Issue 135 - 8 September 2006

	Issue 135, 8 September 2006 Welcome to the latest issue of Thomson’s Tax & Accounting Insight, your free news service for tax and accounting professionals. Tax & Accounting Insight is the easy way to keep up with the latest developments in your industry. Watch your inbox for your fortnightly issue of this free, informative service from Thomson.		Articles in this edition include: Simplifying super plan: Govt’s final decisions on transitional concessions FSR compliance: Progress towards simpler regulatory system Bill Business real property used in not-for-profit business Thomson special offers and product news Editorial Enquiries: Tel: 1300 304 197 LRA.Service@thomson.com Copyright: Thomson Legal & Regulatory Limited ABN 64 058 914 668 100 Harris Street Pyrmont NSW 2009 All rights reserved. To subscribe, please click here. To unsubscribe, please reply to this email with Unsubscribe in the heading. Disclaimer: The information contained in this bulletin neither represents nor is intended to be legal or professional advice. While every care has been taken in its preparation, no person should act specifically on the basis of the material contained herein. If expert assistance is required, competent professional advice should be obtained. Privacy Policy
	Simplifying super plan: Govt’s final decisions on transitional concessions In a surprise announcement [5.9.2006], the Treasurer and Assistant Treasurer confirmed that the Government will proceed with its superannuation simplification proposals, which include the removal of end benefits tax for those over age 60 from 1 July 2007 and the abolition of RBLs and age-based contribution limits. The Government also announced its ‘final decisions’ on further transitional concessions (some of which are very generous) for its 2006/07 Budget superannuation simplification plan. In particular, Mr Costello announced the following transitional arrangements, which will be put in place to make the transition to the new superannuation system easier: undeducted contributions — people will be able to make up to $1m of post-tax undeducted contributions between 10 May 2006 and 30 June 2007. The $150,000 annual limit on post-tax contributions will now commence from 1 July 2007 (instead of 10 May 2006). People aged less than 65 will be able to bring forward two years of contributions, enabling $450,000 to be contributed in one year. In addition to the annual $150,000 cap, people will be able to contribute a lifetime limit of $1 million from the sale of small business assets held for 15 years and settlements for injuries resulting from permanent disablement; indexation of contribution limits — administration of contribution caps will be streamlined and indexed to AWOTE in $5,000 increments; employer ETPs — transitional arrangements until 1 July 2012 for employer ETPs specified in existing employment contracts as at 9 May 2006; employee invalidity benefits — concessional tax treatment will be extended to the self-employed; TFNs — quotation of a TFN for employment purposes to be treated as being for superannuation purposes; people allowed until 30 June 2008 to quote their TFN before withholding tax will apply; a refund of any tax withheld for a period of up to four years; and removal of the $1,000 threshold for accounts commenced from 1 July 2007; untaxed superannuation schemes — the concessional amount of lump sum benefits from an untaxed source will be increased from $700,000 to $1 million; and SMSFs supervisory levy — to be increased to $150 (up from $45). The Treasurer also said the Government will not be proceeding with the numerous other issues raised in the consultation process. According to the Government, those submissions would have imposed a significantly higher cost to revenue and added complexity. Legislation to implement the measures is expected to be introduced into Parliament before the end of 2006. The full text of the Treasurer and Assistant Treasurer, joint press release No 093, 5 September 2006 can be found on the Treasurer’s website. This article appeared in Thomson’s Superannuation News Alert (5 September 2006). Delivered 2–3 times a week to specifically cover superannuation developments as they happen, it is ideal for specialist practitioners who need to keep fully up-to-date with the latest superannuation developments without searching through large quantities of general tax news and information. To find out more, phone Thomson Customer Service on 1300 304 197. Return to TOP
	FSR compliance: Progress towards simpler regulatory system Bill On 14 August 2006, the Parliamentary Secretary to the Treasurer announced progress on the topics outlined in the Government’s ‘Corporate and Financial Services Regulation Review’, Consultation Paper, April 2006 (see 2006 Superannuation & Financial Services Bulletin No 4 para [156]). In particular, Mr Pearce released a list categorising how the topics in the consultation paper will be handled in the work going forward. Broadly, the topics cover company reporting obligations, corporate governance, further refinements to financial services regulation and dealing with regulators. Mr Pearce said the three categories for progressing the reform proposals are: draft regulations for consultation; proposals paper for consultation; and focused projects for further consultation. Mr Pearce explained that the Government will progress the reforms principally through the Simpler Regulatory System Bill, to be introduced into Parliament. To assist with round-table consultations on the preparation of the Bill, the Parliamentary Secretary to the Treasurer said he intends to release a paper in September 2006 that will enable comment on defined proposals. Mr Pearce also indicated that some of the more minor technical changes can be put in place quickly through regulations which will be released soon for consultation