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Newsletter April 2008

New FBT Benchmark Interest Rate

The benchmark interest rate for the FBT year commencing 1 April 2008 is 9% (up from 8.05% for the previous year). The rate is used to calculate the taxable value of; 

• a loan fringe benefit
• a car fringe benefit where the operating cost method is used

Taxpayers whose income producing use of a car does not exceed the 5,000 kilometre threshold can deduct car expenses on a per kilometre basis (i.e. by multiplying the number of work related kilometres by the rate per kilometre as shown below). 

The rates for the 2007/2008 income year are unchanged from the 2006/2007 rates and are as follows; 

The ATO has reminded us of the one-off opportunity they are providing to business owners to self correct past mistakes made between 2001–2002 and 2006–2007 inclusive and thereby avoid deemed dividends under Division 7A. 

Taxpayers can take corrective action on or before 30 June 2008, including:

• having complying loan agreements in place, and
• making a ’catch up’ payment or a series of payments on loans which place them in a similar position to those taxpayers who have complied with Division 7A. 

Interest paid to the private company in 2007–2008 income year must be included in the company’s assessable income. Where taxpayers have more complex circumstances, they may prefer to make a written request for the Commissioner’s discretion to be exercised.

Employers will need to check that their employer-nominated super fund is a complying fund and meets the insurance requirements for choice of super fund. From 1 July 2008, employer-nominated super funds (also known as default funds) must offer minimum levels of life insurance death cover to members. An employer-nominated super fund is the fund that an employer chooses to pay an employee’s superannuation guarantee contributions to if they do not choose a fund. 

Employer-nominated super funds must offer minimum life insurance for members:

• at a premium of at least $0.50 per week for those under 56 years
• with at least the level of insurance cover shown in the following table, or
• at a level of cover equivalent to the following table if the contributions are made to a defined benefit fund on behalf of a defined benefit member. 

There are some instances where employer-nominated superannuation funds do not need to meet the life insurance requirements, for example if employers:

• are making contributions under a federal award or into a retirement savings account
• arrange insurance either with another super fund or with an insurance provider and it meets the requirements, or
• are unable to obtain insurance from the fund in respect of a particular employee due to the employee’s health, occupation (for example, a high risk occupation) or hours worked (for eg, some casuals).

Regardless of the goods and services tax (GST) accounting method used when purchasing a property for business use under a standard land contract, the attribution of GST credits must align with the legal settlement of the property. Often GST credits are incorrectly claimed in tax periods when:

• contracts are exchanged, or
• a deposit is paid.

 GST credits must only be claimed on an activity statement for the tax period in which the property is settled, or a later period. The earliest period a GST credit can be claimed is the period when the name of the holder of the physical title of the property changes. 

You are also required to hold, at the time of lodging the activity statement, a valid tax invoice issued by the vendor to support their claim to a GST credit. A standard land contract is not considered a valid tax invoice and cannot be used to claim a GST credit. Purchasers are not eligible to claim GST credits on a payment of a deposit on a property unless the deposit has been forfeited, or used as all or part of the payment for the property.

The file delivery tool allows Wearne & Co clients to upload and submit files to a company partner using a simple form in their web browsers. Typically this method of file delivery would be used if the file is too large to email due to size restrictions.  To upload a document use the link http://www.wearne.com.au/FileDelivery/FilePost.aspx or follow the link on the Wearne website navigation named ‘Upload File’.