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From time to time we pick up income and goods & services
taxation tips for our clients.
You are welcome to browse!
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Unless advised
otherwise, 2006 Tax Returns for our clients are due for lodgement
by the end of April 2007. If your lodgement date is earlier,
we will send a letter advising you of when your Return is
to be lodged.
Please ensure that you have provided us with your tax information
well in advance of your lodgement date. It takes us four to
six weeks to process your work, so the earlier we receive
it, the earlier it gets completed.
Remember
– late penalties and interest may apply to late lodgements.
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The Company Tax Rate for 2005-06 remains unchanged
at 30%.
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The Seniors Tax Offset (SATO) is age and income dependent.
Males must be over 65 and females 60.5 years at the end
of the financial year. The effect of the tax cuts announced
in the May budget is that, from 1 July 2006, senior Australians
who receive the Tax Offset will be able to earn more income
without paying tax. Singles will be able to have income
up to $24,867 (previously $21,968), and couples up to
$41,360 (previously $36,494) before they are liable to
pay tax.
The Medicare levy thresholds that apply to senior Australians
will also be increased to ensure that they do not pay
the levy until they begin to incur an income tax liability.
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From 1 July 2006 the part-year tax-free threshold for
taxpayers ceasing full-time education will be removed
(effective from 2006/07 income year).
However, the full tax-free threshold of $6,000 will
be extended to all resident taxpayers that cease full-time
education for the first time.
This means that the requirement for these taxpayers
to calculate a part-year tax-free threshold will be
removed and will end the requirement for taxpayers to
isolate income (and any deductions) attributable to
the period during which a taxpayer was studying full-time.
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A new 30% tax offset is available to individual taxpayers for
the difference between fees incurred for approved child care
and the Child Care Benefit (CCB), up to $4,000 per child, for
taxpayers who received the CCB and meet the CCB work/study training
test. The tax offset applies to out-of-pocket child care
expenses incurred from 1 July 2004.
However, the expenses incurred in one year can only be claimed
in the succeeding year. i.e. out-of-pocket expenses for 2004/05
are claimed in the 2005/06 tax return.
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Simplification of Superannuation
The Government has proposed substantial changes to
the way in which people fund for their retirement and
withdraw their benefits. Further clarification of these
changes is expected during 2006-07.
In general, however, the changes are focused on the
complexity of the superannuation system.
The following is a snapshot of the changes proposed
from 1 July 2007:
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Superannuation
benefits paid from a taxed superannuation fund as
either a lump sum or pension will be tax free in
the hands of retirees over the age of 60 |
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A person aged less than
60 under the proposed arrangements will remain subject
to tax on superannuation withdrawals but under a
streamlined regime |
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Benefits paid from an
untaxed superannuation fund (such as ComSuper) will
remain subject to tax, but at lower rates than currently
apply |
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Reasonable Benefit Limits
will be abolished |
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Superannuation contributions
and fund earnings will remain concessionally taxed
(currently 15%) |
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Changes have been made to the age-based contribution
limits to streamline the amount that can be claimed
annually by a taxpayer. In the May budget, a cap
of $150,000 was put on personal undeducted superannuation
contributions made from post-tax income effective
immediately.
The Treasurer made a further announcement in
mid-June allowing the cap to be average over three
years.
In addition, contributions made between 1 July
2005 and 9 May 2006 will not contribute to the
cap. This means that the 2005-06 cap of $150,000
would apply only for contributions made between
10 May 2006 and 30 June 2006.
Under proposed averaging arrangements, it would
be possible for a person to contribute $450,000
of post-tax contributions between 10 May and 30
June2006, fully utilise their entitlements for
2005-06 and average them over the three years
2005-06-07-08. |
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The Government claims
that the preservation rules will not change in that
the preservation age was already scheduled to increase
from 55 to 60 in the period 2015 and 2020.
What the Government has not told us is that a person
who would normally retire at age 55 will now need
to defer their retirement until they are aged 60
if they wish to withdraw their benefits tax free. |
It is also likely that if retirement benefits are received
tax free after the age of 60, that this will encourage
individuals to remain in the workforce longer.
Further, as retirement benefits from taxed funds will
not be included in a retiree’s assessable income,
a person will be encouraged to remain in some form of
employment beyond retirement age.
Increased Incentives to Save for
Retirement
In addition to exempting from income tax benefits withdrawn
from a fund on retirement, the Government is also substantially
enhancing the benefits available for contributors to
a superannuation fund.
The main changes in this area include:
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The self employed will be entitled
to a full tax deduction for amounts contributed
to a taxed fund.
Currently self employed people are entitled to a
deduction of $5,000 plus 75% of amounts contributed
in excess of that amount up to maximum deduction
limited to the age based contribution limit. |
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The age at which tax deductible contributions
can be made to a fund will be extended to 75.
