Tool Box
Issue No. 24 - August/September 2005
Commonsense wins for super result
by Mr Tony Martin
The financial and SME industry has been given some good news and direction in recent weeks.
A Court decision on a commonly used super/tax strategy regarding income splitting and, secondly, some direction from the ATO to clarify re-contributions to Superannuation.
But first the Court decision, which looked at the validity of superannuation contributions made by a family company on behalf of the wife of a taxpayer. The taxpayer effectively earned the income of the company by providing his services to third parties.
The taxpayer’s wife provided the company with secretarial assistance and was paid a salary commensurate with her duties. In addition, the company made superannuation contributions on her behalf.
The Australian Taxation Office argued that the amounts paid to the taxpayer’s wife and on her behalf should have reasonably been included in the taxpayer’s income. Therefore, the payments to the taxpayer’s wife were an attempt to reduce the taxpayer’s assessable income.
The Administrative Appeals Tribunal (AAT) held that no part of the salary paid to the wife (the salary was deemed to be reasonable in its amount) nor her superannuation contributions might reasonably have been expected to be included in the taxpayer’s assessable income.
The AAT stated that the purpose of the arrangement was not to secure a tax benefit, but to provide the wife with payment for her work, including the provision of superannua...
