Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

 

 

November 2007 **************************************************************

 

Decision Impact Statement on Trust Deeds

Readers will remember the Full Federal Court decision in Cajkusic v. Commissioner of Taxation from our February 2007 issue. In response to this decision, the Tax Office has released a Decision Impact Statement indicating its position from the Court’s decision.
In that decision, the Full Court held that while contributions made to various employee benefit trusts were not deductible, the default beneficiaries under the trust were not assessable on the resulting increase in taxable net income of the trust.
The Court held the trust's carry forward losses from the previous year were properly applied against current year income. As the prior year losses were greater than the current year income, there was no distributable income in the current year. Therefore, the beneficiaries were not entitled to or assessable on any income of the trust.
In the decision impact statement, the Tax Office indicated that it accepts the decision as an application of conventional tax law principles in determining

when a beneficiary of a trust is presently entitled to the income of a trust estate.
However the Tax Office has further indicated that it does not believe the case to be authority for the proposition that the terms of a trust instrument can govern the meaning of income, for tax purposes, of the trust.
The Tax Office does not propose to conduct active compliance targeted at this issue, but will seek to further test the issue in the appellate courts as soon as the opportunity arises.
 TIP: It is important to carefully consider the wording of each trust deed before the trustee resolves to distribute the income of the trust. This analysis should be undertaken each year, as the income profile of the trust may change from year to year.

Penalty for Incorrectly Claimed Input Tax Credits

In a recent decision, the Administrative Appeals Tribunal (AAT) affirmed the Commissioner’s decision to impose a 25% administrative penalty on a property developer for failing to take reasonable care

in claiming input tax credits relating to the GST incurred on a land acquisition.
However, the AAT set aside the Commissioner’s decision not to remit the penalty and reduced the penalty on the basis that the property developer’s advisors played a part in giving rise to the liability.

Overseas Volunteer Work Payments not Assessable

In a recent decision, the AAT dismissed a taxpayer’s appeal and held that neither a payment received by the taxpayer from the Rotary Club, nor salary or wages received for employment, were assessable income. Consequently, the taxpayer was also not entitled to a deduction for work-related travel expenses claimed for an overseas trip.
The taxpayer was employed as a physiotherapist and took leave without pay to volunteer
in Vietnam. She was offered $3,300 by the Rotary Club to fund the airfares and accommodation costs, and also received salary and wage income while in Vietnam. The taxpayer argued that income derived from volunteer work in Vietnam and the payment from the Rotary Club towards airfares and accommodation costs was assessable income. Subsequently, the taxpayer claimed work-related travel expenses against that assessable income.
The AAT did not agree with the taxpayer’s treatment of the income on the grounds that the payments received did not constitute assessable income. As a result, deductions claimed by the taxpayer would not be an allowable deduction, as the deductions were not incurred in gaining or producing assessable income.

Taxpayer’s Investment not Anti-avoidance

In a recent decision in Lenzo v. Commissioner of Taxation, the Federal Court found that a taxpayer’s investment in a sandalwood project in Western Australia was not a tax avoidance scheme.
The taxpayer entered into an arrangement to invest in a sandalwood plantation in Western Australia with the sole aim of accumulating wealth for the taxpayer’s retirement.
The taxpayer had undertaken a review of several similar projects before deciding to invest in Tropical Forestry Services Ltd (TFS). As part of the project, the taxpayer was required to make certain payments to the project managers for management and administration of the project. He also made loan repayments to the financial institution from which he borrowed the funds for the investment.
The taxpayer claimed a tax loss for respective tax years in which he was involved in the project, which represented project maintenance fees, rental, interest and bank fees, and indemnity fees, all of which were associated with the taxpayer’s involvement in the project.
The Commissioner sought to apply the tax anti-avoidance provisions to deny the deductions the taxpayer claimed in relation to his investment in the project.
In this case, the Court concluded that overall the project had a commercial nature. The management fees were paid for a service to be provided by TFS and the loan repayments made by the taxpayer were as prescribed by the loan agreement in place.
As a result, the Court upheld the taxpayer’s claim that there was no suggestion that any of the agreements entered into by the taxpayer were contrived. While a tax benefit was derived from the project, it could not be concluded that this benefit was the sole or dominant purpose for entering into the arrangement.
 TIP: Taxpayers considering entering into an investment project such as a plantation, should seek independent tax advice.

Lump sum Payment Assessable as Income

In a recent decision, the AAT held that a lump sum compensation payment received by a taxpayer was income.
The taxpayer was a life tenant under four trusts. Under this arrangement, the taxpayer was entitled to the income of the trusts

for her lifetime. Her son, the remainderman, was entitled to the assets of the trust after her death.
The taxpayer entered into a deed of release whereby she gave up her rights under the trusts. She received a lump sum payment as well as the income of the trusts.
The taxpayer argued that the payment was received due to a breach of the duties of the trustee. She claimed that the trustee had been focused on the capital growth of the assets of the trust and did not balance this with her entitlement to income.
The taxpayer was not entitled to any capital growth of the trust.
The Commissioner assessed the lump sum payment as a receipt
of income, and the AAT upheld this assessment.
The AAT considered the rules regarding lump sum receipts where the nature of the receipt is determined by looking at it in the hands of the recipient taxpayer. As the taxpayer in this case was only entitled to income of the trust, any amount of compensation that she received for the loss of that income must also be income.

GIC and SIC Rates Released

The Tax Office has released updated general interest charge and shortfall interest charge rates for the October to December quarter 2007, which are as follows:

 

Rate	Annual	Daily
GIC	13.75%	0.03767123%
SIC	9.75%	0.02671233%

 

October 2007 **************************************************************

 

No deduction for franchisee fee

In a recent decision, the Administrative Appeals Tribunal (AAT) disallowed deductions for the payment of an initial upfront fee to participate in a franchisee arrangement.
A group of taxpayers were involved in an arrangement whereby they would pay an upfront amount to secure franchise rights. They also paid legal and administration fees in respect of the franchise.
These outgoings were claimed as a deduction by all taxpayers, in their income tax returns.
The franchise business involved marketing financial services to accounting firms in certain areas throughout Australia.
The Commissioner amended the taxpayers’ assessments for the periods in question, disallowing the deductions for the franchise fee and administration fees on the basis they were outgoings of a capital nature.
The taxpayers objected to this decision arguing that the payments were made in the course of carrying on a business and were therefore deductible as an outgoing of a revenue nature.
The AAT upheld the Commissioner’s position.
It indicated that there was no business being conducted and the expenses were not incurred in the production of assessable income. Instead the AAT held that the taxpayers had made a capital investment.
 TIP: Broadly, a tax deduction will be available where it can be shown that the expense is incurred in carrying on a business to produce assessable income, as opposed to acquiring a capital or investment asset.

Personal services income

In a recent decision, the Administrative Appeals Tribunal (AAT) held that consultancy income derived by a company was personal services income (PSI). The income was earned by the company for the provision of the services of an engineer, who was also the sole director of the company.
The taxpayer consulted as an electrical engineer through his company. Over several contracts the company derived income for the provision of engineering services.
Readers may remember that the PSI rules apply where the income is derived mainly as a reward for the individual’s personal efforts or skills.
In such circumstances, the income represents the individual’s PSI, irrespective of whether or not that income is derived in another entity, such as a company.
The Commissioner attributed the company’s income to the taxpayer directly.
In his view, the taxpayer was not operating a personal services business and therefore the PSI rules should apply.
Broadly, the taxpayer argued the company satisfied two of the four tests required for a personal services business. These tests were:
• the results test — where at least 75% of the personal services income derived is for producing a result; and
• the unrelated clients test — where a taxpayer derives personal services income from at least two entities which are not associates of each other.

The AAT held that the Commissioner had correctly attributed the income of the company to the taxpayer as personal services income and that a personal services business did not exist in the circumstances of the case.

