BUSINESS BRIEFLY
December 1998 Issue No 32

SEASONS GREETINGS

On behalf of all the Partners and staff at Norman Waterhouse, we wish you all the best for this festive season and a very happy new year.

NORMAN WATERHOUSE NEWS

We are delighted to announce the recent appointment of Jill Francis, Associate, to our technology and intellectual property area. In addition to being a lawyer, Jill is an experienced microbiologist and has worked extensively in the health care sector.

MORE RELIEF FOR PROPRIETARY COMPANIES

The Federal Government proposes to grant relief to proprietary companies from the requirement to lodge Annual Returns as from the year 1999 - 2000.

In keeping with the current "less is best" trend, a proprietary company will only be required to lodge an Annual Return for the year 1999 - 2000 if there has been a change in the information set out on the semi-complete Annual Return for the company sent out by the Australian Securities and Investments Commission (the ASIC).

In addition, proprietary companies will not be required to file Annual Returns as from the year 2000 - 2001 in any circumstances. However, they will be required to notify the ASIC immediately of any change to the information which was previously contained in Annual Returns.

In addition to these changes, the proposals include:

• facilitating greater lodgement of data and other information with the ASIC through electronic data interchange and over the Internet;
  

• facilitating payment of ASIC fees by EFTPOS and credit cards; and
  

• reducing fees payable to the ASIC by small business.
  

We will keep you posted of any developments in this area, however, if you require further information, please contact Johanna Churchill, Senior Associate, on (61 8) 8210 1236 or via E-mail: jchurchill@normans.com.au.

IS YOUR PRODUCT MADE IN AUSTRALIA?

Back in March of this year, we reported on the Federal Government's proposed origin labelling reforms. These reforms have now been incorporated into a new Division 1AA of Part V of the Trade Practices Act.

Suppliers are now entitled to identify products as being made in a particular country where the products are substantially transformed in that country and at least 50% of the production or manufacturing costs are incurred in that country.

The term substantially transformed in relation to a product requires a product to have undergone a change, whether relating to its appearance, operation or its purpose. It is proposed that regulations will set out what changes will and will not be regarded as substantial transformations for the purposes of the Division. Production or manufacturing costs include the sum of materials, labour and overhead expenses incurred in relation to the product.

Suppliers are only entitled to label a product as a product or produce of a country where all significant ingredients or components come from the relevant country and all or almost all of the production process in relation to the product has occurred in that country. In addition to the above, the Minister for Customs and Consumer Affairs is able to prescribe other origin logos which suppliers will be able to use when the substantial transformation test has been satisfied and more than a specified percentage of the production or manufacturing costs have been incurred in a particular country.

For further information on this article, please contact Johanna Churchill, Senior Associate, on (61 8) 8210 1236 or via E-mail: jchurchill@normans.com.au.

TAX CONCESSIONS FOR R & D

The Federal Government proposes to limit access to tax concessions for research and development expenditure. Proposals contained in the Industry Research and Development Bill of 1998 will limit the availability of the 125% tax deduction for R & D expenses to where those expenses relate to activities involving a higher degree of innovation or technical risk than currently required.

Having said this, it is not all bad news for manufacturers. The Bill, if passed, will introduce greater flexibility to the process of applying for the R & D concession. In particular, businesses:

• will have 10 months from the end of an income year to apply for the concession instead of the current 6 months;
  

• will be able to ask the Industry Research and Development Board to exercise a discretion to accept a late application for the concession; and
  

• may be able to negotiate with the Industry Research and Development Board as to the type of information required in order to receive registration for the concession.
  

For further information or advice on this article, please contact Christopher Darby, Associate, on (61 8) 8210 1286 or via E-mail: cdarby@normans.com.au.

HONG KONG TAX ISSUES

Back in May of this year we reported on taxation and other implications of the British handover of sovereignty over Hong Kong to the Peoples Republic of China.

The Commonwealth Commissioner of Taxation has issued a tax ruling (TR97/19) confirming that the operation of the Australia - China Double Taxation Agreement does not extend to Hong Kong following the British handover. Consequently, Hong Kong will continue to be regarded as an "unlisted country" for the purposes of the Income Tax Assessment Act.

MORE TAX NEWS

As part of its tax reform plan, the Federal Government proposes that tax payers with simple tax questions will be able to rely on oral advice received from the Australian Tax Office (the ATO) in the same way that they can currently rely on private rulings from the ATO.

Currently any oral advice given by the ATO is regarded as a "gratuitous expression of opinion" and pursuant to the Tax Payers Charter, if such advice turns out to be incorrect, any tax payer honestly relying on such advice will be required to pay any underpaid tax but will not have to pay any penalties.

Under the Government's proposals, the ATO will be bound by any incorrect oral advice given on simple tax questions where it results in a lower tax liability than would result if a correct assessment had been made. In other words not only will the tax payer avoid having to pay penalties, the taxpayer will only be required to pay the lower "incorrect" amount of tax.

What is not currently clear about the proposals is whether tax payers will be able to object and seek a review of ATO oral advice in the same way that they can seek reviews of private rulings. It is also not clear whether the ATO will impose a penalty if a tax payer ignores unfavourable oral advice from the ATO as it currently does if a tax payer ignores an unfavourable private ruling.

It has been suggested that ATO officers may be reluctant to commit the ATO to any advice given without the request for advice being given in writing and without the relevant officer having an "adequate" opportunity to fully consider all relevant information. Accordingly, the proposals may result in the ATO avoiding giving oral advice in the future and instead forcing tax payers to incur the time and expense of seeking a private ruling. Whether this will be the case remains to be seen.

For further information and advice on this article, please contact Johanna Churchill, Senior Associate, on (61 8) 8210 1236 or via E-mail: jchurchill@normans.com.au.


The contents of this newsletter are for information only and should not be taken as advice on the law. This newsletter may be reproduced in whole or in part with the prior permission of Norman Waterhouse and acknowledgement of its source and copyright.