Disadvantaged families may need IVA advice

Rhian Beynon, head of policy and campaigns at Family Action, has expressed her concerns towards already disadvantaged families being hit by the recession, increased household spending, and low incomes resulting in exclusion from mainstream credit.

It was now "vital" that the government addresses such issues, said Ms Beynon.

"In the end their incomes need boosting through increased benefits and tax credits and making sure that those who can only get part-time work are at least better off through working by increasing the earnings disregard for benefits to £50 a week," she claimed.

Ms Beynon's comments follow a speech by governor of the Bank of England Mervyn King, warning of salary freezes and rising inflation.

Mr King said the patience of UK households was likely to be "sorely tried" over the next couple of years, with little scope for real take-home pay, and a marked increase in inflation during the first half of the year.

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To be taxed or not, that's a super question

VARIOUS tax concessions apply to encourage people to save for retirement. These affect the treatment of income earned by super funds in the accumulation phase and when a super fund is in pension phase.

Q How much tax do you pay on gains when selling shares in your self-managed super fund, and how long do you have to keep them before selling?

A When a super fund sells shares that it has owned for less than 12 months, tax is paid at 15 per cent on the total profit. Shares owned for 12 months or more have the profit discounted by a third, resulting in tax being paid at 10 per cent. If a super fund is paying a pension at the time the shares are sold, no tax is payable on the profit.

Q I am 63, retired and have nothing in super, but about $600,000 in CBA shares. My wife is still working. If I transfer my shares to a SMSF, will I avoid a capital gains tax bill rather than if I sold them and bought them back through the fund? Is it acceptable for a SMSF to have shares in only one company and is it possible to set up a SMSF with only one member?

A Transferring shares will only save brokerage fees; it will not avoid paying tax on any capital gain. By transferring the shares to a SMSF, there is a change in ownership and therefore a sale for tax purposes.

The impact of tax can be reduced by classing some the value of the shares transferred as a tax-deductible self-employed super contribution. You will not be able to transfer your shares in one transaction as you would breach the contribution limits. You can set up a SMSF with only one member if you form a company to act as trustee for the fund. In this case you would be the only shareholder and director of the company.

An alternative would be to set up a SMSF with you and your wife as members and trustees. That fund could have only one investment, the CBA shares, as long as the investment policy of the fund allowed it.

Q I have an SMSF with a large share portfolio. Many of the shares were bought years ago and I paid higher entry prices than present values. Can I selectively sell on market those shares and then buy them back at present prices? My thinking is the buy/sell transaction won't cost much but I will crystallise taxation losses that can be used to offset against future capital gains.

A What you have described is known as a wash sale transaction. The ATO issued a taxpayer alert in April 2008 stating that they would attack this practice under Part IVA of the Income Tax Act. This section of the act allows the ATO to attack anything done where the sole or dominant purpose is to gain a tax benefit. If Part IVA is applied, tax penalties of 50 per cent of the tax avoided are imposed.

If you as trustee of the SMSF regularly reviewed the shares held by the fund and, as part of that review, sold under-performing shares and purchased new shares, the provisions of Part IVA should not apply.

As long as the shares are being sold for investment reasons based on analysis of the companies and not the crystallisation of capital losses, you should not be caught by the provisions of Part IVA.

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5% IVA value-added tax return extended

The five percent IVA value-added tax return on debit card purchases plan has been extended until December 31st, 2010, government officials announced.

According to resolution 403, published on the Economy Ministry's Official Gazette, "the reasons that allowed for this retribution mechanism applied to debit card purchases to be implemented, are still valid."

Goods and services purchased with a debit card get a 5 percent IVA value-added tax return since 2001, which has been a useful move to stimulate consumption.

The Ministry's resolution also clarifies that "fuel and gas purchases are exempted" from the tax return.


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Childcare tax break cut could increase IVA needs

UK parents could find themselves struggling financially as a result of government plans to abolish the tax break on childcare vouchers.

The cuts are set to be imposed in order to fund the placement of 250,000 two-year-olds into childcare.

The move has been criticised by Parentsoutloud.com, which suggests that the move will only put hard working parents under increased pressure.

Losing the tax relief on childcare vouchers could prove to be one bill too far for some families struggling to cope in the recession and adoption of bankruptcy-avoidance methods such as individual voluntary agreements (IVAs) could increase.

