years and an interest rate specified in
subsection 109N(2), and
- for an unsecured loan, a maximum term of 7 years with the above
interest rate.
Item 6 inserts new
subsection 109E(3A) and 109E3B)
into the ITAA36. These new subsections allow the conversion of an
unsecured loan meeting the requirements of section
109N to a secured loan also meeting these
requirements.
Item 9 inserts new subsections
109G(3A) and 109G(3B) into the
ITAA36. A company making a loan to an entity may elect to forgive
an amount of an outstanding loan. Under current section
109F the amount of the deemed dividend arising from such
an action would be the total amount of the loan
forgiven.(7) This would occur even if a deemed dividend
in relation to the same loan also arose from the operation of
section 109E ITAA36. This can lead to the double
counting of a deemed dividend arsing from the same event for tax
purposes.
Item 9 allows for the reduction
of the deemed dividend arising from the forgiveness of a loan made
to an entity by a private company by the amount of any deemed
dividend arising from the same loan under section
109E ITAA36. Thus, the above mentioned double counting is
avoided. The general effect of Division 7A ITAA36
is to prevent the perpetual refinancing of loans made by private
companies to various entities. However section
109R specifies payments that can be made to a private
company for the refinancing of a loan that are not to be taken into
account when assessing whether the required minimum repayment under
section 109E has been made or whether some much of
a loan that remains unrepaid in any one year is to be assessed as a
deemed dividend payment made to an entity under sections
109D and 109E ITAA36. Item
12 expands the range of circumstances in which payments
made to a private company in order to refinance it loan to an
entity, without triggering the assessment of a deemed dividend
payment to the entity for taxation purposes.
Item 13 inserts new
section 109RB into the ITAA36. Under current law
when a deemed dividend is paid from a private company the
Commissioner for Taxation cannot disregard it, and that company s
franking credit account cannot be debited.
New section 109RB gives the
Commissioner the ability to disregard a deemed dividend where the
dividend arose from an honest mistake or an inadvertent omission by
the receiving entity or the company deemed to have paid the
dividend.
Just what circumstances lead to the assessment of
an honest mistake or inadvertent omissions by the Commissioner are
to be determined by reference to all of the circumstances
surrounding the particular case. The Explanatory Memorandum gives
various examples of these circumstances and the Commissioner s
likely response in each of these circumstances.(8)
Further, in these circumstances the private company may choose
whether or not to attach dividend imputation credits to (i.e. frank
the dividend) to amounts classed as deemed dividends in these
circumstances.
There may be circumstances where a private
company must make a dividend payment to a person as to satisfy a
Family Court order. Under current law, such payments cannot be
franked. That is, they cannot have the tax benefits of the dividend
imputation tax regime attached to them.
Item 13 also inserts new
section 109RC into the ITAA36. This new section
allows dividends paid from a private company in response to a
Family Court order to be franked. That is, to have the company s
dividend imputation credits, at that company s normal benchmark
franking percentage (i.e. 100% or such lesser percentage of the
dividends are normally franked) attached to such payments.
Where an entity fails to make the required annual
repayment of a loan from a private company the un-repaid annual
amount is classed as a deemed dividend paid by the company.
Item 13 also inserts new section
109RD, which gives the Commissioner for taxation the
ability to extend the time period in which the required repayments
may be made for a particular financial year, providing the reasons
why the repayments were not made were beyond the entity s
control.
Under current law if an entity defaults on a loan
from another party, say a bank, and a private company covers the
liability, the private company s payments to the bank are classed
as a deemed dividend. Item 14 inserts new
subsection 109UA(5) into the ITAA36. The effect of
this new subsection is that a deemed dividend will not arise in
these circumstances where the said private company has guaranteed
the repayment of the annual liability and pays that
liability.
This amendment could be seen as a way for
entities to effectively receive tax free income if:
- they raise a loan from a financial institution, say a bank,
and
- have the annual repayment of that loan guaranteed by a private
company in which they hold shares, and
- the loan meets all the requirement of existing section
109N, and
- the entity defaults on the annual loan repayment, and
- the private company makes the required repayment.
Under the provisions of Division
7A a private company can only be assessed as having paid a
deemed dividend if it has a distributable surplus . The value of a
private company s distributable surplus is worked out according to
a formula existing subsection 109Y(2).
Items 16 and 17
amend the above subsection to allow the Commissioner for Taxation
wider powers to determine the correct value of a private company s
distributable surplus. This will enhance the Commissioner s ability
to correctly determine the amount of deemed dividends arising from
a private company in any one year.
Item 29 repeals section
205-30 (table item 8) of the Income Tax Assessment Act
1997 (ITAA97). Currently, the effect of this particular table
item in section 205-30 ITAA97 is that a private
company s franking account is automatically debited when a deemed
dividend arises under Division 7A. This particular
amendment means that this automatic debiting will no longer
occur.
When a deemed dividend was assessed under
Division 7A ITAA36 a double penalty was imposed.
The receiving entity was assessed as having received this dividend,
un-franked. They could not offset their income tax liability with a
dividend imputation credit. Further, the company lost the
associated amount of franking credits that may have been available
for later distribution. The amendment in Item 29
will allow a private company to retain the associated franking
credit when a deemed dividend is assessed as being paid to an
entity.
Items 30 to 32
remove a loan made by a private company to its employee from the
definition of a Fringe Benefit for taxation purposes, where such
loans meet the requirements of section 109N
ITAA36. The private company making the loan is not then subject to
the Fringe Benefits Tax in respect of that loan.
The main issue concerning this particular
amendment is whether the requirements of section
109N ITAA36 provide enough protection against the undue
avoidance of tax in respect of these loans.
Item 42 inserts new
subsection 214-60(1A) into the ITAA97. The effect
of this new subsection will be to prevent the Commissioner for
Taxation from making an assessment under section
214-60 ITAA97 of a corporate entity s franking account
where:
- a corporate entity is not required to give the Commissioner a
franking return for an income year, and
- the same entity has otherwise lodged the required tax return
for the year, and
- three years have passed since the corporate entity has lodged
the tax return or was required to lodge the tax return, whichever
is the later.
This gives the Commissioner three years in which
to make an assessment of a corporate entity s franking account.
Item 43 provides for different
dates on which the amendments made in Schedule 1
apply, as follows:
- for loans that are not affected by the above mentioned
amendments to the Fringe Benefits Tax (FBT) provisions (i.e.
private company loans made to its employees) 1 July 2006
- where the FBT amendments applies 1 April 2007
- where new section 109RB applies (i.e. the
Commissioner s ability to disregard a deemed dividend arising from
an honest mistake etc) 1 July 2002, and
- where the new three year limit for the Commissioner to make an
assessment of a corporate entity s franking account applies 1 July
2006.
Even though this particular schedule commences
operation on the date of Royal Assent the provisions of
item 43 make this schedule retrospective tax
legislation.
As part of the recently legislated simplified
superannuation arrangements limits were placed on the amount of
after-tax contributions (these are non-concessional contributions)
that could be made to a superannuation fund between 10 May 2006 and
1July 2007.
The relevant legislation applied to
contributions made by the superannuation fund member, or their
employer. It did not apply to non-concessional contributions made
by a friend of the superannuation fund member, on the latter s
behalf. The amendments in Schedule 2 correct this
oversight.
This measure was announced in the Minister for
Revenue and Assistant Treasurer s media release no. 37 of 24 April
2007.
There has been little media or interest group
commentary on this proposed measure.
This measure preserves the integrity of the
recently legislated simplified superannuation legislation. Under
this legislation, superannuation fund members may make up to $1
million of non-concessional contributions up to, and including, 30
June 2007. Once these contributions are inside the superannuation
fund their earnings are taxed at a nominal rate of 15 per cent p.a.
The actual rate of tax is often far lower. This measure prevents
wealthy individuals making unlimited use of the superannuation
environment as a tax shelter. Indeed, the government s already
legislated limits on non-concessional contributions are considered
quite generous.
The Explanatory Memorandum to this Bill notes
that there is no financial impact of this proposed
change.(9)
Item 2 of Schedule
2 inserts new subsection 292-80(7) to the
Income Tax (Transitional Provisions) Act 1997. The effect
of this addition is to include non-concessional superannuation fund
contributions made by a person, who is not an employer of a
superannuation fund member, in the assessable income of that
superannuation fund. This allows such contributions to be subject
to transitional limits on non-concessional contributions to
superannuation funds between 10 May 2006 and 30 June 2007 mentioned
above.
Generally, a testamentary trust is a trust
which is created through the grantor's will and does not become
operational until the grantor's death.
Under current laws a beneficiary of a
testamentary trust is generally assessed on a share of that trust s
taxable income. If this income includes capital gains of the trust
s assets, the beneficiary s assessable income will include their
share of those capital gains. Thus, the beneficiary may pay tax on
capital gains to which they have no access.
