Tax Treatment of Vehicle Reimbursement16.07.2014

Question
A shareholder uses their private vehicle 60% for business use, what is the tax treatment of their vehicle reimbursement?

Can he be reimbursed for his interest expense on the loan used to purchase the vehicle?

Can he claim the business portion of the GST on the purchase of the vehicle in the company?

Answer
The company may reimburse the shareholder for the business portion of the motor vehicle related expenses incurred by the shareholder. This amount can include an interest component, where the shareholder has borrowed money to purchase the vehicle.

No, the company cannot claim any GST in relation to the shareholder’s purchase of the vehicle.

If you are an employer see here for further information.

Do I need to register for GST?3.07.2014

You must register for GST if you carry out a taxable activity and if your turnover:

* was over $60,000 for the last 12 months, or
* is expected to go over $60,000 for the next 12 months (This equates to $5,000 per month. If your turnover is $5,000 per month and you expect to maintain that level all year, you’ll need to register for GST.), or
* was less than $60,000, but you include GST in your prices, for example taxi drivers who have included 15% in their taxi fares.

You can choose to register for GST even if your annual turnover it less than $60,000. This is referred to as voluntary registration.

LTCs and the Attribution Rules26.06.2014

Question
Our client provides IT services through a company. The company is owned 50/50 between our client and his wife, who carries out administration duties in the company.

We understand the attribution rules apply to our client since the company derives more than 80% of its income from one client, the company has minimal assets and our client’s income is over 70K for the year.

If the company was to become an LTC, would the profit be split based on the 50/50 shareholding, or do the attribution rules override?

Answer
The attribution rules will override the general transparency principle that applies to LTCs. Therefore if the attribution rules apply, the net services income derived by the LTC will be attributed to the person performing the services, and the LTC’s income will not be split 50/50 between the shareholders.

GST on FBT Owner Contributions23.06.2014

Question
Our client, a company, provides a car to shareholder employees and then at year end the FBT is offset by a journal to the shareholder’s current account.

When we journal the owner’s contribution for FBT purposes, is there any GST effect?

Also, how is the owner’s contribution shown in the company’s tax return?

Answer
The owner’s contribution will have a GST effect (it is treated as income) and will need to be shown in the company’s tax return as income.