Speaking of the policy change, Margaret Morrissey of Parentsoutloud.com said that parents would most likely fund themselves spending more, despite working really hard to survive the downturn.

She commented: "It is probably going to cost all parents more. In total, 450,000 parents who currently take part in the voucher scheme will lose, with most receiving no help in future with their childcare costs. How can this be a positive way forward?"

She went on to say that parents that were "working their socks off" should be helped rather than hindered.


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Could John Barnes opt for an IVA?

Former Liverpool and England footballer John Barnes has been declared bankrupt by Her Majesty's Revenue and Customs.

While Barnes has suggested that the issue is nothing more than a "tax oversight" and applied to have the bankruptcy order annulled, his assets are currently being evaluated by the official receiver, according to the Insolvency Service.

Should the ex-midfielder's claims of an ability to pay the overdue tax bills not come good, he could consider entering into an individual voluntary agreement (IVA) in order to pay back the money owed.

Earlier this year, Barnes made clear his aversion to bills when he said: "I don't like dealing with taxes, of course. I just hate not having enough money. Apart from that, I don't like dealing with bills and never have done."

The former Jamaica national team boss was sacked as manager of Tranmere Rovers earlier this month.


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Ailing Disability Insurance Hopes For Tax Boost

The campaign over a proposed tax increase to prop up the state-run disability insurance scheme is slowly gathering pace ahead of a nationwide vote.
Most political parties, the government as well as various organisations and pressure groups have come out in favour of a 0.4 per cent hike in value added tax (VAT). The rightwing Swiss People's Party is up against an overwhelming alliance on September 27.

Over the past two weeks several small political parties, the farmers' association and organisations for the disabled all issued statements recommending voters approve the proposal.

On Friday a group of mainly retired politicians of the People's Party became the latest committee to outline its reasons against the increase.

In line with their party they slammed the planned temporary fiscal charge as a "false and dangerous compromise" which jeopardised the financial future of the state old age pension scheme – another tenet of the Swiss social security system.

The reason being that the proposal includes an injection worth several billion francs from the pension scheme into the disability insurance.

The rightwing party earlier warned that raising taxes would slow private consumption and put a financial strain on families.

"An increase is poison for the purchasing power of consumers," parliamentarian and businessmen Peter Spuhler argued at a news conference in June when his People's Party launched its campaign.

VAT is currently 7.6 per cent, with reduced rates for the hotel industry and for essential consumer goods.

Opponents also claim money could be saved by cracking down on fraudsters, notably beneficiaries of Turkish and East European origin, who allegedly cheat the Swiss authorities by faking mental illness.

« We are no longer able to help those in need if the disability insurance is in trouble. » Christophe Darbellay, Christian Democratic Party


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Tax Exemption Eyed to Help Contain Influenza A

Individuals concerned about the rapidly spreading influenza A here will be able to receive either anti-viral vaccine or treatment at a cheaper cost later this month.

This follows government steps to lift taxes on both imported and locally manufactured anti-influenza medical goods.

The Ministry of Strategy and Finance said Sunday that it would temporarily exempt foreign and domestic flu vaccines and treatments from value-added tax (VAT) and tariffs until the end of 2010 to help more concerned people obtain medical treatment at lower costs and prevent the spread of the deadly epidemic.

Currently, importers of H1N1 vaccines from abroad are subject to an 8-percent rate and have to pay an additional 10-percent VAT, making flu-related medical costs substantially higher.

The ministry plans to submit the changes in tax-related ordinances to a Cabinet meeting on Sept. 15. If approved, they will go into effective immediately.

The government is scrambling to secure as many influenza A vaccine doses as possible in preparation for a possible flu pandemic this fall and winter. It has ordered 10 million doses, with additional purchases planned next year.

It aims to vaccinate 13 million people or 27 percent of the population by February 2010.

Since the first case of the disease was confirmed in early May, four H1N1 infected patients have died, with more than 4,000 falling ill from the disease.

Additionally, patients suffering from seven illnesses, including AIDS and Wilson's disease, will be able to receive treatment at cheaper costs as tariffs levied on imported medicines and other medical treatments will be abolished.

The government expects the tariff exemption to help about 6,000 patients across the nation save an average 500,000 won per person annually.

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