• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 6/25/2014

Australia - Treatment of R&D expenditures, debt-equity classification, joint ventures 

June 25:  The KPMG member firm in Australia prepared reports on the following developments (read the June 2014 reports by clicking on the hyperlinks provided below):
  • Design R&D expenditure - The Australian Taxation Office (ATO) in June 2014 released guidance concerning a design expenditure incurred as part of a research and development (R&D) project. The ATO position is: (1) when an entity incurs an expenditure on various stages of design activities, this design expenditure will be included in the cost of a depreciating asset if it forms part of the final shape, feature, and performance of the particular completed asset; and (2) when the expenditure is part of the cost of a depreciating asset, it cannot be claimed as an R&D expenditure in the year incurred, but will only be able to be claimed as part of the depreciation of the asset during the time it is used for R&D activities.

    Read a June 2014 report.

  • Fixed trust for tax purposes - In the lead up to 30 June it is timely to revisit the continuing uncertainty regarding what constitutes a fixed trust for income tax purposes. It cannot be assumed that a unit trust will qualify as a fixed trust. The types of clauses in a unit trust deed that can cause a trust to be non-fixed include: (1) an ability to redeem or allot units other than for market value; (2) the ability to allot partly paid units; (3) the existence of special class units; (4) the trustee having a wide ranging amendment power without requiring unanimous consent of all unit holders; and (5) the trustee having a power to make gifts.

    Read a June 2014 report.

  • Foreign Investment Review Board’s tax focus - A clear trend has recently emerged of increased focus and scrutiny by Foreign Investment Review Board (FIRB) of the taxation consequences of foreign investment proposals.

    Read a June 2014 report.

  • Debt-equity classification - Earlier this year, a case considered what constitutes a financing arrangement for Australia’s debt-equity regime. A distinction was made between the raising of finance (which contemplates expending the amount raised) and the raising of capital (which might be raised for other reasons, consider prudential regulation).

    Read a June 2014 report.

  • Joint venture arrangements - Due to various commercial objectives, including capital funding and sharing of risks and expertise, un-incorporated joint ventures are a common arrangement between mining entities. Often, there are questions on tax issues associated with unincorporated joint venture arrangements that are not limited to the mining sector.

    Read a June 2014 report.

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