A Q&A that appeared in the Law Society of New South Wales ‘Smalltalk’ newsletter.

Profile: Peter Gell
Principal, PG Lawyers…

In this issue we talk to Peter Gell, a sole practitioner based in North Sydney. Peter’s thriving practice focuses on tax and commercial work, and he bases his billing system on a fixed fee model, which he says gives his clients certainty.
Peter believes

There are at least three different ways that a self-managed superannuation fund (SMSF) can own property:

As a sole owner
Jointly (e.g. as tenants in common)
As an investor in another entity (e.g. a unit trust or company that owns property)

SMSFs have always been able to invest directly in property but the SIS legislation has put limitations on how they acquire and deal with…

The following is a summary of the Tax Concession Working Group’s Discussion Paper on potential reforms to the Not-for-profit Sector. The Working Group attempts to determine whether there are fairer, simpler and more effective ways of delivering the current envelope of support provided through tax concessions to the NFP sector. Accordingly, the Paper sets out a number of arguments which identify areas of concern pertaining…

ACNC’s role…
The Australian Charities and Not-for-profits Commission (ACNC) is the independent national regulator of charities.
It sets out the following objectives:

Maintain, protect and enhance public trust and confidence in the sector through increased accountability and transparency.
Support and sustain a robust, vibrant, independent and innovative NFP sector
Promote the reduction of unnecessary regulatory obligations on the sector

In order to achieve these objectives,

It should be noted that this case refers extensively to s 26AFB of the ITAA 1936, which was repealed in 2007.

Facts…
These are the facts as stated in the Decision Impact Statement by the ATO.
Pursuant to a direction signed by the taxpayer, $53,000 of his superannuation benefits were rolled-out of an APRA regulated superannuation fund in which he was a member (the “APRA

Beginning from 1 July 2012, the Australian Government is making a series of improvements to super over the next seven years to help protect and grow the savings of Australians.

Individuals…
Improvements have been made to the free online tool, SuperSeeker to make it much easier for individuals to keep track of the super. The system will allow individuals to see details of their active

This decision concerns the discretion to disregard or allocate to another year one or more superannuation contributions made to relieve the taxpayer from excess concessional contributions tax.
Facts:…
These are the facts as outlined in the Decision Impact Statement by the ATO.
The taxpayer had a long-standing salary sacrifice agreement with his employer under which he agreed to forgo certain amounts of salary in exchange

This case concerned illegal access to superannuation benefits and the remission of a penalty.
Facts:…
These are the facts as outlined in the Decision Impact Statement by the ATO.
Pursuant to a direction signed by the taxpayer, $40,000 of his superannuation benefits were rolled-out of an APRA regulated superannuation fund in which he was a member (the “APRA Fund”) to another fund (the “Other Fund”),

Below is a summary of the ATO’s Decision Impact Statement on the AAT’s ruling on MH Ghali Superannuation Fund and the Commissioner of Taxation.
 
Facts:…
The MH Ghali Superannuation Fund (the Super Fund) held units in the Ghali Unit Trust (the Unit Trust) and derived income as a beneficiary of the Unit Trust.
Clause 12.3.11: The Trustee shall in its absolute discretion determine which

Below is a summary of the ATO’s Decision Impact Statement on the AAT’s ruling for Siddiqi and the Commissioner of Taxation.
Facts:…
The taxpayer was a sole trader operating an import, local purchase and export business. An audit of his business affairs revealed that there were a large number of unexplained deposits into the taxpayer’s bank accounts during the 2008 and 2009 income years that

The Commissioner of Taxation has recently released a Taxpayer Alert addressing issues he is concerned with regarding self-managed superannuation funds acquiring property using limited recourse borrowing arrangements or using related unit trusts, which may not comply with superannuation law.
Below is an summary of this Taxpayer Alert.
Types of Arrangements
Property Investments using LRBA…
Subject to a limited number of exceptions, self-managed superannuation funds (SMSFs)

This case pertains to the jurisdictional challenge by Rio Tinto Exploration (‘RTX’) in regards to the employment status of Mr Kruger, an employee of Gnomic Exploration Services (‘Gnomic).
Kruger had made a claim against RTX pursuant to s 394 of the Fair Work Act 2009 (‘the Act’), seeking an unfair dismissal remedy.
 
RTX’s jurisdictional challenge…
Gnomic is a supplier of geoscience and geo-technical contractors

This case deals with the issue of underpayment of wages and concerns contraventions of the Workplace Relations Act 1996 (‘WR Act’) and Fair Work Act 2009 (‘FW Act’).
 
