Every year there is a huge amount of hoo-ha about the May Federal Budget.

I tend to find the annual Budget from a tax point of view not that exciting. This is because in the main it seems to be only a reiteration of what was previously forecast (either explicitly or by leaks) by the Government.

Further the tax aspects of a Budget are not nearly as important as they used to be. This is because tax amendments seem to be made on a rolling basis rather than by an annual avalanche. However always hidden away in the Budget papers are some unexpected normally nasty surprises (which are never mentioned by the Treasurer in his address to Parliament).

The End of Certainty

But this year I am particularly disappointed in the annual Budget.

It seems that the Government no longer appreciates the need for tax certainty.

The Government has:

1. shelved promised tax cuts for companies (the tax was going to be reduced from 30% to 29%) ;

2. doubled the superannuation contributions tax for persons who have income over $300,000;

3. deferred the higher concessional contributions allowance for persons aged over 50;

4. only allowed limited grandfathering of the new living away from home allowance rules;

5. abolished the promised 50% discount for interest income;

6. decided not to proceed with its promise of tax breaks for green buildings.

Added to that is the proposed retrospective change – to be effective from 1 March 2012 – to the anti-tax avoidance provisions contained in Part IVA of the Income Tax Assessment Act 1936. Not only will these amendments be retrospective but scant details have been given as to what these amendments will mean.

Why I am uncomfortable with these changes is because of the damage they might cause to persons who have made financial plans based on what they believed would be the law.

The superannuation changes seem to be particularly unfair. There is no doubt that the present superannuation system is generous. Proper financial planning will allow many to escape the tax system either wholly or in part during their retirement years. But most persons who will gain the most benefit will have acted by now.

Others are less fortunate. It is often very difficult for persons to provide for superannuation until they are in their mid-50’s. They have mortgages to service; families to raise; school fees to pay. Further if they followed conventional financial advice they would have been told to pay off their mortgage first before contributing any amount to superannuation (in addition to what their employer should have contributed).

The problem is that it can take many years to accumulate a worthwhile superannuation account benefit. If in their mid-50’s they may not have sufficient time to accumulate any such balance.

Many people are scared away from superannuation because of the seemingly never ceasing changes to the superannuation rules. Even the Courts and Tribunals seem to be intimidated by the superannuation law. These latest changes can only add to that perception that superannuation is “just too hard” and that perception will not be just that of high income earners.

A few specific notes:

Superannuation

As from 1 July 2012 individuals with incomes greater than $300,000 will have the tax concession on their concessional superannuation contributions reduced from 30% to 15% (excluding the Medicare levy).

That is such taxpayers who can no longer make a $50,000 tax deductible contribution will each pay an additional $3,750 in contributions tax as a result of that change.

“Income” will include taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment losses, some foreign income and tax free government pensions and benefits.

The reference to “total net investment losses” intrigues me – is this an indirect tax on negative gearing.

While this change would appear to have as much to do with accounting as to policy the proposed higher concessional contributions cap for individuals aged 50 or over with superannuation balances below $500,000 will be deferred from July 2012 to July 2014. As a cynical comment as to the generosity of this allowance persons who have superannuation balances of $500,000 will be lucky to achieve $25,000 per year income from the investment of that balance.

What these changes will mean for some is that they should maximise their 2012 contributions and then take a superannuation break for a year.

Living Away from Home Allowance

The Government reiterated that tax concessions will only apply if an employee maintains a home for their own use in Australia while they live away from that home for work purposes. But it is also going to only allow the tax concession for a maximum period of 12 months in respect of an individual employee for any particular work location.

I do not know whether it will remain acceptable for that home to be rented or not whilst that employee works away from home.

The new rules apply to both persons who are permanent residents in Australia and persons who are only temporary residents in Australia.

However there is one win for taxpayers. In general the rules are to apply from 1 July 2012. However they will not apply until 1 July 2014 when living away from home allowance arrangements have been entered into prior to 8 May 2012.

Carry-back of Losses

The problem with annual accounting is that it only measures income for a relatively short and in some cases illogical period of time.

This is recognised by the use of averaging provisions for primary producers, sportsmen, artists and inventors but not generally.

The Government confirmed a pre-Budget leak in its Budget that it would allow a limited carry-back of losses with effect from 1 July 2012.

From that date companies will be able to carry back up to $1 million of losses to get a refund of tax paid in the previous year. From 1 July that one year period will be extended to 2 years.

Final details are not yet available (and one always finds the devil in the legislation).