The proposed amendments will allow the trustee
of a resident testamentary trust to choose to be assessed for tax
purposes on the capital gains that would otherwise be included in
the income of the beneficiary. The trustee would then pay the
required tax on these capital gains.
These particular measures were announced in the
Minister for Revenue and Assistant Treasurer s media release no. 74
of 17 October 2006.
Industry comment was generally favourable at the
time the Minister for Revenue and Assistant Treasurer first
announced this proposed change.(10)
The proposed change will allow trustees of
testamentary trusts to pay tax on any capital gains the trust
realises, instead of the beneficiaries who may not have access to
these capital gains.
However, these proposed changes give the
trustee the option of whether or not to pay the required tax. If
the trustee decides not to pay this tax the beneficiary is still
obliged to pay the tax.
The Explanatory Memorandum to this Bill notes
that the financial impact of these particular changes are
unquantifiable but are expected to be small.(11)
Item 2 of Schedule
3 inserts new section 115-230 into the
ITAA97. This new section has several subsections, each with
separate functions.
New subsection 115-230(2)
specifies the trusts to which this policy applies. These trusts can
only arise from a will or a codicil. The latter term refers to a
legal instrument made subsequently to a will, modifying it. It
legally becomes a part of the original will it is amending.
This new section also applies to the estates
of those who die intestate . The latter term refers to those who
die without leaving a will or whose estate is disposed of without a
will.
New subsection 115-230(3)
specifies the circumstances in which the trustee can make the
choice to pay the required tax on the realised capital gains of the
estate. In particular the beneficiary does not have a vested
interest in the property of the trust and that property has not
been paid to this beneficiary.
In law vesting is to give an immediately
secured right of present or future enjoyment. Basically that means
being able to take full advantages of the asset in which one is
vested. Trustees of testamentary trusts can only make the choice to
pay tax on the realised capital gains of that trust if the
beneficiary does not have a vested interest in the property in
question.
Proposed subsection
115-230(5) ITAA97 allows the trustee to make this choice
up to 2 months after the last day in the trust s income year, or a
later day allowed by the Commissioner for Taxation.
Item 3 of Schedule
3 provides that these amendments apply for the 2005 06
income year and later years.
Normally, lump sum superannuation payments
made on the death of a fund member to their dependents (including
those in an interdependent relationship) are made tax free.
Payments made to non-dependents are taxed, the actual rate
depending on the source of the funds and the age of the person
receiving the payment.
Under the proposed measure payment made to
non-dependents of Defence Force personal, Australian Protective
Service officers and federal or state or territory police killed in
the line of duty will also be paid tax free.
This treatment will apply from 1 January 1999.
Ex-gratia payments will be made to those non-dependents who
received superannuation payments between 1 January 1999 and 30 June
2007. The payment of superannuation benefits will be tax free to
non dependents of deceased military and police personal who die in
the line of duty from 1 July 2007.
These particular measures were announced in the
Minister for Revenue and Assistant Treasurer s media release no. 32
of 5 April 2007.
There has been little media or interest group
commentary on this proposed measure.
The proposed change marginally increases the
benefits available from serving in the military or federal police
forces.
However, it is questionable whether
non-dependents of such deceased persons are actually in need of the
benefits they stand to receive. There overall interests in
retirement may be better served if they are given access to these
funds under the same general conditions as other Australians; that
is once they have reached their preservation age (between 55 and
60) and have retired from then workforce. This would provide
resources to the non-dependent at a time closer to their
retirement. Such use of these funds is the original intention of
superannuation benefits.
The Explanatory Memorandum to this Bill notes
that the financial impact of this particular change will be a cost
of $0.2 million per year.(12)
Item 2 of Schedule
4 inserts new subsection 302-195(2) into
the ITAA97. This new subsection allows a non-dependent to be
treated as a death benefit dependent if they receive a
superannuation benefit as a result of the death of a Defence force
or police officers if they die in the line of duty. Superannuation
benefits received by a death benefit dependent are free of tax.
Exactly what may constitute a death in the
line of duty will be specified in regulations.
Item 5 of Schedule
4 allows (but does not require) the Commissioner of
Taxation to make an ex-gratia payment in relation to a
superannuation payment received before 1 July 2007, where:
- the payment arose because of the death of another person,
and
- the person who received the lump sum is not a dependent of the
deceased person.
The purpose of such payments is to refund any tax
paid in relation to those superannuation payments, if they were
received between 1 January 1999 and 30 June 2007.
Readers are referred to pages 73-74 of the
Explanatory Memorandum for information on this amendment, which
deals with an extension to the transitional period relating to
accounting standards under the thin capitalisation rules.
With certain exceptions, dividends that are
debited to, or paid out of amounts transferred from, a
disqualifying account are not frankable (ITAA36 sections 46G to 46M: the dividend tainting rules
) and are classed as tainted for corporate tax purposes.
A disqualifying account is:
- a share capital account
- an account consisting of shareholders' capital in relation to a
statutory fund of a life company
- a reserve to the extent that it consists of profits from the
revaluation of assets of the company that have not been disposed of
by the company, and
- if the company is a life company, are not assets of a statutory
fund.(13)
The proposed changes will repeal the dividend
tainting rules and make consequential amendments that will:
- ensure that distributions by a company from a share capital
account (including a tainted share capital account) will continue
to be unfranked (i.e. not have dividend imputation credits attached
to them). Normally dividends are not paid from a company s share
capital account, and
- modify the general dividend imputation anti-avoidance rules so
that when considering whether to apply the rule the Commissioner of
Taxation can take account of whether the distribution is sourced
from unrealised or untaxed profits.(14)
The removal of the dividend tainting rules arises
due primarily to the previous repeal of the provisions covering the
inter-corporate rebate. The dividend tainting rules were introduced
in 1995 to prevent corporate taxpayers from taking advantage of
this rebate to make tax free distributions to corporate
shareholders or transferring franking credits to shareholders by
inappropriate means.(15)
The inter-corporate rebate rules were removed
with effect from 1 July 2003 at the same time as the introduction
of the corporate tax consolidation regime. This regime made it
impossible for a company to enter into transactions that misused
the inter-corporate rebate. As a consequence, the dividend tainting
rules are now without a primary objective.
Further, the dividend tainting rules may be
inadvertently triggered by the requirements of the Australian
Equivalent of the International Financial Reporting
Standards.(16) Australia has adopted the International
Financial Reporting Standards for its corporate reporting from 1
January 2005 and all corporate entities must now prepare their
reports for taxation purposes in accordance with these
standards.(17) There are many benefits of reporting
under these standards, including better financial information for
shareholders and regulators, enhanced comparability, improved
transparency of results, and increased capability to secure
cross-border listing and funding.(18) The proposed
changes avoid the inadvertent triggering of the dividend tainting
rules by the latter s removal from the ITAA36.
These particular measures were announced in the
Minister for Revenue and Assistant Treasurer s media release no.80
of 9 November 2006.
The Institute of Charted Accountants have
welcomed the government s proposed measures.(19)
There are some apparent advantages to the
proposed changes:
- they remove unnecessary sections of the ITAA36
- they avoid a potentially unintended consequences of the
introduction of the International Financial Reporting Standards
regime
- they maintain the tax avoidance intent of the tainted dividend
rules, and
- the proposed changes are claimed to reduce costs of tax
compliance through companies no longer having to maintain separate
disqualifying accounts.(20)
The Explanatory Memorandum to this Bill notes
that there is a negligible financial impact of the proposed
changes.(21)
Item 1 repeals existing sections
46G to 46M of the ITAA36.
Item 2 inserts new
paragraph 177EA(17)(ga) into the ITAA36.
Section 177EA contains anti-tax-avoidance measures
applying to the payment of franked dividends. The proposed
amendment to this section allows the Commissioner to determine
whether a franking credit (i.e. an imputation tax credit) is
attached, or not attached, in circumstances where the distribution
arises from unrealised or untaxed profits of a company. This
amendment is necessary due to the removal of the tainted dividend
rules in item 1 above.
Item 4 repeals paragraph
202-45(e) of the ITAA97 and substitutes a new one in its
place. This amendment is necessary because the current
paragraph 202-45(e) refers to the tainted dividend
rules that are repealed by item 1 above. The
replacement text preserved the same rule, namely that dividends
paid from a company s share capital account cannot be franked.
Item 5 repeals
subsection 375-872(4) of the ITAA97 and
substitutes new text in its place. Again, this change is necessary
due to the current text referring to the tainted dividend rules
that are to be repealed by item 1 above.
Item 8 provides that the
amendments made by Schedule 6 of this Bill apply
to distributions made by a company on or after 1 July 2004.
Interest withholding tax is payable on
interest derived by a non-resident unless an exemption applies.
