FROM THE PRESIDENT’S DESK

Racing’s Night of Champions is over for another year and as we have come to expect, a great night was had by all and the event was another great success.  May I take this opportunity to once again congratulate all award nominees and winners.

It would be remiss of me indeed if I did not make special mention of the winners of the 2016 NSWROA Industry Recognition Awards – Colin Tuck and Ray Murrihy.  Both gentlemen were most deserved award recipients for their wonderful contribution to our industry.
 
On behalf of both the Prince of Wales Hospital Foundation (our charity of choice for the function) and NSWROA, I extend our thanks to all of those who attended and contributed so generously to the auctions and raffle. A special thanks to those who attended for the first time and we look forward to seeing you again at future functions.  For further details please see item later in the newsletter.

Whilst still in “function mode”, the Association was delighted to once again support the National Jockeys Trust by taking a table at their annual function which was conducted at Royal Randwick on 3 September 2016.  As usual this function was well attended by the industry and raised much needed funds for the National Jockeys Trust.
 
Last week Racing NSW and the Australian Turf Club (ATC) announced the increase of minimum prizemoney for Saturday metropolitan races to $100,000 per race effective 1 October 2016.  This was just one of many increases announced which were additionally highlighted by:

  • Provincial minimum prizemoney increasing to $30,000 per race
  • Country TAB minimum prizemoney increased to $20,000 per race
  • Country Sky 2 minimum prizemoney increasing to $10,000 per race
  • Addition of an eighth race to 20 selected midweek and night ATC race meetings
  • Inclusion of an $80,000 feature race on ATC Night meetings
  • Group 2 race prizemoney increasing to a minimum of $200,00 per race
  • Group 3 race prizemoney increasing to a minimum of $150,00 per race
  • Listed Race prizemoney increasing to a minimum of $125,000 per race
  • Inclusion of a $150,00 feature race on selected metropolitan meetings
  • BOBS bonuses of $20,000 to be added to two and three-year-old Listed Races
  • Country and Provincial Championships qualifying heats to be run for $150,000
  • A fortnightly $40,000 provincial maiden race on selected meetings; and
  • Thirty $40,000 country restricted maiden races on selected Showcase meetings.

As members would agree this is fantastic news for owners and we congratulate both Racing NSW and the ATC on these great initiatives.

 

On behalf of our Members, NSWROA is grateful for the sponsorship and support of Tabcorp.

TABCORP, we’re committed to supporting the racing industry.

Tabcorp is Australia’s leading wagering and entertainment group. We pride ourselves on our commitment to the Australian Racing Industry through our support of organisations like NSWROA.

Tabcorp returned $735 million to the racing industry in FY14 contributions such as this help to ensure the preservation and improvement of the industry and its people.

Having a bet with the TAB lets you be part of the action by getting involved in the race or the game. You can bet at any of the widely distributed TAB retail outlets, online, by phone or at the track - it's your choice.

You can also enjoy the best features of the TAB when you’re out and about with our website or app. Compatible on all devices.

  • Fast, responsive data loading – makes for easy betting and up-to-date odds
  • Multi building so you can place multis faster
  • My Account functionality: Pending Bets, Account Balance, Bet history and Account Statements.

Click here to open an account now or to download the TAB App, visit tab.com.au on your mobile device.

If you have any inquiries or questions, please contact our friendly customer service staff on 133 390.

 

2016 RACING’S NIGHT OF CHAMPIONS

 

In front of an adoring and packed audience and with the industry once again united in the Royal Randwick Ballroom of the Australian Turf Club, Winx was named the Tab.com.au NSW Champion Horse of the Year at the NSW Racehorse Owners Association’s (NSWROA) 2016 Racing’s Night of Champions.


The Proud Owners, Trainer & Rider of Winx the winner of the
Tab.com.au NSW Champion Horse of the Year Award flanked by Ray McDowell (left)
and Andrew Vouris from Tabcorp (right)

 

Co-Major Sponsor Racing NSW also presented their annual awards on the night with Chris Waller once again taking out the coveted Bart Cummings Medal for a record 6th time.


 

There were dual winners of the NSWROA Industry Recognition Award with Colin Tuck and Ray Murrihy the very worthy recipients.


 

We saw the “very best” in the racing world in contention for all the awards at this gala event in aid of the Prince of Wales Hospital Foundation which was televised live on Sky Thoroughbred Central.

