The Board of Taxation is a non-statutory advisory body charged with contributing a business and broader community perspective to improving the design of taxation laws and their operation.
Ideas for better tax regulation
Superannuation on resignation
When an employee leaves they are paid annual leave and long service leave, but no superannuation. This means that when an employer won't let the employee work out their leave, the employee misses out on the super. This is unfair and confusing. The super for the annual leave is confusing. Under the Fair Work Act 2009 Section 90 it says "If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave." This sounds like it should include superannuation. Recent changes to awards means that employees are now able to ask for annual leave in advance - surely this action attracts superannuation? Otherwise we'd have employees on leave but not attracting super. Annual leave (like normal time) includes super as part of payment/benefit. The legislation needs to be changed to specify that superannuation is part of the benefit of annual and long service leave and has to be paid. Our retirement system is built on superannuation, so it's critical that employees remain eligible.
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.
Meetings & events
- 13 Feb 2019 - Melbourne
- 14 Mar 2019 - Sydney
- 11 Apr 2019 - Brisbane
The Board of Taxation would like to thank those who have contributed to the Board's project work throughout the yea… twitter.com/i/web/status/1…1 3
The Board’s online survey on FBT compliance costs is now closed. Thank you to those who took part in the survey - w… twitter.com/i/web/status/1…0 0
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