Interest withholding tax applies where interest is paid by:
- a resident, except where the interest is wholly incurred by the
resident as an expense of carrying on a business overseas at or
through a overseas branch, or
- a non-resident and the interest is an expense wholly or partly
incurred by the non-resident in carrying on a business in Australia
at or through a branch in Australia.
Withholding tax payments are required, not
only where interest is actually paid to a non-resident, but also
where interest is payable and has been dealt with on behalf of, or
at the direction of, the non-resident by, for example, being
reinvested.
In addition, to avoid a possible loophole,
interest derived by a resident in the course of carrying on a
business through an overseas branch is subject to interest
withholding tax if it is paid by:
- another resident and it is not wholly incurred by the payer in
carrying on a business in a foreign country through a branch in
that country, or
- a non-resident and it is wholly or partly incurred in carrying
on business in Australia through a branch.
Interest withholding tax is imposed at a flat
rate of 10% on the gross amount of interest paid (i.e.
without deducting expenses incurred in deriving that interest,
etc). With some exceptions, this rate is unaffected by Australia's
Double Taxation Agreements.(22)
The Explanatory Memoranda to this Bill
contains an excellent background to the proposed
measures.(23) The following comments seek to explain
some of the terms used in this background.
The term refers to debts owed by a company
that are not raised by way of a debenture.
A debenture is a long term debt instrument
used by governments and large companies to obtain funds. A
debenture is unsecured in the sense that there are no liens or
pledges on specific assets. It is however, secured by all
properties of the issuing company not otherwise pledged. In the
case of bankruptcy, debenture holders are considered general
creditors.
Thus, a non-debenture debt is a debt that is
not secured by way of a debenture and would most likely be a debt
secured by a charge over a specific asset of the issuing
company.
The Explanatory Memorandum notes that
non-equity shares are shares in a company that are viewed as equity
on a legal form assessment, but are characterised as debt interests
based on their economic function.(24) An example of such
an instrument may be a preference share issued by a company.
Generally, preference share dividends, and capital returns (if any)
are paid first before dividends paid in respect of ordinary
shares.
A syndicated loan (or syndicated bank
facility) is a large loan in which
a group of banks or other lenders work together to provide funds
for a borrower. There is usually one lead bank (the Arranger or
Agent) that takes a percentage of the loan and syndicates
the rest to other banks. A syndicated loan is the opposite of a
bilateral loan, which only involves one borrower
and one lender (often a bank or financial institution.)
Interest paid under a debenture is exempt from
interest withholding tax if the issue of the debenture satisfies a
public offer test (section 128F ITAA36). If the
issuing company is a resident, it must also be a resident at the
time of payment. If the issuing company is a non-resident, the
issue must be after 30 June 2001, the company must be a
non-resident at the time of payment, and the issue and payment must
be made through a permanent establishment of the company in
Australia.
An exemption also applies where the sale of a
debenture is deemed to give rise to deemed interest under section
128AA ITAA36 on or after 29 August 2001, and the public offer test
is satisfied. This is intended to ensure that there will be an
exemption where the debenture is on-sold by a non-resident to an
Australian resident before the debenture's maturity date.
A company will satisfy the public offer test
if the debentures were offered for issue in any of the following
circumstances:
- to at least 10 persons operating in a capital market
- to at least 100 investors whom it was reasonable for the
company to have regarded as either having previously acquired
debentures or likely to be interested in acquiring debentures
- as a result of the debentures being accepted for listing by a
stock exchange where the company had previously entered into an
agreement with a dealer, manager or underwriter requiring the
company to seek such a listing
- as a result of negotiations initiated publicly in electronic
form (eg through Reuters or Bloomberg), or in another form, used by
financial markets for dealing in debentures, or
- to a dealer, manager or underwriter for the purpose of
placement of the debentures.
Debentures which are global bonds also satisfy
the public offer test.(25)
The proposed measures are that only
non-debenture debt interests that are non-equity shares and
syndicated loans will be eligible for the exemption from interest
withholding tax unless the non-debenture debit interest is
prescribed as eligible for exemption by separate
regulations.(26)
Despite this statement it is not clear whether
the proposed changes are also meant to exclude interest paid on
debentures from the interest withholding tax exemption. The
Explanatory Memorandum also notes that the requirement for interest
arising from issued debentures still applies, though it is not
clear whether this is meant to relate to debentures already on
issue, or debentures issued after the date on which these
amendments take effect.(27) The following section on the
Bill s main provisions in relation to this measure considers
whether the actual wording of the amended legislation actually
precludes interest paid on debentures from the interest withholding
tax exemption.
The Explanatory Memorandum also notes that the
purpose of these amendments is to restore the original intent of
previous amendments to the interest withholding tax provisions of
2005(28) and to eliminate a risk to tax system
integrity.(29)
These measures were announced in the Minister
for Revenue and Assistant Treasurer s media release no. 91 of 7
December 2006
The proposed changes to interest withholding
tax have not led to substantial comment from either the press or
industry groups.
The restoration of the policy intent of the
2005 changes to the interest withholding tax provisions is helpful
in containing tax avoidance behavour. The Explanatory Memorandum
notes that an unintended consequence of these changes was that a
wider range of interest payments qualified for an exemption from
this particular tax than was intended.(30) The proposed
changes seek to restrict types of debts whose interest payments,
when effectively made to a foreign entity, may benefit from this
exclusion.
However, the proposed changes leave the way
open for Australian business to raise finance from overseas
sources. Interest payable on these debts may still be exempt from
the interest withholding tax if they are a non-debenture debt that
is also a non-equity share, or the funds come from a syndicated
loan, or the particular financial instrument used to source the
funds is prescribed by regulation as being exempt from this
particular tax.
Business may be concerned that the reduction
in the types of interest payments that may benefit from this
exemption will restrict their capacity to raise loans from
overseas.
Financial Implications
The Explanatory Memorandum notes that these
proposed measures have no financial impact.(31)
Item 1 of Schedule
7 repeals the existing paragraph
128F(1)(e) ITAA36 and substitutes new text in its place.
The new text ensures that interest payable by a resident company
arising from a debt interest that is either a non-equity share, or
a syndicated loan, or a debet interest prescribed by regulations is
eligible for an exemption from the interest withholding tax if they
satisfy the public offer test set out later in section
128F ITAA36.
Item 2 achieves the same end
for a non-resident company operating through a permanent
establishment in Australia, and that establishment issues the debt
and pays the interest arising from that debt.
Item 3 repeals
paragraph 128F(1B)(b) ITAA36 and substitutes a new
paragraph of the same number. It deals with applying the interest
withholding tax exemption to a particular type of debt security.
The purchase price of a debt security may be made up of both the
amount lent, and the interest payable. The effect of Item
3 is to ensure that only the interest component of the
purchase price is exempt from the interest withholding tax if that
security otherwise meets the public offer test.
When considering this question is worth noting
the full text of the proposed new subsection
128F(1) ITAA 36:
INCOME TAX ASSESSMENT ACT 1936 - SECT 128F
Division does not apply to interest on certain
publicly offered company debentures or debt interests
Interest to which this section applies
(1) This section applies to
interest
paid by a
company in respect of a
debenture or
debt interest in the
company if:
(a) the
company was a
resident of Australia when it issued the
debenture or
debt interest; and
(b) the
company is a
resident of Australia when the
interest is
paid; and
(c) for a debt interest other than a debenture the
debt interest:
(i) is a non-equity share; or
(ii) consists of 2 or more related schemes (within
the meaning of the Income Tax Assessment Act 1997) where
one or more of them is a non-equity share; or
(iii) is a syndicated loan; or
(iv) is prescribed by regulations for the purposes
of this section; and
The vital point here is to observe that
paragraph (a) above refers to debentures and new
paragraph (c) above does not exclude debentures
from the operation of section 128F ITAA36. Rather,
it includes the interest paid on debts that are not a debenture and
which are either a non-equity share or a syndicated loan as being
eligible for the interest withholding tax exemption. This pattern
of wording is repeated in the amendments in Items
2 and 3 of Schedule
7.
If this interpretation of the proposed
changes in Items 1 to 3 above is
accepted, despite the apparent stated intent of these changes in
the Explanatory Memorandum noted above, it appears that the
proposed changes do not necessarily exclude interest paid on issued
debentures from the interest withholding tax. This point may need
to be further clarified with the benefit of legal advice.
Item 4 inserts new
subsection 128F(3A) into the ITAA36. This
insertion ensures that loans made through a syndicated loan
facility sill comply with the public offer test.
Item 5 inserts new
subsection 128F(5AA) into the ITAA36. This
amendment specifies conditions under which a syndicated loan
facility will fail the public offer test. Briefly, the grounds for
such a failure are that a member of the lending syndicate is an
associate of the borrowing company and would not have become a
member of the lending syndicate in the normal course of commercial
practice.
Items 6, 7
and 8 define the terms syndicated loan and
syndicated loan facility for the purposes of section
128F of the ITAA36.
