Voice Page 1

April 2009

April 2009 Edition No.180

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Voice Tax Advisers'The

What's NEW This Issue Page

Your Association at Work 2– Government set to steal our tax refunds by stealth?

Practice Notes 5

– GIC and SIC rates for June 2009 quarter

– Ongoing help for disaster victims

– Donationstothe2009Victorianbushfireappeals

– Amendments to super guarantee late payment offset

– Tax agent re-registration – disaster areas

– Another 12 charged under Project Wickenby

– CGT relief for transformation of water rights

– New investment allowance (a.k.a. Tax Break)

– Using charities for money laundering & evasion

– Superfund audits to rise to 11,000 in 2009/10

– SMSFs,theATOandtheglobalfinancialcrisis

– Auditor independence under the gun

– Commissioner to modify tax laws to help taxpayers?

– Regulations released for halving pension drawdowns

– Timberfloorinstallationbenchmarksandexamples

FBT, GST and Income Tax Rulings 14

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DISCLAIMERThis publication has been prepared for the members of the National Tax & Accountants' Association Ltd. Many of the comments contained in Voice are general in nature and anyone intending to apply the information to practical circumstances should independently verify their interpretation and the information's applicability to their particular circumstances.

NTAA National Headquarters29-33 Palmerston Crescent

South Melbourne Vic. 3205All inquiries, please call: The

Tax Advisers'ABN: 76 057 551 854Ph: (03) 9209-9999Fax: (03) 9686-4744Email: ntaainfo@ntaa.com.auWebsite: www.ntaa.com.au

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The NTAA's Tax on the Couch is a monthly tax update on CD & DVD that we’ve created to help you (and your practice) keep up to date. For more information, please call 1800 808 105 and speak to one of our friendly staff.

Voice

Government set to steal our tax refunds by stealth?Editor: Clearly the storm clouds are gathering as the government and its henchmen embark on a softening-up process on the Australian taxpayer to convince them to agree to the abolition of "I" returns and WREs.

The following are excerpts from speeches by Wayne Swan, Treasurer, and Dr Ken Henry (doctor of economics, of course), Secretary to the Treasury.

SwanIn a recent speech to the National Press Club in Canberra, Treasurer Swan said "Almost three-quarters of Australians use a tax agent to complete their tax return."

"This is considerably higher than in other comparable countries – in New Zealand, for example,thesamefigurestandsat30%."

Editor: Where they don't have CGT for a starter – with all the problems that brings.

"Surely we can design a tax return system simple enough to make this sort of cost to

working families unnecessary. As a matter of principle, working families should not have to pay hundreds of dollars per year to accountants tofillouttheirtaxreturn."

Editor: Of course they pay hundreds of dollars so they can often get refunds of thousands of dollars that they might not have otherwise received.

"And I believe businesses should be spending their money employing extra staff, purchasing extra services and investing in new capital equipment, rather than hiring expensive tax lawyers to beat the tax man."

Editor: Where did that come from? Businesses need tax agents, not expensive lawyers, because the tax laws are necessarily complex. We don't live in Bedrock, Wayne!

HenryAt the first publicmeeting under theHenrytax review, the Australian Financial Review (AFR) reported on the 17th March that Dr Henry said that "The difficulty is when youhave a tax system that allows for a number of rebates and allowances, but that doesn't

Your Association at Work

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April 2009

mean that we should give up on the search for a tax return-free world".

"This is the big question we are asking ourselves on the panel. Is it possible to do awaywiththeneedformosttaxpayerstofillin a tax return?"

Editor: Treasury-speak for "Is it possible to do away with the need for taxpayers to be able to claim work-related deductions?"

"Thecommunityappetiteforquitesignificantchange in this area has grown over the past 10 years."

Editor: And the evidence for that would be where, Dr Henry?

One could be forgiven for thinking that the statement from the Commissioner of Taxation (below) about people liking their refunds, means that your assertion is just more Treasury 'spin'.

Thankfully – there's one voice of reason(apart from our own, of course)

Editor: Interestingly, but not surprisingly, the Tax Office has a different and far more practical approach.

It was reported in the AFR on 12 March, in relation to comments made by the Commissioner of Taxation, Michael D'Ascenzo, that:

"D'Ascenzo, who in 1990 said he thought it would one day be possible to abolish personal income tax returns, is now less optimistic."

"He says tax returns facilitate a number ofpurposes like claiming work-related expenses, taxoffsets,socialbenefitpaymentsandfueltax credits."

"In a time of downturn like now most people want their return because they like their refunds."

Editor: Damn right! People are entitled to their refunds.

We urge members to write to their Member of Parliament now and the Henry Review before 1 May!

The NTAA is gearing up to take this on, but we're all going to need all the help we can get.

Taxpayers Association wants WREs and "I" returns out tooIn a recent interview, on 612 ABC Brisbane, in relation to trying to simplify the tax system, Madonna King interviewed a panel of three tax people including Roger Timms from Taxpayers' Australia and Andrew Gardiner for the NTAA.

