Disclaimer
Disclaimer
Government to phase out Spouse Rebate (published 10/06/2011)
The Government has announced in its annual budget that it will phase out the spouse rebate for dependent spouses who are under the age of 40.
Be aware of the changes to the dependent spouse tax offset.
- The dependent spouse tax offset is designed to assist taxpayers who maintain their spouse by offering a tax rebate which can be offset against any tax payable.
- In general, taxpayers are eligible for the dependent spouse tax offset if they satisfy the following conditions:
- They maintained their spouse;
- Their spouse was a resident for tax purposes;
- The taxpayer was a resident for tax purposes; and
- Neither the taxpayer nor their spouse was entitled to claim Family Tax Benefit Part B.
- The Government has now announced that the tax offset for dependent spouses under the age of 40 will be phased out in order to encourage more Australians into paid employment.
- As a result of the changes taxpayers with spouses who are younger than 40 years old from the 2011-12 financial year onwards will not be eligible for the dependent tax offset.
- In order for eligible taxpayers to claim the tax offset, taxpayers will also need to ensure that their taxable income and their spouse's separate net income are below the relevant year's thresholds.
- The announced changes will not affect taxpayers whose dependent spouse is either:
- A carer;
- Permanently unable to work; or
- Eligible for the zone rebate, overseas forces or overseas civilian tax offset.
Remember from 2012, you may not be entitled to a spouse rebate if your spouse is under 40.
Increase in the Medicare low income threshold (published 10/06/2011).
With the release of the 2011 Federal budget, the Government has announced it will increase the Medicare levy low income thresholds from the 2010/11 income tax year.
- The Medicare levy is a scheme designed to give Australian residents access to health care.
- To fund the scheme all Australian tax residents are required to pay a levy of 1.5% of taxable income.
- There are however, exemptions available to people earning under a certain income threshold which is currently $18,488 for individuals and $31,196 for individuals in families.
- From the 2010-11 year, the Medicare levy low income thresholds will be increased to $18,839 for individuals and $31,789 for individuals in families.
- The additional amount of threshold for each dependent child or student will also increase to $2,919 (up from $2,865).
- Further, the Government has announced it will increase the Medicare levy low income threshold for pensioners below Age Pension age to $30,439 (up from $27,697).
- The increases in the relevant thresholds will take effect from July 1, 2010.
The changes to the low income threshold apply from the 2010/11 financial year.
Changes to Family Tax Benefit (published 10/06/2011).
Are you a recipient of the Family Tax Benefit A and/or B?
With the release of the Federal Budget, the Government has announced changes to the Family Tax Benefit system.
- The 2011 Budget provides for an increase in FTB Part A for 16-19 year olds, which are as follows:
- § From January 1, 2012, the new maximum rate of FTB Part A for 16-17 year olds in secondary school will be increased to $214.06 per fortnight (up from $52.64 per fortnight), an increase of around $4,200 per year;
- § The FTB Part A for 18-19 year olds increases by $3,741 per year; and
- § Increases to FTB Part A will only be available to families where the 16-19 year olds are in either full-time secondary study, or the vocational equivalent.
- From January 1, 2012 the Government will also lower the maximum eligibility age for FTB Part A from 24 to 21, which will bring it into line with the reduction in the Youth Allowance age of independence.
- From July 1, 2012, families will be able to advance a maximum of 7.5% of their total rate of FTB Part A payment up to $1,000.
- The Government has also announced it will extend indexation pauses on higher income limits in the following areas:
- The FTB Part B primary earner income limit will remain at $150,000;
- The income threshold for the FTB Part B primary earner receiving dependency tax offset will remain $150,000;
- The Baby Bonus eligibility limit will remain at $75,000 of family income in the 6 months following the birth or adoption of a child;
- The Paid Parental Leave income limit remains at $150,000 for the primary carer in the previous financial year before the birth of the child; and
- The higher income-free area of FTB Part A will remain the same.
- Fortnightly payment rates for FTB and the Baby Bonus will continue to be indexed every year.
New depreciation rates, write-offs and tax rate for small businesses! (published 10/06/2011).
Are you the owner of a small business?
