Reasons for Decision Section of the ITAA allows a deduction for losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business Optkons the purpose of gaining or producing assessable income, provided that the Options trading stock ato james or outgoings are not capital, private or domestic in nature. In particular, paragraph 3 states: The market value of the taxpayer's open sold ETO positions represents the cost to the taxpayer to acquire offsetting ETOs in the same contract series. Effectively it trwding the cost to the taxpayer jqmes close out the positions. At the end of the income year the taxpayer is not under any obligation to close out their open sold ETO tarding.
The market value of the taxpayer's open sold ETO positions is not a loss or outgoing incurred by the taxpayer as there is no presently existing liability to pay an amount to close out the ETOs. The landowner then sold the shares. But the cost to him of the shares was the full value of the land he gave to get them. Per Kitto J, at The plain fact of the matter is that the cost was the land which he transferred to the company. That was the sum which the sale agreement named as the price of the land, and it was the sum which was credited as paid up on the respondent's shares. The sale agreement provided for only one method of completion: The Full Court of the High Court rejected the view that there is a general principle that: Federal Commissioner of Taxation 42 CLR Tivoli Vaudeville was High Court authority for the view that a company which acquired a lease for an amount to be provided by the issue of its shares fully paid to that amount was entitled to write off the paid up amount over the lease term, under paragraph 25 i of the Income Tax Assessment Act ITAA However, that case, R v.
Bullfinch Proprietary WA Ltd 15 CLR Bullfinch holding that under then WA stamp duty provisions the dutiable consideration for leases acquired for an amount to be provided only in shares issued as paid was the amount and not the value of the sharesand Messer v.
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Deputy Federal Commissioner of Taxation 51 CLR Messer holding, conversely, that under paragraph 16 d of the ITAA the consideration for the assignment of a lease was the value of the shares given by the company acquiring the lease although a money amount had been stated and a cheque tendered were each distinguished in Becker as cases of no general application and depending on their particular statutory provisions. Becker itself concerned a provision which 'unlike the provisions with which the court was concerned in the cases cited, uses the language of everyday affairs without artificial restriction or enlargement', per Kitto J at pageand is therefore general in its implications.
As payment of an obligation other than to issue shares by set-off is being considered here in the context of the general provisions of the income tax law, provisions which also 'use the language of everyday affairs', Becker is the more readily applicable authority. Section 21 of the ITAA applies where any consideration on a transaction is given or paid other than in cash. It deems the money value of that consideration to have been paid or given. Under section 21, where consideration is given in kind it is taken to be given to the money value of the consideration in kind. However, if consideration is given that is not a loss or outgoing, or expenditure or in satisfaction of such a loss or outgoing or expenditurethen section 21 has no effect of converting the consideration into a loss or outgoing or expenditure incurred.
Company's loss, outgoing or expenditure for assets or services paid by set-off against consideration due to it for issue of shares The fact that a company pays or discharges a loss, outgoing or expenditure by set-off against the consideration due to it for the issue of its shares does not change the tax treatment of the loss, outgoing or expenditure it has incurred. That will depend on the original character of the loss, outgoing or expenditure.
sttock A loss, outgoing or expenditure that is deductible is no less so trrading it is paid or discharged by set-off rather than in some other way. That is illustrated clearly by Lowry itself. Viscount Maugham illustrated the case where the consideration for tradinng issue of shares is set-off against an independent liability of the company to the allottee at page If in this case the employees were paying the stoxk value of the shares and also releasing to the Company some amounts of salary Ootions to them the case would be very different from what it is. And, for payment by set-off more generally, at page The authoritative statements are those of James LJ at pages to If it came to this, that there was a debt in money payable immediately by the company to the shareholders, and an equal debt payable immediately by the shareholders to the company, and that each was accepted in full Optiona of the other, the company could have pleaded payment in an action brought against them, and the shareholder could have pleaded payment in cash in a corresponding ati brought by the company against him for calls.
Supposing the transaction to be an honest transaction, it would in a court of law be sufficient evidence in support of a plea of payment in cash, and it appears to me that it is sufficient for this Court sitting in a winding-up matter. Mellish LJ's much-cited words at page are that: Options trading stock ato james is clearer than that if parties account with each atk, and sums are stated to be due on one side, and sums to an equal amount due on the other side on that account, and those accounts are settled by both parties, it is exactly the same thing as if the sums due on both sides had been paid. Indeed, it is a general rule of law, that in every case where a transaction resolves itself into paying money by A to B, and then handing it back again by B to A, if the parties meet together and agree to set one demand against the other, they need not go through the form and ceremony of handing the money backwards and forwards.
Spargo is itself an example distinguishing a company's issue of shares from its acquisition of property, for in that case Mr Spargo bought the lease of a mine for a company to be formed, subscribed for shares in the company, and in general meeting he, the company and the other members resolved to set off the liability of the company to pay for the lease bought for it against Spargo's liability to pay for his shares. However, obligations can be set-off in this way only where they actually arise. The requirement that obligations payable immediately must have arisen is illustrated in the New Zealand tax case of Northern Roller Milling Co Ltd v.