Why Taxpayers' Australia don't want WREs and "I" Returns

The interview went like this:

– Madonna King 612 ABC"Roger Timms from Taxpayer Association, how do you think it will be simplified . . . and what taxes out of those 125 might just disappear."

– Roger Timms Taxpayers Australia (TA)"Well, I am not about to predict which will disappear. It will need to be a far braver and learned man than I, but I think the point about reducing the number of returns that are lodged is entirely valid."

"I mean we have a situation where we have a thing we call work related expenses and $10 billion a year is claimed as deductions for things like running your car and paying union subs and self education and all these things and the TaxOffice spends an inordinateamount of time involved in let's say auditing or reviewing those sort of things."

"An approach may be to do away with those deductions."

"Now that might be even ultimately aligned with removing the lodging of returns from the tax system."

Editor: Anything else Roger? Do away with tax agents maybe? And, he continues:–

"We might for example put in a withholding regime so that someone who has a salary and some bank interest pays tax withholding on the bank interest their salary is taken care of with their withholding and they don't lodge a return."

Editor: Maybe it's just me, but I find it a little odd that Taxpayer Australia's slogan is "helping you minimise the tax you pay".

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The response from the NTAA– Madonna King 612 ABC

Andrew Gardiner from the NTAA, how do you see the simplification working?

– Andrew Gardiner for the NTAA"I must admit I probably disagree with my colleagues in industry on the issue of individual returns and I will explain why."

"I think that any reform that seeks to remove the right of people to claim work related expenses ultimately will result with one major loser."

"And that's the average man and woman in the street. Because they will go from the right and the legal right as it stands at the moment to claim things like car expenses, union fees and everything else, and that will be removed."

"Now, the argument that is often used to counteract that is to say, ah, I know what we'll do, the Government will allow somebody to have, say, a tax offset or tax entitlement that is meant to offset the deductions that they would have otherwise claimed and that's normally been the defence."

"Here'stheworry.Historyshowsusovermany, many years what happens when the Government takes steps to remove an entitlement."

"Classic example, in the 70's people were entitled to make claims on things like funeral expenses, medical expenses and the like. We were told that was very complicated so that was removed and replaced by a tax offset, or tax entitlement."

"Lo and behold, some years later, the entitlement was removed. So people went from being able to claim these types of expenses, or get some tax incentive, to nothing."

"The worry is, history repeats itself in these sorts of areas and we've always been very protective of peoples' rights to claim these expenses because they are legal rights."

"And yes, let's look at ways of streamlining the system, but let's not remove a legal entitlement for individuals, and for us, that is a very important one."

Private Binding Ruling (PBR) Register Stays!In a decision that is a victory for the transparencyandefficiencyoftheAustralianTaxation system, the ATO has just announced the retention of the PBR register in its current form.

Particular acknowledgement must be given to the Commissioner of Taxation who invited and engaged in robust and open dialogue with the relevant professional associations and bodies in coming to his decision.

The NTAA was heavily involved in that dialogue. (By way of background, consideration was being given to the removal of the PBR register as it currently exists).

In light of this development, it is an opportune time to remind our members of the appropriate use of the PBR register.

No PBR represents the view of the ATO in a contextbroaderthantothespecifictaxpayerwho requested the ruling.

A PBR has no precedential value and cannot be relied upon by any taxpayer (other than the one who originally sought the ruling) to even establish a "reasonably arguable position" for remittance of any penalties and GIC (this can be contrasted with the level of protection offered by Public Rulings and to a lesser extent ATO Interpretative Decisions).

The PBR register does, however, provide transparency and is a useful research tool in the hands of an experienced tax practitioner who understands the inherent limitations in its use. Direct use by taxpayers is to be strongly discouraged by tax practitioners and the tax profession generally.

We encourage members to utilise the services of the NTAA TaxTeam who selectively draw upon relevant legislation, case law, rulings and other material in providing guidance on a broad range of taxation issues.

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PRACTICE NOTESGIC and SIC rates for June 2009 quarterTheTaxOfficehasadvisedthattheGeneralInterest Charge (GIC) and Shortfall Interest Charge (SIC) rates for the 4th quarter of the 2008/09financialyear(i.e.,1April2009–30June 2009) are as follows:

u GICrate– 10.16%;u GIC daily compounding rate – 0.02783562%;u SICrate– 6.16%;u SIC daily compounding rate – 0.01687671%.

The ATO also says the Interest on Over-payments, Interest on Early Payments and DelayedRefundsInterestrateis3.16%.

Ongoing help for disaster victimsEditor: members are reminded of two current media releases issued by the Tax Office to provide additional help to those taxpayers who have suffered through the Victorian fires and the Queensland and NSW floods.

Time to lodge extended to 30 June 2010An ATO Media release entitled "Get your tax bonus faster" asked people who had not lodged their 2007/08 tax returns to do so by 30 June 2009 in order to be eligible for the tax bonus.