 

The award winners for the 2015/16 season were:

Award

Winners

TAB.COM.AU NSW CHAMPION HORSE OF THE YEAR

Winx

NSWROA INDUSTRY RECOGNITION AWARDS

Ray Murrihy and Colin Tuck

NSW 2 YEAR OLD OF THE YEAR
Proudly sponsored by the Australian Turf Club

Capitalist

NSW 3 YEAR OLD OF THE YEAR
Proudly sponsored by Gow-Gates Insurance Brokers

Press Statement

NSW SPRINTER OF THE YEAR
Proudly sponsored by the Australian Turf Club

Chautauqua

NSW MILER OF THE YEAR
Proudly sponsored by Whitby Bloodstock

Winx

NSW MIDDLE DISTANCE HORSE OF THE YEAR
Proudly sponsored by New Zealand Bloodstock

Preferment (NZ)

NSW STAYER OF THE YEAR
Proudly sponsored by Emirates

Libran (IRE)

QUEEN OF THE AUTUMN
Proudly sponsored by Inglis

Azkadellia (NZ)

NSW COUNTRY CHAMPION HORSE OF THE YEAR
Proudly sponsored by Sky Thoroughbred Central

Fell Swoop

NSW PROVINCIAL CHAMPION HORSE OF THE YEAR
Proudly sponsored by Sky Thoroughbred Central

Lucia Valentina (NZ)

 

As well as the Bart Cummings Medal, Chris Waller also picked up the T J Smith Award for the Sydney Premiership Trainer.  Other awards presented included the George Moore Award (James McDonald), the Theo Green Award (Rory Hutchings), BOBS Horse of the Year (a tie between Sir Bacchus and Pioneering), NSW Racing Writers’ Personality of the Year (Ray Murrihy) and the Sydney Strapper of the Year (Ali Iftikhar).

Guests took to the dance floor with Jellybean Jam who delighted the crowd with their vast repertoire of songs.

NSWROA President, Mr Ray McDowell said “on behalf of the Prince of Wales Hospital Foundation and NSWROA, I would like to thank everyone for attending to help us “celebrate the best” of the NSW thoroughbred industry.  My thanks again to our wonderful sponsors – we couldn’t do it without you!  Congratulations to all winners and I look forward to seeing you all again next year at this fantastic event.”

Visit the NSWROA website www.nswroa.com.au to view the Photo Galleries from the night.

 

NSWROA TROPHY RACE – OFFICIAL PRESENTATION AT RACING’S NIGHT OF CHAMPIONS

As advised in the last newsletter, the inaugural NSW Racehorse Owners Association Trophy race, the last race of the 2015/2016 metropolitan season, was conducted on Saturday 30 July 2016 at Rosehill Gardens with Magnajoy our first winner.

Further to the formalities on race day, a special trophy presentation was made to part owners, Tom Barron and Troy Redden at Racing’s Night of Champions with NSWROA Committee member, the Hon Wayne Haylen, QC, once again officiating on behalf of the Association.


2016 RNOC Red Carpet hosts Gerard Middleton & Priscilla Schmidt
with (l-r) the Hon Wayne Haylen QC, Tom Barron and Troy Redden

 

A reminder that the NSW Racehorse Owners Association Trophy race will be conducted each year as the last race of the metropolitan season.

 

2016 GODOLPHIN STUD AND STABLE STAFF AWARDS


After an outstanding response to the inaugural Australian Godolphin Stud and Stable Staff Awards in 2015, nominations are now open for 2016.

Staged in association with Thoroughbred Breeders Australia (TBA) and Racing Australia (RA), the awards recognise the hard work and dedication of those who occupy what are often behind-the-scenes roles that are nevertheless vital to the industry.

Building on the success of last year’s awards, the 2016 edition offers prizes in six categories (together with an overall Thoroughbred Excellence Award), carrying a total prize-pool of $100,000 and is open to the entire staff of every racing stable and every stud in Australia.

The prize categories are as follows:

1.         Leadership Award (Stud or Stable)
2.         Horsemanship Award (Stud or Stable)
3.         Dedication to Breeding Award
4.         Dedication to Racing Award
5.         Administration and Ancillary Services Award (Stud or Stable)
6.         Thoroughbred Care and Welfare Award

The winner of each of the six main categories will receive a cash prize of $10,000 each and a trophy. The runner-up in each of these categories will receive $1,000 each and an additional $3,000 also goes to the winner’s yard or stud.

The nomination period closes at 5.00 pm AEST on Monday 3 October 2016.

Click here for the 2016 Godolphin Stud and Stable Staff Awards Nomination Form.

Click here for FAQ information.

 

A TRIBUTE TO RACETRACK MAGAZINE

 

Our good friend and NSWROA member Mr Graham Caves, has kindly prepared for the interest of members the following item.

