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Tax Alert for December 2011 and January 2012

Posted on | November 22, 2011 | Comments Off

We are pleased to supply you with the December 2011/January 2012 edition of Client Alert, which contains information on a number of important taxation developments up to and including 16 November 2011:

Small business benchmarks under microscope

The Inspector-General of Taxation, Ali Noroozi, has advised that he will review the Australian Tax Office’s use of small business performance benchmarks. The benchmarks produced by the Australian Tax Office (ATO) are used to identify taxpayers who may not be declaring all of their income and who may be involved in the cash economy. Mr Noroozi said he will investigate whether the benchmarks are an appropriate tool for identifying underreporting of income.

There has been growing concern among tax advisers about the use of benchmarks. The Inspector-General said he will also consider whether the ATO’s expectations of small business in relation to record keeping are clearly communicated and reasonable. The investigation is expected to commence later this year.

Carbon tax scheme to commence on 1 July 2012

The Government’s controversial carbon tax scheme has passed Parliament and will commence on 1 July 2012. From that date, the country’s biggest polluters will be required to pay $23 for each tonne of carbon pollution released into the atmosphere. As part of the scheme, tax cuts to assist households and support measures for businesses to assist them in adapting to the new carbon tax will also be implemented.

TIP: Although the carbon tax scheme will not commence until next year, businesses should consider putting some serious thought into how they may be affected, both directly and indirectly, by the scheme. Please contact our office for any assistance.

Uncertainty with private rulings system

In a recent case, the Full Federal Court unanimously affirmed assessments issued by the Commissioner to a taxpayer, a sports club, even though the assessments were inconsistent with a private ruling issued to the club. In 2004 the club had received a private ruling stating it was exempt from income tax for the 2003 to 2010 income years. However, the Commissioner in 2006 claimed the facts of the club’s situation had changed and withdrew the ruling. The club claimed it should be afforded with protection under the tax law. However, the Court disagreed.

TIP: According to some commentators, the court’s decision could cause taxpayers to lose confidence in the private rulings system. If you have any questions, please contact our office.

Taxpayer entitled to prompt GST refund, says Court

An exporter of mobile phone goods has been successful before the Federal Court in a case concerning GST refunds. The Federal Court ordered that the Commissioner comply with the GST and tax law and immediately pay the exporter the net amount notified in its GST returns for various tax periods covering January to May 2011. The ATO had alleged that the refunds claimed were unsubstantiated and were fraudulent. It refused to pay the amounts until an audit had concluded. However, the Court did not agree that in the circumstances the law allowed the withholding of a payment pending an investigation by the Commissioner. The Full Federal Court later also dismissed the Commissioner’s appeal against the decision.

CGT test includes commission liability after CGT event

In a recent decision, the majority of the Full Federal Court held that for the purposes of accessing the small business capital gains tax (CGT) concessions, a real estate agent commission incurred on the sale of a hotel business could be included as a liability for the purposes of the maximum net asset value test. This was the case even though the taxpayer was invoiced for the commission after entering the contract of disposal.

TIP: Small businesses can access a range of tax concessions to reduce CGT on the sale of certain assets if certain conditions are met. One of the conditions is that the taxpayer must satisfy the “maximum net asset value” test. To pass the test, the net value of all the CGT assets of the taxpayer (including affiliates and connected entities) must not exceed $6 million. Debts owed to the taxpayer are included as CGT assets for the purpose of the test. The rules can be complex: please contact our office for more information.

Personal services income rules apply, finds Tribunal

The Administrative Appeals Tribunal has recently held that the personal services income (PSI) rules applied to an IT professional to include in his assessable income amounts derived by his company through the provision of his IT expertise to a small number of clients from the same company group. The Tribunal also held the company was not a “personal services business”.

TIP:  Many consultants and contractors operate as a sole trader or through a company, partnership or trust. In many cases, the income received for the work they do may be classified as PSI if certain tests are not passed. However, the PSI rules do not apply to individuals or interposed entities carrying on a “personal services business”. It should be noted that the PSI rules remain a tax compliance risk area for the ATO. Please contact our office for any assistance.

Tax changes for small businesses introduced

The Government has introduced legislation into Parliament which proposes to increase the small business instant asset write-off threshold from $1,000 to $6,500, and create a single depreciation pool to write-off assets at a rate of 30% (15% in the first year). The changes are proposed to commence from the 2012–2013 year; however, their formal enactment would first require the commencement of the Government’s carbon tax scheme (which will start on 1 July 2012) and the proposed Minerals Resource Rent Tax (MRRT). The changes also propose to allow an immediate write-off of up to $5,000 for motor vehicles from the 2012–2013 income year. The Assistant Treasurer, Bill Shorten, said under the changes small businesses would benefit from improved cash flow and reduced compliance costs.

Superannuation guarantee to be increased to 12%

Legislation has been introduced into Parliament which proposes to increase the superannuation guarantee (SG) rate from 9% to 12%, phasing in from 1 July 2013. The Government also announced that it would abolish the age limit for which employers no longer need to provide superannuation guarantee.

TIP: If the SG age limit is to be abolished, then from 1 July 2013, employers will be required to make SG contributions for employees regardless of an employee’s age.

Tax Alert for November 2011

Posted on | October 26, 2011 | Comments Off

We are pleased to supply you with the November 2011 edition of Client Alert, which contains information on a number of important taxation developments up to and including 17 October 2011:

Business tax losses under Tax Forum spotlight

The treatment of business tax losses will be reviewed by a business tax reform working group announced by the Treasurer at the Tax Forum held in October 2011. It is understood the first priority of the working group is to identify options for losses and how the Government would fund them. “We need to consider things like loss carry back, uplifting losses, and what happens to the value of losses when business change composition or ownership”, said Treasurer Wayne Swan. It is expected that the working group will deliver its initial report in November 2011 and a final report to the Government by March 2012, before the next budget.

Tax Office views on SMSFs, real property and borrowing rules

The Australian Tax Office (ATO) has recently issued a draft ruling which concerns self-managed superannuation funds (SMSFs), real property and the application of certain borrowing rules under the superannuation law. The draft ruling outlines where money borrowed under a limited recourse borrowing arrangement (LRBA) can be applied in maintaining or repairing (but not improving) a single acquirable asset.

TIP: While the draft ruling provides some welcome clarification on the ATO’s views on key aspects of the LRBA provisions, it only covers a few pieces of the LRBA puzzle. The rules can be complex and the penalties can be severe for getting it wrong. If you have any questions, please contact our office.

