PRACTICE UP DATE

August, 2003

Quarterly super contributions – statements to employees

Employers must advise their employees in writing about contributions made to the employee's superannuation fund. This change in the law came into effect on 1 July 2003.

In a recently released Fact Sheet, the Tax Office says that employers have to provide these statements to employees “within thirty days of making the final contribution for the quarter.” *

Note(*): This is welcome news as, technically speaking, employers should provide the statement within 30 days of making each and every contribution to a superannuation fund.

Therefore, employers who make monthly contributions will only be required to provide one statement covering all the contributions being made during that quarter.

What is this new statement?

The statement must be in writing and contain the following information:

· the amount of the super contribution;

· the name of the super fund receiving the payment from the employer; and

· the employee's super fund membership number.

Editor: As we said, this is a new requirement. Clients must advise employees within 30 days of

the last contribution in September. If you need assistance contact us as soon as possible.

Employers paying super fund expenses

The ATO has announced that it is going to "come down" on the practice of employers paying expenses on behalf of self managed superannuation funds (SMSFs) and then claiming the expense as a contribution to the fund.

The ATO has now indicated that, from 1 July 2003, employers will no longer be allowed to claim a

deduction for these expenses, because, basically:

· they don't accept that a payment of a SMSF's expenses is a "contribution"; and

· if it's not a deductible super contribution, the expense is not deductible to the employer as it was not incurred in gaining or producing its assessable income.

Editor: This has been a widely accepted practice and as there is no "mischief" it's hard to see why the

Tax Office is taking such a hard-line approach. Nevertheless, unless they change their mind,

and they have asked for comment, they are saying that they expect employers to comply with

this change from 1 July 2003.

We'll keep you posted.

Tax Office warns businesses about fake letter

The Tax Office has warned businesses about a fraudulent letter being circulated asking for detailed personal and business information. The letter has been fraudulently issued in the name of the Australian Tax Office and the NSW Office of Fair Trading.

The letter asks businesses to send their business, home and income details as well as a scanned passport or driver's licence to 'taxfairtrading' at an internet provider.

Tax Commissioner Michael Carmody said businesses should be wary of anyone asking for their business or personal details.

"The Tax Office is certainly not asking people to scan their passports and driver's licences and email these details," Mr Carmody said.

Overtime meal allowances

The Tax Office has advised employers and employees that overtime meal allowances up to an amount of $19.75 per meal are considered reasonable for 2003/2004.

For employees to claim a deduction, the amount must actually have been incurred in buying food or drink in connection with paid overtime, under a relevant industry award or enterprise bargaining

agreement.

If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the excess over the reasonable amount.

Athlete not carrying on a business

The Full Federal Court has held that an Olympic athlete was not carrying on business as a

professional athlete and that, therefore, prize money and grants received were not assessable income.

The taxpayer was a full-time police officer and only trained for and competed in top-level competitions in her spare time.

She was not engaged in a business activity to exploit her sporting prowess or turn her talent into money and the competitions were not to receive money but to gain competitive experience.

As such, prize money and grants for the costs of competing were not income.

However, appearance money and sponsorship payments were assessable income as payments for services rendered.

Main residence exemption – residence owned by family trust

The ATO has issued a statement to the effect that individuals who own a dwelling in the capacity as trustees of a family trust and who use the dwelling as their main residence are not entitled to the main residence exemption.

The taxpayer must be an individual acting in their personal capacity to obtain the main residence

exemption.

Landlord's legal expenses – damages claim by a third party

The Tax Office has issued an interpretative decision which states that a landlord can claim legal expenses incurred in defending a claim for damages where a person asserts they were injured as a result of the condition of the property.

As the legal expenses arose out of the letting of the property to a tenant, there is a clear connection between the expenditure and the generation of rental income.

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