QUESTION

We require an opinion on the following: -

We have a client that owns two car yards with multiple brand dealerships and they run a sprint car operation that competes around Australia. We are wanting to know more about the deductibility of the sprint car expenses.

The sprint car set up is a serious operation, all drivers/mechanics etc. are employees and are not family members. The main business owner and his son are involved as managers of the sprint car operation, but not day to day managers as their day job is actually running the car yards. The primary purpose of the sprint car operation is to promote the car yard businesses. Ball park numbers $400k expenses and $200k prize money.

The “Sprint Car’ business is operating under the same entity as the car business. The ‘loss’ has been written off as advertising in previous years.

Do you know of any ATO guidance documents on the deductibility of these types of expenses? Do you have any advice on general deductibility of the expenses?

QUESTION

Hi, I would like to ask one question. We are a building materials wholesales company. If we provide the company Ute to our sales rep. who need to carry the goods to customer from time to time, does it fall into the FBT?

I don't know the percentage of private use but from my understanding, at least driving between home and company will be the private use. Technically we need staff to do the logbook and pay the FBT if only small portion of private use.

Mid-Year Industrial Relations Update July 2018

Increase in Award Wages

Deceased Estate Tax Question

I have couple of questions on how income from deceased estate are taxed. Unfortunately, one of our director has passed away with a massive heart attack before Christmas so I need below clarifications:

Main Residence: Director has a house which is his main residence. He brought that house before 1985 (Pre CGT). As per his will this house will be sold and distributed to his Wife, 3 Children’s and 2 Grand Kids.

So, my query is:

1. Because it his Main Residence there is no Capital Gain Tax and
2. How the distribution of Sale Proceeds of this house to his Wife, 3 Children’s and 2 Grand Kids will be taxed? Will they be taxed or not? I am assuming that they will not pay because main source is not taxed in the first place?

Transfer of Shares Transfer in Unit Trust and Company: The deceased director has shares in Unit Trust and also holds shares in our company. As per his will these shares are equally given equally to his children. Does CGT apply? I assume CGT does not apply as it is just transfer, not sale. Please clarify in each instance – Trust and Company

Answer

GST Question 

We are an Australian consolidated group registered for GST with a subsidiary company in NZ. An IT firm (Australian Entity) did some work for our NZ business, and have charged out Head Company for the work but with no GST. Is this correct or should they charge us GST?

Answer

Question about Asset Test

We would like to get your opinion on the interpretation in relation to the active asset test.In particular, we want to confirm how the ">50% period that the property is used to carry on the business" is measured.

Please refer to the following scenario:

Active Asset Test requirements.

1. Taxpayer acquired a property to carry on his business on 21/7/2005 [contract date]. Settlement date was 29/11/2005.
2. Taxpayer commenced trading / carrying on the business immediately.
3. Taxpayer ceased his business on 1/12/2011 but kept the property.
4. Taxpayer demolished the property and sold vacant land on 31/10/2017 [date of contract].
5. According to my understanding, the test period according to s152-30 is 4486 days being the time from acquisition 21/7/2005 to the date of the CGT event 31/10/2017]?

To work out whether the building qualifies for the SBE CGT concessions, the asset needs to be an active asset.If the entity owned the CGT asset for less than 15 years, the CGT asset has to be an active asset for at least one-half of the test period and the entity uses the asset, or holds it ready for use, in the course of carrying on a business.

What is the active asset period used in carrying on the taxpayer business?

1. The days from 29/11/2005 (settlement date) to the date the taxpayer ceased business on 1/12/2011?Total active asset period is 2194 days. OR
2. The days from acquisition of the property 21/7/2005 (contract date) to date taxpayer ceased business on 1/12/2011? Total active asset period is 2325 days.

We would like your opinion and please provide reference or example (if applicable).

Questions about FBT & staff loans:

1. If you provide a staff loan, then you must charge the FBT benchmark rate of interest to avoid any FBT liability?
2. If you provide a loan to staff to buy shares as an investment, will the interest be "otherwise deductible" for FBT purposes?
3. Does it make any difference if the shares are in the employers’ company?
4. If "otherwise deductible", can the interest cost be Salary Sacrificed with no FBT applying?  

Question:

I have a question regarding GST on the sale of advertising space to a non-resident entity and whether this qualifies as a GST Export – even if the advertising space is in an Australian medium (e.g. publication etc).

According to what I have read (thus far), it would seem the provision of advertising space would not represent work physically performed (as the advertising space will only display the completed ad provided to the supplier of the advertising space), nor is it in regard to real property (i.e. not related to land) – but is this correct if the sale concerns a specific/individual advertising space?

The supplier is selling the advertising space to a non-resident entity not registered in Australia (nor having a branch or agent in Australia). That non-resident customer may, in turn, on-sell the space to a client who may or may not be registered in Australia for GST, but such a sale would be under a separate contract.

The material I have read thus concludes that it should be GST free. Can I get a second opinion on this?

Question:

My client has a company YellowX Pty Ltd.

John is a director and shareholder of YellowX Pty Ltd.

YellowX Pty Ltd has a liability to pay John of $100,000. I.e. a Credit Loan of $100,000.

YellowX Pty Ltd will never have the funds to pay back John.

What are the implications if, and how does the loan get written off?

Is there no issues to Yellowx Pty Ltd? Is it a capital loss to John?

If John forgives the loan, and does not claim a loss, does the loan in YellowX Pty Ltd have no implications?