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Share Buyback Arrangement |
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Overturning an earlier decision of the Full Federal Court, the High Court has found that the proceeds from the sale of sell-back rights granted by St George Bank were assessable as ordinary income. In February 2001, St George Bank granted sell-back rights to its shareholders as part of an off-market share buyback. The sell-back right entitled the shareholder to sell back one of their shares to St George at a fixed price above the current market value of the shares. The mechanics of the arrangement resulted in the taxpayer receiving and then disposing of her sell-back rights. The High Court held (in a 4:1 majority decision) that whether a receipt is income depends upon its nature in the recipient’s hands and not the nature of the expenditure incurred by the other party. The Court said that while the rights acquired by the taxpayer were a product of her shareholding, they were ‘severed’ from that shareholding, and accordingly, the market value of the sell-back rights was held to be ordinary income. The Tax Office has identified that this case affects over 80,000 taxpayers and it will be contacting them to provide advice on the decision and what it means for them. |
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Changes to Small Business Taxation |
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In an attempt to standardise the eligibility criteria for small business tax concessions, the government recently released the Exposure Draft Tax Laws Amend-ment (Small Business) Bill 2007. The current regulations require small business to undertake separate eligibility tests for tax concessions relating to CGT, GST, PAYG and FBT. The proposed Bill aims to simplify the system by defining a small business entity as one which has turnover of less than $2 million. Eligible entities would have access to the following concessions: · simplified trading stock rules; · simplified depreciation rules; · amended assessment period limited to two years; · immediate deductions for expenses which were previously required to be deducted on a pro-rata basis; and · accounting for GST on a cash basis, enabling taxpayers to claim input tax credits when they actually pay for acquisitions. |