Legislation
TOFA Bill
05.12.2008
The Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008, which will give effect to the Taxation of Financial Arrangements (TOFA) Stages 3 and 4, was introduced into Parliament on 4 December 2008. TOFA Stages 3 and 4 provides a comprehensive framework for taxing financial arrangements. The measures contain rules that cover tax timing treatments for financial arrangements, including elective tax timing and character hedging rules that are designed to minimise tax timing and character mismatches. The rules permit eligible taxpayers to elect to have financial arrangements taxed on a fair value or retranslation basis, or to rely on their financial reports for taxation purposes. These elections create compliance cost savings by more closely aligning tax treatment with accounting standards.
Taxpayers to which the measures apply and which do not elect to use these methods will be required to apply the TOFA Stages 3 and 4 accruals and realisation rules.
The TOFA rules will not be applied on a mandatory basis to individual and small business taxpayers, except where significant deferral of tax is involved. Superannuation funds and managed investment schemes will apply the rules if the value of their assets is $100,000,000 or more. Most other taxpayers will apply the rules if their turnover is $100,000,000 or more, if the value of their assets is $300,000,000 or more or if the value of their financial assets is $100,000,000 or more. Taxpayers who are not required to apply the TOFA rules may elect to apply the rules.
The TOFA Stages 3 and 4 measures will apply for income years commencing on or after 1 July 2010. However, taxpayers may elect to have the measures apply for income years commencing on or after 1 July 2009.
For the text of the Bill, click here.
For the text of the Assistant Treasurer’s media release, click here.