Tax law changes to tackle phoenix activities

The Government has recently introduced legislation in Parliament which aims to deter company directors from engaging in phoenix activities. Phoenix activities involve the deliberate liquidation of a company to avoid paying tax liabilities and employee superannuation. The business then “rises” again and continues operations controlled by the same person, but under another corporate entity and free of debts. The legislation also aims to encourage director compliance with tax and superannuation obligations.

The proposed tax law changes will make directors personally liable for their company’s failure to pay the employees’ superannuation guarantee amounts. The changes will also allow the ATO to pursue directors without issuing a “director penalty notice” where the company’s pay as you go (PAYG) withholding or superannuation guarantee liability remains unpaid and unreported three months after the due day. In addition, the Government proposes to deny directors (and their associates) entitlement to PAYG withholding credits (through the imposition of a new tax) where the company they are involved in has failed to remit PAYG withholding amounts.

TIP: It is proposed that the changes commence once the legislation is formally enacted. However, there are special transitional provisions which can cover amounts that are due to the ATO or a superannuation fund at the time the legislation enters into force. Directors should ensure their company’s tax risk management policies and systems are up-to-date. Please contact our office if you have any questions.

Small business depreciation rule changes on the horizon

The Government has sought comments on draft legislation which proposes to make various tax law changes concerning the small business depreciation rules that apply to small business entities. The changes are subject to the passage of the mining tax legislation as well as the carbon tax legislation in Parliament. However, should these taxes be successfully implemented, the proposed changes could improve cash flow and reduce compliance costs for small businesses. The proposed changes include increasing the instant asset write-off threshold from $1,000 to $6,500, and simplifying the current depreciation pooling arrangements to allow small businesses to depreciate some assets more quickly. The changes are proposed to apply from the
2012–2013 income year.

Standard deduction for work expenses next year

Public consultation has closed on the Government’s draft legislation which proposes to provide individual taxpayers with a standard tax deduction to cover work-related expenses and the cost of managing their tax affairs. The standard deduction proposed is $500 for 2012–2013, increasing to $1,000 for 2013–2014 and thereafter. Taxpayers whose claims exceed the proposed standard deduction will still be allowed to make those claims provided receipts are kept. However, the Government has noted the deduction is dependent on the implementation of the mining tax legislation (which is yet to be introduced).

Partnership not ended, so director still liable, says Court

A businessman has been unsuccessful in appealing to the NSW Court of Appeal against an earlier District Court decision which had held that, as a director of a company, he was liable to pay monies to the ATO that were withheld from employees’ wages. Under the tax law, a director of a company could face a tax penalty if amounts withheld from employee’s wages are not paid to the ATO.

Broadly, the director was part of a partnership operating a café/bar restaurant with another partner. However, the Court heard the relationship between the partners had deteriorated. The director argued the partnership had terminated, so therefore there could be no withholding by his company. However, the Court found it was the director’s involvement in the management of the partnership that had actually ended, not the partnership itself.

Dutch retiree took reasonable care, finds Tribunal

In a recent decision, the Administrative Appeals Tribunal held that a retiree had not failed to take reasonable care when he omitted foreign early retirement fund payments from the Netherlands from his 2003 to 2006 income tax returns. Among various factors, the Tribunal accepted the retiree’s evidence that he had sought and received oral advice from the ATO in 2002 which was contrary to later advice contained in a “private binding ruling” issue by the ATO in 2005. The Tribunal also took into account in making its findings that the retiree had limited English and did not understand and was confused by the ruling.

Super guarantee charge is a valid tax, says High Court

A market research company has been unsuccessful in its constitutional challenge in the High Court against the validity of the superannuation guarantee charge. The High Court had unanimously held the charge to be valid tax. In doing so, the High Court also affirmed an earlier Tribunal’s finding that market research interviewers were “employees” of the company for superannuation guarantee purposes, and not independent contractors.

Tax Alert for October 2011

Posted on | October 21, 2011 | Comments Off

We are pleased to supply you with the October 2011 edition of the Client Alert, which contains information on a number of important taxation developments up to and including 15 September 2011:

Cash economy still on ATO’s radar

The ATO has maintained a focus on its compliance activities in relation to small business performance benchmarking and the cash economy. In a recent speech, the Commissioner of Taxation said businesses outside the relevant benchmarks are subject to ATO review and/or audit. Where businesses do not have adequate records to substantiate their performance, the Commissioner said the ATO will make a default assessment using the relevant small business benchmark.

The ATO uses a variety of tools to help it identify potential cash economy activities which include:

• collecting and comparing significant amounts of information from a number of sources, including banks, other government agencies such as Centrelink, and industry suppliers. The ATO can even collect information about purchases of major items such as cars and property; and
• comparing the performances of businesses against other similar businesses in the industry. The ATO currently has over 100 small business benchmarks for this purpose. The benchmarks are used to identify businesses that may be avoiding their tax obligations.

TIP: Undertaking a review of business records may help to identify whether you are at risk of review by the ATO. According to the ATO, taxpayers may be given concessional treatment in relation to penalties and interest, should they make a voluntary disclosure of a mistake.

Don’t take the bait on tax avoidance schemes

The ATO has recently identified a number of tax avoidance schemes which it says are a risk to small businesses. These include:

• complex arrangements involving trusts to provide loans to individuals;
• abusive labour hire schemes;
• claims by companies for a deduction for unpaid directors fees; and
• avoidance of fringe benefits tax.

TIP: Not all tax avoidance schemes are obvious and many can look legitimate. Only on close examination do higher risk features start to appear. Please contact our office if you have any questions.

Capital gains tax bills for failing test

The Administrative Appeals Tribunal has recently handed down two separate decisions concerning capital gains tax (CGT) concessions for small businesses. The tax law offers a range of tax concessions for small businesses that have made a capital gain on a “CGT asset” that has been used in the business. The concessions can reduce, eliminate or roll-over a capital gain. However, the concessions are only available if certain tests are met. The main issue before the Tribunal was whether the taxpayers satisfied the “maximum net asset value” test. The test would be satisfied if, just before the “CGT event”, the value of the assets of the taxpayers and their connected entities did not exceed $5 million.

Broadly, the Tribunal held the taxpayers did not meet the then “maximum net asset value” test in order to qualify for the concessions. The taxpayers did not satisfy the onus of proving that the “maximum net asset value” of the assets of the taxpayers and their connected entities were less than $5 million. In the first case, the Tribunal denied the taxpayer the concessions with respect to the sale of a marina for $8.9 million. In the second case, the Tribunal also refused the taxpayer the concessions in respect of a gain he made on selling two $1 shares in a company for $4.9 million.

