What were they thinking

What were they thinking

Ideas that require the policy intent be clarified and identifying uncertainty in the application of the law.
(@andra91) kudos icon +

What were they thinking

Anti hybrid rules: related parties in s 832-200

The anti hybrid rules broadly apply to payments between related entities. For most mismatches, whether entities are related is worked out by reference to their participation interest in section 350 of the 1936 Act but excluding any rights to vote or participate in decision-making (section 832-205). However, such rights are not excluded for the purpose of determining participation interest (and therefore whether the parties... more »
(@iraspin) kudos icon +

What were they thinking

Partial main residence exemption: section 118-205

There is a defect in the way that the main residence exemption applies where ownership of a dwelling has passed through a number of deceased estates.
Some of the most complicated deceased estate cases occur where a dwelling passes through several persons each of whom dies before a sale is made. The complexity arises because if a partial exemption is being determined, then it may not be appropriate to consider the use... more »
(@iraspin) kudos icon +

What were they thinking

Surviving joint tenant cost base

There is a defect in the way that cost base rules in section 128-50 of the ITAA 1997 apply where a dwelling that was the main residence of a joint tenant passes by survivorship to the other joint tenant(s).

For CGT purposes generally, joint tenants are treated as tenants in common: section 108-7 of the ITAA 1997. However that deeming does not override the operation of the 'rule of survivorship' that apply on death.... more »
(@iraspin) kudos icon +

What were they thinking

Cost base of deceased main residence

There is a deficiency in the CGT main residence exemption relating to deceased estates which has a considerable impact on tax compliance costs.

The deficiency is that the market value cost base rule in item 3 in the table in subsection 128-15(4) of the ITAA 1997 does not literally apply where a deceased's dwelling was used to produce assessable income just prior to death, but this would not have affected an exemption... more »
(@iraspin) kudos icon +

What were they thinking

Partial main residence: sections 118-200

There is a defect in the way that the main residence exemption applies if a deceased person's legal personal representative (LPR) or beneficiary is taken to have acquired the deceased's main residence for market value at the date of death: item 3 in the table in subsection 128-15(4) of the ITAA 1997. The defect is that the rewritten partial main residence rules in section 118-200 of the ITAA 1997 fails to incorporate... more »
(@kitmorgan64) kudos icon +

What were they thinking

Incorrect CGT small business entity requirement in 328-430

There appears to be a drafting error in subsection 328-430(1)(d)(ii) dealing with small business entity ['SBE'] rollovers. A SBE is defined in section 328-110 as an entity that has an aggregated turnover of less than $10 million, accordingly it should be possible to roll an asset into a SBE using Subdivision 328-G provided the SBE is either an affiliate of or connected with the transferor (assuming the other requirements... more »
(@kitmorgan64) kudos icon +

What were they thinking

152-70 - How can a Trustee hold a legal and equitable interest?

There is an apparent disconnect between the language of Item 1 in section 152-70, which requires an entity to hold a legal and equitable interest in the shares in a company, and Example 1.2 in the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 7) Bill 2006 - which introduced this section.
While Example 1.2 evidences a clear policy intention that a Trust (via its Trustee) can hold a direct small business... more »
(@elinor.kasapidis.cpaaustralia) kudos icon +

What were they thinking

Redundancies after the age of 65 aren't 'genuine' – is it fair?

Subsection 83.175(2)(a) of the Income Tax Assessment Act 1997 requires that the employee is dismissed before the day he/she turns 65 to satisfy the genuine redundancy provisions. The provision was inserted in July 2007 as part of the Tax Laws Amendment (Simplified Superannuation) Bill 2007. No mention of this provision was included in the Explanatory Memorandum, nor in the second reading speeches. The earlier Treasury... more »
(@onesuperidea) kudos icon +

What were they thinking

Superannuation on resignation

When an employee leaves they are paid annual leave and long service leave, but no superannuation. This means that when an employer won't let the employee work out their leave, the employee misses out on the super. This is unfair and confusing.

The super for the annual leave is confusing. Under the Fair Work Act 2009 Section 90 it says
"If, when the employment of an employee ends, the employee has a period of untaken... more »
(@michaelc) kudos icon +

What were they thinking

Adjusted income calculations - double counting of losses

Some odd outcomes can arise when working through adjusted income calculations for certain tax and other purposes. The problem seems to mainly arise when someone has a net investment loss for the year as well as an overall tax loss for the year.

For example, for some purposes a taxpayer will need to calculate their 'income for surcharge purposes' (eg, to determine whether Division 293 applies, applying the private health... more »
(@michaelc) kudos icon +

What were they thinking

ESS start up options held by associates

Amendments were made to the employee share scheme rules in 2015 to introduce concessions for small start up companies. If certain conditions are met, the discount provided in relation to shares / options is not included in the assessable income of the employee. Section 115-30 has been amended to ensure that for the purpose of the CGT discount, when options are issued under the start up rules the ownership period is not... more »
(@michael.flynn) kudos icon +

What were they thinking

Absolute entitlement

If a beneficiary is absolutely entitled to a trust asset, they, rather than the trustee, are required to return any capital gain, or claim any capital loss from a CGT event that happens to the asset. A common example that illustrates the significance of this concept is that of a nominee who holds shares on behalf of a principal. If the principal directs the nominee to sell the shares, the principal returns the capital... more »

Voting

2 votes
2 up votes
0 down votes
(@reynah) kudos icon +

What were they thinking

Foreign resident capital gains withholding payments

Given the broad application of this regime (eg. deeming all vendors of real property to be foreign residents unless they produce a clearance certificate from the ATO) and its red tape implications for day to day transactions, there is an urgent need for the ATO to issue class variations for situations where there is no tax payable including:

• transactions attracting roll-over relief;
• transactions required to give... more »

Voting

7 votes
7 up votes
0 down votes