Background…
Proceedings were commenced by the Fair Work Ombudsman (‘the applicant’) against Butler & Blackberry Melbourne Pty Ltd (‘the first respondent’) and the first respondent’s sole director, Lenny Scalia (‘the second respondent’), for contraventions of the

This case pertained to a jurisdictional challenge by Visy Paper Pty Ltd trading as Visy Recycling (‘Visy Recycling’) in regards to a claim brought by Dale Beazley under s 394 of the Fair Work Act 2009 for an unfair dismissal.
Beazley argued that Visy Recycling was the relevant employer against whom this claim should be brought.
 
Background…
Ranstad Pty Ltd (‘Ranstad’) was a labour

This case concerns breach of confidentiality and fiduciary duty in a commercial setting.

Facts…
The Plaintiff in this case was Wilson HTM Investment Group (Wilson HTM), which provides financial advice and other services to customers (the Services)
The defendants were:

Joseph Pagliaro – a senior investment/financial advisor employed by the Plaintiffs
Wren Bligh (W Bligh)
Angus Bligh (A Bligh)
James Hunter and Hamish Blanche (the

Facts…
The Victorian Commissioner of State Revenue assessed land tax against the unit holders in a number of unit trusts that held shopping centres. The taxpayers held 100% of the units in some trust and less than 100% in others.
One company (CPT) in particular held all of the issued units of a unit trust.
It was held in the lower court that CPT was

Facts
Port Stephens Development Pty Ltd was the registered proprietor of land with respect to which the Director-General of National Parks and Wildlife had been seved with notices requesting the land be resumed
In order to maximise claims for compensation, a large number of lots were established adopting the structure of ISPT….
Hundreds of trust deeds were executed, of which one particular trust (The

Traditionally, entities cannot be tax exempt unless they are operated principally in Australia, are prescribed as exempt in the Income Tax Assessment Act 1997 …(‘ITAA’) or are a deductible gift recipient (‘DGR’).
The introduction of this Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012 (‘Bill’) into Parliament, follows the Commonwealth Government announcement in its 2009-10 Budget that it would amend the ‘in Australia’

Overview
This case concerns the tax treatment of payments made by the trustee of a unit trust on the redemption of units; in particular whether redeeming unitholders would be assessed on trust capital gains apportioned to them.

Facts…
The taxpayer, Colonial First State Investments Limited (Colonial), is the trustee and Responsible Entity of a retail unit trust (the Retail Fund).
In its capacity as trustee

What is the Director Penalty Regime?
The director penalty regime (DRP) is used to enforce the duties of directors through the use of penalties. The provisions of the regime are set out under Division 269 of the Tax Administration Act 1953 …(Cth) (TAA 1953). Amongst other things, Div 269 outlines the directors’ obligations, penalties for failing to meet those obligations, and means of discharging liabilities

Under the Fringe Benefits Tax Assessment Act 1986… (‘FBTAA’), an employer can provide employees with benefits for living away from home, either in the form of an allowance (Division 7 of Part III), or as the provisions of accommodation (sub-section 47(5)), food (s 63) or expense payments (s 21).
This article will focus specifically on the recent amendments to the living-away-from-home allowance (‘LAFHA’) as provided

Background:
The State Revenue Legislation Amendment Bill 2012, introduced into the New South Wales Parliament on 28 March 2012, makes significant changes to the corporate reconstruction exemption (CRE…) from stamp duty in NSW with effect from 1 July 2012.
In general terms, the CRE exempts transfers of property between entities of a corporate group from stamp duty, provided certain requirements are met.

Meticulous Mentoring
The devil is in the detail yet how often do business owners and business executives confronting complex and difficult issues fail to see the wood for the trees when it solving problems and achieving outcomes.  A clear, cool and objective mind in these circumstances can add considerable value to an outcome. An outside mind can ask the right questions to get the right…

The Legal profession is one of the few where the pricing of legal services is based on a cost plus model – that is, the price paid by the client is judged according to the costs inputs to the lawyer plus a margin. This pricing is done in arrears after the job is done and is implemented via the medium of time recording. To most…

Over the years,   in the multiple disputes I have been engaged in, I have seen many different negotiating styles in action. In the good old days it was negotiating was done in a more intimidatory style, with lots of foot stomping, ridiculing and intellectual bullying as was the norm. In the 90′s the positional bargaining methods gave way to more softer interest based outcomes, particularly…

