RECENT DEVELOPMENTS BULLETIN, MAY 2008

FINANCIAL REPORTING

1. The Australian Accounting Standards Board (AASB) has approved the issue of a revised AASB 3 Business Combinations and a revised AASB 127 Consolidated and Separate Financial Statements , which will apply for financial periods commencing 1 July 2009 .    Charter, May

2. The ASSB has released AASB 2008-1 Amendment to Australian Accounting Standards – Share Based Payments: Vesting Conditions and Cancellations , and AASB 2008-2 Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations Arising on Liquidation.     Charter June

AUDITING

Guidance Statement GS 007 Audit Implications of the Use of Service Organisations for Investment Management Services is operative for periods commencing on or after 1 July 2008 .   Charter May

VICTORIAN BUDGET

Changes announced in the Victorian 2008-09 budget included –

• Top land tax rate reduced to 2.25 per cent and thresholds increased by about 10 per cent.
• Land tax exemption for residential accommodation for young people with disabilities.
• Payroll tax rate reduced to 4.95 per cent from 1 July 2008 .
• Stamp duty thresholds on land transfers reduced by about 10 per cent.
• WorkCover premiums reduced by approximately 5 per cent.

Thomson Weekly Tax Bulletin (WTB) 9 May

SUPERANNUATION

1. The Commissioner has released a draft ruling which sets out the Commissioner’s opinion when in house assets rules are contravened when a SMSF is presently entitled to distributions from a related trust which are not paid over to it . Various situations may arise. For example the relevant amount may be a loan or, if invested in additional units in the trust, may constitute a new in house investment. The subject is comprehensively covered on page 560 of Taxation in Australia 10 May.                          

2. Draft Superannuation Fund Ruling SMSFR 2008/D3 explains how the term, “business real property” , in s 66(5) of the SIS Act applies for SMSFs in respect to certain exceptions to the investment restrictions in the SIS Act. Detailed coverage is given at par 658 of WTB 2/5

DROUGHT ASSISTANCE

The “ Exceptional Circumstances Relief ” scheme is the subject of a Bill introduced on 29 May, by which the period in which a person is eligible is extended to 30 June 2009 , the salary or wage

a farmer or small business owner applicant can earn and which is exempt from the income test is increased to $20,000, and operators of small business owners in small, farmer-dependent towns are eligible. Details are in par 929 of Taxation in Australia 30/5

MEDICARE LEVY

1. The Medicare levy threshold amount for individuals eligible for the senior Australians tax offset will increase from 1 July 2008 to $28,867 (couples $42,000).    WTB 13/5

2. The Medicare levy phase-in limit for individuals eligible for the senior Australians tax offset will increase from 1 July 2008 to $33,961 (couples $49,412).    WTB 13/5

CAPITAL GAINS TAX (CGT)

1. The Government will increase access to the CGT small business concessions via the $2 million aggregated turnover test for taxpayers owning a CGT asset used in a business but owned by a related entity , and for partners owning a CGT asset used in the partnership business, with effect from the 2007-08 income year.     WTB 13/5

2. The improvement threshold for 2008-09 is $119,594.     WTB 23/5

3. The decision in Metlife Insurance Ltd v FCT is authority for the proposition that the Commissioner may amend assessments at any time for the purpose of assessing capital gains arising out of certain CGT events where the time of the relevant CGT event is determined based on when a contract was entered into.   WTB 30/5

GENERAL GOODS AND SERVICES TAX (GST)

The High Court has allowed the Commissioner’s appeal against a Full Federal Court decision and held that the vendor of a property was liable to pay GST on a forfeited deposit following the rescission of a sale contract.    TaxVine 23/5 and WTB 23/5

FRINGE BENEFITS TAX

1. A Bill introduced on 27 May includes a FBT amendment to ensure that food or drink provided as part of a salary sacrifice arrangement (eg a “meal card arrangement”) is excluded from the FBT exemption in s 41 of the FBTA Act 1986. The Bill also restricts the FBT exemption for eligible work-related items to those which are used primarily for work-related purposes. Depreciation is not allowed on the exempt items but is allowable on items acquired under salary-sacrifice arrangements .        TaxVine 30/5 and WTB 13/5

2. Tax Determination 2008/10 states that, if an employer allows an employee time to repay an amount mistakenly paid and to which the employee is not legally entitled, there is a “Loan benefit ” for FBT purposes. If the employer subsequently forgives the amount, a “debt waiver benefit” is created.        WTB 2/5

3. The FBT car parking threshold for the FBT year commencing on 1 April 2008 is $7.07.    WTB 9/5

4. From 13 May 2008 , the FBT law will be amended to ensure it applies appropriately where an employer provides employees and their associates with a fringe benefit in relation to a jointly held investment. The “otherwise deductible rule” will apply to jointly owned assets according to the respective rights of the joint owners.    WTB 13/5

FAMILY TAX BENEFIT (FTB) PART B

From 1 July 2008 , an income test will be introduced so that FTB Part B will be available to families only where the annual adjusted taxable income of the principal earner does not exceed $150,000. The Family Tax Benefit will be delivered only through Centrelink and Medicare from 1 July 2009 .     WTB 13/5

LUXURY CAR TAX

The Luxury Car Tax will increase from 25 per cent to 33 per cent from 1 July 2008 .   WTB 13/5

INCOME TAX

1. The Government will introduce a refundable tax offset ( the Education Tax Refund ) to be claimed on the lodgement of an income tax return. Eligible families will be able to claim a 50 per cent refund every year for key education expenses up to $750 for each primary education child, and $1,500 for each secondary education child. Eligibility criteria are shown in WTB 13/5 par 736

2. Taxation Determination TD 2008/8 sets out the elements of a Division 7A loan agreement which must be in writing. These are set out in WTB 2/5, par 655

3.The Government will amend the definition of “family” for family trusts to limit lineal descendants to children and grandchildren of the test individual and the test individual’s spouse. A one-off change in the test individual will be permitted only in a marriage breakdown.   WTB 13/5  

4. The Tax Office will change the administrative treatment of company loss recoupments to remove the $100m income cap on the same business test retroactively from 1 July 2005 .   WTB 23/5

5. From 13 May 2008 , the period over which taxpayers, for tax purposes, can write off depreciable “ in house software ” is 4 years (previously 2.5 years).     WTB 30/5

NOTE – The above summaries of information received in publications and other material by WHK 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 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.

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