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March 2004 Newsletter

The Government has announced substantial changes to the superannuation system.

Key points include:

• The removal of the work test for superannuation contributions for people aged under 65;
• The work test for people aged 65-74 will be on an annual basis, not weekly as is currently the case;
• Individuals reaching preservation age can access their superannuation benefits as a non-commutable income stream without retiring;
• The introduction of 'growth' complying pensions;
• Assets test exemption for complying income streams changing from 100% to 50%;
• From 1 July 2004, all employer ETPs rolled over will be preserved; and
• Removal of the actuarial requirement for allocated pensions.

Some of these changes are quite substantial. For more information, visit the Department of Family & Community Services website.  Please note that the changes are not law.

The Taxation Office has released a draft ruling detailing what it regards as the necessary characteristics of a joint venture for GST purposes, as opposed to a partnership.  For GST, a joint venture is not an entity unless it is approved by the Taxation Office as eligible to register and pay GST as an entity separate from each of the participants.

An approved GST joint venture permits transactions between the joint venture partners to be exempt from GST.  Only when the transactions are made with outside parties does GST apply.

The Taxation Office regards the following characteristics as essential for a joint venture to exist:

• Joint control;
• A specific economic project;
• A sharing of costs by the participants;
• A sharing of product not for profit; and
• A contractual agreement between the parties.

Accordingly, if you are planning to enter into a joint venture with another party, it will be necessary to plan the structure to be used and obtain approval to register as a joint venture prior to the commencement of the project.

Statute of limitations can deem a loan to be unrecoverable after 6 years.  If or when this occurs to one of these 'untouchable' pre- 4 December 1997 loans, the loan then falls within Division 7A and the entire outstanding balance is potentially deemed to be an unfranked dividend.

The Institute of Chartered Accountants has requested a meeting with the Australian Taxation Office to discuss this issue.  We will keep you informed of any developments.

The ATO has recently released Interpretation Decisions (ID) in relation to the following matters:

No deduction for Payment of Partners Salary - The payment of a salary to a partner only constitutes an advance of drawings and not a payment made in respect of employment. Accordingly, for the purpose of determining the net income of a partnership, the payment of "salaries" to partners in a partnership is not an allowable deduction. 

Excess Partnership 'Salary' Not Assessable if Repaid - If there is insufficient partnership profits to cover the drawings and the partnership agreement requires a repayment of the excess, the amount repaid is non-assessable as it constitutes a repayable advance rather than a taxable share of partnership net income.

The GIC for the March 2004 quarter will be 12.32%.  This is a 0.5% increase on the previous rate.

"Our tax system is an outstanding example of complexity built upon complexity. I can't describe it as a house of cards because the damn thing certainly won't fall down."

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