The new rules do not apply to trusts and individuals. Nor do they apply to capital gains and losses.

Non-Residents Hit

Apart from the changes to the living away from home allowance rules there are two other changes which affect nonresidents.

First the non-resident tax rates are to be changed. 

From 1 July 2012 there will be a change to the allowance of the tax-free threshold.  From 1 July 2013 the bottom 32.5% tax rate will be increased to a 33% tax rate.

Second whilst the capital gains tax rules might not apply to non-residents where these rules do apply – for example where a non-resident owns and then sells real estate in Australia – the non-resident will not be allowed the general 50% capital gains tax discount. This new rule applies from 8 May 2012. It is another example of what is effectively retrospective legislation.

More Help to the Taxation Office

Extra funding is to be provided to the Project Wickenby task force.

The Government will also provide a further $106 million to the Taxation Office over 4 years to assist it in managing outstanding tax debts (although I wonder given how aggressive the Taxation Office debt collection people are why they require further funding assistance in the first case).

Tax Deductible Gift Recipients

I am often asked by charities how they can cause gifts to be made to them to be eligible for tax deductibility. I explain to them that to do this normally they have to have been endorsed by the Taxation Office as a tax deductible gift recipient.

I also tell them that alternatively that if they can find a champion in the Government they might be able to be specifically listed in the tax legislation as a charity to which tax deductible gifts can be made. Each year additions seem to be made to this list – for example in its May Budget the Government added to that list the “One Lap Top Per Child” association.

I frequently find clients asking me what is the best structure they can adopt to protect their assets. Of course there is no off the shelf answer – it depends upon the personal circumstances of the client, what sort of assets they own, and where they might be at risk.

But these are the sort of things I tell my clients:

1. Discretionary trusts are still the best structure for asset protection advantages (superannuation funds are better but there are limitations on amounts which can be accumulated in a fund).

2. The use of a discretionary trust does not limit the use of companies – the trust would own shares in company.

3. Don’t put all of one’s eggs in one basket – multiple trusts might be appropriate.

4. The two most important roles in controlling a trust are the trustee and the appointor.

5. The trustee might be one or more individuals or a company controlled by one or more individuals.

6. The trustee manages the trust. The trustee does not have unfettered power; the trustee must act in the interests of the beneficiaries (and not in the interests of the trustee). This can cause problems. However the trust deed is paramount and should not be drafted so as to unnecessarily restrict the trustee.

7. Trustees’ duties include:

• to act impartially between the beneficiaries;

• to properly invest the trust funds;

• to provide accounts and other information to beneficiaries (if required by beneficiaries);

• not to deal with trust property for own benefit.

8. Individuals should consider ways of being able to prove that they have acted in the interests of the beneficiaries and not just themselves. An individual who is the sole trustee (or who controls a trustee company) might have more difficulty in defending a claim that he or she did not act in the interests of the beneficiaries, than would be the case if there were a number of trustees (or a number of persons controlling a trustee company.)

9. An appointor controls who will be the trustee. Often the best appointor is some arm’s length person who can be trusted to act in the best interests of all.

10. At the end of the day there are few real winners in family disputes. The best way of avoiding family disputes does not involve law; it involves relationships. And a court is less likely to sympathise with a child or spouse who has been well looked after than one who has not.

11. Trust arrangements can be strengthened by arrangements which make it difficult for a trust to access its underlying assets; for example the underlying assets of a trust might be loans or shares which are not readily realisable.

In my blog of 26 March 2012 I stated that I would soon make some comments about residency.

But I was not planning on writing about residency generally.

Rather there was a specific issue I wanted to consider and one which comes up surprisingly frequently.

And that is the situation where one spouse claims to live in one jurisdiction and the other spouse in another.

A typical example.

A family moves to Australia from Asia.

They own a profitable business and house in Asia which they keep. They buy another house typically in Vaucluse or the North Shore.

After the move the husband returns to Asia to run the business.

The husband spends most of each year living there in the house that the couple own.

The wife however spends all her time in Australia while the children attend nearby private schools.

They claim that the husband’s residence is in Asia and the wife’s is in Australia.

Another example.

One spouse obtains an overseas job. The other spends most of his or her time overseas perhaps only being able to visit Australia overseas twice a year.

The other spouse (typically the wife) remains in Australia looking after the children.

Again, the husband claims that while he is working overseas he is not a tax resident of Australia.

Definition of a “Resident”

The definition of “resident” or “resident of Australia” is contained within section 6 of the Income Tax Assessment Act 1936.