*   *   *   *   *

It was with great disappointment that the Australian racing world learned recently of the cessation of RACETRACK magazine, one of the best known, and certainly the longest surviving, racing magazine of Australia.

In a press release last month the proprietor, Andrew Speedy, announced that the edition now on the news stands is the last.

RACETRACK began life in September 1946 as Sports Novels. The first few issues were, as the name said, composed of fiction stories related to sport. Soon the policy changed, the content became factual and the horse racing coverage began to increase. By the late 1950s horse racing filled the majority of the pages and the decision to become a completely racing magazine came with a name change to RACETRACK in November 1964.

Owner and founder of the magazine Arthur Thorn sold to Australian Consolidated Press in 1987 and in 1992 it was taken over by the Federal Publishing Company. Andrew Speedy acquired RACETRACK for the Easter issue in 2000 and with some wise counsel from veteran turf writer, the late Tom Brassel, Andrew kept up the content level and improved the magazine’s presentation with wonderful photographs and produced it on quality gloss paper.

Fierce competitor TURF MONTHLY which began in July 1951 succumbed in January 2009 but RACETRACK soldiered on.

As the world of information accessibility began to change the magazine became bi-monthly, then quarterly and racing season specific, with a year-end Group One Annual produced to much acclaim. 

By continuing as he did to keep RACETRACK going until now, Andrew deserves the praise of the industry and he has the gratitude of his regular readers and those that care about racing and its traditions.

The reasons for the closure are best described in Andrew’s own words in his Press Release:

“It is based on the latest consumer trends and the rapidly changing nature of how information is delivered.  To continue publishing would not have been in the best interests of future advertisers – the lifeblood of any magazine – along with the loyal subscribers and news agency customers”. 

Thank you Andrew ! Vale RACETRACK magazine ! You’ve served us well !
 
With this article we display the covers of:

  • the March 1947 Sports Novels, which featured the recently retired Bernborough;
  • the November edition of 1964 - the first with the RACETRACK title, with Eskimo Prince on the cover; and
  • the final edition (winter 2016) titled 2016 Sires & Group 1 Racing Annual RACETRACK – which is the icon for the item.
 

 

CARRAZZO CONSULTING UPDATE: PROPERTY BUYER BEWARE - NEW WITHHOLDING RULES ARE HERE

 

Every so often a new tax rule, with quite significant implications and obligations, especially to the racing and breeding industry, comes on the scene with surprisingly little media attention or fanfare.

One such rule is in relation to the new withholding tax regime applying to the purchase of expensive property (i.e. for at least $2 million) from non-residents, these rules relating to property sales contracted on or after 1 July 2016.

As a result, entities (including individuals) purchasing “Taxable Australian Real Property” (“TARP”) from foreign resident vendors will be potentially be subject to a new 10% withholding tax obligation. Although the new withholding obligations is labelled as applying in respect of acquisitions from foreign residents, the new obligations can equally apply where property is acquired from Australian resident vendors.

When does the new withholding obligation apply?

Basically, under the new rules, a purchaser will be required to pay an amount to the ATO, where certain conditions are met, the new rules most relevant to the racing and breeding industry are:

  1. The asset acquired is Australian real property (e.g. a farm, residential property);
  2. The property acquired has a market value (i.e. not necessarily a ‘manipulated’ contract price) of equal to or greater than $2 million dollars;
  3. The vendor of the property (including non-individuals) is a relevant foreign resident; and
  4. Where the vendor cannot obtain a clearance certificate (see below).

Tax Warning – Withholding may apply in respect of a resident Vendor

Where an Australian resident vendor disposes of property (or a company title interest) and does not have a clearance certificate from the ATO (to certify that they are not a foreign resident), a withholding obligation can still arise for the purchaser.

Where a purchaser has an obligation to make a 10% withholding tax payment to the ATO under these rules:

  • The amount to be paid to the ATO is generally equal to 10% of the purchase price;
  • The payment must be made to the ATO on or before the day the purchaser becomes the property owner (i.e. which is the date of settlement); and
  • The obligation of the purchaser to make a payment to the ATO effectively overrides any contractual commitment to pay the full settlement proceeds to the vendor.

Exceptions to the new withholding rules – obtaining a clearance certificate and declarations
  
There are two exceptions that can apply to allow purchasers to avoid withholding and remitting obligations with respect to the purchase of relevant property.

Exception 1 – ATO clearance certificate

There is no 10% withholding obligation imposed on a purchaser for transactions involving property where the vendor has provided the purchaser with an ATO clearance certificate issued by the ATO.

