Rental Property Travel Deductions – ATO has released guidelines regarding what can be claimed for rental property owners – they identify that any travel to a rental property where the travel was for private purposes or use of the property, to carry out repairs while the property was not available for rent or being rented and any travel to carry out repairs of a capital nature (ie not associated with wear and tear) are not deductible (but may be able to be added to the capital cost of the house for CGT calculations).

C of T v Barnes Development – the courts decided in favour of the ATO to allow the tax office to pursue a trustee company and family trust for recovery of tax debts owed by individual beneficiaries, where the trust owed money to the individuals as a result of tax planning accounting entries – this was effective even after the accounts where cleared.

In the case of C of T v Leaseplan Australia – the courts decided in favour of the taxpayer in concluding that where the taxpayer acquired motor vehicles from employees of other companies, that it then leased back to the employees, they could claim a GST credit, even though the employees were not registered for GST – this was permitted through subsection 66-5(1) of the GST Act – businesses in the business of acquiring second hand goods from unregistered private sellers for resale can claim a GST credit for the purchase price of the goods.

The Australian market traded flat in the morning, but rose late in the afternoon. The All Ords advanced 28 points Thursday.

The S&P/ASX 200 closed 29 points up. Most sectors rose except for Consumer Discretionary, Telecommunication and Healthcare. The Material  sector advanced, led by BHP (+$0.40) and Rio Tinto (+$1.54). The Financial sector was another key performer, buoyed by Commonwealth Bank (+$0.47), Westpac (+$0.25), National Australia Bank (+$0.39) and ANZ (+$0.19). Energy stocks were on the rise, with gains in Woodside Petroleum (+$0.68), Worley Parsons (+$0.11) and Santos (+$0.06). A retreat in Healthcare stocks limited the market’s gains, with decliners including CSL (-$0.50) and Sonic Healthcare (-$0.06). Consumer Staples also underperformed on selling in Woolworths (-$0.61), Wesfarmers (-$0.40) and Foster’s Group (-$0.05).

Alesco (+$0.10) reported 1H10 NPAT of $9.7M, down 23% on 1H09. EBITA of $30.2M from continuing operations was down 29% but in line with guidance provided in December 2009. Newcrest Mining (-$0.17) released its 4Q09 production report. Gold production rose 16% YoY to ~442,000oz. The main contributors were Telfer and Gosowong. Macquarie Office (unchanged) announced the results of asset revaluations as at 31 December 2009. The value of its portfolio has decreased 3.75% to $4.19 billion, with declines in the individual markets of AUS -1.47%, US -5.58%, EUR -4.91% and JAP -5.28%. Oil Search (-$0.06) released its 4Q09 report, which showed a strong production performance with new wells providing a much needed boost to output. Also, with improved sales volumes, the company made up lost ground from prior quarters due to shipment timings.

OECD Release, 25/01/2010

International trade statistics: trends in third quarter 2009

27/01/10 - Merchandise trade volumes of the Group of seven (G7) countries grew in third quarter of 2009, after stabilising in the second, but still was significantly below the levels of 2008.

A. Volume growth of Merchandise Trade (customs-based data)

Exports from G7 countries grew 5.0% quarter-on-quarter and imports were up 4.1% in the third quarter of 2009. Year-on-year, exports were down 17.5%, while imports were 14.6% lower etc.

G7 includes France, Germany, Italy, Japan, United Kingdom, United States, and Canada.

After a bad Friday night lead from overseas, the Australian market plunged again upon opening. However, the market managed to make its way back up over the day and by late afternoon, its losses had shrunk significantly - the All Ords finished Monday only 29 points lower. Please note that the Australian market had remained closed on Tuesday 26 January for the Australia Day holiday, and hence the next Australian market report will be on Wednesday 27 January.

