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2008/09 Tax News
Last Chance for Superannuation Concessions · From 1 July 2009, the co-contribution matching rate will be reduced from 150% to 100% (i.e., the maximum co-contribution will be $1,000). · Salary sacrifice of income/remuneration into superannuation should be done so before 30 June this year, for two main reasons 1. the concessional contribution caps (i.e., the maximum amount of deductible superannuation that can be contributed to a superannuation fund in respect of a particular member that is only taxed at 15%) will be halved from 1 July 2009, these being to $25,000 per year, which is indexed, for persons aged under 50 and to $50,000, which is non-indexed, for persons aged 50 or more.
2. From 1 July 2009, reportable superannuation contributions, including salary sacrificed superannuation, will be taken into account when evaluating a taxpayer's entitlement to a number of benefits, including the superannuation co-contribution, the Baby Bonus, and dependant tax offsets, as well as various liabilities, such as the Medicare Levy Surcharge and child support.
Small Business Entities Tax Break now 50% (was 30%) · A small business entities have an annual turnover less than $2m · An additional 50% deduction can be claimed as follows
Earlier News ATO Data Matching Programs The ATO is currently undertaking several data matching programs to help identify tax shortfalls: some of the programs include;
· Motor vehicles which have been purchased valued at $10,000 or more. It is estimated about 2.5 million are involved. · Labour hire firm, placement agency and computer consultancy contract payments relating to about 30,000 individuals will be examined. · Mining company payments to contractors and sub contractors involving some 100,000 records will be matched. Tax Bonus Payments Start If your 2007-08 taxable income was $100,000 or less and you paid tax, you could be eligible to receive a tax bonus payment of up to $900. Approximately 7.4 million people who have already lodged their 2007-08 tax return will start receiving their payments from Wednesday 8 April 2009. Payments will be made progressively through to 16 May 2009. The ATO will pay you automatically if you are eligible and has advised it will not be able to answer queries on the progress of individual payments until after 16 May 2009.
New 'Investment Allowance' UPDATE The Government has now increased both the amount and the scope of this allowance. The Treasurer has stated that the Government will introduce an investment tax break for all Australian businesses, which it is calling the 'Small Business and General Business Tax Break'. Note: This is not legislation it is the government’s intention (2/3/09) Small businesses can claim an additional 30% tax deduction for eligible assets costing $1,000 or more that they acquire from 13 December 2008 to 30 June 2009, and install by 30 June 2010. For eligible assets costing $1,000 or more that they acquire from 1 July 2009 to 31 December 2009, they can claim a 10% deduction where they are installed by 31 December 2010. This deduction is on top of the usual capital allowance deduction (i.e., depreciation) claimable for the asset in the taxpayer's income tax return. To benefit from this tax break a small business must have a turnover of $2 million a year or less. New 'Investment Allowance' introduced The Government has announced that it will introduce a 10% temporary investment allowance to encourage capital investment by Australian businesses. The allowance will be in the form of an additional tax deduction equal to 10% of the cost of an eligible asset. It will apply to most new tangible depreciating assets – which includes most items of plant and equipment – over $10,000 which are acquired or ordered by the end of the 2008/09 financial year. The allowance will be available for businesses which start to hold or start to construct the asset after 12.01am AEDT 13 December 2008 and before the end of June 2009. Assets must be ready for use by the end of June 2010. Reduction of the December Quarter PAYG Instalment The Government has announced it will cut the December 2008 quarter's PAYG instalment payable by small business entities (i.e., generally those with aggregated turnover of $2 million per annum or less) by 20%. How will it apply? The 20% reduction applies to the instalment amount shown on the BAS dispatched by the ATO in December 2008 for the quarter ending on 31 December 2008. This instalment amount is due on or before 28 February 2009 (which will be extended to 2 March 2009, as 28 February 2009 falls on a weekend) for most small business taxpayers, although for some (e.g., those which elect to report and pay GST on a monthly basis), this due date was 21 January 2009. As such, for the quarter ending 31 December 2008, small business entities are only required to pay 80% of the instalment amount shown on the BAS on 21 January 2009 or 2 March 2009. Note that this will not reduce the actual tax eventually payable for the 2009 income year (which will be established after the business lodges its 2009 tax return)This reduction does not apply to taxpayers who calculate their instalments based on the instalment rate notified by the ATO, as their payments will