So far as is presently relevant, those terms mean a person “whose domicile is in Australia unless the Commissioner is satisfied that his permanent place of abode is outside Australia”.

We can assume that the persons I mentioned above have domiciles in Australia (“domicile” – a technical term – is broadly that place with which a person has the closest legal attachment. It is not necessarily where the person lives).

“Permanent place of abode” does not mean everlasting – it simply is where the person’s current home is. A distinction can be drawn between living in place and merely being a visitor to a place. It is a factual issue – I explain it by saying that in deciding which of two places is a person’s permanent place of abode one should look to see whether a person is a member of one community as opposed to another.

The Gunawan Decision

There is a recent Administrative Appeals Tribunal decision where a person who spent some time working overseas was nevertheless held to be a resident of Australia (Gunawan v F C of T [2012] AATA 119).

However I would not regard this decision as one which has any precedential value. There was scant reiteration of the relevant facts (and indeed they might not have even been put to the Tribunal). As a consequence one cannot really understand why the Tribunal decided why it did (although I say more as to this in a minute).

Gunawan came to Australia with his wife and children in 1995. He came as a permanent resident.

His children were educated in Australia.

He purchased properties in Australia not only for the purposes of housing his wife and children but also as investment properties from which he received rent.

Gunawan worked for a company which marketed Australian residential home units to overseas resident investors (who were mainly residents of Indonesia).

Gunawan travelled to Indonesia to market those properties.

Each time Gunawan re-entered Australia from Indonesia he re-entered on the basis of his permanent residency in Australia.

It would seem that the Tribunal (Senior Member Allen) felt that was enough to conclude that Gunawan was “at all relevant times, notwithstanding his absences in Indonesia where he was engaged in selling, on commission, properties constructed [by an Australian developer], [Gunawan] had his home, that is to say his settled place of abode, in Australia and therefore had been resident in Australia”.

But there is insufficient evidence cited to allow one to judge whether the decision was correct or not (the decision might be correct, however it is impossible to tell whether this is the case or not).

What a Permanent Place Really Involves

We do not know:

• Where Gunawan lived in Indonesia;

• What his social arrangements were in Indonesia;

• What was his attachment to Indonesia;

• Whether he intended to return to Indonesia after a stay in Australia.

There were only two factors cited which would appear to have formed the basis of the Tribunal’s decision. These two factors were that:

• Gunawan’s wife and family remained in Australia while he was in Indonesia;

• Each time Gunawan re-entered Australia he did so on the basis of his permanent residency in Australia.

Neither of these factors are conclusive; they are merely two of the many factors which should be considered when determining where a person’s personal place of abode is.

Unfortunately some Taxation Office persons seem to think that these two factors are paramount; they are likely to see the Gunawan decision as supporting their mistaken view of the law.

[One might also note that the decision concerned a married couple. I sometimes think that those persons who want same sex marriages might not appreciate the practical tax disadvantages that such a marriage might have.]

In my blog of 11 March 2012 I referred to Draft Taxation Determination 2011/D8 which involved what was described as an “investment loan interest payment arrangement” (an arrangement more commonly known as a “split loan arrangement”).

That draft determination had been issued in June 2011; my blog was written some 9 months later.

I rather cynically noted that nothing had been heard from the Taxation Office, as to the status of that draft determination, over those 9 months.

By one of those coincidences my blog crossed with the release by the Taxation Office of Taxation Determination TD 2012/1.

That final determination replaces and essentially reiterates the draft.

I still doubt its correctness – whether it is correct or not might be dependent upon the proposed retrospective amendments to Part IVA of the Income Tax Assessment Act 1936.

(Last week I said in my next blog I would look at residency – this note has intervened. But unless there are more Taxation Office surprises residency is next).

The Administrative Appeals Tribunal has decided 9 disputes involving superannuation funds and the Taxation Office already this year.

Taxpayers lost each and every case. A 100% success rate for the Taxation Office. A total wipeout for the superannuation funds.

So what were these decisions? In chronological order they were:

Strasser v F C of T [2012] AATA 33

The first of the 2012 superannuation wins to the Taxation Office.

This case was a case where because a taxpayer’s contribution to a superannuation fund had exceeded his “concessional contributions” cap of $50,000 the taxpayer became liable to excess contributions tax.

This case was one of those doomed to fail cases where the taxpayer represented himself.

Broadly the taxpayer claimed that he had been misled by the Taxation Office correspondence.

