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The Tax Specialist

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• Tax litigation Add to cart

  01 Apr 2012

  Litigation is a costly exercise, and a process of final resort, in which skill, knowledge and rules all play a significant part. Tax litigation is no exception. In this article, the author examines recent trends in tax litigation and, in particular, cases on Pt IVA (the general anti-avoidance provision) of the Income Tax Assessment Act 1936 (Cth).

  The article deals with the importance of facts in tax cases, and then explains the different roles of the different courts in tax litigation, with a special focus on the role of appellate courts. The author then considers the publicly-expressed attitude of the Commissioner of Taxation to court decisions in tax cases which he considers to be wrong, and the Commissioner’s current response to recent losses in Pt IVA cases. The article then examines current trends in statutory interpretation, as applied to tax statutes, and concludes with a detailed examination of recent Pt IVA cases.

• A question of attribution problems with the hedging election under TOFA Add to cart

  01 Apr 2012

  Under Subdiv 230-E of the Income Tax Assessment Act 1997 (Cth), a taxpayer may elect to apply hedging treatment to holdings of financial arrangements which are in a designated hedging relationship for accounting purposes. The election also covers other situations, including hedges of currency risks in relation to anticipated dividends from overseas subsidiaries.

  This article examines the character-matching aspects of the hedging election, the effect of which is to match the character of the gain or loss attributable to the hedging financial arrangement with the character of the underlying hedged item. By way of an extended worked example, the article provides a close examination of the issues raised by a hedging transaction, applying the core taxation of financial arrangements (TOFA) rules and the hedging election. In the author’s view, there is a need to resolve some of the issues exposed by the example, both by legislative amendment and finalisation of the Commissioner’s views.

• Tax consequences of disposing of intellectual property Add to cart

  01 Apr 2012

  The purpose of this article is to provide a brief introduction to the taxation concepts and issues that arise when disposing of intellectual property, particularly “know-how” (including trade secrets and confidential information), but also such other items as film expenditure. The article explores the relevant tax issues, including the fundamental calculation of the taxable gain or loss, the tax category into which the asset falls (noting that certain types of intellectual property fall outside traditional tax categories), tax costs deductible by the taxpayer when disposing of the asset, the possible application of the concessional research and development regime, and the possibility of selling the entity which holds the intellectual property and the consequent possible application of the tax cost setting rules in the consolidation regime.

  Finally, the article examines certain types of intellectual property, being certain film expenditure, which provide the taxpayer with another avenue to claim tax deductions.

• Potential deductions arising from creating or exploiting intellectual property Add to cart

  01 Apr 2012

  The purpose of this article is to explore different ways in which taxpayers can obtain tax relief for expenditure incurred in either creating or exploiting intellectual property (“IP”). The discussion concentrates on taxpayers who create or exploit IP for use within their own businesses, or in the course of providing services to their customers, rather than for the purpose of disposing of it. The article first examines general deductibility of IP expenditure, and then reviews other opportunities for tax relief, including the capital allowance provisions, where the general deduction is not available.

  The article also discusses the possibility of tax relief under the various special concessions and incentives for research and development activities, and film and television production expenditure. Finally, the article briefly reviews the position under the tax consolidations regime, and the implications under that regime where part of the acquisition cost of a subsidiary relates to items of IP.

• Managed investment trusts Add to cart

  01 Apr 2012

  The purpose of this article is to discuss the key issues arising out of the current review of the managed investment trust (MIT) taxation regime, the legislative response to which has been deferred. The article examines the Board of Taxation’s report, the government’s response, and the Treasury discussion paper. The article then considers contentious issues in the MIT review, including the need for a clear definition of rights, the treatment of “unders” and “overs”, the arm’s length rule, and the retention of the tax character of amounts flowing through a trust.

  The article deals with MIT issues not yet covered in consultation, including attribution methodology, cost base adjustments, interaction with non-resident withholding tax rules, some interim changes to the taxation of trust income, and the concept of the fixed trust. The article concludes with a discussion of current proposals for the reform of the trusts rules in Div 6 of the Income Tax Assessment Act 1936 (Cth).