Australian Tax Reforms Hit City Farmers, Couriers

by Mary Swire, Tax-News.com, Hong Kong

15 August 2001

Efforts by the Australian government to limit abusive tax shelters following the Ralph Report on business taxation included clearer rules to distinguish legitimate businesses from 'hobbies' conducted without a clear commercial intent. This is the first year that the new rules come into effect, and the Australian Tax Office yesterday said there are misunderstandings about their operation.

The Government is expecting an extra $30 million of revenue from the new laws from 2000/2001 tax returns, and another $540 million over the next three financial years, but the ATO said a check last month of about 30 returns where tax breaks have been claimed for farm expenses shows one in two fall foul of the law. Surprisingly, most of the returns had been filled in by tax professionals.

As usual, the professionals are saying that the Tax Office has not properly consulted them, and is still formulating practice notes dealing with application of the four tests in the legislation.

Quoted in the Sydney Morning Herald, tax counsel for the Tax Institute of Australia, Ms Maria Benardis, said: "It's no wonder that people are making all these mistakes."

One of the tests is the level of farm income: those with annual farm income of less than $20,000 are caught by the new rules. Experts say this will let many rich 'hobby' farmers off the hook (just buy more cows) while capturing legitimate farmers (too poor to buy more cows).

Meanwhile, outside Prime Minister John Howard's Sydney residence another of the Government's attempted reforms is running into a jam, with a convoy of sixty courier vans delivering a protest letter about 'personal service income' draft tax rulings which may cost them an extra 20% tax.

A Transport Workers Union official representing the workers said that after saying couriers would not be affected, the ATO had changed its mind and was now saying that owner-drivers would be covered by the new rules.

Angry couriers have imposed a ban on pickup and delivery of urgent freight to the tax office and the federal government.

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