TIP: There have been changes to the relevant rules. For example, the amount for the “maximum net asset value” test increased to $6 million. If you have any questions please contact our office.

Share trading business existed, says Tribunal

In an unusual decision, the Administrative Appeals Tribunal held a taxpayer was not a passive investor in relation to share trading activities and was carrying on a business of share trading for the year ended 30 June 2008. The taxpayer was a chief executive of a services company and traded shares in his own name on the share market. The Commissioner argued the taxpayer was not conducting a share trading business as he did not have a formal business plan and did not sell many shares during the relevant period. The taxpayer argued that the only reason he did not sell much of his portfolio during the period was due to the global financial crisis.

Taxpayer loses excess super contributions tax appeal

A taxpayer has been unsuccessful before the Federal Court in appealing against a decision of the Administrative Appeals Tribunal. The Tribunal had affirmed a superannuation excess non-concessional contributions tax assessment of $86,867 against her for breaching the $1 million non-concessional contributions cap during the transitional period to 30 June 2007 (which existed at the time). The taxpayer had argued that a $355,000 payment from her personal superannuation fund in June 2007 was received by her in a capacity as trustee before being on-paid to her new superannuation fund and therefore should be treated as a roll-over superannuation benefit. However, the Court broadly agreed with the findings made by the Tribunal.

TIP: As part of the 2011–2012 Budget, the Government proposed that eligible individuals be given a once-only option to have excess concessional contributions up to $10,000 refunded and assessed at their marginal tax rate for the financial year in which the contribution was made. The refund option is proposed to only apply for the first year in which the concessional contributions cap is breached, commencing from 2011–2012. If you have any questions please contact our office.

SMSFs warned on improper lending of money

The ATO says it is concerned that some self-managed superannuation fund (SMSF) trustees are lending money on favourable terms from their SMSFs to people who provide advice or assist in the running in the fund. It warns that this arrangement may lead to the loss of the complying status of the fund and concessional tax rates. The ATO says trustees should ensure that loan terms comply with the law and fit their investment strategy.

TIP: Decisions to lend money from an SMSF should be backed by the appropriate documentation such as an appropriate loan agreement. If you have any questions please contact our office.

Tax Alert for August 2011

Posted on | August 19, 2011 | Comments Off

We are pleased to supply you with the September 2011 edition of Client Alert, which contains information on a number of important taxation developments up to and including 12 August 2011:

Carbon tax to commence on 1 July 2012

The Prime Minister has announced details of the Government’s plans to put a price on carbon. The plan, to commence on 1 July 2012, proposes to set a price of $23 for each tonne of carbon pollution released into the atmosphere by Australia’s biggest polluters. It is proposed that around 500 businesses will be required to pay for their pollution under the carbon pricing mechanism. The Prime Minister also announced tax cuts to assist households and support measures for businesses to assist them in adapting to the new carbon tax.

TIP: Although the carbon tax scheme will not commence until next year, businesses should consider how they may be affected both directly and indirectly by the scheme and whether they are able to access some of the compensation and support measures announced as part of the scheme. Please contact our office for any assistance.

Government set on countering phoenix activities

The Government has proposed tax law changes to counter fraudulent phoenix activities by company directors. Such activities involve the deliberate liquidation of a company to avoid paying tax liabilities and employee superannuation. The business then “rises” again and continues operations controlled by the same person, but under another corporate entity and free of debts. The proposed tax law changes include making directors personally liable for unpaid employee superannuation, and allowing the Australian Taxation Office (ATO) to pursue directors where certain tax debts remain unpaid and unreported three months after the due day.

TIP: The changes would place additional pressure on directors to ensure that their company’s tax risk management policies and systems are up-to-date. It should also be noted that the ATO, as part of its Compliance Program for this year, intends to detect potential phoenix activities sooner through a targeted program of reviews and audits of directors.

New restrictions on SMSF investment in artworks

New regulations have been made to prevent self-managed superannuation fund (SMSF) trustees from gaining current day benefit from an investment in collectables and other personal use assets, for example artwork, jewellery, antiques, coins and stamps, wine or spirits and motor vehicles. The regulations are designed to ensure such investments are made for genuine retirement income purposes only.

TIP: The new regulations commenced on 1 July 2011, however, there is a five-year transitional period for assets that were held by an SMSF as at 30 June 2011. Please contact our office if you have any questions.

Income test for private health insurance rebate

The Government is again attempting to pass legislation to give effect to the 2009–2010 Federal Budget announcement to income test the 30% private health insurance rebate by introducing three new “Private Health Insurance Incentive Tiers”. The changes propose to reduce the amount of private health insurance rebate an eligible person with a complying private health insurance policy is entitled to when that person has income for surcharge purposes above the relevant Medicare levy surcharge threshold. If enacted, the changes are proposed to apply from 1 January 2012.

TIP: The income thresholds which would trigger application of the proposed changes need to be carefully noted. Please contact our office for any assistance.

Tax discount on interest income

The Government has released details on how it will implement its 2010–2011 Federal Budget proposal to provide individuals with a 50% tax discount on interest income from 1 July 2012. Under the proposal, the discount will apply on up to $500 of interest earned on deposits held with any bank, building society or credit union, as well as bonds, debentures or annuity products. The Government proposes to increase the $500 amount to $1,000 from 1 July 2013 onwards.

TIP: Some of the technical details of the Government’s proposed tax discount on interest income are complex. Please contact our office if you have any questions.

ATO targets FBT avoidance using employee share trusts

The ATO has warned taxpayers of an arrangement whereby effective after-tax benefits are provided to employees without a corresponding fringe benefits tax (FBT) liability to the employer. Under the arrangement, employees acquire share units in an employee share trust, which is funded by a loan from the trustee, which is in turn repaid by the employer from amounts salary sacrificed by the employee; however, the employer does not include the taxable value of the benefits provided as part of its FBT liability. The ATO says failure to include the benefit may trigger specific “anti-avoidance” rules under the FBT law.

No GST on damages paid for lost scaffolding

A taxpayer has been successful before the Federal Court in obtaining orders that there is no GST payable on damages it recovered when it lost its scaffolding to other parties. The taxpayer was in the business of hiring out its scaffolding in the building and construction industry. However, after various events, the scaffolding became intermingled with scaffolding belonging to another company. The taxpayer sued and won damages for the loss of its scaffolding. However, the Commissioner claimed GST was payable as a result of the ownership of the scaffolding vesting in the defendant. The Federal Court though disagreed and held the taxpayer in the circumstances did not make a “taxable supply” under the GST law. (Note the Commissioner has appealed against the decision to the Full Federal Court.)

