Client declaration required for lodgement
David Bent August 2013
The ATO has reminded tax and BAS agents that before lodging documents on behalf of their clients, the law requires the client to give the agent a signed declaration in writing stating that:
the tax or BAS agent is authorised to give the document to the Commissioner; and
the information they have provided to the agent for the preparation of the document is true and correct.
The ATO says the law prohibits a tax or BAS agent from giving a document to the Commissioner until clients have made the declaration.
The ATO reminded agents that their clients are required to retain the declaration (or a copy) for up to five years, depending on their circumstances. The ATO recommends agents also keep a copy of the declaration for their own records.
Abolition of FBT statutory formula method for company cars
David Bent August 2013
On 16 July 2013, the Prime Minister and the Treasurer formally announced that the Government would bring forward by one year the start date of a "cap and trade" emissions trading scheme to 1 July 2014. The PM said the bring-forward of the ETS would cost the budget around $3.8bn over the next four years. The Government said it will make up for the lost revenue through savings, including $1.8bn from changes to FBT arrangements relating to employer-provided cars, as follows:
The Government proposes to remove the statutory formula method for both salary-sacrificed and employer-provided car fringe benefits for new contracts entered into after announcement [ie after 16 July 2013], with effect from 1 April 2014.
Existing contracts materially varied after 16 July 2013 will also fall under the new arrangements.
Existing contracts that are not varied will continue to have access to the existing statutory rate throughout the contract.
All car fringe benefits for new leases will be calculated using the operating cost method from 1 April 2014.
People who use their vehicle for work-related travel will still be able to use a log book to ensure their car fringe benefit excludes any business use.
In the Government's view, "a tax subsidy for the private use of a car is no longer justified or appropriate".
The Government said the changes would not affect the existing exempt car benefit concessions that apply to certain uses of taxis, panel vans, utes and other non-car road vehicles. If an individual uses their vehicle for a significant amount of work-related travel, they will still be able to use the operating cost method to ensure their car fringe benefit excludes any business use of the vehicle. FBT will still only apply to the private portion of any benefit provided to an employee. Employers who provide a work car to employees for occasional private use (eg weekend travel) will continue to be able to use the operating cost method.
The Government says the abolition of the statutory formula method "will not affect the more than 3.6 million workers – including employees, the self-employed and sole traders – claiming deductions for work-related travel expenses when they use their own car for work reasons". The Treasurer said it does however affect potentially around 320,000 people who are expected no longer to be able to justify the statutory formula percentage claim.
The Coalition has indicated it does support the FBT changes and will not implement them if elected. Shadow Treasurer Joe Hockey said the Government's announced FBT changes "fly in the face" of the Henry Review which recommended in 2009 that: "The current formula for valuing car fringe benefits should be replaced with a single statutory rate of 20%, regardless of the kilometres travelled." (Part of Recommendation 9) (Source: Shadow Treasurer's media release, 17 July 2013.)
Effective life of depreciating assets
David Bent August 2013
Taxation Ruling TR 2013/4 applies from 1 July 2013, and explains the methodology used by the Commissioner in making determinations of the effective life of depreciating assets under s 40-100 of the ITAA 1997. The Ruling replaces Taxation Ruling TR 2012/2, which will be withdrawn on and from 1 July 2013. To the extent the Commissioner's views in that Ruling still apply, they have been incorporated into TR 2013/4. The ATO has prepared a consolidated version of the amended determination which is set out in the Schedule to the Ruling.
The Commissioner has made new determinations that commence on 1 July 2013 pursuant to s 40-100, determining the effective life of assets covered by the following descriptions:
ammonia and ammonium nitrate manufacturing;
non-ferrous metal casting;
paint and costing manufacturing;
pet food manufacturing;
prefabricated concrete product manufacturing; and
sanitary paper product manufacturing.
These new determinations, as well as the removal of some previous determinations, that formerly appeared in the schedules attached to TR 2012/2, are now incorporated in consolidated Tables A and B which are contained in the new "1 July 2013 Schedule" to TR 2013/4.
New and reviewed items have been marked with an asterisk (*) in column 3 of Tables A and B. Statutory caps on the Commissioner's determined effective lives apply to certain assets. Where the Commissioner has determined effective lives for assets in excess of the statutory caps or proposed caps for those assets, they have been marked with a hash (#) in column 3 of Tables A and B.
Car depreciation limit
David Bent April 2013
Taxation Determination TD 2013/15 which states that the car limit for the 2013-14 financial year is $57,466. The car limit is used to work out decline in value deductions of certain cars under the income tax law.
The ATO says the index for the year ended 31 March 2012 was 401.5 and the index for the year ended 31 March 2013 was 395.1 resulting in an indexation factor of 0.984. As the indexation factor is less than 1, the car limit for the current year has not been indexed and remains the same as the previous year.