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Newsletter April 2006

Managed Investment Schemes (MIS) are an investment structure where multiple investors can pool their investments so as to create an efficient investment.  Examples of MIS investments include property funds, trees, olives and other investments.

A client of Wearne & Co, Australian Bight Abalone is an MIS investment that allows investors to become growers of Abalone in a sea based environmental friendly production system.  Abalone is a shell fish that is exported to Asia where it is a delicacy.

Each unit of investment has a cost of $27,863.  The Investor will get $2,533 GST back and obtain a tax deduction for $22,373.  The life cycle of the investment is 7 years, and includes 3 growth/product cycles.  For the 2006 tax year project the ATO has issued a Product Ruling.

Additional information can be obtained from www.australianbightabalone.com.au or by contacting John McAuley or Peter Woodhead of this office.

The Australian Taxation Office has specified the rates at which taxpayers may claim income tax deductions for the 2005/2006 income year, where the car does not travel more than 5,000 business kilometres during the year.

Taxpayers can deduct car expenses on a per kilometre basis by multiplying the number of business kilometres by one of the following rates;

New regulations have been introduced to increase the private health insurance offset to 35% for persons aged over 65 years and 40% for persons aged over 70 years.

The new regulations provide that the annual statements issued by health insurance funds must include the applicable rate of tax offset for that person.

Tougher anti-avoidance provisions in the Bankruptcy Act have been passed by Federal Parliament to target people who dispose of assets in the lead up to bankruptcy. 
 
The most significant amendments will;  

• Increase the claw back period from two to four years for transfers of property by a bankrupt to a related entity for less than market value, 
• Allow the bankruptcy trustee to recover consideration paid to third parties in some instances, 
• Introduce a rebuttable presumption of insolvency where a bankrupt has failed to keep proper books, accounts and records; and  
• Provide that a transfer made to defeat creditors is void against the bankruptcy trustee if it was reasonable for the transferee to infer that the bankrupt's main purpose in transferring the property was to defeat creditors.

It is important for businesses to know the status of their workers for tax purposes as there are different obligations depending on whether a worker is an employee or a contractor.

Factors to consider when determining whether workers are employees or independent contractors include;

• Who has the ultimate control over the work performed,
• Whether their work is independent of the business,
• Whether payments are based on time worked or dependent on the performance of contracted services,
• Who bears the legal risks in respect of the work performed,
• Who provides the tools and equipment.

If you have employees, you are generally responsible for;

• withholding amounts from payments you make to them,
• making contributions towards their superannuation, and
• paying fringe benefits tax if you provide fringe benefits to them or their associates.

If you engage contractors, generally;

• you don't have to withhold from payments to them, provided an ABN is provided,
• you may have to make superannuation contributions for them if they mainly supply labour,
• fringe benefits tax does not apply,
• goods and services tax (GST) may be applicable on contractor payments.