Tax News

Tax Update – August 2007

 


Disclaimer


This information is of a general nature only and professional advice should be obtained on your situation prior to acting on these changes.

REASONABLE ALLOWANCES


The reasonable allowance rates are in the ATP [104 830]. You need to remember that the allowance received must be more than just a token allowance to be considered a reasonable allowance, and for you to claim under the reasonable allowance method.

For example if a client is paid $15.00 per day for meals whilst travelling in the USA for 6 weeks, the tax office would NOT consider this a bona fide travel allowance you would not be able to use the reasonable method of claiming these meals. They would need to be fully substantiated.


RULINGS - ATOIDS - ATO UPDATES

RULINGS

TD 2007/22 Car Limit and Luxury Car Threshold for 2007/08 tax year - The car Limit is $57,123.

ATOIDS

ATOID 2003/99 Capital Gains tax- Non resident- disposal of shares

Issue

Will the trustee of a trust, that is not a resident trust for CGT purposes, make a capital gain or capital loss from CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) on the sale of shares that do not have the necessary connection with Australia?

Decision

No. As the trust is not a resident trust for CGT purposes and the shares do not have the necessary connection with Australia, the trustee will not make a capital gain from CGT event A1 in section 104-10 of the ITAA 1997 on the disposal of the shares.

Facts

The taxpayer is the trustee of a trust that is not a unit trust. The taxpayer is not a resident of Australia and the central management and control of the trust is not in Australia. The trust owns shares in an Australian resident company that is listed on the Australian stock exchange. The trust owns less than 10% of the total value of the shares in the company and has not owned more than 10% by value of the shares of the company at any time during the 5 years before the shares were sold.

During the year the trustee disposed of some of these shares.

NOTE this ATOID applies equally to individuals who are non residents.

ATO UPDATES

GST REGS AMENDED - AMOUNT REQUIRED FOR TAX INVOICE

There have been changes to the regulations of A New Tax System (Goods and Services Tax) which will increase the value of expenses from $50 to $75 for which taxpayers will be able to claim input tax credits without holding a tax invoice.

SIMPLIFIED GST ACCOUNTING BILL 2007 PASSED

On 19 June 2007, Tax Laws Amendment (Simplified GST Accounting) Bill 2007 was passed. The Bill amends the A New Tax System (Goods and Services Tax) Act 1999 to enable the Commissioner of Taxation to extend simplified goods and services tax accounting methods to more small businesses and other entities with an annual turnover of less than $2 million.

GST REGS AMENDED - GST REGISTRATION TURNOVER THRESHOLDS

A New Tax System (Goods and Services Tax) Amendment Regulations 2007 (No 2) was made on 28 June 2007. These Regulations amend the A New Tax System (Goods and Services Tax) Regulations 1999 to increase from $50,000 to $75,000 the GST registration turnover thresholds for all entities other than non-profit bodies and increase from $100,000 to $150,000 the GST registration turnover threshold for non-profit bodies.

TAX CASES

Re Staker and FCT, [2007] AATA 1442, 20 June 2007:

The taxpayer was a fitness instructor at a Gold Coast resort, and in her 2005 tax return had claimed deductions for work related uniforms, work related expenses and gifts..

The AAT disallowed the claims for clothing (insufficient connection with the taxpayer’s employment) and the gifts claimed.

DID YOU KNOW?

CHILD CARE REBATE and CHILD CARE BENEFIT

There is a 2 year time limit for Child Care benefit to be claimed from the Family assistance office.
This means that CCB cannot be claimed after the 2 years. IE the 2005 claim cannot be made after the 30/06/07, and no CHILD CARE REBATE can be claimed.
NOTE Be sure to tell our clients of the change to Child Care rebate and that for the next financial year they can claim the CCR on a fortnightly basis and not through the tax return.

SHARE BUY BACKS

Alumina: 2007 off-market share buy-back
Components of buy-back price
The buy-back price was $6.48 per share. This amount consisted of:

  • A fully franked dividend of $6.12 per share
  • A capital component of $0.36* per share.
  • Franking credit of approximately $2.62 per share

br>For capital gains tax (CGT) purposes, participants in the buy-back are deemed to have received $1.36 as the capital component of the buy-back price

What are the tax consequences of my participation in the buy-back?

There are two tax consequences.
- The dividend must be included in assessable income for the 2006-07 income year.
- The sale of shares (to Alumina) is a capital gains tax event that may have resulted in a capital gain (or capital loss). Depending on circumstances, details may have to be included on the 2006-07 tax return.

What are the CGT consequences for me?

A CGT event happened on 23 April 2007, when Alumina accepted the offer of shares for buy-back.

The capital proceeds are deemed to have received is $1.36 for each Alumina share that was bought back.

A capital gain or a capital loss may have been made on the Alumina shares, depending on their cost base (or reduced cost base) and the amount received for them.

A capital gain or capital loss is calculated using the capital payment amount of $1.36 (see note below) deemed to have received for each share. The following table will help.

For each Alumina share with a: you have made: equal to:
cost base of less than $1.36 a capital gain $1.36 minus the cost base of the share
reduced cost base of more than $1.36 a capital loss the reduced cost base of the share minus $1.36
$48,897–$51,466 5.00% 5.00%

If the cost base is not less than $1.36 and the reduced cost base is not more than $1.36, neither a capital gain nor a capital loss has been made on the share buy-back. There is nothing needed to be included on the 2006–07 tax return at the capital gains tax question regarding this sale.

LODGEMENT DATES 2007/08 SEASON

Activity Statements

Monthly 21st of each month    
Quarterly 25 August 2007* 4th Quarter 2006/07 Business activity statement
  25 November 2007* 1st Quarter 2007/08 Business activity statement
  28 February 2008* 2nd Quarter 2007/08 Business activity statement
  26 May 2008* 3rd Quarter 2007/08 Business activity statement

* BAS’s must be lodged by an agent via ELS or the Portal

Tax Returns

31 October 2007  - To appoint a new client as a client of a tax agent
                                - Income tax returns for all entities where one or more prior year is outstanding
31 March 2008      - Tax returns for level 6 Individual taxpayers
15 May 2008          - Tax Returns for level 1, 2, 3, 4, 5, taxpayers. Can be lodged 3 June 2008 as long as payment is made on the same day.