Deductions disallowed for scheme

In a recent decision, the Federal Court has upheld the Commissioner’s decision to disallow deductions in relation to management fees, license fees and marketing fees paid by investors.
A partnership of individuals and a company were established to invest in a business which provided an information product to travel agents.
As part of their involvement in this business, each partner was required to pay license fees, management fees and marketing fees. These fees were largely funded by limited recourse loans.
Broadly, under the limited recourse loan arrangement, the lender only had access to 50% of the gross income from exploiting the licenses in overseas territories (after deducting certain expenses for recovery of the loan).
The Tax Office’s position on limited recourse finance is that deductions are only available for amounts actually paid.
Amounts not ultimately incurred as a result of the limited recourse nature of the loan will not be deductible.
In this instance, the taxpayers claimed a deduction for the entire amount of the license fee, management fee and marketing fee paid as part of their investment, despite the fact that they were largely funded by limited recourse loans.
The Commissioner amended each of the taxpayer’s assessments and applied Part IVA of ITAA 1936 to each taxpayer.
He argued that the sole or dominant purpose of entering into the arrangement was to obtain a tax benefit. He indicated that this argument was based on the overall size of the management fee paid relative to the income earned and the fact that the scheme lacked commercial substance.
In conclusion, the Federal Court held that the taxpayers had entered into a scheme for the sole benefit of obtaining a tax benefit as the deductions claimed were far in excess of any funds each of the taxpayers actually contributed.
Each taxpayer’s deductions were disallowed to the extent that they exceeded their actual cash outlays.
 TIP: Taxpayers should be wary when entering into arrangements that involve limited recourse debt and should seek advice as to the availability of deductions.

Penalties for recklessness in preparing BAS

In a recent decision, the Administrative Appeals Tribunal (AAT) has set aside a decision regarding shortfall penalties of approximately $134,000 imposed on the taxpayer for recklessness in preparing two business activity statements (BASs).
The taxpayer claimed to misunderstand the advice given to them by the Tax Office and indicated that he did not have an intention to mislead or avoid any payment of GST.
As the relevant law and the calculation of the liability was complex, the AAT held that, under the circumstances, reasonable care was taken by
the taxpayer in relation to the BASs.

Tax Office Compliance program

The Tax Office has released their compliance program for the 2007/2008 financial year, indicating their tax priorities for the year include the following issues:
• reviewing whether taxpayers have correctly accounted for CGT on the disposal of assets;
• work-related expenses, specifically regarding tourism workers, travel consultants, fitness and sporting industry employees, construction industry employees, mining employees and guards and security employees;
• company executives with remuneration in excess of
$1 million who aren’t fully reporting income;
• rental income and expenses with a specific focus on unusual patterns of rental claims; and
• aggressive tax planning where taxpayers are creating losses through the acquisition of prepaid warrants, and through new financial products.

September 2007 **********************************************************

 

Wash Sales

The Tax Office recently released a draft taxation ruling regarding the application of the anti-avoidance rules to arrangements known as ‘wash sales’.
Broadly, a wash sale is an arrangement in which the sale of an asset occurs where there is no long term intention on the part of the seller to cease holding the asset (i.e. the taxpayer continues to be exposed to the economic risks of ownership of the asset).
This situation may occur where a taxpayer disposes of or deals with a CGT asset in such a way as to give rise to a capital loss or allowable deduction, and then shortly after this event, re-acquires the asset. Alternatively, an asset with an unrealised loss may be sold to a related entity to crystallise the loss.
The ruling indicates that if the Commissioner believes that a wash sale has occurred, he may cancel all the tax benefits attached to the sale. The Commissioner will look at all the facts and circumstances surrounding each sale to determine whether they demonstrate that the taxpayer entered into the sale with the purpose of gaining those benefits.

Car Fringe Benefits

The Tax Office recently released an interpretative decision regarding whether journeys that result in minor benefits, which are exempt under the operating cost method, will be treated as business journeys when calculating the business use of a car.
Under the operating cost method, the taxable value of the benefit is based on the operating cost of the car during the period in which the benefit arises. This method requires that employers keep substantial records to show the operating costs of the car over a period, and the proportionate business and non-business use of the car. The proportion of business use is based on the number of business-related kilometres travelled during the year.
The Tax Office has indicated that non-business travel that results in a minor benefit for FBT will still be treated as business use for the purposes of calculating the taxable value of the fringe benefit.
By including this minor exempt benefit as business travel, the ratio of business kilometres to total kilometres of the car is increased, and hence the business use percentage also increases.
 TIP: when calculating car fringe benefits it is important to keep a logbook for 12 continuous weeks throughout the year, which represents the average use of the car. The logbook should also detail what the business travel was, including travel dates and times.

Superannuation Contributions

The Tax Office recently released an interpretative decision regarding the deductibility of superannuation contributions made by a private company for the benefit of its directors, where the private company was in the business of passive investment.
The interpretative decision indicates that a deduction can be claimed in relation to the superannuation contributions, provided that the directors are entitled to be paid for their services.
Broadly a deduction is allowed for superannuation contributions where the following apply:
• the contribution was made to a fund for the purpose of making a provision of superannuation benefits payable for another person;
• the fund is a complying superannuation fund; and
• the members are eligible employees.
The Tax Office considered whether the directors were employees of the company. A director is an employee where they are entitled to payment for the performance of their duties as a member of the executive body of the company.
The Tax Office concluded that if the company makes a determination to pay the directors for their duties, then they can be considered employees of the company. The company can then make superannuation contributions on behalf of the directors. The fact that the company was in the business of passive investment does not change the outcome.

GST on Packaged Supplies

In a recent decision, the Administrative Appeals Tribunal (AAT) decided in favour of the Commissioner of Taxation concerning the supply of promotional items given away with the sale of GST-free food products.
In this case, the entity was a food supplier that supplied products including items such as instant coffee.
Occasionally, these food products were supplied with non-food products such as alarm clocks, radios and cricket balls. Both the items were branded with the entity’s name, packaged together and sold as one item for the same price as that for which the food would normally sell at.
The AAT took the view that the promotional items were not integral, ancillary or incidental to the main food item, and therefore the supply as a whole was a mixed supply (supply of separate items together).
As a consequence, this mixed supply gave rise to the question of whether the promotional item was a supply for consideration, in which case GST would apply.
Based on the facts, the AAT held that the promotional item was supplied for consideration even though the item was included in the package and marketed as being ‘free’. The AAT adopted the view that the food product included in the package was actually sold at a discount. In reaching this view, the AAT noted that ‘the promotional items could only be acquired in packages with the food products. The taxpayer would not supply them free of charge alone.’
Although the AAT decided that consideration was provided for the supply of the packaged products as a whole, it did not decide conclusively the basis on which GST should be calculated. It concluded that the GST relating to the promotional item should be apportioned as food products represent a GST-free supply.

Commissioner’s Discretion

The Tax Office recently released a practice statement that outlines how the Commissioner will exercise his discretion in providing relief to taxpayers where they have made an inadvertent omission or honest mistake in dealing with their shareholder loans.
The amnesty will apply for the 2001 to 2006 income years, provided that the taxpayer takes corrective action by 30 June 2008.
Under the shareholder loan rules, loans or payments by private companies to shareholders or their associates may be deemed to be dividends paid by the company. The shareholder loan rules also provide the Commissioner with the discretion to disregard a deemed dividend.
The statement outlines the circumstances in which the Commissioner may exercise his discretion, including where:
• it is clear in the Commissioner’s view that the taxpayer has made a genuine mistake or inadvertent omission;
• the taxpayer has sought to take corrective action prior to 30 June 2008;
• the deemed dividend from the shareholder loan occurred between 30 June 2001 and 30 June 2006; and
• the taxpayer’s income tax return lodgements are up-to-date.
If the above conditions are satisfied, the taxpayer need not apply in writing seeking the Commissioner’s discretion in relation to their shareholder loan. The discretion can automatically apply on a self-assessment basis.

STS Taxpayers

The Tax Office has released two publications relating to accessing the simplified tax system, specifically relating to calculating STS group turnover and the 25% entrepreneur’s tax offset.
The publications indicate that this will be the last year in which the STS will operate in its current format. New changes have been introduced making further amendments for small business taxpayers.