A clearance certificate is issued in writing by the ATO to the vendor, who then provide it to the purchaser, certifying that there is nothing to suggest the vendor is or will be a foreign resident during a specified period. A vendor must make an application for such a certificate via the ATO’s online form entitled: “Clearance certificate application for Australian residents”, which is now available on the ATO’s website. N.B. Based on the experience in our office, these certificates can take anywhere between 1-6 weeks to issue.

Exception 2 – Declaration obligation

For property sales involving an IARPI (an indirect Australian real property interest), which is an interest in property that is held indirectly through one or more interposed entities (e.g. a company or trust), the vendor will be a relevant foreign resident where the knowledge condition is satisfied, unless, for example, a residency or membership interest declaration is made by the vendor and given to the purchaser.

Paying and reporting withholding amounts to the ATO

Once a purchaser works through the above rules and identifies that they have a withholding obligation, the following guidelines should be considered regarding the purchaser’s obligations under these new rules:

  • Re amount to be withheld, 10% of the purchase price is withheld, less, if the acquisition is the result of an option being exercised, any payment made and/or the market value of any property given for the option.

    Note – if the purchaser is registered for GST and GST is embedded in the purchase price of the property, the purchase price is reduced by any input tax credit entitlement of the purchaser.

  • Any amount withheld must be paid to the ATO on or before the date of settlement.
  • Where a payment is withheld, a purchaser must complete the ATO’s approved online “Purchaser Payment Notification” form.
  • Once the above form has been completed, the purchaser will receive a payment reference number, which can be used to pay the 10% withheld by way of electronic transfer or via a cheque.
  • Where a withholding amount has been paid to the ATO, vendors will be entitled to a credit for amounts remitted to the ATO when calculating the income tax liability on the sale.

Penalties that can apply to purchasers who fail to meet these new withholding obligations

There is a strict liability for purchasers to get these new rules right, otherwise they will be subject to existing administrative penalties if they fail to make the required payment. In addition, the General Interest Charge (GIC) will apply to any amounts not paid to the ATO by the required date.

Example – 10% withholding required for property purchase

Allen enters into a contract (dated 4 July 2016) to purchase a breeding property in the Hunter Valley for $4 million. Allen has no information re the tax residency of the vendor

Settlement is due to occur on 21 October 2016. Despite requests from Allen’s lawyers, the vendor does not obtain a clearance certificate from the ATO.

Will Allen be required to pay an amount in respect of the property purchase?

Yes. As the property has a market value of at least $2 million, without a clearance certificate, Allen will be required to pay the ATO $400,000 (10% of $4 million) on or before the day he settles on the property.

If Allen fails to make this payment to the ATO (regardless of having withheld the amount or not), he will be liable to pay the full $400,000 as a penalty to the ATO, as well as GIC.

Will the result be different if Allen is satisfied the vendor is an Australian resident?

No. As the property acquired by Allen is relevant Australian property, the withholding regime effectively treats the vendor as a foreign resident at first instance. Therefore, a clearance certificate must be obtained from the ATO by the vendor in this case, for Allen to avoid the new withholding obligation.

Where a clearance certificate is not obtained by the vendor, Allen must withhold and pay to the ATO, 10% of the property’s purchase price (i.e. $400,000).


Please contact Paul Carrazzo on 03 9982 1000 if you wish for me to clarify or expand on any of the matters raised in this article.

DISCLAIMER
Any reader intending to apply the information in this article to practical circumstances should independently verify their interpretation and the information’s applicability to their particular circumstances with an accountant specialising in this area.


Prepared by:

PAUL CARRAZZO CPA
CARRAZZO CONSULTING CPAs
801 Glenferrie Road, Hawthorn, Vic, 3122
TEL:   (03) 9982 1000
FAX:   (03) 9329 8355
MOB: 0417 549 347
E-mail: paul.carrazzo@carrazzo.com.au
Web Site: www.carrazzo.com.au

 

EQUI-COVER FARM INSURANCE



Wouldn’t it be good if your farm insurance also covered you while you were away from the farm?   Wouldn’t it be good if your farm insurance in fact covered you for theft or damage of saddlery and tack while at an event?

Gow-Gates together with Allianz Australia Insurance Limited and Lloyd’s of London have developed a specialised farm insurance package – Equi-Cover Farm.

Equi-Cover Farm ensures you won’t have to double up on your liability costs and that you are adequately covered.

Want to know more?  Click here to download our fact sheet or contact our team at equine@gowgates.com.au.

 

SAVE THE DATE – NSWROA NIGHT RACING FUNCTION – 25 NOVEMBER 2016



By popular demand I am very pleased to advise members that the Association will be conducting a Night Racing Function on 25 November 2016 at Canterbury Park.  This function will be our last for 2016.