before being implemented. Further details are available on the Treasury website. Moves to simplify provision of financial planning advice welcomed CPA Australia CEO Mr Geoff Rankin said the Simpler Regulatory System Bill to be introduced into Parliament would address some of the barriers to consumers receiving timely, appropriate and cost-effective financial advice. ‘Our members have reported saving a considerable amount of time as a result of the 2005 FSR refinements. They welcome the pruning back of some of the requirements which will mean less compliance for financial planners and reduced costs for consumer financial advice. This means lower fees to the client, who in turn has more to invest. So it’s a win-win situation for members and clients,’ Mr Rankin said. Mr Rankin said he is looking forward to further consultations on several issues identified by the Pearce report so that these can be ironed out before the end of the year. He said that CPA Australia has long been an advocate of an exemption for a Statement of Advice (SoA) for pro bono advice that does not relate to financial products. In circumstances where personal advice is given, but no financial product is recommended, and no remuneration is received for this advice, CPA Australia would recommend that a statement of advice does not need to be prepared but streamlining of training requirements will be necessary under ASIC’s Policy Statement PS146, Mr Rankin said. Mr Rankin noted that, in certain one-off situations, a planner may be in a position to provide some guidance or advice to a consumer, but may refuse to do so because of the expense and onerous requirements for a full SoA. This common sense solution would allow more consumers to receive relevant professional advice, he said. The full text of the CPA Australia release, 15 August 2006 can be found on the CPA Australia website. The full text of the Parliamentary Secretary to the Treasurer press release No 028, 14 August 2006 can be found on the Treasury website. This article appeared in Thomson’s Superannuation & Financial Service Bulletin (24 August 2006). Superannuation & Financial Service Bulletin is a comprehensive and informative superannuation news service. Special coverage is given to newly introduced legislation with contributions from business-focused experts. Return to TOP
	Business real property used in not-for-profit business On 18 August 2006, the Tax Office released *ATO ID 2006/226* stating that a property used by a not-for-profit business can still satisfy the definition of ‘business real property’ under s 66 of the SIS Act, when the entity satisfies the ordinary indicators of a ‘business’. Fact situation ATO ID 2006/226 deals with a fact situation involving a not-for-profit registered training organisation providing commercial training products and services to the community. The Tax Office says that the entity satisfies the ordinary indicators of a ‘business’, in that it: has a business plan; maintains records; is registered with the State Department of Fair Trading; pays market rates for the rent of the premises; employs staff on a permanent basis and remunerates their services at market rates; has been operating for over 10 years; and carries on its main activity in the same manner and provides the same products and services as other companies and training organisations in the industry. In addition, the registered training organisation is a viable and ongoing concern and not a loss-making entity as it generates enough income to meet its costs. It usually makes a small profit retained within the entity. Tax Office view The Tax Office considers that real property used by a not-for-profit business can satisfy the definition of 'business real property' under section 66(5) of the SIS Act. ‘Business’, as defined under section 66(5) of the SIS Act, includes, ‘any profession, trade, employment, vocation or calling carried on for the purposes of profit, including…’. In the case of a not-for-profit entity, where its main purpose is something other than to produce profit, if the activity otherwise satisfies the ordinary indicators of a ‘business’, the Tax Office says that such a not-for-profit entity may be classified as a ‘business’ for the purposes of section 66(5) of the SIS Act. The Tax Office says that the definition of ‘business’ under section 66(5) of the SIS Act is an inclusive one and enlarges the ordinary meaning of the term. A set of indicators has been developed over the years by case law to evidence the carrying on of a ‘business’ in its normal and ordinary meaning: Ferguson v FCT (1979) 9 ATR 873. Some of these indicators include: significant commercial purpose or character of the activity; whether the entity has more than just an intention to engage in business; purpose of profit as well as a prospect of profit from the activity; repetition and regularity of the activity; whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business; whether the activity is planned, organised and carried on in a businesslike manner; the size, scale and permanency of the activity; and whether the activity is better described as a hobby or recreation. The Commissioner notes that no one factor is the key determinant and the absence of any particular factor is not fatal to an activity receiving classification as a ‘business’: Evans v. FCT (1989) 20 ATR 922. The Tax Office has also adopted these indicators in Taxation Ruling TR 97/11. ATO ID 2006/226 is available on the Tax Office's Legal Database Website. This article appeared in Thomson’s Superannuation & Financial Service Bulletin (24 August 2006). Superannuation & Financial Service Bulletin is a comprehensive and informative superannuation news service. Special coverage is given to newly introduced legislation with contributions from business-focused experts. Return to TOP
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