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Review of Small Business Tax Concessions

Corporate Tax Transparency Code Register

A message from the Chair

Sounding Board

Ideas for better tax regulation

  • Treatment and remediation of excess super contributions

    The Board has received the following suggestion during the course of its consultations. The existing process for the treatment and remediation of excess superannuation contributions is unfair and overly bureaucratic. Many directors with contributions multiple organisations and death and disability insurance find it difficult to comply with the existing caps. Where they don't they are required to be advised by the ATO generally years later, withdraw the surplus and take an earnings adjustment. No account is taken of other withdrawals in excess of the minimum pension amount that the beneficiary may have received. In my case I had made a six figure withdrawal in excess of the minimum pension but still had to make a further withdrawal of the deemed excess amount. The policy is directed at ensuring contributors don't benefit from a lower tax rate on excess earnings but it is a one sided test which does not account for situations where no benefit has been derived. The Board is interested in getting the thoughts of the Sounding Board community on this issue. Do people share a similar concern?

  • Adjusted income calculations - double counting of losses

    Some odd outcomes can arise when working through adjusted income calculations for certain tax and other purposes. The problem seems to mainly arise when someone has a net investment loss for the year as well as an overall tax loss for the year. For example, for some purposes a taxpayer will need to calculate their 'income for surcharge purposes' (eg, to determine whether Division 293 applies, applying the private health insurance rebate rules and Medicare levy surcharge). A similar issue can arise in other areas such as when applying the $250,000 adjusted income test under the non-commercial loss rules. These calculations generally require you to start with the taxpayer's taxable income for the year. If the taxpayer actually has an overall tax loss for the year then their taxable income is taken to be nil (section 4-15 ITAA 1997). It will often then be necessary to add other items such as reportable fringe benefits, reportable super contributions and net investment losses. This process can basically lead to investment losses being added back twice. For example, assume someone has investment income of $100,000 and investment related deductions of $150,000. They have a tax loss of $50,000 for the year. However, when calculating income for surcharge purposes this ends up being a positive amount of $50,000. This is because their taxable income is taken to be nil (ie, the tax loss is basically ignored) and we then need to add back the investment loss. The result of the formula / process does not seem to truly reflect their financial position for the year. It is not clear whether this is an intended outcome.

  • ESS start up options held by associates

    Amendments were made to the employee share scheme rules in 2015 to introduce concessions for small start up companies. If certain conditions are met, the discount provided in relation to shares / options is not included in the assessable income of the employee. Section 115-30 has been amended to ensure that for the purpose of the CGT discount, when options are issued under the start up rules the ownership period is not reset when the options are exercised (item 9A of the table). However, a strict reading of the legislation suggests that this concession only applies if the options are held directly by the employee and that the CGT discount ownership period would be reset if the options are held by an associate of the employee (eg, spouse, family trust etc) and they are exercised. It is not clear whether this is an intended or unintended outcome.

Meetings & events

  • 15 Feb 2018 - Melbourne
  • 22 Mar 2018 - Sydney
  • 19 Apr 2018 - Brisbane