Adding value in a time of volatility - Tax Topics for the Financial Services Industry |
In the global financial services industry business models need to be re-examined and re-invented. The tax impacts of each market driven change are a key element of this re-invention.
Deloitte’s report: Adding value in a time of volatility - Tax Topics for the Financial Services Industry looks at five key business issues for global financial services institutions to consider:
- Tax loss utilisation
- Acquisitions and divestments
- Compensations and reward
- Finance transformation
- Updating transfer pricing models
While many countries are having similar experiences, there are a number of differences between the Australian and US markets. We highlight two areas in particular below:
Tax loss utilisation
- While Australia does not have any time limits in which tax losses must be recovered or else forfeited, consideration needs to be given the extent that the carried forward losses can be recognised for accounting purposes and where appropriate, unit pricing or crediting rate purposes. This is critical given the ramifications this can have on the entity’s stakeholders, particularly where a stakeholder’s interest is based on the net assets of the entity, such as superannuation fund members and unitholders of investment trusts.
- Our recent Super vision outlines some of the issues that need to be considered regardless of the nature of the entity booking the tax losses. Importantly, there should be robust discussions about any suggestions that a general rule of thumb (such as a cap) be adopted for the recognition of a Deferred Tax Assessment for tax losses rather than an assessment of the probability of recovering the losses.
Compensations and rewards
- The Federal Government released its policy options paper on 5 June 2009, together with draft amending legislation, on the tax treatment of Employee Share Schemes. This consultation paper and amending legislation propose significant modification to the measures that were announced in the Federal Budget.
- See the proposed new measures, which will apply to shares and rights (such as options) acquired on or after 1 July 2009, here.
- The changes have addressed some of the industry’s concerns – although there are still a number of unresolved issues including:
- the practical application of the “genuine risk of forfeiture” test
- the problems associated with taxing qualifying rights plans at vesting rather than at exercise
- Government’s stated intention to review and amend the existing valuation rules
- termination of employment remains a taxable event if the share or right has not previously been taxed
- whether executives will now be taxed on the full value of awards granted while working offshore as a non-resident that vest after becoming tax resident.
Submissions to the Government sought submissions and comments on the paper, and the draft amending legislation, by 12 June 2009
ACTION
- Consider granting new or suspended awards before 1 July 2009 (as they will not be impacted by the proposed new measures)
- Review share plan arrangements immediately to assess the tax impact of any future awards on Australian participants
| Contacts | |
| Sally Morton Global Employer Services Partner Deloitte Touche Tohmatsu Direct: +61 (2) 9322 7511 |
Noelle Kelleher Superannuation Partner Deloitte Touche Tohmatsu Direct: +61 (3) 9671 6600 |
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