Tax whine

Hey everybody. I am on the WA Technical Liaison Committee for The Tax Institute.

Anyway. The ATO has asked The Tax Institute for a list of inconsistencies in the law or duplicated tax issues that make no sense.

So if you have a problem or niggle let me know and I will pass it up. It doesn't matter how small. All of the guys in the our office are tailing up their lifelong litany of complains so I thought I would let PC'ers do the same (if it is something like "give me a life of zero tax" - it probably won't get pass my filter).

Our technical liaison committee meet's quarterly with head office at The Tax Institute and if they get enough problems they will lobby it to the ATO in Canberra. The other members are all big tax guys (Deloitte, EY etc) so I represent the small and middle market.

The committee does a few other things but they are confidential with embargo public release dates and what not so I cannot talk about them (they are not exciting).

Thanks!

 

Ask @Terry_w or @Paul@PFI

 

I think its pretty consistant - or the parts I am interested in are.

 

Ross - I have a amendment that should be made to s6-20 that has been niggling me for years.

New sub(5):

(5) All income earned by Paul Gerrard is exempt income.

 

There is a concern is s118-192 (Main Residence Special Rule) and I posted a thread a week or so back.

Issue is this ....s118-192 is automatic and taxpayers cannot choose for it not to operate, fair enough. However it can have very unfair outcomes especially on some who may be unable to avoid s118-192.

Lets use example of Bill the miner since the mining industry has copped some difficulties in the past 2 years. It helps illustrate the issue. Bill owns a property he bought in regional QLD. He bought it for $400K. In 2015 Bill is retrenched and loses his well paid job. There is no mining work in his town or anywhere close. He is forced to move with his family to a coal minim community in regional NSW for what appears a well paid opportunity in a new community. He ahd his wife look at selling the house in QLD. There are no buyers !! A likely sale at $200K is possible, at best and could take some time. They rent as they cannot afford to lose $200K and also the sale means they cannot repay the lender. Renting is their sole choice to avoid bankruptcy. At best they can negative gear, right ?

Jim's tax problem is that s118-192 treats that property as having a CGT costbase far lower than its actual costbase. Even if the property rebounded to $300K it still represents a $100K loss of capital. However s118-192 would impose income tax on the $100K (perhaps discounted). So in Bills example renting the property for say 9 months and selling for $300K could mean taxes of $95K on what is a $100K loss that would not have occurred if the property had not been rented.

This is inconsistent. It applies to those less vulnerable who have incurred losses of capital and then seeks to always impose the highest possible tax outcome that favours the Commonwealth. This specifically affects those who buy property in regional areas so that it disproportionately harms regional towns and those employed in industries which pay well to attract workers (resources, mining, fishing, remote divers etc). It is inconsistent with the desire to employer large numbers of itinerant works and those who seek to relocate and develop regional communities.

A fairer and less vulnerable approach would be changing s118-192 so that a taxpayer has a choice of using market value OR use the original costbase so that tax is only paid on the actual total gain. eg :

Current
(2) You are taken to have * acquired the * dwelling or your * ownership interest at the income time for its * market value at that time.

to

Proposed
(2) You are taken to have * acquired the * dwelling or your * ownership interest at the income time for the greater of the costbase or its * market value at that time.

A taxpayer who chooses the actual costbase must then apportion the gain / loss based upon a time basis.

The Commonwealth hasnt experienced a major property correction to major capital cities but s118-192 could become a thorn for any future Govt if that occurred.