Details for the function are currently being finalised with full details to be sent in the next couple of weeks as well as appearing in next month’s newsletter.

Save the date so you can join us for a wonderful night.

 

NAMING OF RACEHORSES

When it comes to naming our wonderful steeds, there is no doubt that some have the skill whilst others struggle.  For those in the later category I am pleased to advise that help is close at hand.

Phil Kimber has a passion and that passion is naming racehorses.  At present he has over 1,000 names available and begging to be used as well as adding new names constantly and the good news is that he is willing to provide these names at no cost at all.   How good is that?  Having said that any donation given is of course greatly appreciated.

To take advantage of this wonderful service all you have to do is send Phil the following:

1.         Breeding of the Horse
2.         Sex of the horse
3.         Colour of the Horse
4.         Any preference of what they would like the name to associate with (not essential).

Information can be sent to Phil by either email, mail or phone.  Contact details are as follows:

Email:  pjkimber@bigpond.com
Mail:    Phil Kimber, 51 Foxtail Rise, DOONAN   QLD   4562
Telephone:  (07) 5471 1812

 

INDUSTRY UPDATES

Hereunder for the interest of members are some recent industry items:

Australian Racehorse of the Year Finalists Announced
The finalists for all seven categories of the 2015/2016 Australian Racehorse of the Year have been released.  The awards ceremony for the 2015/2016 Australian Racehorse of the Year Awards will be held at the Four Seasons Hotel in Sydney on Thursday, 29 September 2016.  The following horses, in alphabetical order, are finalists in their respective categories.

Champion Two-Year-Old of the Year
Capitalist
Extreme Choice
Prized Icon
Sacred Elixir
Yankee Rose

New Zealand Bloodstock Champion Three-Year-Old Filly of the Year
English
Jameka
Perfect Reflection
Sofia Rosa
Speak Fondly

Champion Three-Year-Old Colt or Gelding of the Year
Holler
Japonisme
Press Statement
Tarzino
Tavago

Inglis Champion Sprinter of the Year
Black Heart Bart
Buffering
Chautauqua
Delectation
Flamberge

Champion Middle-Distance Horse of the Year
Criterion
Lucia Valentina
Preferment
The United Stakes
Winx

Champion Stayer of the Year
Criterion
Gallante
Mongolian Khan
Preferment
Prince of Penzance

Champion Jumper of the Year
Gingerboy
Nishiazabu
Sea King
Wells
Zanteco

The Australian Champion Racehorse of the Year is voted on from the full list of the above horses.

 

2016 RACING’S NIGHT OF CHAMPIONS – MEMBER TICKET COMPETITION

 

Thank you to all who attended 2016 Racing’s Night of Champions.  What a night!    

As advised previously, as a small gesture to say thank you to members who purchased tickets to our flagship event, a post event draw was conducted to win two FREE TICKETS to the 2017 Racing’s Night of Champions.

I am very pleased to announce that Mrs Debbie Kepitis was the winner of the draw.  Our congratulations to Mrs Kepitis.

My thanks to NSWROA Life Member, Mr Noel Bracks, who officiated at the draw which was conducted in the NSWROA office on 13 September 2016.

 

BOBS & BOBS EXTRA UPDATE


Update by Matt Jones, Racing NSW Media & Communications Executive

 

Evacuation, Sezanne and Dowdstown Charlie are the early leaders in the 2016/17 BOBS Horse Premiership.

All horses took home $20,000 in BOBS Bonus earnings and for Dowdstown Charlie it took his career BOBS earnings to $70,000 for his connections.

Evacuation, trained by Gai Waterhouse and Adrian Bott, strode away for a win at Rosehill Gardens – the second-straight of his short career.  The two-year-old colt, by More Than Ready, was a raging $1.90 favourite and was appropriately ridden by Kerrin McEvoy who sat him just outside the leader before proving to be tough than his rivals and winning by three lengths.  “He’s big, strong and very good,” Waterhouse said.  “He’s a magnificent-looking colt, but he is still working out what he has to do.  “Because he’s such a big colt he has needed time to fill into his frame...he will only get better.”

Sezanne, trained by Chris Waller, has earned two $10,000 BOBS Bonus wins to join the leaders thanks to a Hugh Bowman ride at Canterbury on August 31.

 

CARRAZZO CONSULTING UPDATE: A NEW EASIER WAY TO CHANGE BUSINESS STRUCTURES

 

We often takeover clients, not just those in the horse industry either, where little thought was put into how their business affairs were originally structured for tax. The frustrating part was that trying to change the business to a more tax efficient or commercial tax entity (e.g. an entity offering greater asset protection) often carried severe “up-front” income tax consequences. In terms of making structure changes after set-up, the “horse had bolted”, so to speak.

