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Barkoczy, Stephen --- "Editorial" [2000] JlATax 26; (2000) 3(6) Journal of Australian Taxation 382

Editorial

Associate Professor Stephen Barkoczy

Tax professionals will remember the year 2000 as a tumultuous year that witnessed the introduction of the GST and PAYG regimes and many other business tax reforms. The scale, complexity and volume of these reforms have been unprecedented. The year closed with the release of two additional Exposure Drafts, being the Exposure Draft New Business Tax System (Capital Allowances) Bill 2000 and the Exposure Draft New Business Tax System (Consolidation) Bill 2000. These Exposure Drafts find their origins in recommendations made by the Review of Business Taxation in its report entitled A Tax System Redesigned.

The Exposure Draft New Business Tax System (Capital Allowances) Bill 2000 contains a draft of what is referred to as the "uniform" capital allowance provisions which are proposed to form the new Div 40 of the Income Tax Assessment Act 1997 (Cth) ("ITAA97"). These provisions contain consistent rules to calculate the decline in value of depreciating assets held by taxpayers. Whilst the new rules will standardise many of the present capital allowance rules, they will not replace the entire set of over 30 separate capital allowance regimes. For example, they do not apply to research and development plant, capital works falling within the present Div 43 of the ITAA97, or assets associated with Australian films. As previously announced in the Treasurer's Press Releases (Nos 58 and 74 of 1999), under the proposed rules, depreciation will be based on the effective life of an asset. Furthermore, special pooling arrangements will be available to taxpayers (other than those falling within the simplified tax system) for depreciating assets costing less than $1,000. An important feature of the new reforms is that the depreciation deduction will lie with the "economic owner" of the asset, rather than its legal owner.

The Exposure Draft New Business Tax System (Consolidation) Bill 2000 contains measures relating to the consolidated tax treatment of wholly-owned groups of "corporate tax entities". Under the proposed measures, an Australian "head entity" will be allowed to make an irrevocable choice to consolidate with its 100% Australian subsidiaries for income tax purposes. The effect of consolidation is that the group will be treated as a single entity. In other words, subsidiary members will be treated as parts of the head entity rather than as separate entities. As a result, the head entity will be required to lodge a single income tax return for the group and intra-group transactions, such as the payment of dividends and the transfer of assets between members of the group, will be ignored for income tax purposes. Where a subsidiary entity becomes a member of a consolidated group, the head entity of the group will be treated as having purchased the subsidiary's CGT assets at the "joining time" for a payment calculated under a set of complex rules. Furthermore, provided specified loss transfer tests have been satisfied, losses of a subsidiary will be transferred to the head entity. Where the requirements of the loss transfer tests have not been met, relevant losses will be lost forever.

The Government aims to have the new capital allowance and consolidation regimes operate from 1 July 2001. This is also the proposed commencement date for the controversial new entity taxation regime applicable to non-fixed trusts which I referred to in my last editorial. In this context, it looks like the year 2001 will also be a tumultuous year.

This final issue of Volume 3 of the Journal marks an important milestone. Many readers will be aware that the Journal has been produced under a three-year joint venture arrangement between CCH Australia Ltd and Monash University which concludes at the end of 2000. I am pleased to advise that the Department of Business Law and Taxation of Monash University has decided to continue publishing the Journal. The Journal will be housed within the Department, which is within the Faculty of Business and Economics.

I consider that this is now an appropriate occasion for me to step aside as Editor of the Journal. In this respect, I have great pleasure in announcing that Vince Morabito and Grant Richardson, who are both Senior Lecturers within my Department, have agreed to take on board responsibility for the day-to-day running of the Journal as Joint Editors.

Over the last three years in which I have been involved in editing the Journal we have received many submissions for publication and ended up publishing over 60 articles on a diverse range of topical taxation issues. There has been much work behind the scenes in publishing the Journal and I have been fortunate to have the assistance of many people. Associate Professor Les Nethercott assisted me as Joint Editor and then as Associate Editor of the Journal in its first and second years of publication respectively. Lorraine Parisi and Wayne Ngo have done marvellous jobs as Production Editors and Grace Bates, from CCH, has also made a valuable contribution. I have also been privileged to have the support of members of a distinguished Advisory Board who were involved in refereeing articles that were submitted for publication. Most of all, however, I must thank the many academics and practitioners that have submitted articles for publication. This Journal would not exist without their contributions.

December 2000


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