News & Tax Insights

The Tax Office interest charges for the October-December 2011 quarter have been released:   + GIC annual rate is 11.86% or 0.03249315% on a daily compounding in basis; and + SIC annual rate is 7.86% or 0.02153425% on a daily compounding in basis.   The interest on overpayments and early payments to be paid by the Tax Office it is on a 4.86% annual basis.

An interpretive decision has been released concerning spouses of overseas employees who are registered under the formal Home School Education Program to tutor the children and keep records of the teaching/learning programs, time allocated, assessments of achievement and progress and resources used. In such cases the spouses will be tutors under the FBT Act. This could reduce the employer’s liability for FBT.   The FBT Act, provides that FBT is reduced on fringe benefits provided for the education of overseas children in an education institution or by a tutor. The term “tutor” is not defined and takes on its ordinary…

Two draft tax rulings have been released setting out the taxation and GST treatment for farm-out arrangements in the resources industry. The rulings are long and complex. They change the previous Tax Office position on the taxation outcomes of certain aspects.   State governments issue exploration permits and mining licences subject to conditions and work programmes. Farm-out arrangements are a common way for the holder of an exploration permit (“farmor”) to fund the required work program. Typically, the farmor will transfer (or agree to transfer in the future) a percentage interest in the exploration permit/ mining licence in return for…

An interpretive decision on trust distributions received by an insurance company has worrying implications for trust beneficiaries because it states that the beneficiaries’ income from the trust distributions may include amounts that were nontaxable in the trust.   Trust beneficiaries are taxed on their trust distributions generally in accordance with Division 6 of the 1936 Tax Act. Recent amendments to that Division purportedly allow for the streaming of capital gains and franked dividends (see Finalise trust distribution minutes by 30 June in September taxInsight).   The Tax Office does not consider this Division to be an exclusive code for the…

Payments by an employer to an employee who was a victim of floods may be an FBT exempt benefit (and not salary and wages).   Conditions are: + The home was made uninhabitable + The employee had no other accommodation following the floods + The payment was for meals, food supplies, clothing, hire of household goods and rent + For a reasonable period of time to enable the employee to find alternative permanent accommodation.   The FBT Act states that an employment benefit provided solely by way of the grant of emergency assistance is exempt from fringe benefits tax. An…

The Tribunal has knocked out a claim for deductions over five years for franchise “establishment fees” made by a branch of the Bendigo Bank. This puts doubt on similar payments for other franchise groups.   It is common practice for a franchisor or to charge a significant up-front fee to enter into the franchising agreement. There are usually subsequent charges either annually or in the case of this branch of the Bendigo Bank payable every five years. The subsequent charges are considered to be on revenue account and deductible when incurred. The establishment fee however is generally agreed to be…

In two separate cases, the Tribunal has denied access to CGT concessions where valuable assets were sold and the taxpayers relied on poor valuations.   In Syattadel Holdings a marina purchased in 1996 for $1.675 million was sold in 2006 for $8.9 million. The $8.9 million price must have been subject to really good negotiation on the part of the vendors as the taxpayer’s valuation placed a market value of $4.5 million on the marina and the Tax Office valuer placed a price of $5.3 million on the facility. The Tribunal said that the two conventional approaches to valuation used…