Editor: The following three cases are good examples of why you should always get tax advice up-front before entering into financial transactions.
Case 1 is the sad tale of a taxpayer who sold a property, didn't receive the full proceeds of the sale but still had to pay the taxman the GST, as if they had received the full amount.
In this case, when the purchaser couldn't come up with the full amount at settlement, the taxpayer entered into a vendor's finance agreement. Under that agreement, the vendor effectively 'loaned' the balance of the purchase price to the purchaser.
As a result, the taxpayer had to pay GST on the full amount.
In the end, the purchaser couldn't pay the full amount they owed to the vendor. Nonetheless, GST was still payable on the full contract price.
Case 2 involved a taxpayer who deposited $430,000 into his super fund. When the GFC hit, he panicked and withdrew half. Six months later he reconsidered, and redeposited another $100,000.
Now, you're only allowed to deposit $450,000 in your own contributions in a three year period (if you're under 65). But he thought that, on a net contribution basis, he was OK given that he had withdrawn about $200K.
Unfortunately, the rules are simple. Don't contribute more than $450,000.
He did and was slugged excess contributions tax on the extra $80,000 that went into the fund.
Case 3 involved a council worker who claimed that he was also a share trader, not merely a share investor – probably to be able to claim losses on sales of shares.
Even though the taxpayer had turnovers of $934,575 and $385,938 in the years concerned, the AAT member presiding over the case said that while it was more than a hobby, it was not a business.
The taxpayer even maintained an office specifically for the purpose of conducting his share trades and for accounting and tax calculations.
Editor: Quite clearly, this was a "line ball" decision that unfortunately went against the taxpayer. Good advice would have cautioned him to prepare business plans and conduct himself in a more "business-like" way. Cases 1 and 2 could equally have gone the taxpayers' way with the right advice.
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