That media release also stated:“Anyone affected by natural disasters, significantillnessorinjuryareeligibleforanextension of the 30 June 2009 deadline to 30 June 2010.”

Ref: ATO Media Release 2009/20

ATO extends deadline for super guarantee charge For people in natural disaster affected areas in Victoria, Queensland and New South Wales,

the deadline for superannuation guarantee charge statements for the quarter ending 31 December 2008 has been extended from 2 March 2009 to 28 May 2009.

“This extension of the superannuation guarantee charge statements will remove the risk of employers in those areas from being penalised for late lodgment,” Mr D’Ascenzo said.

“However,Idonothavediscretioninrelationtothe nominal interest component of the charge which is charged to employers who have not made contributions to a fund on time.”

Nominal interest is passed on to an employee’s super fund to compensate the employee for late payments made on their behalf to their super fund by their employer.

Ref: ATO Media Release 2009/14

Donations to the 2009 Victorian bushfire appealsLegislation will be introduced to ensure that the donations for those affected by the 2009 Victorianbushfirescanbeusedforboththeimmediate response and the longer term recovery and reconstruction efforts.

Charities will not have their current tax concessional status affected if those monies are used for longer term recovery and reconstruction of community infrastructure in bushfire-affectedcommunities.

The legislation will provide a mechanism to ensure that donations to organisations in support of victims of such disasters can be used for immediate relief or reconstruction.

Fringe Benefits TaxThe Government will also amend the FBT law from the beginning of the 2008/09 FBT year to ensure that donations made under salary sacrificingarrangementsdonot result inanemployer incurring a FBT liability*.

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Note(*): To facilitate the collection of donations to those affected by the 2009 Victorian bushfires, a number of employers entered into salary sacrificing arrangements with their employees.

These arrangements may result in a potential FBT liability under the current FBT provisions.

In contrast, donations collected through an employer's Workplace Giving arrangements are made from an employee's post tax dollars and do not result in a FBT liability.

Ref: Assistant Treasurer's Media Release No.010

Amendments to super guarantee late payment offsetAmendments to change the operation of the Superannuation Guarantee (SG) late payment offset have passed through Parliament – [Tax Laws Amendment (2008 Measures No. 6) Bill 2009]The existing late payment offset allows an employer who makes a late SG contribution to reduce their SG charge liability for a quarter.

This ensures employers are not required to pay the SG contribution twice (once to the fund and once to the ATO).

Senator Sherry said that "The amendments in this Bill ensure that an employer will only be able to use the offset if they make SG contributions before they are assessed with the superannuation guarantee charge liability.

"This measure provides an incentive for employers to make their super contributions in a more timely manner, while still providing employers with the option of using the offset to reduce their superannuation guarantee charge liability."

In addition, under the amendments the general interest charge (GIC) will accrue on the remaining amount of any unpaid SG liability after the offset has been applied.

This ensures the GIC calculation takes into account the fact that the employer has made a contribution to the fund for the employee.

These amendments will commence from the date the Bill receives Royal Assent.

Ref: Minister for Superannuation and Corporate Law Media Release – No.021

Tax agent re-registration – disaster areasTax Agent Boards have reached out to tax agentswhohavebeenaffectedbythebushfiresinVictoriaorthefloodsinNewSouthWalesand Queensland.

They have advised that tax agents whose registration is due for renewal in the next few months should contact the Tax Agents' Board on 1300 362 829 (presumably to arrange an extension of time if required).

Changes to contact detailsTax agents who have changed any of their contact details, should fax or email any changes to the Tax Agents' Board in their state:

VictoriaFax: 1300 721 512

Email: tabdvic@tabd.gov.au

New South WalesFax: 1300 669 082

Email: tabdnsw@tabd.gov.au

QueenslandFax: 1300 669 820

Email: tabdqld@tabd.gov.au

Another 12 charged under Project Wickenby Twelve people have faced Court in Sydney as a result of an investigation into a $10 million offshore tax evasion and money laundering scheme.

A total of 153 charges have been laid against a Sydney accountant, her husband and 10 of her clients.

It will be alleged in court that a 62-year-old Warriewood woman devised, promoted,

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facilitated and implemented tax evasion schemes on behalf of Australian-based clients.

The schemes allegedly implemented by the woman involved incorporating companies in Vanuatu.

Fees were then paid to these companies by Australian-based companies.

The Australian-based companies then claimed these false expenses as deductions in tax returns.

It will be alleged that no actual services were provided by the offshore companies and that the funds held offshore were then laundered to individuals in Australia, but were not disclosed as income in tax returns.

The total amount allegedly laundered by these 12 people is approximately $5.2 million.

The 62-year-old woman has been charged with a total of 34 counts of conspiracy for defrauding the Commonwealth, obtaining a financialadvantagebydeceptionandmoneylaundering.

These offences carry maximum penalties of 10 years and 20 years imprisonment.

The other 11 persons have been charged with a variety of similar offences.Ref: AFP Media Release

CGT relief for transformation of water rightsThe Government has announced that it will provide CGT roll-over relief for irrigators who transform their entitlement to water under an irrigation right* into an individual water entitlement.

