Tax Round Up

From the Government

LAFHA changes now law

The reforms to living away from home allowances  and benefits is now law.  In the final legislation,  LAFHA benefits continue to be wholly taxed under the FBT regime.

The new rules limit the concessional tax treatment of LAFHA and benefits to those provided to employees (other than those working on a ‘fly-in

fly-out’ or ‘drive-in drive-out’ basis) for a maximum period of 12 months who:

• Maintain a home in Australia (which is their normal place of residence) for their immediate use and enjoyment at all times while living away from that home for their work; and
• Have provided their employer with a declaration about living away from home.

Special rules apply to employees who are working on a fly-in fly-out or drive-in drive-out basis. These employees do not have to maintain a home in Australia and the 12-month limit on concessional tax treatment does not apply.

Transitional rules apply to permanent residents who have employment arrangements for LAFHA and benefits in place prior to 7.30 pm (AEST) on 8 May 2012. These employees are not required to maintain a home in Australia for the concessional treatment to apply and the concession is not limited to a maximum period of 12 months until the earlier of 1 July 2014 or the date a new employment contract is entered into, or the existing contract is varied in a material way.

The transitional rules also apply to temporary residents who maintain a home in Australia.

For the purposes of the transitional rules, an annual salary review or changes in food component of a LAFHA do not constitute a material variation to an employment arrangement.

Portability of super between Aus & NZ

The exposure draft of the Superannuation Legislation Amendment (New Zealand arrangement) Bill 2012 on the portability of superannuation between the two countries was released this month.

The current superannuation laws do not allow Australians and New Zealanders living in Australia, who permanently leave Australia, to either access their superannuation benefits on their departure (prior to reaching preservation age) or to move their benefits to a superannuation fund in another country.

The legislation, if enacted, will enable individuals who hold an interest in an Australian superannuation fund to transfer their superannuation benefits to a New Zealand KiwiSaver scheme when they move to New Zealand. Similarly, individuals in New Zealand who hold retirement savings in a KiwiSaver account will be able to transfer those savings to an Australian superannuation fund when they move to Australia.

The legislation will also assist Australians and New Zealanders to consolidate their retirement savings in their country of residence.

More information

•     Portability of superannuation between Australia and New Zealand
•     Media release – Government releases draft legislation for Trans-Tasman retirement savings

From the ATO

More SMSFs will be made non-compliant

In a recent speech, the Assistant Commissioner for Superannuation, Stuart Forsyth said, “On time SMSF lodgment rates sit at 74%.  The overall lodgment  rate is just over 92%.  This is not good enough and we will consider making some SMSFs noncomplying.” In the same speech Mr Forsyth also pointed out that funds were often misreporting non-arms length income, noting that the transaction of assets must be reported on a commercial arm’s length basis.  He also dropped the tax office’s successful litigation record in this area and warned that there is more to come.

More information

• Issues affecting SMSFs: The ATOs perspective at SISFA 2012 SMSF forum.

ATO warning on emission units scheme

The ATO has released TA 2012/6 on new tax scam promoting access to deductions for offshore “emission units.”

Under these arrangements, participants who are carrying on a business, contract with an offshore entity to purportedly purchase offshore ’emission units’ generated through offshore carbon reduction activities.

The arrangement claims to allow participants to deduct the entire purchase price of the offshore ’emission units’ in the income year that they enter the arrangement.

The ATO says that they have seen examples where for an outlay of $21,000 for the emission unit, the taxpayer has claimed $140,000 in deductions. The ATO is obviously not keen to accept the arrangement.

More information

• TA 2012/6 Deduction generation from purported purchase of offshore ’emission units’ that do not exist at the time of the arrangement
• Media release – ATO warns on offshore emit unit scheme