Taxman shows his caring side

The taxman knows that recent natural disasters will have thrown people’s lives and their businesses into turmoil, and he intends to help, with the Government’s blessing. We unwrap the tax office’s care package to see what’s on offer.

The recent natural catastrophes that have affected Victoria, Queensland and northern NSW have prompted the Federal Government and the tax office to offer tax help to individuals and businesses affected.

Here’s a wrap-up so far of that help.

Tax Commissioner Michael D’Ascenzo said: “We don’t want people affected by the disasters to worry about tax matters right now. We will work with them to help with any tax issues once they are ready to focus on them.”

No need to worry about tax matters for now

As a first step, D’Ascenzo said the tax office has implemented its usual response to natural disasters, and suspended correspondence and planned contacts to people or tax agents whose postcode indicates they are in the affected areas.

Those tax agents not in affected postcodes but who have clients in the area may receive mail from the tax office if they are listed as the mailing address. The Commissioner said there is no need for them act on that mail, but that the tax office would appreciate it if they could call to let it know if their client is affected.

Once people are able to focus on tax matters, the Commissioner said they can contact the tax office if they need to fast-track a refund or to discuss the best way to deal with any outstanding obligations.

There are a broad range of options the tax office can discuss, such as giving extensions to lodge and pay debts without interest charges, fast-tracking refunds, remissions of interest and penalty, fast-tracking hardship applications, and offering assistance to help people reconstruct records.

This includes helping people who no longer have any or few records by using information the tax office already has, including the past year’s tax return, to make a reasonable estimate of their assessment.

BAS deadlines extended

The Tax Commissioner has also agreed to extend to 21 May 2009 the lodgement and payment due dates for people and small businesses affected by the Victorian bushfires and north Queensland and northern NSW floods who usually lodge monthly business activity statements (BASs) in late February, March and April. In addition, he has extended the due date for all quarterly BAS normally due on 28 February and 28 April to 28 May 2009.

Useful tax office publications

The tax office has also compiled a selection of publications for small business taxpayers and tax agents who have been affected by natural disasters.

The tax office publications include information on meeting any upcoming obligations and specific information on insurance, lost or damaged property, lost tax records, charitable assistance and employers.

They also contain information for individuals and organisations that want to collect funds or make donations to assist victims of disasters that occur in Australia or overseas

The Commissioner said that if affected taxpayers are having problems meeting their tax obligations, or have received a letter or notice from the tax office, they should call the office on 13 11 42 to make arrangements specific to their individual circumstances.

GST concessions for charitable fund-raising events

The tax office has reminded certain organisations that they can choose to have all supplies they make in connection with a fund-raising event for the recent natural disasters treated as input-taxed for GST purposes. This applies to organisations that are; endorsed charitable institutions, endorsed trustees of charitable funds, gift-deductible entities, or government schools.

The tax office said the concession allows organisations to use any surplus funds generated for relieving distress. The way the surplus funds are used does not affect the GST treatment of the supplies that generated those funds.

The tax office says an organisation that makes this choice will need to keep a record of their decision for each type of fundraising event. The organisation will not be required to charge GST on the fundraising event, and cannot claim GST credits for any purchases or acquisitions they make in relation to the fundraising event.

For GST purposes, the tax office says a fundraising event is one of the following:

• A fete, ball, gala show, dinner, performance or similar event.
• An event where goods other than alcoholic beverages or tobacco products are sold – provided that each sale is for payment that is $20 or less.
• An event that has been approved by the tax office as a fundraising event.

However, the tax office warns that if an organisation does not choose to input-tax a fundraising event and still holds the event, supplies made in connection with the event will be subject to GST.

The tax office has also reminded organisations that conduct non-commercial activities, or raffles or bingo in accordance with a state or territory law, that any related supplies they make will be GST-free if they have not treated those supplies as input-taxed under the fundraising event concession.

Government to amend income tax and FBT changes to support bushfire appeals

It should also be noted that the Assistant Treasurer Chris Bowen has announced that the Government will make changes to the income tax and FBT laws to help support those affected by the Victorian bushfires.

Specifically, charities that are collecting funds to respond to bushfires will not have their current tax concessional status affected if that money is used for longer term recovery and reconstruction of community infrastructure in bushfire-affected communities.

Bowen said legislation will be introduced as soon as practicable to amend the tax and other related laws to provide a mechanism to clarify the status of organisations collecting donations in response to a disaster, such as the 2009 Victorian bushfires.

The Assistant Treasurer also announced that the Government will amend the FBT law from the beginning of the 2008-09 FBT year (from 1 April 2008) to ensure that donations made under salary sacrificing arrangements do not result in an employer incurring an FBT liability.

Beer – bitter is better, but not always

Now for something completely different – just to show that the tax office truly does some interesting work!

The Excise Tariff Act states that excise is to be imposed on beer manufactured or produced in Australia. No surprise there. But there’s a twist in the tale.

The tax office recently looked at a beverage manufactured by a manufacturer of alcoholic drinks. The product was manufactured from water, malted cereal, other fermentable carbohydrates, yeast, sugar, food acids, flavour and preservative. It is stated that the beverage contains hops extract.

The flavours used are all alcohol free, although the final strength of the beverage is 6% alcohol by volume. To get technical, the alpha acids in the final product are measured at less than 0.01 parts per million alpha acid and less than 0.1 parts per million iso-alpha acid.

Why is that important?

It’s important because the above beverage, even though 6% alcohol by volume and containing hops extract, was found by the tax office not to constitute “beer” as defined for excise purposes. The beverage was therefore not subject to excise.

According to the tax office, a beverage that contains less than 0.01 parts per million alpha acid and less than 0.1 parts per million iso-alpha acid does not meet the requirement that it contain hops or extracts, and therefore does not meet the definition of “beer” in the Excise Tariff Act 1921.

The Tax Commissioner considers that the provision in the law that beer contain hops, extracts thereof, or other bitters means the final beverage has these additives in sufficient quantities, measurable by common industry testing methods, to satisfy the bitterness requirement – that is, give the beverage a bitter taste.

Based on available information, the tax office concluded that the bitterness of a product that contained less than the above quoted acids levels would not be discernible to the taste. The Commissioner said it was his view that “the bitterness requirement should be purposively construed in context as requiring at least sufficient bitters to impart a bitter flavour”.

Who said life was dull at the tax office!

Terry Hayes is the senior tax writer at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.