Shares Jump After Energy Price Rebound

The Australian share market is rising strongly, with energy and resource stocks aided by a rebound in global oil prices over the weekend.

Shortly before the midday (AEDT) the ASX 200 had added 69 points, or 1.3 per cent, to 5,368.

The All Ordinaries index was 66 points higher at 5,343.

Local investors are following the lead set by healthy gains on Wall Street on Friday night, when the S&P 500 rose 1.3 per cent.

That rise was underpinned by a 5 per cent bounce in West Texas crude oil, to $US48.44 a barrel.

As a result, oil-exposed Australian-listed firms are also benefitting today.

Oil Search had gained 4.6 per cent, while Santos was up 1.9 per cent and Woodside had risen 1.6 per cent.

BHP Billiton had jumped 4.6 per cent and Rio Tinto was 2.1 per cent higher.

Fortescue Metals Group had added 3.9 per cent and gold miner Newcrest was up 1.4 per cent.

The higher oil price has taken some shine off the airlines though, with Qantas down 2.2 per cent and Virgin Australia falling 1.1 per cent.

The major banks were all trading higher with gains of 0.9 per cent for ANZ, NAB and Westpac and 0.4 per cent for the Commonwealth.

Macquarie Bank had jumped 5.2 per cent, after advising investors it now expects to report an improved full-year profit.

The Australian dollar was buying around 82.3 US cents.

This news story is reprinted from www.abc.net.au

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MYEFO Shows Cost Of Disputes With ATO At $5.1b

The value of tax disputes, including court cases between taxpayers and the Australian Taxation Office, has reached $5.1 billion.

The latest figures in the Mid-Year Economic and Fiscal Outlook (MYEFO) show that the "estimated aggregate value of tax in dispute as at October 31 2014, for which a provision has not been made, is $5.1 billion".

This figure is up from $4.6 billion in disputes reported in the May budget, but down from $7 billion reported in the MYEFO papers from a year ago.

The ATO has mounted some big cases against multinationals including Chevron, which are still pending.

Tax Commissioner Chris Jordan has repeatedly vowed to only take cases the ATO thinks it can win to court, rather than waste time on lengthy legal disputes. This explains the dramatic fall in disputes over the past year.

The 2014-15 MYEFO papers said that the $5.1 billion figure could not be taken as an indication as a loss to government revenue, as disputes were ongoing.

"At any point in time the Australian Taxation Office is involved in a range of dispute resolution processes, including litigation, relating to tax disputes," the papers said.

"Details of the outcome of dispute resolution processes are uncertain until a court ruling is made and/or an agreement is reached with the taxpayer. As a result, in most cases it is not possible to estimate with any reliability the likely financial impact of current disputes."

According to the ATO's latest annual report, over the past 12 months, the tax office has settled 393 cases for a combined total of $2.6 billion.

"This is the highest number of settlements reached in any year for the ATO," said PWC tax controversy partner Ashley King.

"It is also the highest amount the ATO has collected from settlements of tax disputes in any year, evidence that it has not necessarily been an easy resolution path for taxpayers."

Mr King said it was all evidence of Mr Jordan's new approach to dispute resolution, which included cleaning up old disputes, but where there is conflict, taking companies to court faster.

Clayton Utz tax partner Niv Tadmore said the Tax Office and companies were now having more "efficient and constructive" engagement than was the case in previous years.

"On the one hand, the ATO audits go deeper and are more forensic and focused, and on the other hand, the ATO encourages the resolution of these disputes out of court in a more efficient and constructive way," Mr Tadmore said. "The new independent review function introduced by the Commissioner is an example on point."

This news story is reprinted from www.smh.com.au

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Australian Equities Market

In Australia, no economic data is released. In the US, CPI data and the FOMC rates decision is handed down.

OVERNIGHT MARKETS

US Equities

US sharemarkets fell sharply in the last hour of trade on Tuesday. A mild rebound in the oil price supported energy shares. The S&P energy sector outperformed rising by 2.4% before closing up 0.6%. Investors also waited on the US Federal Reserve ahead of the FOMC rates decision which is released tomorrow. At the close of trade, the Dow Jones was down by 110 points or 0.6%. The S&P 500 index was down by 0.8% and the Nasdaq lost 57 points or 1.2%.

