Standardisation of Tax Statement Format Executive Summary:

Currently all the managed fund companies have their own format of tax distribution statements. This inconsistency in reporting generates inefficiency in the system by introducing errors when figures are transcribed to produce summaries of income to be reported to the Australian Tax Office (ATO). The standardisation of tax distribution statement is important because the inefficiency is very costly to our society. In 2008, the initial conservative estimate of at least a total of $348 million per year could be returned to the public when the reporting format was standardised. With the reform in the superannuation industry, the Superannuation Guarantee rate will increase to 12% by 2019-20 (to be phased in) from the current 9%. The Budget has stated that process will start in 2013-14. Not counting the effect of inflation over the years, when the reform is in full effect; the resulted saving from the project would be at least $464 million per year. This proposal could generate savings in the economy that has the potential to stimulate consumption and investment without increase in government spending. At the same time, it would not create any bias in the decision of spending. It could certainly help boosting the retirement savings for all Australians. On the operational level, the uniform tax statement format could reduce the burden in compiling the financial data to report to the tax office for both of the investors and managed fund companies. With the advancement in technology, when electronic forms of tax statements are delivered to investors, it could further simplify the process by allowing data to be manipulated in the form of tables. Less paper would be required to print annual tax distribution statements. For those who do not have access to internet, hardcopies of instruction would continue to be provided by the ATO. The managed fund companies would save further in the cost of printing instruction to investors annually. The proposed uniform format has all the details to complete individual, trust, self-managed superannuation fund (SMSF), partnership and company tax returns. It would be suitable for a great majority of cases. Exceptions are when there are Australian franking credits from New Zealand companies and Listed Investment Companies (LIC) capital gains. Suggestions are made as to how those exceptional items are positioned in the uniform format to facilitate compliance (Appendix 1). Given that the government has adopted the 50% discount on interest income up to $1000 offered to individual, trust or managed investment fund effective from July 2011, the Total Distribution from Trust excluding Interest that will allow individual, trust and managed fund to take up the 50% discount on interest up to $1000. In the uniform format, the managed fund companies only need to differentiate the capital gains that are eligible for discount from those that are not. The application of discount is left to the accountants or knowledgeable investors to avoid mistakes. This simplifies the administration process and provides savings for the managed fund companies. Another feature that is unique about the proposed format is related to property fund. The accumulated tax free incomes and accumulated deferred incomes are to replace the current tax free incomes & tax deferred incomes. The adoption of these would simplify the capital

gains calculation for investors. The investors only need to account for the tax free or tax deferred incomes at the end when the last unit of the property fund is sold instead of accounting for them each time when units are disposed. All the investors need are the latest tax distribution statement and capital gain calculation sheet from the property fund to calculate the capital gains tax at disposal. The overall effect of this is the cost base or reduced cost base of the units would be slightly higher in the years when the accumulated deferred income and the accumulated tax free income are not used. Since investors tend not to provide all the distribution statements required for calculation, this could translate to more income for the tax office when the investors decided to dispose of all the remaining units in the property fund. Given that the deferred incomes and the tax free incomes only contribute to a small proportion of the cost base or reduced cost base, the relaxation of rule applied to managed fund companies would not create a loophole for tax avoidance. Evaluation is in place to assess the effectiveness of the Standardisation of Tax Statement Format at the end. The success of the project is evaluated by the percentage of companies being approached that have actually complied with the uniform format. Another area that required evaluation is the percentage of new companies formed during the year that have actually adopted the format. Follow-up is in place to assure all the companies that agreed to participate will generate the desired format.

List of Supporters for the Project

Moore Stephens McLean Delmo & Partners Condon Associates Mulqueen Griffin Rogers MB+M Business Solutions Butler Settineri Wearne & Co. McInnes, Graham & Gibbs

Appendix 1.

Proposed Uniform Format (Post Jul 2011)

Contact Details of the Investment Institution

Tax Statement Period:

Investor Number: XXXX Investor Details

Fund A Non-Primary Production Income Interest Other Income Unfranked Dividends Franked Dividends Share of Imputation Credits Total Distribution from Trust Total Distribution from Trust excluding Interest Management & Administration Expenses TFN/Withholding Tax Deducted Credit of Tax Paid by Trustee Capital Gains Not Eligible for Discount Capital Gains Eligible for Discount Total Capital Gains Foreign Source Income Australian Franking Credits from NZ Foreign Tax Credits LIC Capital Gain *Accumulated Tax Free Income *Accumulated Deferred Income

Fund B

Total

Items highlighted by * are used when the last units of the property fund are disposed during the year to calculate capital gain. At other time they are figures for reference purpose. Exceptional items are highlighted to indicate their proposed position on the uniform format.

Please Retain This Statement for Your Records

Standardisation of Tax Statement Format

Proposed by Faliana Lee PO Box 3037 Syndal, 3149 Victoria

Table of Content:
Executive Summary.3 Goal..4 Problems.4 How could the proposed uniform tax statement solve the problems?.....5 How to use the uniform tax statement to fill out the corresponding tax returns? Individual returns..7 Trust returns.. 8 Self managed superannuation fund returns..9 Partnership & company returns..10 Exceptions11 Resistance to Change11 Why introduce the uniform format now?....................................................12 Who support the idea?.................................................................................13 How much does it cost?...............................................................................13 Qualification of the administrator for the project......14 Financial Benefits Community14 Investment Institutions..15 Accounting Sector..15 Operational Benefits Community16 Investment Institutions..16 Accounting Sector..16 Environmental Benefits.17 Strategies to implement the change..17 Timeline.....19 References20 Appendices...20

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 2 of 27

Title: Standardisation of Tax Statement Format Executive Summary:

Currently all the managed fund companies have their own format of tax statements. This inconsistency in reporting generates inefficiency in the system by introducing errors when figures are transcribed to produce summaries of income to be reported to the Australian Tax Office (ATO). The standardisation of tax statement is important because the inefficiency is very costly to the society. At the time when the first proposal was written on a conservative estimate at least a total of $348 millions per year could be returned to the public when the reporting format was standardised. With the reform in the superannuation industry, the Superannuation Guarantee rate will increase to 12% by 2019-20 (to be phased in) from the current 9%. The Budget has stated that process will start in 2013-14. Not counting the effect of inflation over the years, when the reform is in full effect; the resulted saving from the project would be at least $464 millions per year. The annual saving generated from the project would be more than enough to fund the National Broadband Network (NBN) each year for the next ten years. That is accredited to be vital for Australia to remain competitive in the global market. Considered this proposal could generate saving in the economy that has the potential to stimulate consumption and investment without increase in government spending. At the same time, it would not create any bias in the decision of spending. It could certainly help boosting the retirement savings for all Australians. On the operational level, the uniform tax statement format could reduce the burden in compiling the financial data to report to the tax office for both of the investors and managed fund companies. With the advancement in technology, when electronic forms of tax statements are delivered to investors, it could further simplify the process by allowing data to be manipulated in form of tables. Less paper would be required to print annual tax distribution statements. To ease the traffic on ATOs websites, information on how to use the tax statement to fill out the individual tax return would be available to general public from the Chartered Accountants (CAs) and Certified Public Accountants (CPAs) website once the project was endorsed. For those who do not have access to internet, hardcopies of instruction would continue to be provided by the ATO. The managed fund companies would save further in the cost of printing instruction to investors annually. The proposed uniform format has all the details to complete individual, trust, self managed superannuation fund (SMSF), partnership and company tax returns. It would be suitable for a great majority of cases. Exceptions are when there are Australian franking credits from New Zealand companies and Listed Investment Companies (LIC) capital gains. Suggestions are made as to how those exceptional items are positioned in the uniform format to facilitate compliance (Appendix 1). Given that the government has adopted the 50% discount on interest income up to $1000 offered to individual, trust or managed investment fund effective from July 2011, there will be another version of the proposed distribution statement format with one change. The Total Distribution from Trust excluding Interest (Appendix 2) that will allow