Items 9, 10,
11 and 12 achieve the same
outcomes for the trustee of an eligible unit trust, as
items 1 to 8 do for a company.
That is, the exemption of interest paid by a trustee of an eligible
unit trust, in respect of non-debenture non-equity shares and
syndicated loans, from the interest withholding tax.
However, it appears that the precise wording
of the amendments in items 9 and
10 also appear to continues to allow the interest
paid in respect of debentures to be exempt from this tax.
Again, the government s intent at this point should be
clarified.
Item 16 provides for these
measures to take effect from 7 December 2007.
Since the mid 1980s the forest plantation
industry has lobbied for, and achieved, a number of changes to the
tax treatment of forestry aimed at:
removing legal anomalies and unintended
consequences, and warding off potential policy mistakes [these]
campaigns have focused on removing impediments in the tax system,
rather than on seeking special incentives for forestry. These
various impediments had been nominated for attention in numerous
federal and national reports and strategies, including the report
of the National Plantations Advisory Committee (1991), the Forest
and Timber Inquiry conducted by the Resource Assessment Commission
(1992), the National Forest Policy Statement (1992), the Wood and
Paper Industry Strategy (1995), and the national plantations
strategy, Plantations for Australia: The 2020 Vision
(1997).(32)
One of the major issues in the taxation of
plantation forestry is that of period inequity . This refers to the
length of the time period between when costs are incurred -
essentially the establishment phase - and income is received from
harvesting.(33)
Managed Investment Schemes (MIS) facilitate
investor participation in timber plantation schemes.(35)
The structure of an MIS which distinguishes it from other forms of
investment is that each investor/grower pays lease and management
fees to a contracted plantation manager, via a product disclosure
statement , to carry on a primary production business on the grower
s behalf, in concert with other growers. This structure results in
investors purchasing one or more woodlots - usually around 1
ha.
The plantation management company pays tax on
its profits from the growers subscriptions (fees). Much later, the
grower pays tax on the assessable income from the harvest proceeds.
Under interpretation of taxation legislation adopted by the
Australian Taxation Office (ATO), until recently growers initial
non-capital expenditure was considered as incurred in gaining or
producing assessable income and hence deductible in the year they
are incurred. MIS allow retail investors to invest in plantation
forestry thereby, in effect, becoming primary producers even though
they are not on-the-land .
MIS operate in accordance with the Chapter 5C
of the Corporations Act 2001 (the Act) and the Product
Rulings program from the ATO, which was introduced in mid 1998. The
Act requires the contract between investors (growers) and the
plantation manager to be covered by a Product Disclosure Statement
(PDS). A PDS is regulated by the Australian Securities and
Investments Commission (ASIC) under the Act and ASIC s policy
statement Prospective Financial Information .
ATO rulings are sought for MIS projects to
confirm the tax deductibility of growers expenditure. In effect the
ATO assesses a project to determine whether growers will be
carrying on a business on a commercial basis. Neither the ATO nor
ASIC make a judgement about the commercial viability of the
project.
The deductibility of prepayments for investors
in forestry MIS has been the subject of significant debate in
recent years. Under the general prepayment rules for business, the
deduction for expenditure which is prepaid is apportioned over the
period covered by the services up to a maximum of 10 years.
However, in the case of forestry the income
tax system provides a '12 month rule' that, in effect, facilitates
an immediate deduction for certain prepaid expenditure incurred
under a plantation forestry managed agreement. The 12 month rule
applies to expenditure for 'seasonally dependent agronomic
activities' that will be carried out during the establishment
period of a particular planting of trees and the concession applies
provided a range of conditions are satisfied.
From the mid 1980s until November 1999
prepayment arrangements were based on a 13 month rule . However, a
problem arose with MIS companies not being required to pay tax on
profits at the same time as the investor claimed the deduction. By
completing the prepaid services in July of the year following that
when growers/investors claimed the tax deduction for the services,
MIS companies were deferring paying tax on profits until the second
financial year. This amounted to a tax holiday .
With the introduction of the 12 month rule MIS
companies were required to include the prepaid expenditure in
assessable income in the same year in which the deduction is first
available to the investor and not when the work is done on the
investor's behalf.
The general prepayment provisions mentioned
earlier continue to apply to the extent that any part of a
prepayment does not satisfy the particular arrangements for
forestry MIS.
The 12 month rule relating prepayment
provisions for seasonally dependent agronomic activities is the
only taxation concession specific to forestry MIS. This provision
is classified by Treasury as an accelerated write off and the cost
to revenue is relatively small as reported in Tax Expenditures
Statement.
Source:
Treasury, Tax Expenditures Statement 2006 p. 105
http://www.treasury.gov.au/contentitem.asp?NavId=&ContentID=1211
A sunset clause of 30 June 2006 was initially
applicable to the 12 month prepayment rule. However the Government
announced in the May 2005 Budget that this would be extended to 30
June 2008 to allow an extensive review to be conducted into all
aspects of support for the plantation timber industry. The
extension was intended to help minimise disruption to investors in
forestry MIS and MIS managers while the review was conducted and
options are developed to support the industry over the long
term.
In the 2005-06 Budget, the Government
announced that it would undertake a review of the taxation
treatment of plantation forestry covering the application of
taxation law to plantation forestry in the context of the
Government s broader plantation and natural resource management
policies.(36) The review was undertaken within
Government by Treasury and the Department of Agriculture, Fisheries
and Forestry (DAFF).(37)
Following the receipt of the report of the
review(38) the Government announced on 9 May 2006 that
it was proposing new arrangements as the basis for consultation.
The Government said the proposed arrangements:
- were designed to remove the uncertainty surrounding whether MIS
investments are deductible under the current law in respect of the
requirement that investors be carrying on a business
- would reduce the administrative and compliance burden on
investors and MIS companies, and
- be fully reviewed in 2011 to examine the appropriateness of the
arrangements in the context of the Government's forestry and
broader policy objectives.(39)
Submissions to this consultation closed on 14
August 2006.(40)
The outcome of the consultation was jointly
announced on 21 December 2006 by the Assistant Treasurer and
Minister for Fisheries, Forestry and Conservation.(41)
The specifics of the administrative requirements foreshadowed in
this announcement were detailed on 8 May 2007.(42) The
key features of the new arrangements are:
- from 1 July 2007, investors in forestry MIS will be entitled to
immediate upfront deductibility for all expenditure provided that
at least 70 per cent of the expenditure is direct forestry
expenditure . Direct forestry expenditure comprises:
-
- expenditures associated with planting, tending and harvesting
of trees at any time over the life of the investment and
- annual costs of the land used to develop forestry, whether that
be effective rental costs or lease payments for land
- the deduction will be provided by way of a separate statutory
provision and taxpayers will not need to demonstrate that they are
carrying on a business in order to access the statutory
deduction
- the Government will not remove deductibility under the general
deduction provision for contributions to forestry MIS. However,
under the general prohibition against double deductions, the
forestry MIS investor will not be able to claim a deduction under
both provisions
- an integrity rule requiring use of arm s length prices in
determining the value of expenditure directly related to forestry.
For purchased services this would include the normal profit margin
that an arm s length supplier would require
- an administrative requirement for promoters to
- notify the ATO when they first receive income from a forestry
MIS to ensure that the ATO is aware of all industry
participants
- document the basis on which the scheme satisfies the 70 per
cent direct forestry expenditure rule; and
- notify the ATO should the trees not be established within 18
months.
- forestry investors using the specific deduction will be treated
as passive investors for GST purposes, and
- tax deductibility arrangements for forestry MIS to be reviewed
within two years of commencement in the context of the development
of a secondary market.
The Government also announced in-principle
support for establishment of a secondary market for forestry MIS
interests. The Government believes that trading of forestry MIS
interests will introduce pricing information into the market and
increase liquidity of the interests. Following a further review of
this issue by Treasury and DAFF the Government announced on 8 May
2007(43) that from 1 July 2007, initial investors can
trade their interests after four years and also taxpayers who
invested prior to 1 July 2003. The four-year restriction applies
only to initial investors.
The Government advised that the income tax law
would be amended to:
- allow existing interests to be traded
- require initial investors (both existing and future) to hold
their interests for four years
- extend the amendment period for forestry MIS investors to allow
the Australian Taxation Office (ATO) to enforce the holding period
rules
- introduce a market value pricing rule at the time of first sale
from an initial to secondary investor to reduce tax arbitrage
- treat secondary investors (other than those holding interests
as trading stock) on capital account for acquisition and disposal
of their interests. For these purposes harvest proceeds will be
treated as a disposal(44) and
- allow secondary investors a deduction for ongoing costs, to
limit the incentive to front-load fees, and introduce a matching
provision that seeks to recoup on revenue account these deductions
from the sale or harvest proceeds.(45)
The proposed changes relating to investments in
forestry managed investment schemes are contained in the Minister
for Revenue and Assistant Treasurer s media release no. 97 of 21
December 2006.
