Contact | Membership | Student Page | Taxation Institute Website

This is one of the busiest times of the year at the Taxation Institute.  We are in the process of renewing all Memberships, launching many new and exciting products and preparing to embark upon another round of Structured Education courses in Study Period 2 (Foundation and Applied Tax).

Don’t forget that your student Membership entitles you to the following Member benefits:

• Access to Australia’s premier tax journal, Taxation in Australia – online;
• TaxVine, the professions leading weekly e-newsletter – online;
• Discounts to Taxation Institute events and even free attendance at some events (as advertised);
• Discounts on Thomson publications and tax and accounting products (20% off the Australian Tax Handbook and 10% off any other tax and accounting products); and
• ConTax four times per year.

The Taxation Institute’s website is one of the preferred sites for tax related information and resources.  Presentations and papers from Australia’s leading tax professionals, handy links and discounted access to a variety of vital tax resources are only a click away: www.taxinstitute.com.au

If you are considering a career in tax, you should seriously consider the Taxation Institute’s Structured Education course after Uni. Foundation Tax, level 1 of the Structured Education Program is fast becoming one of the most popular practical, hands on post graduate courses in the country.  By bridging the gap between university and the workplace, it will aid in building your on the job confidence from day one. For further information: http://sep.taxinstitute.com.au

Yours sincerely,

Noel Rowland
CEO, Taxation Institute of Australia

Issue highlights:

• Partnership Salaries and TR 2005/7
• Sample Exam Question

Regular Features:

• Young Practitoner Profile
• Reading List
• Special Offers
• Feedback

This article critically examines Taxation Ruling TR 2005/7 concerning the income tax treatment of partners’ salaries. An earlier ruling Income Tax Ruling IT 2218 is also considered as background to the current ruling, together with the relevant legislation and case law. TR 2005/7 is found to be without foundation in the law, being contrary to the scheme of the legislation and to case law. As a result, it is recommended that the ruling be withdrawn.

This article first appeared in JAT at Monash University.

1. INTRODUCTION

The treatment for income tax of so-called salaries paid to partners has presented an interesting turn for tax conjurors for many years. For example, being able to produce a distribution of income to a partner of a greater amount than the net income of the partnership requires a certain sleight of hand. In these performances, it should be noted, the Commissioner of Taxation (“Commissioner”) has acted most ably as the conjuror’s assistant by his general administrative practice of allowing certain distributions even though they have had no foundation in the law.

Now, however, the Commissioner has announced a departure from his old administrative practice by the release of Taxation Ruling

TR 2005/7 of 25 May 2005 which introduces an extraordinary new practice. This article examines this practice on the basis of the legislation and case law authorities to determine whether there is any foundation for the creative practice promoted in the ruling. It is found that it is without foundation in the law and outside the scheme of the income tax legislation. In effect, this article provides an alternative view to the ruling, but one different from the token alternative view presented in the ruling.

To read the rest of this article please click here

back to top

Susan Lawson was a solicitor in sole practice who had returned income on a cash basis. On her death in November 2006, a trust was created under her will conferring the following fixed interests in the net income of the trust estate:

In addition to the above fixed interests, the trustee of this trust estate has the discretion each year to accumulate the balance of the net income or to distribute it amongst other eligible beneficiaries as the trustee sees fit. The trustee made the following resolution on 29 June 2007:

‘It is resolved that the balance of the net income of the Estate of Susan Lawson for the year ending 30 June 2007, after taking account of the fixed interests in this net income, be distributed as follows:

For the year ending 30 June 2007, the trust returned a net income of $160,000 in terms of subsection 95(1) of the 1936 Act. The bulk of this income was derived from extensive rental properties which had been owned by Susan, but also included was an amount of $20,000 received for fees owing to Susan at the time of her death. There were no outstanding debts owing by the estate.

Additional information

(1) Albert is a son aged 26 and a resident of Mexico for the last 3 years where he is employed as a computer consultant. He does not lodge income tax returns in Australia.

(2) Belinda is a daughter aged 19 who is a full-time student with a part-time job.

(3) Cate is a daughter aged 16 who is also a full-time student with a part-time job.

(4) David is a son aged 14 and fully occupied with school work.

Required

Explain how the net income of the trust, and the taxable incomes of the beneficiaries where appropriate, will be assessed for income tax for the year ending 30 June 2007.

Reference should be made to the relevant tax law and rates, but calculations of tax are not required.

To see the suggested solution to this sample question click here.

back to top

Name: Jennifer Rees

Employer: William Buck, Adelaide

Position: Assistant Manager, Tax Services

Jennifer is responsible for providing taxation advice to both internal and external clients. Her primary focus is taxation compliance and planning to small and medium businesses in a variety of industries. She is actively involved in assignments such as business, family and superannuation restructuring, due diligence and business acquisitions. Jennifer is also involved with William Buck's staff training committee and regularly presents at internal training events.

Jennifer is a current member of the Tax Institute's SA Membership Services Sub-committee (SA Division) and has presented at a number of the Institute's educational events.

What are your career highlights so far?

