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Newsletter January 2008

Recent amendments for boat-hire arrangements ensure great equity in the tax system for tax payers generating assessable income from boat-hiring activities. The new measures prevent deductions from boating activities that are not carried on as a business from being offset against other assessable income.

 The previous boat-hire arrangement provisions did not allow taxpayers to claim deductions unless specific exemptions were satisfied. These include;

• holding boats as trading stock for sale in the ordinary course of carrying on a business,
• using a boat for conducting a business of letting or hire,
• using a boat for transport for payment in the ordinary course of carrying on a business, and;
• using a boat as an essential component in the ordinary course of carrying on a business.

The new measures, effective from 1 July 2007, will allow taxpayers who cannot demonstrate that they are carrying on a business from their boating activities to;

• claim deductions up to the level of the income generated from such boating activities in an income year, and;
• allow excess deductions derived from boating activities in an income year to be carried forward and deducted against boating income that is derived in future years.

The new measures do not affect deductions for expenses incurred by taxpayers who can demonstrate they are carrying on a business.

Recent changes to the Corporations Act mean that from 31 December 2007, employees of companies that go into liquidation, voluntary administration or receivership will stand a better chance of receiving their superannuation entitlements.

 Under the changes, the superannuation guarantee charge must be paid before payments to ordinary unsecured creditors. This means that the superannuation guarantee charge will be provided the same priority as other employee entitlements for wages and super contributions.

 Other important changes include;

• requiring administrators and liquidators to provide a statement of their independence, notifying of any ‘relevant relationships’ or potential conflicts of interest when communicating with creditors,
• increasing the level of scrutiny able to be exercised in relation to the remuneration of administrators and liquidators.

Funds that registered in 2006/2007 must lodge their income tax and regulatory returns by 28 February 2008.

All self managed super funds (SMSF’s) must appoint an approved auditor to assess their financial statements and overall compliance with super laws. It is important that SMSF’s don’t lodge their income tax and regulatory returns until after their audit is finalised, as they need information from their audit reports to complete their regular returns.

Persons who are liable for land tax for the first time in the 2008 tax year or who have not previously lodged a land tax return or received an assessment should lodge an ‘initial return’ by 31 March 2008.

Persons who must lodge a variation return because of errors in the notice of assessment must do so by the first instalment date shown on the notice. If no tax is payable, the due date for lodgement of the variation is 40 days after the issue date on the notice.

The following information has been published by the ATO on SMSF’s, and highlights the growing importance of SMSF’s. 

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