ATO appeals court tax ruling on deductibility of education expenses vs Youth Allowance income

Following our previous coverage on Symone Anstis v. Federal Commissioner of Taxation, the Australian Taxation Office has decided to appeal the Tribunal's decision. 

In other words, until the ATO is defeated once again in court, it will not allow education expenses to be claimed against "Commonwealth education assistance schemes".

SUMMARY FOR THOSE WHO MISSED THE CASE RULING

SYMONE'S CASE

Symone (the taxpayer) is claiming that her education expenses should be tax deductible because being enrolled in a tertiary education is one of the prerequisites for her entitlement to Youth Allowance.

So, she claimed various expenses such as textbooks, depreciation on the computer, travel, etc. 

COMMISSIONER'S CASE

The ATO claimed that this was bogus because she incurred these education expenses to finish her teaching degree and eventually qualify as a teacher. 

They are arguing that the expenses are not deductible because it wasn't incurred to derive an income. That is, she was not earning money as a teacher yet at this point in time.

They also rejected the argument that the education expenses was a valid deduction to get Youth Allowance income.

TIMELINE OF EVENTS

17/11/2006  ATO issues an amended tax assessment to Symone

27/11/2006  Symone objects to amendment

05/12/2006  ATO disallows Symone's objection 

12/12/2006  Symone goes to Tribunal to dispute ATO decision

18/04/2007  Tribunal rules in favour of ATO

21/07/2008  Symone appeals to the Federal Court

01/04/2009  The Federal Court rules in favour of Symone

29/05/2009  The ATO appeals against the Federal Court decision 

SUMMARY

We will have to wait and see whether or not the ATO's appeal will be allowed. If so, then the whole legal circus starts again. 

We will update everyone on the progress of this tax case. 

In the meantime, the ATO has issued a statement that it will continue to treat education expenses as non-deductible against Youth Allowance (and other government assistance) until a FINAL decision is made.

SPECIAL NOTE FOR LAW STUDENTS OR TAX LAW ENTHUSIASTS (!)

The case judgement is a very useful and straight-forward explanation of basic tax law. That is, the explanation of how revenue recognition and tax deductibility works.

The case judgement can be found here.

From the AusTax team. 

The #1 provider of Australian tax news on twitter.

Is your employer taking out enough tax from your pay?

This is a quick post for those of you who are employees...

Have you ever happily lodged a boring tax return with just your employment income, NO extra income, NO exciting tax deductions and then get hit with a MASSIVE TAX BILL?

WELL... READ ON, THIS MAY JUST BE THE REASON..!

As part of your payroll, tax is withheld by your employer every pay period. The total tax withheld for the year forms the amount of tax that shows up in your PAYG Payment Summary (aka Group Certificate).

Assuming that your only taxable income is from your job, you shouldn't have to pay any additional tax when you lodge your income tax return. 

This is because your employer has already taken tax out every week/fortnight/month/etc throughout the year.

HOWEVER..!

How do you know that the CORRECT amount of tax is being withheld from your pay?

This is what you do...

You simply cross-check the tax withheld on your payslip against the ATO PAYG Withholding Tax Tables.

The ATO provides these simple tax tables to employers to allow them to easily deduct the correct tax from their employees. However, mistakes do happen and it is worthwhile double-checking.

This is what you need to know beforehand (HINT: have your payslip handy!): 

1. What is your pay cycle? ie Weekly, Fortnightly, Monthly

2. How much are you getting paid per pay cycle? 

3. Do you have HECS/HELP or SFSS?

4. Do you have leave loading? (most likely not)

5. Are you claiming a tax-free threshold for this employer?

Once you have the above information, you can use the Tax Tables that your employer also use. Here's the link to the ATO's PAYG Withholding Tax Tables.

Or....

If you are really lazy or just not into numbers (we don't blame you), then click on this link to the ATO's PAYG Withheld Calculator.

You enter all the information, click on Calculate and voila..! The calculator shoots out the Tax Withheld amount which should match up with your payslip.