Senior Member Frost felt that the Taxation Office’s letter was not misleading: he said “even if the letter was misleading (which in my opinion, it was not), the Commissioner is nevertheless under a duty to apply the law as it is written.”

Not considered by the Tribunal – and I think it should have been – was whether the Taxation Office has exercised its discretion to disregard or reallocate concessional and non-concessional contributions for a financial year as allowed by section 292-465(3) of the Income Tax Assessment Act 1997.

Most probably however it would have come to naught even had the Tribunal considered that section; the Tribunal’s track record is that of strict application of the taxation law rather than protection of a person’s superannuation savings.

The Trustee of the R Ali Superannuation Fund v F C of T [2012] AATA 44

Here the issue was whether the fund was a complying superannuation fund.

Mr Ali was a member of the fund. Ali was an accountant and registered tax agent.

The fund lent moneys to Alnaz Limited which was a company controlled by Ali.

Alnaz lent the moneys to members of the fund and/or to business entities in which a member of the fund was interested. One of those members was Ali’s daughter, Mrs Khan.

The Tribunal held that the fund breached the sole purpose test since:

(a) the loan to Alnaz amounted to effectively 100 per cent of the fund’s assets;

(b) the loan to Alnaz were made to a related party;

(c) at least some, if not all, of the loans to Alnaz were not made on an arm’s length, commercial basis and were unsecured;

(d) the loan to Alnaz, was an arrangement constituting financial assistance to a member of the Fund;

(e) the Fund assets were mixed with the private assets of Mr Ali; and

(f) the above matters constituted contraventions of the trustees’ covenants contained in the Superannuation Industry (Supervision) Act 1993 and the fund’s deed.

What I do not understand is what these factors really have to do with the sole purpose test – what that the test is about is whether the Fund intends that retirement benefits be provided to the member (or death benefits paid on death of a member).

Further the Tribunal held that Taxation Office discretion not to deem the fund to be a non-complying superannuation fund (as allowed to the Taxation Office by section 42A(5)(b) of the Superannuation Industry (Supervision) Act 1993) could not be exercised since the claimed breaches:

(a) exposed almost all of the fund’s assets to risk of a type not permitted (although this appears to be an assumption rather than an authoritative statement of law);

(b) involved multiple contraventions over an extended period of time;

(c) involved implementing arrangements designed, at least in part, to disguise true relationships;

(d) breached the trustees’ covenants and in particular, the trustees’ obligation to exercise the care, skill and diligence of an ordinary prudent person in dealing with trust property;

(e) in the case of the loan to Mrs Khan, involved arrangements designed to circumvent or undermine the act;

(f) were implemented by an accountant who at least ought to have known that such arrangements constituted contraventions of the Superannuation Industry (Supervision) Act 1993; and

(g) were only corrected after the Taxation Office’s activities commenced.

Tran v F C of T [2012] AATA 123

Another case where the taxpayer was self-represented.

Here the taxpayer claimed that because in making superannuation contributions she had relied on media reports that there were special circumstances why the Taxation Office should exercise that discretion to disregard or reallocate concessional and non-concessional contributions for a financial year.

The Tribunal said no. It gave a serve to the media – it said “the Tribunal considers that a choice of the applicant to rely upon media reports, and not to seek professional advice, constituted a decision to proceed at her own risk.”

Montgomery Wools Pty Limited as Trustee for Montgomery Wools Pty Ltd Superannuation Fund v F C of T [2012] AATA 61

This was a hard luck case involving a number of fundamental questions of superannuation tax law.

The fund had (perhaps – I think not) a right to an unpaid present entitlement due to it from an associated unit trust.

The unit trust lost all of its moneys. It could not pay that (arguably) unpaid present entitlement.

The Taxation Office deemed the fund to be a non-complying superannuation fund.

As a consequence it assessed its tax pursuant to section 280A of the Income Tax Assessment Act 1997 on broadly speaking, the market value of the fund’s assets less the amount of non-deductible contributions which were made by it (and not as the Tribunal claimed, only on the Fund’s net income of the previous years).

The fund argued that the Taxation Office should not have made it non-complying.

There were a range of difficult issues for the Tribunal to consider:

• what was the role of the Tribunal in considering a notice of non-compliance;

• the application of the in house asset rule and the sole purpose test;

• whether the unit trust had made a loan to the fund (that is both whether an unpaid present entitlement could be a loan in the first place, and if this was the case, whether considering the relevant trust deed there had been a loan in this case);

• and whether the Taxation Office should have exercised its discretion not to deem the fund to be a non-complying superannuation fund.

The Tribunal found against the fund.

