YOUR QUESTIONS TO ATR

TAX TIP For a family to increase its chances of qualifying, one person in the family should pay for all medical expenses.

 

Your accountant is correct.  Loans made by a private company to their shareholders or associates are governed by Division 7A of the Income Tax Assessment Act.  A loan to the shareholder can be considered an unfranked dividend unless it is an excluded loan.  Even if the loan was borrowed for the purpose of purchasing a property which would derive income and that income would therefore be subject to tax in the shareholder's own hands, the Tax Office still consider that the loan is subject to Division 7A.  Also note that in some circumstances, the loan will be repayable over 25 years.

 

A reimbursement normally implies some other party meeting costs you have incurred, placing you in a similar position to that which would have happened if the other party had met the cost directly in the first place.  A reimbursement normally involves no profit element or mark up.  A straight reimbursement would reduce the cost base of the asset and so depreciation would be calculated from the net cost after reimbursement.

 

If you were paid a sum of money to induce you to make a certain purchase, then receipt of that money may not be a reimbursement but more likely be treated as income.  If that is the case, the receipt may be treated as income and the cost of the asset would be the gross amount paid.

 

Provision of a benefit to a former employee would be tax deductible where it is provided in connection with the operation of your enterprise.  The expense paid would be of similar nature to deferred pay.

 

FBT extends to benefits provided to future, present, and past employees and their associates in respect of their employment.  As the benefit is connected with his employment, the trip provided to the employee and spouse after termination still attracts FBT in the same way it would for a serving employee.  Reportable fringe benefit rules would require that a payment summary be prepared showing only the grossed up value of the trip (if that amounted to more than $2 000), assuming the employee received no salary in the financial year.

 

Salary sacrifice of investment property interest by a taxpayer represents an expense payment fringe benefit.  However, the taxable value of this fringe benefit can be reduced by an amount that would otherwise be deductible to the employee had they paid the expense themselves.  This is known as the "otherwise deductible" rule.  An employee will need to provide their employer with an expense payment declaration testifying to the extent by which the amount is otherwise deductible.  If we assume the amount is otherwise deductible to the employee in full, then the implications are:

This arrangement will only be viable if the salary sacrifice is an effective salary sacrifice arrangement.  Broadly speaking, an effective salary sacrifice arrangement involves the employee agreeing to receive part of his/her total remuneration as a fringe benefit before the employee has earned the entitlement to receive that amount as salary and wages.

 

For individuals who do not use an accountant, the due date is 31 October following the end of the previous financial year.  For those that do, the due date can be extended, usually to at least March in the following year (subject to various conditions).  However, to be eligible for this extension, you must be on an accountant's lodgement list by 31 October.