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Tax Telegraph, November 2012


Tax Laws Amendment (2012 Measures No.4) Bill 2012:

This Bill was introduced on 23 August 2012 into the Senate. Broadly, it proposes to amend the Fringe Benefits Tax Assessment Act 1986 and the Income Tax Assessment Act 1997 (ITAA 1997) to reform the treatment of living-away-from-home (LAFH) allowances and benefits. This Bill was passed by the House of Representatives with amendments which inserted a new Schedule 1 to the Bill in response to the House of Representatives Standing Committee on Economics’ recommendations. The Assistant Treasurer has announced that these amendments will:

  • Ensure LAFH allowances are taxed entirely within the fringe benefits tax (FBT) system
  • Expand the definition of fly-in fly-out workers and drive-in drive-out workers for the purposes of the reforms, so those workers who live at home with their parents, or whose home on ‘off' days is in a country other than Australia, do not lose the concessional tax treatment
  • Expand the definition of drive-in drive-out workers for the purposes of the reforms, so it includes workers who use their own vehicle to travel to the workplace
  • Amend the circumstances in which the 12 month time limit will pause, to provide certainty and simplicity, and
  • Ensure that the provisions that prevent people accessing the transitional treatment if they ‘vary' an existing arrangement only apply to ‘material variations' and do not prevent minor changes such as normal salary increases.

Exposure Draft - Loss carry-back:
On 23 August 2012, the Assistant Treasurer released ED legislation and explanatory material to implement the loss carry-back measure for companies. The measure will allow corporate tax entities (CTEs) to carry back losses and deduct them against income of earlier income years to produce a refundable tax offset. The key features of the measure proposed in the ED remain largely unchanged from those that were proposed in the discussion paper (released July 2012) except for:

  • A requirement that the CTE has lodged an income tax return for each year of the current year and the last five years (subject to some exceptions)
  • More than $1million could be carried back to years that have net exempt income so long as the amount remaining does not exceed $1million
  • If the CTE is a foreign entity with a permanent establishment in Australia, the franking account balance restriction does not apply
  • Modified continuity of ownership (COT) and same business (SBT) tests will apply rather than the option of a broader anti-avoidance section (which was considered in the discussion paper).  Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) will also be amended to apply to schemes to obtain a loss carry-back benefit.

Of significance were the Assistant Treasurer’s comments that he will oversee targeted consultation to identify and further develop alternative integrity measures to COT and SBT for loss carry-back prior to legislation being introduced into Parliament.  Presumably this will also have implications for losses carried forward.  He states: “If this consultation can identify a simpler approach that adequately addresses integrity risk, the Government will adopt it.” Consultation on the ED closed on 19 September 2012.

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