This case has had to date little publicity but I am sure given how much there is in it that once commentators catch up with it, it will be often referred to.

This might sound like sour grapes given that I argued this case for the fund. But I am convinced that the Tribunal made many errors of law and that many of the observations made by the Tribunal will need to be looked at again somewhere in the future.

Leckie v F C of T [2012] AAT 129

Another excess contributions tax assessment.

Here the Tribunal gave the matter more than what was the perfunctory attention it gave to the Strasser and Tran cases – perhaps because the taxpayer had a representative.

But it didn’t do the taxpayer any good. He still lost.

The taxpayer argued that there were special circumstances why excess contributions tax should not be levied.

The Tribunal disagreed. This was because the taxpayer’s “excess concessional contributions appear to have arisen more from [the taxpayer’s] ignorance and his own misadventure rather than from factors or circumstances beyond his control”.

Naude v F C of T [2012] AATA 130

Once more the Tribunal found that there were no special circumstances to the making of excess concessional contributions to a superannuation fund which would allow it to ignore those contributions or to allocate them to another year.

Mason v F C of T [2012] AATA 133

The taxpayer was paid $20,000 from a superannuation fund.

The fund should not have made that payment to the taxpayer.

It should not have been paid to the taxpayer until he had retired.

The taxpayer argued that the Taxation Office should exercise its section 304-10(4) of the Income Tax Assessment Act 1997 discretion to exclude that payment from his assessable income.

The Tribunal refused to do so.

The Tribunal said that this was because of the history of section 304-10, the legislative context in which it was enacted, the nature of the relevant fund, and because of the taxpayer’s particular circumstances (most probably being his education and lack of financial hardship).

Peaker v F C of T [2001] AATA 140

Another unsuccessful excess contributions tax case.

Barker v F C of T [2012] AATA 168

This was not really a superannuation case as such.

Rather it was a question of whether the taxpayer was a resident of Australia or not (and I will write more about residency generally in my next blog). In the present case the issue was a more specific one involving the taxpayer’s membership of a Commonwealth Public Sector superannuation scheme.

The consequences of the taxpayer being a resident of Australia was that he was subject to Australian tax on his worldwide income (unless there was a specific provision exempting all or part of that income from Australian tax).

The Tribunal found that the taxpayer was a resident of Australia – thus another win to the Taxation Office.

Bad Luck for Funds?

All of this might be just bad luck for the funds. Most of the decisions are probably correct.

However if I were the Government I would be concerned.

The decisions show that there are many taxpayers out there, who believe that the Taxation Office is more concerned with a technical application of the superannuation law, rather than in assisting taxpayers to meet their retirement goals.

Australian tax law contains both specific anti-tax avoidance provisions and a general anti-tax avoidance provision (but no judicial authorities which explain the interrelationship of these provisions).

The general anti-tax avoidance provision is Part IVA of the Income Tax Assessment Act 1936.

That provision is not as draconian as the Government (undoubtedly just reflecting the advice of the Taxation Office) would like. Accordingly the Government proposes that Part IVA be amended retrospective from 1 March 2012.

This really is quite unacceptable. Not only is retrospective legislation abhorrent but especially as is the case here, taxpayers have only been given the broadest of hints as to what it will contain.

And given overseas experience one must query just how effective these amendments will be.

It is not as if the problems of applying Part IVA have been overlooked. Back in 1980 before Part IVA was introduced the then Government received advice from all manner of consultants including the late Justice Hill who specifically looked at the problem which now concerns the Government.

I am going to bet that all the proposed amendments will achieve, will be more uncertainty and work for tax advisors such as myself.

But even after the proposed amendments are enacted there are a number of common tax planning schemes which are unlikely to be ever attacked.

This is because they have become the sacred cows of tax planning; that is tax planning devices which are so entrenched as principles of sound financial planning, that no government would ever allow the Taxation Office to attack them.

Paying off the Family Home

Standard financial advice is that a taxpayer should first pay off a borrowing on the family home, before reducing the amount of an investment loan.

This strategy makes sense. It ensures that the maximum part of a person’s borrowing costs are tax deductible.

If this is all that a taxpayer does the taxpayer should have little difficulty with the Taxation Office (despite the taxpayer’s actions being a “scheme” potentially of the type the subject of Part IVA).

But the Taxation Office does not like more orchestrated arrangements.