The proposed changes relating to investments
in forestry managed investment schemes are based on, firstly, the
outcomes of a review of the taxation treatment of plantation
forestry and secondly, the subsequent consultation with industry on
the proposed new arrangements arising from the review. Both of
these have been detailed in the previous section.
The plantation forestry industry and the MIS
sector have generally supported the new arrangements. The National
Association of Forest Industries (NAFI) said:
The Australian Government has put in place a
system which ensures the ongoing confidence in the plantation
forestry industry by providing appropriate taxation arrangement for
investors [and] the development of a secondary market will also
assist in ensuring the investment in plantations is sustainable in
the long-term.(46)
Australian Forest Growers (AFG) which is the
national association representing and promoting private forestry
and commercial tree growing interests in Australia, i.e. not only
managed plantations, has given a mixed reaction. It has observed
that:
Changes to managed investment scheme rules
announced in the [2007] federal budget should allow more investment
in longer rotation plantations further expanding the plantation
sawlog estate.
while the approval of trading of immature MIS
plantations
implements long standing AFG policy relating to
secondary markets, which would allow trading of MIS plantations
prior to harvest. This will underpin future investment in secondary
processing by assisting in providing consistent wood flows.
However AFG also stated that:
private forest growers remain concerned that the
Government has not fully responded to the plantation tax review
announced in the 2005 budget. Forestry MIS has been a focus of the
review, and we welcome progress being made in that area, but we are
concerned that the many other longstanding issues such as period
inequity (lumpy returns), enhanced tax deductibility for natural
resource management plantings, and transfer of income into
superannuation, continue to await a Government
response.(47)
Treefarm Investment Managers Australia
(TIMA)(48) and A3P(49) have jointly welcomed
the conclusion to review of taxation arrangements for Australian
plantation forestry saying it:
reaffirms the Government s commitment to
maintaining a supportive tax arrangement for plantation
investment.
With regard to the introduction of the 70 per
cent direct forestry expenditure requirement, a move designed to
address concerns that MIS schemes were charging inflated fees to
investors, TIMA and A3P said that they:
believe that retail forestry companies will be
able to demonstrate that their projects comply with the condition
that 70% of the fees paid by investors must be spent directly on
forestry over the life of the projects.(50)
Traditional farmer organisations have been
less than enamoured with MIS. Although the National Farmers
Federation (NFF) has not specifically commented on the Government s
announcements which are the subject of this Bill, it has previously
been highly critical of MIS. It asserts that investor interest in
MIS is driven by tax deductibility considerations rather than
market forces and hence has resulted in distorted markets for both
inputs, especially land and water, and the outputs produced,
especially non-forestry commodities.
In its submission on the forestry
consultation, the NFF was opposed to the proposed cap on the
deductible amount; called for the removal of the 12 month
prepayment rule and expressed concerns about the proposed secondary
market.(51)
The debate over MIS has seen widely differing
views expressed by members of the Coalition. For example Hon. Peter
McGauran MP, the Minister for Agriculture, Fisheries and Forestry
has been very critical of MIS(52) whereas the Hon. Sen
Abetz, the Minister for Fisheries, Forestry and Conservation, has
publicly defended them.(53)
The ALP has been critical of the Government s
handling of the decision to end favourable product rulings for
non-forestry MIS and has unsuccessfully sought to establish a
Senate inquiry into non-forestry MIS. However, in relation to the
measures proposed by this Bill, the ALP has not actually indicated
a position.
The Greens have described forestry MIS as
ecologically destructive market intervention which they would
stop.(54)
The ATO has advised
that from 1 July 2008 it will cease issuing Product Rulings
supporting non-forestry MIS based on its current interpretation of
the income tax law. While that matter is not the subject of this
Bill there is a relevant point to be drawn from that decision given
that, to date, Product Rulings supporting forestry MIS have been
based on the same interpretation of the law by the ATO.
The ATO s change of interpretation means that
it no longer considers any investors in MIS i.e. both forestry and
non-forestry to be carrying on a business .(55) The
measures proposed in this Bill mean that prepayment deductibility
for forestry MIS will continue and be based in legislation not
interpretation. It is widely expected that without favourable
Product Rulings supporting investment under MIS, expansion of the
non-forestry agri-business will be significantly
affected.(56) The Government has not explained why it is
only facilitating the continuation of one category of MIS, that
being forestry.
The Explanatory Memorandum contains a table on
the revenue impact of these proposed measures.(57)
| 2007-08 |
2008-09 |
2009-10 |
2010-11 |
|
Nil
|
$61m
|
$103m
|
-$222m
|
Item 2 inserts new
Division 394 into the ITAA97. This Division sets
out rules about tax deductions for contributions to forestry
managed investment schemes It also sets out the tax treatment of
proceeds from the sale of interests in such schemes and the
proceeds from harvesting trees under such schemes.
New section
394-10 of the ITAA97 sets out the basic conditions for
claiming a tax deduction in respect of contributions to a forestry
managed investment scheme . This latter term is defined in new
section 394-15 as a scheme is for establishing and
tending trees for felling in Australia.
This new section allows a deduction for both
initial investors in a scheme, whose contributions establish that
scheme. It also allows a tax deduction to investors who purchase an
interest in the scheme on a secondary market, in relation to their
own contributions to the scheme made after they purchase that
interest. This latter provision is one of a number of provisions
that support the establishment of a secondary market for interests
in forestry management schemes in Australia.
New subsection 394-10(3)
denies this deduction to a person who has purchased an interest in
a forestry managed investment scheme if they have bought that
interest on a secondary market. Nor is the deduction available to a
person whose contribution first established the scheme, but who
sells their interest within 4 years after the end of the income
year in which they first invested in the scheme, under new
subsection 349-10(5).
New subsection 394-10(4)
ITAA97 requires that a scheme s trees have to be established within
18 months of the end of the relevant income year in order for a
deduction to be claimed for that year.
New subsection 394-35
outlines the 70% DFE rule for the purposes of this Division.
Briefly, a forestry managed investment scheme satisfies this rule
if at least 70 per cent of the amount of payments under the scheme
are devoted to direct forest expenditure (i.e. DEF).
The value of this amount, under
subsection 394-10(3) is the net present value , on
the 30 June of the income year, of all amounts that all current and
future participants in the scheme have paid, or will pay, under the
scheme.
A net present value is the future stream of
benefits and costs converted into equivalent values today. This is
done by assigning monetary values to benefits and costs,
discounting future benefits and costs using an appropriate discount
rate, and subtracting the sum total of discounted costs from the
sum total of discounted benefits. Under subsection
394-10(7) the required discount rate is the yield on 10
year Australian Government Treasury Bond.
Item 2 also inserts
new subsection 394-25 into the
ITAA97. This item allows the proceeds of the disposal of an
interest in a forestry management scheme (referred to in the
proposed legislation as a CGT event) to be market value of the
interest or the decrease in the market value of the interest. The
amount added to the taxpayer s assessable income is not the actual
amount received for the interest. The Explanatory Memorandum notes
that this allows these proceeds to be treated as the taxpayer s
assessable income and prevents undue tax minimization
practices.(58)
The net proceeds that a secondary investor
receives from the sale of their interest in a forestry managed
investment scheme is also included in their assessable income under
new section 394-30 ITAA97, also inserted by
item 2. These recepts are capital in nature and
the 50 per cent capital gains tax discount applies. The calculated
amount of assessable income takes account of the:
- the amount paid for the interest
- the amount of incidental income received during the period the
interest was held (e.g. income received from thinning operations,
and
- the amount of deductions claimed under new
section 394-10.
Example 9.10 in the Explanatory Memorandum gives
a good example of how a secondary investor s assessable income is
worked out under these new provisions.(59) Further
examples illustrate the tax treatment of a secondary investor s tax
treatment upon receiving the proceeds of a harvest.
New section
394-45 defines what is included in the term direct
forestry expenditure or DEF. This amount includes:
- amounts paid for the establishing, tending, felling and
harvesting or trees, and
- notional amounts reflecting the market value of goods, services
and the use of the land provided by the forestry manager.
Item 3 makes additional
amendments, in relation to investments in forestry managed
investment schemes to the Taxation Administration Act 1953
(TAA53).
New section 394-5 TAA53 requires
a forestry manager to give the Commissioner for Taxation a
statement about the scheme, the identity of its management and
amounts payable under the scheme, and any other information the
Commissioner for taxation may required, within 3 months after the
end of the income year in which that scheme s contributions are
received.
This allows the Commissioner for Taxation to keep
track of the number of forestry managed investment schemes in
operation and their expected effect on revenues.
Item 26 applies the provisions
of this schedule from 1 July 2007.
