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Tax Telegraph, February 2013

LegislationCorporations amendments – improving disclosure requirements and new dividends test

On 14 December 2012, the Parliamentary Secretary to the Treasurer released ED and explanatory material which contains measures to enhance the disclosure of executive remuneration in Australia and further clarify the test for the payment of dividends (section 254T). Importantly, proposed amendments to the Corporations Act 2001 will:

  • Repeal and replace the current dividends test in section 254T with a 2 limb test that:
    • The company's assets exceed its liabilities, and the excess is sufficient for the payment of a dividend
    • The directors reasonably believe that the company will be solvent immediately after the dividend is declared or paid

  • Apply the dividends test immediately before a dividend declaration, or if no declaration, immediately before payment

  • Allow non-reporting entities to calculate assets and liabilities with reference to financial records when applying the dividends test (rather than with reference to accounting standards under the current rules).

The changes to section 254T are expected to apply from the date the proposed draft legislation receives Royal Assent. Submissions on the ED are due on 15 March 2013. As a result of this proposed legislation, it is likely that TR 2012/5 Income tax: section 254T of the Corporations Act 2001 and the assessment and franking of dividends paid from 28 June 2010 may be amended.

Miscellaneous amendments to the tax laws

On 21 December 2012, Treasury released ED and explanatory material regarding proposed miscellaneous amendments to the taxation laws. The proposed amendments include:

  • Amending the definition of 'tax preferred end user' in Division 250 (Assets put to tax preferred use) of the Income Tax Assessment Act 1997 (ITAA 1997) to bring Australian residents within that definition to the extent that they carry on a business at, or through, a permanent establishment in a foreign jurisdiction

  • Simplifying the process for future changes to the phase-out thresholds in the Income Tax Rates Act 1986 by replacing references to fixed monetary thresholds with formulae that are used to produce new monetary amounts

  • Amending the Tax Laws Amendment (2011 Measures No. 9) Act 2012 to allow the Commissioner to amend assessments of those taxpayers who are entitled to apply the foreign income tax offset against the Medicare levy and Medicare levy surcharge back to 1 July 2008

  • Correcting typographical errors, references and mis-descriptions and updating references to provisions.

Submissions were due by 18 January 2013.

Amendments to the taxation of financial arrangements (TOFA) stages 3 & 4

On 10 January 2013, Treasury released ED legislation and explanatory material proposing amendments to the TOFA Stages 3 & 4 provisions. Broadly, amendments are proposed to Division 230 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the following:

  • The core rules
  • The accruals and realisation methods
  • The fair value method
  • The hedging financial arrangements method
  • The transitional balancing adjustment provisions
  • The requirements for making certain elections.

Submissions were due by 13 February 2013.

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