The S&P/ASX 200 closed 33 points down. The Telcos and Healthcare sectors rose, helped by Telstra (+$0.08), CSL (+$0.11), Sonic (+$0.18) and Cochlear (+$1.18). Every other sector fell. In the Financial sector, Commonwealth Bank (-$0.60), Westpac (-$0.46), ANZ (-$0.36), National Australia Bank (-$0.18), Westfield (-$0.16), QBE (-$0.17), AMP (-$0.11), Suncorp-Metway (-$0.10), Stockland (-$0.08), and Insurance Australia Group (-$0.05) went backwards. The Energy sector saw Woodside (-$0.37), Origin (-$0.25) and Santos (-$0.16) sag. The Consumer Discretionary sector saw News Corp (-$0.26) and Harvey Norman (-$0.06) dip. Within the Material sector, Rio Tinto (+$0.40) and Alumina (+$0.03) fared better than BHP Billiton (-$0.45), Amcor (-$0.09), BlueScope (-$0.03) and OneSteel (-$0.05). Another notable loser was Qantas (-$0.06).

Monday was a quiet day for company news. Greenspark has announced it will extend its offer for Energy Developments (+$0.10), with the closing date now 5 February 2010.

ABS Release 27/01/2010
Consumer Price Index, Australia, Dec 2009

DECEMBER KEY POINTS

THE ALL GROUPS CPI

• rose 0.5% in the December quarter 2009, compared with a rise of 1.0% in the September quarter 2009
• rose 2.1% through the year to December quarter 2009, compared to an annual rise of 1.3% to September quarter 2009.

OVERVIEW OF CPI MOVEMENTS

• The most significant price rises this quarter were for fruit (+15.9%), domestic holiday travel and accommodation (+6.6%), house purchase (+1.0%), rents (+1.0%) and beer (+2.1%);
• The most significant offsetting price falls were automotive fuel (-2.8%), audio, visual and computing equipment (-7.1%) and pharmaceuticals (-5.3%).

ATO approach to trust issues pending Bamford

The ATO has advised that the Bamford v FCT appeals in the High Court have been listed for hearing on 2 and 3 March 2010. With the High Court’s decision pending, the Commissioner of Taxation, Mr Michael D’Ascenzo, says he will continue to apply his view of the trust provisions. Further information is in Practice Statement Law Administration PS LA 2009/7.

Beneficiaries claiming deductions against distributions from discretionary trusts

During January and February 2010, the ATO says it is sending letters to selected taxpayers who are beneficiaries claiming deductions against distributions from discretionary trusts.

Some tax agent clients may receive these letters. The letters include an outline of the ATO’s position about claiming these deductions and ask taxpayers to review their claims. The letter requests they provide details supporting their claims, or make a voluntary disclosure if they have made an error in claiming these expenses.

Tax Board review of consolidation regime: consultation forums

The Board of Taxation will hold consultation forums in Sydney on February 1 and in Melbourne on February 3 on the board’s post-implementation review into certain aspects of the consolidation regime. In December 2009, the board released a discussion paper on the post-implementation review into certain aspects of the consolidation regime. The objective of the consultation meeting is to provide information on the discussion paper, and to seek feedback from participants on the issues raised in the board’s paper.

The board invites stakeholders to register their interest in attending either of these forums by email at taxboard@treasury.gov.au by Tuesday 26 January.

Employee share schemes and income tests: ATO seminars

The ATO has advised that during February it will conduct free seminars for employers on the legislative changes to employee share schemes and reforms to income tests. The ATO notes these changes apply from July 1, 2009 and introduce new reporting and record keeping obligations.

After a discouraging lead from overseas, the Australian market opened in the red and stayed weak throughout the day. The All Ords finished Thursday 46 points lower.

The S&P/ASX 200 closed 41 points down. The only sector to close in the black was Telcos, thanks to Telstra (+$0.05). The Financial sector saw Westpac (+$0.13), Macquarie Group (+$0.61) and AMP (+$0.16) rise, while National Australia Bank (-$0.26), Westfield (-$0.07), QBE (-$0.39), and Mirvac (-$0.06) went backwards. In the Material sector, BHP Billiton (-$0.74), Rio Tinto (-$2.49), Newcrest (-$1.29), Fortescue (-$0.15), Lihir (-$0.14), Incitec Pivot (-$0.15), BlueScope (-$0.08), Alumina (-$0.08), Aquarius (-$0.51) and Mount Gibson (-$0.11) fell. In the Energy sector, Woodside (-$0.60), Oil Search ($0.21), Energy Resources of Australia (-$0.72), Arrow (-$0.15), Caltex (-$0.49) and AWE Ltd (-$0.21) were sold down. In the Industrial sector, Leighton (+$0.51), Brambles (+$0.15) and Qantas (+$0.06) rose, while Toll (-$0.30), MAP Group (-$0.10) and Asciano (-$0.06) declined. Another notable mover was Sonic (+$0.33).