These proposed amendments alter the current
law in relation to the tax treatment of trust distributions made to
non-resident trustee beneficiaries.
A non-resident trustee beneficiary is a
trustee of a non-resident trust who receives a distribution from a
resident trust. It is not clear whether the non-resident trustee
beneficiary must themselves reside away from Australia.
Under current law, a resident trustee does not
pay tax on a distribution paid to a non-resident trustee
beneficiary. This tax status contrasts sharply with a resident
trustee s obligation to pay tax on trust distributions made to:
- a non-resident company under subsection 98(3) ITAA36, and
- a non-resident individual under subsection 98(4) ITAA36.
These amendments extend a resident trustee s
liability to pay tax in respect of distributions made to
non-resident trustee beneficiaries.(60)
This measure was announced in the Treasurer s
media release no. 39 of 9 May 2006, as part of the 2006 07
Budget.
Numerous press articles identified the
proposed measure as one dealing with tax avoidance by wealthy
Australians.(61) The Investment and Financial Services
Association welcomed the proposed changes.(62)
The ability to avoid Australian tax
requirements through ensuring that trust distributions are paid to
non-resident trustee beneficiaries is obvious. The proposed
measures plug this tax loophole.
The Explanatory Memorandum contains a table on
the revenue impact of these proposed measures.(63)
| 2006-07 |
2007-08 |
2008-09 |
2009-10 |
|
Nil
|
$250m
|
$270m
|
$280m
|
The provisions of this schedule deal with the
taxation of distributions where they are paid from one trust to
another trust. In particular this schedule contemplates
arrangements, where the distributions are paid from a resident
trust into a non-resident trust or a series of non-resident trusts.
This arrangement is called a chain of trusts and can involve a
number of trusts receiving distributions from a resident trust by
being passed along the chain.
Item 1 of Schedule
9 repeals current subsections 98(3) and (4) ITAA36 and
inserts new subsections 98(2A),
98(3) and 98(4) into the ITAA36.
New subsections 98(2A) and 98(3)
restate the current provisions. New subsection
98(4) imposes a tax liability on a resident trustee in
respect of distributions made to a beneficiary who is themselves
the trust of a non resident trust. This is the major operative
amendment of this particular schedule.
Item 4 inserts new
subsections 98A(3) and (4) into
the ITAA36. The effect of this item is to ensure that the ultimate
non-resident beneficiary of trust distribution is not taxed a
second time on amounts that have already been subject to taxes when
paid by a trustee in a chain of trusts.
Item 5 inserts new
section 98B into the ITAA36. This new section
ensures that a beneficiary s tax obligation in respect of
Australian sourced income is reduced by the amount of tax a trustee
earlier in the chain of trusts has already paid. Again, this
prevents the double taxation of the same amount of money. This
section applies to both resident and non-resident trust
beneficiaries.
Items 6, 7
and 8 also amend the ITAA36 to prevent the
taxation of Australian sourced trust distributions that have
already been subject to tax in the hands of a trustee of another
trust. Further, amounts that are not assessable income for
Australian tax purposes, when received by a non-resident
beneficiary through a trust distribution, are also not subject to
further tax.
Item 11 inserts new
subsection 100(1B) into the ITAA36. This new
provision ensures that a resident beneficiary of a trust, who has
no other source of income and is only a beneficiary of a single
trust in a chain, is assessed on income that has already been taxed
under new subsection 98(4) noted above. Of course,
this beneficiary s tax liability would be reduced to the extent of
the tax already paid on this income under items
6 to 8 discussed above.
Item 21 inserts new
section 115-222 into the ITAA97. This section
ensures that a non-resident trustee beneficiary:
- that is subject to tax under new subsection 98(4) of
the ITAA36, and
- whose assessable income includes a capital gain
does not benefit from the 50 per cent discount of
assessable capital gains available to resident tax payers. This
treatment [i.e. the denial of the discount] is similar to the
treatment of capital gains received by non-resident company trust
beneficiaries under section 115-220 of the ITAA97.
Item 23 deals with the receipt
of conduit foreign income by a non-resident trustee and a
non-resident beneficiary.
In general terms, conduit foreign income is
foreign income which is derived by a foreign resident through an
Australian corporate tax entity (the conduit), and which would not
normally be assessable to that Australian
entity.(64)
Item 23 inserts new
section 802-17 into the ITAA97. This new section
exempts both a non-resident beneficiary and a non-resident trustee
from Australian tax liability on any conduit foreign income they
receive.
Item 30 specifies that, with
some exceptions, the provisions of this schedule apply from 1 July
2006.
Like any other trustee, the trustee of a
managed investment trust is required to withhold an amount from
distributions made to non-resident unit-holders. However, the rate
at which the tax is withheld can vary, depending on whether the
non-resident unit-holder is a trust, a company or an
individual.
This situation is further complicated if the
resident managed investment trust makes payments to non-resident
unit-holders through an intermediary, such as a bank acting on the
resident investment trust s behalf. Apparently, there is
significant uncertainty about the relations between the three
parties to a transaction (i.e. the resident investment trust, the
intermediary and the non-resident unit-holder) in these situations
which lead to undue complications about the correct rate at which
the withholding tax is levied.(65)
The general rates of withholding tax payable
on payments to non-residents are as follows:
- dividends 30%
- interest 10%
- royalties 30%.
These general rates are subject to limits set
under Australia s double taxation agreements. In most cases where
Australia has entered into an agreement the withholding tax rates
on gross payments made to non-residents are:
- dividends 15%
- interest 10%
- royalties 10%.(66)
This variation in possible rates that may apply
to a resident managed investment trust s distributions to a
non-resident unit-holder, through an intermediary, may be one
potential cause of the above-mentioned confusion. Another cause may
be that the resident investment trust is not aware of whether the
non-resident unit-trust holder is a company, trust or individual,
especially if payments are made through an intermediary. In these
circumstances the potential for the wrong rate of withholding tax
to be applied may be significant.
Further, under the proposed amendments in
Schedule 9 of this Bill, a trustee of a resident
managed investment trust would be required to withhold tax at the
appropriate rate from distributions made to a non-resident unit
holder. This would require the trustee to be aware of whether the
non-resident unit-holder was a company, a trustee or an individual.
The amendments in this schedule are also necessary to avoid that
outcome and preserve the simplicity of imposing one flat rate on
all such non-resident unit-holders.(67)
Finally the Explanatory Memorandum notes that the
proposed changes in Schedule 10 will result in
compliance savings, especially by the Australian property trust
industry.(68)
The following table illustrates the gross rate of
withholding tax apparently imposed by other countries on
distributions from their resident managed property investment funds
to overseas investors.
|
Table 1: Comparison of Australian and overseas withholding
tax rates
|
|
Country
|
Rate
%
|
|
Australia
|
30
|
|
Canada
|
15
|
|
France
|
15
|
|
Germany
|
15
|
|
Netherlands
|
15
|
|
UK
|
15
|
|
US
|
15
|
|
Singapore
|
10
|
|
Japan
|
7
|
|
Source:
Property Council of Australia(69)
|
The above table only notes the gross rates.
Because of the effect of Australia s double tax agreements
Australia s final rate of tax on these distributions may be well
below the headline rate of 30 per cent if the non-resident
unit-holder submits the appropriate Australian tax return.
Generally, the proposed changes seek to remedy
this situation by imposing a flat rate of withholding tax of 30 per
cent on all distributions made by resident managed investment
trusts to non-resident unit-holders, no matter how the distribution
is made. The non-resident unit-holder may then submit an Australian
tax return to claim back any excess tax withheld.
If the resident managed investment trust makes
the payment to the non-resident unit-holder, it will be liable to
impose the 30 per cent withholding tax. If an intermediary makes
the payment to the non-resident unit-holder, that entity will be
responsible for applying the withholding tax to these payments.
Income consisting of dividends, interest or
royalty income is generally excluded from this measure, as are
capital gains on assets other than taxable Australian
property.(70)
The measures in this schedule were also
announced in the Treasurer s media release no. 39 of 9 May 2006, as
part of the 2006 07 Budget.
Press comment has focused on the apparent
increase in the withholding tax rate for property investors; from
zero in some cases to 30 per cent. Unfavourable comparisons have
been drawn between the proposed withholding tax rate for Australia
of 30 per cent and the much lower withholding tax rate in other
countries.(71) The Real Estate Institute of Australia
has called for a flat 12.5 per cent withholding rate instead of the
proposed 30 per cent rate. The Institute is concerned to ensure the
Australian property industry s international competitiveness by the
adoption of this proposed rate.(72) By this it means the
ability of the Australian property industry to attract
international funds.
The proposed changes will greatly simplify the
current withholding tax regime applying to distributions made to
non-resident unit holders in resident managed investment
trusts.