Division 7A benchmark interest rate

The ATO has advised that, for the income year that commenced on 1 July 2011, the benchmark interest rate to be used in calculating the interest component on the repayment of a private company loan received by a shareholder (or the associate of the shareholder) is 7.8%.

Reasonable travel and meal allowance amounts

The ATO has announced the amounts the Commissioner considers are reasonable for the
2011–2012 income year in relation to claims made for: overtime meal allowance expenses; domestic travel allowance expenses; travel allowance expenses for employee truck drivers; and overseas travel allowance expenses.

Car depreciation limit and luxury car tax threshold

The ATO has released the following limits and thresholds for the 2011–2012 income year:

• car depreciation limit and luxury car tax threshold – $57,466;
• fuel efficient car limit – $75,375.

Tax Alert for August 2011

Posted on | August 1, 2011 | Comments Off

We are pleased to supply you with the August 2011 edition of Client Alert, which contains information on a number of important taxation developments up to and including 15 July 2011:

Tax Office announces compliance focus areas

The Commissioner of Taxation has released the Australian Taxation Office’s compliance program for the 2011–12 financial year. Under the program, the Australian Taxation Office (ATO) plans to enhance its tax fraud detection and management strategies, concentrate on sham contracting arrangements and continue its extensive data matching and risk profiling activities. The ATO said it also aims to reduce phoenix arrangements through audits of directors, focus on those who fail to report some or all cash transactions and check employers’ super guarantee payments.

TIP: The ATO’s compliance program is wide-reaching covering individuals to large businesses. Please contact our office for further information.

Trust streaming: extension to record beneficiaries’ entitlements

Following a High Court decision last year – known as the Bamford decision – legislation has been formally enacted to provide certainty to trusts in relation to the streaming of capital gains and franked distributions (including any attached franking credits) to specific beneficiaries as an interim measure. However, as the legislation was finalised so close to the end of the income year, the ATO has decided to extend the time allowed for trustees to record a beneficiary’s entitlement to a franked distribution for the purpose of the new legislation for the 2010–11 income year only. The extension ends on 31 August 2011.

TIP: The trust streaming changes are technical. Please contact our office for any assistance.

Car fringe benefit taxation changes

Legislative changes to simplify the method for determining the taxable value of car fringe benefits has been formally implemented. Broadly, the changes introduce a flat 20% rate to replace the previous method which, according to the Government, encouraged people to drive their vehicles further than they needed to in order to obtain a larger tax concession.

Dependent spouse offset finishes for under 40s

From 1 July 2011, taxpayers will no longer be entitled to the dependent spouse tax offset in respect of a dependent spouse born on or after 1 July 1971, following the enactment of tax law changes. However, the changes include some exceptions – for example, dependent spouses who are carers, invalid or permanently unable to work.

Low income taxpayer offset ends for most minors

From 1 July 2011, the ability of minors (children under 18 years of age) to access the low income tax offset to reduce tax payable on their unearned income (dividends, interest and rent) has been removed. The Government said the tax law amendments are designed to discourage income splitting between adults and children.

Building contractors face reporting proposal

The Government is seeking to introduce a reporting regime for payments made to contractors in the building and construction industry. The proposal will require businesses in the building and construction industry to report annually to the ATO payments they have made to contractors in the industry. The regime is proposed to commence on 1 July 2012. According to the Government, the proposal will support greater compliance in areas such as GST, record-keeping requirements, and the personal services income rules.

TIP: The proposal indicates a closer scrutiny of the industry by the authorities. The Government also indicated that its proposal could later be applied to other industries.

Unpaid directors’ fee schemes and private companies on ATO radar

The ATO has warned taxpayers of an arrangement where a private company claims a deduction for unpaid directors’ fees. Under the arrangement, a private company makes a resolution before 30 June in relation to amounts payable to directors that reflect that the company is irrevocably committed to the payment. The company claims a deduction for the payment, but the actual payment is never made. The Commissioner of Taxation said he was concerned that some companies may be using the arrangement to claim amounts that were never intended to be fully paid out.

ATO reminds employers of superannuation obligations

The ATO has recently revealed some common superannuation mistakes made by employers. They include paying insufficient superannuation contributions for employees, missing the quarterly payment cut-off dates (ie 28 October, 28 January, 28 April, 28 July), and not understanding that in some circumstances superannuation should be paid for contractors, even if the contractor provides an Australian Business Number.

TIP: The ATO has been selecting various industries on which to focus its compliance activities. This year, in its compliance program, the ATO intends to target the following industries in relation to superannuation guarantee obligations: cafes and restaurants; real estate services; carpentry services; computer system design and related services; and accommodation.

Tribunal denies deduction for interest on loans made to trust

In a recent case, the Administrative Appeals Tribunal confirmed that husband and wife taxpayers were not entitled to a deduction for interest on loans made to a discretionary trust which ran their building business, or a deduction for interest on their investment properties which they made available to the trust to provide accommodation for building contractors. The taxpayers argued they had certain agreements in place with the trust which made them entitled to distributions of trust income, so accordingly, the deductions were permissible. However, the Tribunal disagreed and found there was an insufficient connection between the interest expenditure and claimed trust income.

Personal services income rules applies to taxpayer

The Administrative Appeals Tribunal has confirmed that the personal services income (PSI) rules under the taxation law applied to a taxpayer who provided his services as a draftsperson through his private company. Accordingly, over $67,000 was included as personal income in the years in question. The Tribunal also held the taxpayer did not meet either the “unrelated clients” test or the “business premises” test to relieve him of his personal liability.

TIP: Many consultants and contractors operate as a sole trader or through a company, partnership or trust. In many cases, the income received for the work they do may be classified as PSI if certain tests are not passed. It should be noted that the PSI rules limit the deductions that an individual may claim against PSI.  Please contact our office on (02) 9954 3843 for any assistance.

Tax Alert for July 2011

Posted on | June 22, 2011 | Comments Off

We are pleased to supply you with the July 2011 edition of the Client Alert, which contains information on a number of important taxation developments up to and including 15 June 2011:

Trust Streaming – Certainty Almost Here

The Government has introduced legislation to provide certainty to trusts in relation to the streaming of capital gains and franked distributions (including any attached franking credits) to specific beneficiaries as an interim measure following a High Court decision last year – known as the Bamford decision – which had cast doubt in this area.

