This Draft Determination, released on Wed 29.5.2013, states that when an employer reimburses an employee for an amount of expenditure incurred to a third party, under a salary sacrifice (or similar) arrangement, and that expenditure would otherwise have been subject to the ‘non-commercial’ business loss provisions in Div 35 of the ITAA 1997, the sub-$250k “income requirement” in s 35-10(2E) cannot be avoided. Whilst the “otherwise deductible rule” in s 24 of the FBTAA will apply, and the ‘reportable fringe benefits total’ for that year will be ‘nil’, the amount will still be included in s35-10(2E)(a) as ‘taxable income’ because in calculating this, the s35-10(2) ‘excess’ of business deductions over business income, has to be ‘disregarded’ (under s35-10(2E)).
DATE OF EFFECT: When the final Determination is issued, it is proposed to apply both before and after its date of issue.
COMMENTS are due by 26 June 2013. ATO contact: Paul Voglis – Tel: (02) 9374 1494; Fax: (02) 9374 1468; Email: paul.voglis@ato.gov.au.
[LTN 102, 29/5/13]
Section 35-10(2E) of the Income Tax Assessment Act 1997
(2E) You satisfy this subsection for an income year if the sum of the following is less than $250,000:
(a) your taxable income for that year;
(b) your * reportable fringe benefits total for that year;
(c) your * reportable superannuation contributions for that year;
(d) your * total net investment losses for that year.
For the purposes of paragraph (a), when working out your taxable income, disregard any excess mentioned in subsection (2) for any * business activity for that year that you could otherwise deduct under this Act for that year.