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 3 of 27

individual, trust and managed fund to take up the 50% discount on interest up to $1000. Given that there is the uncertainty of when this proposal will be approved by the government. There are more managed fund companies today than that in 2008. There will not be a detail timeline as to which events are going to take place. Rather it is an approximate timeline from when the project is approved. This is a voluntary project. The administrator is seeking donation to cover the cost incurred in administration & travelling. In 2008 a minimum $26,130 must be received in order for the project to go ahead to cover 97 major managed fund companies (Appendix 5) in five different states. In 2010 with an approximate inflation of 7% over the period of two years, the estimated cost would be $27,959. A further $19,120 is required to cover an additional 112 managed fund companies on the list (Appendix 6). Assumed that there are 30 new managed fund companies in the market, and inflation at 7%, another $25,940 would be required. That meant a total of $53,900 would be required to finish the project. To hold the administrator accountable, a monthly report would be produced to notify sponsors of the progress. The administrator has completed Advanced Graduate Diploma in Taxation from UNSW and has years of experience in tax compliance as accountants in the field. She also has a degree in MBA; therefore she is capable to carry out the project to completion. Evaluation would be done to assess the effectiveness of the project at the end of each period. The success of the project is evaluated by the percentage of companies being approached that have actually complied with the uniform format. Another area that required evaluation is the percentage of new companies formed during the year that have actually adopted the format.

Goal:
The goal of the project is to standardise the tax statement so that the inefficiency within the current system could be removed. The major beneficiary is the investors because it reduces the time and cost to fulfil their tax obligations. Given that the majority of workers have not been putting aside enough funding for their retirement, this project would help boosting their retirement savings. The managed fund companies could reduce their cost in printing tax statements and annual instructions to help their clients to fill out their individual tax returns. This in turn could help the preservation of the environment by reducing the usage of paper. The adoption of the proposal would reduce the operational cost of the companies in determining the appropriate capital gains discounts applied to any given fund because that is no longer needed. Lastly the proposal could facilitate growth in the accounting sector by allowing their human resource to focus on building wealth for their clients.

Problems:
All the managed fund companies have their own tax statements. This inconsistent reporting caused confusions for the investors because many institutions try to reconcile the total income received to the income required to report to the tax office on the same statement. It would be better to produce two separate reports, one
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 4 of 27

summarise all the income received during the financial year and provide a percentage of return for the investors. Another one is a tax specific report organised in the same order as that of the actual tax return to facilitate tax compliance. This is the tax distribution statement being proposed here. The inconsistency in reporting generates inefficiency in the system by introducing errors when figures are transcribed to produce summaries of income to be reported to the tax office. Thus require the individuals who prepare the summaries to doublecheck all figures to avoid mistakes. It would lead to higher accounting fee charged to the clients due to the extra time spent on the cases. This is certainly not economic for the clients and not even beneficial for the accounting firms. If given a choice, accountants would prefer to lose a small portion of their income in exchange for time spent on building wealth for the clients because that is how they grow their business. The inefficiency of the system limits their growth potential and the clients stand to lose the most by not getting value for their money. The managed fund companies are not gaining anything in the process; the present system requires them to keep the status and nature of the investment in check to determine the appropriate capital gains discounts applied to any given fund. This is often problematic because wrong discounts could be applied to new investors and required re-issuing of tax statements. They also have to print instructions to advise their investors how to complete their annual tax returns. These often oversimplify the taxpayers position. Another way to improve the efficiency of the system is allow each party to do what they do best. The investment bodies should focus on investing in areas that generate the greatest gains for their clients and leave the responsibility of applying the appropriate discounts to the accountants and investors who are knowledgeable in that area.

How could the proposed uniform tax statement solve the problems?
The adoption of the Henry Tax Review did change part of the format of the proposed statement. Since the 50% discount on interest income up to $1000 offered to individual, trust or managed investment fund wont be in effect until July 2011, there will be two versions of the proposed distribution statement format depending on when the proposal could be endorsed. Given that the government has no intention to remove the benefits of dividend imputation and reduce the capital gains tax discount on investment. All the other items as in the original proposal remained the same. The proposed format is organised in the same order as that of the individual tax return to facilitate tax compliance. Prior Jul 2011, the original proposed format could be used (Appendix 1). From Jul 2011 to allow individual, trust or managed investment fund to take advantage of the 50% discount on interest up to $1000, one item is added namely the Total Distribution from Trust excluding Interest. The proposed format has all the details to complete individual, trust, self managed superannuation fund (SMSF), partnership and company returns. If required, it also contains the necessary information to complete the capital gains tax schedule. In the uniform format, the managed fund companies only need to differentiate the capital gains that are eligible
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 5 of 27

for discount from that are not. The application of discount is left to the accountants or knowledgeable investors to avoid mistakes. Another feature that is unique about the proposed format is that property funds are required to provide the accumulated tax free incomes and accumulated deferred incomes to the investors. This would overcome the problem of obtaining those figures from investors because they generally have no idea that they are required to keep all the statements from the time when the investment was first made. Given that it is not the responsibility of the managed fund companies to keep track of the unused proportion of those figures, to avoid double counting they are not to be used when there is a partial disposal during the year. They are used only when the last of the units in the property funds are sold. The overall effect of this is the cost base or reduced cost base of the units would be slightly higher in the years when the accumulated deferred income and the accumulated tax free income are not used. At the end all the accumulated tax free income and accumulated deferred income would be accounted for in the final disposal. Given that generally the deferred incomes and the tax free incomes only contribute to a small proportion of the cost base or reduced cost base, the relaxation of rule applied to managed fund companies would not create a loophole for tax avoidance. One of the advantages of adopting the uniform format is that the managed fund companies no longer need to print instructions for their investors to complete their individual tax returns. That responsibility would be transferred to the tax office. To avoid oversimplification of the taxpayers tax position, conditions are listed at the beginning of the proposed instruction as in Appendix 3 to advise them of the suitability of using the instruction for their tax position. The proposed instruction is not a finalised document; there is room to negotiate as to what should be included and excluded to facilitate compliance. The final document would be available to investors to download from the ATO website. To ease the load of the ATO website, it is important to gain the endorsement from Chartered Accountants (CA), and Certified Public Accountants (CPA) so they could help to put the instruction in their websites to reduce the traffic. To ensure the accuracy of the instruction, there should be a designated individual from ATO who check the information each year to ensure its accuracy preferably one who is responsible for the format of the individual return. Once the instruction is checked, the other organisations should be notified whether there is a new update in the instruction or not. If there is new update, a new instruction in electronic format should be sent to the other associations so that they could update their websites. This could significantly reduce the use of paper. Given that not all the individuals have access to the internet; the ATO should prepare some hardcopies to distribute to those who need them. The instruction should avoid making any reference to the year that is in effect, when there is no update in the year; there would not be any need to print new materials for distribution. This could reduce the use of paper. The proposed format would suit the great majority of investment funds for reporting purposes. However, there could be two exceptions to the use of the proposed format. One is that involved with Australian franking credits from New Zealand companies and the other is Listed Investment Companies (LIC) capital gain (Appendix 1, 2 & 3). They are put in the order that corresponded closely to the tax return to be completed.

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 6 of 27

To signal the tax preparers of the special items, whenever either of or both of them appear on the tax statement; they are to be highlighted or bolded.