The Government has announced that it will introduce new tax write-offs and a reduced tax rate for small businesses from 2012-13.
Be aware of the new depreciation tax rates.
- The 2011-12 Budget has revealed that a number of instant tax write-offs and a reduced income tax rate have been introduced for small businesses to assist the Australian economy.
- The following changes will come into effect from the 2012-13 financial year:
- · An immediate write off of the first $5,000 of any motor vehicle. The balance, if any, can be depreciated using the new depreciation rules for small business entities.
- · An immediate write off of all other assets that are under $5,000, up from $1,000 under the current rules.
- · All other assets, except buildings, can be written off under the new depreciation rules consisting of a single depreciation pool at a rate of 30%. Under the current legislation, assets are allocated to 2 different pools with different depreciation rates of 5% and 30%.
- · A reduction in the company tax rate from 30% to 29% for incorporated small businesses.
- The immediate write off of the first $5,000 of any motor vehicle will replace the current Entrepreneur Tax Offset (ETO) with effect from the 2012-13 income year, as the ETO has been deemed a costly and ineffective tax incentive for small businesses.
- The reforms will be available to all small businesses, including sole traders and businesses operating through trusts, partnerships and companies.
- The tests used to determine whether a business can be considered a small business has not changed.
Remember only small businesses qualify for these concessional tax and depreciation rates.
Education tax refund reminder (published 10/02/2011).
Are you a parent and entitled to Family Tax Benifit PART A ?
The Prime Minister has reminded parents of children heading back to school that they can take advantage of the "education tax refund" to assist with the fees.
Be aware of the Education Tax Refund.
The Education Tax Refund is designed to support parents by offering refunds for their children's eligible education expenses for the 2010/11 financial year of up to:
- $397 per year for primary school students, up from $390 in 2009/10; and
- $794 per year for secondary school students, up from $779 in 2009/10.
The expenses currently eligible for the Education Tax Refund include:
- Laptop Computers
- Home Computers
- Printers
- USB flash drives
- Disability aids to assist with computers
- Computer repairs
- Home internet connections
- Educational computer software
- School textbooks
- Stationery
- Prescribed trade tools for secondary courses
Parents can claim a refund for these education expenses in their income tax returns at the end of the financial year.
The government will also extend the refund to school uniforms from July 1, 2011.
Remember you may be entitled to a refund for your childrens education expenses.
Timing your superannuation contributions (published 09/02/2011).
Are you a trustee or a member of a superannuation fund ?
The Tax Office has released a ruling that explains when contributions to your Superannuation Fund will be recognised by your fund and when you can claim them.
Be aware when your superannuation contributions will be recognised.
- A recent Tax Office ruling has defined a Superannuation contribution as "anything of value that increases the capital of the fund" which is provided by the members.
- Members and trustees of Superannuation Funds should be familiar with the timing of contributions, in order to avoid having to pay excess contributions tax on concessional and non-concessional contributions.
- The Tax Office has released a table that outlines the timing of various types of contributions:
Type of Contribution |
Timing of Contribution |
Cash and Money Order |
When received by the fund |
Electronic Funds Transfer (EFT) |
When the amount is credited to the fund's account (not when paid) |
Bank or personal cheque |
When received by the fund |
Post-dated cheque |
The date on the cheque |
Promissory note |
When received by the fund |
Transferring assets such as listed securities or business real property |
When beneficial ownership changes (not when legal ownership changes) |
Increasing the value of an asset already owned by the fund |
When the improvement becomes a fixture to the land or building |
Paying for an expense or repayment of a loan of the fund without reimbursement |
When the amount is paid |
Forgiving a loan to the fund |
When the lender executes a deed of release |
Creation of a right to receive income |
When the fund's liability is satisfied |
These timing differences can influence whether the fund exceeds their contributions caps as well as when members and their employers are able to claim these contributions as a deduction in their tax return.
Remember excess contributions as a result of timing differences may result in penalty taxes applying.
Donations to Flood Victims (published 06/02/2011)
Are you Intending to assist those affected by the flood disaster?
The Tax Office has released guidance to help taxpayers who wish to assist victims of the recent floods in Queensland and Northern New South Wales.
