Print Newsletter

Newsletter November 2007

The cost of providing a Christmas party is tax deductible only to the extent that it is subject to Fringe Benefits Tax (FBT). Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) or not declared on an annual FBT return cannot be claimed as a tax deduction.

 If an entity is not using the 50:50 method of recording entertainment costs, the costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. A taxable fringe benefit will arise in respect of an associate of an employee who attends the party if not otherwise exempt under the minor benefits exemption.

 If an entity is not using the 50:50 method of recording entertainment costs, the provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300

The Tax Office has recently issued notices of non-compliance to a number of SMSF’s on the grounds that they ceased being ‘resident’ or ‘Australian’ funds.

Broadly, a fund must satisfy two tests in order to be an Australian superannuation fund in any given income year. Firstly, the central management and control (CMC) of the fund must ordinarily be in Australia. Secondly, the test requires that where the fund has active members (members who contributes, or has contributions made on their behalf), at least 50% of the total assets of the fund must be attributable to interests by resident active members. So in the case where Mum and Dad who are both overseas and are non-resident members, a single contribution by either of them will cause the fund to lose its Australian status, and the entire fund could be taxed at 45%

 Trustees should consider whether they roll-over from their SMSF to a public offer fund if they take an extended absence from Australia. A public offer fund would allow non-resident members to continue making contributions. The tax office also supports the appointment of a resident legal personal representative in place of the non-resident trustees, which is one way of meeting the CMC test.

The superannuation guarantee charge is a charge you will be liable for if you do not pay enough superannuation for your employees or if you pay late. The superannuation guarantee charge is made up of three components:

• superannuation guarantee (SG) shortfall amounts (which includes any choice liability)
• interest on that amount, and
• an administration fee.

 You can avoid paying the superannuation guarantee charge by:

• offering all eligible employees a choice of superannuation fund within 28 days of them starting work
• providing superannuation at the level set out in the superannuation guarantee legislation, making sure you are paying enough, and
• paying your contributions for all employees by the quarterly cut-off dates.

While superannuation contributions are tax deductible (to certain limits), the superannuation guarantee charge is not tax deductible and must be paid directly to the Australian Taxation Office.

The tax office is reminding employers that the choice of superannuation funds has been extended to more employees. If you are an incorporated business and you have employees that were covered by a state award, you should check whether they are now covered by a ‘notional agreement preserving state award’ under the WorkChoices changes.

 From 1 July 2006, these employees can choose the fund into which their superannuation contributions are paid. As an employer, you are required to offer them (and all new employees) a ‘Choice of superannuation Standard choice form’.

As part of the NSW 2007 budget, the government has announced that the land tax rate will be reduced from 1.7 per cent to 1.6 per cent from the 2008 land tax year. The threshold is $359,000 and is based on the average unimproved land value for the last 3 years.

Land exempt includes the principal place of residence, primary production land, boarding homes.

Just a reminder that land tax is a tax levied on the owners of land in NSW as at midnight on 31 December of each year. If you own property other than your principal place of residence or primary production land, you should complete a land tax registration form.

After 22 years we are moving to Level 10, 168 Walker St North Sydney NSW 2060.

The move will happen over the weekend of 15 December 2007. Our contact telephone and fax numbers will not change.