 

August 2007 **********************************************

 

Main Residence Exemption — Burden of Proof

In a recent decision, the Administrative Appeals Tribunal (AAT) held that a taxpayer failed to prove that a property they had constructed and used was their main residence and therefore eligible to concessional tax treatment on sale.
Broadly, any capital gain or loss from a dwelling is ignored for capital gains tax (CGT) purposes where it can be proven that the dwelling was the taxpayer’s main residence throughout the ownership period, and was not used for an income producing purpose. If the property was used for an income producing purpose during part of that period, only part of the capital gain or loss is ignored.
The taxpayer purchased a vacant block of land intending to build a house. After the house was built, the taxpayer sold the land. Three months prior to the settlement, the taxpayer moved into the house, claiming it as their residence. Upon selling the property, the taxpayer did not disclose the capital gain, relying on the main residence exemption. The Commissioner subsequently assessed the taxpayer on the net capital gain contending that the taxpayer failed to prove that the property constructed was actually their main residence.
The Commissioner indicated that while there is no set definition of ‘main residence’ some factors lend themselves to provide guidance with respect to the definition including:
• the length of time the taxpayer has lived at the residence;
• the connection of utility services to the residence;
• the address to which mail is directed; and
• the taxpayer’s address on the electoral role.
The AAT agreed with the Commissioner indicating that the taxpayer’s failed to prove that the property was their main residence.

Shareholder Loan Rules

The Tax Office recently released a Taxpayer Alert, which is intended to be an ‘early warning’ of high risk tax planning issues. This alert concerns the avoidance of the shareholder loan (deemed dividend) rules through corporate limited partnership arrangements.
A corporate limited partnership (CLP) is an association of persons carrying on business as partners or in receipt of ordinary or statutory income, where the liability of at least one partner is limited. For taxation purposes, a CLP is treated like a company.
Broadly, the shareholder loan rules apply to payments, advances or loans made by a private company to a shareholder or associate, unless certain exclusions apply.
The Tax Office’s alert applies to arrangements where a CLP is interposed or placed between a company and its shareholder or associate. The CLP is interposed to prevent any loans being made directly from the company to the shareholder or associate.
 TIP: Taxpayers should be aware of the Tax Office is closely examining such arrangements to determine if they contravene the shareholder loan rules and whether other anti-avoidance provisions may apply.

Work Deductions Disallowed

In a recent decision, the AAT disallowed part of a taxpayer’s work expense deductions incurred during the taxpayer’s time working as a fitness instructor. Broadly, a deduction for workplace expenses is allowed where the expenditure is incurred in carrying out the duties of the taxpayer’s employment. In most instances, some degree of substantiation is required for certain expenses such as meals, accommodation, subscriptions and the like.
The taxpayer contended that as a fitness instructor it was part of her role to have a constant change of clothes due to the rigorous nature of the activity and to maintain her personal presentation. The taxpayer contended that as an employee of a prestigious resort, it was her responsibility to always be well groomed and presentable as part of building client loyalty and goodwill.
The claims were originally accepted, however, the taxpayer became the subject of an audit and as a result, the Commissioner amended the taxpayer’s assessments disallowing all of the taxpayer’s work expense deductions.
The AAT found that in many instances the taxpayer had over-exaggerated her work-related expenses and agreed with the Commissioner in disallowing the majority of the deductions. The issue was remitted to the Commissioner to make the appropriate amended assessments.
 TIP: The Tax Office recently announced that it will once again be on the lookout for over-claiming of work deductions in the 2007 income tax year, and will be focussing on several occupations including:
• tourism and travel consultants;
• fitness and sporting industry employees;
• construction and trades people;
• guards and security employees; and
• a continuing focus on mining employees.

Bona Fide Redundancy

The Tax Office has released a decision impact statement, in relation to a recent AAT decision regarding whether or not a payment was made in consequence of bona fide redundancy where the terminated employee was both an employee and a director of the company.
In that case, the Commissioner amended the taxpayer’s assessment to include the amount of the redundancy payment as assessable income, contending that because the taxpayer was a director of the company, the payment was not in consequence of termination of employment. The AAT disagreed with the Commissioner in this instance, finding that the payment was made as a result of the genuine closure of the business.
Following on from this decision, the Commissioner, in his decision impact statement, has indicated that the decision is limited to the facts of the particular case. In circumstances where the factual scenario is essentially the same, the Commissioner will seek to apply the decision.
The decision impact statement also indicates that where an employee consents to terminating their own employment, it can still potentially be a situation of bona fide redundancy in appropriate circumstances.

Failure to Lodge BAS on Time — Penalties Upheld

In a recent decision, the AAT held that prolonged and knowing non-compliance with the obligation to lodge Business Activity Statements (BASs) on time justifies the application of administrative penalties, unless the taxpayer can prove otherwise.
The taxpayer had registered for GST from 1 July 2000 and was due to account for GST on a quarterly basis, with his first BAS, for the September 2000 quarter due for lodgment by 28 October 2000. However, the taxpayer did not lodge any BASs until December 2004.
In this case, it was held that the reasons for non-compliance provided by the taxpayer were insufficient and, accordingly, the AAT upheld the Commissioner’s decision to impose penalties of $10,450 for prolonged late lodgment of BASs.
The result of this case serves to provide taxpayers with guidance concerning the application of late lodgement penalties.

Tax Compliance Tools

The Tax Office recently released three web-based decision tools to assist employers in understanding how to meet their tax and superannuation obligations. These tools include:
• an employee/contractor decision tool;
• a superannuation guarantee eligibility decision tool; and
• a superannuation guarantee contributions calculator.
Benchmark Interest Rate
The Tax Office recently released the benchmark interest rate for the 2007/08 income year for the purposes of the shareholder loan rules. The new rate is 8.05%, which is up from 7.55% for the prior year.

 

 

 

July 2007 ***************************************************

 

Restructuring Jointly Held Shares

In a recent decision, the Administrative Appeals Tribunal (AAT) confirmed that where assets held in joint names are divided between the owners, CGT will apply.
In this case, two brothers owned a parcel of shares jointly and undertook a transfer so that each could own half of the shares in their own right. The taxpayers submitted that CGT would not apply to the restructure of the jointly held shares as it was always intended that the shares were held equally.
The Commissioner argued that CGT did apply on the basis that the share register showed that each share was held jointly, and therefore a part disposal of each share was required to divide the shares between the brothers.
The AAT agreed with the Commissioner that CGT applied to the restructure, concluding that there was not sufficient evidence to suggest that the shares were not jointly held or not intended to be jointly held. Furthermore, the AAT found that no CGT rollover relief was available in relation to the restructure.
TIP: If assets held in joint names are transferred, the CGT consequences should always be considered.

Redundancy Payment to Director

In a recent test case, the AAT has held that a payment made on termination of an employee, who was also a director of the company, was a bona fide redundancy payment in the circumstances of the case.
An eligible termination payment (ETP) is any payment made in respect of the termination of employment. Excluded from an ETP is a bona fide redundancy amount which is tax-free. This amount is calculated based on a prescribed formula.
A bona fide redundancy occurs where an employer no longer requires an employee to carry on work of a particular kind and the termination is not in relation to the employee’s performance.
The taxpayer in this case was a director and employee of a company, who contracted to install hardware on behalf of another company. This was the only operation of the business.
The contracting company terminated this contract and as a result the taxpayer’s company was required to close its operations.
The taxpayer was paid out her salary and an amount of a redundancy payment.
The Commissioner amended the taxpayer’s assessment to include the amount of the redundancy payment as assessable income, contending that because the taxpayer was a director of the company, the payment was not in consequence of termination of employment.
The AAT disagreed with the Commissioner, finding that the payment was a bona fide redundancy payment paid as a result of the closure of the taxpayer’s business.
TIP: The facts and circumstances of each case will determine whether or not a taxpayer has received a bona fide redundancy.

Black Hole Expenditure

The Tax Office recently released a series of interpretive decisions which consider the principles surrounding the availability of deductions for certain ‘black hole’ expenditure. Broadly, a taxpayer is entitled to a deduction over five income years for certain black hole expenditure, subject to limitations and exclusions. For example, expenditure that forms part of the cost of a depreciating asset or a CGT asset is excluded.
The taxpayer conducted a bus charter service, which involved acquiring buses. The taxpayer sought to purchase a bus, and in doing so incurred expenditure on airfares and tyres. Upon inspection of the bus, the taxpayer decided not to purchase it, and abandoned the tyres it had already purchased. Consequently, the taxpayer sought to claim a deduction as black hole expenditure for these costs.
The Tax Office held that:
• the costs incurred in relation to purchasing buses were an integral part of the taxpayer’s bus charter business;
• the airfares and tyres were not excluded from black hole expenditure deductions under the depreciating asset exclusion on the basis that the taxpayer never held the bus and therefore depreciation would not be available;
• the airfares were not excluded from black hole expenditure deductions under the CGT asset exclusion as the taxpayer did not purchase the bus; and
• the tyres were excluded from black hole expenditure under the CGT asset exclusion as the tyres themselves constituted a CGT asset.
In conclusion, the Tax Office found that the taxpayer was only entitled to a black hole expend-
iture deduction for the airfares.
TIP: Eligible black hole expenditure will be deductible over five years where it is related to the activities of the business.

