iscover Tax expert finds ‘unfinished business’ in tranche 2 legislation
BusinessA tax expert has said the second tranche of CGT and negative gearing changes “bear the marks of the same haste” as the Tax Reform No.1 bills.
Speaking to Accountants Daily, RSM head of tax risk management and partner of technical tax, Liam Telford, has said that tranche 2 is reminiscent of the tax consolidation regime legislated in 2002, which was amended on a remedial basis over the next 16 years.
“A key difference here is that tranching is being used to build the regime before it starts, against a commencement date fixed before the design was settled,” Telford said.
“This is particularly concerning given how broadly the reforms will reach and the criticality of decisions that taxpayers need to make before commencement.”
Telford told the brand that the tranche 2 exposure drafts and explanatory materials “bear the marks of the same haste” as the Tax Reform No.1 bills, and noted that further tranches would be released to ensure the rules are fit for purpose.
“The Government will continue to finalise implementation of the reforms in further tranches of legislation,” Treasury said in its statement.
“These will include interactions with CGT rollovers and similar concessions, remaining aspects of the application of the CGT reforms to foreign, mixed and temporary residents, and any amendments required to ensure that the rules apply appropriately for certain special cases such as tax consolidated groups.”
Telford identified symptoms of rushed legislation in the latest tranche.
“The Explanatory Materials cite legislation that does not exist ('paragraph 102AG(2)(a) of the ITAA 1997'), and the new AMIT provisions require members to report figures they have no legislated means of obtaining: new paragraphs 102-6(2)(c) and (4)(c) measure a member's pre- and post-July 2027 ownership periods by reference to when the trustee acquired the underlying asset, with no corresponding amendment to the AMMA statement requirements in Subdivision 276-H.”
Despite this, some aspects of the amendments were welcomed by Telford, such as Treasury’s repair of the ‘widow’s tax’, ‘deferral realisation event’ drafting, the provision for circumstances of marital breakdown, and reversing its course on delegated legislation.
“Curiously, inheritance beyond a spouse is not protected, with new section 26-157 of the ITAA 1997 requiring the survivor to have held a pre-existing interest in the same dwelling as joint tenant or tenant in common. This appears intentional but doesn’t sit right from an equity perspective,” Telford said.
“The list of unfinished business is exceedingly long and goes to core aspects of the rules’ operation, such as rollover problems (Subdivision 126-A and deceased estate transfers) that have been expressly deferred (again).”
“There is also still no draft legislation for the announced Innovative Business CGT Concession for early-stage investors, which remains at consultation-paper stage.”
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