|
|
Issue 153, 6 July 2007
Welcome to the latest issue of
Thomson's Tax & Accounting Insight, your free news
service for tax and accounting professionals.
Tax & Accounting Insight is the easy
way to keep up with the latest developments in your industry.
Watch your inbox for your fortnightly issue of this free,
informative service from Thomson.
|
|
Articles in this edition include:
Editorial Enquiries:
Tel: 1300 304 197
LRA.Service@thomson.com Copyright:
Thomson Legal & Regulatory Limited
ABN 64 058 914 668
100 Harris Street
Pyrmont NSW 2009
All rights reserved. To subscribe,
please click
here. To unsubscribe, please reply
to this email with Unsubscribe in the heading. Disclaimer:
The information contained in this bulletin neither represents nor
is intended to be legal or professional advice. While every care
has been taken in its preparation, no person should act
specifically on the basis of the material contained herein. If
expert assistance is required, competent professional advice
should be obtained. Privacy
Policy |
|
2007 tax returns: Tax Office flags
rental property; work deductions; CGT
The Tax
Office has warned of the following areas it will scrutinise this
year.
Rental property deductions
The Tax
Office says over 1.4 million people claimed more than $21 billion in
rental deductions in their tax returns for the 2006 tax year, with
almost 200,000 people claiming deductions for the first time.
To help
minimise errors, the Tax Office has outlined some of the common
mistakes made by both first-time and other rental owners:
- Incorrectly claiming the cost of structural improvements as
repairs when they are capital works deductions (e.g. remodelling of
bathrooms and kitchens, and constructing a deck or pergola).
- Overstating deduction claims for the interest on loans taken
out to purchase, renovate or maintain a rental property. A loan can
be taken for both income-producing and private purposes, such as to
buy a car or go on an overseas holiday. The interest on the private
portion of the loan is not tax deductible.
- Incorrectly claiming the full cost of an inspection visit when
it is combined with a private purpose, such as a holiday. Deduction
claims can only be made for the portion of the travel that directly
relates to the property inspection.
- Claiming deductions for rental properties not genuinely
available for rent.
- Incorrectly claiming deductions for properties only available
for rent for part of the year. If a holiday home or unit is used by
a taxpayer, his or her friends or relatives free of charge for part
of the year, the taxpayer is not entitled to a deduction for costs
incurred during those periods.
- Incorrectly claiming the cost of land as a capital works
deduction. The cost of land forms part of the cost base when
calculating CGT on the sale of the property.
- Incorrectly claiming deductions for depreciating assets that
are actually capital works deductions. There is a comprehensive list
of more than 230 residential property items setting out whether
items are depreciating assets that are eligible for a decline in
value deduction, or assets eligible for a capital works deduction.
This list appears in the Tax Office's Rental Properties booklet,
which is available from the Tax Office website.
The Tax
Office also notes that renovation costs and costs to repair damage,
defects or deterioration existing on purchase cannot be claimed as
an immediate deduction. These costs are capital expenditure,
depending upon what is repaired or improved, and must be claimed as
either decline in value deductions over the asset's effective
life, or as capital works deductions over 40 years.
Work-related expenses
The Tax
Office says that, last year, over 7 million people claimed more than
$12 billion in deductions for work-related expenses. For 2007 tax
returns, the Tax Office says it will review a range of deduction
claims including expenses for motor vehicles, self-education,
home-office and travel.
Each year,
the Tax Office selects a number of occupations for specific focus
because they have above average work-related expense claims, a high
number of work-related expense claimants or because the ratio of
work-related expense claims are high compared to the salary and
wages. For 2007 tax returns, the Tax Office will focus on:
- tourism, travel consultants and guides;
- fitness and sporting industry employees;
- construction trades people who are employees;
- guards and security employees; and
- a continued focus on mining site employees.
CGT issues for 2007 returns
The Tax
Office says it will continue to focus on CGT and people who do not
report capital gains for the sale or disposal of shares, properties
and other assets. The Tax Office uses data from state and territory
revenue offices, managed funds, the Australian Stock Exchange and
share registries, matching it against tax return information to
identify share and property sales that involve capital gains. The
Tax Office reminds taxpayers of the following points regarding CGT.
- Taxpayers who took advantage of the opportunity to invest into
superannuation prior to 30 June 2007 and sold assets may have made a
capital gain. This gain may be subject to CGT. The Tax Office warns
that it is important for taxpayers to set aside funds to meet any
tax liability (including CGT) from selling or transferring assets
into superannuation.
- Taxpayers who purchase or inherit an asset, receive an asset
as part of a divorce settlement or as a gift, may be liable for CGT
when they sell or otherwise dispose of it.
- Capital losses from collectables can only be offset against
capital gains from collectables, not against capital gains made on
other assets.
- Records on the purchase or acquisition and the sale or
disposal of any asset that may attract CGT must be kept.
This is an excerpt from an article appeared in Thomson's InTAX
magazine (July 2007); Australia's best independent monthly tax
magazine. It provides concise reports of the latest tax news, plus
the practical implications of tax developments in an easy-to-read
magazine format. To find out more, phone Thomson Customer Service on
1300 304 197.