automatically adjust when they apply that rate to their actual income for the quarter. FBT exemption for laptop with upgrades The ATO has confirmed that, where an employee is reimbursed by their employer for the purchase of a laptop computer, the cost of including additional memory in the computer (and similar upgrades) at the time of purchase will form part of the cost of the laptop for fringe benefits tax (FBT) purposes Concreting Benchmarks For concreters working directly with households, the ATO has issued expected income levels based on materials used and after consultation with industry bodies in Qld, NSW and Vic. Full details at: http://www.ato.gov.au/businesses/content.asp?doc=/content/00117594.htm Main Problem with Self Managed Superannuation Funds It appears to be “loaning” of money to fund members and their relatives. There is a real danger of the fund being made non complying resulting in adverse tax consequences. Market Valuation for Tax Purposes The ATO has issued a guide to outline accepted market valuation processes for taxation purposes. The guide can be accessed at http://www.ato.gov.au/taxprofessionals/content.asp?doc=/Content/00161737.htm&page=1&H1 Cash Economy Letters During the last few months the ATO has sent some 44,000 letters to cash economy businesses to remind them of their obligation to record all income and expenses correctly in their tax returns. Benchmarking industries, third party data matching with insurance companies, shopping centre managements, luxury car and boat records are some of the sources used to target the cash economy. First Home Savers Accounts From 1 October 2008 financial institutions including most banks and some superannuation funds will be able to offer First Home Savers Accounts (FHSA) for persons aged between 18 and 65 with a tax file number and who have never owned a main residence home in Australia or have never previously had a FHSA. Earnings on the income in the FHSA are taxed at 15% and salary sacrifice contributions are not allowed. Refer to ATO fact sheets NAT 72404, NAT 72453 and NAT 72450 for further information on government bonuses and other requirements of the scheme. Car depreciation limit for 2008/09 The ATO has advised that the car depreciation limit for the 2008/09 financial year is $57,180 (up from $57,123 in 2007/08). The ATO 2008-09 Compliance Program:
Their priorities for individual
taxpayers include:
Refer to ATO media release
no 2008/42
Low Income Tax Offset From 1 July 2008 the maximum low income tax offset is increased from $750 to $1,200, available in full to annual taxable income is $30,000 or less and tapers off until annual taxable income reaches $60,000. Employers can use half of the available offset, up to $600, in calculating the tax instalments deducted. Education Tax Offset Eligible families (generally parents entitled to Family Tax Benefit Part A) will be able to claim a 50% tax offset every year in their tax return for main education expenses up to
Eligible
expenses include:
As with all tax claims
it is recommended that good records with receipts be kept.
Minor benefits exemption may apply to benefit provided every year The provision of a 'minor benefit' (which must be less than $300) to an employee or their associate can be exempt from fringe benefits tax (FBT) if it meets the relevant criteria. One of those criteria requires a consideration of the infrequency and irregularity of the provision of associated, identical or similar benefits. The ATO recently confirmed that the provision of a Christmas party to employees and their associates every year would still be considered 'infrequent and irregular', and may, therefore, be exempt from FBT. It has now confirmed that the same rationale can apply to the provision of other benefits. An employer may not need to pay any FBT when it provides each of its employees with a reimbursement of $295 p.a. towards, say, a local gym membership. However, this would not be the case if the gym membership was included in an employee's salary package under a salary sacrifice arrangement. ATO has Cash Economy Compliance Action Recently the ATO sent over 9,000 letters to people who had applied for an owner/builder’s licence in NSW and Victoria, advising them about tax obligations of persons they were likely to employ and also sent 3,000 letters to shopping centre retailers, advising them that the shopping centre owners had provided the ATO with information about their business turnover and rental payments. Other actions include data matching from outside sources such as motor vehicle registrations, boat registrations, property purchases and sales, to check lifestyle against declared taxable income. Industry Benchmarks The ATO has been developing ‘benchmarks’ or ‘industry norms’ of the relationship between costs and income for various industries, to give people an idea of what range of income can be expected based on the work they do and other costs they incur, and so business operators can compare their performance with the rest of their industry. Apart from the taxi industry benchmarks brought out a few years ago, the ATO has now produced benchmarks for the following industries:
Other benchmarks will be
forthcoming for other building trades
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