In June 2011 the Taxation Office released Draft Taxation Determination TD 2011/D8 headed “Income tax: does a taxpayer’s purpose of “paying their home loan off sooner” mean that Part IVA of the Income Tax Assessment Act 1936 cannot apply to an “investment loan interest payment arrangement” of the type described in this Taxation Determination?”.

The arrangement considered by the Taxation Office was one where a taxpayer owns both a residence and an investment property.

The taxpayer makes three separate borrowings (not necessarily from the one lending institution). The borrowings are:

• A residential loan;

• An investment loan;

• A credit facility.

The taxpayer pays off the residential loan thus reducing the amount of non-deductible interest payable on it.

The taxpayer pays the interest on the investment loan by making borrowings under the credit facility.

In its draft determination Ruling the Taxation Office says Part IVA would apply to the arrangement; the Taxation Office says that this would mean it would not allow the taxpayer to deduct interest payable on the credit facility.

The Taxation Office gave taxpayers up to 29 July 2011 (that is a whole month) to comment on the draft determination. Nothing has been heard from the Taxation Office since.

Income Splitting

The most basic of tax planning ploys is income splitting.

The tax law attacks some income splitting arrangements.

It contains the rules that cause the unearned income of minors to be taxed at the maximum personal tax rates; the alienation of personal services income rules; the rules that might cause a revocable trust to be tax ineffective; and the short term alienation of property income rules.

Further the courts disapprove of some income splitting arrangements. The courts certainly disapprove of attempts by medical practitioners to alienate income (I suspect that there is some sort of reverse snobbery here – professionals are not allowed to split their income; plumbers and electricians are).

But overall income splitting is acceptable. Some years ago I ran Ryan v FC of T [2004] AATA 753. It involved superannuation – see below. Not only did the Taxation Office accept that case – which was an important win for taxpayers generally – but went further and said that the case justified the use of family partnerships.

I suspect that if income splitting is to be defeated some basic structural change to the tax law would be required – for example taxing family groups instead of just individuals.

Negative Gearing

Many Australians have built their wealth on negative gearing. A couple might buy a small home unit. On the other extreme a large public company might borrow to fund a takeover.

Given the capital gains tax discount, the advantages of negative gearing to individuals is obvious. A full deduction for holding costs, but the gain only half taxed.

Given the capital gains tax discount, the advantages of negative gearing to individuals, is obvious. A full deduction for holding costs, but only half tax on a gain.

Of course negative gearing assumes rising prices and in a stagnant market many are discovering that negative gearing is no longer as simple as it once was (and not that many years ago at that).

If negative gearing is to be attacked it will not be because of Part IVA.

For example, assume that as is more often than not the case, the negatively geared investment is real estate. While the Taxation Office might be able to show for example that had not the taxpayer negatively geared, the taxpayer might have purchased, say, securities, the taxpayer relying on the decision of the High Court in F C of T v Spotless Services Pty Limited [1996] HCA 36 will always be able to argue that the dominant purpose of the scheme was to obtain a stable investment.

If negative gearing is to be attacked it will have to be by way of specific provision. This was attempted once. Specific law was introduced 1985; in 1987 the law to restrict negative gearing was abandoned.

Superannuation

The Government wants taxpayers to invest in superannuation funds. It allows deductions for contributions (but subject to limits) and concessionally taxes complying superannuation funds.

It would be disappointed if taxpayers did not take advantage of these concessions.

But sometimes it is not as easy to invest in superannuation as the Government might think.

Salary sacrifice arrangements are the most obvious.

If a taxpayer wants to maximize the allowable superannuation contributions which might be made for his benefit he might need employer assistance. He may have to agree to accept a lesser salary in return for the employer making greater superannuation contributions.

Some arrangements are more aggressive such as “transition to retirement ” pensions – taxpayers over 60 can receive (subject to maximum and minimum rules) a tax free pension from a complying superannuation fund.

These rules have led to the so called “superannuation re-contribution strategies” where taxpayers take a tax free pension from a superannuation fund and replace that pension with tax deductible contributions.

Notwithstanding the obvious tax planning involved the Taxation Office believes this is acceptable tax planning (Taxation Office Media Release, 4 August 2004).

I mentioned above the decision of Ryan v F C of T. There a family company employed both a husband (who provided technical services) and the husband’s wife (who provided fairly minimal secretarial services). The company paid superannuation contributions to a family superannuation fund in excess of the amount of the salary paid to the wife. The Taxation Office tried to use Part IVA to prevent the company from claiming tax deductions from the amounts contributed to the fund.

The Administrative Appeals Tribunal rejected the Taxation Office’s claim; it said that the company could deduct those contributions.