Return to TOP
|
|
|
Tax Office SMSF compliance focus
for 2007/08
Assistant Deputy Commissioner of Taxation, Ian
Read, recently gave a speech on the
Tax Office's compliance activities in relation to self-managed
superannuation funds (SMSFs) and approved auditors.
Mr Read said that the Tax Office has been
analysing the reaction of trustees and advisers to the
superannuation simplification measures and will use this
information to tailor its future compliance activities.
Mr Read revealed that the Tax Office compliance
program for the 2007/08 year is being finalised and will be
published and released by the Commissioner early in the new
financial year. The compliance coverage of SMSFs will increase to
around 10,000 cases for 2007/08 (up from around 3,600 the previous
year).
Mr Read also outlined the Tax Office's
compliance program for SMSF auditors. When selecting cases for the
2007/08 year, the Tax Office will look at various risk indicators
such as funds with an unqualified audit report and where the Tax
Office has identified a significant contravention. Mr Read also
indicated that in 2007/08, the Tax Office intends to conduct a
broader review of the procedures of large entities whose approved
auditors audit at least 250 SMSFs per year.
For more on this topic, see the Assistant
Deputy Commissioner of Taxation's speech to the ICAA Audit
Conference, Southbank, 13 June 2007.
This article appeared in Thomson's daily Latest
Tax News (Tuesday, 3 July 2007). With tax fast-moving and ever
changing — EVERY DAY, practitioners rely on Thomson'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.
Return to TOP
|
|
|
Redundancy payment to Director
In a recent test case, the Administrative
Appeals Tribunal (AAT) has held that a payment made on termination
of an employee, who was also a director of the company, was a bona
fide redundancy payment in the circumstances of the case.
An eligible termination payment (ETP) is any
payment made in respect of the termination of employment. Excluded
from an ETP is a bona fide redundancy amount, which is tax-free.
This amount is calculated based on a prescribed formula.
A bona fide redundancy occurs where an
employer no longer requires an employee to carry on work of a
particular kind and the termination is not in relation to the
employee's performance.
The taxpayer in this case was a director and
employee of a company, who contracted to install hardware on
behalf of another company. This was the only operation of the
business.
The contracting company terminated this
contract and as a result the taxpayer's company was required to
close its operations.
The taxpayer was paid out her salary and an
amount of a redundancy payment.
The Commissioner amended the taxpayer's
assessment to include the amount of the redundancy payment as
assessable income, contending that because the taxpayer was a
director of the company, the payment was not in consequence of
termination of employment.
The AAT disagreed with the Commissioner,
finding that the payment was a bona fide redundancy payment paid
as a result of the closure of the taxpayer's business.
TIP: The facts and circumstances of each case
will determine whether or not a taxpayer has received a bona fide
redundancy.
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.
Return to TOP
|
|
|
Thomson special offers and product alert
Tax time essentials
Are you prepared for the peak tax lodgment
period? Make sure you are with Thomson's essential tax time
tools and get the practical assistance on crucial tax and
accounting business issues you face daily. Solve complex tax
questions quickly with quality analysis and an easy to use
structure, and develop effective solutions for your clients or
business faster.
Get help and clarification on all key tax
issues for tax return preparation. Thomson's leading Australian
Tax Handbook — Tax Return Edition is updated to 1 July 2007 with
all developments in one convenient volume.
Ideal companion to the Australian Tax
Handbook with over 200 worked examples. Speed your understanding
of the operation of tax law with practical 'examples' that
clearly illustrate the tax rules. Each example starts with the
broad legal principle and is cross-referenced to the relevant
provisions, rulings, cases and Australian Tax Handbook paragraphs,
so you can quickly identify its relevance and find further
information fast.
Find tax data quickly and easily with Tax
Rates & Tables — the leading single volume reference guide
that combines comprehensive coverage of Australian tax rates with
a wealth of practical information and tools, including a handy
foldout desktop rates and tables guide for hardcopy subscribers.
Visit www.thomson.com.au/resources/taxtime/
for more information on Thomson's full range of Tax Time
essentials or call us on 1300 304 197.
Financial
Accounts Presentation Workshop — Two-day workshop
This is your last chance to attend the 2007
series of Financial Accounts Presentation Workshops. Seats are
filling fast so register now to attend the Financial
Accounts Presentation Workshop — two-day workshop.
Now
is the time to refresh and consolidate your knowledge. Be guided
through statutory record-keeping requirements and preparation of
work papers.
Introduction
to AIFRS Financial Reports Workshops — one-day workshop
Learn
or refresh your knowledge of the fundamental requirements of
preparing compliant financial reports using Australian Accounting
Standards by attending the Introduction to AIFRS Financial Reports Workshops — one-day workshop.
XYZ Model Financial Accounts
Generate a meaningful set of accounts for
your diverse range of clients with Australia's definitive
financial reporting resource.
Achieve greater efficiency with Thomson's
financial reporting solutions. Hurry orders shipping now!
XYZ Model Financial Accounts Generator
Take the hard work out of producing financial
reports and let the XYZ Model Financial Accounts Generator
automatically create presentation-ready formatted reports in
minutes.
Achieve greater efficiency with Thomson's
financial reporting solutions. Hurry orders shipping now!
Visit www.thomson.com.au/catalogue/shopexd.asp?id=563
for more information on XYZ Model Financial Accounts or call us on
1300 304 197.
Return to TOP
|
|
|
