AUDITING

The Australian Securities and Investments Commission (ASIC) will be writing to selected auditors requesting their auditor rotation succession plans for listed companies and schemes in the near future.   Thomson Company Secretarial Procedures Recent Developments 29/5

HIGHER EDUCATION CONTRIBUTION SCHEME (HECS)

The Government announced that accounting, administration, economics and commerce will move into the same HECS-HELP band as law, medicine etc. This will apply to students who commence studying at higher education providers after 1 January 2008 . This will result in a higher contribution - $8,499.      Thomson ATP Weekly Tax Bulletin 18/5 and 25/5

SUPERANNUATION

1. The Tax Office is writing to almost four million superannuation account holders telling them that their superannuation fund does not have their tax file numbers (TFNs ). From 1 July 2007 , before-tax contributions above the concessional $1,000 threshold for fund member who have not quoted a TFN will be taxed at the top personal marginal tax rate instead of 15 per cent . Unless the recipients of the ATO’s letter object, the Tax Office will inform the superannuation fund of the member’s TFN.      WTB 4/5 and 18/5

2. Amounts in a superannuation fund’s reserve allocated to a member within 28 days of a month-end, in compliance with Div 7.2 of the SIS Regulations, will be counted against the member’s concessional contributions cap.   WTB 4/5

3. The Treasurer announced that the Government will pay a one-off additional co-contribution into the superannuation accounts of those persons who made eligible contributions in 2005-06, doubling the maximum co-contribution from $1,500 to $3,000.    WTB 8/5

4. The Government will legislate to allow superannuation funds to invest in instalment warrants of a limited recourse nature over any asset a fund would be permitted to invest in directly.   WTB 25/5

5. An excellent eight page article in Taxation in Australia 10/5 gives a comprehensive coverage of superannuation strategies for 2007.  

6. On 28 March, the ATO issued tax determination TD 2007/3 largely reversing its two year benefit period limit for salary continuance premiums on policies held by superannuation funds.   ING circular

LAND TAX

The Victorian 2007-08 budget announced changes to land tax, including –

• Tax-free threshold increased from $200,000 to $225,000
• The 1.2% rate for landholdings $1.19m to $1.62m cut to 0.8%.
• The 1.8% rate ($1.62m to $2.7m) cut to 1.3%
• Top rate cut from 3% to 2.5%
• Abolition of special rate on primary production land in metropolitan area.   WTB 4/5

FRINGE BENEFITS TAX

The car parking threshold for the FBT year which commenced on 1 April 2007 is $6.78.   WTB 11/5 and TaxVine 11/5

CAPITAL GAINS TAX

1. The tax law will be amended to allow CGT rollover relief when spouses in a marriage breakdown transfer their entire in specie interest in a small superannuation fund to another complying superannuation fund.   WTB 8/5

2. A useful article appears at par 863 in WTB 18/5 on “tricky issues” which can arise when spouses have different residences . Where spouses nominate different homes as their main residences, the CGT exemption applies to a spouse’s interest for the whole period in question when the interest is 50% or less, whereas, if the interest is greater than 50%, the exemption will apply for only half the period. De facto spouses are eligible for the exemption. The application of the exemption when children inherit is also dealt with in the article.     

3. The AAT has held that a taxpayer was subject to tax on the capital gain he made when he and his brother divided between them a parcel of CSR shares they jointly owned.   TaxVine 21/5 and WTB 18/5

INCOME TAX

1. Employers are exempted from giving employees a duplicate copy of PAYG withholding payment summaries issued after 1 May 2007 .     WTB 4/5

2. A taxpayer was successful in appealing against an ATO decision that a payment was not a bona fide redundancy payment . The taxpayer was a director, along with her husband and son, in a business which the directors decided to close when its major contract was cancelled. The Tribunal considered that there had been a cessation of employment against the taxpayer’s wishes, forced on her as both a director and employee by external issues .   WTB 4/5

3. The Government announced funding for the ATO to enable the Tax Office to pre-fill electronic individual tax return for 2007-08 . The Tax Office will automatically include information about salaries/wages etc, dividend and interest income, Social Security payments, Medicare out-of-pocket expenses, HECS etc. Nearly one million taxpayers will need to do no more than lodge their pre-filled returns electronically.    WTB 8/5     

4. The Bill incorporating the changes to Division 7A (see RDBs 11/06 and 12/06) has been introduced into Parliament. The changes cover such subjects as-

·         Removal of automatic debiting of franking account

·         Company payments allowed to be converted into loans

·           Refinancing of loans

·         Commissioner’s discretion to disregard Division 7A

·         Loans involving interposed entities

·         FBT exemption for excluded loans. WTB 11/5

5. An amending Bill amends the tax law to ensure a trustee can be taxed on Australian net income of the trust to which a non-resident trustee beneficiary is entitled, in a similar way to the treatment of non-resident companies and individual beneficiaries. The rate of tax will be the top personal tax rate. Separate PAYG withholding provisions apply to distributions to foreign residents by managed investment trusts of Australian net income . Tax is to be withheld at 30 per cent. The application of these new provisions will be 1 July following Royal Assent. WTB 11/5

NOTE – The above summaries of information contained in publications and other material received by WHK Day Neilson should not be relied upon without reference to the firm as often the context in which the item appears needs to be understood and the summarising of the information may omit significant connotations.