Superannuation Contributions

The Tax Office recently released an interpretative decision regarding the deductibility of superannuation contributions made by a private company for the benefit of its directors, where the private company was in the business of passive investment.

The interpretative decision indicates that a deduction can be claimed in relation to the superannuation contributions, provided that the directors are entitled to be paid for their services.

Broadly a deduction is allowed for superannuation contributions where the following apply:

· the contribution was made to a fund for the purpose of making a provision of superannuation benefits payable for another person;

· the fund is a complying superannuation fund; and

· the members are eligible employees.

 

The Tax Office considered whether the directors were employees of the company. A director is an employee where they are entitled to payment for the performance of their duties as a member of the executive body of the company.

The Tax Office concluded that if the company makes a determination to pay the directors for their duties, then they can be considered employees of the company. The company can then make superannuation contributions on behalf of the directors. The fact that the company was in the business of passive investment does not change the outcome.

GST on Packaged Supplies

In a recent decision,  the Administrative Appeals Tribunal (AAT) decided in favour of the Commissioner of Taxation concerning the supply of promotional items given away with the sale of GST-free food products.

In this case, the entity was a food supplier that supplied products including items such as instant coffee.

Occasionally, these food products were supplied with non-food products such as alarm clocks, radios and cricket balls. Both the items were branded with the entity’s name, packaged together and sold as one item for the same price as that for which the food would normally sell at.

The AAT took the view that the promotional items were not integral, ancillary or incidental to the main food item, and therefore the supply as a whole was a mixed supply (supply of separate items together).

As a consequence, this mixed supply gave rise to the question of whether the promotional item was a supply for consideration, in which case GST would apply.

Based on the facts, the AAT held that the promotional item was supplied for consideration even though the item was included in the package and marketed as being ‘free’. The AAT adopted the view that the food product included in the package was actually sold at a discount. In reaching this view, the AAT noted that ‘the promotional items could only be acquired in packages with the food products. The taxpayer would not supply them free of charge alone.’

Although the AAT decided that consideration was provided for the supply of the packaged products as a whole, it did not decide conclusively the basis on which GST should be calculated. It concluded that the GST relating to the promotional item should be apportioned as food products represent a GST-free supply.