If it doesn't match AND you answered all the calculator questions correctly, it's time to talk to your employer's HR or Finance team. 

It could be a simple case of ticking the wrong box when you first filled in your TFN Declaration form.

Note: The rates changed in July 09. So, when you will get a different tax withheld amount when you run the calculator in July 09.

GOOD LUCK..!

RIGHTING TAX WRONGS, ONE AT A TIME...

From the AusTax team. 

The #1 provider of Australian tax news on twitter.

What the budget means for you

We have decided to provide commentary on the budget using a series of posts as to how they affect different segments of society. There is a lot of commentary out there from the major news outlets and there is a raft of changes. 

We have simplied our analysis into "What the budget means for...."

1. The Eldery:  We have defined this as 50 years of age and over, as the budget impacts the pension and the age pension from 2017

  

2. Young people: We have defined this as 25 and under and first home buyers

3. Business: We have a particular focus on SME's (small and medium enterprise business).

There will also be some additional posts from our contributors focusing on Superannuation and the economic impact.

From the AusTax team. 

The #1 provider of Australian tax news on twitter.

A budget forged in the fire!

Wayne Swan delivered the federal budget tonight outlining how the government will spend $58 BN (though he never mentioned the deficit number did he?). A budget that was "forged in the fire". He made some interesting points regarding infrastrucutre spending, and drew a lot of laughter when he suggested increasing the retirement age by 2 years.  

There was a lot of chatter on twitter, so much that the hashtags for #ausbudget09 and #budget09 became trending topics after the speech was delivered. @austax microblogged the whole time while watching the speech on ABC, delivering live updates from our various correspondents. 

We're currently in lockdown in the moment, like other major news outlets, accounting firms and financial institutitions digesting all the information. We are discussing the changes and writing up some analysis - some will be ready for tonight, and there'll be more tomorrow as well. 

Watch this space!  

Cheers, 

The Austax team

The #1 provider of Australian tax news on twitter.

Are directors liable for a company's TAX DEBT?

Corporate structures are created on the assumption of limited liability status. This means that the company is considered a separate legal entity.

So, most of the time, the liabilities of the company is limited to itself and does not extend to shareholders and directors.

Of course, if the directors have engaged in insolvent trading, then they would be liable for the debts of the company. We have had many cases of this in recent times such as HIH.

But, we are talking TAX and specifically TAX DEBT. The tax debt of a company would normally not extend to the directors. 

However, if a payment arrangement has been made with the ATO for the tax debt AND the company breaches the arrangement....

Then, the directors can be personally liable for the tax debt under s.222AOE "Directors Penalty Notice".

FINAL WORDS

The corporate structure has been traditionally held as a great tool for business. However, the privileges of directors have been increasingly eroded thru the years. 

At the same time, the liabilities and responsibilities of directorships have increased steadily. 

So, research the company before you assume the directorship...! It may just have a few hidden traps for the unwary..!

From the AusTax team. 

The #1 provider of Australian tax news on twitter.

ATO ALERT: Data-matching program targeting car sales

Grim news for those caught under this new data-matching program started by the ATO.

The ATO will be reviewing all car sales  over $10,000 that was made in the 2007 / 2008 financial year. Apparently, 1.7 million sales records fall under this category. The information has been provided to the ATO via the motor registries around Australia.

The previous crackdown in 2008 was for "luxury" car sales over $57,000. In that case, a whooping 70% of investigations yielded a tax liability for the ATO. A very good return on investment, indeed..! 

So, no surprise that its now chasing after the "middle-class".

WHO DOES IT AFFECT?

1. Employers who have provided their employees with car benefits. 

Any benefit provided to your employees outside of wages & salaries is subject to the Fringe Benefits Tax (FBT) rules. 

The ATO will be catching out any employers who have not been declaring FBT on car benefits to employees.

2.  Persons who appear to be living beyond their financial means. 

If you declare a taxable income of only $10,000 but buys a car worth $30,000, then that's suss...!

