Category: Articles

The accepted principle of the tax accounting rules for taxpayers’ assessable income inclusions is that a receipt or entitlement must have arisen or accrued before year-end in order to support an assessable inclusion for that year. In spite of this, for at least 45 years of Australia’s income tax, the tax accounting rule for beneficiaries of discretionary trusts has not been a year-end rule; it has been (at least) a two month post year-end rule. It is only recently that the rule has been ‘restored’ to a year-end rule. While no final decision has been made yet, it is clear that the current trust tax review strongly favours a post year-end rule for beneficiary derivation; in fact, there is little evaluation of a year-end rule. This article examines the merits of a year-end rule as opposed to a post year-end rule. Even though the discretionary trust is a problematic and unique ‘entity’, this article contends that the arguments for having a post year-end derivation date for taxation of a beneficiary of a discretionary trust are not convincing.

Included in the law introducing the first Commonwealth income tax in 1915 were provisions which conferred on the Commissioner of Taxation wide powers of investigation and to gather evidence. They were introduced at a time when Australia had no offshore investment and most foreign income was exempt. Despite the dramatic change in Australia’s economy over the last 100 years these fundamental powers have broadly remained the same. However, recent media coverage of the Commissioner’s successes in pursuing offshore tax evaders under the guise of Project Wickenby suggest there have been further developments that have converted these ‘lead bullets’ into gold. This paper explores whether that has occurred through ‘tax alchemy’ or through a quiet evolution. It does so by reviewing the development in the Commissioner’s offshore information gathering powers over the last 21 years and briefly examining the emergence of multilateral treaties that have the potential to enhance the effectiveness of those powers further.

With increasing levels of complexity, bulging statute books and pleas for simplification, the 1990s saw three Commonwealth jurisdictions pursue similar, yet deceptively different, paths towards the intended outcome of tax law simplification. Retaining the underlying core concepts and with minimal critical examination of tax policy processes, Australia, New Zealand and the United Kingdom embarked upon three journeys towards their (arguably) utopian goals of tax law simplification through rewriting their tax legislation. New Zealand and the United Kingdom have ‘finished’ their ‘marathon’ projects (receiving, in the Olympian parlance, the ‘gold’ and ‘silver’, respectively), while Australia is closing in on the ‘bronze’ with an aspirational (but now unachievable) target of completing their project in 2013. This paper will build upon prior research by examining the journeys of these three countries, focussing on the ‘flaws’, inherent to varying degrees, in their roadmaps for their respective marathon journeys. It also highlights a number of the memorable milestones, with the view of offering perspectives on their various ‘successes’ and ‘failures’. Furthermore, the paper will contemplate the question ‘Where to from here?’ for each country. While it would be unfair to suggest that the manner in which the three rewrite projects were structured could only at best produce something akin to ‘fool’s gold’ without working towards effective simplification, the act of seeking to turn silver into gold is usually tax alchemy, even if the result may glisten that little bit more!