RECENT DEVELOPMENTS BULLETIN, JULY 2008

ACCOUNTING

The International Accounting Standards Board (IASB) has amended IFRS 1 to allow first-time adopters of international standards to use a deemed cost of either fair value or the carrying amount to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements.   These and other changes will be released in AASB 2007-08, which will apply to financial years ending on or after 1 January 2009 .   Details appear on page 71 of Charter August .

AUDITING

The Institute of Chartered Accountants in Australia (ICAA) has launched an audit manual on using International Auditing Standards in the audits of small and medium-sized entities .   It is available on the ICAA website.   Charter August, page 70

SOCIAL SECURITY

The Department of Veterans’ Affairs has released a document which summarises increases to the social security pension assets and income test thresholds effective from 1 July 2008 .   Benefits affected include Income Support Supplement and Service Pension.   Thomson Weekly Tax Bulletin (WTB) 4/7

SUPERANNUATION

1. Self Managed Superannuation Funds Ruling SMSFR 2008/1 explains the prohibition on trustees of self-managed superannuation funds giving financial assistance using the resources of the fund to a member or relative, under section 65 (1) (b) of the SIS Act. Examples of prohibited forms of assistance are listed.   WTB 18/7

2. SMSFR 2008/2 outlines the Commissioner’s approach to the application of the sole purpose test under section 62 of the SIS Act.   Examples of breaches of the test are quoted.   WTB 18/7

FRINGE BENEFITS TAX (FBT)

An article on page 74 in Taxation in Australia for July explains the difference for FBT purposes of benefits received from a trust by persons who are directors of corporate trustees as well as beneficiaries of the trust .   The questions are whether the directors are employees of the trust and whether the benefits are provided in connection with their employment.   The answers will vary depending on circumstances.

GOODS AND SERVICES TAX (GST)

The Full Federal Court has upheld the taxpayer’s appeal against a decision that a taxpayer was not entitled to the benefit of the GST margin scheme on the sale of new strata units (see RDB 2/08, page 3).   The relevant question was whether the property sold was the same as the property acquired.   TaxVine 4/7

LUXURY CAR TAX

The luxury car tax threshold for 2008-09 is $57,180, which is also the income tax “depreciation” limit for the year.    TaxVine 4/7

INCOME TAX

1. Regulations were registered in June to support changes to the tax laws which provide tax-free treatment for superannuation lump sums paid to persons suffering from a terminal medical condition .   TaxVine 4/7

2. The Full Federal Court has held that lump sum compensation received by a life tenant under several trusts was not in the nature of income according to ordinary concepts and so was not assessable .   In effect, the compensation was paid because the trustees followed an investment policy favouring the remainder men rather than the life tenant.   Taxation in Australia July page 8

3. The resident minors low income tax offset of $1,200 for 2008-09 has effectively increased the Div 6AA tax-free threshold for “unearned income” of an eligible resident minor to $2,667 for 2008-09.   Thomson Weekly Tax Bulletin (WTB) 1/8

4. In WTB 18/7 par 1337, there is an informative article on the tax implications of the Government’s Green Paper on the proposed emissions trading scheme . Participants in the scheme may have an inventory of permits, and transactions may be treated similarly to those involving trading stock.  

5. The 30 June year-end exchange rates are provided in par 1347 of WTB 18/7 . The average rates for USA and UK were 90.42 cents for USA and 45.31 cents for UK .  

6. The AAT has affirmed the Commissioner’s disallowance of a claim for self-education expenses. The taxpayer claimed the cost of a hospitality course involving 500 hours industry placement. The taxpayer conceded that undertaking the course was not a condition of employment and remuneration was based on the job and not qualifications.   “The Tribunal considered the expenses were concerned with the getting of work in the future .”   WTB 18/7

7. The Federal Court has affirmed the Commissioner’s decision that a taxpayer was not entitled to a deduction for prior year losses because it did not satisfy the requirements of the same business test .   The Court accepted that the taxpayer was managing the hotel business when the shareholdings changed but had outsourced the management of the hotel when the losses were incurred.   WTB 11/7

8. The Treasurer has advised parents to keep their receipts for education expenses from 1 July 2008 to be able to claim the education tax offset . Parents entitled to Family Tax Benefit Part A are eligible.   WTB 4/7

9. In par 1243 of WTB 4/7 , there is a list of ATO publications to assist employees from 45 industries with working out what they can claim as tax deductions .

10. Taxation Determination TD 2008/18 issued on 2 July sets out the “ reasonable travel and meal allowance amounts for 2008-09”.   WTB 4/7

NOTE – The above summaries of information received in publications and other material by WHK Western Victoria should not be relied upon without prior reference to the firm, as often the context in which the item appears needs to be understood, and the process of summarizing may cause unintended connotations or distorted implications.

This publication is provided by WHK and Investor Financial Planning (IFP) as an information service only and does not constitute financial product advice. WHK & IFP provide no warranty regarding the accuracy or completeness of the information. All opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation (May 2008) but are subject to change without notice by WHK & IFP. Both WHK & IFP assume no obligation to update this document after it has been issued.   Except for any liability which by law cannot be excluded, WHK & IFP, its Directors, employees and agents disclaim all liability (whether in negligence or otherwise) for any error, inaccuracy in, or omission from the information contained in this document or any loss or damage suffered by the recipient or any other person directly or indirectly through relying upon the information.

Section 945A of the Corporations Act requires financial planners to obtain information from clients before making recommendations. Equivalent requirements apply also to accountants in relation to the provision of taxation advice. Accordingly, clients and readers should not act only on the basis of material obtained in this newsletter because the contents are of a general nature and therefore do not take into account each person’s individual circumstances and may be liable to misinterpretation. Do not act upon any of the information contained within this newsletter without first obtaining specific advice from your local WHK Group Adviser.

As WHK Group firms, WHK is a registered business name of WHK Pty Ltd ABN 84 006 466 351 and Investor Financial Planning Pty Ltd, holder of Australian Financial Services License No. 238244 ABN 51 060 092 631.