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November 2003 Newsletter

For businesses operating on a non-cash basis for GST, when a debt is written off or a debt has been overdue for 12 months or more, a GST decreasing adjustment equal to 1/11th of the amount written off can be claimed on the BAS (This is recorded at 1B on the BAS).

It should be noted that if subsequently all or some of the amount written off is recovered an increasing adjustment equal to 1/11th of the amount recovered will need to be declared on the BAS (This is recorded at 1A on the BAS).

Effective 1 July 2003, principal contractors will need to check that their subcontractors have the proper workers compensation insurance.  To protect themselves, principal contractors must have:

• A copy of the subcontractor's Certificate of Currency, and
• A written statement by the subcontractor that all workers compensation premiums applicable for that work have been paid.

Until this statement is received, the principal contractor may withhold payment from the subcontractor, without penalty.

If the principal does not obtain the above, the principal may be liable for insurance premiums owing in connection with the work or service performed on their behalf.

With Christmas getting closer you may be considering providing Christmas gifts and / or a social function to your employees as a reward for their efforts.  Fringe benefits Tax (FBT) can effectively double the cost of your generosity if thought is not given to the type of benefit provided. The cost to an employer of providing a Christmas party and gifts are generally subject to FBT where the benefit directly provides entertainment by way of food, drink or recreation. Examples of such benefits include a holiday, tickets to a sporting event and the cost of a night out at a restaurant.

Exemptions

Employers that use the actual method (not 50/50 method) in calculating meal entertainment for FBT, are able to claim an exemption for minor benefits if they are provided infrequently and irregularly, and the value of the benefit is less than $100.  Examples are:

1. Inexpensive Christmas gifts of food or drink that will be consumed by the employees at home (e.g. a bottle of champagne or a hamper of food) are not to be regarded as being the provision of entertainment. Expenditure incurred on such gifts will be treated as an allowable income tax deduction for the employer and not subject to FBT.
2. Christmas parties are exempt from FBT if the total value of the benefit provided to the employee and any family members attending is less than $100. Expenditure incurred will be treated as not subject to FBT, but not tax deductible.
3. Christmas parties held on the employer's premises are exempt from FBT irrespective of the total value per head per employee.  Expenditure incurred will be treated as not subject to FBT, but not tax deductible.

The above exemptions are not available for employers that use the 50/50 method.  Under the 50/50 method 50% of all entertainment is subject to FBT and 50% is tax deductible.

In-house Benefits

An exemption for $500 per annum is available for in-house benefits provided to employees and their associates.  This applies to goods and services which the employer sells or supplies to a third party in the ordinary course of business.  As a general rule for FBT purposes the value of any in-house benefit is calculated at 75% of the employer's normal selling price.

www.tradingroom.com.au  Is a website that provides current share prices as well as share price history.

www.asic.gov.au  This is the site of the Australian Securities & Investments Commission. This site contains a wealth of information. An interesting tool that is available is to be able to search for business names and company names and to search as to what ASIC documents have been lodged.