General tax news
No change in motor vehicle limits for 1998/99 - The motor vehicle depreciation cost limit for 1998/99 will remain the same as last year, ie $55,134. The 1998/99 taxable value threshold for sales tax purposes for luxury vehicles will be $36,995, the same as for 1997/98.
Individual surcharge advice notices - The ATO will issue advice notices to individuals informing them of surcharge liabilities arising from either superannuation contributions, where the surcharge liability will be met by the fund holding the contributions, or termination payments, where the liability is met by the individual.
ATO Audit Programs for 1998/99 year - Recently, the ATO has released to the professional bodies and others on the ATO's proposed audit program for the 1998/99 year. For further details, contact Coopers & Lybrand.
Prepaid swap fees - ATO reconsidering timing of deduction? - Rumour has it that the ATO may be reconsidering the timing of deductions for prepaid interest rate swap payments. As any action is likely to be prospective, clients who are contemplating prepaying bona fide swap fees should be alerted to this possible change in interpretation, particularly when considering year end tax planning.
Repair costs partly deductible - The AAT held that initial work undertaken on a storm-damaged building qualified as a repair. However, work completed after ownership in the building changed resulted in the staged construction of a new building and were not deductible, (AAT Case 10/98).
Company director entitled to deduction for personal superannuation contribution - The Federal Court held that a director of a company which had gone into liquidation was entitled to a deduction in respect of his $60,000 personal superannuation contribution. The Federal Court said that a person is ineligible only if conditions (a) and (b) in s82AAS are both satisfied, (Findlay v FC of T).
IR&D Board decision cannot be taken to have been made earlier - The Federal Court has held that a decision of the IR&D Board cannot be taken to have been made earlier than it was actually made for the purpose of determining whether a taxpayer company was able to be registered under s39J of the Industry Research and Development Act 1986 (TJM Products Pty Ltd v IR&D Board).
Federal Parliament has risen for a two week break and will resume sittings on Monday 22 June 1998. The last day of the Winter sittings is 2 July 1998. A quick round-up of the status of key tax legislation to date:
- Taxation Laws Amendment Bill (No 4) 1998 was passed by the House of Representatives without amendment and is now ready to be introduced into the Senate.
- Taxation Laws Amendment Bill (No 3) 1998 was passed by the House of Representatives, ie the Senate's amendments were agreed to, and is now awaiting Royal Assent.
- The Taxation Laws Amendment (Company Law Review) Bill 1998 was passed by the House of Representatives, with Government amendments, and is not expected to be considered by the Senate until the end of June.
- The Company Law Review Bill 1997 is not expected to be considered by the Senate until the end of June.
Taxation Laws Amendment Bill (No 5) 1998 - At the National Tax Liaison Group meeting held last week representatives of the professional bodies were told that Taxation Laws Amendment Bill (No 5) 1998 was expected to be introduced into Federal Parliament on 24 June 1998. The measures expected to be contained in the new Bill:
- Franking credit trading - 45 day rule
- Company tax instalment provisions affecting superannuation funds
- Measures to develop Australia's financial markets and provide a competitive offshore banking regime
- Demutalisation of non-insurance organisations
- Implementation of proposals arising from the penalty review
- Special income of superannuation funds
- Gift deductibility measures - especially funds to assist victims of domestic violence
- Rules to disallow a deduction for bribes paid to a foreign public official
- Deductibility of computer software expenditure
The Taxation Laws Amendment (Landcare and Water Facility Tax Offset) Bill 1998, Taxation Laws Amendment (Farm Management Deposits) Bill 1998 and the Taxation Laws Amendment (Political Donations) Bill 1998 have been passed by the House of Representatives without amendment. The Retirement Savings Account Providers Supervisory Levy Imposition Bill 1998 was amended by the Senate. The amendment relates to the day as at which an RSA provider's asset value is to be worked out for the purposes of the supervisory levy. The House of Representatives has agreed to the amendment and the Bill is awaiting assent.
The following issued during last week:
Taxation Ruling TR 98/7 - which discusses whether packaging items are trading stock.
Taxation Ruling TR 98/8 - which discusses whether materials and spare parts held by a taxpayer supplying services are trading stock.
Draft Taxation Determination TD 98/D5 - provides that deductions under Div 43 of ITAA 1997 are excluded by s82(2) ITAA 1936 when calculating any assessable profit or deductible loss from the sale of property.
Draft Taxation Determination TD 98/D4 - which explains what are sufficient instructions to enable a payer to make an eligible termination payment and addresses the retention requirements for redemption instructions.
Taxation Determination TD 98/12 - contains:
- the 1998/99 indexation factor for various superannuation thresholds and limits the "tax free amount" for 1998/99 of bona fide redundancy payments and approved early retirement scheme payments
- the age-based deduction limits for superannuation contributions by employers and eligible persons in 1998/99
- the 1998/99 lump sum reasonable benefit limit (RBL) and pension RBL
- the 1998/99 lower rate tax threshold on the post-30 June 1983 component of an eligible termination payment paid to a person who is 55 or over.
Several Superannuation Contributions Determinations - specifying the 1998/99 surcharge threshold and indexable amounts for superannuation contributions and termination payments, the surchargeable contributions threshold and the maximum contribution base for 1998/99 contribution periods.
State Tax News Highlights
1998/99 NSW Budget - was handed down and contained no new taxes or tax increases but included measures on land tax; first home purchase scheme; stamp duty on motor vehicle transfers; and some new legislation.
SA Budget - The 1998/99 South Australian Budget was delivered and includes measures on the rate of stamp duty payable on all forms of general insurance; the stamp duty rebate on the first transfer of new home units; the eligibility criteria under the Payroll Tax Exporters Rebate Scheme; and differential gaming machine tax rates.
West Australian budget legislation - The Revenue Laws Amendment (Taxation) Bill 1998 and the Revenue Laws Amendment (Assessment) Bill 1998 were introduced to implement the measures announced in the 1998/99 West Australian Budget.
ACT moves to protect share buy-back assessments for stamp duty purposes - The ACT Government has announced that the Stamp Duties and Taxes Act will be amended to overcome the recent Coles Myer decision in which the Victorian Supreme Court ruled that duty was not payable on the transfer of shares associated with a company's buy-back of its own shares.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information, contact:
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