TIP: The changes are technical and are proposed to apply to the current year (ie the year from 1 July 2010 to 30 June 2011). This does not give a lot of time for trusts affected to respond. Please contact our office for any assistance.

Car Fringe Benefit Taxation about to Change

A Bill has been introduced into Parliament to simplify the method for determining the taxable value of car fringe benefits. Broadly, the change will introduce a flat 20% rate to replace the current method which, according to the Government, encourages people to drive their vehicles further than they need to in order to obtain a larger tax concession.

TIP: The changes affect salary-sacrificed or
employer-provided vehicles. If you think the changes affect you, please call our office.

Dependent Spouse Offset on the Chopping Board

The Government will soon put in place changes so that taxpayers will not be entitled to the dependent spouse tax offset in respect of a dependent spouse born on or after 1 July 1971. The change is proposed to take effect from 1 July 2011. This means taxpayers with a dependent spouse aged less than 40 years will no longer be eligible for the offset from 1 July 2011. However, some exceptions will be available – for example, dependent spouses who are carers, invalid or permanently unable to work.

TIP: Note that the maximum offset is $2,355 for 2011-2012.

SMSF Non-complying Status Affirmed, Despite Tragic Circumstances

In a recent case, the Administrative Appeals Tribunal affirmed the decision of the Commissioner of Taxation that a self-managed superannuation fund (SMSF) be treated as a non-complying fund, despite acknowledging the tragic circumstances surrounding the case. The fund was created in April 2002 and its members included a husband, wife and their adult son. The Tribunal noted the son had a “drug addiction and took almost all of the money from the fund and spent it or gave it away”. Although noting the circumstances of the family, the Tribunal was unable to exercise a discretion to treat the fund as a complying fund under the superannuation law.

Goods Taken from Stock for Private Use

The Tax Office has updated the amounts the Commissioner will accept for 2010-2011 as estimates of the value of goods taken from trading stock for private use by taxpayers in certain specified industries. For example, for a takeaway food shop, the Commissioner will accept $2,970 (excluding GST) for each adult (or child over 16 years of age). Note that the Tax Office intends to adjust the values annually.

Travel and Study Scams on Tax Office Radar

The Tax Office has issued a warning to taxpayers to steer clear of dodgy arrangements which involve claiming holiday travel expenses as work-related or self-education expenses. The Commissioner said he was concerned that some people are getting involved in arrangements to deliberately claim inflated deductions which they are not entitled to, particularly in relation to overseas travel. If the claim is legitimate, the Tax Office says taxpayers need to correctly apportion their expenses to the extent they are connected to their income-earning activities and are not private or domestic in nature.

Low-income Taxpayer Offset to End for Most Minors

A Bill has been introduced which contains changes to implement the Government’s 2011-2012 Budget announcement to restrict access by minors (children under 18 years of age) to the low income tax offset. Under the changes, the ability of minors to access the offset to reduce tax payable on their unearned income (dividends, interest and rent) will be removed from 1 July 2011. The Government said the changes are designed to discourage income splitting between adults and children.

TIP: Income earned by minors from work will still be eligible for the full benefit of the offset. Unearned income of minors who are orphans or disabled, as well as compensation payments and inheritances received by minors, will not be affected by this measure.

Commissioner’s Claim to Recover GST Refunded Not Out of Time

A taxpayer has been unsuccessful before the Administrative Appeals Tribunal in arguing that the Commissioner’s claim to recover an amount of GST refunded was ineffective. The taxpayer had argued that the claim was made outside of the four-year time limit under the tax law. However, the Tribunal found the time limit did not apply in the circumstances of the case.

GST and Tax Invoice Requirements

The Tax Office has issued a draft GST ruling which replaces an earlier ruling in relation to the minimum information requirements for a tax invoice and the circumstances of when a document can be deemed a tax invoice even when it does not meet all of the requirements. The draft ruling also sets out the application of the low value threshold for transactions for which a tax invoice is not required. Note the draft ruling maintains the same outcomes as the earlier ruling.

Deductibility for Private Pilot’s Licence Cost Denied for a Solicitor

A solicitor has been unsuccessful before the Administrative Appeals Tribunal in claiming a deduction for expenses he incurred in converting his New Zealand private pilot’s licence to an Australian one. The solicitor had hoped to take on aviation matters for local clients. However, the Tribunal was of the view that there was not a sufficient connection between the expenses claimed and the income earned as a solicitor.

TIP: Tax time 2011 is just around the corner. As usual, the Tax Office will be paying close attention to large deductions claimed by individuals in their 2011 tax returns.

Tax Alert for June 2011

Posted on | June 2, 2011 | Comments Off

We are pleased to supply you with the June 2011 edition of Client Alert, which contains information on a number of important taxation developments up to and including 2 June2011:

Trust Law Changes On The Way

The Government has announced that it intends to review and rewrite the highly complex area of trust tax law to deal with ongoing uncertainties regarding its proper application. Two proposed measures have been flagged by the Government for implementation sooner rather than later including:

• changes to enable the streaming of capital gains and franked distributions; and
• changes to allow trust beneficiaries to continue to use the primary production averaging and farm management deposit provisions in a loss year.

These changes are proposed to apply for the 2010–11 and later income years.

TIP: The proposed changes are highly complex and new developments are likely to occur quickly. Please contact our office if you have any questions.

Personal Services Entities: ATO Takes a Closer Look

The Australian Tax Office (ATO) has announced that it will request and collect information on amounts paid to personal services entities by 39 labour hire firms, placement agencies and computer consultancies. Under the project – known as the Personal Services Income (PSI) data-matching project – data requested will include name and address details of the individual who is the main service provider to the entity. The ATO said it anticipates that records relating to approximately 100,000 individuals and entities who have received contract payments from the 39 entities will be matched.

TIP: If you are concerned this data-matching program will affect you, please contact our office.

Flood Levy Now Law

The legislation to implement the Government’s proposed temporary flood levy has been enacted. The legislation imposes a one-year levy on taxpayers to help raise the revenue needed to assist the reconstruction work following the destruction by the floods and Cyclone Yasi in Queensland earlier this year. The 0.5% to 1% levy will apply to individuals with taxable incomes above $50,000, and will apply for the 2011–12 income year only. However, there are specific classes of taxpayers who are exempt from the levy.

TIP: Employers will need to identify their employees who earn more than $50,000, and withhold the levy from their salary or wages. Employees who are exempt from the levy may lodge a flood levy exemption declaration form with their employer.

