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Issue 178, 18 July 2008
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Articles in this edition include:
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LRA.Service@thomson.com Copyright:
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Govt Green Paper on Carbon Reduction
Scheme released
The Government has released its Green
Paper on the Carbon Pollution Reduction Scheme. The Green
Paper sets out options and identifies the Government's disposition
and preferred positions on emissions trading and the support
proposed to help households and businesses. The Government proposes
a cap and trade scheme and commits to reducing Australia's
greenhouse gas emissions by 60% below 2000 levels by 2050.
The Government confirmed its intention to commence the Scheme in
2010. The Scheme will cover stationary energy, transport, fugitive
emissions, industrial processes, waste and forestry sectors, and all
six greenhouse gases counted under the Kyoto Protocol (i.e. carbon
dioxide, methane, nitrous oxide, sulphur hexafluoride,
hydrofluorocarbons and perfluorocarbons) from the time the Scheme
begins. The Government said it 'is disposed' to include
agriculture emissions in the Scheme by 2015 and to make a final
decision on this in 2013.
At the heart of the Scheme is emissions trading, in which the
Government sets a limit on how much carbon pollution industry can
produce, and then the Government sells permits up to that limit,
creating an incentive to look for cleaner energy options. Companies
can buy and sell permits from each other depending on how much they
value them. The Government intends that revenue raised from the
selling of permits will be used to help households and business (see
below).
Compensatory changes
The Government announced a range of compensatory arrangements and
transitional measures:
- To offset the initial price impact on
fuel associated with the introduction of the Scheme, the
Government said it would cut fuel taxes on a cent-for-cent basis
(this will include fuel used by heavy vehicle road users). The
Government will review this measure after one year.
- For rural and regional areas, a rebate
will be provided equivalent to the excise cut for businesses in
the agricultural and fishing industries for three years.
- Transitional assistance will be provided
in the form of a share of free permits to the most
emissions-intensive trade-exposed activities.
- The Government also proposes to provide
a limited amount of direct assistance to existing coal-fired
electricity generators.
- Payments will be increased, above
automatic indexation, to people in receipt of pensioner, carer,
senior and allowance benefits and to provide other assistance to
meet the overall increase in the cost of living flowing from the
Scheme.
- Assistance will be increased to other
low-income households through the tax and payment system to meet
the overall increase in the cost of living flowing from the
Scheme.
- 'Middle-income households' will also
get assistance to help them meet any overall increase in the
cost of living flowing from the scheme.
Tax and accounting aspects
The Green Paper says 'discrete provisions of the income tax
law' would be developed to provide generally the same tax
treatment to permits purchased by taxpayers who are carrying on a
business or other income-earning activity as would occur under
existing legislation. Other tax aspects include:
- the cost of acquiring a permit would be
deductible at the time the permit is acquired. If the permit is
banked, the effect of the deduction would be deferred until the
time the permit is surrendered or sold;
- any proceeds received on the sale of a
permit would be treated as assessable income;
- the value of free permits would be
included in the taxpayer's assessable income in the year the
permits are received; and
- Scheme transactions would be treated
under the normal GST rules.
Submissions
The Government now seeks feedback on the Green Paper and intends
that a White Paper incorporating its decisions and an exposure draft
of legislation for the Scheme will be released in December 2008.
The full text of this media release can be found at the following
link: Minister
for Climate Change and Water media release PW 117/08, 16 July 2008.
This article appeared in Thomson's daily Latest
Tax News (Wednesday 16th July). With tax fast-moving and
ever changing - every day, practitioners rely on
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CGT - Inherited dwelling
Q. Does the exemption for the disposal of an inherited
dwelling within two years of the deceased's death only apply to
the disposal of the whole dwelling or can someone who inherited a
dwelling dispose of only a 'part-interest' in it and still
claim the exemption (e.g. where a person inherits a whole dwelling
and then transfers half the interest in it to their spouse)?
A. Section 118-195 of ITAA 1997 deals with this
exemption. It states that a 'capital gain or capital loss you
make from a CGT event that happens in relation to a dwelling or
your ownership interest in it is disregarded' in the
circumstances specified in the section.
One circumstance is that 'your ownership interest ends within
two years of the deceased's death'.
The confusion over whether the exemption applies only to the
disposal of the whole dwelling arises because the ownership
interest that is inherited is the whole dwelling while the
ownership interest that ends (e.g. on the transfer of a 50%
interest to the spouse) is only half the interest in the dwelling.
Likewise, the opening words in section 118-195 refer to
disregarding the gain made from a CGT event that happens in
relation to a 'dwelling' or 'ownership interest', while
Item 1 only refers to 'ownership interest', raising doubt
whether they refer to the same interest.
Section 118-130, which defines 'ownership interest', does
not of itself solve the problem. In relation to a dwelling, it
refers to a legal or equitable interest in the land on which it is
erected (in the case of a house). In relation to a flat or home
unit, it refers to a legal or equitable interest in a stratum
unit. It also includes a licence or right to occupy either a house
or a flat/home unit.
Perhaps the better approach is to recognise that every
provision dealing with the main residence exemption specifically,
or by implication, deals with an individual's liability or
exemption being determined in terms of their particular 'interest' in the land or dwelling (a matter supported by the
section 118-130 definition of 'ownership interest'). If this
were the case, there would seem to be no reason why it would be
different for the purposes of section 118-195.
Moreover, any other view would seem to run contrary to the
generous 'policy' considerations that underpin the main
residence exemption provisions. For example, it would seem unfair
to deny the exemption to say a child who jointly inherits a home
with his or her siblings and than transfers that interest to one
of those siblings within two years of the deceased's death.
Therefore, while not without doubt, the better view appears to
be that the exemption does apply to the disposal by a taxpayer of
his or her part-interest in an inherited dwelling as well as the
whole dwelling.
This issue appeared recently in Thomson
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GST - Supplies of real property
and bare trusts GST Ruling GSTR 2008/3
This GST
Ruling, released on 25 June 2008, explains how the GST Act
applies to the limited circumstance of supplies of real property
involving bare trusts and similar trust arrangements where the
trustee has limited active duties and acts solely at the direction
of the beneficiary or beneficiaries. The Ruling was previously
released as Draft GSTR 2007/D3 and is substantially unchanged.
The Ruling states that a bare trust arrangement does not in
itself create the relationship of agency between the trustee and
the beneficiary. The Ruling proceeds to state that the activities
of a bare trust are essentially passive in nature and therefore it
does not carry on an enterprise for GST purposes. However, the Tax
Office states that a supply or acquisition may be made in the
course of an enterprise carried on by the beneficiary, such that
the beneficiary is liable for any GST or entitled to any input tax
credit, notwithstanding that title to the relevant property is
conveyed by or to a bare trustee for the beneficiary.
The article comes from A-Z of Trusts,
fortnightly email news alert (Thursday 26th June 2008).
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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