Government introduces Bill on proposed changes to Part IVA

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Important changes to the operation of the general anti-avoidance rule under Part IVA of the Income Tax Assessment Act 1936 ("Part IVA") were introduced into Federal Parliament yesterday. Those changes, if legislated in their current form, will in some cases have a significant impact on how taxpayers and the Australian Taxation Office ("ATO") approach the potential application of Part IVA going forward.

The amendments are the culmination of significant debate concerning the ongoing effectiveness of Part IVA as a bulwark against tax avoidance and propose to alter the analysis for determining whether a taxpayer has obtained a tax benefit; one of the three key criteria which needs to be satisfied in the application of the general anti-avoidance rule under Part IVA.

Read our full Alert on the paper.

The Assistant Treasurer, David Bradbury, has today announced the release of exposure draft legislation and explanatory memorandum in relation to the previously announced amendments to the general anti-avoidance provisions in Part IVA of the Income Tax Assessment Act 1936. The proposed amendments are stated as addressing "technical deficiencies in the way in which Part IVA determines whether or not a tax advantage has been obtained in connection with an arrangement". The amendments are not intended to disturb the operation of Part IVA in any other respect.

The start date of the proposed amendments has been revised, and the measures will now apply to schemes entered into or commenced to be carried out on or after today, i.e. 16 November 2012.

Broadly, the amendments apply to: allow Part IVA to operate as an integrated wholeensure that when a conclusion that a tax benefit has been obtained depends upon a hypothetical reconstruction of what would have happened absent the scheme (as distinct from a straight forward application of the statutory postulate that the scheme, in its entirety, did not happen), the hypothesis focuses on other ways in which the taxpayer might reasonably be expected to have achieved the same non-tax effects as it achieved from, and in connection with, the scheme; andensure that, in considering alternatives to the scheme, no consideration is given to the taxation implications of those alternatives.Submissions on the draft legislation can be made until Wednesday 19 December 2012.On 19 July 2012, the Australian Taxation Office (ATO) released its Compliance Program for 2012-13 which outlines the compliance activities it will be taking over the coming year.

It also describes the market segments and compliance issues that the ATO will focus on for each segment, including individuals, micro enterprises, small-to-medium enterprises and large businesses. This information is essential for taxpayers as it enables them to adopt a more strategic approach to manage tax risk by assessing their exposure to the focus areas identified in the Compliance Program.

This year's Compliance Program sees a continuation of a number of themes that have emerged in recent years. Some of the recurring themes include a focus on: international cooperation with other countries to tackle cross-border tax avoidance and evasion.profit-shifting through the use of related party transactionsensuring companies have good corporate governance and tax risk management, and a continued commitment to Project Wickenby Read our full Alert on the paper. Register to our upcoming events on this topic.More and more countries, such as the UK and India, are considering the enactment of a General Anti-Avoidance Rule (GAAR). This Alert summarises the main features for the GAARs of 17 countries, illustrating the diversity of anti-avoidance regimes currently existing around the world (see table at the end.)

This Alert summarises the main features for the GAARs of 17 countries, illustrating the diversity of anti-avoidance regimes currently existing around the world (see table at the end.) It also describes some broad design elements that move toward a balanced approach, the potential negative impacts if a po oor design is implemented, as well as competing policy interests. This Alert does not, however, advocate the introduction of a GAAR. Whether a GAAR should be enacted must be determined with reference to the individual circumstances of each country.

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In late March 2012, the ATO commenced issuing letters to taxpayers advising it had commenced an intelligence gathering project to investigate the level of exempt foreign income being declared by Australian companies under section 23AJ of the Income Tax Assessment Act 1936. The letter advises that no action is required of the taxpayer at this time.

However, taxpayers ought to be aware that the ATO has indicated that it has already commenced the process of obtaining information from those countries listed below under the relevant article of the double tax agreement or tax information exchange agreement.

The project is part of the ATO's broader Tax Haven strategy which, until now, had not focused closely on the large business sector.