Ensure you are aware of the deductibility of your donations.
- In early 2011 major floods have struck much of Queensland and Northern New South Wales, causing casualties and widespread damage to property.
- Many relief appeals have been launched to help victims of the disaster by collecting donations to support relief operations.
- The Tax Office has confirmed that taxpayers who contribute to approved charities for relief efforts in the affected areas can claim a tax deduction for their donations.
- The Tax Office will also allow deductions for donations up to $10 made to so-called "bucket appeals" for the floods without the need to retain a receipt for the gift. In order to claim gifts over $10, taxpayers will need to keep a receipt.
- For donations made over the internet, taxpayers can claim a deduction if they keep a copy of their bank or credit card statement.
- Organisations that collect donations on behalf of approved charities are reminded to ensure that they comply with relevant state and territory government collections acts. Other donations to relief appeals are also tax deductible provided the charity is a registered deductible gift recipient.
- Taxpayers can check whether an organisation is a registered deductible gift recipient by visiting the Australian Business Register website at www.abr.gov.au.
Remember ensure any donations you make to help victims of the recent floods are to a registered deductible gift recipient.
SMSF's: Share Investor or Share Trader ? (published 29/08/2010).
Are you a trustee or member of a Self Managed Superannuation Fund?
The Tax Office has released a new guide to help trustees of SMSF's understand the difference between share investing and share trading..
-Ensure you are aware of the correct tax treatment for your fund's investments.
- Contact us if you require any clarification or advice.
- Many investments have fallen in value over the past year as a result of the global financial crisis. It is expected that many superannuation funds will report significant losses in their income tax returns.
- Normally, revenue losses can be used to offset other assessable income. Capital losses however, can only be used to offset capital gains made in the same year otherwise they are carried forward to offset capital gains from future periods.
- A revenue loss is a loss arising from carrying on a business for the purpose of earning income. Generally, taxpayers who carry on a business of share trading can recognise revenue losses.
- In contrast, a capital loss is a loss made by someone who holds shares for the purpose of earning income from dividends and similar receipts (i.e. an investor), or as a longer term investment.
- Many trustees are incorrectly classifying their funds as they believe that as the fund's main activities relate to the buying and selling of shares they meet the definition of a share trader.
- The Tax Office advises that such an interpretation is incorrect as most SMSF's will not satisfy the definition of a share trader.
Remember, ensure that you correctly classify losses from the sale of your fund's investments.
Small Business Tax Calendar for 2011
Are you a small business owner ?
The Tax Office has released an updated electronic calendar to help small businesses keep track of their lodgment and payment due dates for the 2011 income year.
Be aware of the tax calendar for small businesses.
Contact us if you require any clarification or advice.
- The calendar can be personalised to suit your requirements depending on the structure and size of your small business.
- The calendar shows all the lodgment and payment due dates for the 2011 income year, such as when to lodge activity statements and when to pay superannuation guarantee contributions on behalf of your employees.
- The small business calendar is designed for the use of businesses with annual turnover below $2 million.
- Small business owners are encouraged to get the latest version of the calendar to ensure they have the latest lodgment and payment information.
- Click here for a copy of the small business tax calendar or visit the Tax Office website at www.ato.gov.au
Remember, ensure you are aware of the small business tax calendar.
Overview of Concessions for Small Business Entities
Are you a small business owner?
The Tax Office has released an overview of all the tax concessions small business entities are entitled to claim if they meet the eligibility requirements.
Consider whether you are eligible for the Small Business Concessions.
Contact us if you require any clarification or advice.
- Small businesses are eligible to make use of a range of tax concessions to allow them to reduce their tax liabilities and better fund their business operations.
- Eligible businesses can choose to use the following concessions:
- Capital Gains Tax 15 year exemption
- 50 per cent active asset reduction
- Capital Gains Tax retirement exemption
- Capital Gains Tax rollover;
- Simpler depreciation rules;
- Simpler trading stock rules;
- Immediate deductions for certain prepaid business expenses;
- Entrepreneurs' Tax Offset
- Accounting for GST on a cash basis;
- Annual apportionment of GST input tax credits;
- Paying GST instalments;
- FBT car parking exemption; and
- PAYG instalments based on GDP.
