Archive for December, 2012

Not a travel allowance, so deduction denied

Wednesday, December 12th, 2012

The AAT has held that a taxpayer, who was employed by a mining company at Port Hedland, Western Australia on a fly-in fly-out basis (ie as a “distant work employee” under the relevant work agreement), was in receipt of a living-away-from-home allowance (LAFHA) of some $20,000 in the 2009-10 income year pursuant to s 30(1) of the Fringe Benefits Tax Assessment Act 1986, and not a travel allowance as the taxpayer claimed. As a result, the AAT found that he was not entitled to a deduction of some $36,000 that he claimed against the travel allowance.

Instead, the AAT found that as the allowance was properly to be characterised as a LAFHA in the circumstances, it was subject to FBT in the hands of the taxpayer’s employer and therefore travel expenses could not be claimed in relation to it. In doing so, the AAT dismissed the taxpayer’s claim that it should have been treated as a travel allowance in accordance with Determination TD 2009/15 and instead found that the Determination was not relevant in the taxpayer’s case as it only dealt with what are reasonable travel and meal allowance expenses. The AAT also noted that once the allowance was characterised as a LAFHA, it was not assessable under 15-2 of the ITAA 1997.

At the same time, the AAT upheld 50% shortfall penalties imposed for recklessness on the basis that the taxpayer’s tax agent was reckless as to the operation of a taxation law in making a statement which was false or misleading in a material particular and that there were no grounds for remission, despite the taxpayer’s claim that he “did not try to be careless or reckless”.

Finally, although apparently not in dispute, the AAT found that the taxpayer would not have been entitled to a deduction for air travel expenses between Perth and Adelaide (the place of his residence) when he carried his lap top and his work tools as the expenses were outgoings of a private or domestic nature or were incurred in relation to gaining or producing non-assessable non-exempt income (pursuant to s 23L(1) of the ITAA 1936).

AAT Case [2012] AATA 836, Hancox and FCT, AAT, Ref No 2011/3484, Dunne SM, 27 November 2012

Three changes you may have missed to the simplified depreciation rules that apply from 2012–13

Wednesday, December 5th, 2012

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. 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.

Changes to the Baby bonus rate from 1 July 2013

Wednesday, December 5th, 2012

From 1 July 2013, the baby bonus rate will be reduced from $5,000 to $3,000 for second and subsequent children.

Records important for Depreciation deduction

Wednesday, December 5th, 2012

A recent case before the AAT has highlighted the need for businesses to maintain appropriate records of plant and equipment used in business.

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”.

Special circumstances found to set aside excess contributions tax

Wednesday, December 5th, 2012

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 relevant cap.

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.

ATO to data-match motor vehicle purchases

Wednesday, December 5th, 2012

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;
  • superannuation;
  • goods and services tax;
  • fringe benefits tax; and
  • luxury car tax.