Entitlement to an ABN

The AAT recently set aside a decision by the Australian Business Register to retrospectively cancel an entity’s Australian Business Number (ABN).
In this case, the Registrar had cancelled the entity’s ABN for the period from July 2000 to 2004 on the basis that the entity was not carrying on an enterprise as there was no reasonable expectation of profit or gain. As a result of cancelling the ABN, the entity would not have been entitled to approximately $25,000 worth of GST input tax credits.
The AAT set aside the decision of the Registrar and substituted a decision cancelling the ABN from 31 December 2004.
The AAT held, based on the facts, that the applicant was carrying on an enterprise as shown by the sales figures on the Business Activity Statement (BAS). The AAT found that the correct time for determining whether an individual has a reasonable expectation of profit or gain is at the time that the business commences and not with hindsight when a business is subsequently unprofitable.

Superannuation Rates and Thresholds

The Tax Office recently released an updated guide providing the key rates and thresholds in relation to superannuation contributions and benefits that apply from 1 July 2007.
Some of the thresholds rates are included below:
• The concessional superannuation contributions cap for the 2007/08 year will be $50,000 (these include contributions made under a salary sacrifice arrangement).
• Between 1 July 2007 and 30 June 2012 a transitional concessions cap will apply to persons aged 50 and over. For persons aged 50 or over, the annual cap will be $100,000.
• The employment termination payment (ETP) cap for concessional tax treatment for the 2007/08 income year will be $140,000. Any amount paid in excess of this ETP cap amount will be taxed at the top marginal rate.
TIP: Superannuation is a key tax and retirement planning opportunity, and taxpayers should consider opportunities based on the thresholds.

Other Key Issues

• The amnesty for lodging Family Trust Elections and Interposed Entity Elections for the 2004 and earlier income years expired on 31 May 2007. All requests received after this date will be assessed on a case by case basis.
• The Capital Gains Tax improvement threshold for the 2007/08 income year is $116,337 which is an increase of $3,825 from the previous year. An improvement to an existing pre-CGT asset is considered to be a separate CGT asset where the value of the improvement exceeds this threshold amount.
• The Tax Office has recently released a fact sheet relating to the application and calculation of the shortfall interest charge (SIC). Generally, where the Tax Office identifies a tax shortfall, SIC will apply from the date of issue of the notice of assessment. In some circumstances, the SIC may be remitted on written application to the Tax Office.

 

 

 

June 2007 Federal Budget ***************************

 

Personal Income Tax Cuts Improve Australia’s Competitiveness

Australian taxpayers will share in tax cuts worth $31.5 billion over the next four years.
The 30% threshold will increase from $25,001 to $30,001 on 1 July 2007.
From 1 July 2008, the 40% threshold will increase from $75,001 to $80,001 and the top marginal rate (45%) threshold will increase from $150,001 to $180,001.
The tax rates for the 2007 to 2009 years will now be as follows:

2006/07 Current
$ Income	Rate
6,001–25,000	15%
25,001–75,000	30%
75,001–150,000	40%
150,001+	45%

 

2007/08 From 1 July 2007
$ Income	Rate
6,001–30,000	15%
30,001–75,000	30%
75,001–150,000	40%
150,001+	45%

 

2008/09 From 1 July 2008
$ Income	Rate
6,001–30,000	15%
30,001–80,000	30%
80,001–180,000	40%
180,001+	45%

 

Medicare Levy

From 1 July 2006, the Medicare levy low income thresholds have increased to $16,740 for singles and $28,247 for families.

Dependent Spouse Rebate

The dependent spouse rebate will increase from $1,655 to $2,100 from 1 July 2007.

Simpler Tax for Small Business

It will now be easier for small businesses to meet their tax obligations as follows:

• Businesses with turnover of less than $75,000 will no longer be required to register for GST.

• The GST registration threshold for non profit bodies will be increased to $150,000.

• Purchases by businesses of less than $75 will no longer require an approved tax invoice to claim an input tax credit.

• The eligibility criteria for a variety of small business concessions covering GST, CGT, the Simplified Tax System, FBT and PAYG will be streamlined so they all apply to businesses with a turnover of less than $2 million.

Superannuation Reforms

Broader superannuation CGT roll-over relief will apply in the event of marriage breakdowns to encompass asset transfers from a self managed super fund to another complying fund (effective 1 July 2007).
One-off doubling of government superannuation co-contributions will apply for eligible contributions made in 2005/06.

Tax Consolidation — Further Improvements

The Government has announced that it will improve the income tax laws relating to consolidated groups to ensure that the rules operate as intended and to reduce compliance costs. Whilst no detail was provided, the changes will impact the tax cost setting rules, the CGT provisions and the uniform capital allowance rules.
The measures will generally take effect from the commencement of the consolidation regime (1 July 2002), although some measures will have a more recent commencement date.
The Government also announced specific measures, to take effect from 1 July 2007, to remove taxation impediments to the restructuring of conglomerates containing authorised deposit taking institutions (ADIs). These apply where a non-operating holding company is appointed as the head company of the consolidated group.

Simplification of Income Tax Returns

Commencing 1 July 2007, the Tax Office will allow taxpayers to access an online pre-filled income tax return.
The prepared returns will automatically include a taxpayer’s salary, wages, allowances, dividends, interest, distributions from managed funds, government payments, Medicare out-of-pocket expenses, health insurance information and HECS/HELP details.
If the taxpayer is satisfied with the pre-filled return, they will be able to lodge their return immediately online. If taxpayers have additional information to provide, such as income from investments, this can be added to the return.

 

 

 

June 2007 *******************************************

 

Loss Not Deductible on Sale of Land

In a recent decision, the Federal Court upheld a previous ruling by the Administrative Appeals Tribunal (AAT), finding that a loss arising on the sale of land purchased as a capital asset was not deductible.
The taxpayer, a shelf company, purchased a block of land from a non-resident businessman who had previously obtained the necessary approvals to build a dormitory for rental to overseas students. Shortly after acquiring the land, the taxpayer entered into a lease of the dormitory with a third party. Land development opportunities were only later considered as a possible option.
The businessman then became the beneficial owner of the taxpayer company, with the shares held on trust by his Australian solicitor.
The taxpayer eventually sold the land at a significant loss and claimed a capital loss in its tax return. The taxpayer, upon receiving further advice, obtained an amendment to the tax return, treating the sale of the land as a sale of a revenue asset, for the purpose of claiming an ordinary tax loss.
Both Courts found that the loss on the sale of the land was not deductible as a revenue loss, because the sale was clearly of a capital asset. In coming to its conclusion, the Federal Court indicated that a profit making intention or scheme cannot just be a subsequent consideration, but must be a ‘not insignificant aspect’ of the taxpayer’s activities.
The Federal Court also upheld the AAT’s penalty decision. The taxpayer has appealed this decision to the Full Federal Court.

Timing of Asset Depreciation

In a recent Taxation Determination, the Tax Office provided guidance in relation to when a depreciating asset is considered to begin its decline in value.
The determination indicates that a depreciable asset does not begin to decline in value until it is installed and ready for use. Merely holding a depreciating asset in anticipation of using it in carrying on a business is not sufficient to constitute use of the asset and hence the business cannot commence to depreciate the asset.

Change in Extent of Creditable Purpose

In a recent GST Ruling GSTR 2006/4, the Commissioner outlined his position on the meaning of ‘creditable purpose’ and ‘extent of creditable purpose’ in the context of claiming the correct amount of input tax credits. The ruling also provides further guidance regarding adjustments where there is a later change in extent of creditable purpose.
Broadly, if a taxpayer is registered or required to be registered for GST, it is liable for GST on taxable supplies it makes. The taxpayer is also entitled to input tax credits for creditable acquisitions made in carrying on its business.
Input tax credits can only be claimed for acquisitions or importations which are creditable. An acquisition or importation is undertaken for a creditable purpose to the extent that it is required in carrying on an enterprise and is not of a private nature. The ruling provides examples where acquisitions and importations are only partly creditable. Under these circumstances, the taxpayer is only entitled to an input tax credit to the extent of the creditable purpose.