How to use the uniform tax statement to fill out the corresponding tax returns?
Individual returns
Pre Jul 2011, the individuals who prepare the return could simply add up all the nonprimary production income under Total Distribution from Trust in their portfolio and put the total in Item13U on 2010 Individual Tax Return (Appendix 1). Post Jul 2011, the individuals would put the non-primary production income under Total Distribution from Trust excluding Interest in non-primary production income (Appendix 2). Quite possibly pool the Interest income from Trust with the Interest income from other sources under Item11 - Gross Interest to determine the discount applicable. The total of all Management & Administration Expenses is put in Item 13Y. The difference between them is then entered in net non-primary production distribution in the return. Whereas the total Share of Imputation Credits is put in Item 13Q, and the total of TFN withholding is put in Item 13R. The total of Credit of Tax Paid by Trustee is entered in Item 13S and the total of Withholding Tax Deducted from foreign investor is entered in Item 13A. In the proposed form, TFN/Withholding Tax Deducted is in the same field because the investors should know their residential status. It should be TFN Withholding if the investors are residents and Withholding Tax Deducted if the investors are non-residents. When all the tax statements are in the same order, transcription errors could be minimised. Capital gains tax discount (CGT discount) percentage applied to individuals is 50%. Companies are not eligible for CGT discount. Based on this information, the individuals who prepare the return could work out the corresponding CGT discount based on the status of the entity that owns the trust funds. This could minimise errors in the tax statements issued by the investment institutes by preventing the application of wrong discounts. In the simplest case where there is not any capital loss in the current year or carried forward from previous year and also there is not any other capital gains besides of those incurred in the trust. One could simply apply the rate of CGT discount to Capital Gains Eligible for Discount to work out the appropriate discount. The Net Capital Gain is calculated by adding the Capital Gains Not Eligible for Discount to the Capital Gains Eligible for Discount; and then subtracting the appropriate discount. The figure is entered in Item18A. The Total Capital Gains figure could be found on the uniform tax statement and put under Item 18H.

Capital gain tax on the disposal of units in trust is calculated according to the Guide to capital gains tax 2010 provided by the tax office. When there is disposal of units during the year that would change the net capital gain and total capital gains figures from that described above. If ATO agreed to relax the rule for the calculation of capital gains tax in property fund, the Accumulated Tax Free Income and the
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 7 of 27

Accumulated Tax Deferred Income would only be used when the last of the units are disposed. Foreign Source Income is put in Item 20E and Item 20M. Regarding to how much foreign tax credits that the taxpayers are entitled to claim at Item 20O, one should consult the Tax Offices publication on Guide to foreign income tax offset rules 200910. If the total foreign income tax offsets from all sources for the year do not exceed $1,000 then one can claim the foreign tax credit in full. Otherwise, the offset allowed should not exceed the calculated foreign income tax offset limit. Special transitional rules applied to foreign tax credit accumulated up to 1 Jul 2008. After such time, no excess can be carried forward.

Trust returns
Prior Jul 2011, the uniform format provides all the necessary information to fill out the 2010 trust return (Appendix 1). The non-primary production Total Distribution from Trust is put under Item 8R, Management & Administration Expenses is put in Item 8T. The difference between them is then entered in net non-primary production distribution in the return. The total Share of Imputation Credits is put in Item 8D, and the total of TFN withholding is put in Item 8E. The total of Withholding Tax Deducted from foreign investor is entered in Item 8U. Post Jul 2011, the Total Distribution from Trust excluding Interest is put under the non-primary production (Appendix 2). The Interest Income from Trust would be pool with Interest Income from other sources under Item 11J to work out the appropriate discount.

Trusts with total current year capital gains of greater than $10,000 or total current year capital losses are greater than $10,000 are required to complete the capital gains tax schedule. Details required to complete the capital gains tax schedule in the trust return can be found in the uniform format. Investment in trusts is generally not qualified as active asset unless the entity is entitled to the small business concession. Assuming that no unit in the trust is disposed during the year and no capital loss is carried forward from previous year, Capital Gains Not Eligible for Discount is put under Part A - Item C whereas Capital Gains Eligible for Discount in Item B. The subtotal of that would be put in Item X and Item W. If there is not any other capital loss in the current year or carried forward from previous years, the figures in Part E Item B & H would be the same as Part A Item W and the figures in Part E Item C & I would be the same as Part A Item X. By applying the 50% CGT discount in Part F Item J which would be the same figure as Part H Item B. Subtracting Part H Item B from Part E Item H, the result is the taxable capital gains put in Part H Item E. Part H Item F figure should be the same as that of Part E Item I given that the entity is not entitled to any small business concession. The net capital gain Part H Item G is equal to the sum of Part H Item E and Item F. Certainly there is CGT event occurred during the year, therefore for Item 21G on the trust return the answer should be Y. The net capital gain Part H Item G figure on the capital gains tax schedule should be copied to Item 21A on the trust return.

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 8 of 27

If any of the units of a given trust are disposed, Capital gain tax on the disposal of units in trust is calculated according to the Guide to capital gains tax 2010. In the case when units of property trust are disposed, Accumulated Tax Free Income and Deferred Income are only used in calculation when the last of the units of the trust are disposed. The accumulated tax-deferred amount will reduce the cost base in a capital gain calculation. Whereas in a capital loss calculation, both the accumulated tax deferred and tax free amounts will reduce the amount of reduced cost base. Trusts with total current year capital gains of less than or equal to $10,000 should also answer Y in Item 21G on the trust return even though capital gain tax schedule is not required. The net capital gain calculation is similar to that of the individuals and the net figure should be put in Item 21A. Foreign Source Income is put in Item 23B & Item 23V. Foreign tax credits allowable should be calculated according to the Guide to foreign income tax offset rules 2009-10 to be put in Item 23Z on the trust return. Different trust tax rates applied depending on the nature of the trust (resident or non-resident, inter vivos trust or deceased estate), the status of the beneficiaries who are entitled or not entitled to the income or the capital and the status of the trustees. All these could result in different foreign tax credits to be claimed. Transitional rules apply to foreign tax credit accumulated prior to 1 Jul 2008. After that time no excess can be carried forward.

Self managed superannuation fund returns

Prior Jul 2011 in a complying fund, Total Distribution from Trust is put in Item 10M and Management & Administration Expenses is put in Item 11J (Appendix 1). Share of Imputation Credits is put in Item 12 F4. TFN Withholding is placed in Item 12 F3 whereas Withholding tax on non-resident is placed in Item 12 - F2. Management & Administration Expenses could be claimed in Item 12 J. Post Jul 2011, Total Distribution from Trust excluding Interest is put in Item 10M whereas Interest from Trust would most likely be grouped at Item 12 C to work out appropriate discount for interest (Appendix 2). CGT schedule is required for SMSF with total current year capital gains greater than $10,000 or with total current year capital losses greater than $10,000. The completion of the schedule is the same as that required by the trust. Under Item 10G of the SMSF return, one should answer Y. CGT discount percentage applied to complying superannuation entities is 331/3 %. The net capital gain in Item 10A is the same figure on Part H Item G of the capital gain schedule. If the total current year capital gains is less than or equal to $10,000, the Net Capital Gain is calculated by adding the Capital Gains Not Eligible for Discount to the Capital Gains Eligible for Discount; and then subtracting the appropriate discount. The Foreign Source Income is put in Item 10 - D1 and in Net foreign income Item 10 D. The maximum foreign tax credits allowed are 15% of the total Foreign Source Income because that is the complying SMSF tax rate. The allowed foreign tax credit
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 9 of 27

will be the lesser of either the Foreign Tax credits or the 15% of the total Foreign Source Income. The allowable foreign tax credits should be put in Item 12 C1. Again the same rules applied, prior 1 Jul 2008 foreign tax credit accumulated could be applied with first in and first out rules for 5 years. After that time no excess can be carried forward.