GST and Goods Sold With Discounted Components

The ATO has released its official view of the Full Federal Court’s decision in a case which concerned the correct calculation of GST on goods sold that are partly taxable and partly GST-free. The case involved a taxpayer that offered its customers spectacle frames at a discount provided they purchase the lenses at full price. The lenses are GST-free, whereas the frames are a taxable supply – together the spectacles are referred to as a “mixed supply”.

The Full Federal Court agreed with the taxpayer that the discount should only be applied to the frames, and not apportioned between the lenses and the frames. The ATO said the Commissioner accepts that it was open to the Court to make its conclusions regarding the correction apportionment and it will not appeal to the High Court. As a result, the ATO said some optical suppliers may be able to seek a refund for overpaid GST (if certain requirements are met).

Land Sale Case Sheds Light On “Going Concern” GST-free Concession

In a recent decision, the Federal Court held that a supply (sale) of land by a taxpayer was not a supply of a going concern, and therefore was not GST-free. Although the Court acknowledged the taxpayer was in the business of property development, it found that business ended when the taxpayer decided to sell the land. Ultimately, the Court found the sale of the land was not a “supply of a going concern” as the sale did not supply “all of the things necessary for the continued operation of an enterprise”.

TIP: For a supply to be considered a supply of a going concern (and therefore GST-free), various conditions must be satisfied. These conditions include the supplier supplying to the recipient all the things necessary for the continued operation of the enterprise, and the supplier carries on the enterprise until the day of supply.

Employees Not Contractors, Says Court

In a recent decision, the Federal Court held interpreters engaged by a business to provide interpreting and translating services were “employees” for superannuation guarantee purposes and were not independent contractors.

TIP: The correct classification of an individual as an employee or as an independent contract is critical. This is because employers are liable to provide the minimum level of superannuation guarantee for their employees. A failure to do so will result in employers being liable to a non-deductible superannuation guarantee charge.

Self-managed Super Funds and Collectables

The Government has introduced legislation into Parliament to change the superannuation law to implement strict rules on trustees of self-managed superannuation funds (SMSFs) who make, hold or realise investments that are considered to be “collectables or personal use assets” – for example, artwork, jewellery, antiques, wines, cars and recreational boats. Once enacted, the new rules will apply to investment made before, on or after 1 July 2011. The Government had earlier indicated that it would implement a 5-year transitional period to allow trustees to dispose of existing assets that do not satisfy the new rules.

FBT Rates and Thresholds for 2011–12

The ATO has announced important FBT rates and thresholds for the 2011–12 FBT year that commenced on 1 April 2011. Some of the key rates and thresholds include:

• the benchmark interest rate is 7.80% pa (was 6.65% pa for the 2010–11 FBT year).
• the record-keeping exemption threshold is $7,391 (was $7,190 for the 2010–11 FBT year).

Car Expenses – Rates per Kilometre for 2010–11

The Government has announced the “cents per kilometre” rates for calculating tax deductions for car expenses for the 2010–11 income year – note they are unchanged from 2009–10 and are:

• small car (non-rotary engine up to 1600cc, or rotary engine up to 800cc): 63c/km.
• medium car (non-rotary engine 1601–2600cc, or rotary engine 801–1300cc): 74c/km.
• large car (non-rotary engine 2601cc and above, or rotary engine 1300cc and above): 75c/km.

• the benchmark interest rate is 7.80% pa (was 6.65% pa for the 2010–11 FBT year).
• the record-keeping exemption threshold is $7,391 (was $7,190 for the 2010–11 FBT year).

Car Expenses – Rates per Kilometre for 2010–11

The Government has announced the “cents per kilometre” rates for calculating tax deductions for car expenses for the 2010–11 income year – note they are unchanged from 2009–10 and are:

• small car (non-rotary engine up to 1600cc, or rotary engine up to 800cc): 63c/km.
• medium car (non-rotary engine 1601–2600cc, or rotary engine 801–1300cc): 74c/km.
• large car (non-rotary engine 2601cc and above, or rotary engine 1300cc and above): 75c/km.

Tax Alert for May 2011

Posted on | June 1, 2011 | Comments Off

We are pleased to supply you with the May 2011 edition of Client Alert, which provides a tax planning focus. This edition of Client Alert contains information on a number of important taxation developments up to and including 13 April 2011:

Tax Planning

Simply put, tax planning is the arrangement of a taxpayer’s affairs so as to comply with the tax law at the lowest possible cost, and involves objectively assessing and actively managing tax risk. Common tax planning techniques are deferring the derivation of assessable income and applying techniques to bring forward deductions.

Deferring Income

• Income received in advance of services to be provided will generally not be assessable until the services are provided.
• Taxpayers who provide professional services may consider, in consultation with their clients, rendering accounts after 30 June to defer the income.
• Consider whether the requirements to be classified as a small business entity are satisfied to access various tax concessions such as the simpler depreciation rules and the simpler trading stock rules.
• Individuals operating personal services businesses should ensure that they satisfy the relevant test to be excluded from the Personal Services Income regime or seek a determination from the Commissioner.

Maximising Deductions

-Business taxpayers

• Debtors should be reviewed prior to 30 June to identify and to write off any bad debts.
• Review the asset register to identify any low-cost and/or low-value assets that may be pooled to access an accelerated rate of depreciation.
• Write off any depreciating assets which are no longer being held for use because a deduction may be available.
• Review trading stock for obsolete stock for which a deduction is available.

• Employees’ superannuation contributions should be paid before 30 June to obtain a deduction and to avoid the Superannuation Guarantee Charge.

-Non-business taxpayers

• Outgoings incurred for managed investment schemes may be deductible.
• A recent High Court decision held a taxpayer deriving Youth Allowance was allowed a deduction for various self-education expenses.
• Assets costing $300 or less may qualify for an immediate deduction subject to certain conditions.
• A deduction for personal superannuation contribution is available where the 10% rule is satisfied.

Capital Gains Tax

• Consider deferring the disposal of shortly-held assets to access the CGT discount, where available.
• Individual taxpayers can consider contributing some or all of capital gain to their superannuation fund because a deduction may be available for personal superannuation contributions.
• Consider whether a rollover relief is available to defer any capital gains.
• Consider the availability of the small business CGT concessions which can disregard, reduce or defer a capital gain arising from the disposal of an asset which has been used by an entity in the course of carrying on its business.