Small Business CGT Changes

Readers will remember from our 2006 Federal Budget edition, that the Government was aiming to pass a raft of changes to the small business capital gains tax concessions making it easier for taxpayers to gain access to them.
These amendments received Royal Assent on 12 April 2007, and were largely unchanged from when they were first reported.
Approximately 32 amendments to the legislation have been made, which are all designed to improve accessibility to the concessions and reduce the compliance burden for small business taxpayers.
The concessions allow small business taxpayers crystallising a gain on or after 21 September 1999 to discount that capital gain by 50%, provided they satisfy the relevant conditions and the asset has been held for longer than 12 months.
The amendments, which will apply retrospectively from 1 July 2006, affect the entry criteria to access to the concessions.
The ‘controlling individual’ (50% ownership) test has been replaced with a ‘significant individual’ (20% ownership) test. This test includes an interest in the voting power, and dividends and capital distributions of the entity. Subsequently this test provides more stakeholders in the business the ability to access the concessions.
The maximum net asset value test totalling $5 million now includes the negative asset values of the taxpayer (and a connected entity). This means that where a taxpayer has a company whose liabilities are greater than its assets, this negative value can be included as part of the taxpayer’s net asset value calculation.
A subsequent amendment to the legislation, announced in a recent treasurer’s press release, should also see the maximum net asset value test threshold increase to $6 million from 1 July 2007.

Loan Repayments Held to be Fringe Benefits

In a recent decision the Federal Court held that loan repayments made by a company to its employees were in respect of their employment and were subject to fringe benefits tax (FBT).
The taxpayer company was in the business of purchasing race horses and forming syndicated partnerships. It was owned and managed by, and employed, a husband and wife. As a small business, working capital injections were required from time to time, so the two owners made loans to the company.
Personal expenses of the two owners were subsequently reimbursed by the company and this was treated as a repayment of the loans.
The Commissioner assessed those loan repayments as liable to fringe benefits tax. Broadly, a fringe benefit is a right, privilege, service or facility which is conferred to an employee, or an associate of an employee which is in respect of the employee’s employment.
The Federal Court agreed with the Commissioner’s finding that the loan repayments were in respect of their employment, as the company had no other employees and would not be able to operate without their work as employees. In addition, the release of the debts owed to the owners was regarded as a release of their own personal obligations including a mortgage and school fees.
The taxpayer has appealed this decision to the Full Federal Court.

2007 Motor Vehicle Claims

The following table provides the updated rates for motor vehicle expense claims on a per kilometre basis for the 2006/07 income year.

Type of car	Engine capacity	2005/06 rate per km (cents)	2006/07 rate per km (cents)
Small car	0 – 1,600cc	55	58
Medium car	1,601 – 2,600cc	66	69
Large car	2,601+cc	67	70

 

 

 

May 2007 ********************************

 

Year-end Tax Planning

As another income year comes to a close on 30 June 2007, it is important that taxpayers take the time to focus on tax planning and the tax issues that affect their business.
Some of the key tax issues to consider are outlined below.

Deferring income

When considering the deferral of income, note the following points:
• As directed by the Arthur Murray principle, taxpayers may be able to defer recognition of income received before year-end for services not yet performed.
• Most taxpayers will not be assessable on interest, dividends or rent until it is received (unless otherwise paid or credited on the taxpayer’s behalf). Therefore, such income may be deferred.
• In general, income may be deferred until the 2007/08 year, significantly delaying tax payments. For example, where taxpayers on a cash/receipts basis of income bill clients on 30 June, assessable income will not arise until after year-end. Conversely, taxpayers on an accruals method may choose to perform services after year-end.
• Royalties and insurance proceeds are typically assessable on a cash basis.
• Work-in-progress of professional practices will not be assessable until there is a recoverable debt (e.g. a bill has been issued).

Maximising deductions

Some initiatives to consider to accelerate deductions are:
• Review debtors and write off bad debts before year-end.
• Realise foreign exchange losses and defer the realisation of gains.
• Bring forward the outlay for deductible expenses.
• Value stock at a lower replacement value or market value, where appropriate.
• Ensure that audit fees are incurred before year-end, based on Taxation Ruling IT 2625.
• Where depreciable assets have been installed for use but are no longer expected to be used, consider ‘mothballing’ the assets to trigger a balancing adjustment event.

Superannuation

• Ensure that employers pay all superannuation contributions by year-end to maximise deductions and avoid potential exposure to the non-deductible superannuation surcharge.
• Consider using the superannuation contribution window, created by the recent changes to the superannuation legislation, to maximise tax effective superannuation contributions in the current year.
• Ensure awareness of reforms set out in the recent changes to the superannuation legislation effective from 1 July 2007.

Blackhole expenditure

• Review expenditure to ensure that any deductible ‘blackhole’ expenditure is identified.
• The types of expenditure to consider include: expenditure on a business plan, the establishment of business premises, research into likely markets or profitability of a business, capital investment in assets of the business, and liquidation and deregistration costs.

Capital Gains Tax

Some strategies to minimise CGT are:
• Utilise the CGT small business and retirement concessions.
• Consider the availability of rollover relief for disposals to related parties.
• Match gains and losses, where possible, to avoid carrying forward a capital loss.

• Defer a disposal to ensure the asset has been held for at least 12 months. This will potentially allow individuals and trusts to benefit from the 50% CGT discount.
• Review the cost base of assets to ensure all expenditure available under the expanded definition is included. Such expenditure includes, for example, certain selling costs, capital costs of ownership, and expenditure to preserve, move or install assets.
• Consider whether non-deductible costs may be included in an asset’s cost base including, for example, holding costs such as interest that are non-deductible.
• Consider whether it is most beneficial to utilise the 50% discount, where available, or frozen indexation.
• Defer a disposal to the subsequent income year where a gain is anticipated. Consider bringing forward a loss transaction if there are gains to offset.

Bonuses

Taxpayers should ensure that where a bonus has not been paid at year-end, they are able to establish a clear binding commitment to the expense at the time. The key indicators of a definitive commitment are:
• the bonus entitlement is included in the contracts of employment; and
• a formula is in place which is not subject to management’s discretion.
Tax consolidation
• Consider whether an election to form a consolidated group should be made for tax purposes.
• If ACA is to be used, or if there are losses, consider whether valuations should be obtained as part of the consolidation process.
• Review the potential tax treatment of losses within company groups. In particular, consider whether tax losses should be best applied within a consolidated group (subject to available fractions) or whether the group should remain unconsolidated.
• If a loss group consolidates, consider the potential impact of capital injections into the group, which may reduce access to losses.

Trust distributions

• Make sure a trustee resolves to distribute the net income of the trust before 30 June 2007, or by 31 August 2007 (relying on Tax Office administrative concessions).
• Remember that year-end trust distributions and income injections may affect a trust’s ability to recoup prior year tax losses and bad debt deductions.
• Where the trust has derived capital gains, consider the Tax Office’s Practice Statement in relation to the taxation of beneficiaries and the trustee on the trust income and capital and the different potential approaches available.

Family trust elections

• Consider whether a family trust election should be made because of losses or bad debts in trusts.
• Ensure optimum utilisation of franking credits and consider making a family trust election where a trust holds shares acquired post-31 December 1997.
• Make sure no distributions are made outside the family group to avoid any potential liability for family trust distributions tax.
• Where a company is owned by discretionary trusts, there may be a need for family trust elections at the trust level if the company has losses. Elections may also be required to enable utilisation of franking credits as noted above.

Simplified imputation

• Ensure all dividends paid within a franking period have been franked to the same extent.
• Ensure that there are adequate franking credits.
• Ensure a company paying a franked dividend has issued a distribution statement in the approved form.

