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Newsletter December 2005

As of 15 December 2005 Wearne & Co have new contact numbers:

Our new PHONE number is 9432 7777
Our new FAX number is       9432 7788

Treasury has updated its draft regulations for the splitting of superannuation contributions. The regulations were reported in our November newsletter issue.  The revised regulations are proposed to take effect from 1 January 2006 and contain two major changes from the previous versions, being the 85% splitting limit for deductible contributions and restrictions on transfers under reg 6.44.

The maximum splitable amount limit means that up to 85% of deductible contributions can be split in a relevant year.  Treasury says that this ensures that the net amount of deductible contributions after contributions tax of 15%, can be split.

New reg 6.44 regulates when a fund member can apply for the trustee of their fund to roll-over, transfer or allot an amount for the benefit of their spouse.  The amount of the benefit is determined by the amount of contributions made by, for, or on behalf of the member in the prior income year.

A trustee cannot however accept the contribution if:

• the member has already made an application during the year;
• the amount to be split exceeds the maximum splitting amount (85% for deductible contributions and 100% of personal untaxed contributions);
• the application does not specify the amounts to be split; and
• the member's spouse is over 65 or between 55 and 65 and permanently retired.

From 1 July 2005, the transition to retirement pensions was introduced to allow people below age 65 years to access their superannuation benefits in the form of a non-commutable income stream once they exceed their Commonwealth preservation age, without having to permanently retire from the workforce.

The measure will allow people to retain their connection with the workforce, for example, continue working part time and access part of their superannuation benefits to supplement their income.

The ATO has clarified that it will also allow taxpayers who commenced a transition to retirement pension, to make salary sacrifice contributions to their superannuation fund, as long as the arrangement is entered in a straight forward way which is consistent with the law.

Superannuation has been voted the biggest regulatory impediment to businesses by clients of Chartered Accountants:

• 60% elected superannuation as a bane of their business.
• 40% identified the cumulative effect of complying with reporting requirements of income tax, payroll tax, fringe benefits tax, capital gains tax and GST.

The ATO has recently issued six new GST Advices:

1. A partnership is entitled to an input tax credit for an acquisition even if the relevant tax invoice contains the name of only one partner;
2. A partnership is entitled to an input tax credit for an acquisition even if the relevant tax invoice contains the name of only one partner, and that partner is reimbursed by the partnership for the cost of the acquisition;
3. Where a partner pays for an acquisition as an expense out of the revenue of the partnership, this is an indicator that the partner is acting in his or her capacity as a partner;
4. An agent for a partnership or trust cannot use its own name and the partnership's or trust's ABN when issuing tax invoices;
5. An arrangement under which an agent merely pays accounts received on behalf of a principal is not a valid arrangement for the purposes of claiming input tax credits;
6. Where the recipient of a supply cancels its GST registration before receiving a tax invoice for a creditable acquisition, it is not entitled to an input tax credit for the acquisition.

In general entertainment of clients is a non deductible expense and entertainment of employees is subject to fringe benefits tax.

For the Christmas party where the food and drink is less than $100.00 for each worker, and the other incidental costs such as taxis to or from the venue are less than $25.00 per head, and the Christmas party is not part of on going entertainment for employees then the Christmas party will be regarded as a minor, infrequent and irregular benefit and therefore will not be subject to FBT.

Merry Christmas on $125.00 per employee.