Companies

• The franking percentage for distributions to shareholders should be the same for each franking period to avoid a franking deficit tax.
• Loans, payments and debt forgiveness by private companies to their shareholders and associates should be repaid by the earlier of the due date for lodgment of the company’s return for the year or the actual lodgment date. Alternatively, appropriate loan agreements should be in place.
• Companies may want to consider consolidating for tax purposes prior to year end to reduce compliance costs and take advantage of tax opportunities available as a result of the consolidated group being treated as a single entity for tax purposes.

• Companies should carefully consider whether any deductions are available for any carry forward tax losses, including analysing the continuity of ownership and same business tests.

Trusts

• Taxpayers should review trust deeds to determine how trust income is defined. This may have an impact on the trustee’s tax planning.
• A recent High Court case confirmed that it is correct to apply the proportionate approach if the net income of a trust for tax purposes exceeds its accounting income.
• The Court also affirmed that the trustee can distribute capital gains as income of the trust for tax purposes if the trust deed permits it.
• Avoid retaining income in a trust because the income may be taxed at 46.5%.
• If a trust has an unpaid present entitlement to a corporate beneficiary, consideration should be given to paying out the entitlement by the earlier of the due date for the lodgment of the trust’s income tax return for the year or the actual lodgment date to avoid possible tax implications.
• The Tax File Number withholding arrangements have been extended to closely held trusts (except were specifically excluded). The arrangements impose new reporting and payment requirements for trustees of trusts subject to the new provisions.

Superannuation

• A re-contribution strategy may produce tax benefits for taxpayers under age 60.
• Low-income earners (including self-employed persons) should consider making a personal superannuation contribution to qualify for the government superannuation co-contribution payment.
• For the 2010/11 income year, pensioners have the option to draw half of the year’s minimum required pension amount.

• The reduction in the concessional contributions cap to $25,000 ($50,000 for those aged 50-74) since 1 July 2009 means that more individuals are now at risk of inadvertently breaching their annual contribution cap. A review of various arrangements involving superannuation (eg salary sacrifice) would be prudent.

Natural Disasters

Natural disasters such as the Queensland floods in early 2011 resulted in the tragic loss of lives and wreaked havoc and devastation. Many businesses and livelihoods suffered severe damage or loss. However, amongst the chaos, it is still important that business owners be aware of the tax implications that may arise from the destruction of their business assets and trading stock (including livestock).

Paid Parental Leave Scheme

The Federal Government’s Paid Parental Leave scheme commenced on 1 January 2011. Under the scheme, eligible employees with a child born or adopted on or after 1 January 2011 can take 18 weeks of paid parental leave at the national minimum wage (currently $570 per week). The new scheme has a number of tax implications, which employers and recipients need to know.

Tax Alert for April 2011

Posted on | March 29, 2011 | Comments Off

We are pleased to supply you with the April 2011 edition of Client Alert, which contains information on a number of important taxation developments up to and including 22 March 2011:

Cash Economy Letters Encouraging Compliance, Says Tax Office

According to the Tax Office, its cash economy letter program is encouraging positive compliance behaviour among small business taxpayers. This financial year, the Tax Office aims to send over 100,000 letters to taxpayers who it believes may be participating in the cash economy. The Tax Office said it will mostly send letters to business operators reporting outside the small business benchmarks for their industry, or to those who, in the Tax Office’s view, have reported insufficient business income to meet their expected living expenses.

TIP: The Tax Office has developed small business benchmarks which it uses to compare the performance of a business against other similar businesses that are operating in the same industry. The benchmarks are published on the Tax Office website. The benchmarks can be used by businesses to help assess if they are likely to be selected for an audit or review. If your business is operating outside the relevant benchmark, it may be prudent to review record-keeping practices or to review how your business operates. Please contact our office for any assistance.

Director’s Penalty Notice Given When Delivered, Not Posted

In a recent case, the NSW Court of Appeal held that a previous decision of the Court was “clearly wrong” when it held that the 14-day period within which a director is required to take specific action in response to a director’s penalty notice ran from the date of its posting. Rather, the Court of Appeal said the period ran from the date of the delivery of the notice.

GIC and SIC Rates

The Tax Office has advised the general interest charge (GIC) and shortfall interest charge (SIC) rates for the fourth quarter of the 2010–11 income year (ie 1 April 2011 to 30 June 2011):

Rate	Annual (%)	Daily (%)
GIC	11.92	0.03265753
SIC	7.92	0.02169863

Labour Hire Firms and Splitting Income Warning

The Tax Office has recently highlighted its concerns regarding an arrangement where a labour hire firm utilises a discretionary trust for the purpose of splitting the incomes of workers with their spouses (or other related people).  Workers may be entering into these arrangements in an attempt to reduce their tax bills; however, they may not be aware that the arrangement, or parts of it, may be ineffective under the tax law.  Tax Commissioner Michael D’Ascenzo said he was concerned that firms involved in such arrangements may not be withholding the required amount of tax or providing the correct amount of superannuation to their workers.

TIP: The Commissioner has given anyone who has participated in such arrangements until 30 April 2011 to contact the Tax Office for guidance. Mr D’Ascenzo said taxpayers will be entitled to a reduction in any penalties that might apply if an arrangement is proved to be ineffective.

Calculating Distributable Surplus when Tax Bill Amended

The Tax Office has indicated that it will administer the law in accordance with the findings of a recent Full Federal Court decision. The case concerned whether income tax and general interest charge (GIC) assessed by an amended assessment are taken into account when calculating a company’s net assets and distributable surplus. This calculation is important because the amount of deemed dividend for a loan, payment or debt forgiveness by a company to its shareholder (or associate of the shareholder) is restricted to the company’s distributable surplus for an income year.

The crux of the Court’s decision is: if a company receives an amended assessment with tax and GIC payable for a previous year, the company’s distributable surplus for that income year needs to be recalculated by reducing the surplus by the amount of the tax and GIC payable on the amended assessment – this may result in lower individual tax bills for individuals who receive the deemed dividend.

Watch Out for Scammers, Says Tax Office

The Commissioner has reminded people to be aware of scam behaviour and to report anything suspicious. The focus of scams in most instances is to steal personal information. The Tax Office says scammers use phone calls, letters, text messages, emails, bogus websites and even job advertisements to try to obtain financial or other personal details. Once scammers have this information they can steal an individual’s identity and commit fraud. Suspicious behaviour can be reported to the Tax Office confidentially by phoning 1800 060 062.