Here the question was whether the deductible rent was the balance remaining after setting off capital instalments due from lessor to lessee, or was the larger amount to be taken as partly paid by the set-off. It was the larger amount, but only because the capital instalments were due independently of the lease in which the set-off was given, and because those instalments were set off only as they fell due, against that quarter's rent. Had the obligation to pay the capital instalments been forgiven as consideration for a lease at lower rent, the rent would have been only the reduced amount and no capital instalments would have been received because there would not have been any obligation to pay the capital instalments and there would have been only a smaller obligation to pay rent.
The set-off applied because there were separate obligations paid by set-off. PJ Underwood v. HM Revenue and Customs  EWHC Ch is a recent illustration where there were not separate obligations discharged by set-off but only a single obligation. There, the taxpayer asserted the sale and the repurchase of his land, with the obligations under the sale and under the repurchase carried out in full by set-off. This treatment would have had CGT advantages for the taxpayer. Briggs J found that the land was neither sold nor repurchased, and that all that happened was the settlement of a difference as part of releasing any obligations for sale or repurchase of the land at paragraph This was because for obligations to be carried out by set-off they must exist as cross-demands for money that are 'immediately payable', applying at paragraph 36 Coren v.
Keighley 48 TC at The potential obligations which could have arisen under the uncompleted sale contract and option agreement were never performed or intended to be performed.
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stoxk Australian courts similarly require obligations to arise so as to be payable stpck before they can be recognized and paid by an agreed set-off. If cross-liabilities in sums certain of equal amounts immediately payable are mutually extinguished jame an agreed set-off, that amounts to payment for most common-law and statutory purposes But for the application of these principles there must be cross-liabilities and agreement, express, tacit or implied, and the cross-liabilities must be equal. If they are not equal payment of the residue must be effected by other means.
In that case a company made no payment of the manager's profit share subject to tax instalment deductions by set-off against advance drawings, because the manager was not entitled to the profit share at the time of the advance drawings, and so the company had no liability to deduct tax instalments from those drawings taken by a manager in advance of the manager's profit share. As the manager had anticipated the profit share, no obligation to pay the profit share ever arose.
The company was entitled to reduce what its obligation would otherwise have been by the amount of the advance drawings. Therefore no such obligation was discharged either. Lend Lease's claims for atock for the paid-up value in shares issued to its staff superannuation fund failed for the same reasons in Lend Lease Corporation Ltd v. The issue of at shares was itself no loss, outgoing or expenditure; only if there was an obligation to contribute in cash, then paid by set-off, could deductions have been allowed.
As Hill J explained at page I doubt whether it is possible to apply the rule in Spargo's case where there are no mutual liabilities but rather a liability on one hand and a voluntary payment on the other. The intention to make a voluntary payment does not constitute a binding obligation. But whether that is correct or not, the present is not a case where there was any agreement at all that could be inferred between the applicant on the one hand and the trustees on the other.
The situation is merely one jamess the matter lay in intention on the part Options trading stock ato james the applicant and was never considered at all in terms of the trust deed by the trustees. Hill J's inclination to regard Spargo traxing unavailable to produce payment by set-off of a liability and a voluntary payment, even where the two are independent of each other, is supported by Gardner v. Commissioner of Probate Duties  WARwhich involved an imperfected gift by a testator to the family company of jamws of the debt the company owed to him.
There set-off of the gift against the debt reducing probate duty was not possible. There, an insolvent company's debt to the banks was set-off against a later agreement by jzmes banks to subscribe for shares, and the separate existence of the agreement to subscribe, and for set-off from the debt, was fundamental to accepting that there had been payment of both obligations set off against each other. The requirement that the separate cross obligations be due immediately explains why a mortgagee who takes over from a mortgagor in possession can demand from the tenant, as it falls due, rent the tenant has already paid in advance to the mortgagor.
Those advance payments were not for rent due at the time; so they are not set off then, or later, against the rent as it falls due. The tenant is entitled to credit from the mortgagor, but not a set-off against the mortgagee. The terms of the loans were therefore a significant issue. Had they not been on demand, and had a term for their payment still to come in, set-off could not have occurred. The obligations must exist before they can be discharged by an agreement to set them off against each other by way of payment. This is why an agreement for set-off of present obligations against future obligations is not only ineffective when made, but is not self-executing when the contemplated future obligations arise.
See, for instance, R Harding and Co Ltd in liquidation v. Hamilton  NZLR ; where the Court of Appeal spelt out that, although cross obligations had arisen as contemplated by an existing agreement for set-off, it required a further agreement, once the mutual obligations were all payable immediately, before the set-off would be carried into effect. The fact that, as actual obligations, the matching present obligations could not actually have been met has been suggested as enough by itself to bar acceptance that the obligations have been paid by set-off.
