Introduction
On 30 March 2010, the High Court unanimously dismissed both appeals, by the Commissioner and the taxpayers, from the Federal Court. It was finally confirmed that it is correct to apply the “proportionate view” where the net income of a trust for tax purposes exceeds accounting income.
Furthermore, the Court upheld that a capital gain made by a trust, but distributed as trust income, should be treated as income for tax purposes.
While the relatively quick judgement by the High Court now provides some certainty on how trust income should be treated for tax purposes, the underlying calls for reform of the law in this area remain to resolve outstanding issues.
On Sunday, 2 May 2010, the Australian Government released the final report of the long awaited Australia's Future Tax System Review (known as the Henry Review) and the Government's initial response to the review.
The centrepiece of the Henry Review, amongst the 138 recommendations, is a new resource super profits tax ("RSPT"). The Government has also accepted a number of recommendations relating to company and small business taxes and superannuation.
It is important to note that the introduction of these latter changes is contingent on the implementation of the RSPT. The government has indicated that this is intended to be the first step in a 10 year tax reform agenda.
Recommendation Highlights
The following is a summary of the highlights of the Government's response:♣ A Resource Super Profits Tax (“RSPT”) will be introduced on 1 July 2012 at a rate of 40%on "super" profits made from the exploitation of Australia's non-renewable resources.
♣ The States and Territories will be provided with new, ongoing infrastructure funding, with an initial total amount of $700m in 2012/13.
♣ A refundable resource exploration rebate will be provided to companies, set at the prevailing company tax rate, for exploration expenditure carried out in Australia from 2011/12.
♣ The company tax rate will be reduced to 29% from 2013/14, and to 28% from 2014/15.
♣ The company tax rate for "eligible small business companies" will be reduced to 28% from 2012/13
♣ The immediate write-off for assets of small businesses will be extended to assets valued at less than $5,000 from 1 July 2012.
♣ The superannuation guarantee charge (SGC) will be increased by annual increments until it reaches the plateau level of 12% by 2019/20
♣ The entitlement to the SGC will be broadened by lifting the maximum age threshold from 70 to 75 years of age
♣ The concessional contributions cap will be raised to $50,000 per year for workers who are 50 and over and who have superannuation balances of under $500,000
♣ A new government superannuation contribution will be created which will pay up to $500 for workers with adjusted taxable incomes of up to $37,000