Note(*): This irrigation right is a right that the irrigator has against an operator to receive water.

The right is not a water access right or a water delivery right as such. Rather it may be an explicit or implicit contract with the operator arising from the irrigator holding a membership interest in the operator, such as shares or trust interests.

This roll-over will facilitate transformation arrangements allowed under new water market rules by deferring the CGT consequences of the transformation for irrigators until they deal with their individually held water entitlement, at some later stage.

This change will apply to CGT events that happen on and after 1 July 2008.

BackgroundTransformation is voluntary. Irrigators elect to permanently transform their entitlement to water, under an irrigation right against an irrigation infrastructure operator, into a water access entitlement.

When the transformation is complete, the entitlement cannot be held by the operator, and is normally held by the irrigator.

In the absence of this roll-over, irrigators who transform their entitlement to water under their irrigation right would typically incur immediate CGT consequences on the transformation.

However, the roll-over will not be availablewhere the entitlement to water under an irrigation right against an irrigation infrastructure operator is transformed into the hands of a third party (rather than the irrigator).

The Government will also allow termination and exit fees to be recognised when calculating a capital gain or loss on an asset by including these costs in the asset's cost base. Ref: Assistant Treasurer's Media Release No.011

New investment allowance (a.k.a. Tax Break)The following is a sample of frequently asked questions on the new Investment Allowance, that Treasury has put on its Website:

What does 'new' mean? The Tax Break will be available for new, tangible depreciating assets or new expenditure on existing assets. 'New' refers to assets that have not been used before by anyone, anywhere, except where an asset has only been used for reasonable testing and trialling.

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Do cars qualify? The Tax Break is available for new, tangible depreciating assets for which a deduction is available under the core provisions of Div.40 or new expenditure on existing assets.

New motor vehicles used for business purposes are an example of the kind of assets that could qualify for the Tax Break (provided all the criteria are met).

Are demonstrator vehicles new or secondhand assets? Demonstrator vehicles can qualify as 'new' assets, provided they have only been used for reasonable testing and trialling.

Will assets held under leases qualify? Provided the asset being leased is a new, tangible depreciating asset for which a deduction is available under the core provisions of Div.40, then the asset will be eligible for the Tax Break (subject to the other criteria being met).

Div.40 provides a framework for determining who in a leasing arrangement is able to claim depreciation deductions in respect of the asset and hence who would be entitled to claim the bonus deduction in a leasing situation.

As is currently the case with capital allowance deductions, how the Tax Break is factored into lease prices will be a matter for commercial negotiations.

Do buildings qualify? No. The Tax Break will be available for new tangible depreciating assets for which a deduction is available under the core provisions of Div.40 and new expenditure on existing assets.

Capital works covered by Div.43 will not qualify for the Tax Break.

Are primary production assets, depreciated under Subdivision 40-F, eligible for the tax break? No. The core provisions of the uniform capital allowance in Subdivision 40-B will provide the framework for determining which assets are eligible and who is entitled to claim the bonus deduction.

This means that assets that already receive concessional capital allowance deductions

under other subdivisions – such as assets used for primary production depreciated under Subdivision 40-F – will not qualify for the Tax Break.

Is the tax break only available to small business entities? No–boththe30%and10%bonusdeductionsare available to all businesses.

However,smallbusinessentitieswillonlyneedto spend a minimum of $1,000 per asset in order to qualify for the Tax Break.

All other businesses will need to meet a minimum expenditure threshold of $10,000 per asset. These expenditure thresholds apply to both30%and10%bonusdeductions.

Do small businesses using Div.328 qualify?Yes. A small business taxpayer who chooses to deduct amounts for depreciating assets under Subdivision 328-D will not be ineligible for the Tax Break merely because they make such a choice.

What if I don't meet the June 2010 installation deadline? If you acquire or start to hold an eligible asset between 13 December 2008 and the end of June 2009 and miss the end of June 2010 installation deadline you will miss out on the 30%bonusdeduction.

However,providedtheassetisinstalledbytheend of December 2010 you will still qualify for the10%bonusdeduction.

Will the tax break be reduced for non-business use?Unlike deductions under Subdivision 40-B, the Tax Break will not be apportioned for any non-business use of the asset.

However, a taxpayer must be able todemonstrate that at the time they started to use the asset or had it installed ready for use, the asset was to be used in Australia and for the principal purpose of carrying on a business.

Will the Tax Break bring forward the deductions I would normally claim over the asset's effective life or is it on top of these deductions? The Tax Break will provide a bonus deduction rather than bringing forward normal deductions

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for an asset's decline in value. This means that, over time a taxpayer could effectively claimdeductionsofupto130%oftheasset'svalue.

The Tax Break will not impact on balancing adjustment events. For example, the Tax Break will not affect the tax treatment of an asset upon disposal.

Will the car limit apply to the Tax Break? Under the core provisions of Div.40, luxury cars have their cost reduced to the car limit for the purpose of calculating capital allowance deductions.