US treasuries rose on Tuesday (yields lower) as the ongoing weakness in oil prices spurred demand for safe-haven US government bonds. Traders also awaited on the US FOMC meeting, which takes place over the next two days. US 2 year yields fell by 2pts to 0.561% while US 10 year yields fell by 6pts to 2.056%.

Major currencies were mixed against the greenback in European and US trade on Tuesday. The Euro rallied from lows near US$1.2445 to highs near US$1.2560, and was around US$1.2510 in late US trade. The Aussie dollar fell from highs near US82.70c to around US82.00 and traded near US82.15c in late trade. And theJapanese yen traded between 115.65 yen per US dollar to JPY117.65 and was near JPY117.15 in late US trade.

World oil prices bounced of 5½-year lows on Tuesday as traders continued to speculate on the likelihood of OPEC oil supply cuts. US options expiry also added to the volatility in oil prices. Brent crude fell by US$1.17 or 1.9% to US$59.75 a barrel while the US Nymex crude price rose by US53c or 0.9% to US$56.46 a barrel.

Base metal prices were weaker on the London Metal Exchange on Tuesday. The contraction in Chinese factory activity weighed on prices . Nickel lost 2.7% while lead gave back 2.5%. Other metals fell between 0.6%-1.9%. Gold fell with Comex gold futures down by US$13.40 an ounce or 1.1% to US$1,194.30 per ounce. Iron ore fell by US50c to US$68.10 a tonne on Tuesday.

YESTERDAY'S MARKET

Local Markets Update

This news story is reprinted from www.businessspectator.com.au

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More Transparency In Australian Business Taxation System

More transparency is expected in the Australian tax system now. The government is planning to make the process more flexible and convenient, so that key corporate regulators can have access to authentic information. This move will help in minimising cases of corporate tax cheats. It will help in encouraging organisations to pay their fair share of tax. According to Mr. Bradbury, the government is looking for possible ways to maintain a good flow of taxation information to and fro taxation office and other relevant corporate regulators. Some of these corporate regulators are:

a) Foreign Investment Review Board;

b) The Australian Securities and Investments Commission (ASIC);

c) Australian Prudential Regulation Authority.

Currently, the existing tax privacy laws applicable through out Australia prevent the government from releasing any taxation information. Mr. Bradbury will discuss underlying techniques used by large corporations to save their tax with Australian Treasurer and the government’s specialist reference group. 

A group of 14 members having treasury Rob Heferen as chairman has been formed to locate the major changes to be done for Australian tax reformThis group will decide information about which federal taxes should be publically available. BDO Tax Partner, Mark Molesworth says “rather than measures to "name and shame" certain companies, the government should be looking at previous tax reform recommendations to simplify the system. These can help the government in attracting more revenue and will prevent profits from going offshore.” 

To know more about Tax Reform and other taxation related queries, please feel free to visit our webpage: http://bbw-services.com/tax/

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Hockey Chases Multinational Tax Dodgers

Australian tax officials have been embedded in the offices of 10 multinationals as the federal government tries to capture as much as $3 billion in dodged revenue each year.

Treasurer Joe Hockey says 60 new ATO staff have been employed as the government cracks down on profit shifting.

He's also in talks with the British government on its announcement that it's introducing a 25 per cent so-called "Google tax" for multinationals that avoid local tax and he has written to the European Commission supporting initiatives out of Germany and other countries that are tightening loopholes.

"It robs Australians when multinationals don't pay tax here," Mr Hockey told reporters in Canberra.

"We are going to do everything we can but it must be co-ordinated."

Mr Hockey has been working with G20 finance ministers and the OECD on tax avoidance during Australia's 2014 presidency.

He expects the tax law to be tested in the coming year using the ATO's existing powers, but the government is working on giving it extra powers.

"I've been in discussion with the Treasury and the Australian Taxation Office about that," Mr Hockey said However, he won't be counting the revenue he hopes to claw back when putting together the budget.

"You shouldn't count your lottery winners or you shouldn't count your income until you have actually received it," he said.

