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taxInsight - Q&A

Q&A from taxInsight

Case study: Tax residency and main residence exemption

Bert Lancaster is an enterprising young mining engineer who has just been offered a new job in New Zealand. He recently bought his first home in Brisbane in January. He starts work in NZ in June on a three year contract and can take a leave of absence from his old Australian employer for up to a year; a policy they have to retain staff. Bert has moved into the home and made best use of the State Government first home owners’ duty concession. He will not rent the property out until February next year. The NZ employer will pay […]

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Question: Asset Protection

Question: What would be the best structure for a sugarcane farm and its assets to provide adequate asset protection in the event of an occurrence outside insurable cover? The farm is currently owned under a discretionary trust with the main beneficiaries as the trustees. Would it be better to have a corporate trustee? Alternatively, should a company own the assets and rent them back to the trust as the operator? Answer: The current trustees should retire in favor of a corporate trustee. Trustees are personally liable for all the debts of the trust and it is very important therefore for individuals not […]

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Question: Interest earned jointly

Question: Where there is a joint savings account, can the amount of interest earned be assigned to one of the holders, or does it have to be evenly split? Answer: Potentially, if you could mount an argument that one party contributed the funds to the savings account you could say that that party was entitled to the interest or the bulk of it. However, this would be a difficult argument to maintain because the Tax Office receives all these details from banks and data matches them to the relevant taxpayers. It is very important to match the information you disclose in tax […]

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Question: CGT – Main Residence

Question: We purchased our Darwin residence in October 1988 and lived there until February 2002. We purchased a Queensland home in October 2001 and initially rented it out. From February 2002 until October 2002 we travelled around Australia and then moved into the Queensland home. Then in October 2003 we sold that Queensland home and purchased another. Our accountants have determined that we were liable for CGT on that Queensland home from the date of purchase until occupancy. We believed we were entitled to exemption because it was intended to be our main residence from purchase. We have heard that it […]

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Question: GST – Exports

Question: We are a GST registered company as is our customer. We provide positioning services to our customers. A particular customer claims that the services provided are used in Papua New Guinea instead of Australia. This company is a GST registered company in Australia. Is GST applicable or will it be considered as GST-free supplies? Answer: Under section 38-190 of the GST Act, a supply of services is GST-free if it is made to a non-resident who is not in Australia when the item is supplied, provided: The supply is neither a supply of work physically performed on goods situated in […]

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Question: travelling expenses

Question:  We understand that if you are an employee required to travel for work-related purposes and in receipt of a travel allowance from your employer, you can claim deductions for expenses incurred. Is the travel allowance paid to the employee taxed?  If not, why would you then be able to claim a tax deduction as well? Answer:  Allowances are generally taxed. If you receive a travel allowance from your employer, the amount should be included in your tax return and you should then claim deductions for expenses incurred. If the employer pays a travel allowance within rates set out in […]

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Question: key man insurance

Question: My client holds one share in a company with a paid up capital of $2. In October last year, the other shareholder was killed in a motor vehicle accident. Prior to his death, the company took out a life insurance policy on both shareholders. The insurance policy settlement on the deceased shareholder is over $200,000. My client wishes to pay the insurance money to the deceased shareholder’s spouse and wishes the spouse to transfer the share she holds as personal representative of the deceased shareholder to my client. The insurance policy was supposed to have been taken out in […]

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Question: stock on hand

Question: Our client is a share trader. Can he adopt either cost or market value for his closing share trading stock on hand? Answer: Yes. It is treated in the same way as stock on hand would be treated for a retailer.

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Question: salary sacrifice

Question: What is the total salary sacrifice we can claim in relation to gross wages for all staff? Would salary sacrifice result in reduced requirement for child support? Answer: There is no limit on the amount of salary which can be sacrificed, from a taxation perspective. The requirements are that the arrangement must be entered into before the wages are earned. However, keep in mind any award or other industrial instrument obligations. If you allow an employee to sacrifice her salary to the extent that the actual salary received falls below the award wage, you run the risk that the employee […]

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Question: child support

Question: How does the Government calculate the amount I should contribute in Child Support?

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Question: superannuation guarantee

Question: Employees of a local hotel are all casual. They work various hours during the week. Some are rostered to work on Saturdays and Sundays. Under their award, there is a penalty for Saturday and Sunday work of 150% which is the same as overtime. Should this penalty be dealt with as overtime (i.e. no super guarantee) or should it be deemed as a penalty and super paid on the amount?

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Question: travelling expenses

Question: We are a motor vehicle dealership. If we were to fly a prospective buyer to the Sydney Motor Show for the day with one of our sales consultants, is GST applicable on the airfares, meals, taxis, etc? Or is it treated as non-deductible/non-GST expense? (i.e. an entertainment type expense).

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FBT – salary sacrifice

Question: I have some questions relating to the provision of laptops to employees under a salary sacrifice arrangement.

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FBT – minor benefits

Question: The infrequent and minor benefits provided to employees are exempt from FBT. Are they tax deductible?

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