News in 2006.... Cotter Accountancy

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Home About Us Our Services Contact Us News Lodgement Dates Seminars Careers	News in 2006 Jan \| Feb \| Mar \| Apr \| May \| Jun \| Jul \| Aug \| Sep \| Oct \| Nov \| Dec Peter Costello's 2006/7 Budget 2010 2009 2008 2007 2006 2005 Note: News items include proposed legislative changes which generally take effect at a later date. DECEMBER 2006 Loans to shareholders On 6 December 2006, the Minister for Revenue and Assistant Treasurer announced amendments to the rules concerning loans made to shareholders of private companies. The current rules require companies to self-assess that any loans made to shareholders and still existing at year end be treated as dividends to the shareholder unless a commercial loan agreement has been put in place. In some cases this has resulted in harsh and unintended consequences. Superannuation changes effective 1/7/2007 Changes to superannuation that the government announced in May 2006 were introduced into Parliament. Bankruptcy Changes Legislation was introduced on 6 December 2006 which seeks to enable a bankruptcy trustee to recover superannuation contributions made prior to bankruptcy with the intention to defeat creditors. Top of page NOVEMBER 2006 Approved occupational clothing guidelines updated The Assistant Treasurer has issued updated Approved Occupational Clothing Guidelines which were registered on the Federal Register of Legislative Instruments on 3 November 2006. An employee can claim a tax deduction for the rental, purchase or maintenance of a non-compulsory uniform if the design is entered on the Register. Treasurer announcement - eligibility criteria for small business tax concessions to be standardised In a joint press release on 13 November 2006, the Treasurer and Minister for Small Business announced that the Government will introduce legislation to standardise the eligibility criteria for small business tax concessions from 1 July 2007. Under the proposal, small businesses will only have to apply one eligibility test to access GST, STS, CGT, FBT and PAYG small business concessions. Small businesses meeting a $2 million annual turnover test will be able to access any of these concessions. Further, businesses with existing access to CGT, FBT and PAYG small business concessions will be able to continue accessing these concessions whether they meet the new small business definition or other existing eligibility criteria. Top of page OCTOBER 2006 Service trusts and the medical profession The Assistant Treasurer has advised that, following consultation with the AMA and a degree of independent verification, the Tax office booklet on service trust arrangements also includes rates as specific guidance for the medical profession in terms of medical practice arrangements that differ from conventional service arrangements. These rates are based on fixed percentages of gross practice fees, as opposed to a mark up on cost approach. New website quiz The website featuring financial tips and safety checks for consumers operated by ASIC – known as FIDO – has designed an online money quiz especially for women. The quiz, which has been developed to enable women to assess their money skills and encourage them to focus on their financial decisions and long-term goals, includes questions about super planning, budgeting, managing credit cards, relationship debt and investing. Visit the FIDO website to take the test. Top of page SEPTEMBER 2006 In addition to the superannuation changes announced in the Budget (refer under the MAY 2006 heading below) the following measures were announced on 5 September 2006: subject to any applicable work test (affecting those 65 and over) people will be able to make up to $1 million of undeducted contributions between 10 May 2006 and 30 June 2007 which will allow people who were planning a large contribution under the existing rules to do so; The $150,000 annual limit on undeducted contributions will commence from 1 July 2007. People aged less than 65 will be able to bring forward two years of contributions, enabling $450,000 to be contributed in one year, with no further contributions in the next two years. in addition to the annual cap, people can contribute: a lifetime limit (indexed) of $1 million from the sale of small business assets which have been held for 15 years; and settlements for injuries resulting in permanent disablement; simplification of the indexation of the contribution caps to Average Weekly Ordinary Time Earnings. Increases will be applied in $5,000 lots to make it easier for people to understand how much they can contribute to superannuation; the arrangements to administer the contribution caps will be streamlined; there will be transitional arrangements for employer eligible termination payments which were specified in existing employment contracts as at 9 May 2006 and are paid before 1 July 2012; the concessional tax treatment of the employee invalidity benefits will be extended to the self-employed; new arrangements to encourage people to quote their tax file number to their superannuation fund including: a Government funded education campaign; allowing people up until 30 June 2008 to quote their TFN before the withholding tax need apply; a refund of any tax withheld for a period of up to four years; allowing quotation of a TFN for employment purposes to be treated as being for superannuation purposes; removal of the $1,000 threshold for accounts commenced from 1 July 2007; and the ATO using their systems to improve the quotation of TFNs; the concessional amount of lump sum benefits from an untaxed source will