• replacing the integrity rules restricting access to losses
• allowing immediate loss refundability
• allowing losses to be carried back and offset against previous years’ profits
• allowing losses carried forward to be uplifted by a determined benchmark rate.

The Interim Report says the bias derives from the way Australia allows for tax deductions of losses, which it says can become “trapped” and unavailable as a tax relief vehicle for entrepreneurs. “In some regards,” the Interim report says, “trapped losses represent a windfall gain for governments.” Current treatment of losses also makes cashflow management cumbersome.

The final report on the tax treatment of losses is expected in March 2012.

Sham contracting occurs when an employer attempts to disguise an employment relationship as an independent contracting relationship, thereby avoiding obligatory rates of pay and other entitlements. This gives the employer an unfair competitive advantage.

The operational intervention began in April in response to intelligence from various sources and concerns raised by key stakeholders, including employee and employer groups and members of parliament.

The report states that a number of trading enterprises engaged contractors who should more properly have been classified as employees.

While Fair Work inspectors found that most of these arrangements were not deliberate, they did identify a number of employers whom they believe knowingly or recklessly misrepresented the employment relationship to their workers as one of independent contracting.

Legal action is being considered in some instances.

The Fair Work Ombudsman found misclassification of employees in each of the three industries that were investigated, but does not believe the problem is confined to these industries alone. 

Misclassification can lead to a contravention of the National Employment Standards (NES), minimum wage orders and terms of a Modern Award or Enterprise Agreement.

It can also result in contraventions of employer obligations to provide employee records and pay slips and may expose employers to back-payment of outstanding entitlements.

The report calls for employers to exercise a greater degree of care over their contracted labour arrangements.

A number of employers had received advice from accountants on how to structure their operations. It appeared the legality or appropriateness of the arrangements under relevant workplace laws was often not considered.

Maintenance of the register

The PPS Register will be administered by the Insolvency and Trustee Service Australia (ITSA). The PPS Register is the cornerstone of a new Commonwealth law, the Personal Property Securities Act 2009 (Cth) (PPS Act) and will replace numerous existing asset registers of security interests, including state and territory registers of encumbered
vehicles and vehicle securities and Australian Government registers including the Australian Register of Company Charges, the Australian Register of Ships (mortgages only) and the Fisheries Register.The Attorney-General’s Department has responsibility for the PPS Act, finalising the legislative arrangements, implementing the new national PPS Register and assisting industry with the transition to the new system.

The Registrar of Personal Property Securities is a statutory position created by the PPS Act. David Bergman has been appointed by the Attorney-General as the first PPS Registrar. The PPS Registrar will be responsible for the ongoing maintenance of the new PPS Register after the commencement date and his office will be established within ITSA.

What will be included on the PPS Register?

Security interests in personal property to be listed on the PPS Register will include assets that may be used to secure a loan. Personal property is any property other than land or
buildings. It includes physical goods such as works of art, furniture, jewellery, cars, boats, farm machinery, business equipment, crops and livestock. It also includes intangible property such as rights under a contract and intellectual property.

Who is affected?

The new PPS Register is part of a reform that will affect the way businesses and consumers deal with secured finance in Australia. Business owners and consumers may be affected by
changes to personal property security laws as:

• buyers of properties that may be subject to a security interest
• business or consumer borrowers
• providers of credit, or
• investors who are contemplating buying into a business.

The PPS Register will also help business owners manage credit risk, check whether property planned for purchase is encumbered and search and register assets used to secure a loan.

For more information about PPS reform visit www.ppsr.gov.au

The taxpayer contended that the air journey was the supply in contemplation, that it did not occur and therefore no supply occurred. The Full Court agreed, stating that it was “plain” that what each customer paid for was carriage by air. The Court said the actual travel was the relevant supply and if it did not occur, there was no taxable supply. (Qantas Airways Ltd & Anor v FCT [2011] FCAFC 113, Full Federal Court, Stone, Edmonds and Perram J, 1 September 2011.)

