Issue 164, 7 December 2007

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Articles in this edition include:

• PSI Rules — Business Premises Test: ATO Decision Impact Statement

• Payment of Tertiary Fees

• Apportionment of Home Office Expenses Affirmed

• Thomson Tools

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PSI Rules — Business Premises Test: ATO Decision Impact Statement

The Tax Office has released a Decision Impact Statement [3.12.2007] on the AAT decision in AAT Case [2007] AATA 1786, Re Dixon Consulting Pty Ltd (reported at 183 LTN [4]). The AAT found that a garage had not been used ‘exclusively’ by the taxpayer in carrying on its business for the purposes of satisfying the ‘business premises test’ under the PSI rules. The Tax Office said the findings of the Tribunal confirm the Tax Office view in Taxation Ruling TR 2001/8.

This article appeared in Thomson’s daily Latest Tax News  (Monday 3rd December).  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

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Payment of Tertiary Fees

Higher Education Contribution Scheme (HECS) applies to study in award courses undertaken in Australian higher education institutions. It is a fee of a pre-determined amount that varies only with inflation and the duration of the course undertaken.

From 1 June 2006 any accumulated HECS debt became an accumulated Higher Education Loan Program (HELP) debt. The 2006 and 2007 contribution fees (per calendar year) for these students are: 

Payment options 

From 1 January 2005, a 20% discount on the full HECS fee applies (partial up-front payments of $500 or more also attract a 20% discount). Before 1 January 2005, the discount was 25%.

The amount to be paid under the deferred payment option is the HECS fee shown, which is indexed annually for inflation until paid.

Repayment of accumulated HECS debt (through the tax system)

For accumulated HECS debts, no actual payment is required until personal taxable income (PTI — the sum of taxable income plus reportable fringe benefits and exempt foreign income) reaches a specified level.

The applicable repayment thresholds and rates for the 2006/07 and 2007/08 tax years are:

Voluntary lump sum payments of $500 or more will attract a 10% discount. It is important to remember that if the taxpayer intends to pay off a total HECS debt with a voluntary payment, the repayment must be made before the Tax Office processes the taxpayer’s income tax return.

The repayment continues as a levy on taxable income plus reportable fringe benefits until such time as the HECS debt has been discharged.

HECS debts are recoverable through the pay-as-you-go (PAYG) system. Employees who have an accumulated HECS debt should complete a Tax File Number Declaration form (if they have not completed an Employment Declaration form under the former PAYE system) advising their employer of their HECS debt. Failure by an employee to complete the form will result in tax being deducted at the current maximum rate of 45%.

Note: It is recommended that taxpayers with accumulated HECS debts provide their tax agent with their outstanding HECS balance prior to completion of their annual tax return.

This content is extracted from Tax Guide 2007/08. 

Ensure that your business is always at front of mind and provide your clients with professional relevant information they need with the 2007/08 Tax Guide.  Tax Guides is a cost-effective way to market your business, containing 72 pages of key tax data that can be branded with your logo and contact details.

To find out more, click here or phone Thomson Customer Service on 1300 304 197.

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Apportionment of Home Office Expenses Affirmed

In a recent decision, the AAT upheld the Commissioner’s decision that a deduction for home office expenses should be apportioned on a floor area basis.

A taxpayer operated its business activities in an office in one of the front rooms of its directors’ main residence, and used this room exclusively for business purposes. For the years ended 30 June 2003, 2004 and 2005, the taxpayer had claimed 50% of the property related expenses in its income tax return.

The taxpayer held a 50% interest in the property and the remaining 50% was held by both directors as tenants in common. The directors, along with their children, used the property as their main residence.

The taxpayer argued that since it had a 50% ownership interest in the property, it was entitled to 50% of the deductions. It argued that its use of the property did not fall within the category of a ‘home office’, which would limit the availability of deductions to a use basis.

The AAT rejected the taxpayer’s arguments and affirmed the Commissioner’s decision, which provided the expense should be apportioned on a floor area basis entitling the taxpayer to claim 10% of the occupancy expenses.

Tip: Where a taxpayer is working from home or operating a business at a private residence, careful consideration should be paid as to whether the home is a place of business or a home office.

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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Thomson Tools

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Tax Rates & Tables 2007

Tax Rates & Tables is the leading single volume reference guide that combines comprehensive coverage of Australian tax rates with a wealth of practical information and finding tools. Tax Rates & Tables now includes rates for both the 2006/07 and, where available, the 2007/08 financial year and includes a handy foldout Desktop Tax Rates & Tables guide with all hardcopy editions.

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With worked examples and calculations, Income Tax and GST Strategies Manual is designed to act as a bridge between the theory of tax law and the practice of tax through the use of specific strategies. Each strategy highlights tax traps and illustrates how to take advantage of a favourable application of a particular provision of tax laws to optimise your client’s tax position. Strategies are cross-referenced to relevant Australian Tax Handbook chapters for related background, saving on research time.

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GST Legislation PLUS 2008 is the only GST Legislation source that provides extensive annotations on a section-by-section basis of relevant rulings and cases. It includes section notes for tracking legislative amendments, cross-references to each defined term, alerts to overriding provisions and relevant overseas and Australian case precedents.

Australian GST Handbook 2007–08

Australian GST Handbook provides a comprehensive topic-by-topic guide to the GST system covering all aspects of the legislation and its relationship with other taxes, including income tax and FBT.  Written by experienced practitioners with practical GST experience, it gives readers a balanced understanding of how the GST system really works, and includes chapters that examine the GST planning issues and consequences involved with starting, buying, running and restructuring a business.

Australian Financial Planning Handbook 2007–08

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Death & Taxes: Tax-effective Estate Planning

Death & Taxes: Tax-effective estate planning is a rigorous and accessible legal guide to the tax consequences of death on superannuation, the home, investments, businesses and assets controlled in family trusts and companies. It is an indispensable reference for all who advise on estate planning, wills and management of deceased estates and testamentary trusts. This edition incorporates the latest developments in estate planning including the new ‘Better Super’ system.

Social Security & Financial Planning 2008

Social Security & Financial Planning 2008 provides tax and financial planning information, tips and guidance appropriate for anyone who provides social security and financial planning advice to their clients, as well as tax educators and students. This easy-to-read resource allows a thorough analysis into client's goals and overall financial situation, using the most practical and up-to-date information.

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