The Commmissioner of Taxation has issued a Taxpayer alert TA 2011/2 advising that he is considering arrangements where a contractor uses a discretionary trust to supply services to a labour hire firm which in turn might supply services to a recruitment agency. The Commissioner is concerned if the trust is used by the contractor to split income with beneficiaries and is looking at the arrangements…

The full Federal Court, in a decision publisjed in October, has confirmed that a company’s distributable surplus for the purposes of Division 7A (deemed dividends) must take into account income tax later imposed as a result of the disallowance of deductions. In this matter a company paid deductions which were later disallowed and the shareholder was assessed on a deemed dividend basis to some monies…

The Federal Court, in a decision delivered 16 December of Sunchen Pty Ltd v Commissioner of Taxation, has clarified whether the subjective intention of the taxpayer in acquiring residential premises “to be predominantly used for residential accomodation” is at all relevant, or whether one looks to the charcateristics of the property at the time of supply. In this case the taxpayer purchased a home and…

The goverment has announced (again?) that it will legislate to treat the superannuation fund beneficiary under an instalment warrant arrangement entered into under s67A of the SIS act as the owner of the asset held by the custodian trustee for income tax and will ensure there is no capital gains tax event when the last instalment of purchase price has been paid. This, in effect,…

The Commissioner of taxation has today issued to separate taxpayer alerts – TA 2010/5 and TA 2010/6.
Taxpayer alert TA 2010/5 concerns the use of an unrelated trust to circumvent superannuation lending restrictions. Taxpayer alert TA 2010/6 concerns the use of an unrelated trust to access funds of a private company in an attempt to circumvent Division 7A.
TA 2010/5 concerns an arrangement where an…

Clients often do not realise how important the key agreements. Time and time again clients cannot even locate their key agreements.
The point about an agreement is this. An agreement creates obligations. Obligations need to be complied with. If obligations are not complied with then severe financial consequences can follow.
It is important to keep a register of your agreements and a table of your…

A recent decision impact statement issued by the Commissioner of Taxation in relation to the decision in Tingari  Village North Pty Ltd v  Commissioner of Taxation emphasises the difficulty in having a property which is used to derive or rent qualifying as an active assets under Division 152 of the Income Tax Assessment Act 1997.

The Tingari Village… case involved the sale of a mobile

The Commissioner has issued another Interpretative decision today concerning whether a borrowing by an SMSF trustee can satisfy the requirements of s67(4A) of the SIS act where a related party of the SMSF has given the lender a personal guarantee as part of the arrangement.  Quite often this has been a requirement of lenders in limited recourse borrowing arrangements. In the matter under discussion a…

The Commissioner of Taxation has issued an interpretative decision this morning, ATO ID 2010/169 which deals with the question as to whether an SMSF trustee that entered into a limited recourse arrangement before 7 July 2010 can refinance that arrangement on or after that date without contravening the general borrowing prohibition in s67(1) of the Superannuation Industry (Supervision) Act 1993 (the “Act”).  Yes it can…

On the 17th September the Commissioner of Taxation indicated he would be appealing the decision handed down by the Federal Court of Australia on the 13th August of Wentworth District Capital.
This appeal was expected.
The Wentworth District Capital case concerned the income exemption status of a company limited by guarantee. At dispute was whether the company was entitled to that status on the basis…

The Commissioner for Taxation on the 17th September 2010 issued Interpretative Decision  ATO ID 2010/162 dealing with rates of interest on loans by members to self managed superannuation funds in instalment warrant situations.
The issue put forward was whether a superannuation fund contravenes s109 of the Superannuation Industry (Supervision) Act 1993 of it borrows money from a related party on a limited recourse basis on…

If you are a business, at some time you will reach disagreement with someone which may result in a legal dispute.
Conflict is inevitable in business life and it must be managed in a constructive manner.
Far too often disputes spiral out of control. Someone takes offence at comments made by another, an email stream starts and before you know it the lawyers have taken…

Estate planning can be as simple as choosing your legal personal representatives and drafting a 2 page will or it can be a great deal more complex.
In these times people have assets in different forms and in different types of entities. Some of these may be estate assets which pass in accordance with what your will says. Others may be in a form of…

When starting a new business people are faced with a myriad of choices as to the type of entity which can be chosen.
You can trade as a sole trader if you are a single person or you can use an entity. The use of an entity by a sole trader is subject to some taxation tests in the personal services income regime under taxation…