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ATO Releases – Rulings/Determinations

Tax Telegraph, April 2013

ATO Releases – Rulings/DeterminationsATO Interpretative Decisions (ATO IDs)

ATO ID 2013/12

R&D: A transitional substituted accounting period (SAP) year of less than 12 months is treated as an 'income year' for the purpose of an assessment under section 168 of the ITAA 1936. Where such a transitional SAP year commences on or after 1 July 2011, it will satisfy paragraph (a) of Part 1 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011 and will fall within the scope of Division 355 of the ITAA 1997.

Decision impact Statements

Commission of Taxation v Citigroup Pty Ltd

The ATO has released a Decision Impact Statement (DIS) on the Full Federal Court’s decision in Commissioner of Taxation v Citigroup Pty Ltd [2011] FCAFC 61 (10 May 2011). The Full Court held that Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applied to cancel foreign tax credits (FTCs) of $11m obtained by the taxpayer. As part of an arrangement, the taxpayer subscribed for Hong Kong based interest-bearing bonds and then immediately sold the interest coupons attached to the bonds for a lump sum. The proceeds from the sale were taxed on a gross basis in Hong Kong and under the Div 16E ITAA 1936 regime in Australia, which gave rise to ‘excess foreign tax credits’ under the old Australian FTC regime, allowing a reduction of Australian tax liability on significant amounts of other foreign source income. The Full Court found that the dominant purpose of this arrangement was to obtain the excess FTCs and that the transaction did not otherwise make sense, and also dismissed the Commissioner’s argument that the taxpayer was liable for the general interest charge (GIC) under subsection 204(3) of the ITAA 1936.

The ATO notes that as the FTC regime has been replaced by the foreign income tax offset (FITO) regime, the Full Court’s decision has no on-going impact in relation to the imposition of GIC for disallowed FITOs.

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