|6 April 1999
Dr Alan Preston
Review of Business Taxation
Department of The Treasury
CANBERRA ACT 2600
"A Platform for Consultation" - Submission
I am pleased to enclose two hard copies of our submission together with
an electronic copy on disk. We are also sending a copy of this letter and the submission
to you by email.
You will see that our submission covers Chapters 15 to 33. These chapters cover the
areas which are most germane to our practice and upon which we feel best qualified to
You will also see that our submission adopts the "checklist" approach which
we have promoted since our meeting on 4 March 1999. The checklist for each chapter is
supported by backing notes, where relevant; and each of the three groups of chapters is
introduced by an Executive Summary.
If you or any member of your team would like to discuss any aspect of our submission,
please do not hesitate to contact us on (03) 9650 4451.
RS/cs: 010499 Response Covering Letter.doc: TRW
Review of Business Taxation
Submission in Response to
Chapters 15 to 33 of
"A Platform for
The Second Discussion Paper issued
by the Review of Business Taxation
6 April 1999
Chapters 15 to 24 raise a large and varied number of issues regarding the
taxation of entities. Although we have not provided a written submission on all issues
raised, we have provided our views in the attached checklist.
The major points we wish to reinforce in regard to the taxation of entities are as
- We prefer the adoption of Option 3 for the introduction of full imputation being the
taxing of unfranked inter-entity distributions. We believe this option offers simplicity
in administration, avoids the difficulties for non-residents which may otherwise arise and
minimises some of the adverse consequences of full imputation.
- Of the options proposed by the Review of Business Taxation ("Review") for the
treatment of inter-entity distributions, the inter-entity dividend rebate is the least
- However, we do not believe that relief via the inter-entity dividend rebate is the best
treatment for inter-entity distributions. We prefer as alternatives a similar treatment
for entities as exists for individuals or the introduction of a dividend deduction regime.
- We believe the proposed reforms to the taxation of capital distributions are misguided
and will be ineffective. We recommend that the Review consider the submissions made prior
to the introduction of Taxation Laws Amendment (Company Law Review) Act 1998. We believe
that notwithstanding the introduction of a profits first rule and slice approach, there
will continue to be transactions undertaken to stream franking credits and capital
- We do not envisage any possibility for the repeal of the existing anti-avoidance
provisions which deal with company distributions. We further envisage that additional
anti-avoidance provisions may be required to deal with the weaknesses inherent in the
profits first rule and slice approach.
- We believe that the taxation of entities does not fully address fundamental policy
issues such as taxation of comprehensive income, the treatment of risk and the concept of
neutrality. It is our view that the proposals made in regard to the taxation of entities
violate the general principles expressed by the Review in regard to these issues.
The full submission is available to download in
PDF or RTF