Partnership & company returns

The partnership return is an information only return the partners must each include their share of their income and any credits in their individual tax returns. Using the information from the uniform tax statement, the completion of the trust income in the partnership return is very much similar to that of the trust return. Since partnership does not own assets for CGT purposes, each partner must include their share of the capital gain or capital loss in their own individual return. Foreign Source Income is put in Item 23B & Item 23V. There is no need to include foreign tax credits in the return; each partner must include their share in their individual tax returns. Given the 50% discount on interest income up to $1000 is only offered to individual, trust or managed investment fund, the company tax return would remain unchanged. In company return, the Total Distribution from Trust is put in Item 6E and Management & Administration Expenses is put in Item 7X. When the company is a franking Australian entity, tax offset is allowed for the franked distribution flows indirectly to the company through trust. Share of Imputation Credits constitute a credit in the company franking account. The details will be filled out in the franking account tax return. Depending on the company history in the franking account, the Share of Imputation Credits will affect the franking account balance in Item 8M. If the franking account is in deficit at the end of the current year, and franking deficit tax offset is paid; the company could claim franking deficit tax offset subject to the reduction rule. TFN Withholding is put under Calculation statement Item Y. Withholding tax on non-resident could be claimed under Item I. Withholding Tax Credit of Tax Paid by Trustee is put under Item Z. When the company received capital gains from any given trust, Y has to be filled in Item 7G. Investment in trusts is generally not qualified as active asset unless the entity is entitled to the small business concession. Companies that are not entitled to small business concession are not eligible for CGT discount, therefore the net capital gain in Item 7A is equivalent to the Total Capital Gains on the uniform format. CGT schedule is required when the total current year capital gains greater than $10,000 or the total current year capital losses greater than $10,000. Foreign Source Income is entered in Item 7B and the allowable foreign tax credits are put in Item D in the Calculation statement. At the current company tax rate of 30%, the maximum foreign tax credits allowed are 30% of the total Foreign Source Income. The allowable foreign tax credits should be the lesser of either the Foreign Tax credits or the 30% of the total Foreign Source Income. When the company tax rate cut to 28% comes in to effect in 2012-13 for small business, the allowable foreign tax credits would be adjusted accordingly. Similarly to larger companies, the allowable foreign tax credits would be adjusted to company tax rate cut to 29% from 2013-14 and 28% from 2014-15. Prior 1 Jul 2008 foreign tax credit accumulated could be
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 10 of 27

applied with first in and first out rules for 5 years. After that time no excess can be carried forward.

Exceptions
The proposed format would suit the great majority of investment funds for reporting purposes. However, there could be two exceptions to the use of the proposed format. One is that involved with Australian franking credits from New Zealand companies. It is suggested if ever there are any Australian franking credits from New Zealand companies; they are to be reported after the Foreign Source Income in the uniform format. For tax purposes, the Australian franking credits from New Zealand companies are also treated as income. The amount of the Australian franking credits from New Zealand companies should not be included in Foreign Source Income to avoid double counting. They have to be reported separately. To allow one to claim those franking credits back (eligibility subject to the holding period rule), they are to be added to other foreign tax credits pool. Again the foreign tax credits allowed to be claimed is calculated according to How to claim a foreign tax credit 2010.

The other exception is that involved with Listed Investment Companies (LIC) capital gain, it is suggested that it should be reported after Foreign Tax Credits as an exceptional item. Resident trusts are entitled to claim a deduction that is 50% of the LIC capital gain amount. When the beneficiary of the trust is an individual, the individual is entitled to the 50% deduction. Given the net income distributed from the trust has already claimed the deduction; there is no need for the individual to make any claim. The deduction is not intended to be passed through a series of trusts or partnership (ITAA 97 s115-280(4) & (5)). When the beneficiary is a company, the 50% of the LIC capital gain amount is to be added back as assessable income in the company return. When the beneficiary of the trust is a trust; the 50% deduction has to be added back to the trust as other income. When the beneficiary of the trust is either a complying SMSF or life insurance company, 1/3 of the reduction amount (50% of the LIC capital gain amount) is to be added back as other income.

Resistance to Change:
One of the benefits of the uniform tax statement is to ease the burden of keeping the required documents to calculate capital gains for property funds. Once the uniform tax statement is adopted widely, to calculate the capital gain for any property fund one only need the tax statement for the year and the capital gain statement from the financial institute. There is no need to refer to all the previous tax statements from the time when the investment was first made. However this requires the Australian Tax Office (ATO) to relax the rule regarding to the calculation of capital gains tax when there is a partial disposal of units in the property fund during the year because the cost of the units would be slightly higher when the tax free income and deferred income accumulated up to the time of disposal are ignored in the calculation. To avoid double counting in the uniform format, the accumulated tax free income and accumulated deferred income are only used when all the units of the property fund are disposed. Ultimately, all the accumulated tax free income and accumulated deferred income are
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 11 of 27

accounted for in the capital gain calculation when the last of the units are sold. This is an administrative adjustment to reduce the information kept and ensure the accuracy of capital gain calculation because when the taxpayers could not provide all the annual tax distribution statements necessary to complete the capital gains tax calculations. The tax free income deferred income for the missing period would be ignored. This in turn would lower the capital gains tax reported. The government could collect less revenue as a result. Given the benefits it offered, the tax office should not have a lot of resistance in adopting the practice of the uniform format. The managed fund companies should have the most resistance to the adoption of accumulated tax free income and accumulated deferred income in the property funds because of the extra resources required to ensure the accuracy of the figures printed. This implied going back to account for all those incomes since the year when the first investment was made for each of their investors. Fortunately this procedure needs only to be done once; afterward the accumulated figures could be carried indefinitely by adding the new annual figures to the previous accumulated figures till all the units of the property funds are disposed. To counter the resistance to change, the proposed format offer incentive to the managed fund companies by releasing their obligation to calculate net capital gain for the investors. They only need to keep track of the capital gains not eligible for discount and those eligible for discount. This will ease their operation significantly. Most importantly this will avoid the oversimplification of the net capital gain calculations especially when there is capital loss in the current year or carried forward from previous years; or there are other capital gains activities incurred during the year beside that in the managed funds. The occasional wrong application of discounts by the financial institutions would be eliminated. New instruction to advise individual investors how to fill out their tax returns using the uniform format should be in place. A proposed instruction could be found in Appendix 3. It is logical to have the ATO, Chartered Accountants (CA), and Certified Public Accountants (CPA) put the instruction in their websites to allow investors easy access to the information. The top priority is to gain government support. Once the project is endorsed, it would be easy to convince the other players to assist in the process.

Why introduce the uniform format now?

The first proposal was written at the time when we faced with the economic downturn in 2008. Witnessing what that had impacted in the community, I initiated this project on my own. Hoping that could alleviate the pain of the millions of investors. I felt sorry that I could not complete what I planned within the time frame that I had set. The projection back then would see the project finished by Jan 5, 2011. Even though the economy seems to bounce back from where it was and the budget predicts a rosy picture for Australia. There are still hidden obstacles to our road of recovery. On one hand, the recovery seems to favour the mining and the construction sector of the economy. The mining industry is dependable on the ability of the Chinese government to curb inflation in the Chineses economy. China is still very dependent on the export income from the US market to feed the population. The

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 12 of 27

prospect that the US might be facing the double dip in the economy will ultimately affect us. The recent boom in the housing market in major cities could be a potential land mine. Even the real estate sector credited that to the increase in migrant population, if one look into the statistics without the locals buying properties to create the demand. The surge of property value would not be justified. There are already signs in the market that demand has eased by the weaker auction trends and falling number of home loan approvals. The renewed fall in business lending is a worrying sign for the economy, whether it is due to the cautions by the banks or the reluctances by the companies to borrow. Overall the effect on the economic recovery is the same. On a comparative basis we will be doing much better than the other OECD countries. Does this mean that we could be complacent about our future? The benefits that this project would deliver are not dependent on economic performance of the country. It is a saving measure and its benefits are not short-lived. With the reform in the superannuation industry, the Superannuation Guarantee rate will increase to 12% by 2019-20 (to be phased in) from the current 9%, the resulted annual saving from the project would be at least $464 millions. Since 2008 the number of managed fund companies has steadily increased, this implied it is a lucrative industry for many even prior the reform coming to effect. It is the potential saving that could be generated from the project that kept me going to pursue the matter. I hope one day the benefits of the project could be realised.

