was the availability of tax deductions that ensured a positive cash flow position for the investor, regardless of the performance of the project.

The AAT held that the scheme in question exhibited the characteristics of a scheme with the sole or dominant purpose of obtaining a tax benefit, through the availability of tax deductions not otherwise available to the taxpayers.

Tip: The Tax Office (and courts) have increasingly applied Part IVA when an obvious tax benefit arises that outweighs the commercial benefits. It would be prudent to consider tax effective investments on which the Tax Office has issued a product ruling to avoid any unexpected tax implications.

 

 

 

Capital Gains Tax and Trust Cloning

In TR 2006/4 the Tax Office has previously outlined in detail its view of all of the key aspects that must be identical under two trusts for a taxpayer to be able to transfer assets between the trusts without triggering a capital gain in certain circumstances.

The Tax Office recently released ATO ID 2006/318, which indicates that this will not apply where the meaning and effect of the trust deeds are not the same, even if the wording of the two deeds is identical.

The example provided concerns two trust deeds that were identically worded, with both having a clause that excluded the settlor from taking any benefit under the trust. Each trust had a different settlor who established the trust by contributing the initial trust property or capital.

In this case, when a piece of property was transferred from one trust to the other, capital gains tax applied as the two trust deeds, while worded identically, did not have the same meaning and effect. This was because a different settlor was excluded from benefiting under each trust.

Tip: When drafting trust deeds, great care should be taken to ensure that the two trusts are considered identical if it is likely that assets may be transferred between the trusts in the future.

GST-Free Exports

The GST legislation provides that exported goods are GST-free. This applies where they are exported within 60 days from the earlier of the issue of the invoice or the first receipt of any consideration. If this deadline lapses, it is possible for a taxpayer to apply for an extension to maintain the GST-free status.

The Tax Office recently released PS LA 2006/16, outlining the circumstances in which a GST-registered entity can obtain a time extension.

The practice statement informs exporters of the information that they need to provide to the Tax Office in order to make an extension request, as well as the factors that the Tax Office will consider in reviewing the application. It also provides useful practical examples that illustrate the general application of the principles explained in the practice statement.

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