The Government have finally taken notice of this dilemma and in the 2015/2016 Budget announced new “Small Business Restructure” rules with these laws having commenced on 1 April 2016.

These are very complex rules, regrettably, but below I will outline the basic operation of these rules and maybe you will conclude that it’s now well worth the effort to convert your business from its existing entity to, say, a trust, company, sole trader or partnership.

 

New Small Business Restructure rules – An Overview

These rules introduce some novel concepts as well as representing an opportunity for businesses to restructure in such a way as to assist them in scaling up their business while putting in place asset protection strategies (e.g. relocating the business to a new company or trust). This article is intended to provide a general guide to these rules, it is not intended to be exhaustive or provide strategies. If you wish to talk about what these new rules could mean, please do not hesitate to contact the Carrazzo Consulting team.

 

The “Rollover” to a new entity

The scope of this rollover from one business entity to another is not simply a deferment of tax. The Rollover is much more than this. The effect of applying these rules is to eliminate all direct income tax consequences of a transfer of assets where these rules are followed. This means, for instance, that nasty up-front tax liabilities associated with the trading stock “market value uplift rule” on transfers to a new entity could potentially be disregarded entirely.

Example 1 – Tax on transferring stock to a new entity

Broodmares with a tax value of $300,000 are held by Molly as a sole trader within her horse business. Molly, after consulting her new accountant, transfers this stock to a new trust on 1 July 2016. Under tax laws, this is a disposal “outside the ordinary course of business” and, as such, they must be transferred at market value. The stock market value at 1 July 2016 is $600,000, thus Molly must declare a $300,000 profit ($600,000 market value less $300,000 tax value) in her tax return, even though no money has changed hands


Molly’s new accountant applies this new rollover, after working through the eligibility criteria and formalising and documenting his advice to the transaction. This eliminates the need to declare the $300,000 profit on the transfer.

Having said this, caution should be exercised because anything that happens to the asset not directly in relation to the transfer or the business will still be subject to income tax laws. Where this line is drawn requires considerable professional judgment and serious advice.

 

Eligibility - Some novel concepts and terms

The eligibility criteria for this rollover rely upon a number of novel concepts that should rightly be discussed before the main requirements for accessing the concession can be gone through. The ability to utilise the concessions will hinge on how these new terms are ultimately interpreted by the courts.

 

The “Small Business Entity” (SBE) condition

Broadly speaking, these new rules require that both the transferee and transferor are a “Small Business Entity” in the tax year the transfer occurs.

An entity will be an SBE for a tax year where it carries on business in that income year and broadly has an aggregated turnover of less than $10 million in the previous or current income year.

These rollover rules are, per recent draft legislation, subject to the new “small business” $10 million turnover threshold, rather than the former lower $2 million, the higher threshold being proposed in the 2016/2017 budget.

 

Must be a ‘Genuine’ restructure

The restructure undertaken must be ‘genuine’ in order to apply this rollover. The term ‘genuine restructure’ is not actually defined by the legislation or the ATO. The guidance from the government on this issue provides the following examples of factors that may impact whether a restructure is genuine:

  • The transaction is a bona fide commercial arrangement undertaken to enhance business efficiency;
  • Business continues to operate following the transfer, through a different entity structure but under the same ultimate economic ownership;
  • Transferred assets continue to be used in the business;
  • Restructure results in a structure likely to have been adopted had the business owners obtained appropriate professional advice when setting up the business;
  • The restructure is not artificial or unduly tax driven; and
  • it is not a divestment or preliminary step to facilitate the economic realisation of assets.

 

Genuine Restructure – Safe Harbour Rule

The government provides an additional safe harbour rule where the restructure doesn’t meet the above conditions. Essentially, where a business restructure does not meet the relevant factors it may yet be classed a ‘genuine restructure’ if one of the three limbs of the safe harbour rule outlined below, for a 3 year period after the restructure, are met:

  • No change in ultimate economic ownership of any of the significant assets of the business (other than trading stock) that were transferred under the transaction;

    Example 2 – Genuine Restructure: 3 year safe harbour
    Molly as part of the transfer of her business also transfers her farm into a family trust.
    Her new accountant consults the solicitor undertaking the transaction to ensure a clause of the contract restricts the sale of the farm for a further 3 year period after the transfer.

    This clause also clarified that the farm contractually must be used in the business originally run by Molly.

  • The significant assets transferred continue to be active assets (i.e. used in the same business); and
  • The assets are not used significantly or materially for private purposes.

