Issue 155 - 3 August 2007

	Issue 155, 3 August 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: Provision of hire car to employee Proposed Australian property trusts amendments: Tax Office administrative treatment Div 7A: One-off opportunity for business to correct past mistakes — Tax Office Practice Statement Thomson Tools 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
	Provision of hire car to employee Q. Lisa’s employer provides her with a car as part of her salary package. The taxable value of the car is calculated under the operating cost method. On the basis of logbook records kept by Lisa and provided to her employer, the business use percentage of the car is 80% for the FBT year. During the FBT year, Lisa’s car is off the road for 10 weeks as a result of an accident. During this time her employer provides her with a hire car. The total cost of the car is $800. What is the FBT liability of Lisa’s employer in relation to the provision of the hire car? Can the employer rely on Lisa’s logbook records to reduce the taxable value of this benefit by 80%? A. The provision of a short-term hire car by Lisa’s employer is a residual fringe benefit. Tax Office Ruling MT 2034 states that the fringe benefits value of this benefit is normally the arm’s length amount paid by the employer: see section 51(a) or (b) of the Fringe Benefits Tax Assessment Act 1986 (FBT Act). Paragraph 21 of the Ruling states that the valuation rules that apply to the private use of motor vehicles other than cars also apply to short-term hire cars. This Ruling confirms that the Tax Office will generally accept logbook records to verify any business use of the hire car (on the assumption that the pattern of use of the hire car is the same as for the damaged car). If no logbook records exist (e.g. if the statutory formula were used for Lisa’s car), the Tax Office will also accept any soundly based estimate of the number of private kilometres travelled during the period. In order to reduce the taxable value of the benefit, Lisa must also provide her employer with a declaration to verify the business proportion of the kilometres travelled. If the cents per kilometre method is used, it is acceptable for the declaration to state the number of private kilometres travelled rather than the deductible percentage: see section 52(1)(c) of the FBT Act. On this basis, the taxable value of the hire car, for FBT purposes, can be reduced to $160 (i.e. $800 – (80% x $800)). This issue appeared recently in Thomson Tax Q&A. Thomson Tax Q&A is issues based and uses actual scenarios confronted in practice to help you understand how developments affect your client’s tax position. New Q&As are added regularly and the answers provided online are updated to take into account tax changes that impact on the issues raised. It therefore provides an up-to-date database of real solutions to actual tax issues facing tax advisers in practice. To obtain more information, or to subscribe, simply contact your nearest Thomson representative or call 1300 304 197. Return to TOP
	Proposed Australian property trusts amendments: Tax Office administrative treatment The Tax Office has released details of the administrative treatment it intends to apply concerning proposed measures to allow certain stapled entities, such as Australian listed property trusts, to restructure with an interposed head without taxation consequences. The proposed changes announced by the Assistant Treasurer in April 2007 include: amendments to provide a CGT roll-over for investors in a stapled group where there has been an interposition of a unit trust between the investors in a stapled group and the stapled entities; and a consequential amendment to Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936), to ensure the restructures do not trigger Division 6C, which would otherwise tax the whole income of the interposed trust as if it were a company. The Tax Office said it will apply the existing law in the period between the announcement and enactment of the proposed law. It added that the Commissioner will not undertake compliance action in relation to these proposed changes until the outcome of the legislation has been finalised. The article comes from A-Z of Trusts, fortnightly email news alert (Wednesday, 1 August 2007). A-Z of Trusts is a one-stop resource authored by field experts from Deacons law firm, giving you current, detailed information and practical assistance on modern trust planning concepts. To find out more, click here. Return to TOP
	Div 7A: one-off opportunity for business to correct past mistakes — Tax Office Practice Statement The Tax Office has released [30.7.07] Practice Statement Law Administration PS LA 2007/20 — Exercise of the Commissioner’s discretion under section 109RB of Div 7A of Pt III to the ITAA 1936 to disregard a deemed dividend in respect of the 2001/02 to 2006/07 income years. The Tax Office said it is giving business owners a one-off opportunity to correct past mistakes regarding payments and loans from their private companies and avoid penalties under Div 7A. It said recent changes to tax law gave the Commissioner discretion to disregard the operation of Div 7A in circumstances where an honest mistake or inadvertent omission has been made. The Practice Statement provides guidance to Tax Office staff on how to treat specific ‘corrective action’ taken by taxpayers in respect of the 2001/02 to 2006/07 income years when considering whether or not to exercise the Commissioner’s discretion to disregard a deemed dividend where that ‘corrective action’ was taken prior to 1 July 2008. The Tax Office noted that from 1 July 2008, it will resume audit work to ensure payments made by private companies are correctly accounted for and company loans are not used to distribute tax-free profits. This article appeared in Thomson’s daily Latest Tax News (Monday, 30 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
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