be increased from $700,000 to $1 million; and the regulation of self-managed superannuation funds (SMSFs) will be improved by increasing funding to the ATO for compliance activities, streamlining reporting requirements and other measures. The supervisory levy will be increased from $45 to $150 which will place SMSFs on a similar cost recovery basis as other superannuation funds. super funds will be required to calculate the pre 1 July 1983 component of existing accumulated benefits as at 1 July 2007 and this amount will remain as a fixed component in the future i.e. there will be no further increases applied to this component. death benefits paid as a pension to a dependant child will have to be paid as a tax free lump sum at age 25. deductible and undeducted contributions made in excess of the annual cap will be taxed to the individual at 46.5% (however the individual may direct the fund to pay the liability). Top of page August 2006 On 15 August 2006 the Treasurer announced amongst other “Red Tape reduction” measures: a new GST simplified accounting method (“SAM”) for small restaurants, cafes and caterers who are expected to have the option of using a formula to calculate their entitlement to GST credits. This means they will no longer need to identify and record the GST credits on each purchase – commences 1 October 2006; commencement of work on the national streamlining of business names through the ABN/ABR website; alignment between definitions of small business, employer and associate; These are in addition to the other measures announced in the May Budget in relation to simplifying superannuation (see May 2006 below). A new Bill has been introduced which will remove the part-year tax-free threshold for taxpayers who cease to be engaged in full-time education for the first time. These amendments extend the standard tax-free threshold of $6,000 to students who cease full-time education for the first time in the same way that it applies to other resident taxpayers. The ATO has confirmed that individuals in direct receipt of personal services income, but who are not conducting a personal services business, may be eligible to enter the simplified tax system and claim the entrepreneurs’ tax offset , provided that they are carrying on a business in the income year. The Tax Office states says that whether an individual is carrying on a business must be decided on the facts of each case. The ATO advises that for 30% child care tax rebate claims for the 2006 year, there may be some circumstances where data held by the ATO for ‘total fees for eligible Child Care Benefit (CCB) hours’ will not match tax agents' clients’ records for ‘total fees’. Some child care providers charge per session which may result in clients being charged for more than 50 hours of approved child care for a week. Unless clients have got approval, and received CCB for hours in excess of 50 per week, the additional hours will not be included in the ‘total fees for eligible Child Care Benefit hours’ data held by the ATO. These clients should use their own records to calculate the ‘total fee’ in their 2006 income tax return. Top of page July 2006 Superannuation contributions made prior to bankruptcy with the intention to defeat creditors will now be recoverable by bankruptcy trustees following changes announced on 27 July 2006. June 2006 During the period 10 May 2006 to 30 June 2007 a super fund trustee is not required to compulsorily cash a members benefits where the member is aged between 65 and 74 and does not meet the current work test, or if the member is aged 75 or over. Transitional provisions are announced in relation to the changes proposed in the May budget. Firstly in relation to the $150,000 annual cap on post-tax (undeducted) contributions – the Government has now decided to allow the cap to be averaged over three years in order for contributors to accommodate larger one-off payments. Any undeducted contributions made during 1 July 2005 and 9 May 2006 will not count towards the annual cap for the 2005/06 year of income. Any cap not utilised in a year will be lost – it cannot be recouped in a latter year. The annual cap excludes any amounts contributed by way of CGT exempt components i.e. due to the small business CGT exemptions. Top of page May 2006 The Budget in a nutshell… Personal tax cuts – from 1 July 2006 new thresholds for taxpayers paying tax at over 30% marginal tax rate; the highest tax rate of 45% will not kick in until after $150,000 threshold is reached Family tax benefits – from 1 July 2006 income eligibility threshold for Part A benefit increased to $40,000, and families with 3 children now considered eligible for the $248 Large Family Supplement Fringe benefits tax rate – reduced to 46.5% from 1 April 2006 Retirement Benefits – from 1 July 2007 tax free in whichever form taken after 60 years of age Reasonable Benefits Limits – from 1 July 2007 abolished Deductible contributions – from 1 July 2007 to be capped at $50,000 for all regardless of age or whether employee or self employed (possible transitional measures for those over 50) Undeducted contributions – from 9 May 2006 to be capped at $150,000 per annum (possible provision for this to be available as a 3 year limit i.e. $450,000 within 3 years) Market linked pensions (TAPs) and annuities – from 20 September 2007 loss of the 50% assets test exemption for Government pension purposes Small business compliance simplification – significant changes to the operation of small business tax relief included in Simplified Tax System (STS), CGT, GST and PAYG. These range from increases in thresholds, changes in eligibility and changes in definitions: increase STS annual turnover threshold from $1m to $2m increase net assets threshold for CGT purposes from $5m to $6m STS taxpayers exempt from CGT net asset threshold access to small business CGT concessions improved enable STS taxpayers to pay quarterly PAYG instalments in fixed predetermined amounts an alignment of STS and GST definitions to turnover Top of page APRIL 2006 The Government has provided an interim response on their commitment to reduce regulatory burdens on business. It responds to a range of recommendations aimed at reducing business red tape, including: an increase in the minor fringe benefits exemption threshold from $100 to $300, effective from 1 April 2007 an increase in the fringe benefits reporting exclusion threshold from $1000 to $2000, effective from 1 April 2007 a halving of the incorporation fee from $800 to $400, at an estimated cost of $216.4 million over the Budget forward estimates period Legislation was passed to allow a 5-year write-off for certain business capital expenses (including pre- and post-business expenses) that are not otherwise recognised and are not denied a deduction elsewhere in the income tax law. These measures apply to expenditures incurred on or after 1 July 2005. The long awaited Taxation Ruling dealing with service entity arrangements was issued on 20 April 2006, together with a guide. The ATO will allow a period of 12 months after the release of the Ruling/guide, ending on 30 April 2007, for affected taxpayers to review their service arrangements and bring them in line with the information contained in the guide. The ATO will, however, continue its audit program during this transitional period in relation to those arrangements which are considered to be of high risk i.e. where all of the following three tests are met: Service fee expenses are over $1 million Service fee expenses represent over 50% of the gross fees of business income earned. Net profit of the service entity (or service entities) represents over 50% of the combined net profit of the entities involved. The Tax Office has given notice of its intention to request and collect details of individuals or entities who have purchased or acquired a motor vehicle valued at $70,000 or higher. The information will be collected from the roads and traffic authorities in each of the States/Territories and electronically matched with certain Tax Office data holdings to identify non-compliance with lodgement and payment obligations. Top of page March 2006 The Federal and Queensland governments recently announced loans of up to $200,000 for small businesses and farms in areas affected by Cyclone Larry. Eligibility for tax-free grants is extended to all businesses and farms regardless of the number of employees and the grant amount is increased to $25,000 (up from $10,000) for businesses that can demonstrate significant losses. In special cases such as enterprises demonstrating extreme damage, the maximum amount will be increased to $500,000, with the grant component capped at $50,000. There will be no repayment in the first 2 years. In addition, assistance for the cost of hiring a generator will be available where electricity is needed to operate equipment that is required to relieve distress or maintain the life of cows and fish and other aquatic organisms. February 2006 The Commissioner of Taxation has decided not to take any active compliance action that would treat loans to directors of companies or beneficiaries made prior to 4 December 1997 as giving rise to a deemed dividend under Division 7A of the Tax Act. The Tax Office has released Practice Statement PS LA 2006/1 (GA) – Calculating the cost base and reduced cost base of a CGT asset if a taxpayer does not have sufficient information to determine the amount of construction expenditure on the asset for the purpose of working out their entitlement to a capital works deduction. The Tax Office has reminded us that most companies and super funds who elected to defer final payment of some or all of their final company instalment for the 2000 year of income (when PAYG commenced) that they will cease to receive activity statements with the pre-printed amount after the March 2006 activity statement. The Tax Office have confirmed that APRA super funds seeking an exemption from the acquisitions and in-house asset rules in relation to pre 11 August 1999 trusts for funds wishing to break down into Self Managed Super Fund’s, will not be available. Top of page JANUARY 2006 Transition to retirement measures (effective 1/1/06) – you can now commence to take a pension from your fund prior to retirement. Superannuation contribution splitting between couples is possible from 1/1/06 – get the benefits of increasing your family’s maximum tax effective benefits. Tax Commissioner gives break to bushfire victims – additional time to get affairs in order including BAS/IAS lodgement and payment requirements.(1/1/06) Superannuation guarantee (SGC) changes to provide relief from penalties when SGC paid late.(1/1/06) Superannuation guarantee (SGC) changes to require employers to make payments in relation to back pays to employees.(1/1/06) Jan \| Feb \| Mar \| Apr \| May \| Jun \| Jul \| Aug \| Sep \| Oct \| Nov \| Dec If you would like further information regarding these new measures please contact Rose Cotter at Cotter Accountancy.	Principal - Rose Cotter What's New? Click here to find out What's New for you, your business or your superannuation fund. Tax Lodgement and Payment Dates Click here to find out what are the important dates.
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Approved occupational clothing guidelines updated