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Issue 162, 9
November 2007
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Tax Office on managing the tax risks
in sports industry
The Tax Office has recently advised of its concerns in relation
to the sports industry. In a speech to the ANZSLA Conference 2007,
Tax Office Second Commissioner Jennie Granger noted the expanding
range of tax obligations of sports clubs and associations. In
particular, Ms Granger highlighted the Tax Office's concerns in
relation to football clubs and player remuneration packages. Ms
Granger said a Tax Office scoping project of football clubs is
underway to obtain an understanding of the compliance issues.
Other concerns raised by Ms Granger included players and their
tax obligations. Ms Granger said the Tax Office is reviewing
lodgment of over 2,000 players, officials and administrators and has
actioned around 300 outstanding returns. Further, Ms Granger said
the Tax Office is also looking at major sporting events (including
international events). She said the Tax Office is working with
international team managers and their Australian-based tax advisers.
To date, Ms Granger said the Tax Office has been involved with golf,
tennis and cricket events.
This article appeared in Thomson's daily Latest
Tax News (Monday 5th November). With tax fast-moving and ever
changing - EVERY DAY, practitioners rely on Thomson's daily Latest
Tax News for quick, accurate, comprehensive information - no
compromises. When you need to know what's new in tax and related
news every day, there's only one place to look - LTN. To find
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Whether family trust distribution tax payable on trust
distributions
Q. We have a discretionary trust that has only two
beneficiaries. They are an individual and a well-known public
Australian university. Distributions to the university have to be
used for scholarships for undergraduate students. On the death of
the individual beneficiary, all distributions will be made to the
university. The trust has made a family trust election. Is family
trust distribution tax payable in respect of the distributions to
the university?
A. Section 271-15 in Schedule 2F to ITAA 1936 provides that
family trust distribution tax is payable if, at any time while a
family trust election is in force (including a time before it was
made), the trust confers a present entitlement to, or distributes,
income or capital of the trust upon or to a person who is not the
individual specified in the family trust election nor a member of
that individual's family group. The question, therefore, is
whether the university is a member of the relevant individual's
family group. (Note that since the term 'person' is defined in
section 6(1) of ITAA 1936 to include a company and a 'company'
is defined in s 995-1 of ITAA 1997 to include a 'body
corporate', the university is a 'person'.)
The 'family group' includes certain tax-exempt entities
specified in various provisions of ITAA 1997 (including sections
50-5, 50-10 and 50-20) or certain entities mentioned in the
table in section 30-15 of ITAA 1997 to which a tax-deductible
gift may be given: see section 272-90(6), (7) in Schedule 2F. If
the university qualifies as one of those bodies, it will be part
of the family group and family trust distribution tax will not be
payable in respect of any distributions to the university.
One of the types of exempt entity listed in section 50-5 is a
public educational institution, which 'has a physical presence
in Australia and, to that extent, incurs its expenditure and
pursues its objectives principally in Australia': see section
50-55. If the university in this case is a 'public educational
institution', it will be tax-exempt under section 50-5 and
therefore part of the relevant 'family group' for the purposes
of the family trust rules in Schedule 2F.
What is a 'public educational institution' in terms of
section 50-5? The term is not defined in ITAA 1997 (or ITAA
1936) and there is very little jurisprudence on the meaning of the
term. However, it is inconceivable that an Australian university
open to all students (who satisfy the entrance requirements) is
not a public educational institution. This is supported by
Windeyer J's observation in Incorporated Council of Law
Reporting (Queensland) v. FCT (1971) 2 ATR 515 (at
523) that a 'public educational institution is generally
understood to be an establishment, in which instruction is given
in some branch of knowledge or in some art or science, the pupils
being drawn from the public generally or from some substantial and
significant section of the public'.
In conclusion, as the university is a public educational
institution that is exempt from income tax under section 50-5 of
the ITAA 1997, it is taken to be part of the relevant family group
by virtue of section 272-90(7) in Schedule 2F and therefore
distributions from the trust to the university are not subject to
family distribution tax.
This issue appeared recently in Thomson
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nearest Thomson representative or call 1300 304 197.
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Garnishee notice issued to
solicitors held void CTH 2/11/2007
Bruton Holdings Pty Limited (in liq) v. FCT
The Federal Court has held that a notice issued by the
Commissioner pursuant to section 260-5 of the Taxation
Administration Act 1953 (a 'garnishee' or 'third
party' notice) to solicitors for a corporate taxpayer, in
relation to a $7.7 million tax debt of the taxpayer, was void
under section 500(1) of the Corporations Act 2001. The
notice related to over $400,000 held by the solicitors in trust
for the taxpayer 'on account of costs and disbursements'. The
Court agreed with the taxpayer's argument that the notice was an 'attachment ... put in force against the property of the company
after the passing of the resolution for voluntary winding up'
for the purposes of section 500(1) and was therefore void. (In the
matter of Bruton Holdings Pty Limited (in liq) v. FCT
[2007] FCA 1643, Federal Court, Allsop J, 2 November 2007.)
The article comes from A-Z of Trusts, fortnightly email news alert
(Wednesday, 7 November 2007). A-Z of Trusts is a one-stop
resource authored by field experts from Deacons law firm, giving
you current, detailed information and practical assistance on
modern trust planning concepts. To find out more, click here.
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