The UK’s Diverted Profits Tax, referred to as the ‘Google tax’ due to its likely ramifications for tech giants, will come into effect in April and could raise more than £1 billion ($1.83bn) over the next five years.

Mr Hockey says there are "new and stronger" links between the ATO and other tax offices around the world and clever accounting to hide profits is "coming to an end".

"I'm absolutely determined to ensure that everything is done to make sure people and companies who earn money in Australia pay tax in Australia," he said.

It's estimated tax avoidance could cost the government between $1 and $3 billion each year.

However, while Mr Hockey says new resources have been allocated to the ATO to focus on multinationals, the office has also shed more than 2000 staff in the past year.

This news story is reprinted from www.theaustralian.com.au

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How GST works for Any Company in Australia

Australian Companies are required by taxation laws to collect and submit GST into the Australian Tax Office. Goods and Services Tax (GST) is 10% of Gross Invoice value levied on all types of goods and services sold subject to some exceptions. Any company can claim for GST credits, if it has submitted GST for any services or goods which are bought for business purpose. If the same goods or services are to be used fully or partially for personal use, then whole GST cannot be credited. Instead, the amount to be used only for business purpose can be credited. 

For claiming GST and getting GST Credits, a company should know which services or sales are subject to collection of GST. For your ease, we have summarised different types of sales in the table given below:

 

Fig: (Collecting and Claiming GST on various types of sales, source: ATO Website) 

The services which are GST free include: 

• basic food for human consumption, for example, fruit, vegetables, plain milk and bread • exports 

• some health services and education courses 

• some activities of charitable institutions 

• childcare 

• religious services 

• water and sewerage services 

• sale of a going concern - for example, a business. As per the Australian tax law, being a company, you are required to mention the amount of GST on all invoices greater than $82.50 (including GST) or if your client requests for the same. All companies can report their GST on the activity statements sent to them by taxation office or they can simply choose to:

• pay quarterly instalments and further lodge an annual gst return; 

• Report and pay their GST once in a year, if voluntarily registered for the same. 

Companies which are not registered for GST are liable to pay additional taxes including GST. So if your annual turnover is more than $75000 or more, please get registered for GST and avail deduction in taxes. To get more clarity on this, please call a registered tax agent today.

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Double Tax Agreements Impede Google Tax

Without seeing the detail of the so-called “Google tax”, as a former assistant commissioner of taxation in the international area of the Australian Taxation Office, it appears to me there is one possibly insurmountable problem, Australia’s double tax agreement with Singapore (“Treasurer poised to impose ‘Google tax’”, AFR, December 9.)

Under that treaty (and all Australia’s tax treaties) Singapore has taxing rights over the income of its resident companies. As a company incorporated there, Google Singapore is subject to income tax in Singapore and not Australia, including on profits which are sourced from Australia. 

The exception is when Google Singapore has a permanent establishment (PE) in Australia, for example a branch physically located here.

I understand that when an Australian contracts with Google Singapore (by, for example, placing an advertisement on Google) they do so through a server not located in Australia rather than by dealing directly with its branch here.

This means that our treaties, and indeed all our and other country tax treaties, based as they are on 19th century concepts of physical presence, make collecting tax from Google Singapore almost impossible to do. Without a change to our Singapore, and indeed all the other tax treaties, any income tax imposed on Google by Australia will in all likelihood be invalid under the treaty.

My suggestion is to impose an operating fee on Google and other taxpayers carrying on business in Australia but paying little tax here. Twenty per cent of estimated turnover might be a starting point.

And while I have your attention on tax matters, Treasurer Joe Hockey’s announcement that 10 multinationals have ATO auditors embedded in them is a joke. Only 10? Are the other hundreds of multinationals all squeaky clean?

Further, that doesn’t address the fact that for the last decade the international area of the ATO has been destroyed and its expertise wrecked, lost or dispersed. With 2200 staff cuts so far in the past 12 months (and an extra 2500 planned for the end of 2017), more of that international and audit experience has been or will be lost.

Putting a few auditors into 10 multinationals isn’t going to change that. It is a smokescreen to cover the destruction of international expertise and capacity in the ATO.

This news story is reprinted from www.afr.com

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