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Tax Rates Changes                            TIP: Taxpayers who hold their
                                                 private health insurance with NIB
                                                                                     Fuel Tax Credits
The Bill amending the personal                   should consider the impact of the   The eligibility for fuel tax credits
income tax rates for the 2008-09                 proposed amendments, which will     has been expanded from 1 July
income year and later income                     provide CGT relief when a health    2008 to include all taxable fuels
                                                 fund demutualises.
years has become law.                                                                that a taxpayer uses in his or her
                                                                                     business activities, provided the
The Bill also increases the low-
income tax offset for those income          Taxpayer Alerts                          fuel is not used in a vehicle with a
                                                                                     gross vehicle mass of 4.5 tonnes
years ($1,200 for the 2008-09               The Tax Office has issued two
financial year). In addition, the                                                    or less travelling on a public road.
                                            Taxpayer Alerts warning
Bill increases the income                   taxpayers of arrangements that are       According to the Tax Office, the
threshold at which Medicare levy            currently being examined:                changes to the fuel tax credits
becomes payable for taxpayers                                                        scheme means that most
who are eligible for the senior             1.   land impairment trust               businesses, including those
Australian tax offset.                           arrangements which are              operating in construction,
 TIP: Taxpayers earning less than               associated with forestry            manufacturing, wholesale/retail,
    $30,000 for the 2008-09 income               managed investment schemes.         property management and
    year will qualify for the full low-                                              landscaping, will be able to claim
                                                 The Tax Office is concerned         credits.
    income tax offset. Taxpayers
    earning between $30,001 and
                                                 about whether these
    $60,000 will qualify for the offset,         arrangements give rise to a         Broadly, fuel tax credits provide a
    which will be pro-rated                      revenue or capital loss and         taxpayer with credits for the fuel
    accordingly.                                 how distributions from the          tax (excise or custom duty)
                                                 land trust should be treated        included in the price of the fuel.
Tax Law Changes                                  for tax purposes; and
In June 2008, the Government
                                                                                     Artworks and
introduced into Parliament a Bill to:
                                            2.   arrangements that have              Antiques
                                                 features which are designed
 provide relief from CGT for                    to allow a member of a              In a recent decision, the AAT set
     private health insurance policy             superannuation fund to              aside the Commissioner’s decision
     holders when their insurer                  circumvent the annual               to cancel retrospectively the GST
     demutualises to a for-profit                superannuation contributions        registration of a taxpayer whose
     insurer; and                                limits.                             sole activity was the acquisition of
 change the definition of                                                           artworks and antiques. Based on
                                                 The Tax Office is concerned         the evidence presented, the
     "family" and remove the                     that certain features of these
     ability for family trusts to                                                    Tribunal was satisfied that the
                                                 arrangements may give rise to       taxpayer was carrying on an
     make a one-off variation to                 taxation and superannuation
     the test individual specified in                                                enterprise despite minimal sales
                                                 regulatory issues.                  over a number of years
     a family trust election.

                                                                                                        August 2008
Two basic conditions must be                     PAYG Withholding                                   The tax laws contain provisions
satisfied before a taxpayer can                                                                     that allow loans by a private
register for GST: the taxpayer                   From 1 July 2008, 50% of the                       company to its shareholders (or
must be an entity, and either be                 low-income tax offset will be                      their associates) not to be treated
carrying on an enterprise or                     taken into account in determining                  as an unfranked dividend if the
intending to carry on an                         the PAYG withholding amount for                    loan is made under a written
enterprise.                                      eligible individuals.                              agreement. One of the
                                                 The remainder of the offset                        requirements of the agreements is
For GST purposes, the carrying on
                                                 entitlement will be paid upon                      that the interest rate to be used in
of an enterprise focuses on the
                                                 assessment of the individual’s                     calculating the interest payable on
activity or series of activities that
                                                 income tax return.                                 the loan for a financial year must
a taxpayer engages in, and
                                                                                                    equal or exceed the benchmark
includes running a business.
                                                 PAYG Summary                                       interest rate for that financial year.
Super Rates and                                  The Deputy Commissioner has
Thresholds                                       issued a Legislative Instrument                    Car Limits
                                                 that removes the requirement for                   The Tax Office states that the car
The Tax Office has released the
                                                 superannuation funds to issue a                    depreciation limit for the 2008-09
2008-09 indexed superannuation
                                                 payment summary to a recipient                     financial year is $57,180.
rates and thresholds, which cover
                                                 for a superannuation lump sum
contribution caps, concessionally                                                                   The Tax Office also states that the
                                                 benefit paid, where the recipient is
taxed superannuation lump sums,                                                                     luxury car tax threshold for the
                                                 classified as having a terminal
employment termination                                                                              2008-09 financial year is $57,180.
                                                 medical condition.
payments, superannuation
guarantee and superannuation co-                 The Legislative Instrument applies
contributions.                                   from the 2007 income year.                         GIC and SIC Rates
The concessional and non-                        GST and PAYG
concessional contributions caps
are $50,000 and $150,000
                                                 Instalment Rate                                    The Tax Office has released the
                                                                                                    general interest charge and
respectively, which did not change               The Tax Office has advised that                    shortfall interest charge rates for
from the 2007-08 income year.                    the Gross Domestic Product                         the first quarter of the 2008-09
                                                 (GDP) factor used to calculate                     income year:
If the assessable income and
                                                 taxpayers’ GST and PAYG
reportable fringe benefits (if any)                                                                 Rate       Annual          Daily
                                                 instalment amounts will increase
of a taxpayer do not exceed
                                                 to 8% from 1 July 2008.                                       (%)             (%)
$30,342 for 2008-09, the taxpayer
will qualify for the maximum co-                 Taxpayers who use the GDP-                         GIC        14.75           0.04030054
contribution of $1,500.                          adjusted notional tax method to
                                                 calculate their PAYG or GST                        SIC        10.75           0.02937158
Child Support and                                instalments may see an increase in
Tax                                              their instalment amounts from the
                                                 first quarterly instalment for the                 The Tax Office has also released
The Government has announced a                                                                      the interest rate for overpayments,
                                                 2008-09 income year.
range of new measures aimed at                                                                      early payments and delays in
boosting the collection of child                 Division 7A Interest                               refunds for the first quarter of the
support payments. The measures
                                                 Rate                                               2008/09 income year. The
                                                                                                    applicable interest rate is 7.75%.
                                                 The Tax Office has stated that the
   requiring both parents (the
                                                 benchmark interest rate for the
    liable parent and the recipient
                                                 2008-09 income year for the
    parent) to lodge a tax return;
                                                 purpose of calculating the interest
                                                 component of a loan from a
   stopping salary sacrifice being              private company to its
    used to minimise child                       shareholders (or their associates)
    support obligations.                         is 9.45%.

Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items h erein are general
comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that
our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for t heir private
information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

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