Who support the idea?

Listed as the order of ranking roughly based on BRW Top 100 Accounting Firms in 2006 & 2007: Moore Stephens McLean Delmo & Partners Condon Associates Mulqueen Griffin Rogers MB+M Business Solutions Butler Settineri Wearne & Co. McInnes, Graham & Gibbs

How much does it cost?

This is a voluntary project. The administrator is seeking donation to cover the cost incurred in administration & travelling. If the project is successful in obtaining the tax deductible status from the ATO, more financial support would be expected from the interested parties.

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 13 of 27

In 2008 a minimum $26,130 must be received in order for the project to go ahead to cover 97 major managed fund companies (Appendix 6) in five different states. In 2010 with an approximate inflation of 7% over the period, the estimated cost would be $27,959. A further $19,120 is required to cover an additional 112 managed fund companies on the list (Appendix 7). Assumed that there are 30 new managed fund companies in the market, and inflation at 7%, another $25,573 would be required. That meant a total of $53,532 would be required to finish the project. To hold the administrator accountable, a monthly report would be produced to notify sponsors of the progress. With the intention to visit the major managed fund companies first then if funding allowed continuing with the rest of the existed managed fund companies. The breakdown of the cost in 2008 could be found in Appendix 4 & 5. The major costs are airline tickets, the cost for the proposal and accommodations. With the majority of the managed fund companies located in Sydney, the cost of travelling would be high. Car hires are required in Queensland and Tasmania because some of those companies are not located in the CBD of the capital cities.

Qualification of the administrator for the project:

Education:
Advanced Graduate Diploma in Taxation: UNSW MBA: BSc. Of Biochemistry: University of Ottawa, Ottawa, Canada Carleton University, Ottawa, Canada

Work Experience: Feb 2004May 2006 Sep 2002Feb 2004 2000-2002 Tax Accountant for MB+M Business Solutions

Tax Contractor for State Trustees Tax Consultant for H&R Block

Financial Benefits:
Community
Assumed household with at least $1,400 gross household income per week and is owner of property without a mortgage would have extra cash for investment. According to the Australian Bureau of Statistics on 2005-06 figures1, the number of
1

Cat No. 6523.0 Household Income and Income Distribution, Australia, 2005-06 Page 14 of 27

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

such household is 989,898 (2,886,000 households * 34.3%). Assumed of them prepared their own tax return, given time is money, and by having a uniform tax statement could save easily $20 per household. As a total it could save $4,949,490 for the individual investors. The other of them would rely on tax agents to prepare their returns as they are more complicated, might involve companies, trusts, or self-managed funds (SMSF) besides of individual returns. The Australian Taxation Office provided self managed superannuation fund statistical report2; it could give an indication of the total assets involved in the SMSF. In particular the total assets involved for public trusts are $34,961 millions (11.65% of the total assets) for Dec 07 quarter, public trusts are of special interest because they are the main targets of this reform. By dividing the total assets involved in SMSF $300,149 millions in Dec 07 quarter by the average assets per member in 2006-07 which is $417,694, there are approximately 718,585 members in the SMSF. That translated to $48,661 are invested by the 718,585 members in public trust. Assumed that each member invests in 3 different public trusts, the uniform format could save 10 minutes per each trust; half an hour of accountants time could be roughly $60. This could save $43,115,100 in accountants fees for SMSF. Based on Managed Fund information published by ABS in Dec Qtr 2007, total public unit trusts involved staggering amount of $278,536 millions of which $34,961 millions are SMSF. The rest of $ 243,575 millions are investment by other trusts, companies, or individuals. Since no published data is available to categorise average number of investment by the abovementioned entities. Assumed again $48,661 are the average investment per members as the SMSF, there are approximately 5 millions of members involved. Using the same logic as before, each member invests in 3 different trusts that would result a total saving of $300 millions in accountants fees. To sum up the figures, a total of at least $348 millions per year could be returned to the public if there is a uniform tax statement format across all the managed fund companies based on the figures for 2008. Not counting the effect of inflation over the years. When the reform of the Superannuation Guarantee rate is in full effect; namely at 12 % by 201920, the resulted saving from the project would be at least $464 millions per year.

Investment Institutions
The cost of printing 1000 copies of A3; doubled sided; gloss finish; &170gsm paper is roughly $700. The more one print the lower its cost. Assumed that there are roughly 5 millions of members in public unit trusts, the saving in terms of printing would be around $3.5 millions per year based on 2008 estimate.

Accounting Sector
On the surface, the unification of tax statement may seem to lower the income for the accounting sector. In reality it is quite the contrary, accounting firms can only grow if the clients income and turnover grow. Freeing the accountants time to invest in other areas such as the monitoring of the company cash flow would prove to be more

ATO Self Managed Superannuation Fund Statistical Report Page 15 of 27

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

productive in achieving the goals of both the accounting firms and the clients in the long run.

Operational Benefits:
Community
The operational benefits of the project are obviously the ease of identifying the necessary information from the uniform format to report to the tax office. This could minimise errors when figures are transcribed to produce summaries of income. The instruction for individual investors with simple tax matter is available for download from the ATO, CA, or CPAs website if endorsements are obtained successfully from the tax office and the other associations. Having the uniform tax statement in place could potentially lower the investment risk because the investors would not be put off from diversifying their investment because they no longer need to read all the different instructions in order to fill out their returns. In the past, this could possibly hinder their decisions in optimising the gains.

Investment Institutions
The managed fund companies also gain in adopting the uniform format because they are no longer responsible for the calculation of the capital gains discount for the investors. Given that individual, company, trust or superannuation fund are entitled to different percentage of discount, significant resource has to be devoted to ensure the accuracy of reporting. Once the format is adopted, they only need to keep track of whether the legal ownership of the fund is superannuation fund or life insurance company or not because of the potential implication of LIC capital gain in the distribution. There is no need to print brochures to educate their clients. The only complication the proposed format could cause is increased the burden of those companies that offered property funds to the public. They are now required to provide the accumulated tax free and deferred incomes to their investors. That meant that they will have to investigate how much tax free and deferred income do each investor earned in the past up to the last financial year. Once this is done, the ongoing reporting should be easy because it is a matter of adding the current tax free and deferred income to last years accumulated figures. The adoption of the uniform format could be used as a public relation campaign to demonstrate that the managed fund companies show genuine interest in maximising benefits to their investors.

Accounting Sector
Ease of operation is the main advantage of the uniform format for the accounting sector. There will not be any need to outsource the mundane task summarising the incomes for all the investment funds that any given entity holds; to allow the accountants to focus on tasks that required more attention. That is the practice for some of the large and medium accounting firms. With the technological advancement, many managed fund companies can send out tax statements in electronic forms. That will allow the data to be manipulated electronically in form of tables. This would generate more accurate summaries of incomes by minimising transcription errors since the figures are now arranged in the same order across all the tax statements
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 16 of 27

regardless of the sources. When exceptional items appeared on the tax statement, the managed fund companies are required to highlight or bold those items to signal the tax preparers so that those items could be treated specially.

Environmental Benefits:
When the standardisation of tax statement across all the institutions is completed, the responsibility of printing instruction will fall on the tax office. When that process is centralised, printing is only required when there is new update. Not all the individuals require instruction in hardcopies. Those who have access to the internet can download instruction from the ATO, CA, and CPAs website. The managed fund companies will not need to produce brochures to educate their investors on how to fill out their tax returns. Assumed each tree produced 80,500 sheets of paper, at least sixty-two trees could be saved each year assumed 5 millions of brochures are required. If the electronic forms are delivered to clients instead of the traditional paper forms, the potential saving could be enormous.

