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Newsletter August 2005

The Taxation Office has issued TD2005/32 Reasonable allowance amounts for the 2005-06 income year.  The ruling applies to deductions claimed for work-related losses and outgoings incurred during the 2005-2006 income year, which are covered by a travel allowance or award overtime meal allowance. A copy of the ruling can be obtained from http://law.ato.gov.au/pdf/td05-032.pdf

Overtime Meals

If you have overtime meal allowance expense, the maximum amount that can be claimed without any written evidence is $21.10 per meal provided the meal allowance is paid under an industrial instrument i.e. an award. If your meal allowance exceeds $21.10, then the whole amount must be supported with receipts or any written evidence.

Domestic and Overseas Travel

You can claim a domestic or overseas travel allowance expense provided the amount of the claim is supported by receipts.  If there are no receipts the tax office will accept as reasonable expenditure amounts as set out in TD2005/32.

The ATO has recently released three Interpretative Decisions regarding the deductibility of business-related costs under the capital allowances regime.

The law allows taxpayers a deduction for certain capital costs incurred in establishing or ceasing a business or raising capital.  The costs are deductible over five consecutive years.

The decisions clarify the period of deductibility for capital payments, winding up costs and un-deducted expenditure in the year of ceasing business.

The Federal Government has recently introduced a number of important changes to the GST laws, which will impact the sale and purchase of real property.

The new laws are, in part, designed to stop arrangements whereby entities reduce or eliminate GST on supplies of real property through the use of the going concern, GST group and GST joint venture provisions.

It is very important that sellers of residential properties undertake a review of their structures and operations in order to ensure that there are no adverse GST implications or 'hidden' GST costs.

From 1 July 2004, private companies now have until their income tax return lodgement due date for a loan to a shareholder to be repaid or put on commercial footing to avoid the operation of the deemed dividend provisions.

The Government has announced a four-year tax exemption for most foreign source income derived by temporary Australian residents, including capital gains on foreign assets.

Interest withholding tax obligations will also be removed and foreign investment fund rules will cease to apply.

Overall losses incurred in deriving foreign source income are currently quarantined and cannot be offset against Australian assessable income.

The Government has announced that quarantining will be abolished when proposed new legislation receives Royal Assent.

The change should reduce tax liabilities and compliance costs for taxpayers with international activities.

It is proposed that CGT will no longer apply to a broad range of assets owned by non-residents.  If the legislation is passed CGT will only apply to Australian real property and certain business assets owned by non-residents.

CGT will no longer apply to other Australian assets owned by non-residents, such as shares in Australian companies.  This should significantly encourage foreign investment into Australian businesses.