Companies targeted under the project include Australian headquartered companies and some Australian subsidiaries of US headquartered companies with operations in any of the jurisdictions listed below. We understand the ATO has already sought information from the following countries. Countries with Double Tax Agreements (DTAs)Countries with Tax Information Exchange Agreements (TIEAs)* Australia does not currently have a TIEA with Panama.

The ATO objectives of the project include: testing the effectiveness of their TIEAs, many of which have only recently come into effectunderstanding the reasons for the decline in amounts of attributable income with a particular focus on assessing the actual operations of the offshore businessreviewing the large increase in section 23AJ non-assessable non-exempt income and determining whether these dividends satisfy the requirements of the provision.Taxpayers may wish to review their tax affairs to determine whether this project is likely to raise risks which require strategic management both domestically and internationally. This may include obtaining an understanding of the ATO's exchange of information procedures and developing appropriate strategies to manage their global tax risk. This process may include reviewing your tax position in order to determine the extent of any risks that might arise.

Should you require any further information, including a sanitised copy of the letters issued to taxpayers, please contact your usual PwC advisor or one of the tax controversy specialists listed on the right.

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New government proposals to improve driver training

The government expects car insurance costs to come down thanks to new proposals aimed at improving the safety of new drivers.

The government is planning a raft of changes which would see new drivers receive better training.

This would also have the knock-on effect of lowering car insurance costs for young drivers.

Currently younger drivers have higher premiums than all other age groups because of their increased risk of being involved in a road accident.

Department for Transport statistics show that 20 per cent of the people killed or seriously injured on Britain's roads in 2011 were involved in collision where one of the drivers was aged between 17 and 24.

A minimum learning period before young drivers can take their driving test. Other measures include enabling learners to take lessons on motorways, in poor weather conditions, and at night. Extend the probationary period from two to three years for a new driver's licence to be revoked if they receive six or more penalty points. Making the driving test more rigorous to better prepare learners to drive unsupervised. Incentives for young drivers to take up additional training after passing their test

The proposals were unveiled at a summit for the motor insurance industry, hosted by the Department for Transport.

Representatives from the Ministry of Justice, Driving Standards Agency and a number of insurers, including Admiral and Aviva, were also present.

The proposals are outlined in a government Green Paper - a preliminary report of government proposals published to stimulate discussion.

The Green Paper could contain further temporary restrictions on newly-qualified drivers. All will be revealed when it is published later this spring.

Campaigners, including road safety charity Brake and the Association of British Insurers, have long called for a new system of graduated driver licensing to be introduced in the UK.

This graduated licensing scheme would impose certain restrictions new motorists aged under 25 during their first six months on the road.

These would include a ban on driving between 11pm and 4am, unless travelling to work or place of education; a zero blood-alcohol limit; and restrictions on the number of passengers that can be carried.

In October last year, road safety minister Stephen Hammond told Confused.com there were no plans to introduce graduated licensing in England and Wales.

But it seems the government has had a change of heart.

Speaking at the summit, transport secretary Patrick McLoughlin said improving safety in young drivers is "a real priority".

He added: "This will not only reduce casualties, but should also mean a reduction in the sky-high insurance premiums they pay.

"I have been clear that I want to see insurance premiums reflecting conditions, performance and risks on the road.

"We have already done much as a government to address the concerns around motor insurance.

"But more still needs to be done before young drivers feel satisfied they are getting value for money."

In addition to the measures outlined above, the government is also considering improving the training of driving instructors.

Information would also be made available to parents and young drivers on what to look for when choosing an instructor, as well as evidence on the most risky behaviours and how to avoid them.

The Association of British Insurers (ABI) welcomed the government's proposals.

Otto Thoresen, director general of the ABI, said: "We have long campaigned to change the way young people learn how to drive in order to reduce death and injury on the roads, and make young drivers safer.

"If the Government implemented the ABI's proposals, lives would be saved and the cost of car insurance for young drivers could reduce by 15 to 20 per cent."