Strategies to implement the change

Copies of the proposal would be sent to the Prime Minister, Treasurer, ATO, initially to seek their endorsements for the project. Copies of the proposal would be sent to CA, CPA and Investment & Financial Services Association (IFSA) to notify them of the second attempt to make the project work. Once the project is endorsed by the government, the administrator will attempt to obtain tax deductible status from tax office. This would allow all the supporters to claim tax deduction on their donations to the project. If those activities are successful, the Chamber of Commerce of all the states, and the Department of Environment would be contacted. Their supports will help to draw more sponsors for the project. The results of that should give significant weight on the issue and allow the administrator to approach various managed fund companies with confidence. The relaxation in the calculation of capital gains on property fund based on the uniform tax statement would require negotiation with the ATO. Given that ultimately all the accumulated tax free income and accumulated deferred income are accounted for in the capital gain calculation when the last of the units are sold. The relaxation of the rule is simply an administrative adjustment to reduce the information kept and ensure the accuracy of capital gain calculation; its practice should be accepted by the tax office. Before reaching out to all the existing fund managers to promote the uniform tax statement, it is important to stop any new registered managed fund from independently set up its own tax statement. This is done by contacting the Australia Securities & Investment Commission (ASIC) and requesting for their support so that all the new financial & investment companies in the future are obliged to follow the uniform format. This will close the loophole to ensure the most costly and labour intensive exercise visiting all the existing fund mangers only needs to be done once.

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 17 of 27

While waiting for the reply from the various parties, contact would be made to ATO to form a new instruction for investors to complete their individual returns based on the model in Appendix 3. Keep in mind that the instruction should avoid making any reference to the year that is in effect to minimise the cost of printing, so that the same document could be used until the format of individual tax return is changed. The instruction should be in place before 30th June in the year that the project is endorsed. If endorsement from CA, and CPA are obtained, instruction should also available for download from their websites. In future to avoid updating the instruction every year, there should be a designated individual from ATO who checks the information each year to ensure its accuracy preferably one who is responsible for the format of the individual return. When there is new update, new instruction should be sent for printing and the other associations should be notified so that they could update their websites. This could significantly reduce the use of paper. The goal of the project is to visit all the managed fund companies in the country. Priorities are given to those companies that are known to have large investors base, given that the administrator is uncertain about the financial support received for the project. The project is split into two phases. If minimum funding is received, 97 major managed fund companies (Appendix 5) in five different states would be visited. Hopefully, the adoption of the uniform format by the major players is enough to encourage the smaller companies to comply. In order to hold the administrator accountable, it is required that the administrator to provide a list of those government and non government agencies that endorsed the project and a monthly updated list of those companies that agreed to comply to all the supporters of the project. With or without additional funding, an evaluation would be done to determine the success of the project. The success of the project is evaluated by the percentage of companies being approached that have actually complied with the uniform format. Given that the administrator is not in the accounting field while undertaking the project, it required the accountants feedback as to which one of those has not yet comply with the proposed format even it has initially agreed to; so the administrator could follow that up. Another area that required evaluation is the percentage of new companies formed during the year that have actually adopted the uniform format. This required the help of ASIC to provide the newly formed company names and contact details during the period that would allow subsequent follow-ups by the administrator to check their compliance. An evaluation report will be provided to all the accounting firms that supported the project and those government and non government agencies that endorsed the project at the end of the period. Follow-ups with non-compliant companies would commence shortly after that. If additional funding is received that is enough to cover the project, the remaining managed fund companies would be visited. The result from the first evaluation would serve as guideline to ensure the success of the overall project. Again regular monthly report would be provided to all the sponsors to keep them updated with the progress. Evaluation report should be available to all the supporters by the end of the period. Follow-ups with non-compliant companies would start soon after that. The project is anticipated to finish 85 weeks from the date the project is endorsed. Obviously this could vary if the number of managed fund companies exceeds the estimate.

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 18 of 27

Timeline:
40th week Evaluation done on 97 companies & new companies formed during the year.

One week after, register the company, apply for tax deductibility.

10 weeks later, start visiting the Managed Funds

37th week Start data collection for evaluation.

Received endorsement for the proposal.

8 weeks after, tax deductibility status approved. Inform the 97 managed fund companies and make appointments for visit. Start with VIC, NSW, QLD, WA and ACT in that order.

35th week Finished visiting the 97 companies.

38th week If funding allowed, inform the rest of managed fund companies to make appointments for visit.

45th week Project is finished if funding is insufficient otherwise continue visiting the rest of the companies.

72nd week Start data collection for evaluation.

80th week Start follow up with the companies that did not comply.

42nd week Start follow up with companies that did not comply.

70th week Finished visiting the rest of the companies.

75th week Evaluation done on the rest of the companies & new companies formed during the year.

85th week Project finished.

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 19 of 27

References:
Cat No. 5655.0 Managed Fund, Australia. Jun 2008 Cat No. 5655.0 Managed Fund, Australia. Mar 2008 Cat No. 5655.0 Managed Fund, Australia Dec 2007 Cat No. 6523.0 Household Income and Income Distribution, Australia, 2005-06 ATO Self Managed Superannuation Fund Statistical Report

Appendices:
Appendix 1: The proposed uniform format (pre Jul 2011) Appendix 2: The proposed uniform format (post Jul 2011) Appendix 3: The proposed instruction on how to report trust income in individual return Appendix 4: The minimum cost covers the major institutions 2008 estimate Appendix 5: The cost to cover all the known institutions 2008 estimate Appendix 6. Major Managed Funds Appendix 7. List of Managed Funds based on 2008 data

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 20 of 27

Appendix 1.

Proposed Uniform Format (Pre Jul 2011)

Contact Details of the Investment Institution

Tax Statement Period:

Investor Number: XXXX Investor Details

Fund A Non-Primary Production Income Interest Other Income Unfranked Dividends Franked Dividends Share of Imputation Credits Total Distribution from Trust Management & Administration Expenses TFN/Withholding Tax Deducted Credit of Tax Paid by Trustee Capital Gains Not Eligible for Discount Capital Gains Eligible for Discount Total Capital Gains Foreign Source Income Australian Franking Credits from NZ Foreign Tax Credits LIC Capital Gain *Accumulated Tax Free Income *Accumulated Deferred Income

Fund B

Total

Items highlighted by * are used when the last units of the property fund are disposed during the year to calculate capital gain. At other time they are figures for reference purpose. Exceptional items are highlighted to indicate their proposed position on the uniform format.

Please Retain This Statement for Your Records

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 21 of 27

Appendix 2.

Proposed Uniform Format (Post Jul 2011)

Contact Details of the Investment Institution

Tax Statement Period:

Investor Number: XXXX Investor Details

Fund A Non-Primary Production Income Interest Other Income Unfranked Dividends Franked Dividends Share of Imputation Credits Total Distribution from Trust Total Distribution from Trust excluding Interest Management & Administration Expenses TFN/Withholding Tax Deducted Credit of Tax Paid by Trustee Capital Gains Not Eligible for Discount Capital Gains Eligible for Discount Total Capital Gains Foreign Source Income Australian Franking Credits from NZ Foreign Tax Credits LIC Capital Gain *Accumulated Tax Free Income *Accumulated Deferred Income

Fund B

Total

Items highlighted by * are used when the last units of the property fund are disposed during the year to calculate capital gain. At other time they are figures for reference purpose. Exceptional items are highlighted to indicate their proposed position on the uniform format.