Other key issues

Other important matters include the following:
• Consider the effective lives of depreciable assets using the Tax Office’s updated Taxation Ruling TR 2006/15.
• Where individuals incur losses from business activities, the non-commercial loss rules should be considered because, under the rules, such losses may not be eligible for offset against other assessable income during the year.
• Where a private company provides loans to shareholders, a careful review of the loan arrangement must be undertaken, as certain rules may deem the loan to be an unfranked dividend. It may be necessary to ensure appropriate loan agreements are in place and repayments are made.
• Review any similar loans by trusts where a corporate beneficiary has an unpaid present entitlement to trust income. These loans can also result in deemed dividends.
• Where an individual applies personal efforts and skill in performing services to third parties through an interposed entity (e.g. a company), the personal services income rules may deem the individual to be assessable on the income generated. Careful consideration of such arrangements should be undertaken to avoid the application of the rules.

 

 

 

April 2007 ****************************************

 

CGT and Forward Purchase Agreements

Overturning an earlier decision of the Administrative Appeals Tribunal (AAT), the Federal Court has found that an arrangement involving a forward purchase agreement (FPA) for the sale of shares did not give rise to a capital gain in the hands of the taxpayer.
The taxpayer purchased shares in 1993 and sought to sell a large portion of those shares in 1996 by way of an FPA. The taxpayer was to receive $3.53 per share in 1996 and fully franked dividends for the next four years. The taxpayer granted a warrant over the shares, obliging the holder to buy or sell shares at the contract date, but retained beneficial ownership over the shares.
By entering into the FPA, the taxpayer potentially limited the consideration for CGT and derived dividends over the next four years that would be sheltered from tax by franking credits.
The Commissioner contended that this right to retain ownership for four years had the characteristics of ‘property’ and hence the capital gain should be included in the taxpayer’s assessable income representing the value of the rights to retain ownership and benefit from the dividend flows until completion.
The Commissioner did not accept that consideration for the shares could simply be an amount set by the FPA and sought to assess the taxpayer on what he deemed to be additional ‘non-cash consider-ation’. The Commissioner viewed the arrangement as conferring on the taxpayer a contractual right, as a result of retaining beneficial ownership of the shares over the period of the agreement.
The Court disagreed with the Commissioner’s position, and found that the taxpayer’s right to retain beneficial ownership of the shares did not constitute property and the right to the dividend stream was an asset for capital gains tax purposes.

Remission of Penalties

The Tax Office has recently released Practice Statement Law Administration PS LA 2007/3, which relates to the remission of penalties. The practice statement specifically covers:
• the failure to issue a tax invoice or adjustment note as required by the GST legislation; and
• an entity and its agent both issuing separate tax invoices or separate adjustment notes contrary to the requirements of the GST legislation.
The practice statement is useful in providing guidance to small and medium sized businesses or partnerships with limited systems for the generation of tax invoices and adjustment notes.
The practice statement only deals with the administrative penalty regime and does not cover the remission of the general interest charge (GIC).

Work-related Expense Errors

The Tax Office has sent out 226,000 letters to taxpayers in respect of incorrect claims for work-related expenses in their 2005/06 tax returns.
Common errors anticipated for 2007 include:
• self education expense claims where there was an insufficient connection between the work activities and the education expense to warrant a deduction;
• car expenses using the cents per kilometre method, where the taxpayer is unable to support the claimed expenses;
• incorrectly claiming the entire amount of an asset purchase rather than calculating the asset’s decline in value; and
• incorrect calculations regarding the taxpayer’s home office expenses.

Family Trust and Interposed Entity Elections

Under the trust loss rules, a taxpayer is subject to concessional treatment, making it easier to claim prior year losses, if they have made a Family Trust Election (FTE) or an Interposed Entity Election (IEE). Also, elections may be necessary to preserve franking credits flowing through the trusts.
Due to the complexity of the these rules and the potentially adverse consequences of failing to make the required elections, the Tax Office has allowed an extension to make retrospective elections as part of the 2004 income tax returns.
The Commissioner recently announced a further extension of time to make a one-off lodgement of an election up until 31 May 2007. This will allow taxpayers to retrospectively submit their FTEs and IEEs for 2004 and earlier income years. The procedures for lodging these extensions have been posted on the ATO website.

Settlement Payment Assessable

The Federal Court has found that a settlement payment made to a former accounting firm partner on his termination from the partnership was assessable income. This overturned a previous decision of the AAT.
Originally, the AAT had held that a large portion of the settlement payment was a non-assessable ‘un-dissected lump sum’ and therefore should not be included in the partner’s assessable income. The AAT did, however, find that the portion of the payment which represented timing differences should be assessable.
The Federal Court overturned this decision stating that the central issue was whether the settlement payment represented the taxpayer’s share of the net income of the partnership and not whether the amount represented ordinary income in the taxpayer’s hands.
The Court found that the AAT had erred in law and therefore remitted the issue back to the Tribunal for further consideration.

Share Buyback Arrangement

Overturning an earlier decision of the Full Federal Court, the High Court has found that the proceeds from the sale of sell-back rights granted by St George Bank were assessable as ordinary income.
In February 2001, St George Bank granted sell-back rights to its shareholders as part of an off-market share buyback. The sell-back right entitled the shareholder to sell back one of their shares to St George at a fixed price above the current market value of the shares.
The mechanics of the arrangement resulted in the taxpayer receiving and then disposing of her sell-back rights.
The High Court held (in a 4:1 majority decision) that whether a receipt is income depends upon its nature in the recipient’s hands and not the nature of the expenditure incurred by the other party.
The Court said that while the rights acquired by the taxpayer were a product of her shareholding, they were ‘severed’ from that shareholding, and accordingly, the market value of the sell-back rights was held to be ordinary income.
The Tax Office has identified that this case affects over 80,000 taxpayers and it will be contacting them to provide advice on the decision and what it means for them.

Changes to Small Business Taxation

In an attempt to standardise the eligibility criteria for small business tax concessions, the government recently released the Exposure Draft Tax Laws Amend-ment (Small Business) Bill 2007.
The current regulations require small business to undertake separate eligibility tests for tax concessions relating to CGT, GST, PAYG and FBT. The proposed Bill aims to simplify the system by defining a small business entity as one which has turnover of less than $2 million. Eligible entities would have access to the following concessions:
• simplified trading stock rules;
• simplified depreciation rules;
• amended assessment period limited to two years;
• immediate deductions for expenses which were previously required to be deducted on a pro-rata basis; and
• accounting for GST on a cash basis, enabling taxpayers to claim input tax credits when they actually pay for acquisitions.

 