So Qantas has a win in being able to keep the full amount of fare paid by customers who didn’t fly. It doesn’t have to give the GST portion to the tax office.
The other side of this is that customer, had they been registered for GST and actually flown, would have been able to claim back the GST paid to Qantas. The corollary of this decision looks like it takes away the right to claim back the GST if the customer doesn’t actually fly. A missed flight costs 10% more than one that is caught.

Whether you have an enforceable claim against Qantas to get your GST back from them is a different question.

The Carbon Pricing Mechanism (CPM) is a mechanism by which businesses pay a charge for each tonne of carbon pollution they emit each year.  The following industries will be covered by the CPM:

• Stationary energy
• Industrial processes
• Fugitive emissions (but excluding those from decommissioned coal mines); and
• Emissions from non-legacy waste (waste deposited after the scheme starts)

Affected businesses will pay the charge by purchasing a carbon unit (permit) for each tonne of carbon pollution emitted and surrender these to the government either yearly, or half-yearly if they emit greater than 35,000 tonnes.

The CPM will be divided into two stages.  From 1 July 2012, there will be a fixed price stage, whereby businesses will pay a fixed charge per tonne of carbon emissions.

From 1 July 2015, the mechanism will shift to effectively change to a market based system, whereby carbon units are tradable on an emissions market and the price of a carbon unit is “floating”. The floating system is called a ‘cap and trade’ emissions trading scheme, and a minimum floor and maximum ceiling will be set for the price of a carbon unit.

How does the first (fixed) stage of the CPM work?

The first stage starts on 1 July 2012 and ends on 30 June 2015.  During the first stage of the CPM, affected businesses will be charged a fixed price per tonne of carbon emissions.  The initial price will be $23 per tonne of carbon, increasing by 2.5% in real terms per year, over the next two years. As such, the fixed price for a carbon unit has been set at:

The fixed carbon price will be imposed by the Clean Energy Regulator
issuing carbon units (ie permits to emit a tonne of carbon pollution)
for a fixed charge to affected businesses. These carbon units issued
during the fixed stage will have a “vintage” year allocated to each
unit, which prevents the banking of carbon units to later periods.

What emissions are caught by the CPM?

The CPM will cover 4 of the 6 Kyoto greenhouse gases. These have been identified as:

1. carbon dioxide
2. methane
3. nitrous oxide
4. perfluorocarbon

These are also covered by the introduction of the National Green
Energy Reporting Act 2007, which was effective from 1 July 2008.

Will I be subject to the Carbon Price Mechanism?

The government has continually announced that only the “top 500
Australian polluters” will be liable for a price on carbon under the
CPM.  If you are not one of these, then you will not need to pay a
charge for carbon under the CPM.

I am not one of the top 500 polluters.  How will my business be impacted?

Although the scheme will only require approximately 500 of the
country’s biggest emitters to purchase and surrender carbon units for
their greenhouse gas emissions, many other businesses are likely to be
impacted in several ways.

Most businesses are likely to experience the indirect effects of
increased prices on many production inputs and general business
expenses, as suppliers subject to the CPM are likely to pass on their
carbon price burden to their customers, in the form of increased prices.

In conjunction with the scheme, there will also be changes to the
Fuel Tax Credit system. The effect of these changes is to reduce the
Fuel Tax Credit available and apply an “effective carbon price” on the
use of certain fuels.  As these changes are not confined to the same top
500 polluters, they will directly impact many more Australian
businesses from various industries that are currently eligible for fuel
tax credits. This is explained further below.

The degree to which any particular business experiences increases in
its cost structure will depend on a number of factors, in particular,
the amount of energy it expends in its operations, its exposure to
transportation costs and the proportion of its domestic inputs and
production compared to its imports.

Is it a tax?