Please Retain This Statement for Your Records

Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 22 of 27

Appendix 3. The proposed instruction on how to report trust income in individual return Conditions need to be met before using the instruction: 1. Have to be an Australian resident for tax purpose. 2. No capital loss in the current year or carried forward from previous years. 3. No other capital gains activities incurred during the year beside that incurred in the managed funds. 4. Have not received any exempt foreign employment income in the current year. Steps to fill out the tax return: Add all the non-primary production income under Total Distribution from Trust in their portfolio and put the total in Item13U on 2008 Individual Tax Return. The total of all Management & Administration Expenses from all the investments is put in Item 13Y. The difference between them is then entered in net non-primary production distribution in the return. The total Share of Imputation Credits is put in Item 13Q, and the total of TFN withholding is put in Item 13R. The total of Credit of Tax Paid by Trustee is entered in Item 13S. (Post Jul 2011, Total Distribution from Trust excluding Interest will in put in Item 13U. The Interest from Trust is grouped with other interest income in Item 11.) Capital gains tax discount (CGT discount) percentage applied to individuals is 50%. Apply the rate of 50% CGT discount to Capital Gains Eligible for Discount to work out the appropriate discount. The Net Capital Gain is calculated by adding the Capital Gains Not Eligible for Discount to the Capital Gains Eligible for Discount; and then subtracting the appropriate discount. The figure is entered in Item18A provided there is no disposal of units during the year. The Total Capital Gains figure could be found on the uniform tax statement and put under Item 18H. Capital gain tax on the disposal of units in trust is calculated according to the Guide to capital gains tax provided by the tax office. When there is disposal of units during the year that would change the net capital gain and total capital gains figures from that described above. Generally trust would issue a capital gain statement to provide the details required to complete the calculation. In the case of property fund, the accumulated tax free income and the accumulated deferred income are used to reduce the cost of acquisition; when the last of the units in a given property fund are disposed. Foreign Source Income is put in Item 20M. Australian Franking Credits from NZ is put in Item 20F. In the absence of Australian franking credits from NZ, the assessable foreign source income is the same as Item 20M and the figure is put in Item 20 E. In other case, the assessable foreign source income is the sum of Item 20M and Item 20F, and the resulted figure is put in Item 20E. Refer to Guide to foreign income tax offset rules 2009-10 to determine how much tax credits is allowed to be claimed at Item 20O. If the total foreign income tax offsets from all sources for the year do not exceed $1,000 then one can claim the foreign tax credit in full. If LIC Capital Gain is shown on the statement, as individual taxpayer you can ignore that piece of information. The deduction has been claimed by the investment fund.
Created by Faliana Lee on 05/05/2008 9:30:00AM revised on 10/6/2010 9:00:00AM

Page 23 of 27

Standardisation of Tax Statement Format

Appendix 4. The minimum cost covers all the major institutions

State NSW VIC QLD WA ACT Description 4 wks to cover 59 companies 15 days to cover 30 companies 2 days to cover 6 companies 1 day to cover 1 company 1 day to cover 1 company Other Costs: Proposal Phone calls Stationery Emergency cash Total Return Airline Ticket Accomodation Breakfast 4000 4000 375 1150 1800 800 180 30 15 15 Lunch 565 22.6 45.2 22.6 22.6 Afternoon 375 15 30 15 15 Dinner 565 22.6 45.2 22.6 Airport Travel 350 70 70 70 Travel 500 1180 20 20 Car Hire Petro+Park Babysitting 1500 1020 65 80 120 60 60 Total 12230 2260.2 1815.4 2025.2 1002.6 5000 500 300 1000 26133.4

7750

4180

435

678

450

655.4

560

1720

65

80

2760

Created by Faliana Lee on 05/05/2008 9:30:00 AM revised on 10/6/2010 9:00:00AM

Page 24 of 27

Standardisation of Tax Statement Format

Appendix 5. The cost to cover all the known institutions

State NSW VIC QLD WA ACT SA TAS Description 9 wks to cover 120 companies 29 days to cover 58 companies 5 days to cover 17 companies 3 days to cover 7 companies 1 day to cover 1 company 1 day to visit 4 companies 2 days to visit 2 companies Other Costs: Proposal Phone calls Stationery Emergency cash Total Return Airline Ticket 7200 2300 3600 800 940 540 Accomodation Breakfast 7200 675 720 188 90 45 15 15 30 Lunch 1017 45.2 135.6 67.8 22.6 22.6 45.2 Afternoon 675 15 90 45 15 15 30 Dinner 1017 22.6 135.6 67.8 Airport Travel 630 210 140 70 70 70 Travel 900 2030 60 20 20 130 Car Hire Petro+Park Babysitting 2700 1860 320 360 180 60 60 160 120 Total 22014 3972.8 4621.2 4393.6 1002.6 1142.6 1307.8 5000 500 300 1000 45254.6

260

160

22.6

15380

8268

870

1356

885

1265.6

1190

3030

390

480

5340

Created by Faliana Lee on 05/05/2008 9:30:00 AM revised on 10/6/2010 9:00:00AM

Page 25 of 27

Standardisation of Tax Statement Format

Appendix 6. Major Managed Funds

NSW Companies Aberdeen Asset Management Limited ABN AMRO Australia Pty Ltd Absolute Capital Ltd Advance Asset Management Limited - St George Bank Amp Capital Investors AMP Financial Planning Pty Ltd ANZ Managed Investments Limited Asgard Wealth Solutions Ltd Ausbil Dexia Limited Australian Skandia Limited Australian Wealth Management Ltd Barclays Global Investors Australia Limited BT Asset Management Ltd Challenger Financial Services Group ClearView Financial Management Limited Colonial First State Investments Ltd Commonwealth Managed Investments Limited Credit Suisse Asset Management (Australia) Ltd Deutsche Asset Management (Australia) Limited DFA Australia Limited Direct Portfolio Eley Griffiths Group Pty Limited Fidelity Investments Australia Ltd Fiducian Portfolio Services Ltd GMO Australia Ltd HFA Asset Management Ltd Hillross Financial Services Ltd Hunter Hall Investment Management Ltd ING Funds Management Ltd Intech Fiduciaries Ltd Investors Mutual Ltd JP Morgan Investments (Aust) Ltd Lazard Asset Management Pacific Co. Macquarie Investment Mangagement Ltd Man Investments Australia Ltd Maple-Brown Abbot Ltd Mariner Securities Ltd Mirvac AQUA Pty Ltd MLC Investment Ltd - NAB MMC Asset Management Ltd Morgan Stanley Investment Management NavraInvest Pengana Capital Ltd Perpetual Investment Management Ltd Platium Asset Management PM Capital Ltd Principal Global Investors Ltd Russell Investment Management Ltd Schroder Investment Management Australia Ltd Select Asset Management Ltd Smallco Investment Manager Souls Funds Management Ltd Stockland Funds Management Ltd Strategic Capital Management Ltd Tower Australia Ltd Treasury Group Investment Services Tyndall Investment Management Ltd UBS Global Asset Management (Aust) Ltd Zurich Investment Management Ltd VIC Companies AXA-National Mutual FundsManagement Ltd APN Funds Management Ltd Auststock Asset Managament Australian Unity Funds Management Ltd Bell Potter Funds Management Limited BlackRock Investement Managers Concord Capital Limited - NAB Commonwealth Managed Investments Limited Equity Trustees Ltd Franklin Templeston Invesetment Australia Ltd Goldman Sachs JB Were Asset Management IOOF Australia Invesco Australia Ltd IPAC Asset Management Ltd K2 Asset Management Ltd Legg Mason Asset Management Australia Ltd Merrill Lynch (Australia) Pty Ltd Navigator Investment Netwealth Investment Fund Opis Capital Ltd Ord Minnett Management Ltd Over 50's Mutual Friendly Society Ltd Portfolio Partner Ltd Prime Value Asset Management Sandhurst Trustees Ltd - Bendigo Bank State Street Global Advisors Australia Ltd STL Financial Services Ltd Trust Company of Australia Ltd Vanguard Investments Australia Ltd Wilson HTM Investment Mgmt Pty Ltd QLD Companies Suncorp Metway Investment Management Ltd Freeman Fox Hyperion Asset Management LM Investment Management Ltd Q Invest Ltd Ventura Investment Management Ltd WA Company Officium Capital Ltd ACT Company Australian Ethical Investment Limited