Road safety charity the Institute of Advanced Motorists (IAM) said the government's proposals were a "once in a generation opportunity to help new drivers survive the crucial first six months of driving".

Neil Greig, director of policy and research at the IAM, said: "We want to see a system that embeds continuous learning for all new drivers.

"Once basic skills are learned under supervision they can gain the solo driving experience they need as safely as possible.

"It makes no sense that the current system abandons new drivers after the test to learn by their often fatal mistakes."

Whether you're a new driver, a young driver, a parent or a driving instructor, we want to hear what you think of the government's proposals.

We want to hear from you! You can share your views on the message board below.

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How the government plans to help you buy a house

One of the most significant announcements in this week's Budget involved plans for the government to help people purchase property.

George Osborne said that the Help to Buy scheme would be for people who wanted to buy their first home or move but only had a small deposit.

Following the credit crunch, banks have become much more reluctant to offer mortgages to buyers with deposits of less than 20 per cent, given the increased risk they represent.

So the government has decided to step in.

Help to Buy comes in two parts. The first, which starts in April, will make it easier for people buy new-build homes.

The second, details of which are still being worked out, will provide guarantees to lenders who offer loans to those with deposits as small as 5 per cent of their property's value.

This will not be restricted to new-build homes, and is due to come into effect next January.

Under the new-build element, buyers will put down a 5 per cent deposit, and take out a government-backed, low-interest loan for a further 20 per cent.

The balance of 75 per cent will take the form of a normal bank or building society mortgage.

This is essentially an expanded version of the current FirstBuy scheme.

FirstBuy is only available to first-time buyers with moderate incomes, whereas anyone can take advantage of Help to Buy.

The loan part is interest-free for the first five years, after which interest rises annually. It can be repaid at any time, or when the home is sold.

The government is also planning to offer lenders a guarantee when they give mortgages to customers with small deposits.

At the moment, these higher-risk buyers are either turned down for finance or face much higher interest rates.

But if banks were reassured that the government would step in if the homeowner could no longer make repayments, they would be able to lend more freely.

The coalition has earmarked £12 billion to pay for these guarantees, which should deliver £130 billion of loans. Properties can be worth up to £600,000.

There have been a number of government schemes introduced over recent years aimed at propping up the housing market and helping first-time and low-income homebuyers.

But their impact has been fairly insubstantial.

David Hollingworth from mortgage broker London & Country says: "Many of the schemes have been helpful for a certain niche of borrower, and it has definitely been better to have them than not.

"However some of the schemes like FirstBuy have tended only to really help the market around the edges."

But Hollingworth believes that Osborne’s plans could go much further.

"The proposed extension of equity loans beyond first-time buyers will help more homebuyers.

"However the mortgage guarantee is likely to be more significant and could stimulate more lending at high loan-to-value and at better interest rates."

He adds that mortgages for those with low deposits are in desperate short supply at the moment.

"So even an increase in product availability would be a start. But improved interest rates in the open market could prove to be a real shot in the arm."

For borrowers, the risks of signing up for either part of the scheme should be no greater than taking out a standard mortgage, as it is the government that will be stepping in to provide cheap loans and guarantees.

But this does mean the taxpayer will be exposed to potential problems in the property market.

Another issue is whether encouraging house buying will lead to higher property prices.

If banks start to lend more freely but there is no great increase in the number of new homes built, this will simply push up the price of the UK’s existing housing stock.

However, the coalition hopes that a more buoyant property market will encourage homebuilders to increase their activity.

There has also been speculation that the government’s guarantee could be used to fund second-home purchases as well as remortgages for people who don’t actually move house.

But ministers say they are still fine-tuning the scheme.

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Irish Government Set to Allow Abortion in Rare Cases

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Rejection of an accord on disabilities wasn’t just Republicans’ fault.

Given that almost every inmate will one day be released, Room for Debate asks: How can prison time change a person for the better, instead of harming and hardening?

Readers discuss the gun lobby, stricter laws and heroism.

View the original article here