The ATO will be investigating you to see whether or not you have been paid in cash and not declaring it.

3. Persons who buy and sells cars regularly for profit. 

There is a strong distinction between "car enthusiasts" & "car dealers". Its the ol'  hobby vs. business argument. It's commonsense at the end of the day. 

If you are turning over 50 cars a year, you may be classified as a business..!! The ATO will be looking at classifying those profits as undeclared capital gains on sale.

If you fall under any of the above, it might be a good idea to see a tax accountant to suss out potential liabilities, etc.

From the AusTax team. 

The #1 provider of Australian tax news on twitter.

How we bring you the latest tax news on twitter

The AusTax team uses a mixture of judgement, research and statistics to work out what are the hot topics for our core audience. We scan the daily news items and pick out certain items to tweet based on our understanding of the market and our years of experience. We also engage in conversations with relevant people in industry and in the profession to gauge what are the big issues. 

To ensure we bring you the most up to date information, we also use some automation in providing you the news. We are still experimenting with the right mix and frequency. If you have any breaking news, would like to request a certain topic or feedback, please email us at: info.austax at gmail dot com.

Please note that we are not affiliated with any accounting firm, and we continue to be an independent source of information scouring the newswire.

From the AusTax team. 

The #1 provider of Australian tax news on twitter.

Trending tax topics - What's hot at the moment

The hottest tax issues at the moment, according to our research are:

1. High Court case challenging the validity of tax stimulus payments - There is an argument presented that the Federal Government does not have the contitutional validity under s51 (tax powers) to offer these payments as they are a gift and not related to taxation. If this case were successful, then this would affect Commonwealth payments made over the past few years. 

This is not the best time to be putting a test case forward for this, as many people are expecting the payment. And frankly, we think the economy needs it. 

2. Our followers are also concerned about the $900 payment, and their eligibility. We have experienced a lot of traffic from our site to the tax bonus calculator. If you earned less than $100k and paid tax, you may be eligible.  

3.  $720 million tax concessions for small business and general business - the government will cut PAYG rates by 6% to give businesses a tax break during these harsh economic times. It includes small businesses, self funded retirees and SMSF (self managed super funds). 

4. Bushfire - Extension of lodgement dates for bushfire affected victims, stamp duty exemptions for bush fire affected areas, and salary sacrifice donations being exempt for FBT for employers. We applaud the government for all these moves and will be covering this in more depth.

5. Alcopops tax to be scrapped - $1.6BN revenue hole now created. We have some contacts in the beverage industry who will provide an industry insight. 

6. Same sex couples being granted same recognition as heterosexul couples for Centrelink. This has been a been a long time coming. We remember people talking about this since the mid 90's. 

"The Federal Government says same-sex couples have three months to contact Centrelink with relevant social security, tax, superannuation or health information."

7. 42,000 people use the first home buyers grant - However this has been declining for since last month. Every man and his dog is aware of the $14k grant for purchasing a home and $21k for building a new home. Interest rates are fantastic now as well but do you really want to be mortaged to the hilt if you could potentially be laid off from your job?

These are hottest tax topics at the moment. The majority of these are influenced by the current economic conditions and also by bushfires. If you come across anything noteworthy, please email us at info.austax at gmail dot com and we will tweet it!

From the AusTax Team - the tax insider. 

The #1 provider of Australian tax news on twitter.

Legal Media Group releases best tax advisers list and best transfer pricing advisers

The Legal Media Group annually releases its Experts Guides list of best lawyers globally and in the US. The list also includes tax advisers and transfer pricing advisers. This list was announced a few days ago and features the who's who of the industry (mainly those working at larger and mid-tier firms).

Please see this blurb from their methodology:

Legal Media Group's Expert Guides series has been an invaluable and indispensable source of guidance for in-house counsel in large corporations worldwide, since its inception in 1994. These practice area guides are designed primarily for individuals who require access to pre-eminent practitioners in specific areas of law for the purpose of instruction on an international

 basis.