The view that obligations could not have been independently entered into would certainly be arguable in relation to such cases as Pro-Image Studios, where actually paying the debts to the banks would have been an improper preference, as the company was already insolvent. The obligation of the Holliday subsidiary to pay unpaid dividends, and the obligation of the Holliday parent to lend the amount of Options trading stock ato james dividends paid, like the agreement to set the one off against the other, were all linked. So much so, that there was no possibility of paying the dividends, or lending the money, Options trading stock ato james as part of such a set-off arrangement.
The court there found that there was only a continuing obligation to pay unpaid dividends, and that the purported payment of the dividends by set-off against a loan back to the subsidiary never happened. There is commonly no set-off, and there is no payment of a separate liability in money, where assets are given or services performed for consideration that must be accepted in shares and the shares are issued. Illustrations include Re Government Security Fire Insurance Co White's Case 12 Ch Din which a newspaper placed advertisements at its usual rates but only to be paid by way of the issue of shares of equivalent paid-up value: In that case a company's controller purported to pay up shares issued to family members by debiting the controller's loan account with the company, but the High Court held that there was payment only to the extent that the loan account was in credit, because only to that extent was there an amount payable to the controller in cash other than by reason of the arrangement to pay up the shares.
As to the rest of the amount, the shares were not paid up then in money, and gift duty had to be assessed accordingly. Similarly, in Joseph v. Campbell 50 CLR the High Court held that there had to be a liability before that liability could be set off against a shareholder's obligation to pay up shares in cash. In most cases where obligations to pay for shares and to pay for an asset or for services were not in existence, so that the company could not be made to pay cash for the asset or services and the vendor could not get cash while the company could only be made to issue shares and the vendor could only get shares, there was no payment in money for the shares by set-off or otherwise.
Therefore the shareholder remained liable to calls on the unpaid shares. Whether there is payment by set-off in the case where the contract or arrangement specifies a price for the assets or services and also requires the company to issue shares As the above discussion explains, in order for there to be payment by set-off there must be two existing cross obligations between the parties, which they have agreed to discharge by set-off. In the case when, as in Example 2, the company's obligation to pay for the assets or services has arisen prior to its arrangement to issue shares for a subscribed amount, or the company's obligation to pay for the assets or services and the vendor's or provider's obligation to pay for the issue of shares arise under separate arrangements, there is no issue that there exist debts on either side which the parties may agree to set-off.
Conversely, in the case when, as in Example 1, the company's obligation to get the assets or services is to issue shares and the vendor or provider has the obligation to provide the assets or services for the shares, no price or amount for the assets or services other than the shares is identified or nominated. In that case there is no issue that the company does not incur a loss or outgoing or expenditure for the assets or services. A key component of the campaign is simple, plain English guidance for people with the most common occupations, like teachers, nurses, police officers and hospitality workers.
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SMSF issues update: The speech was mainly about practical considerations to be taken into account when setting up a new self managed superannuation fund SMSF and during the first year of its operation. The ATO has prefilled over 80 million pieces of data from banks, employers, health funds and government agencies to make tax returns easier for taxpayers and agents. Under the conditions of the scheme, Tania's rights will lapse if South Ltd's current year sales do not exceed last year's sales. The ESS does not have a minimum employment requirement. In this case, we consider that a reasonable person might consider that the rights acquired by Tania were not at a real risk of forfeiture.
End of example Example 3: Bob Ltd has a history of regularly achieving a high TSR relative to its peer group.
Even though Bob Ltd has OOptions achieved a high TSR relative to its peer group, we consider in this case, that a reasonable person might stocck the rights acquired by Anne to be at real risk of forfeiture, considering that this performance hurdle is based on the performance of peers. End of example Minimum term of tradinb An ESS may provide at the time of mames for ESS interests to be forfeited if the employee doesn't complete a minimum term of employment forfeiture period. For ESS interests acquired outside these parameters, we Ootions consider all tfading facts and circumstances to determine whether they are at a real risk of forfeiture.
Example 4: Steve's rights to acquire shares in Ceiling Ltd are accepted as being at a real risk of forfeiture. End of example Example 5: Forfeiture after vesting due to choice, no real risk Aimee works for Skydiving Ltd and is granted rights to acquire shares in Skydiving Ltd under an ESS. However, Aimee's rights will lapse: In this case, we consider that at the time of acquisition the rights are at a real risk of forfeiture. We consider that any risk of Aimee losing her rights after the two-year period will be due to her choosing not to take action to exercise her rights. End of example Example 6: Forfeiture on cessation of employment and monthly vesting, real risk Alastair works for Camera Ltd and is granted rights to acquire shares in Camera Ltd under an ESS.
Under the conditions of the scheme, rights will vest progressively at monthly intervals over a four year period. Upon vesting, Camera Ltd will issue shares to Alastair. If Alastair ceases employment with Camera Ltd, any unvested rights will lapse.