Prescriptions for reform of Australia's superannuation tax concessions

The highly controversial and often politicised issue of Australia’s retirement savings regime featured prominently throughout the two day Federal Government’s October 2011 Tax Forum. Calls for reform of this regime are by no means new. Reform debate over the years has focused on each of the three separate pillars: the age pension, compulsory superannuation, and voluntary saving, as well as the interaction of those three elements. However, recently there has been a significant shift away from reliance on the age pension, with its associated risks falling to the government, to a defined contributions scheme where the associated risks fall to the individual taxpayer. Consequently, Australia’s superannuation regime is predominantly subject to current debate, and, as such, the subject of this article. This article considers the history of Australia’s retirement savings regime, along with a framework for evaluating the superannuation tax concessions. It then discusses the recommendations of the Australian Future Tax System (AFTS) Review Panel and ensuing debate at the Tax Forum. Finally, it suggests two proposals to achieve the objectives of the AFTS Review in relation to retirement, those objectives being a system which is broad and adequate, acceptable to individuals, robust, simple and approachable, and finally sustainable. The first, whilst potentially requiring some tinkering’, is relatively simple and a blue print has already been provided to the Federal Government – the adoption of Recommendations 18 and 19 of the AFTS Review. The second is one of management. Superannuation concessions are fundamentally categorised as tax expenditures and the management of these tax expenditures, not just the reporting, should be undertaken.

The traditional rationale of the arm’s length approach to transfer pricing : should the separate accounting model be maintained for modern multinational entities?

This article examines the current transfer pricing regime to consider whether it is a sound model to be applied to modern multinational entities. The arm's length price methodology is examined to enable a discussion of the arguments in favour of such a regime. The article then refutes these arguments concluding that, contrary to the very reason multinational entities exist, applying arm's length rules involves a legal fiction of imagining transactions between unrelated parties. Multinational entities exist to operate in a way that independent entities would not, which the arm's length rules fail to take into account. As such, there is clearly an air of artificiality in applying the arm's length standard. To demonstrate this artificiality with respect to modern multinational entities, multinational banks are used as an example. The article concluded that the separate entity paradigm adopted by the traditional transfer pricing regime is incongruous with the economic theory of modern multinational enterprises.

Advance pricing arrangements : an Australian Tax Office success or a legislative failure?

Australia’s domestic income tax legislation and double tax agreements contain transfer pricing rules which are designed to counter the underpayment of tax by businesses engaged in international dealings between related parties. The current legislation and agreements require that related party transactions take place at a value which reflects an arm’s length price, that is, a price which would be charged between unrelated parties. For a host of reasons, it is increasingly difficult for multinational entities to demonstrate that they are transferring goods and services at a price which is reflective of the behaviour of independent parties, thereby making it difficult to demonstrate compliance with the relevant legislation. Further, where an Australian business undertakes cross-border related party transactions there is the risk of an audit by the Australian Tax Office (ATO). If a business wishes to avoid the risk of an audit, and any ensuing penalties, there is one option: an advance pricing arrangement (APA). An APA is an agreement whereby the future transfer pricing methodology to be used to determine the arm’s length price is agreed to by the taxpayer and the relevant tax authority or authorities. The ATO views the APA process as an important part of its international tax strategy and believes that there are complementary benefits provided to both the taxpayer and the ATO. The ATO promotes the APA process on the basis of creating greater certainty for all parties while reducing compliance costs and the risk of audit and penalty. While the ATO regards the APA system as a success, it may be argued that the implementation of such a system is simply a practical solution to an ongoing problem of an inherent failure in both the legislation and ATO interpretation and application of this legislation to provide certainty to the taxpayer. This paper investigates the use of APAs as a solution to the problem of transfer pricing and considers whether they are the success the ATO claims. It is argued that there is no doubt that APAs provide a valuable practical tool for multinational entities facing the challenges of the taxation of global trading under the current transfer pricing regime. It does not, however, provide a long term solution. Rather, the long term solution may be in the form of legislative amendment.