- Businesses qualify for the above concessions if their aggregate turnover is less than two million dollars.
- Other entities may be eligible for the CGT concessions if their net assets are $6 million or less, and the FBT car parking exemption if their income is less than $10 million.
Remember, consider whether you may be entitled to use the Small Business Concessions to reduce your taxable income.
Just What Exactly is Personal Services Income ["PSI"]?
Are you self employed and earn income as a reward for your personal skills or effort ?
Taxpayers who earn income from personal services endeavours are prevented from operating under certain structures and may have certain deductions against their assessable income disallowed.
Consider whether the income you earn is "personal services income".
Contact us if you require any clarification or advice.
- The personal services income regime works by attributing any income a taxpayer earns from services provided using their own skills and preventing taxpayers from transferring income from those services into entities which may pay tax at lower rates such as companies.
- Income will be deemed to be personal services income if:
- The income is earned by a professional without any outside assistance;
- The income was paid for a contract where labour costs were more than 50% of the costs; or
- Was earned by a professional sportsperson or entertainer exercising their skills.
- Income which the Tax Office will not deem to be personal services income includes:
- Income from the sale or supply of goods;
- Income from an income producing asset;
- Income from granting a right to use property; and
- Income generated by a business structure.
- Generally taxpayers who work as contractors will fall under the PSI regime and all income from their services will be attributable to them personally.
- Taxpayers who are caught under this regime will have to report all the income deemed to be personal services income in their own tax return and pay tax at their marginal tax rate and are also prevented from claiming certain deductions.
Remeber, consider whether the PSI provisions may apply to you, and if so, whether there are any tests that you can satisfy to avoid them.
Small Business Concessions - Calculating your Aggregate Turnover
Are you an owner of a small business?
The Tax Office has released a guide to assist business owners in determining whether they meet the requirements to be considered a Small Business Entity (SBE) and are able to make use of the SBE concessions.
Consider whether you are eligible for the Small Business Concessions.
Contact us if you require any clarification or advice.
- Small businesses are eligible to make use of a range of tax concessions which enable them to reduce their tax liabilities and better fund their business operations.
- Businesses may qualify for these concessions if they meet either the "Maximum Net Asset Value" test or the "Aggregate Turnover".
- Generally, the aggregate turnover test requires that the aggregate turnover of a business be $2 million or less.
- To calculate aggregate turnover, the following items must be included:
- Trading stock sales;
- Fees charged for services provided;
- Interest from business bank accounts; and
- Any payments received to replace lost earnings.
- The following items are not included in calculating aggregate turnover:
- GST charged on transactions;
- Amounts borrowed by the business;
- Proceeds from selling capital assets;
- Insurance proceeds received for the loss of business assets; and
- Any amounts received from farm management deposits.
Insurance Requirements for SMSF's
Are you a trustee of a Self Managed Superannuation Fund?
Trustees of Self Managed Superannuation Funds which invest in real property must ensure that they have adequate insurance cover.
Be aware of the insurance requirements for superannuation funds.
Contact us if you require any clarification or advice.
- Trustees of Self Managed Superannuation Funds [SMSF's] must ensure that they take appropriate steps to mitigate any risks which could impact on the retirement savings of the funds' members.
- SMSF's which hold investments in real property, both commercial and residential, need to ensure that they hold adequate insurance to recover any losses should damage occur to the properties.
- Property owners also need to consider taking out public liability insurance to ensure that they are protected from liability should any members of the public be injured whilst on the property.
- A recent case involving the electrocution of an electrician on a commercial property has highlighted the need for adequate insurance cover by SMSF's. In the case, the trustee of the fund was found liable for damages caused to the electrician from the incident.
- Trustees who are unsure of the level of insurance required for their fund must seek advice to ensure that the SMSF's assets are fully protected.
Ensure you are aware of the insurance requirements for your SMSF.
The above article are not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this article. All information is subject to change without notice. We and each party providing material displayed in this article disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of the information or material in this article. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.
