Resource Company Compensation.
Compensation is a current reality for many of our clients currently dealing with resource companies and sometimes little thought is given to the tax implications of these compensation packages in the fight to receive them.
Understanding the type of compensation being offered is vital and for compliance purposes it is imperative that we receive a copy of the payment advice issued by the resource company and a copy of the agreement in order to ascertain how to treat the compensation. Unfortunately, there is no blanket rule for all our clients as compensation packages are formulated based upon an individual's set of circumstances.
Compensation may have capital and revenue components and GST implications. They usually fall under three categories:
It is important to be aware of all the facts. EnVision Partners has arranged numerous private rulings from the Australian Taxation Office to ascertain the correct treatment of compensation payments based on individual's specific contracts. Should you wish to discuss your individual circumstances, please don't hesitate to contact our office.
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Compensation is a current reality for many of our clients currently dealing with resource companies and sometimes little thought is given to the tax implications of these compensation packages in the fight to receive them.
Understanding the type of compensation being offered is vital and for compliance purposes it is imperative that we receive a copy of the payment advice issued by the resource company and a copy of the agreement in order to ascertain how to treat the compensation. Unfortunately, there is no blanket rule for all our clients as compensation packages are formulated based upon an individual's set of circumstances.
Compensation may have capital and revenue components and GST implications. They usually fall under three categories:
- Compensation for decline in value. These payments are usually capital and affect the cost base at sale time.
- Compensation for grant of access or easement. These payments are capital and usually taxable in the year of receipt. No general 50% discount is applicable.
- Royalties and rental payments. These payments are usually revenue and taxable when received.
It is important to be aware of all the facts. EnVision Partners has arranged numerous private rulings from the Australian Taxation Office to ascertain the correct treatment of compensation payments based on individual's specific contracts. Should you wish to discuss your individual circumstances, please don't hesitate to contact our office.
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