Best of the best list

The lists are actually quite large, so we've decided to not include the whole thing. We can't seem to find a list of Australian tax advisers on that list or transfering pricing specialists. We can only find a directory list. For general list of the Australian tax advisers go here. 

We are curious, do people in industry look at these best of the best lists? And how much weight do you give them? 

Australian Transfer Pricing directory list

From the Aus Tax team - your tax insider.

TGIF - Thankyou ATO for releasing a useless GST ruling about Strippers

We've heard on the news wire that due to the continuing economic crisis, more and more American women are turning to occupations in the adult industry. According to SMH via Associated Press:

"The tough job market is prompting a growing number of women across the country to dance in strip clubs, appear in adult movies or pose for adult magazines like Hustler.

Employers across the adult entertainment industry say they're seeing an influx of applications from women who, like Brown, are attracted by the promise of flexible schedules and fast cash. Many have college degrees and held white-collar jobs until the economy soured."

Yes, the current times are tough. Banks are crashing, Jim Cramer can't recommend any stocks, and Kevin Rudd is giving away $900 to boost the economy. Desperate times calls for desperate measures. Gone are the days of dropping "$3,000" on a lap dance. 

Which brings us to this related tax issue. One of our contacts reminded us of this tax ruling. A few years ago, 2004 to be exact, a GST ruling came out about the "supply of adult entertainment services: dancer collects payments and distributes entity's percentage". Summarised below:

Issue

Is the entity, a supplier of adult entertainment services, making a taxable supply to a customer under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when a dancer, engaged by the entity, performs a lap dance or striptease for one or more customers and the dancer collects the payment for the performance?

Decision

Yes, the entity is making a taxable supply to a customer under section 9-5 of the GST Act when a dancer, engaged by the entity, performs a lap dance or striptease for one or more customers and collects the payment for the performance.

This "transaction" has a GST component and is considered a taxable supply. We suppose it is a service performed by a professional, conducted in a business like manner. There is consideration and both parties walk away satisfied. 

Now try getting a reciept for that and telling your accountant.

As the rapper Akon would say:

Tax that, all on the floor

Tax that, give me some more

Tax that, 'til you get sore

Tax that, oh ooh

TGIF

From the AusTax team - Your Tax Insider.

H&R Block Superbowl Grim Reaper Ad

We thought these ads were pretty funny and should share it with you. H&R Block is known for their great social media ads. The one above was shown during the Superbowl while the one below is just hilarious! For the H&R Block Youtube channel, go here.



From the Tax Insider

Look no further for controversy than at PWC tax

Our Tax HR correspondent reported this hot tip over the news wire.

PWC are now hiring 2 tax controversy staff at management and senior consultant level. Don't get us wrong, tax controversy is a great area to be in. It's just that PWC let go over 100 staff recently from their Australian offices.  Its tough times given the global economic crisis. Even some of our friends were laid off.

So how is PWC hiring two new staff? 

The ad claims the following: 

• "As we continue to grow our Sydney Practice"
  
• "Rapidly growing practice"
  
• "Ambitious and fast growing team"

We would hardly think that these areas are growing or expanding if you have just laid off a significant proportion of your workforce. A bit hypocritical we think.

By way of background, tax controversy is a specialist and growing area. One of our colleagues works in this area and has told us in the past that this position deals with tax litigation, tax audit and negotiation with the ATO. 

In later posts, we will confirm with our sources regarding the exact number of staff that PWC and throughout the Big 4 industry has laid off. 

From The AusTax team.

Welcome to AusTax

Hi there, 

Thank you for enquiring about the AusTax twitter account. We are Austaxation and we aim to be the #1 source of Australian tax information on twitter.  

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Our mission is to provide tax information to individuals, businesses and to tax professionals. We also occassionally cover overseas tax stories and economic news if we believe they are relevant to our core audience. 

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For news and business enquiries please contact info.austax dot gmail.com. 

Thank you, 

AusTax twitter team.