Eye Glasses Discount Deal Throws New Light on GST Calculation

A retailer of spectacles has won a court case regarding the correct calculation of GST in relation to spectacles it sold to customers under a special promotion. Broadly, the taxpayer offered its customers spectacle frames at a discount provided they purchase the lenses at full price. The lenses are GST-free, whereas the frames are a taxable supply – together the spectacles are referred to as a “mixed supply”. The Full Federal Court agreed with the taxpayer that the discount should only be applied to the frames, and not apportioned between the lenses and the frames as contended by the Commissioner.

TIP: The Court’s method may result in a lower amount of GST payable than the method contended by the Commissioner in the case.

Tax Office’s Approach to Self-Managed Super Funds Affected by Floods

The Commissioner has given an indication of how the Tax Office will deal with self-managed superannuation funds (SMSFs) that own flood or cyclone-damaged buildings purchased under the strict borrowing rules contained in the superannuation law. Mr D’Ascenzo noted that SMSFs in these situations may be prevented from making improvements without breaching the rules. However, while the Commissioner does not have the discretion to treat an improvement as a repair, he said the Tax Office will not be seeking to make fine distinctions when having regard to what is available to repair what has been damaged.

For more information or to make an appointment with our professional staff, please contact Hurley & Co. Chartered Accountants on (02) 9954-3843 or click here to make an online enquiry.

Tax Alert for March 2011

Posted on | March 29, 2011 | Comments Off

We are pleased to supply you with the March 2011 edition of Client Alert, which contains information on a number of important taxation developments up to and including 16 March 2011:

Temporary Flood Levy Proposed

The Prime Minister, Julia Gillard, has proposed a temporary flood levy for individual taxpayers to help raise revenue to fund the reconstruction cost for areas of Queensland and elsewhere which were affected by severe flood damage earlier this year. The flood levy is proposed to apply for one financial year from 1 July 2011.
Under the proposal, individuals with a taxable income of $50,000 or less will be exempt. However, a levy of 0.5% will be applied for individuals on taxable incomes between $50,001 and $100,000. A levy of 1% will be applied on taxable incomes above $100,000. For example, under the levy, someone who has a taxable income of $80,000 will pay $2.88 extra per week.
Ms Gillard said those who receive the Australian Government Disaster Recovery Payment for a flood event in the 2010–2011 financial year will be exempt from paying the levy.

Tax Help for Flood Victims

The wake of the recent severe flooding in Queensland and elsewhere has brought about a bevy of announcements from authorities offering tax help to assist those in need.
The Government has announced that clean-up and recovery grants of up to $25,000 (paid to primary producers and small businesses directly affected by the flooding that has occurred since 29 November 2010) will be exempt from tax.

The Government has also confirmed that the Disaster Income Recovery Subsidy to assist small business persons, farmers, and employees, who have lost their income as a direct consequence of the flooding, will be tax-exempt.

TIP: Has your business been severely affected by the flooding? You may be eligible for tax help offered by the authorities. Please call our office for further information.
In response to the floods, the Commissioner has also announced that the Tax Office will allow deductions for “bucket donations” of up to $10 in individuals’ 2010-11 tax returns without needing to keep a receipt.

Café Owners’ Tax Bill Reduced after Cash Wages Taken into Account

In a recent case, the Administrative Appeals Tribunal found that amended tax assessments issued to husband and wife shareholders of a company that operated two cafés were excessive as they had failed to take into account deductions for cash wages paid to staff in determining the deemed dividend from the company, on which the assessments issued to the husband and wife were based. The Tribunal also found that the deemed dividend was to be further reduced to take into account the company’s liability for general interests charge imposed on its unpaid tax liability and a loan the husband had made to the company. As a result of these adjustments, the amount of the deemed dividend of the company on which the husband and wife’s assessments were based was reduced from around $2.1 million to some $630,000.

Same Trust, so Capital Gain Can Be Offset by Earlier Losses

The Commissioner has been unsuccessful before the Full Federal Court in seeking orders to overturn an earlier decision, which had held that a trust could apply earlier capital losses to offset the capital gain made from a property sale.
The Commissioner had argued that there was a lack of continuity of the trust following a series of events and that, essentially, the trust estate which made the losses was not the same trust which made the capital gains, which meant the trust could not apply the losses to offset the gains. However, the majority of the Full Federal Court did not accept the Commissioner’s arguments.

Superannuation Excess Contributions Tax Bill for Breach of Cap

The Administrative Appeals Tribunal has confirmed a superannuation excess non-concessional contributions tax assessment of $86,867 against a taxpayer for breaching the $1 million non-concessional contributions cap during the transitional period to 30June 2007 (which existed at the time). The taxpayer had argued that a $355,000 payment from her personal superannuation fund in June 2007 was received by her in a capacity as trustee before being on-paid to her new superannuation fund and, therefore, should be treated as a roll-over superannuation benefit. However, the Tribunal found the amount was received by the taxpayer and treated by her an as eligible termination payment before being on-paid to the new fund as a non-concessional contribution.
TIP: Different annual contribution caps apply depending on your age and whether your contributions are classified as “concessional” or “non-concessional”. Contributions above the annual contributions caps are subject to excess contributions tax levied on the individual.

Penalty for Late Superannuation Deduction Notice “Harsh”

In a recent case, the Administrative Appeals Tribunal determined that a 25% administrative penalty was properly imposed by the Commissioner on a taxpayer who failed to provide a notice of intent on time to claim a deduction for a personal superannuation contribution.
However, the Tribunal decided to remit in full the administrative penalty as it found it would be “harsh” for the taxpayer to pay a penalty of $10,000 on top of the $40,000 increase in his tax bill due to a shortcoming in paperwork.
TIP: To be eligible for a deduction for a personal superannuation contribution, the individual must:
(a) give a notice to the fund trustee stating his or her intention to claim a deduction; and
(b) receive an acknowledgment of receipt of the notice.
The notice must be given by the time the person lodges his or her income tax return for the year in which the contribution is made or, if no return has been lodged by the end of the following income year, by the end of that following year.

Superannuation Benefit and Payment by Cheque

The Tax Office has issued a determination which states that a superannuation benefit payable with a cheque or promissory note is “cashed” at the time the cheque or note is “received” by the member or beneficiary, provided the trustee’s objective intention is to immediately transfer funds from the SMSF to the member or beneficiary. The Tax Office said this will only be the case where the money is payable immediately and available for payment when the instrument is received.
For more information or to make an appointment with our professional staff, please contact Hurley & Co. Chartered Accountants on (02) 9954-3843 or click here to make an online enquiry.

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