Bringing OBUs onshore : assessing the concessions

In the context of the Federal Government's desire to establish Australia as a competitive international financial centre this article examines the current position of OBUs in Australia. Further, the changes that have been made to accommodate the present system, along with proposed changes and the likely effectiveness of the tax concessions in attracting offshore banking activities in Australia are considered

International transfer pricing : the Australian approach and lessons for Canada

In response to developments in international trade and an increased focus on international transfer-pricing issues, Canada’s minister of finance announced in the 1997 budget that the Department of Finance would undertake a review of the transfer-pricing provisions in the Income Tax Act. On September 11, 1997, the Department of Finance released draft transfer-pricing legislation and Revenue Canada released revised draft Information Circular 87-2R. The legislation was subsequently amended and included in Bill C-28, which received first reading on December 10, 1997. The new rules are intended to update Canada’s international transfer-pricing practices. In particular, they attempt to harmonize the standards in the Income Tax Act with the arm’s-length principle established in the OECD’s transfer pricing guidelines. The new rules also set out contemporaneous documentation requirements in respect of cross-border related-party transactions, facilitate administration of the law by Revenue Canada, and provide for a penalty where transfer prices do not comply with the arm’s-length principle. The Australian tax authorities have similarly reviewed and updated their transfer-pricing practices. Since 1992, the Australian commissioner of taxation has issued three rulings and seven draft rulings directly relating to international transfer pricing. These rulings outline the selection and application of transfer pricing methodologies, documentation requirements, and penalties for non-compliance. The Australian Taxation Office supports the use of advance pricing agreements (APAs) and has expanded its audit strategy by conducting transfer-pricing risk assessment reviews. This article presents a detailed review of Australia’s transfer-pricing policy and practices, which address essentially the same concerns as those at which the new Canadian rules are directed. This review provides a framework for comparison of the approaches adopted in the two jurisdictions. The author concludes that although these approaches differ in some respects, ultimately they produce a similar result. Both regimes set a clear standard to be met by multinational enterprises in establishing transfer prices. Both provide for audits and penalties in the event of noncompliance. And both offer the alternative of an APA as a means of avoiding transfer-pricing disputes with Australian and Canadian tax authorities.

Regulatory infrastructure for nonprofit organisations

The Australian economy has been transformed by bold federal government initiatives over the last decade. The political rhetoric is that without these reforms, the Australian economy will falter and be uncompetitive in a global market place. Despite the electoral disquiet that rapid systemic change brings, both sides of politics have adopted the broad starting point that it is imperative that our economy be transformed or Australian living standards will dramatically plummet...

An examination of tax-deductible donations made by individual taxpayers in Australia for 1997/98

This paper analyses the amount and type of tax-deductible donations made by Australian taxpayers to charities for the period 1 July 1997 to 30 June 1998. The information has been extracted from the Australian Taxation Office's publication Taxation Statistics 1997-98 which provides an overview and profile of the income and taxation status of Australian taxpayers using information extracted from their income tax returns for the period 1 July 1997 to 30 June 1998. This report is the latest publicly available summary. At the time of writing.

Tax concessions in support of charitable giving: an international comparison

The Australian taxation system encourages charitable giving through tax deductibility for donations made by individuals and companies, and via tax exemption for income distributed to charities through charitable trusts. Other means of giving, such as through bequests enjoy little tax concessions...

Development of a 3D culture system to study the skeletal metastasis of prostate cancer