The plasma display was invented at the University of Illinois at Urbana-Champaign by Donald L. Bitzer, H. Gene Slottow, and graduate student Robert Willson in 1964 for the PLATO Computer System. The original monochrome (usually orange or green, sometimes yellow) panels enjoyed a surge of popularity in the early 1970s because the displays were rugged and needed neither memory nor circuitry to refresh the images. A long period of sales decline followed in the late 1980s as semiconductor memory made CRT displays cheaper than plasma displays. Nonetheless, plasma's relatively large screen size and thin profile made the displays attractive for high-profile placement such as lobbies and stock exchanges.
In 1983, IBM introduced a 19-inch (483 mm) orange-on-black monochrome display (model 3290 'information panel') which was able to show four simultaneous IBM 3270 virtual machine (VM) terminal sessions. That factory was transferred in 1987 to startup company Plasmaco, which Dr. Larry F. Weber, one of Dr. Bitzer's students, founded with Stephen Globus, and James Kehoe, who was the IBM plant manager. In 1992, Fujitsu introduced the world's first 21-inch (533 mm) full-color display. It was a hybrid, based upon the plasma display created at the University of Illinois at Urbana-Champaign and NHK STRL, achieving superior brightness. In 1996, Matsushita Electrical Industries (Panasonic) purchased Plasmaco, its color AC technology, and its American factory. In 1997, Pioneer started selling the first plasma television to the public. Current plasma televisions are often seen around the home and are thinner and in greater sizes than their predecessors. Their thin size allows them to compete with other display technology such as projector screens.Screen sizes have increased since the 21-inch (533 mm) display in 1992. The largest plasma video display in the world was shown at the 2006 Consumer Electronics Show in Las Vegas, Nevada, U.S.A, a 103-inch (2.616 m) unit manufactured by Matsushita Electrical Industries (Panasonic).Until quite recently, the superior brightness, faster response time, greater color spectrum, and wider viewing angle of color plasma video displays, when compared with LCD televisions, made them one of the most popular forms of display for HDTV flat panel displays. For a long time it was widely believed that LCD technology was suited only to smaller sized televisions, and could not compete with plasma technology at larger sizes, particularly 40 inches and above.
However, since then, improvements in LCD technology have narrowed the technological gap. The lower weight, falling prices, higher available resolution, which is important for HDTV, and often lower electrical power consumption of LCDs make them competitive against plasma displays in the television set market. As of late 2006, analysts note that LCDs are overtaking plasmas, particularly in the important 40-inch (1.0 m) and above segment where plasma had previously enjoyed strong dominance a couple of years before.[1] Another industry trend is the consolidation of manufacturers of plasma displays, with around fifty brands available but only five manufacturers.The plasma display was invented at the University of Illinois at Urbana-Champaign by Donald L. Bitzer, H. Gene Slottow, and graduate student Robert Willson in 1964 for the PLATO Computer System. The original monochrome (usually orange or green, sometimes yellow) panels enjoyed a surge of popularity in the early 1970s because the displays were rugged and needed neither memory nor circuitry to refresh the images. A long period of sales decline followed in the late 1980s as semiconductor memory made CRT displays cheaper than plasma displays. Nonetheless, plasma's relatively large screen size and thin profile made the displays attractive for high-profile placement such as lobbies and stock exchanges.
In 1983, IBM introduced a 19-inch (483 mm) orange-on-black monochrome display (model 3290 'information panel') which was able to show four simultaneous IBM 3270 virtual machine (VM) terminal sessions. That factory was transferred in 1987 to startup company Plasmaco, which Dr. Larry F. Weber, one of Dr. Bitzer's students, founded with Stephen Globus, and James Kehoe, who was the IBM plant manager. In 1992, Fujitsu introduced the world's first 21-inch (533 mm) full-color display. It was a hybrid, based upon the plasma display created at the University of Illinois at Urbana-Champaign and NHK STRL, achieving superior brightness. In 1996, Matsushita Electrical Industries (Panasonic) purchased Plasmaco, its color AC technology, and its American factory. In 1997, Pioneer started selling the first plasma television to the public. Current plasma televisions are often seen around the home and are thinner and in greater sizes than their predecessors. Their thin size allows them to compete with other display technology such as projector screens.Screen sizes have increased since the 21-inch (533 mm) display in 1992. The largest plasma video display in the world was shown at the 2006 Consumer Electronics Show in Las Vegas, Nevada, U.S.A, a 103-inch (2.616 m) unit manufactured by Matsushita Electrical Industries (Panasonic).Until quite recently, the superior brightness, faster response time, greater color spectrum, and wider viewing angle of color plasma video displays, when compared with LCD televisions, made them one of the most popular forms of display for HDTV flat panel displays. For a long time it was widely believed that LCD technology was suited only to smaller sized televisions, and could not compete with plasma technology at larger sizes, particularly 40 inches and above.
However, since then, improvements in LCD technology have narrowed the technological gap. The lower weight, falling prices, higher available resolution, which is important for HDTV, and often lower electrical power consumption of LCDs make them competitive against plasma displays in the television set market. As of late 2006, analysts note that LCDs are overtaking plasmas, particularly in the important 40-inch (1.0 m) and above segment where plasma had previously enjoyed strong dominance a couple of years before.[1] Another industry trend is the consolidation of manufacturers of plasma displays, with around fifty brands available but only five manufacturers.
The plasma display was invented at the University of Illinois at Urbana-Champaign by Donald L. Bitzer, H. Gene Slottow, and graduate student Robert Willson in 1964 for the PLATO Computer System. The original monochrome (usually orange or green, sometimes yellow) panels enjoyed a surge of popularity in the early 1970s because the displays were rugged and needed neither memory nor circuitry to refresh the images. A long period of sales decline followed in the late 1980s as semiconductor memory made CRT displays cheaper than plasma displays. Nonetheless, plasma's relatively large screen size and thin profile made the displays attractive for high-profile placement such as lobbies and stock exchanges.
In 1983, IBM introduced a 19-inch (483 mm) orange-on-black monochrome display (model 3290 'information panel') which was able to show four simultaneous IBM 3270 virtual machine (VM) terminal sessions. That factory was transferred in 1987 to startup company Plasmaco, which Dr. Larry F. Weber, one of Dr. Bitzer's students, founded with Stephen Globus, and James Kehoe, who was the IBM plant manager. In 1992, Fujitsu introduced the world's first 21-inch (533 mm) full-color display. It was a hybrid, based upon the plasma display created at the University of Illinois at Urbana-Champaign and NHK STRL, achieving superior brightness. In 1996, Matsushita Electrical Industries (Panasonic) purchased Plasmaco, its color AC technology, and its American factory. In 1997, Pioneer started selling the first plasma television to the public. Current plasma televisions are often seen around the home and are thinner and in greater sizes than their predecessors. Their thin size allows them to compete with other display technology such as projector screens.Screen sizes have increased since the 21-inch (533 mm) display in 1992. The largest plasma video display in the world was shown at the 2006 Consumer Electronics Show in Las Vegas, Nevada, U.S.A, a 103-inch (2.616 m) unit manufactured by Matsushita Electrical Industries (Panasonic).Until quite recently, the superior brightness, faster response time, greater color spectrum, and wider viewing angle of color plasma video displays, when compared with LCD televisions, made them one of the most popular forms of display for HDTV flat panel displays. For a long time it was widely believed that LCD technology was suited only to smaller sized televisions, and could not compete with plasma technology at larger sizes, particularly 40 inches and above.
However, since then, improvements in LCD technology have narrowed the technological gap. The lower weight, falling prices, higher available resolution, which is important for HDTV, and often lower electrical power consumption of LCDs make them competitive against plasma displays in the television set market. As of late 2006, analysts note that LCDs are overtaking plasmas, particularly in the important 40-inch (1.0 m) and above segment where plasma had previously enjoyed strong dominance a couple of years before.[1] Another industry trend is the consolidation of manufacturers of plasma displays, with around fifty brands available but only five manufacturers.
The plasma display was invented at the University of Illinois at Urbana-Champaign by Donald L. Bitzer, H. Gene Slottow, and graduate student Robert Willson in 1964 for the PLATO Computer System. The original monochrome (usually orange or green, sometimes yellow) panels enjoyed a surge of popularity in the early 1970s because the displays were rugged and needed neither memory nor circuitry to refresh the images. A long period of sales decline followed in the late 1980s as semiconductor memory made CRT displays cheaper than plasma displays. Nonetheless, plasma's relatively large screen size and thin profile made the displays attractive for high-profile placement such as lobbies and stock exchanges.
