Tax News / Tax Time /Tax Fact

Tax News

It seems that never a year goes by without some changes, large or small, to the tax system.  This year has plenty!

The changes with by far the biggest impact on most people are those in relation to superannuation.  The amount of deductions claimable, and who can claim those deductions; the tax consequences of receiving a superannuation pension; and the information to be disclosed in a Self Managed Superannuation – all these have changed substantially. There is a cap on the amount of deductible contributions ($50,000, except for those over the age of 50, who can contribute $100,000 each year until 2012).  Self employed people are now able to claim a deduction for the full amount of their contributions.  Working people up to the age of 75 can now make deductible personal contributions, provided that they satisfy a “work test” once they pass age 65 – they must be gainfully employed for at least 40 hours in a period of 30 consecutive days in the year the contribution is made (and that test must be satisfied before the contribution is made).  Superannuation pensions are now tax free to those over the age of 60.  This does produce some income tax saving, though not as much as it might appear, given the concessional tax treatment that applied to such pensions under the old rules. The real bonus is that these pensions no longer appear in the tax return, thus greatly simplifying the tax affairs of retired people.  Not so simple, though, is the lot of those who have a Self Managed Superannuation Fund.  Reporting rules have tightened, the annual “supervisory levy” has increased, and compliance costs will increase, with a renewed emphasis on Tax Office audit activity.

A new First Home Savers Account was announced this year.  At this stage, it is due to be introduced from 1 October 2008. It provides an opportunity for those who have not previously owned a home to receive Government co-contributions to an eligible account.  These accounts will be taxed in a similar manner to superannuation funds, and withdrawals will be tax free when used to purchase a first home.  In this way, first home buyers will be able to accumulate a larger deposit, sooner – and some more air will be blown into the leaky housing bubble!

The complex world of tax on capital gains has become more so, with the Tax Office releasing a Ruling in relation to the tax consequences of the Wesfarmers takeover of the Coles Group, and another in relation to the acquisition of Telstra shares under the “T3” scheme. If you own these, or indeed any investment assets, make sure that you keep all of your records relating to their acquisition and eventual disposal.

For small business owners, the Simplified Tax System has been replaced by a range of tax concessions that apply to a qualifying small business entity. A business will qualify if its turnover is less than $2 million.  There are special rules that apply to determine eligibility when turnover is approaching that level.

If you have invested in a forestry managed investment scheme, there are new rules applying to the deductibility of your contributions.

What is the Tax Office doing?
The Tax Office has been provided with additional funding of $446 million over the next four years to increase their enforcement activities. That is a lot of money they have to recoup, in order to break even.  Expect some increased audit activity! What are they targeting?

Salary and wage earners make up the largest group of taxpayers (around 11.5 million), with around 43% of tax collected by the Tax Office coming from this group.  The Tax Office are worried about a potential blow-out in claims for work-related expenses.  This year they have set their sights on travel agents or consultants; fitness and sporting industry employees, guards and security employees; and mining site employees.  Claims for car expenses are one of the largest claims made each year, and so the Tax Office are again looking closely at this area.
Rental properties remain on the agenda, with particular attention being paid to houses in holiday destinations.  They are concerned that some houses claimed as rental properties may not be genuinely available for rent.

Tax Time

When is my return due?
Income tax returns for the 2008 year can be lodged now.  They are due for lodgment by 31 October, unless you are already on our lodgment program.  If your 2007 return was lodged after 30 June 2008, then you must lodge this year’s return by 31 October.  As always, it is best to get your information in to us early.  Some people prefer to leave their lodgment as late as possible, if they are due to pay tax, in order to defer the payment.  However an early lodgment does not mean that the payment will be required early, whereas a late lodgment, or lodgment on the due date, requires payment at the time of lodgment.  That is, there is no benefit in delaying the lodgment.  In fact it is better to know early what your liability will be, to enable you to plan better for it.

Do I need to lodge a return?
With the sweeping changes to the superannuation rules which took effect from the 2008 year, more people will be in the position of not being required to lodge income tax returns. You are not required to lodge a tax return if your income is below $6,000.  If you qualify for the Senior Australian Tax Offset (basically, if you are of the age to qualify for an Age Pension) then the threshold is $25,867 (or $21,680 if your spouse also qualifies).  The major effect of the superannuation changes is that pensions from most superannuation funds are now tax free, if you are over the age of 60.  That means that if you have income of less than $6,000 from other sources, then you will not be required to lodge a return.

However, if you have had tax taken out of any income, or if you have received dividends with tax credits, you will need to lodge a return to get your refund.

The bottom line is, if you are in any doubt, send us your information, and we will let you know what needs to be done.

What tax records do I need to send?

Tax Facts

Personal tax cuts for 2007/08

A Medicare levy surcharge applies if you do not have private patient hospital cover, and your income exceeds $50,000 (or a combined family income of $100,000). These thresholds will increase to $100,000 and $150,000 for the 2009 year.

The offset reduces by 4c for every dollar of income over $30,000.

Note that the offset applies to children under the age of 18, so that the effective tax free threshold is $1,667 for the 2007/08 year. This offset will increase over each of the next three years, lifting the effective threshold to $14,000 in 2009, and an extra  $1,000 for each of the next two years.

Medical expenses offset
20% of excess over $1,500

The hardest thing in the world to understand is the income tax. - Albert Einstein

The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing.  - Jean Baptist Colbert