As the Tax Break relies on the core provisions of Division 40, the car limit will apply to eligible luxury cars.

This means that a taxpayer who is eligible to claim the Tax Break for a luxury car will have to use the car limit when working out the amount of their deduction.

The car limit for 2008/09 is $57,180 and is indexed annually in line with the index number for the motor vehicle purchase sub-group of the CPI.

Thismeansthat,atthe30%rate,themaximumbonus deduction available for a car in 2008/09 is $17,154.

Using charities for money laundering & evasionEditor: The OECD's survey and Report on Abuse of Charities for Money-Laundering and Tax Evasion in 19 countries can make for interesting reading – sort of.

The 65-page report says that tax evasion and tax fraud through the abuse of charities is a serious and increasing risk in many countries.

Some countries estimate that the abuse of charities costs their Treasury many hundreds of millions of dollars and is becoming more prevalent.

According to the report, the vast majority of charities are legitimate, but some may be targeted by criminals to launder the proceeds of tax crimes and other serious offences.

However,theoverseasexperienceisthatsomeregistered charities wilfully participate in tax evasion schemes.

Thereportalsoprovidesthe"redflag"indicatorsto help tax staff carry out audits.

The 'red flag' indicatorsWhile there are a number of indicators, the followingredflagindicatorsprovideaguideas to how the OECD is "thinking":

n Taxpayers who report low to moderate income with an abrupt change in donation pattern.

n Taxpayer has no history of donating and now is suddenly making charity donations in varying ranges.

n There is a high ratio of donation amount to net income.

n The donations are made in cash making it harder to trace.

n When challenged by the Tax Administration:

– the taxpayer does not provide a responsetothequeries;

– the taxpayer provides copies and not originals of charity donation receipts;

– the receipts provided are not pre-numbered;and

– when queried about the method of payment, "cash" is the predominant answer.

Superfund audits to rise to 11,000 in 2009/10Editor: In a recent speech in Sydney, Neil Oleson, Deputy Commissioner of Taxation, indicated that the Tax Office was targeting SMSFs and their auditors.

Superannuation funds have become big businessfortheTaxOffice.

There are now almost 395,000 SMSFs with funds invested of around $350 billion.

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Compliance issuesMrOlesonindicatedthattodate,theTaxOfficehas concentrated on putting its efforts into educating and assisting those involved in the system to meet their roles and obligations.

However,whereitseesevidenceofcareless-ness, recklessness or intentional disregard of obligations, it is now prepared to respond accordingly by:

q makingafundnon-complying;

q disqualifyingatrustee;or

q prosecution through the courts.

"We now have some 200 compliance staff focussed on self-managed fund issues. We have gone from completing around 3,600 compliance cases in 2006/07 to around 10,400 cases in 2007/08. In 2008/09 we are well on track to completing over 11,000 cases."

SMSFs, the ATO and the global financial crisisIn the same speech (above), Mr Oleson stated thattheTaxOfficewas"cognisantoftheimpactoftheglobalfinancialcrisisandthechallengesexperienced by many trustees, taxpayers and tax professionals."

HeraisedtwomainareasofinterestfortheATO:

uMinimum pension payments – which cannot be met because of frozen funds or where the SMSF would rather pay a lesser amount* given the decline in the value of the fund assets.

*Note that the Government has announced this week a halving of the minimum drawdown requirements for 2008/09 – see page 11.

u In-house assets and changing market values – may cause some trustees to breachthe5%rule.

Minimum pension paymentsWhile trustees may be able to commute pensions to help manage these situations, care will still need to be taken to ensure minimum

payment amounts are met up to the point of commutation.

Where a fund is unable to sell assets to make a payment (for example where funds are frozen) and the SMSF does not make a pension payment, then the fund may be in breach of the super laws."

"However,wewouldconsideranybreachofthepayment standards sympathetically in these circumstances, particularly where the situation is beyond the trustees' control."

In-house assets and changing market valuesWhether the downturn in market values of shares and other assets will cause some trustees to breach the 5% rule will not beevident until year end values of SMSF investments are known.

Mr Oleson said that "If there is a problem, then trustees will need to have a plan in place to address the proportion of in-house assets held and reduce the proportion to an acceptable level."

"If values recover in the following year then there will be no need to sell. But if not, we will look at the action we should take, based on the circumstances."

"As mentioned in relation to the payment standards, we would consider these circumstances sympathetically, particularly where the situation is beyond the trustees' control."

Auditor independence under the gunIn 2007/08, the ATO completed some 665 approved auditor review cases and has plans to complete over 700 in its 2008/09 program.

It also sent letters to 350 approved auditors where its data suggested that there may be independence issues.

229 of these letters were to auditors who audited their own fund, and 121 to those who audited a relative's fund.

The letters strongly suggest that these auditors should take action to ensure that

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there are safeguards in place to ensure independence.