In 1983, IBM introduced a 19-inch (483 mm) orange-on-black monochrome display (model 3290 'information panel') which was able to show four simultaneous IBM 3270 virtual machine (VM) terminal sessions. That factory was transferred in 1987 to startup company Plasmaco, which Dr. Larry F. Weber, one of Dr. Bitzer's students, founded with Stephen Globus, and James Kehoe, who was the IBM plant manager. In 1992, Fujitsu introduced the world's first 21-inch (533 mm) full-color display. It was a hybrid, based upon the plasma display created at the University of Illinois at Urbana-Champaign and NHK STRL, achieving superior brightness. In 1996, Matsushita Electrical Industries (Panasonic) purchased Plasmaco, its color AC technology, and its American factory. In 1997, Pioneer started selling the first plasma television to the public. Current plasma televisions are often seen around the home and are thinner and in greater sizes than their predecessors. Their thin size allows them to compete with other display technology such as projector screens.Screen sizes have increased since the 21-inch (533 mm) display in 1992. The largest plasma video display in the world was shown at the 2006 Consumer Electronics Show in Las Vegas, Nevada, U.S.A, a 103-inch (2.616 m) unit manufactured by Matsushita Electrical Industries (Panasonic).Until quite recently, the superior brightness, faster response time, greater color spectrum, and wider viewing angle of color plasma video displays, when compared with LCD televisions, made them one of the most popular forms of display for HDTV flat panel displays. For a long time it was widely believed that LCD technology was suited only to smaller sized televisions, and could not compete with plasma technology at larger sizes, particularly 40 inches and above.
However, since then, improvements in LCD technology have narrowed the technological gap. The lower weight, falling prices, higher available resolution, which is important for HDTV, and often lower electrical power consumption of LCDs make them competitive against plasma displays in the television set market. As of late 2006, analysts note that LCDs are overtaking plasmas, particularly in the important 40-inch (1.0 m) and above segment where plasma had previously enjoyed strong dominance a couple of years before.[1] Another industry trend is the consolidation of manufacturers of plasma displays, with around fifty brands available but only five manufacturers.
The plasma display was invented at the University of Illinois at Urbana-Champaign by Donald L. Bitzer, H. Gene Slottow, and graduate student Robert Willson in 1964 for the PLATO Computer System. The original monochrome (usually orange or green, sometimes yellow) panels enjoyed a surge of popularity in the early 1970s because the displays were rugged and needed neither memory nor circuitry to refresh the images. A long period of sales decline followed in the late 1980s as semiconductor memory made CRT displays cheaper than plasma displays. Nonetheless, plasma's relatively large screen size and thin profile made the displays attractive for high-profile placement such as lobbies and stock exchanges.
In 1983, IBM introduced a 19-inch (483 mm) orange-on-black monochrome display (model 3290 'information panel') which was able to show four simultaneous IBM 3270 virtual machine (VM) terminal sessions. That factory was transferred in 1987 to startup company Plasmaco, which Dr. Larry F. Weber, one of Dr. Bitzer's students, founded with Stephen Globus, and James Kehoe, who was the IBM plant manager. In 1992, Fujitsu introduced the world's first 21-inch (533 mm) full-color display. It was a hybrid, based upon the plasma display created at the University of Illinois at Urbana-Champaign and NHK STRL, achieving superior brightness. In 1996, Matsushita Electrical Industries (Panasonic) purchased Plasmaco, its color AC technology, and its American factory. In 1997, Pioneer started selling the first plasma television to the public. Current plasma televisions are often seen around the home and are thinner and in greater sizes than their predecessors. Their thin size allows them to compete with other display technology such as projector screens.Screen sizes have increased since the 21-inch (533 mm) display in 1992. The largest plasma video display in the world was shown at the 2006 Consumer Electronics Show in Las Vegas, Nevada, U.S.A, a 103-inch (2.616 m) unit manufactured by Matsushita Electrical Industries (Panasonic).Until quite recently, the superior brightness, faster response time, greater color spectrum, and wider viewing angle of color plasma video displays, when compared with LCD televisions, made them one of the most popular forms of display for HDTV flat panel displays. For a long time it was widely believed that LCD technology was suited only to smaller sized televisions, and could not compete with plasma technology at larger sizes, particularly 40 inches and above.
However, since then, improvements in LCD technology have narrowed the technological gap. The lower weight, falling prices, higher available resolution, which is important for HDTV, and often lower electrical power consumption of LCDs make them competitive against plasma displays in the television set market. As of late 2006, analysts note that LCDs are overtaking plasmas, particularly in the important 40-inch (1.0 m) and above segment where plasma had previously enjoyed strong dominance a couple of years before.[1] Another industry trend is the consolidation of manufacturers of plasma displays, with around fifty brands available but only five manufacturers.
The plasma display was invented at the University of Illinois at Urbana-Champaign by Donald L. Bitzer, H. Gene Slottow, and graduate student Robert Willson in 1964 for the PLATO Computer System. The original monochrome (usually orange or green, sometimes yellow) panels enjoyed a surge of popularity in the early 1970s because the displays were rugged and needed neither memory nor circuitry to refresh the images. A long period of sales decline followed in the late 1980s as semiconductor memory made CRT displays cheaper than plasma displays. Nonetheless, plasma's relatively large screen size and thin profile made the displays attractive for high-profile placement such as lobbies and stock exchanges.
In 1983, IBM introduced a 19-inch (483 mm) orange-on-black monochrome display (model 3290 'information panel') which was able to show four simultaneous IBM 3270 virtual machine (VM) terminal sessions. That factory was transferred in 1987 to startup company Plasmaco, which Dr. Larry F. Weber, one of Dr. Bitzer's students, founded with Stephen Globus, and James Kehoe, who was the IBM plant manager. In 1992, Fujitsu introduced the world's first 21-inch (533 mm) full-color display. It was a hybrid, based upon the plasma display created at the University of Illinois at Urbana-Champaign and NHK STRL, achieving superior brightness. In 1996, Matsushita Electrical Industries (Panasonic) purchased Plasmaco, its color AC technology, and its American factory. In 1997, Pioneer started selling the first plasma television to the public. Current plasma televisions are often seen around the home and are thinner and in greater sizes than their predecessors. Their thin size allows them to compete with other display technology such as projector screens.Screen sizes have increased since the 21-inch (533 mm) display in 1992. The largest plasma video display in the world was shown at the 2006 Consumer Electronics Show in Las Vegas, Nevada, U.S.A, a 103-inch (2.616 m) unit manufactured by Matsushita Electrical Industries (Panasonic).Until quite recently, the superior brightness, faster response time, greater color spectrum, and wider viewing angle of color plasma video displays, when compared with LCD televisions, made them one of the most popular forms of display for HDTV flat panel displays. For a long time it was widely believed that LCD technology was suited only to smaller sized televisions, and could not compete with plasma technology at larger sizes, particularly 40 inches and above.
However, since then, improvements in LCD technology have narrowed the technological gap. The lower weight, falling prices, higher available resolution, which is important for HDTV, and often lower electrical power consumption of LCDs make them competitive against plasma displays in the television set market. As of late 2006, analysts note that LCDs are overtaking plasmas, particularly in the important 40-inch (1.0 m) and above segment where plasma had previously enjoyed strong dominance a couple of years before.[1] Another industry trend is the consolidation of manufacturers of plasma displays, with around fifty brands available but only five manufacturers.
The plasma display was invented at the University of Illinois at Urbana-Champaign by Donald L. Bitzer, H. Gene Slottow, and graduate student Robert Willson in 1964 for the PLATO Computer System. The original monochrome (usually orange or green, sometimes yellow) panels enjoyed a surge of popularity in the early 1970s because the displays were rugged and needed neither memory nor circuitry to refresh the images. A long period of sales decline followed in the late 1980s as semiconductor memory made CRT displays cheaper than plasma displays. Nonetheless, plasma's relatively large screen size and thin profile made the displays attractive for high-profile placement such as lobbies and stock exchanges.
In 1983, IBM introduced a 19-inch (483 mm) orange-on-black monochrome display (model 3290 'information panel') which was able to show four simultaneous IBM 3270 virtual machine (VM) terminal sessions. That factory was transferred in 1987 to startup company Plasmaco, which Dr. Larry F. Weber, one of Dr. Bitzer's students, founded with Stephen Globus, and James Kehoe, who was the IBM plant manager. In 1992, Fujitsu introduced the world's first 21-inch (533 mm) full-color display. It was a hybrid, based upon the plasma display created at the University of Illinois at Urbana-Champaign and NHK STRL, achieving superior brightness. In 1996, Matsushita Electrical Industries (Panasonic) purchased Plasmaco, its color AC technology, and its American factory. In 1997, Pioneer started selling the first plasma television to the public. Current plasma televisions are often seen around the home and are thinner and in greater sizes than their predecessors. Their thin size allows them to compete with other display technology such as projector screens.Screen sizes have increased since the 21-inch (533 mm) display in 1992. The largest plasma video display in the world was shown at the 2006 Consumer Electronics Show in Las Vegas, Nevada, U.S.A, a 103-inch (2.616 m) unit manufactured by Matsushita Electrical Industries (Panasonic).Until quite recently, the superior brightness, faster response time, greater color spectrum, and wider viewing angle of color plasma video displays, when compared with LCD televisions, made them one of the most popular forms of display for HDTV flat panel displays. For a long time it was widely believed that LCD technology was suited only to smaller sized televisions, and could not compete with plasma technology at larger sizes, particularly 40 inches and above.
However, since then, improvements in LCD technology have narrowed the technological gap. The lower weight, falling prices, higher available resolution, which is important for HDTV, and often lower electrical power consumption of LCDs make them competitive against plasma displays in the television set market. As of late 2006, analysts note that LCDs are overtaking plasmas, particularly in the important 40-inch (1.0 m) and above segment where plasma had previously enjoyed strong dominance a couple of years before.[1] Another industry trend is the consolidation of manufacturers of plasma displays, with around fifty brands available but only five manufacturers.