However, there is a danger that these
non-resident unit-holders may be paying to higher rate of tax than
they may be required to pay unless they submit an Australian tax
return in respect of that income. Further, the headline rate of 30
per cent for this withholding tax contrasts with the lower rates of
a similar tax imposed by other countries.
This measure is expected to increase revenue
by $10 million in the first year of its application. Thereafter,
the measure is expected to increase revenue by $15 million per
annum.(73)
Item 1 of Schedule
10 inserts Subdivision 12-H, entitled
Distribution of managed investment trust income to foreign
residents into the Tax Administration Act 1953
(TAA53).
New section 12-385 is
inserted by Item 1. This section requires that the
trustee of an Australian managed investment trust that makes a fund
payment to an entity covered by new section 12-410
must withhold an amount equal to the corporate tax rate by the
amount of the payment. The current corporate tax rate is 30 per
cent per annum.
New section
12-390, also inserted by Item 1 of
Schedule 1, requires that an intermediary making a
fund payment to an entity covered by new
section 12-410 (see below) must also withhold an
amount from that payment equal to the corporate tax rate by the
notice part of that payment by the corporate tax rate.
The notice part of the payment made to the
entity is, according to new paragraph 12-390(1)(b)
is so much of the total payment made to the entity as is
attributable to an earlier payment . This latter term is defined as
an amount in respect of which the intermediary has received a
notice from the trustee of a managed investment trust declaring it
to be a fund payment . New section
12-415 further defines the content of this notice (see
further comment below).
New sections 12-385 and
12-390 are the main operative parts of this
schedule.
Item 1 also inserts new
section 12-395 into the TAA53. This section
defines a managed investment trust for the purposes of
subdivision 12-H of that Act. Briefly, a trust is
a managed investment trust if in an income year:
- the trustee was an Australian resident or the central
management and control of the trust is in Australia, and
- it was a managed investment scheme as defined by
section 9 of the Corporations Act
2001,and
- it was operated by a financial service licensee as defined by
section 761A of the Corporations Act
2001, and
- the units in the trust are listed for quotation in the official
list of an approved stock exchange in Australia, or the trust has
at least 50 members, or it is one of the entities noted in new
subsection 12-395(2) TAA53.
New subsection 12-295(2) lists a
wide range of entities capable of being a managed investment trust
for these purposes. Generally either listed or unlisted trusts,
superannuation trusts or life insurance companies or a entity
recognised under a foreign law as having a similar status to a
managed investment scheme and has at lease 50 members
(subparagraph 12-395(2)(d)) qualify for
classification as a managed investment trust under this
section.
An exception to this classification is detailed
in new subsection 12-395(3) TAA53, where an entity
that may meet the requirements of subsections
(1) and (2) cannot be a managed
investment trust for these purposes if a foreign resident controls
10 per cent or more if the interests of the trust or receives 10
per cent or more of any distribution of income that the trustee may
make.
The requirements that managed investment trusts
either be listed, have at least 50 members (if unlisted) and cannot
be dominated by foreigners ensures that only widely held trusts are
eligible for classification as a managed investment trust.
Item 1 also inserts new
section 12-400 TAA53 which defines the term fund
payment for the purposes of the main operative sections. There are
three steps in calculating this amount.
Under step one dividends, royalty income, capital
gains that do not arise from the realisation of
taxable Australian property and amounts that are not from an
Australian source are excluded from this term by subsection
12-400(1). The resulting payment is the step one
payment.
A foreign resident's liability for CGT (for
CGT events that happen on or after 12 December 2006) is based on
whether the relevant asset is taxable Australian property. The
following assets are taxable Australian
property:
(1) taxable Australian real property
(2) an indirect interest in Australian real
property
(3) a business asset of a permanent
establishment in Australia
(4) an option or right to acquire any of the
CGT assets in items 1 to 3 above, or
(5) a CGT asset that is deemed to be
Australian taxable property where a taxpayer, on ceasing to be an
Australian resident, makes an election under s 104-165.(74)
By including capital gain that arise only from
the realisation of taxable Australian property in a trust s fund
payments the integrity of the current CGT arrangements for the
taxation of non-resident unit-holders is maintained.
The remaining income is then adjusted by the
trustee s reasonable expectation, based on their knowledge at the
time of payment, of the trust s annual net income (that is income
excluding the amounts mentioned in subsection
12-400(1). This is called the step two
payment.
Step two of the Method
Statement in new subsection 12-400(2)
TAA53 requires that the trustee remove the effect of the 50 per
cent discount of realised capital gains, available to a resident
tax payer, from the Fund payment at this point. It does this by
doubling any amount that it is reasonable to expect will be
included within the actual payment made by the trust in any one
income year. Thus, a non-resident unit-holder will not get the
benefit of the 50 per cent CGT discount in any fund payment they
receive.
Under step three of this
Method Statement the fund payment is so much of
the step two amount minus the step
one amount (i.e. the excluded income). Further, account is
taken of any earlier fund payment made by the trustee and the
expected amounts of any later fund payments made by the trustee in
any one income year when arriving at the amount of a particular
fund payment.
The above process is a complex one. Managed
investment trust staff will find the example included in the
Explanatory Memorandum of this process very helpful in working out
how to apply these legislative provisions.(75)
Item 1 also inserts new
section 12-405 into the ITAA53. This new section
defines the term intermediary for the purposes of
Subdivision 12-H of this Act. Briefly, an
intermediary must have a relevant connection to Australia, must
satisfy certain Corporations Act 2001 requirements for the
conduct of an intermediary business (i.e. be appropriately
licensed) and must have received a notice from the trustee of an
Australian managed investment trust relating to the fund payment it
is to distribute. New section 12-415 TAA53 deals
with this notice (see below).
New section 12-410 is also
inserted into the TAA53 by Item 1 of
Schedule 10. This provision defines the entities
to which a fund payment is made. The salient point is that the
payer has a degree of latitude to treat the recipient as a
non-resident unit-holder if they have reasonable grounds to believe
that this is the case. The onus would be on the recipient to prove
that they are not a foreign resident where the payer has partial
information on the residency status of the recipient.
The requirements for a notice given to an
intermediary in respect of a fund payment are set out in new
section 12-415, also inserted into the TAA53 by
Item 1. Briefly, this notice must contain all the
information necessary to enable an intermediary to calculate the
necessary withholding tax amount from any fund payment made to a
non-resident.
The Explanatory Memorandum notes that if a notice
under section 12-415 is not given the withholding
arrangements of this schedule do not apply and the tax obligation
to withhold amounts may rest with another entity (say another
entity in a chain of entities) or under another tax
regime.(76)
It is not clear whether the proposed withholding
arrangements would apply at all if a notice under new
section 12-415 were not provided to an
intermediary.
Item 2 of Schedule
10 inserts new section 18-50 into the
TAA35. The purpose of this new section is to ensure that a
non-resident beneficiary receives a tax credit for the amount of
tax withheld from their Australian investment trust distribution
under Subdivision 12-H of this Act.
Item 32 of Schedule
10 provides for its provisions to commence from the first
1 July after the day on which this Act receives Royal Assent.
These schedules make many worthwhile
amendments to Australia s taxation arrangements, particularly in
the areas of preventing undue tax minimisation and evasion.
However, apparent technical difficulties noted
in relation to Schedule 1, Item
13 and Schedule 7, Items 1
3 may mean that these proposed changes achieve their full
potential.
- The Hon Peter Dutton
MP, Further Improvements to the Tax System , Media
Release, No. 56, 10 May 2007.
- CCH 2007
Australian Master Tax Guide, Topic 4-200 Deemed Dividends
Payments by Private companies to associated entities (Div 7A)
.
- The Hon. Peter
Costello MP, Treasurer, Explanatory Memorandum to Taxation Laws
Amendment Bill (No. 7) 1997 , 4 December 1997, p.121 (This
Explanatory Memorandum became Explanatory Memorandum to Act No 47
of 1998).
- Taxation Institute
of Australia, A victory for commonsense on shareholder loans ,
Media Release, 6 December 2006.
- The Hon. Peter
Costello MP, Explanatory Memorandum to the Tax Laws Amendment (2007
Measures No. 3) Bill 2007 (hereafter the Explanatory Memorandum),
p. 3.
- Subsection 109E(3)
ITAA36.
- The amount of a loan
forgiven under section 109F ITAA36 is limited by section 109Y to
the total distributable surplus of the private company for that
income year.
- Explanatory
memorandum, ibid, pp. 21 to 29.
- ibid, p. 3.
- Elizabeth Kazi,
Practical plan to make inheritance less taxing , Australian
Financial Review, 18 October 2006, p. 5.
- Explanatory
Memorandum, ibid, p. 5.
- Explanatory
Memorandum, ibid, p. 6.
- CCH, ibid, Topic 4
945 Dividend Tainting Rules .
- Explanatory
Memorandum, ibid, p. 75.
