Tax Facts

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  • Another win against ATO's assessment of SGC on contractors

    Plumbing contractors engaged to carry out maintenance jobs under the applicant's sub-contract from a government housing authority were held to be independent contractors, rather than employees, for the purposes of SGC legislation. Consequently, SGC assessments issued to the applicant were set aside.

    As is always the case in such matters, all the evidence must be considered. However, the AAT specifically acknowledged that what must be performed is not a mechanical task of checking off against a list of indicia ‘without recognising that different significance may attach to the same indicators in different cases’. The Tribunal concluded that:

    Having regard in particular to the evidence in relation to control, to the non-representation of the employer by the worker, to the results character of the oral contract for engagement of the worker, to the capacity of a worker to delegate, to the assumption of risk by the worker and to the significant ownership by the worker of tools and equipment I conclude that the workers were not employees within the usual meaning of that word.

    It was held also that neither were the workers working under contracts wholly or principally for their labour, for the purposes of the extended definition of an employee for SGC purposes.

    Practitioners should be wary about relying too heavily on a couple of recent wins in this area by taxpayers. Those wins resulted from genuine factual situations that were distinctly different from employment. (XVQY v Commissioner of Taxation [2014] AATA 319)
    ... Read More

    05 Jun 2014

    Topic: Other News

  • Important lessons for estate planning with super

    A recent decision in the Queensland Supreme Court highlights the importance of a valid will and getting things right about who is to benefit from super death benefits. The outcome of the case was apparently contrary to the plain intentions of the deceased and would be seen by many as unfair.

    The deceased was 40 years old at the time of his death and unmarried with no children. Significantly, he died without a will and his estate was therefore subject to the rules of intestacy – in the circumstances, his parents would share his estate equally. His mother applied for, and was granted, Letters of Administration to administer the estate. The estate was only about $80,000 (mainly from a life insurance policy), but there was over $450,000 of superannuation benefits in 3 different funds. The deceased lived with his mother, who had separated from his father when the deceased was only 5 years old.

    There was evidence that the deceased had nominated his mother to receive all super death benefits from the 3 funds, although those nominations were not binding. The mother, on the basis of an interdependency relationship with her son, applied for those benefits and received the full amounts from all 3 funds. The mother was held to have breached her fiduciary duty as administrator of the estate, by applying for the super death benefits for herself rather than for the estate (in which her ex-husband would share equally). She was consequently ordered to account to the estate for all super benefits that she received.

    The outcome is likely to have been different had the deceased made a valid will and appointed his mother as executor. It is quite common for an executor to be a major beneficiary under a will – the duty is far less onerous in that case, since the conflict is imposed by the testator exercising mere testamentary choice. And the deceased's desire to benefit his mother would also have been successful if given effect by way of a binding death benefit nomination. (McIntosh v McIntosh [2014] QSC 99)
    ... Read More

    05 Jun 2014

    Topic: SMSFs/Trusts

  • Decisive loss for the Commissioner about tax residency

    So-called ‘evidence’ from answers to questions on incoming and outgoing passenger cards, as well as positive answers on income tax returns as to whether the taxpayer was an Australian resident, were substantially outweighed by the total factual matrix relating to the taxpayer's work in Saudi Arabia. It was held by the AAT (with a Tribunal of 3 members sitting, including Logan J of the Federal Court) that the taxpayer did not ‘reside’ in Australia during the relevant period and that, despite retaining an Australian domicile, his ‘permanent place of abode’ was outside Australia. Consequently, his income from employment in Saudi Arabia was not subject to tax in Australia (and it was of no relevance that the income bore no tax in Saudi Arabia).

    The taxpayer's absence in Saudi Arabia was from September 2007 until May 2010, although the taxpayer believed that he would very shortly be back in Saudi Arabia again for additional work. The facts are interesting because he retained a number of connections with Australia – his home in Australia that was unrented and used by him to stay briefly when returning on holidays (although Thailand was his main holiday destination), furniture and cars at the home, his gun collection in a secure armoury at the home, an Australian bank account into which his salary was paid, continuing electoral enrolment, etc. (Dempsey v Commissioner of Taxation [2014] AATA 335).
    ... Read More

    05 Jun 2014

    Topic: Income Tax