Re point 1 above, in the horse breeding and racing industry, a ‘significant asset’ like mares and foals may often be fully or partly sold after transfer. As these are trading stock, these transactions will not invalidate this 3-year safe harbour rule. 

 

Family trusts – alternative ultimate economic ownership test

It is sometimes difficult to determine the ultimate economic owner as a trust is subject to a trustee’s discretion as to the distribution of income and/or capital (as with most family trusts).

To meet this alternative test in respect of the ultimate economic owners where a family trust is either the transferor or transferee, every individual who had ultimate economic ownership of the transferred asset before the transfer, and every individual who has ultimate economic ownership of the transferred asset after the transfer, must be members of the ‘family group’ in relation to the family trust.

Another requirement is that the transferor just before or just after the transaction was a family trust. A family trust is one that has an ATO ‘Family Trust Election’ in place, something that Carrazzo Consulting considers as part of a client’s overall affairs.
Eligible assets

Where a party to the transfer is a small business entity the asset being transferred must be an “active asset” per capital gains tax (CGT) concepts.

 

Residency

Both the transferor and transferee must be Australian tax residents in order to apply this concession.

 

Parties to the concession

Both transferee and transferor must choose to apply a roll-over in relation to the assets transferred under the transaction. It would be prudent to evidence this choice in writing.
Furthermore, this cannot be chosen by a superannuation fund.

 

Effect of Rollover

The real benefit of this rollover is the generous and expansive nature of the concession. Essentially, a transaction to which the rollover applies resulting in the transfer of an asset will have no income tax consequences.

This rule is extremely generous but be careful it doesn’t trigger general anti-avoidance provisions. Here again you’re the advice of your adviser must be sought.

 

CGT Assets

Note that for the purposes of the 12 month 50% general CGT discount, eligible transferees will need to wait another 12 months from the transfer of the asset before disposing of it and getting this concession (e.g. a breeding property).

Pre-CGT assets transferred under the roll-over will retain their pre-CGT status on the transfer.

 

Trading Stock

The transferee will inherit the transferor’s cost and other attributes of the assets as the transferor just before the transfer. This is to ensure that any deductions claimed by the transferor up to the date of the transfer are taken into account.
 
In other words, if the trading stock is held at the start of the relevant income year at market value this is the value that will be inherited on transfer of the asset by the transferee. This is especially important for mares and stallions transferred who have been written-down under the special “write-off” rules.

 

Example and Summary

If horses are held in your individual name as a hobby but the scale of the activities starts to increase to possibly ‘business’ status, this may be a viable option. Carrazzo Consulting would review your affairs to ensure that across all relevant entities your group is under the relevant turnover threshold (i.e. $10 million). We would then go through all the eligibility requirements and restructure the business into a more appropriate entity be it a partnership, trust or company. The tax costs that are normally associated with this type of restructure would be disregarded and the client would get on with running the business.

This rollover is generous in nature. It allows businesses to restructure without incurring additional tax costs of undertaking transactions. Clients should be mindful that State based duties and other transfer costs would presumably still apply to relevant transactions and that these costs should be considered prior to undertaking relevant transactions.


Prepared by:
Bill Mavropoulos CA, Senior Tax Manager
CARRAZZO CONSULTING CPAs
801 Glenferrie Road, Hawthorn, Vic, 3122
TEL:  61 (03) 9982 1000
FAX:  61 (03) 9329 8355
E-mail: bill@carrazzo.com.au
Web Site: www.carrazzo.com.au

DISCLAIMER
Any reader intending to apply the information in this article to practical circumstances should independently verify their interpretation and the information’s applicability to their particular circumstances with an accountant specialising in this area.

 

WINNERS ARE GRINNERS

A WINNER – there are no better words for an owner to hear!  As members are aware, as part of our membership renewal process, NSWROA requested members to forward the names of their racehorses in order for us to acknowledge their racing triumphs in our publications.

The listing under comprises wins recorded in New South Wales as well as Australian black type successes which are recorded in bold type.