Preparing the accounts then auditing the fundApproximately25%ofSMSFauditorsreviewedin 2007/08 also prepare the fund accounts and operational statements which they audit, presenting, as the Tax Office says, "a 'selfreview' threat to independence".

WhiletheTaxOfficeacceptsthat,inlargerfirms,safeguards such as dividing responsibility between partners may be in place, it believes that itwouldbedifficult for a sole trader toundertake both roles without compromising their professional and ethical obligations.

Editor: With all due respect, wasn't that what Arthur Andersen said?

TheTaxOffice'spresentstanceisthatsuchconflictingrolesshouldbeavoided.However,if the auditor indicates that he or she is willing to work towards removing the risk, the ATO will take no further action.

Editor: Note that it appears the Tax Office is hardening its stance in this area and that tax agents who are also SMSF auditors would be well advised to be able to show how they will move to have their super funds independently audited in the near future.

As to all auditors being treated equally, we'll talk to the Tax Office on that.

Commissioner to modify tax laws to help taxpayers?In a recent speech, the Assistant Treasurer advised that he would be putting out a public discussion paper later in the year on whether the Commissioner should be granted additional powers to make minor amendments to the tax law to give relief to taxpayers.

It follows a recommendation of the Tax Design Review Panel which examined ways of reducing delays in introducing tax legislation and improving the quality of consultation on changes to tax laws.

He said that "An as yet outstandingrecommendation of the Panel is the

recommendation that the Government consider whether it should empower the Commissioner of Taxation, in appropriate circumstances, to modify tax laws to give relief to taxpayers or whether the Commissioner could provide such concessions in a better way."

"The Panel's recommendation responded to submissions that tax laws required numerous relatively minor amendments to ensure they worked as intended."

"Empowering the Commissioner might allow the Australian Taxation Office to be moreflexible in administering the law to deliversensible and pragmatic outcomes."

"Such a proposal has advantages and disadvantages. For instance, the Commissioner may be able to quickly solve a problem by granting an extra-statutory concession rather than Parliament having to pass an amendment."

"However,somemayviewsuchapowerasweakening the rule of law and perhaps creating more uncertainty."

A public discussion paper explaining the proposal and canvassing opinions will be released during the course of this year.Ref: Speech of 13/3/2009 No.4

Regulations released for halving pension drawdownsThe Minister for Superannuation and Corporate Law has announced the release of regulations which give effect to the Government's decision to halve the minimum payment amounts for account-based pensions for the 2008/09 financialyear.

The regulations, Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 2) reduce the minimum payment amounts for account-based, allocated and market-linked(termallocated)pensionsby50%for2008/09.

Similar amendments have been made to the Retirement Savings Accounts Regulations 1997.

This temporary relief addresses concerns

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that the minimum drawdown requirement forthisfinancialyearwasbasedonaccountbalances at 1 July 2008, when equity values were higher.

"The release of these regulations removes any doubt that pension payments can cease fortheremainderofthisfinancialyearwherethe pension has already paid out half of the previous minimum," Minister Sherry said.

"The Government will continue to monitor market conditions and will examine options for a longer-term solution to this issue following Australia's Future Tax System Review," Minister Sherry said.

Ref: Minister for Superannuation Media Release No.022

Timber floor installation benchmarks and examplesIn addition to the other benchmarks that the TaxOfficehasissuedinrelationtothefollowingindustries:

n Concreting;

nFloorsandingandpolishing;

nMetalroofing;

nPainting;

nRoofguttering;

nRooftiling;and

nTaxis,

it has now issued the following benchmarks forthetimberfloorinstallationindustry.

These benchmarks indicate an expected range ofincomefortimberfloorinstallersbasedonthe labour and materials used. They apply to timberfloorinstallerswhoworkdirectlywithhousehold customers.

The ATO has developed the benchmarks with advice from the Australian Timber Flooring Association and trade participants.

Taxpayers can use these benchmarks to:

q compare their performance to the rest ofthetimberfloorinstallationindustry;and

q check that their tax records accurately reflecttheirincome.

These benchmarks represent the industry norm. Taxpayers should consider their own personal circumstances when using the benchmarks to assess their situation. For example, a taxpayer's income may differ from the benchmarks if they work part-time.

Benchmark guideThe table below sets out benchmarks for timber floorinstallers.It isnotrelevanttoinstallerswhodotheirownfloorsanding.

Benchmark guideCoverage rate (square metres) for every 100 square metres of timber ordered allowing for wastage

90sqm to

95sqm

Cost of timber as a percentage of price charged to the customer to supply and install (varies depending on type/quality of timber installed)

50sqm to

70sqm

Average job size (square metres) 80sqm

Days to complete average job

2 trades-people 4 days*

Price charged ($) per square metre – install only

$23 to $40

Price charged ($) per square metre - supply and install (standard and top grade timbers)

Tongue and groove

$65 to $140

Parquetry $100 to $180

Plywood and particle board – subfloorpreparation included

$35 to $50

* Add half a day for installation of skirtings for rooms of 70 square metres or more

Note: – All dollar amounts are GST inclusive.– Prices charged may vary between

states and regions.

