Trusts and Div 115	Consolidation regime
Tax structure advice and Division 152	Directors Duties Under the Common Law
Contractors & Tax

1. Trust and Division 115 Income Tax Assessment Act 1997.

For some time there has been doubt as to whether the general 50% discount would be available to trusts after 1 July 2001 as the treasurer had previously indicated it would not once trusts became taxed under the entity regime. With the shelving of the entity regime indefinitely the situation with trusts and capital gains was unclear until a press release issued 22 March 2001. The Treasurer has now confirmed in that press release that trusts will have ongoing access to the general 50% discount.

2. Consolidation regime – deferred

The Government has, wisely, decided to defer the introduction of the consolidation regime until 1 July 2002, in view of the complexities involved – see the Treasurers press release 22 March 2001. The decision to consolidate or not consolidate is important for a number of reasons, not the least of which is the ability to import losses into a group from an outside entity subject to a number of conditions. The decision to consolidate will be a major project for most company groups. For assistance speak to Peter Gell.

3. Contractors & Tax

On 13 April 2000 a package of 3 Bills was introduced which affect contractors who earn money through limited sources – specifically individuals and ‘interposed entities’ who get 80% or more of their income from one source, have no employees and do not maintain separate business premises. The Legislation is complex and will affect many people who contract through companies. For details and advice contact Peter Gell.

4. Directors Duties Under the Common Law

In a recent case in the NSW Supreme Court Hodgson C J said that in certain circumstances it may be possible that directors owe a duty of care to ensure that a company does not breach an agreement. Hodgson C J said that a director who takes some positive action knowing it will bring about a situation where a person who has a contract with the company will suffer substantially greater loss if the company breaches the contract may well be under a duty to exercise reasonable care to ensure the company fulfils its contractual obligations. This comment was not central to the decision but it is interesting. One wonders whether the concept can apply where a duty may be owed but to exercise that duty may place the directors in conflict with their obligations to their shareholders. The decision as yet is unrecorded and was delivered on 23 March 2000 – see Tsaparazis and Ors-V-Goldcrest Properties Pty Limited and Anors – NSW Supreme Court 23 March 2000.

5. Division 152 Income Tax Assessment Act 1997.

Division 152 allows small business various concessions on the same of CGT assets. These concessions include an additional 50% exemption on the sale of GGT active assets. The right to the relief is restricted by a number of conditions. Getting the structure right is very important – for example having a company owned by discretionary trusts will not enable the concessions to be accessed. For assistance in structuring call Peter Gell.