Issue 167, 15 February 2008

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Articles in this edition include:

• First Home Saver Accounts — discussion paper released

• Superannuation for Temporary Residents

• TD 2007/28 — Division 7A: ‘present legal obligation’ of a private company

• Thomson Tools

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First home saver accounts — discussion paper released

On Friday 8 February 2008, the Treasurer announced the release of the First Home Saver Accounts discussion paper outlining the proposed features of the accounts and how they would operate. A fact sheet was also released.

An individual will be able to open one of the new accounts if they:

• are aged 18 or over and under 65;
• are an Australian resident for taxation purposes;
• have not previously purchased or built a first home in Australia to live in;
• do not have or have not previously had an account; and
• make an initial contribution of at least $1,000.

The Government is seeking comments and submissions from industry and the community on the paper by 7 March 2008. Treasury will also consult with industry to assist the Government in settling the detail of the proposal. Interested parties are invited to make comments and submissions to: General Manager, Personal and Retirement Income Division, The Treasury, Langton Crescent, PARKES ACT 2600; Email: homesaver@treasury.gov.au

Source: Treasurer’s press release No 005, 8 February 2008

This article appeared in Thomson’s daily Latest Tax News (Friday 8th February). 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. 
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Superannuation for temporary residents

On 15 October 2007, the Treasurer under the previous Howard Government announced that, from 1 July 2008, all future superannuation contributions and balances for temporary residents will be required to be paid to the Australian Government, rather than to the temporary residents themselves. The Government stated that they would hold the superannuation on behalf of the temporary residents.

The Treasurer stated that this would assist the Government in creating a temporary resident superannuation register, making it easier for temporary residents to locate and claim their superannuation.

Temporary residents who become permanent residents

Temporary residents who become permanent residents will be able to have their superannuation transferred back from the Government into a superannuation fund (with interest). However, the new measure will not apply in respect of contributions or balances of New Zealand citizens.

Temporary residents who permanently depart Australia

Temporary residents who permanently depart Australia will be able to claim back their superannuation by contacting the Tax Office within five years of permanent departure (subject to existing withholding tax arrangements).

Implications for employers

Employers will still be required to pay the compulsory 9% Superannuation Guarantee contributions for temporary residents, but they will have the choice of continuing to make payments to a superannuation fund or paying contributions directly to the Tax Office. Further, superannuation providers will be required to transfer the balances (including existing balances) of superannuation accounts held by temporary residents to the Tax Office on an annual basis.

This summary article appears in the March 2008 Recent Developments of Thomson’s The Accountant’s Manual. For over 27 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. 

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TD 2007/28 — Division 7A: ‘present legal obligation’ of a private company

TD 2007/28 was released on 17 October 2007 and replaced TD 2007/D8. It states that the present legal obligation of a private company is an obligation that is binding at law regardless of whether it is payable and enforceable presently or at a future point of time for distributable surplus calculation purposes.

The Tax Office’s view on the matter of contingencies and future provisions is that they are not included in the calculation unless they are one of the accounting provisions set out in section 109Y2(a) or 109Y2(b) of the Income Tax Assessment Act 1936 (ITAA 1936).

Practically, a present obligation of a legal nature under AASB 137 Provisions, contingent liabilities and contingent assets would also be a present legal obligation for the purposes of the distributable surplus formula in section 109Y of the ITAA 1936.

Examples from TD 2007/28

The following examples are set out in the Taxation Determination:

• Z Coy Pty Ltd (Z Coy) operates a small financial services business and on 30 May 2007 receives a quarterly rates demand from the local council in respect of its business premises. The demand is due for payment by 21 June 2007 but Z Coy does not make payment for a further two weeks. The amount of the rates demand is an immediate obligation binding at law and presently enforceable. It is therefore a present legal obligation for the purposes of subsection 109Y(2) of the ITAA 1936 at the end of the income year (30 June 2007).
• Y Coy Pty Ltd (Y Coy) operates a small lawn mower retail business and provides free repairs for selected customers for an additional two years after the manufacturer’s warranty period expires. Y Coy does not advertise this service but it is known in the community that free repairs may be provided outside of the warranty period. Y Coy expects to provide 20 out-of-warranty repairs at a cost of approximately $5,000 as at 30 June 2007 in respect of completed sales as at that date. Y Coy takes $5,000 up as a ‘provision for out of warranty repairs’ when compiling its annual reports for the reporting period ending 30 June 2007. The provision taken up by Y Coy is not enforceable by legal action either presently or in the future and is therefore not a present legal obligation for the purposes of subsection 109Y(2) of the ITAA 1936 at the end of the income year (30 June 2007).

This article appeared in the March 2008 Recent Developments of Thomson’s Company Secretarial Procedures. It provides clear, non-legalistic information for company administrators, with precedent documentation on managing the administrative and compliance issues arising from the Corporations Act. To find out more, click here.

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