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Benchmark sales turnover Income guide Two

tradespeopleAmountoftimberflooringused per year (square metres)

4,631sqm to 4,889sqm

Square metres installed per year

4,400sqm

Price charged per square metre (install only)

$23 to $40

Price charged per square metre (supply and install)(mid - range)

$100 to $140

Sales turnover range install – labour only

$101,200 to $176,000

Sales turnover range including materials

$145,200 to $242,000

Sales turnover range including supply and install (mid - range)

$440,000 to $616,000

Average labour charge per day – per tradesperson

$230 to $400

Average job size (square metres)

80sqm

Jobs completed per year 55Days to complete average job

4 days

Days worked per year 220 days

Note:– All dollar amounts are GST inclusive.– Add extra day for installing skirtings

and plywood/particle board base. – Refer to Floor sanding and polishing

benchmarks for sanding work.

Example 1Robrunsatimberfloorinstallationbusinessand has one sub-contractor working for him. They work on household jobs only.

Rob normally charges $110 per square metre for supply and installation of tongue and groove flooring.

Hereviewsthestatementsfromhissupplierwhich show that he has purchased 4,700 squaremetres of flooring. Allowing for 5%wastage, he determines that he installed 4,465 squaremetresofflooring.

As his price per square metre and the amount of timber installed are consistent with the benchmarks, he uses the benchmark guide to calculate that his total sales should have been $491,150.

Rob's records show reported income of $490,000, which is within the benchmarks and close to his estimate. This leaves him confidentwithhisrecordkeeping.

Example 2Tonyhasatimberflooringbusinesswithoneemployee.Hisworkisallinstallationonly.

Tony normally charges $32 per square metre and installs around 19 square metres per day to earn $608 which is close to the benchmark.

Checking his business records Tony findshe has recorded income of $98,500 for the year.

Using his benchmark earnings of $608 per day, Tony estimates he would have worked 162 days to earn $98,500.

However,Tonyhashadabusyyearand issure he worked more than that.

He reviews his quote books and finds 14jobs where he was paid cash and he charged $34,500 for these jobs.

With these additional jobs, he calculates that he worked for 218 days and he recalculates his income for the year at $133,000 which is consistent with the benchmarks.

Tony asks his bookkeeper for advice on keeping better records.

FAREWELLWe are extremely sorry to have to report that after a long illness, Ray Regan, ex-National President and co-founder of the NTAA, passed away suddenly and unexpectedly last month.

Ray will be remembered as an entertaining presenter and vigorous defender of tax agents' and taxpayers' rights.

Our thoughts are with his family members who will miss him dearly.

Page 14 April 2009

Voice

TD2009/3 – ESAS: are options to acquire, an interest?RulingWhen an employee is granted a simple option to obtain a share in a company under an employee share scheme (ESAS), they do not become the holder of a legal or beneficialinterestinashareforthepurposesof S.139CD(6).

Note: The question is raised because, if a taxpayer were to become the holder of a beneficial interest (in a share) on acquiring an option, one of the conditions under S.136CD(6) (i.e., in determining that the option is a 'qualifying option') is that immediately after acquiring the right, the taxpayer must not hold a legal or beneficial interest in more than 5% of the shares in the company to which the right relates.

More elaborate arrangements The above analysis is concerned with the simplest kinds of option arrangements found in typical employee share schemes.

The position might be different for some arrangements that are more elaborate.

For example:

n if immediately on the grant of options particular shares are held on an expresstrustforthebenefitofaparticularemployee;or

n if the contractual arrangements relate to particular, ascertained shares and theremedyofspecificperformancemight be available to the grantee for a breach of the contract (as in the case of a contract for the sale of particular existing shares in a private company).

Such arrangements are beyond the scope of this Determination.

TD2009/4 – Accounting for a dividend reinvestment planA Dividend Re-investment Plan (DRP) with the (standard) features outlined below and accounted for in accordance with this Determination will not taint* the issuing company's share capital account for the purposes of Division 197 of the ITAA 1997.

*The share capital tainting rules

The share capital tainting rules are contained in Div.197 of the ITAA 1997. Div.197 was introduced with effect from 26 May 2006.

The share capital tainting rules are integrity rules designed to prevent a company from making tax-preferred capital distributions from a share capital account to which the company has transferred profits.

If a company taints its share capital account, a franking debit arises in the company's franking account. Once tainted, the company's share capital account remains tainted until it is untainted. Distributions from a tainted share capital account are treated as unfrankable dividends rather than returns of capital.

Example 1 On 31 July 2008, Alison elects to participate in Corporate Pty Ltd's DRP for the whole amount of her anticipated cash dividend with respect to her holding of 100 shares.

On 15 August 2008, Corporate Pty Ltd declares that a dividend of $1 per share be payable with a record date of 29 August 2008.

As a shareholder of Corporate Pty Ltd as of the record date, Alison is entitled to the dividend.

