Mini-budget tightens fringe benefits, health rebates
The Government's mid-year budget update was handed down in
late October 2012. The Treasurer revised down the expected Budget underlying
cash surplus to $1.1 billion for 2012-2013 - down from $1.5 billion
estimated in the May 2012 Budget.
The Government did not announce anticipated changes to
claw-back superannuation tax concessions (much to the relief of many
superannuation investors). However, the update did contain a host of small, but
not insignificant, tax proposals.
In the mini-budget update the Government announced the removal
of the concessional treatment for in-house fringe benefits that are accessed
through a salary sacrifice arrangement. The proposal will apply from 22 October 2012 to salary
sacrifice arrangements entered into on or after 22 October 2012, and from 1 April 2014 for salary sacrifice
arrangements entered into prior to 22 October 2012.
Changes to the Private Health Insurance Rebate were also
announced. From April 2014, the premium to which the rebate is applied will
move in line with the CPI or
commercial premium increase, whichever is lower.
The Government is also widening the circumstances for which
monies in "lost" or "inactive" superannuation accounts are to be transferred to
the ATO. However, the Government
said that from 1 July 2013,
interest at a rate equivalent to CPI
inflation will be paid on lost superannuation monies reclaimed from the ATO.
These proposals, including many others, are subject to the formal enactment of
legislation. Please contact our office for further information.
ATO to data-match motor
The ATO is
collecting details of individuals and businesses who have purchased or acquired
a vehicle with a transaction value of $10,000 or greater in the 2011-2012 or 2012-2013
financial years. The information will be collected from state and territory
motor vehicle registries and matched electronically with the ATO's records. The ATO
is seeking to address potential non-compliance in the following areas:
- income tax;
- goods and services tax;
- fringe benefits tax; and
- luxury car tax.
AUSTRAC shares information with the ATO
AUSTRAC has recently highlighted the growing role of financial
intelligence in tackling crime, including tax evasion. In 2011-2012, AUSTRAC
reported that information sharing with the ATO
assisted with over 3,500 cases that resulted in $252 million in additional tax
assessments being raised. The year before, AUSTRAC reported that its
information directly contributed to some 1,600 ATO
investigations, leading to tax assessments of around $241 million.
Honest mistake in not documenting private company loans
A taxpayer has been, in most part, successful before the
Administrative Appeals Tribunal (AAT) in relation to a matter concerning loans
from a private company. These loans were made to him, over various years, as a
shareholder and director of the private company. The ATO
had treated the loans, which were made in the 2005, 2006 and 2007 income years,
as assessable dividends.
The AAT sided with the ATO
in relation to the 2005 loans. However, the AAT decided differently in respect
of the 2006 and 2007 loans. It found that a discretion under the tax law should
be exercised to disregard the deemed dividends because it found that there was
an "honest mistake" in failing to properly document the loans.
TIP: The Tax Commissioner has the
ability to disregard a deemed dividend, or allow it to be franked, if certain
conditions are met. Generally, a taxpayer must apply to the Commissioner to ask
for the discretion to be exercised, and must be able to demonstrate that the
failure to meet the requirements of the law was due to an honest mistake or an
In making his decision, the Commissioner must have regard to various
factors specified in the law. Please contact our office if you have any
Depreciation deduction allowed for certain equipment
A recent case before the AAT has highlighted the need for
businesses to maintain appropriate records of plant and equipment used in
The taxpayer, who was a partner of a box manufacturing
business, was partially successful before the AAT in relation to claims for
depreciation for certain items of plant and equipment used in the business. The
AAT found that there was sufficient evidence that some items of plant and
equipment were used in the business for the purpose of deriving assessable
income. However, the AAT found it was not possible to allow the depreciation
claimed for a number of other items. A key problem noted by the AAT "was the
fact that the partnership did not keep basic business records".
The depreciation rules for small businesses have recently been amended. The
changes only apply to small businesses (including connected or affiliated businesses)
that have an aggregated turnover of less than $2 million. Businesses must keep
appropriate records. From the 2012-2013 income year:
- the small business instant asset write-off threshold has increased from $1,000 to $6,500;
- small businesses can claim an accelerated initial deduction for motor vehicles acquired in 2012-2013 and subsequent years; and
- the long-life small business pool and the general small business pool have been consolidated into a single pool to be written off at one rate.
Special circumstances found to set aside excess contributions tax
A taxpayer has successfully argued before the AAT that there
were special circumstances in his situation to allow for the exercise of the Commissioner's
discretion under the law to reallocate superannuation contributions.
Accordingly, monies paid into his superannuation account in late July 2009 could
be attributed to the 2008-2009 financial year, and this meant that the taxpayer
would not exceed the (then) $50,000 contributions cap.
The taxpayer had a salary sacrifice arrangement with his
employer, whereby funds were paid on his behalf to his super fund. The taxpayer
had the intention of contributing super each month and staying below the
However, the AAT heard that the disputed payments occurred
because salary sacrifice amounts for the months of April, May and June 2009
were not transferred by the taxpayer's employer to the fund until July 2009.
The taxpayer claimed that he had been unaware of the delay because
he believed the sums were transferred to the fund, based on his monthly
payslips. The AAT found that, in this case, there were "special circumstances" that
allowed the reallocation of the monies to the previous year.
TIP: This case highlights the need for
individuals to check their payslips for their super contributions (especially
year-to-date amounts) and know when their super contributions are being paid
into their super fund by their employer.
Individuals should also consider reviewing their salary
sacrifice arrangements to check whether there is an agreement as to when salary
sacrifice amounts will be transferred by the employer to the individual's super
fund. Please contact our office if you have any questions.