Currently, deductible contributions can only be
made up to 70, and then only if a person has satisfied
certain work tests.
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Greater Flexibility on When to Withdraw Benefits from
Taxed Funds
There will be greater flexibility on how benefits can
be withdrawn.
Benefits withdrawn as either pensions or lump sums will
be exempt from income tax if received after the age
of 60. In addition it would appear that a person will
not be required to withdraw their benefits from a fund
simply because they have obtained the age of 65 and
no longer continue to work a minimum number of hours.
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Capital Gains Tax: Small Business Concessions
Made Easier
Capital Gains Tax (CGT) exemptions and reductions for small
business will be available to more taxpayers with the following
changes from 1 July 2007.
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The 50% controlling individual
test will be replaced with a 20% significant individual
test that can be satisfied directly or indirectly through
one or more interposed entities. This will allow more
small businesses to use these concessions.
The Government has stated that the changes will allow
up to 8 persons to utilise the small business concessions
from a particular entity
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The maximum assets threshold test will be increased
from $5 million to $6 million
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The definition of ‘active asset’
will be extended to include assets that were active for
the lesser of either half the period of ownership or 7
½ years |
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Small businesses will be allowed concessions
for disposals of assets by deceased estates where the
assets of the deceased person were active assets and the
disposal is within 2 years of the date of death |
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Taxpayers who are in the Simplified Tax
System (STS) to be eligible to the CGT small business
concessions without having to meet the $6m asset threshold. |
Further Simplifying the STS
The Simplified Tax System (STS) will be available to more
taxpayers with the following changes:
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An increase in the average annual
turnover threshold from $1m to $2m |
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Removal of the $3m depreciating asset
threshold test
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STS taxpayers will now be able to pay quarterly
PAYG instalments on the basis of GDP-adjusted notional
tax |
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The Government is considering aligning certain
GST definitions of turnover with the STS definition. |
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Reduction in Rate
The Fringe Benefits Tax (FBT) rate will reduce from its current
level of 48.5% to 46.5% with effect from 1 April 2006. This
change recognises the reduction in the highest personal income
tax rate against which the FBT rate has traditionally been
benchmarked.
Increase in the In-house Benefits Tax Free Threshold
In-house fringe benefits are goods and services provided
to employees which are similar to the goods and services which
the employer provides to the public in the ordinary course
of its business. Under the current FBT legislation, employees
are able to receive $500 worth of in-house fringe benefits
free of FBT. The Government announced an increase in the threshold
to $1,000 with effect from 1 April 2007.
Increase in the Minor Benefits Exemption Threshold
Under the current FBT legislation, benefits with a value
of $100 or less, which are infrequently provided to employees,
are exempt from FBT. The Government announced an increase
in the threshold to $300 with effect from 1 April 2007.
Increase in the Reportable Fringe Benefits Exclusion Threshold
Under the current FBT legislation, employers are required
to report on an employee’s PAYG payment summary the
grossed-up value of fringe benefits received by the employee
where the non grossed-up value of the benefits received by
the employee exceeds $1,000. The Government announced an increase
in the threshold to $2,000 from 1 July 2006.
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The maximum claim is 5,000 km per vehicle
| Conventional Cars |
Rotary Driven Cars |
Cents Per Kilometre |
Up to 1600cc
(Up to 1.6 litre)
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Up to 800cc
(Up to 0.8 litre)
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55.0 |
1601 - 2600cc
(1.601 – 2.6 litre) |
801 - 1300cc
(0.801 – 1.3 litre)
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66.0 |
2601cc and over
(2.601 litre +)
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Over 1301cc
(1.301 litre +) |
67.0 |
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| 2005
– 06 Tax Rates |
2006
– 07 Tax Rates |
(1)
Taxable Income
$
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(2)
Tax on column (1)
$
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(3)
% on excess
(marginal rate)
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(4)
Taxable Income
$
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(5)
Tax on column (4)
$
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(6)
% on excess
(marginal rate)
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| 1
- 6,000 |
Nil
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Nil
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1 - 6,000 |
Nil |
Nil |
| 6,001
– 21,600 |
Nil
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15%
on excess over $6,000 |
6,001 – 25,000 |
Nil |
15% on excess over
$6,000 |
| 21,601
– 63,000
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2,340 |
30%
on excess over $21,600 |
25,001 –
75,000 |
2,850 |
30% on excess over
$25,000 |
| 63,001
– 95,000 |
14,760 |
42%
on excess over $63,000 |
75,001 –
150,000 |
17,850 |
40% on excess over
$75,000 |
| 95,001
+ |
28,200 |
47%
on excess over $95,000 |
150,001 + |
47,850 |
45% on excess over
$150,000 |
Please note that these rates do
not include the Medicare Levy of 1.5%
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Ledger Rutledge & Walker Pty Ltd 