On 15 September 2008, Alison's dividend entitlementissatisfiedbyCorporatePtyLtd

FBT, GST and Income Tax RulingsThe following are summaries of Tax Alerts, Practice Statements, Public Rulings and Draft

Rulings and Tax Determinations. Copies are available from the ATO Website.

Voice Page 15

April 2009

issuing 10 shares to Alison pursuant to her participation in the company's DRP.

Corporate Pty Ltd accounts for the transaction as follows:

On date of declaration

Dr Retained earnings $100

Cr Dividend payable $100

On date of payment

Dr Dividend Payable $100

Cr Share Capital $100

Although the transfer from the Dividend Payable account to the Share Capital account would constitute a transfer for the purposes of S.197-5(1) of the ITAA 1997, the share capital account of the company does not become tainted as a result of the crediting of the dividend to the share capital account under S.6BA(5) of the ITAA 1936.

Example 2 On 31 July 2008, Luke elects to participate in Company Pty Ltd's DRP for the whole amount of his anticipated cash dividend with respect to his holding of 100 shares.

On 15 August 2008, Company Pty Ltd determines that a dividend of $1 per share be payable with a record date of 29 August 2008.

As a shareholder of Company Pty Ltd as of the record date, Luke is entitled to the dividend.

On 15 September 2008, Luke's dividend entitlement issatisfiedbyCompanyPtyLtdissuing 10 shares to Luke pursuant to his participation in the company's DRP.

Company Pty Ltd accounts for the transaction by way of short form entries as follows:

On date of payment

Dr Retained Earnings $100

Cr Share Capital $100

To record payment of dividend to participant in DRP

Although the transfer from the Retained

Earnings account to the Share Capital account would constitute a transfer for the purposes of S.197-5(1), the share capital account of the company does not become tainted as a result of the crediting of the dividend to the share capital account under S.6BA(5).

Date of effect This Determination applies from 26 May 2006, the date of application of Division 197.

Standard Features of a DRPFor the purposes of this Determination, a DRP has the following features:

u it is an offer by the company to shareholders to apply their dividend entitlements to subscribe for additional shares;

uparticipation in the DRP is optional for the shareholder, with the shareholder having the ability to vary participation or withdrawatanytime;

ushareholders can participate with respect to the whole or part of their shareholding;

ushares issued under the plan rank equallywithexistingfullypaidshares;and

u from the perspective of the issuing company, no cash payment of the dividend is actually made.

Rather, the participation of shareholders in the DRP is recorded internally as transfers between accounts which involve a transfer of an amount to the issuing company's share capital account.

This Determination does not deal with Bonus Share Plans which are not considered to be a DRP for the purposes of this Determination.

A modern Bonus Share Plan typically involves a company issuing shares in lieu of a dividend to those shareholders who have elected to participate in the Plan with no amount transferred into the company's share capital account.

Similarly, 'scrip dividends' as discussed in Taxation Ruling IT 2603 are also not covered by this Determination.

Page 16 April 2009

Voice

TD2009/06 – FBT: Reasonable food componentThe amounts listed below are acceptable as a food component of living away from home allowances for the 2009/10 FBT year.

The amounts result from the indexation of the previous year's food component:

per week

One adult $221

Two adults $354

Three adults $397

One adult and one child $286

Two adults and one or two children

$397

Two adults and three children

$463

Three adults and one child $463

Three adults and two children

$529

Four adults $529

('Adults' for this purpose are persons who had attained the age of 12 years before the beginning of the FBT year.)

In relation to larger family groupings, the ATO accepts a food component based on the above figuresplus$133foreachadditionaladultand$65 for each additional child.

ExampleBobandhiswifeand their fivechildren (allunder 12 years of age) are temporarily living in Australia while Bob is working on a project for his employer (an overseas company).

Bob is in receipt of a living-away-from-home allowance.

The amount that is considered to be a reasonable food component of the allowance for the year commencing 1 April 2009 is $593 per week (i.e., $463 plus $130).

TD 2009/7 – FBT: cents per kilometre basisThe rates to be applied where the cents per kilometre basis is used for the 2009/10 FBT year are:

Engine capacity Rate per kilometre0 - 2500cc 44 centsOver 2500cc 53 centsMotorcycles 13 cents

TD 2009/8 – FBT: Non-remote housingThe indexation factors for the purpose of valuing non-remote housing for the 2009/10 FBT year are:

New South Wales 1.072Victoria 1.062Queensland 1.096South Australia 1.053Western Australia 1.127Tasmania 1.046Australian Capital Territory 1.078Northern Territory 1.100

TD 2009/9 – FBT: Record keeping exemption thresholdThe small business record keeping exemption threshold for the 2009/10 FBT year is $7,063. This replaces the amount of $6,766 that applied in the 2008/09 FBT year.

TaxTeam TrainingMembers are advised that TaxTeam training in the form of their attendance at our Trusts and Tax Schools seminars will be held on:

21 April, 18 May and 2 June.

We are sure members will not mind the inconvenience as this training keeps our TaxTeam members at the cutting edge.