Fortescue shipped ~9.1Mt of ore during the December 2009 quarter, up 45% YoY and down 5% QoQ. The annualised production rate of 36.6Mtpa exceeded the 35Mt guidance. Fortescue is targeting a run rate of ~40Mtpa until the step up to 55Mtpa in early 2011, when the Christmas Creek expansion has been completed. AXA Asia Pacific (unchanged) advised that based on preliminary numbers it expects to deliver a FY09 profit after tax and non-recurring items of around $675M compared to a loss of $279M for FY08. Transpacific (-$0.02) expects 1H10 EBITDA of $197M-$200M, well down on1H09 EBITDA but up slightly on 2H09. Santos’ (-$0.15) full year production was 54.4mmboe, flat on FY08, and in the mid-range of company guidance. FY10 guidance has been maintained.

The Australian market started the day well in the black, but surrendered most of its gains in the afternoon. The All Ords finished Wednesday 6 points higher.

The S&P/ASX 200 closed 7 points up. Most sectors rose except for Material, Energy and IT. The Industrial  sector saw gains by MAP Group (+$0.19), Macquarie Infrastructure (+0.05), Toll (+$0.25), and Virgin Blue (+$0.04), while Leighton (-$0.39) went backwards. In the Financials sector, Westpac (-$0.22) and AMP (-$0.07) dipped while Macquarie Group (+$0.99), Westfield (+$0.10), Suncorp-Metway (+$0.11), Stockland (+$0.04), Insurance Australia Group (+$0.05), ASX Limited (+$0.60) and Lend-Lease (+$0.38) rose. In the Material sector, Orica (+$0.28) gained while Newcrest (-$0.55), Lihir (-$0.06), Incitec Pivot (-$0.07), Sims Metal (-$0.41), Alumina (-$0.04) and James Hardie (-$0.29) were sold down. Other notable movers included Flight Centre (+$0.98), Fairfax (+$0.05) and ResMed (+$0.14).

Petroleum was the key performer in BHP Billiton’s 4Q09 production report, with crude oil rising 28% YoY. Iron ore rose 11% YoY to a record 32.4Mt. Aluminium output was flat and coal fell YoY. The weakest performance was uranium, where the Clark Shaft outage at Olympic Dam led to a 60% decline YoY. BHP is uncertain on the speed of recovery in the developed economies and expects some degree of volatility in the short-term outlook for commodities.

TR 2009/D3 has been released by the ATO (Draft Ruling) regarding among other matters details of what constitutes a contribution into super.  There are no real surprises, but what is significant is that the ruling now confirms what appears to be prima facie confirmation from the ATO that personal guarantees by the members on loans for the super fund are acceptable, but these may result in contribution caps being breached, if they are called on in the event of a default.  This is a very big step forward and now covers off the only matter we were waiting on confirmation for from the ATO to approve our security trust structure.

ABS Release 20/01/2010

Building Activity, Australia, Sep 2009

SEPTEMBER KEY POINTS

VALUE OF WORK DONE, CHAIN VOLUME MEASURES

TOTAL BUILDING

• The trend estimate of the value of total building work done fell 1.4% in the September 2009 quarter.
• The seasonally adjusted September quarter estimate of the value of total building work done rose 1.6%, to $18,451.5m, following a fall of 3.9% in the June 2009 quarter.

NEW RESIDENTIAL

• The trend estimate of the value of new residential building work rose 0.1% in the latest quarter, with new houses rising 0.9% and new other residential building falling 1.5%. Alterations and additions to residential building fell 2.7%.
• The seasonally adjusted estimate of the value of new residential work done rose 2.8% to $9,072.4m. Work done on new houses rose 6.5% to $6,305.8m, while new other residential building fell 4.7% to $2,766.6m. Alterations and additions rose 3.9% to $1,543.2m.

NON-RESIDENTIAL

• The trend estimate of the value of non-residential building work done in the quarter fell 2.7%. This follows a fall of 2.6% in the June quarter;

The seasonally adjusted estimate of the value of non-residential building work done in the quarter fell 0.2%, following a fall of 6.7% in the June quarter.