Accordingly, hereunder are the lucky NSWROA members who had winners in August 2016


Owner

Meeting

Horse

J Abrahams

Wagga

I've Got This

J N Allen

Caulfield

Redzel

G Altomonte

Canterbury

Fabrizio

R J Balding

Warwick Farm

Centro Superior

R S Balding

Warwick Farm

Centro Superior

G Besgrove

Canberra

Atlantic Sentinel

B Bryant 

Canberra

Atlantic Sentinel

L Carpenter

Rosehill

Sir Bacchus

F & Mrs C Cook

Cessnock

Marilisa (NZ)

 

Gosford

Kings of Leon

 

Hawkesbury

McCreery (GB)

 

Rosehill

Sir Bacchus

H Dyball

Wyong

Houdini Hal

Ms J Evatt

Cessnock

Marilisa (NZ)

Godolphin

Canterbury (3)

Allision

 

 

Chetwood

 

 

Precautions

 

Goulburn

Fragonard

 

Kembla

Retaliation

 

Randwick

Pearls

 

Rosehill (3)

Allergic

 

 

Astern

 

 

Chetwood

 

Warwick Farm

Malaise

Gooree Stud

Muswellbrook

Pera Pera

A Gow-Gates

Dubbo

Suncraze

Mrs S Grant 

Rosehill

Sir Bacchus

S Grant 

Rosehill

Sir Bacchus

G Harvey

Canterbury

Serve and Volley (NZ)

 

Casino

Crooked Stick

A W Hatton

Newcastle

Pena Ajena

Hon W R Haylen

Cessnock

Marilisa (NZ)

J Janiak

Tamworth

Polskie Prince

I Johnson

Kembla

Levenses

Mrs D Kepitis

Randwick

Winx

W Lanham

Nowra

Flys Away

R Lapointe

Warwick Farm

Pound Sterling

 

Wyong

Silom Road

Laurel Oak Bloodstock 

Canberra

Atlantic Sentinel

 

Forbes

Out of the Night

 

Rosehill

Sir Bacchus

N Macdonald 

Rosehill

Sir Bacchus

Ms N Mackay 

Rosehill

Sir Bacchus

K Maloney

Caulfield

Voodoo Lad

 

Kembla

First Approval

J & Mrs A McDonnell

Wyong

Positive Problems

B McGilvray

Taree

Eyezoff

J Middleton 

Canberra

Atlantic Sentinel

L A D Mihalyka 

Rosehill

Sir Bacchus

L & Mrs J Mihalyka 

Canberra

Atlantic Sentinel

 

Forbes

Out of the Night

 

Rosehill

Sir Bacchus

Dato Tan Chin Nam

Kembla

Nassak (NZ)

P Nottage

Newcastle

Chakana

 

Sapphire Coast

Halliday Road

D Ramage

Kembla

Nassak (NZ)

S Ramsey

Canterbury

Glenall

Mrs C Remond

Kembla

Eva Luna

P & Mrs R Richards 

Rosehill

Sir Bacchus

Ms J Ritchie

Wyong

Houdini Hal

L Saville

Forbes

Out of the Night

Mrs M Smith

Gosford

Kings of Leon

J L Thompson

Taree

Calibra

S van Eyk

Goulburn

Better Be Good

N & Mrs A Vass

Kembla

Chloe's Comet

 

Newcastle

Travancore (NZ)

Ms L Watson

Wagga

Gentleman Max

B Wood

Gosford

Cosmic Cameo


Another feature in the Newsletter is the NSWROA Member's Black Type Honour Roll which acknowledges the success of members in the black type arena.

The Honour Roll for the 2016-2017 season is as follows:


NSWROA Members
2016/2017 Black Type Honour Roll
Current to 31 August 2016


Category

Race Name

Horse

Owner

G2

ATC Warwick Stakes

Winx

Mrs D Kepitis

G2

ATC Run To The Rose

Astern

Godolphin

 

 

 

 

G3

ATC Toy Show Quality

Pearls

Godolphin

G3

MRC The Heath 1000 Stakes

Redzel

J N Allen

 

 

 

 

LR

MRC Regal Roller Stakes

Voodoo Lad

K Maloney

LR

HRC Rowley Mile

McCreery (GB)

F & Mrs C Cook

What great results! Congratulations to all! Don't forget to forward the names of your racehorses to the NSWROA office.

 

SHOWCASE MEETING – DUBBO CUP – SUNDAY, 18 SEPTEMBER 2016

Dubbo is the venue for the next Showcase Meeting to be held on Sunday, 18 September 2016.

The exciting eight event card has a BOBS Bonus available on all races.

The feature on the day will of course be the Dubbo Cup an Open Handicap run over 1600 metres with $60,000 in prizemoney on offer.

For further details regarding Dubbo Cup day visit the Dubbo Turf Club’s website at www.dubboturfclub.com.au.

 

GENERAL

If you have recently moved, changed your postal address or obtained an email address, it would be greatly appreciated if you could contact the office in order for our records to be updated accordingly.

 

Yours in Racing
Ray McDowell
President

15 September 2016

 

NSW Racehorse Owners Association • GPO Box 1506, SYDNEY NSW 2001
Ph: 9299 4299 • Fax: 9299 3212 • E: nswroa1@ozemail.com.au • W: www.nswroa.com.au