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Tuesday, 3 May 1994
Page: 111

(Question No. 1088)

Senator Watson asked the Minister representing the Treasurer, upon notice, on 24 February 1994:

  With reference to Mr Mark Lawson's article in the Financial Review on 8 February 1994 highlighting the uncertainty surrounding the valuation of leased goods at the end of a lease as revealed by Administrative Appeals Tribunal Case 47/93:

  (1) Can the Treasurer give an assurance that the Australian Taxation Office's Fringe Benefits Tax (FBT) and Capital Gains Tax experts who currently have contradictory approaches to the question of "arm's length dealing" will have resolved their differences of approach by April, when FBT returns must be lodged.

  (2) What will be the impact on the leasing industry if the FBT section's view prevails, that acquisition of a leased asset at residual value which is less than market value is not an arm's length deal, given the operation of section 59(4) of the Income Tax Assessment Act 1936.

Senator Cook —The Assistant Treasurer has provided the following answer to the honourable senator's question:

  (1) The Commissioner of Taxation has advised that the ATO takes the view that an employer, who may be liable to capital gains tax on the disposal of an asset which has been acquired from a lessor, may also be liable to fringe benefits tax where the disposal of the asset is to an employee. A recent decision of the Administrative Appeals Tribunal has raised issues relating to whether the tax law in this area achieves the intended result. This decision is currently before the Full Federal Court in Granby v FC of T: This case is expected to provide the necessary guidance to determine this issue.

  (2) The Commissioner of Taxation has also advised that it is not intended to disturb the current operation of subsection 59(4) of the lncome Tax Assessment Act 1936. Any amendment that may be needed as a consequence of Granby's case will be considered after the decision has been handed down.