TOLL Autumn 04 FINAL - TOLL Group

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TOLL CORPORATE 12 Superannuation ANZ Super Advantage News As stated in the Summer edition of Toll Today, ANZ in keeping with its promise to inform all members of the ANZ Super Advantage fund, will be continuing with its member education program and visiting most capital cities and major sites. Our aim is to focus on key areas of our offering to members concentrating on insurance, new investment suite, investment performance, demonstrating internet access capabilities, ANZ@work banking package and introducing a comprehensive Financial Planning support program. We again look forward to seeing as many members as possible. In the meantime, we encourage you to take time to have a look through all the new material that has been sent to members and come to the education sessions prepared with all your questions. You will have received your 31 December 2003 half yearly statement by now. We encourage you to have a look at your statement which provides a snapshot of your account details and utilise the services of the Customer Service Centre on 13 38 63 if you need to clarify or change any details. If you have any further questions please e-mail Cheryl Barbary, Toll Group Superannuation Manager on: cheryl_barbary@toll.com.au “Court Order Funds Environmental Works” On 5 February 2004 at Heidelberg Magistrates’ Court, Toll Transport Pty Ltd (ACN 006 604 191 (“Toll”) pleaded guilty to one charge of water pollution on 12 February 2002. The charge was brought by the Environment Protection Authority in relation to a spill of several hundred litres of diesel from a BP petrol station at the corner of Austin St and Heidelberg Rd, Fairfield. The spill occurred during unloading operations when the delivery hose from the tanker truck to the fill point of the underground storage tank disconnected from the fill point. Notwithstanding early efforts by Toll, an unknown quantity of the diesel flowed from the service station and into the stormwater drainage system, eventually making its way to the Yarra River. Toll acknowledges that it failed to ensure that its driver was adequately trained and was properly following procedures. The Heidelberg Magistrates’ Court ordered Toll to pay $10,000 to the City of Yarra to be used to fund an environmental resource centre to be located at Alphington Primary School. The Court also ordered publication of this notice.” Website: www.toll.com.au ‘Talking Tax’ Software Expenditure – Are you aware of the tax implications? With the introduction of the Uniform Capital Allowance system on 1 July 2001, the taxation treatment of software expenditure incurred in respect of the implementation of an IT system has changed. For software expenditure incurred before this date the tax treatment is different. This article focuses on the post 1 July 2001 treatment. The tax treatment for software expenditure is broken into three classes: ■ Expenditure on capital account of $1,000 or more is depreciated for tax purposes on a 40% straight line basis over 2.5 years. Examples include acquiring an off the shelf software package, and most expense components of developing / designing an in-house system. ■ Expenditure on capital account less than $1,000 can be allocated to a Low Value Pool (LVP) and depreciated. As Toll’s software projects are expected to cost more than $1,000 the LVP has limited application for software costs and so is not discussed here. ■ Expenditure on revenue account is immediately deductible. Typical examples include, annual software license fees, and employees’ costs (see below) in developing / designing an in-house system. So what exactly is software development? It is not defined in the Tax Act and no judicial guidance is available. However, the ATO in Taxation Ruling TR2001/6 stated it is “generally described as computer programs consisting of encoded instructions designed to cause a computer to perform a particular task or to produce a particular result.” Software development costs Typically, an IT system implementation project will involve a number of phases, not all of which will involve software development. Further, depending on the phase of the project, the tax treatment may also differ. Examples of the typical phases are set out below: ■ Design, configuration and prototype phases. These Welcome to our Concetta Palozzi joins Toll as Assistant Manager Business Assurance and Internal Audit.
– with the Toll Group Tax Team phases relate to determining how the software is to be used and may relate to initial scoping such as business process re-engineering and mapping. On the basis that at this stage there is no acquisition or development of software at this initial stage, costs incurred would generally be on revenue account and deductible immediately because they are incurred earlier than the actual build / implementation and do not entail the creation of software. ■ Off the shelf software purchase, in-house building software development and testing phases. These costs are depreciable on a 40% straight line basis over 2.5 years. In some instances, the costs of testing may be immediately deductible where there is no modification to the source code of software or the creation of new functionality. ■ Implementation phase. Once the software system is built and tested, the system is implemented in the relevant business unit for operation. These costs are generally depreciable on a 40% straight line basis over 2.5 years. These costs may include training, change management, business process re-engineering, human resource costs and data conversion costs. Treatment of in-house employee costs in developing software Employees’ remuneration (salaries, wages, bonuses, superannuation and fringe benefits tax) and oncosts (payroll tax, Workcover, travel expenses and office overheads) are immediately deductible on revenue account in all cases where they are permanent employees and they were not recruited specifically to perform software development with no ongoing tenure once the development is complete. External contractors and consultants’ costs are on capital account and, for tax purposes, must be capitalised and depreciated on a 40% straight line basis over 2.5 years. Software development pools Software development costs that are capital in nature can be allocated to software development pools (treats all costs for a financial year on a ‘one in all in’ basis). Regardless of whether costs are allocated to a pool or not, they are depreciable on a 40% straight line basis over 2.5 years. The only difference between pooled and non-pooled costs is when depreciation can commence. For pooled costs, depreciation commences at the start of the next financial year, regardless of whether the software is installed and ready for use by then. For non-pooled costs, tax depreciation commences when the software is installed and ready for use. Therefore, there may be timing advantages in electing to pool software expenditure, ie in bringing forward the timing of the tax depreciation deduction before the software is operational or installed ready for use. Annual software license fees paid to third parties Are immediately deductible as they are incurred on revenue account. Withholding tax – payment of license fees offshore for access to source code Payments of license fees to a licensor for the right to use software (whether immediately deductible or not) will ordinarily constitute the payment of a royalty for tax purposes. Accordingly, if the payee is a non-resident (eg a US or European software developer), and Toll is paying for the right to access source code, then the payments are likely to be subject to Royalty Withholding Tax* (RWT) which means Toll would be required to deduct and remit RWT to the ATO (* generally 10% of the gross payment for dealings with most OECD countries). Toll Central – Tax Site (Under the Finance home page) We continue to populate our evolving Toll Taxation intranet site with useful and practical tax material and developments, including the Toll Tax Policy & Procedures Manual and training material. The tax policy manual also includes (at page 42) a more elaborate analysis of the taxation treatment of software expenditure, including hardware costs. We recommend the taxation site be regularly visited by all Toll personnel involved in managing each business units’ tax compliance activities. The site link is: http://intranet/HomeLink/Finance/Taxation/index.jsp New Corporate Appointments Teree Bradley joins Toll as Assistant Property Manager Toll Property. 13 T OLL CORPORATE
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TOLL Autumn 04 FINAL - TOLL Group

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