- The Hon. Ralph
Willis MP, Treasurer, Explanatory Memorandum to the Taxation Laws
Amendment Bill (No. 3) 1995, May 1995, pp. 21 29.
- Explanatory
Memorandum, ibid, pp. 75 76.
- Australian Taxation
Office, Large Corporates and Multinationals, International
Reporting Standards: Overview , webpage at
http://www.ato.gov.au/large/content.asp?doc=/content/52981.htm&pc=001/009/038/006/001&mnu=&mfp=&st=&cy=1
(accessed 15 May 2007).
- KPMG (International
Accounting Firm), International Financial Reporting Standards ,
webpage at http://www.kpmg.com.au/default.aspx?tabid=695
(accessed 15 May 2007).
- The Institute of
Charged Accountants of Australia, Resolution to problematic issues
of Division 7A welcomed by industry leader , Media
Release, 6 December 2006 at http://www.charteredaccountants.com.au/A118021825
(accessed 16 May 2007).
- The Peter Dutton MP,
Minister for Revenue and Assistant Treasurer, Improvements to the
simplified imputation system , Media Release, 9 November
2006.
- Explanatory
Memorandum, ibid, p. 7.
- CCH, ibid, Topic
22-022 Interest .
- Explanatory
Memorandum, ibid, pp. 81 85.
- Explanatory
Memorandum, ibid, p. 83.
- CCH, ibid., Topic
22-022 Interest on Certain Publicly offered Debentures .
- Explanatory
Memorandum, ibid, p. 83.
- Explanatory
Memorandum, ibid, p. 87.
- The amending Act was
the New International Tax Arrangements (Managed funds and Other
Measures) Act 2005, No. 21, 2005.
- The Hon. Peter
Dutton MP, Minister for Revenue and Assistant Treasurer, Government
to make further improvements to the tax system , Media
Release, No. 91, 7 December 2006.
- Explanatory
Memorandum, ibid, p. 82.
- Explanatory
Memorandum, ibid, p. 7.
- Allan Cummine,
Plantations in the landscape − tax is not the
villain paper presented at Australian Forest Grower s Biennial
Conference, Albany WA, 14-16 October 2002.
- For additional
background on forestry and taxation issues see Plantations for
Australia: The 2020 Vision Establishing Plantations in
Australia: A Review of Legislative and Regulatory Frameworks
November 2004; Forest and Wood Products Research and Development
Corporation Impediments to Investment in Long Rotation Timber
Plantations, Project No. PN05.1011, 2005; Australian Forest
Growers and Treefarm Investment Managers of Australia Timber
Plantations and Managed Investment Schemes Essential Tax
Basics, February 2005; and Alan Cummine, Timber Industry s
future depends on ordinary investors continued backing of MIS
sector, Australian Forest Grower, Autumn 2005.
- This section draws
on Cummine op cit and submissions to the Government s 2005
Review of Taxation of Plantation Forestry by the National
Association of Forest Industries and Tree Plantations
Australia; Australian Forest Growers and Treefarm
Investment Managers of Australia; and NSW Government.
http://www.treasury.gov.au/contentitem.asp?ContentID=1000&NavID=037
- MIS have also
operated in other sectors of agriculture in recent years but the
Government has announced that the ATO will no longer issue
favourable product rulings after for these after 30 June 2008. That
matter is not the subject of this Bill and hence only of passing
relevance to this Bills Digest.
-
http://assistant.treasurer.gov.au/mtb/content/pressreleases/2005/035.asp
- The terms of
reference of the review can be found
here while the submissions can be accessed
here.
- This report has not
been made public.
- Hon Peter Dutton MP,
Minister for Revenue and the Assistant Treasurer Consultation on
Proposed Taxation Arrangements for Plantation Forestry , Media
Release, 9 May 2006.
- Submissions are
available at
http://www.treasury.gov.au/contentitem.asp?ContentID=1122&NavID=037.
- Hon Peter Dutton MP,
Minister for Revenue and the Assistant Treasurer Minister For
Fisheries, Forestry And Conservation Senator Eric Abetz Review of
the taxation of plantation forestry , Joint Media Release,
21 December 2006.
- Hon Peter Dutton MP,
Minister for Revenue and the Assistant Treasurer Trading of
forestry managed investment scheme interests , Media
Release, 8 May 2007.
- ibid
- Treating the income
on the capital account simply means that the income is capital in
nature and is assessed under the Capital Gains Tax (CGT)
regime.
- Reference to the
revenue account simply means that the amounts are subject to normal
income taxation, rather than tax assessment under the CGT
arrangements.
- National Association
of Forest Industries, Forest industry welcomes Government approach
to taxation of plantation forestry investment , Media
Release 21 December 2006.
- Australian Forest
Growers, Farm forest growers still wait for government action on
tax arrangements , Media Release, 8 May 2007.
- TIMA is the industry
group within TFG that represents the interests of the managed
plantation timber investments sector.
- A3P is the peak
national body for Australia s plantation products and paper
industry.
- TreeFarm Investment
Managers and A3P, Government reaffirms support for plantation
forestry investment , Joint Media Release, 22 December
2006
- National Farmers
Federation, Consultation on Proposed Taxation Arrangements for
Plantation Forestry , NFF Submission, 14 July 2006.
http://www.treasury.gov.au/documents/1122/PDF/058_National_Farmers_Federation.PDF
See also National Farmers Federation , Media Releases,
NFF Warns
Govt: Don't Allow MIS to Distort Agriculture 11 September 2006
http://www.nff.org.au/read/2428457160.html
and Managed
Investment Schemes Fail Says NFF 17 July 2006 http://www.nff.org.au/read/2428457173.html
.
- McGauran, Peter
MIS just a tax dodge Weekly Times, 21 February 2007.
- Senator the Hon.
Eric Abetz, Minister for Fisheries, Forestry and Conservation, In
defence of tree farms , Media Release, 23 August 2006.
http://www.mffc.gov.au/releases/2006/06106a.html.
- Senator Bob Brown,
Planning Howard s end: how the Greens aim to rescue the Senate ,
Speech to the National Press Club, 1 November 2006
http://www.bobbrown.org.au/files/speeches/BOB%20BROWN%20AT%20THE%20NATIONAL%20PRESS%20CLUB.pdf
- Hon Peter Dutton MP,
Minister for Revenue and the Assistant Treasurer, Non-Forestry
Managed Investment Schemes Media Release, 6th February
2007.
http://assistant.treasurer.gov.au/pcd/content/pressreleases/2007/007.asp
- See for example Anna
Fenech, A MIStake in investment schemes Weekend Australian
17 February 2007
http://parlinfoweb.parl.net/parlinfo/Repository1/Media/npaper_4/TI8M62.pdf
and Peter Morley, Projects canned Courier Mail 19 February
2007.
- Explanatory
Memorandum, ibid, p. 8.
- Explanatory
Memorandum, ibid, p. 132.
- Explanatory
Memorandum, ibid, p. 139.
- Explanatory
Memorandum, ibid, p. 150.
- Ben Schneiders, Tax
crackdown to cost $272m, Age, 10 May 2006, p. 3; John
Garnaut, Campaign to catch rich tax cheats beefed up , Sydney
Morning Herald, 10 May 2006, p. 4; Fiona Buffini, At last, it
s a win for the high income earners , Australian Financial
Review, 10 May 2006, p. 5; Govt to target evaders in bid to
recoup $2bn , Canberra Times, 10 May 2006, p. 26.
- Investment and
Financial Services Association, International tax arrangements ISFA
2006 Budget response , Media Release, 11 May 2006.
- Explanatory
Memorandum, ibid, p. 9.
- CCH, ibid, Topic
21-100 Conduit foreign Income .
- Explanatory
Memorandum, ibid, p. 169.
- Invest Australia
(Axiss Australia) Executive Briefing, Managed Funds in
Australia, July 2004, p. 48.
- Explanatory
Memorandum, ibid, p. 169.
- Explanatory
Memorandum, ibid, p. 197.
- Property Council of
Australia, Opposition Reform Will boost International
Competitiveness Media Release, 11 May 2007.
- KPMG, Daily Tax News
, 10 May 2007 at
http://www.kpmg.com.au/Default.aspx?TabID=63&KPMGArticleItemID=457#n4
(accessed 17 May 2007).
- Robert Harley,
Taxing times for local funds industry , Australian Financial
Review, 17 May 2007, p. 47.
- Real Estate
Institute of Australia, Flat 12.5% Withholding Tax Essential for
International Competitiveness, Media Release, 18 May
2007.
- Explanatory
Memorandum, ibid, p. 9.
- CCH, ibid, Topic
13-725 Taxable Australian Property.
- Explanatory
Memorandum, ibid pp, 177 to 183.
- Explanatory
Memorandum, ibid, p. 185.
Les Nielson and Peter Hicks
23 May 2007
Economics Section
Parliamentary Library
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ISSN 1328-8091
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