Created by Faliana Lee on 05/05/2008 9:30:00 AM revised on 10/6/2010 9:00:00AM

Page 26 of 27

Standardisation of Tax Statement Format

Appendix 7. List of Managed Funds

NSW Companies (visit before 30/6/09) Aberdeen Asset Management Limited ABN AMRO Australia Pty Ltd Absolute Capital Ltd Advance Asset Management Limited - St George Bank Amp Capital Investors AMP Financial Planning Pty Ltd ANZ Managed Investments Limited Asgard Wealth Solutions Ltd Ausbil Dexia Limited Australian Skandia Limited Australian Wealth Management Ltd Barclays Global Investors Australia Limited BT Asset Management Ltd Challenger Financial Services Group ClearView Financial Management Limited Colonial First State Investments Ltd Commonwealth Managed Investments Limited Credit Suisse Asset Management (Australia) Ltd Deutsche Asset Management (Australia) Limited DFA Australia Limited Direct Portfolio Eley Griffiths Group Pty Limited Fidelity Investments Australia Ltd Fiducian Portfolio Services Ltd GMO Australia Ltd HFA Asset Management Ltd Hillross Financial Services Ltd Hunter Hall Investment Management Ltd ING Funds Management Ltd Intech Fiduciaries Ltd Investors Mutual Ltd JP Morgan Investments (Aust) Ltd Lazard Asset Management Pacific Co. Macquarie Investment Mangagement Ltd Man Investments Australia Ltd Maple-Brown Abbot Ltd Mariner Securities Ltd Mirvac AQUA Pty Ltd MLC Investment Ltd - NAB MMC Asset Management Ltd Morgan Stanley Investment Management NavraInvest Pengana Capital Ltd Perpetual Investment Management Ltd Platium Asset Management PM Capital Ltd Principal Global Investors Ltd Russell Investment Management Ltd Schroder Investment Management Australia Ltd Select Asset Management Ltd Smallco Investment Manager Souls Funds Management Ltd Stockland Funds Management Ltd Strategic Capital Management Ltd Tower Australia Ltd Treasury Group Investment Services Tyndall Investment Management Ltd UBS Global Asset Management (Aust) Ltd Zurich Investment Management Ltd NSW Companies (visit after 30/6/09) Abacus Funds Management Limited Adam Smith Asset Management AON Financial Planning & Protection Limited Allianz Global Investors Australia Anderson & Tees Funds Management Limited Antares Managed Investments Limited Ascalon Capital Management Limited Ascend Asset Management Limited Asia Pacific Asset Management Pty Limited Astarra Capital Limited Asteron Holidings Limited Atom Funds Management Pty Limited Aurora Fund Management Limited Ausbil Dexia Limited Ballina Mortgage Management Limited Brookfield Multiple Investment Managements Century Funds Management Limited Charter Hall Funds Management Limited Chifley Financial Services Limited City Pacific Limited Clime Asset Management Pty Limited Columbus Investment Services Limited Connelly Temple Ltd Constellation Captial Management Ltd Denning Pryce Pty Limited Donaldson Burston Pty Limited Ellerston Captial Ltd FRM (Australia) Pty Ltd FSP Funds Management Ltd Falkiner Global Investors Ltd Fundhost Ltd Goldlink Managed Investments Ltd H3 Global Advisors Pty Ltd Integrity Investment Management Australia Ltd Investa Property Group Kara Capital Ltd Liontamer Investments Ltd MIR Investment Management Ltd Magellan Asset Management Ltd Maxim Asset Managemnt Mercer Global Investment Naos Asset Management Ltd Orbis Investment Management (Aus) Pty Ltd Optimal Fund Management - Australia Parker Asset Management Ltd Premier Asset Management Pty ltd Putnam Investments Questor Financial Services Ltd Quintessential Wealth Ltd RCM Capital Management Limited - Allianz Spectrum Asset Management Ltd Tankstream Funds Management Ltd TechInvest Pty Ltd Teys Property Fund Ltd Tidewater Asset Management Pty Ltd Tribeca Investment Partners Pty Ltd Tricom Investment Management Ltd Valuestream Australian Equities Fund WestLB Asset Management (Australia) Pty Ltd Westpac Funds Management Ltd Wright Patton Shakespeare Capital Ltd VIC Companies (visit before 30/6/09) AXA-National Mutual FundsManagement Ltd APN Funds Management Ltd Auststock Asset Managament Australian Unity Funds Management Ltd Bell Potter Funds Management Limited BlackRock Investement Managers Concord Capital Limited - NAB Commonwealth Managed Investments Limited Equity Trustees Ltd Franklin Templeston Invesetment Australia Ltd Goldman Sachs JB Were Asset Management IOOF Australia Invesco Australia Ltd IPAC Asset Management Ltd K2 Asset Management Ltd Legg Mason Asset Management Australia Ltd Merrill Lynch (Australia) Pty Ltd Navigator Investment Netwealth Investment Fund Opis Capital Ltd Ord Minnett Management Ltd Over 50's Mutual Friendly Society Ltd Portfolio Partner Ltd Prime Value Asset Management Sandhurst Trustees Ltd - Bendigo Bank State Street Global Advisors Australia Ltd STL Financial Services Ltd Trust Company of Australia Ltd Vanguard Investments Australia Ltd Wilson HTM Investment Mgmt Pty Ltd VIC Companies (visit after 30/6/09) Armytage private Limited Australian Property Custodian Holdings Limited Australian Wholesale Funds Marketing Limited Bain & Company, Inc. BNP Paribas Asset Management Bank of Ireland Asset Management Australia Pty Ltd Becton Invesetment Management Limited CPT Manager Limited Centro Manager Limited Citicorp Global Asset Management Concise Asset Management Limited Elstree Invesment Management Ltd Fitzpatrick's Dealer Group Pty Ltd Grant Samuel Fund Services Ltd Guild Capital Asset Management Ltd Hastings Funds Management Ltd La Trobe Capital & Mortgage Corportaion Ltd Lincoln Indicators Pty Ltd Mccarthur Cook Funds Management Ltd National Australia Financial Management Ltd Orchard Funds Management Patriot Asset Management Ltd Pentacle Property Funds Management Ltd Perennial Investment Partners Ltd Sovereign MF Ltd Super Members Investments Ltd Top Quartile Management Ltd United Funds Management Ltd QLD Companies (visit before 30/6/09) Suncorp Metway Investment Management Ltd Freeman Fox Hyperion Asset Management LM Investment Management Ltd Q Invest Ltd Ventura Investment Management Ltd QLD Companies (visit after 30/6/09) Cromwell Property Services Limited DDH Graham Limited Ganes Captial Management Ltd Life Settlements Fund Ltd Opus Capital Group Reed Funds Management Ltd Rockstead Funds Management Shakespeare Haney Securities Ltd Trilogy Funds management Ltd Viento Group Ltd Wellington Capital Ltd WA Company (visit before 30/6/09) Officium Capital Ltd WA Companies (visit after 30/6/09) Aspen Funds Management Ltd Agio Capital Pty Limited Aspen Funds Management Limited BWA Managed Investments Limited Great Southern Funds Management Ltd Patersons Asset Management Ltd ACT Company (visit before 30/6/09) Australian Ethical Investment Limited SA Companies (visit after 30/6/09) Adelaide Management Funds Limited Commodity Strategies Limited KeyInvest Ltd Lifeplan Australia Friendly Society Ltd TAS Companies (visit after 30/6/09) SMF Financial Services Ltd Synergy Capital Management Ltd

Created by Faliana Lee on 05/05/2008 9:30:00 AM revised on 10/6/2010 9:00:00AM

Page 27 of 27

Standardisation of Tax Statement Format

ian Holdings Limited s Marketing Limited

agement Australia Pty Ltd

nt Management Ltd

Created by Faliana Lee on 05/05/2008 9:30:00 AM revised on 10/6/2010 9:00:00AM

Page 27 of 27