Although the CPM has a similar effect to levying a tax on carbon
emissions during its initial fixed stage, it is not technically a tax.

Each carbon unit is a separate asset issued by the Clean Energy
Regulator and paid for by emitters.  A carbon unit is considered to be
an item of personal property and as such it is not a tax.

During the second stage of the CPM, these units are able to be traded on the market with other businesses.

The cost of acquiring the carbon units will be deductible to
business; however the timing of the deduction will be similar to trading
stock in that the amount of the deduction will be limited to the
proportion of the carbon units surrendered/traded.

Taxpayers will be assessable on revenue account on amounts they are
entitled to receive on ceasing to hold a unit.  Free carbon units
granted to certain emissions intensive industries which are not required
to be surrendered can be sold back to the Regulator or traded, at which
time that income will be assessable.

Thanks to Grant Thornton for this summary

The term “phoenix activities” is commonly used to describe arrangements whereby a company incurs, but does not pay, various liabilities whilst carrying on business activities.

The amendments proposed are to extend the “Director Penalty Notice” provisions in the Taxation Administration Act 1953 (which currently apply in the main to unremitted PAYG deductions) to include unpaid superannuation guarantee amounts, a change which may result in Directors becoming personally liable for unpaid amounts of this type.

If the legislation is amended in accordance with the budget announcement, Directors may become personally liable for unpaid superannuation amounts merely because of an inability of the company to pay rather than any activity which might be considered to be fraudulent. This should be sufficient encouragement for Directors to ensure that arrangements are in place for the timely payment of superannuation guarantee obligations.

The cash sales benchmarks, covering fifteen industries, are a part of the Austrlaian tax Office’s comprehensive suite of small business benchmarks across 107 industries that they use to identify and deter activities in the cash economy.

The ATO claims it is on a small part of their complance activity and is just one tool that they use in the course of our compliance activities with our key focus remaining on evidence of businesses declaring all income through appropriate record keeping.

Cheryl-Lea Field, Deputy Commissioner, Tax Practitioner and Lodgment Strategy, advised tax agents this week that “We only raise assessments based on cash sales benchmarks when there are inadequate or no records to substantiate their declared income.”

Cash sales benchmarks identify the expected ratio of cash sales to total sales and are based on credit and debit card sales data provided by financial institutions, as well as information provided by small businesses on activity statements.

A review of the data used to calculate the cash sales benchmarks has identified inconsistencies in the way in which cash-outs paid by businesses to their customers were recorded. (An example of cash-out is when a customer requests additional cash when purchasing goods or services.) Accordingly, the ATO believes it is appropriate to withdraw the cash sales benchmarks at this stage. The ATO is refreshing the data used to calculate these benchmarks and will release updated cash sales benchmarks for 2010 later this year.

The 15 industries covered are:

• Beauty services
• Fuel retailing
• Meat retailing and butchers
• Clothing retailing
• Garden supplies retailing
• Newsagents
• Coffee shops
• Grocery retailing and general stores
• Pubs, taverns and bars
• Florists
• Hair dressers
• Restaurants
• Fruit and vegetable retailing
• Hardware and building supplies retailing
• Takeaway food services

If you own or manage a “small business”, the new rules could very well affect you.

As of 1 January 2011, only businesses that employ fewer than 15 employees – by simple headcount – qualify as a small business when an employee makes an unfair dismissal claim.

Before the change, a small business was one that employed fewer than 15 full-time equivalent employees.

This is a very important distinction, especially if you employ a number of part-time staff, encourage job sharing and provide flexible working arrangements. Your employees may do the work of fewer than 15 full-time equivalent staff, but in themselves add up to more than 15 people.If this situation applies to your business, you will find that you’re no longer eligible for the special unfair dismissal arrangements that apply to small businesses.

These special arrangements include a minimum employment period of 12 months before employees can make an unfair dismissal claim, and a simple Fair Dismissal Code to help employers ensure dismissals are not unfair.