Completing my professional studies was a highlight (and also a relief), however I find achieving in my work much more rewarding in the long term. Assisting clients achieve their goals is very rewarding, particularly when you can look back and see how much money you have saved them or see how well a new business/entity structure works for them. I also enjoy assisting in the development of the other William Buck staff as it also gives me the opportunity to strengthen my own skills.

What do you do to unwind?

Travelling, and a bottle of good wine (often together). When at home I unwind by spending time with family and friends, dining out, going to the movies and regular visits to the gym.

Why did you join the Tax Institute?

The Tax Institute provides excellent training opportunities to its members which are specific to our needs. In addition there are some fantastic networking opportunities available to us. The infamous annual SA State Convention is a great example of both of these things, where a variety of seminar topics are offered as well as various social aspects such as dinners, drinks and activities such as golf and wine tours. The Tax Institute has also offered me opportunities to speak at education events which has developed my presentation skills, which I can apply to other aspects of my work and career.

What advice can you give to graduates?

Be open to opportunities when they come your way, regardless of how small they may appear
Don't be too worried if you make mistakes - everyone makes them now and again
Try to have fun!

Who/What inspires you?

There are many people from different walks of life that inspire me, but they are all generally positive and happy people. There isn't one person in particular who inspires me, but I am inspired by certain aspects of a number of different people. I am also inspired by past successes of my own and others.

Favourite Holiday Destination?

I cannot pick just one, there are so many fantastic places to visit within Australia, however when I get the chance I do love to travel overseas. My travel wish list is endless!

back to top

Legislation

You can find all the legislation that you require from the Austlii or ComLaw websites.

ATO Legal Database

• Public Rulings
• ATO Interpretative Decisions

Journals

• Taxation in Australia
• Tax Specialist
• Australian Tax Forum

The Treasury and Ministry Websites

• The Treasury
• The Treasurer: The Hon Peter Costello MP
• The Minister for Revenue and Assistant Treasurer: The Hon Peter Dutton MP
• The Parliament Secretary to the Treasurer: The Hon Chris Pearce, MP

Related Websites

• Taxation Institute of Australia
• Australian Taxation Office
• Board of Taxation
• Austlii
• ComLaw
• Ralph Review
• Review of Income Self Assessment
• Inspector General of Taxation
• Commonwealth Parliament
• Thomson

Cases

• SAGA HOLIDAYS LIMITED v FC of T [2005] FCA 1892
• BENNETT & DIX t/a FITNESS PAINTING & PROPERTY MAINTENANCE v HIGGINS [2005] WASCA 197
• FC of T v HORNIBROOK [2006] FCA 9
• R v RIGOLI & ANOR [2006] VSCA 1
• ELSINORA GLOBAL LTD & ORS v HEALTHSCOPE LTD & ORS [2006] FCA 18
• CUMINS v FC of T [2006] FCA 43
• ELL & ANOR v FC of T [2006] FCA 71
• HALLORAN & ORS v MINISTER ADMINISTERING NATIONAL PARKS AND WILDLIFE ACT 1974 [2006] HCA 3
• COMMISSIONER OF STATE REVENUE (VIC) v AUSTRALIAN FOOTBALL LEAGUE [2006] VSCA 24
• TOYAMA PTY LTD v LANDMARK BUILDING DEVELOPMENTS PTY LTD [2006] NSWSC 83
• DERRING LANE PTY LTD v FITZGIBBON [2006] VSC 46
• RAFTLAND PTY LTD v FC of T [2006] FCA 109
• FC of T v IKIN & ANOR [2006] NSWSC 86
• LEDA PTY LTD & ANOR v WEERDEN [2006] NSWSC 125
• STERLING GUARDIAN PTY LTD v FC of T [2006] FCAFC 12
• TRUST COMPANY OF AUSTRALIA LTD v COMMISSIONER OF STATE REVENUE (VIC) [2006] VSC 64
• DFC of T v JOHNSTON [2006] QSC 061
• MOORE PARK GARDENS MANAGEMENT PTY LTD v CHIEF COMMISSIONER OF STATE REVENUE (NSW) [2006] NSWCA 115
• DAY v FC of T [2006] FCA 655
• FC of T v DB RREEF FUNDS MANAGEMENT LTD [2006] FCAFC 89
• AVON PRODUCTS PTY LIMITED v FC of T [2006] HCA 29
• INDOOROOPILLY CHILDREN SERVICES (QLD) PTY LTD v FC of T [2006] FCA 734
• VL INVESTMENTS PTY LTD v COMMISSIONER OF STATE REVENUE (VIC) [2006] VSC 215
• ISAACS v FC of T [2006] FCAFC 105
• CASCADE BREWERY COMPANY PTY LTD & ANOR v FC of T [2006] FCA 821
• PEARSON v FC of T [2006] FCAFC 111

back to top

Various special offers from The Tax Institute's Business Alliance Partners can be accessed by clicking here

back to top

We welcome your feedback about ConTax and the receipt of proposed content contributions (i.e articles) for future editions. Click here to contact ConTax

back to top