Issue 141, 1 December 2006

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Articles in this edition include:

• PSI provisions apply to consultant

• Transport expense for travel between workplaces

• Too many super funds, says Choice

• Thomson special offers and product news

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PSI provisions apply to consultant

In a recent decision, the Administrative Appeals Tribunal (AAT) found that the personal services income (PSI) provisions applied to a taxpayer who derived consultancy income through a company. 

The taxpayer was the sole director, shareholder and employee of DK Consulting Pty Ltd, who entered into a contract to provide services to certain end users for a set period at an hourly rate.

Rather than returning the entire amount earned by the company as income, the taxpayer declared salary and wages paid to him in his capacity as an employee and director of DK Consulting on his income tax return.

The Commissioner sought an amended assessment contending that the income arose solely from the provision of the taxpayer's services. 

The AAT rejected the arguments of the taxpayer, upholding the Commissioner's decision, concluding that the PSI rules were designed to tax income in the hands of a person whose exertion caused its receipt even if the company was technically the contracting party.

This article appeared in Thomson's Client Alert Newsletter Service. Client Alert is a monthly newsletter that promotes your business and develops your client's awareness of upcoming tax issues. To find out more, phone Thomson Customer Service on 1300 304 197 or click here.

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Transport expense for travel between workplaces

On 27 October 2006, Taxation Determination TD 2006/61 was issued and states that where a business is carried on at one of the workplaces, the amount of a transport expense otherwise deductible for travel between workplaces under section 25-100 of ITAA 1997 is attributable to both the relevant business activity and the activity at the other workplace.

The extent to which such an amount is attributable to the business activity for the purposes of subsection 35-10(2) of ITAA 1997 is a question of fact and degree and where apportionment is called for, this needs to be on a `fair and reasonable' basis. In most situations a fair and reasonable basis will be to apportion the amount 50% to the business activity and 50% to the other workplace activity as the travel arises because of the income-producing activities being carried out at both. 

However, there may be cases where the circumstances strongly suggest a different basis of apportionment is appropriate. Taxpayers should self-assess on a fair and reasonable basis or seek the Commissioner's opinion on what portion of the otherwise deductible amount is attributable to the business activity. 

This summary article appeared in the December 2006 Recent Developments of Thomson's The Accountant's Manual. For over 25 years, thousands of practitioners have turned to the The Accountant's Manual for over 3,000 pages of non-legalistic assistance covering tax and accounting issues.

Complete with email alert service, subscriber helpline, subscriber webpage, tax rates and tables, handy tax tools plus much more, this valuable resource keeps you aware of and on top of all your crucial responsibilities. To find out more, click here.

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Too many super funds, says Choice

According to a Choice research report into the growth and costs of having multiple superannuation accounts, members are losing billions of dollars as a result of holding multiple superannuation accounts. The report states that members are paying more than $1 billion each year in unnecessary fees on about 13 million unnecessary accounts. It also says that members lose further millions through 'lost' superannuation associated with multiple accounts. 

The research report, The Super Secret: How multiple accounts cost consumers billions, is available on the Choice web site. 

Industry response

The Association of Superannuation Funds of Australia (ASFA) has responded to Choice's research report saying it supports the report's objective in encouraging the consolidation of superannuation accounts, however, ASFA notes that it is important not to overstate the costs to members. ASFA also says multiple accounts are not a windfall for the superannuation industry. (Source: ASFA media release, 23 November 2006.) 

This article appeared in ATP's daily Latest Tax News (Friday 24 November). With tax fast-moving and ever changing - EVERY DAY, practitioners rely on Thomson ATP's daily Latest Tax News for quick, accurate, comprehensive information - no compromises. When you need to know what's new in tax and related news every day, there's only one place to look - LTN. To find out more, click here

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Thomson special offers and product news

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• Consolidation - Key Legislative Provisions - giving you access to all amendments made to this complex legislation since 2004 in a single, indexed volume.

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Salary Packaging Toolkit

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This automated toolkit has been updated to reflect the new income tax rates and superannuation rules so you can:

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