Have you recently received a Division 293 Notice from the ATO?

You may have received one of these notices recently. Sounds technical but what is it?

It’s basically a money grab from the Australian Government.

Where an individual earns more than $250,000 in a year then they are charged an additional 15% tax on their concessional (read as pretax) super contributions. Concessional contributions include contributions by your employer, member contributions where you claim a tax deduction and salary sacrifice.

Concessional contributions are already taxed at 15% so the additional 15% brings the total tax to 30% on super contribution.

Is it worth it?

If you’re subject to this tax then you’re probably paying 47.0% tax so there is still a saving of 17.0%. Still worth it but less exciting (well for an accountant)..

How to Pay?

You can pay the bill using your own funds or the super funds. If you want to use your super to pay the bill then you need to complete the release authority which should be attached to your notice of assessment.

Pro Tips

Income for Div 293 purposes is not just taxable income. The ATO make adjustments such as adding back rental losses and including fringe benefits (amongst other things).

Using a trust?

Potentially you could stream your income to certain family members to avoid the additional tax.

State higher level office holder or Commonwealth Judge?

You’re in luck, there are some exemptions for yourselves.

Here’s a link to some further information from the ATO.

Author: Brigette Liddelow
Email: brigette@faj.com.au

Blackhole expenditure is capital expenditure that is not otherwise deductible and that relates to a business carried on for a taxable purpose. It is deductible over five years at the rate of 20%, provided the deduction is not denied by some other provision.

The blackhole deduction relates to outlay incurred when carrying a business, examples include:
1) discharging obligations such as licenses or leases,
2) commencing a business (such as the cost of feasibility studies and setting up the business entity)
3) business restructuring
4) defending against a takeover
5) the costs of ceasing business

Before deciding to utilise the blackhole expenditure deduction you should go through a number of steps.

Step 1) was the expenditure incurred on or after 30 June 2005?

Step 2) does the expenditure attract or is it denied a deduction anywhere else in the tax law?

Step 3) was the expenditure incurred for one or more of the following?
a) for your business
b) for a business that used to be carried on, such as capital expenses incurred in order to cease the business
c) for a business proposed to be carried on, such as the costs of feasibility studies, market research or setting up the business entity
d) as a shareholder, beneficiary or partner to liquidate or deregister a company or to wind up a trust or partnership (and the company, trust or partnership has carried on a business).

Step 4) Does the business satisfies both the following conditions?
a) the business was, or is proposed to be, carried on for a taxable purpose, and
b) the expenditure is in connection with your deriving assessable income from the business and the business that was carried on or is proposed to be carried on.

If you satisfy the following conditions you may be eligible to take advantage of the blackhole expenditure deduction and you should consult your accountant or get in touch with one of the friendly accountants at Francis A Jones.

Author: Adrian Wardlaw
Author Email: adrian@faj.com.au