ATO Interpretative Decision
ATO ID 2002/349 (Withdrawn)
Superannuation
Reasonable benefit limit - calculation of 'salary'.FOI status: may be released
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This ATO ID is withdrawn from the database because it contains a view in respect of Division 14 of Part III of the Income Tax Assessment Act 1936 and Part 5A of the Income Tax Regulations 1936 (the RBL provisions). The RBL provisions do not apply for the 2007-08 income year and later income years. This ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2006-07 income years.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 23 November 2007
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can a taxpayer exclude a loss incurred from a forestry business from the calculation of 'salary' for reasonable benefit limit (RBL) purposes.
Decision
No, the loss from forestry operations cannot be excluded from the calculation of 'salary' for RBL purposes.
Facts
The taxpayer requested an arm's length salary determination.
The Commissioner did not accept the taxpayer as an associate and stated that business losses that incurred from a forestry business are included as part of salary.
Later, the taxpayer objected to the first determination and requested a further determination to be made for the year in question.
The taxpayer is employed in the public sector. The taxpayer participated in a primary production venture and commenced a forestry business in the 1992 year. In that year, a loss was incurred in relation to the establishment phase of the forestry business.
The taxpayer carried on the forestry business as part of a project. The forestry business is fully managed for the taxpayer by a company that is not associated with the taxpayer. The taxpayer spends very little time engaged in the business; less than one hour per week.
Individual taxpayers have received favourable binding private rulings in relation to deductions claimed on the same basis as the taxpayer. Afforestation scheme participants have been accepted as carrying on a business for income tax purposes.
Reasons for Decision
The taxpayer requested that the Commissioner determine an arm's length salary pursuant to paragraph 47(3)(c) of the Income Tax Regulations 1936 (ITR), ignoring the loss from forestry operations.
'Salary' for RBL purposes is defined in subregulation 47(1) of the ITR subject to subregulations 47(3) and (4) of the ITR.
Subregulation 47(3) of the ITR expands the definition of 'salary' in subregulation 47(1) to include a person's share of net business income or net business losses where the person carries on a business either alone or in partnership with another.
The amount paid to the afforestation scheme Manager is an allowable deduction as all participants are carrying on a business. Consequently, the loss is considered to be 'net business losses' as defined in subregulation 47(1) of the ITR.
The loss from forestry operations is to be included in working out the taxpayer's salary.
Date of decision: 24 May 2001
Legislative References:
Income Tax Assessment Act 1936
Section 140C
Section 26AAB(14)
Paragraph 47(3)(c)
Paragraph 47(3)(b)
Subregulation 47(3)
Subregulation 47(4)
Subregulation 47(1)
Keywords
Reasonable benefit limits
Bankstown ATO
Superannuation case reports
Extended definition of salary or wages
Highest average salary
ISSN: 1445-2782
| Date: | Version: | |
| 24 May 2001 | Original statement | |
| You are here → | 23 November 2007 | Archived |
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