In the cancer research field, most in vitro studies still rely on two-dimensional (2D) cultures. However, the trend is rapidly shifting towards using a three-dimensional (3D) culture system. This is because 3D models better recapitulate the microenvironment of cells, and therefore, yield cellular and molecular responses that more accurately describe the pathophysiology of cancer. By adopting technology platforms established by the tissue engineering discipline, it is now possible to grow cancer cells in extracellular matrix (ECM)-like environments and dictate the biophysical and biochemical properties of the matrix. In addition, 3D models can be modified to recapitulate different stages of cancer progression for instance from the initial development of tumor to metastasis. Inevitably, to recapitulate a heterotypic condition, comprising more than one cell type, it requires a more complex 3D model. To date, 3D models that are available for studying the prostate cancer (CaP)-bone interactions are still lacking. Therefore, the aim of this study is to establish a co-culture model that allows investigation of direct and indirect CaP-bone interactions. Prior to that, 3D polyethylene glycol (PEG)-based hydrogel cultures for CaP cells were first developed and growth conditions were optimised. Characterization of the 3D hydrogel cultures show that LNCaP cells form a multicellular mass that resembles avascular tumor. In comparison to 2D cultures, besides the difference in cell morphology, the response of LNCaP cells to the androgen analogue (R1881) stimulation is different compared to the cells in 2D cultures. This discrepancy between 2D and 3D cultures is likely associated with the cell-cell contact, density and ligand-receptor interactions. Following the 3D monoculture study, a 3D direct co-culture model of CaP cells and the human tissue engineered bone (hTEBC) construct was developed. Interactions between the CaP cells and human osteoblasts (hOBs) resulted in elevation of Matrix Metalloproteinase 9 (MMP9) for PC-3 cells and Prostate Specific Antigen (PSA) for LNCaP cells. To further investigate the paracrine interaction of CaP cells and (hOBs), a 3D indirect co-culture model was developed, where LNCaP cells embedded within PEG hydrogels were co-cultured with hTEBC. It was found that the cellular changes observed reflect the early event of CaP colonizing the bone site. In the absence of androgens, interestingly, up-regulation of PSA and other kallikreins is also detected in the co-culture compared to the LNCaP monoculture. This non androgenic stimulation could be triggered by the soluble factors secreted by the hOB such as Interleukin-6. There are also decrease in alkaline phosphatase (ALP) activity and down-regulation of genes of the hOB when co-cultured with LNCaP cells that have not been previously described. These genes include transforming growth factor β1 (TGFβ1), osteocalcin and Vimentin. However, no changes to epithelial markers (e.g E-cadherin, Cytokeratin 8) were observed in both cell types from the co-culture. Some of these intriguing changes observed in the co-cultures that had not been previously described have enriched the basic knowledge of the CaP cell-bone interaction. From this study, we have shown evidence of the feasibility and versatility of our established 3D models. These models can be adapted to test various hypotheses for studies pertaining to underlying mechanisms of bone metastasis and could provide a vehicle for anticancer drug screening purposes in the future.

Biological responses of human bone marrow mesenchymal stem cells to Sr-M-Si (M = Zn, Mg) silicate bioceramics

Strontium (Sr), Zinc (Zn), magnesium (Mg), and silicon (Si) are reported to be essential trace elements for the growth and mineralization of bone. We speculated that the combination of these bioactive elements in bioceramics may be effective to regulate the osteogenic property of boneforming cells. In this study, two Sr-containing silicate bioceramics, Sr2ZnSi2O7 (SZS) and Sr2MgSi2O7 (SMS), were prepared. The biological response of human bone marrow mesenchymal stem cells (BMSCs) to the two bioceramics (in the forms of powders and dense ceramic bulks) was systematically studied. In powder form, the effect of powder extracts on the viability and alkaline phosphatase (ALP) activity of BMSCs was investigated. In ceramic disc form, both direct and indirect coculture of BMSCs with ceramic discs were used to investigate their biological response, including attachment, proliferation, ALP activity, and bone-related genes expression. Beta-tricalcium phosphate (b-TCP) and akermanite (Ca2MgSi2O7, CMS) were used as control materials. The results showed that the Sr, Zn, and Si (or Sr, Mg, and Si)-containing ionic products from SZS and SMS powders enhanced ALP activity of BMSCs, compared to those from b-TCP. Both SZS and SMS ceramic discs supported the growth of BMSCs, and most importantly, significantly enhanced the ALP activity and bone-related genes expression of BMSCs as compared to b-TCP. The results suggest that the specific combination of bioactive ions (Sr, Zn, Si, e.g.) in bioceramics is a viable way to improve the biological performance of biomaterials, and the form of materials and surface properties were nonnegligible factors to influence cell response.

Practical physical activity measurement in youth : a review of contemporary approaches

Background: The accurate evaluation of physical activity levels amongst youth is critical for quantifying physical activity behaviors and evaluating the effect of physical activity interventions. The purpose of this review is to evaluate contemporary approaches to physical activity evaluation amongst youth. Data sources: The literature from a range of sources was reviewed and synthesized to provide an overview of contemporary approaches for measuring youth physical activity. Results: Five broad categories are described: self-report, instrumental movement detection, biological approaches, direct observation, and combined methods. Emerging technologies and priorities for future research are also identified. Conclusions: There will always be a trade-off between accuracy and available resources when choosing the best approach for measuring physical activity amongst youth. Unfortunately, cost and logistical challenges may prohibit the use of "gold standard" physical activity measurement approaches such as doubly labelled water. Other objective methods such as heart rate monitoring, accelerometry, pedometry, indirect calorimetry, or a combination of measures have the potential to better capture the duration and intensity of physical activity, while self-reported measures are useful for capturing the type and context of activity.