Contact: Neil Ward
Deloitte
Tax Partner
61-3-9208 7444

Contact: Louise Denver
Deloitte
Financial Services Media Relations
+61 (0) 2 9322 7615

Contact: Vessa Playfair
Deloitte
Director of Communications
9322 7576

Contact: Larry Gafinowitz
Deloitte
Partner Tax Services Sydney
Tel +61 (0) 2 0322 5841

Contact: Jamie Gatt
Deloitte
Partner Assurance & Advisory Sydney
Tel +61 (0) 2 9322 5396

After 14 years of comment and consideration, the Treasury today released an exposure draft covering new rules for the taxation of financial arrangements (TOFA), which will support Australia’s aspiration for greater alignment between its taxation and accounting systems.

The changes will provide organisations with a radically different approach to recognising taxable income for financial instruments – their assets and liabilities. "TOFA will change the way businesses are taxed on their financial arrangements," said Deloitte Tax Services partner, Neil Ward.

Commenting on the reforms he said, "In general we expect today’s proposals to be widely welcomed by corporate Australia".

"Certainly the banking industry will be the primary beneficiary of the TOFA reforms, as the proposed changes will go far in eliminating the vexed timing differences on their treasury books. The proposals will enable banks to manage their dividend franking capacity with greater certainty and simplicity.

"In a nutshell these proposed changes bring greater rigour, certainty and transparency to the tax accounting process of listed companies, not just banks," said Deloitte Tax Services partner, Larry Gafinowitz.

"By aligning the tax rules with accounting rules, current issues around timing relating to cash flow management, franking capacity and systems will be more predictable for all listed companies."

More than just financial services and resources to be impacted…
"The TOFA reforms will impact on the financial services industry, the resources industry, large corporate manufacturers and exporters, and Australia’s burgeoning middle market," said Neil Ward.

"To that extent TOFA is a far reaching proposal with a big footprint in corporate Australia".

Today’s announcement invites Australian business and industry bodies to make submissions by 1 March 2006 about the proposals and discuss the impact in detail.

Download the complete release below: