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News in 2007

Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec

Peter Costello's 2007/8 Budget

If you want to see earlier news items please use the following links:

2010            2009            2008            2007            2006            2005

Note: News items include proposed legislative changes which generally take effect at a later date.

December 2007

• Recent legislative changes give superannuation the same priority as other debts when a company goes into liquidation, administration or receivership from 31 December 2007.  Under the changes, superannuation will rank equally with employee entitlements such as unpaid wages and annual leave. 

• The Queensland Treasurer has announced that Queensland's payroll tax system will be harmonised with those of NSW and Victoria from 1 July 2008. The current payroll tax rate of 4.75 per cent and the $1 million threshold will be retained.  

November 2007 

• Coalition Party Tax Policies if elected (Summary)

- Introduction of a Tax Free Home Saver Accounts from the 2008-09 financial year to provide a simple, tax effective way to help Australians to save for their first home. Contributions up to $1,000 per year to the accounts will be tax deductible. All interest and earnings from the accounts will be tax free.

- Tax Free Home Savings Accounts for Children will be available to all Australians under 18 years of age. Parents, grandparents and others will be able to contribute up to a total of $1,000 between them each year to an account. The contributions will be tax deductible. Savings in the account will be available to purchase a first home anytime after the account holder turns 18 years of age.

- Tax Free Home Savings Accounts for Adults will also be available to Australians aged from 18 to 39 years. Up to a maximum of $10,000 a year can be contributed to the account. Interest and earnings on the account will be tax free and the account holder will be eligible to claim a tax deduction of up to $1,000 for their contributions. Child accounts will become adult accounts when the account holder turns 18 years of age.

- Will provide a capital gains exemption to individuals who share equity in a home occupied by a family member (and which is the family member’s first home).

- Reduced individuals tax rates:

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• Labour Party Tax Policies if elected (Summary)

- Introduction of Low Tax First Home Saver Accounts (no start date located) to provide a simple, tax effective way to help Australians to save for their first home. Contributions up to $5,000 per year to the accounts will be eligible for a low tax rate of 15% of income they deposit. All interest and earnings from the accounts will be taxed at 15% or less. In addition to the first $5,000 in tax-preferred contributions an additional $5,000 a year may be contributed from after tax income without paying any further tax on that contribution.

- Lifting the Child Care Tax Rebate from 30 per cent to 50 per cent paid every three months rather than once a year.

- Reduced individuals tax rates:

• New tax ruling in relation to what elements of a loan agreement need to be in writing between private companies and shareholders or associates in an income year where the loan has not been fully repaid.

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October 2007

• The ATO has advised that it will apply the existing law in the period between the announcement of changes to the consolidation rules following certain CGT rollovers and enactment of the proposed law.

• Changes announced that will mean employers who make a late Superannuation Guarantee (SG) payment do not pay the same amount twice.

• Employers are required to make SG contributions on behalf of employees quarterly. When an employer does not make their SG contribution on time, they become liable for the SG charge. The SG charge includes the amount of the contribution plus interest and an administration fee and is directly payable to the ATO. The SG charge generally includes the amount of the late contribution, even where the employer has paid the amount into a superannuation fund, albeit late.

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September 2007 

• The ATO has published a number of factsheets outlining the recent changes designed to make it easier for small business to access a number of existing tax concessions. The factsheets are as follows:

- Changes affecting small business,

- Capital gains tax concessions for small business – overview,

- Concessions for small business entities,

- Income tax concessions for small business entities - overview

• The Minister of Revenue and Assistant Treasurer announced an exemption from tax for people with a terminal illness who access their superannuation under the age of 60.  The exemption is to apply to payments made on or after 11 September 2007.

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August 2007

• Commissioner of Taxation releases his Compliance Program for the 2007/08 year of income.  He will focus on the following (amongst other areas):

-          Individuals – high tax payers and those in high profile and influential professions; those with child support obligations; promoters of tax schemes and those using tax havens.

-          Capital Gains Tax – intends writing to those who purchased investment property, shares or units during the 2006/07 year to tell them of their CGT obligations; write warning letters; examine 6,000 at risk cases; expand data matching capabilities.

-          Work related expenses – will focus on tourism workers, travel consultants, fitness & sporting industry employees, construction industry employees, guards & security employees and mining site employees.

-          Rental properties – incorrect apportionment of interest expense; claims for capital works; initial repair & renovation costs; borrowing expenses.

-          Self managed super funds – undertake 10,000 compliance audits especially reviewing the work of auditors.

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July 2007

•  A Taxation Ruling was issued providing guidelines on how the Commissioner may exercise his discretion to determine that it would be unreasonable for the loss deferral rule to apply to a loss attributable to an individual taxpayer's business activity.

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June 2007

• Effective 15 June 2007 the QLD Government have altered the financial reporting and the public liability insurance requirements in relation to Incorporated Associations registered in QLD. 

• The financial reporting requirements vary depending on the Associations level of assets and level of turnover.  If the Association has more than $100,000 in assets or a turnover greater than $100,000 then the rules remain the same – audited accounts are still required. 

• Public Liability Insurance is not longer mandatory under the Act.  Management Committees are required to determine their own level of exposure as well as other legislative requirements and advise their members if they do not take out this form of insurance.

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May 2007

• Application forms to reduce the pay as you go (PAYG) withholding rate for the year ending 30 June 2008 are now available.  You can seek to reduce the tax deducted from your employment salary where you incur costs which would reduce your taxable income for the year e.g. you hold a negatively geared investment property.

2007/08 Budget announcements … 
Superannuation

Eligible taxpayers will receive double the super co-contribution payment for contributions made by them in the 2005-06 financial year only. For example, if a person made eligible contributions in the 2005-06 year and received a co-contribution of $1,500 they will now receive an additional $1,500, totalling $3,000. 

Tax cuts

From 1 July 2007, the 30% threshold will rise from $25,001 to $30,001.

From 1 July 2008, the 40% threshold will rise from $75,001 to $80,001 and the 45% threshold will rise from $150,001 to $180,001.

The Government will increase the dependent spouse rebate from $1,655 to $2,100 with effect from 1 July 2007. This measure will increase the separate net income at which the rebate is completely phased out from $6,901 to $8,681. 

From 1 July 2007, the low income tax offset will increase from $600 to $750 per year. In addition, the income threshold at which the offset begins to reduce will increase from $25,000 to $30,000. As a result, some offset can be claimed up to an income of $48,750 compared to $40,000 currently. Those eligible for the full income tax offset will not pay tax until their annual income exceeds $11,000 (up from $10,000 currently).  

Senior Australians eligible for the senior Australians tax offset currently pay no tax up to an annual income of $24,867 for singles and $41,360 for couples (depending on the income earned by each member of the couple). The effect of the tax cuts is to lift these income levels up to $25,867 for singles and $43,360 for couples. 

The Government will increase the Medicare low income thresholds to $16,740 for individuals and $28,247 for families, with effect from 1 July 2006. The additional amount of threshold for each dependent child or student will also be increased to $2,594. The Medicare levy low income threshold for pensioners below age pension age will also be increased. From 1 July 2006, the threshold will rise to $21,637. 

GST 

The annual turnover thresholds for registration for the GST will be raised to $75,000 for businesses and to $150,000 for non-profit bodies, with effect from 1 July 2007. 

The Government will align the pay as you go (PAYG) payment and reporting requirements with the annual payment and reporting requirements for taxpayers who are voluntarily registered for GST, with effect from 1 July 2008. 

Businesses will be allowed to claim input tax credits for purchases with a GST-exclusive value of $75 or less without the need for an approved tax invoice, with effect from 1 July 2007. 

Individuals tax return simplification 

The Government will provide funding in 2007-08 to enable the ATO to pre-fill electronic individual income tax returns for the 2007- 08 and following income years. 

Child Care

The Government will convert the existing Child Care Tax Rebate (CCTR) to a direct payment administered through Centrelink.

From 1 July 2007, families will receive the CCTR - which covers 30% of out of pocket costs, up to a maximum of $4,000, plus indexation - as a direct payment, soon after the financial year in which they incur child care costs. The change means that the CCTR will be received nearer to the time when costs are incurred by parents compared to current arrangements.

Families will still receive a rebate for out of pocket costs incurred in 2005-06, under the existing tax system arrangements. This means families with out of pocket costs for both 2005-06 and 2006-07 will receive two rebates in 2007 08 - one through the tax system, and one as a direct payment.

The change in the delivery of the CCTR from a tax offset to a payment also means that families with insufficient tax liability to absorb their full CCTR entitlement will now receive their full rebate.

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April 2007

• Students who cease full-time education for the first time will be entitled to the standard tax-free threshold of $6,000 that applies to all resident taxpayers. The measure will be applicable to assessments for income years commencing on or after 1 July 2006.

• The Government announced a number of amendments to the small business capital gains tax (CGT) concessions in the 2006-07 Budget. These amendments will reduce the compliance costs for small business as well as increase the availability of the concessions.

  The amendments will improve the operation of the small business CGT concessions by making changes to the:

  • maximum net asset value test

  • active asset test

  • 15-year exemption

  • retirement exemption

  • small business roll-over, and

  • way the concessions apply to partners in a partnership and deceased estates.

  The amendments also improve access to the concessions by replacing the current controlling individual 50 per cent test with a new significant individual 20 per cent test. This test can be satisfied directly or indirectly through one or more interposed entities.

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March 2007

Simpler Super

The Simplification of Superannuation Bills received Royal Assent on 15 March 2007.  You can obtain more information from the ATO website at "Simpler Super".

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February 2007 

Superannuation simplification awaiting Royal Assent

The Simplification of Superannuation Bills were passed by the Senate on 27^th February and are now awaiting Royal Assent.  A number of additional items to those reported by me from the Budget in May 2006 (clients may request a summary of these measures prepared by me) are: 

• Unclaimed superannuation monies are to move from the States and Territories to the Australian Taxation Office (“ATO”) from 1 July 2007. 

• Taxpayers who are able to take advantage of the existing CGT sale of business superannuation rollover concessions may contribute up to $1 million from sale proceeds at any time from 10 May 2006 to 30 June 2007 – the current rules would have required such rollover to be effected within 7 days in order to gain the concession.

• From 1 July 2007 the period after the sale of business in which a contribution can now be made in order to take advantage of the CGT sale of business superannuation rollover concessions has been extended from 7 days to 30 days.

• No limit has been placed on the amount which can be contributed to superannuation in relation to personal injury claims.   From 1 July 2007 the contribution must be made within 90 days of receiving the settlement amount.

• A person who turned 75 between 10 May 2006 and 5 September 2006 is allowed to contribute after-tax income to superannuation during the 2006/07 year of income as long as they pass the work test.

• Contributions may be made, and benefits may be paid, by way of transfers of property.

• The transfer of overseas superannuation benefits will be counted towards the contribution cap of $150,000 per person per annum from 1 July 2007.

Taxation penalty

The Commissioner of Taxation has issued a Practice Statement setting out the guidelines for the remission of penalties for failing to apply for GST registration or failing to cancel GST registration where required to do so.  The penalty can be up to $2200 for such failures.

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 January 2007

Employer superannuation contributions for December 2007 quarter

Payments of superannuation contributions to a complying superannuation fund or retirement savings account for the quarter ending 31 December 2006 are due to be paid on or before 29 January 2007 (the 28^th being a Sunday) even though lodgement and payment of the BAS is not required until 28 February 2007.  Payment needs to be made within the required time frame in order to avoid the super guarantee charge.

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If you would like further information regarding these new measures please contact Rose Cotter at Cotter Accountancy.

Principal -

Rose Cotter

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