June 2001
NEWSLETTER
With the end of the 2001 financial year almost upon us, I would like to take this opportunity to brief you on some of the more relevant changes that have occurred during the current financial year and on some of the more urgent
pre 30 June 2001 taxation requirements.
Should you wish to discuss any matter raised in this newsletter or any other matter that may be specific to your situation, you are encouraged to do so before 30 June 2001.
Please do not hesitate to contact my office.
It is now one year since the implementation of GST and it is hoped that alot of the “teething issues” that you may have had have been sorted out.
If you have any specific issues that you remain unsure of, you are encouraged to seek advice now. It is noted that the Australian Taxation Office have commenced their program of field audits and accordingly you are best advised to seek advice now if you remain uncertain about any aspects as they pertain to you.
The Federal
Government has announced that businesses will be able to claim full input
credits on motor vehicle purchases with effect from 22 May 2001.
This means
that motor vehicles purchased for business use will effectively become cheaper,
as the GST component will be claimable up to the depreciation limit of $55,134.
CHANGES TO THE WAY ACCOUNTS
CAN BE PREPARED FROM 1ST JULY 2001
As part off the new tax system there is now an option that eligible small business can adopt to prepare their accounts. To be eligible your average annual turnover must be less than $1 million and any depreciating assets (other than land and buildings) are valued at the less than $3million at the end of the year.
This so called simplified Tax System has 3 main elements.
ATTRIBUTED PERSONAL SERVICES INCOME (PSI)
These measures are designed to apply to contractors who derive their income predominantly from their personal efforts or skill, have no employees & do not use capital equipment as part of supplying their services.
EXAMPLE 1– New IT Pty Ltd provide computer programming services but Ron does all the work involved in providing those services. New IT’s ordinary income from providing the services is Ron’s personal income because it is a reward for his personal efforts or skills.
EXAMPLE 2 – Trux Pty Ltd owns a semi-trailer & Tom is the only person who drives it. Trux’s ordinary income from transporting goods is not Tom’s PSI because it is produced mainly by use of the semi-trailer, and not as a reward for Tom’s personal efforts or skills.
The legislation is designed to ensure that the person who derived the income pays tax on the money. This objective is achieved by:
· Limiting the deductions contractors & interposed entities (eg companies) can claim in relation to PSI.
· Ensures that a taxpayer who is responsible for the income being derived, is taxed on the income.
Provided 80% or more of the taxpayers PSI does not come from the same client (or associate) the taxpayer will be treated as conducting a Personal Services Business if it meets at least one of the following three tests:
· The unrelated clients test – the individual produces income from 2 or more entities that are not associates.
· The employment test - engages 1 or more entities to perform the principal work.
· The business premises test – maintains & uses, at all times during the year, business premises, which is physically separate from the private premises of the taxpayer or associate.
From 1 July
2000, excess imputation credits arising from franked dividends will become
refundable to the taxpayer.
Previously
any excess imputation credits would be lost and not available to be refunded.
The group
certificate has been replaced by the PAYG Payment Summary for employees.
The PAYG
Payment Summary Statement (previously Annual Reconciliation Statement) must be
completed by 14 August 2001.
These
statements show total payments made and tax withheld.
Remember
penalties apply for late lodgment of these PAYG Payment Summary Statements.
If at midnight on 31 December of any given year you owned land then you may have an obligation to pay land tax.
As a general rule, land tax is payable at the rate of 1.7% for every dollar of land value in excess of $205,000 (investment property) or $1,319,000 (principal place of residence).
There are certain exceptions to the rule eg. primary production land, nursing homes etc. Similarly the rates differ for certain entities, eg. family trusts do not receive the $205,000 threshold.
When your land holdings change, there is an obligation upon you to advise the Office of State Revenue of such change. Certain forms need to be completed and the latest date for completion is two months after 31 December.
Should you require our assistance in attending to your land tax obligations, then please ensure that you keep us abreast of all movements in you landholdings.
As 30 June approaches it may be prudent to review your total payroll for the year to ascertain whether you have a liability towards payroll tax.
Payroll tax is a NSW State Tax that is payable when total payroll exceeds $600,000. It is charged at a rate of 6.4% for the amount of payroll in excess of $600,000 for the period 1 July to 31 December 2000, and for the period 1 January to 30 June 2001 at a rate of 6.2%.
It is important to note that the definition of payroll includes not only wages, but also superannuation and the value of fringe benefits. Employers also need to aware of Grouping Provisions that allow the payrolls of two (2) or more related entities to be pooled.
If in any doubt to whether you may have payroll tax obligations, then please let us know.
All sole traders, partners in partnership or companies and superannuation Funds with a turnover of less than $1 million can now elect to make quarterly payments of tax based on the prior year adjusted upwards by the change in Gross Domestic Product (It was 6% in 2000/2001).
The amount will be calculated by the tax office and it will not be necessary to lodge an Instalment Activity Statement.
Individual Taxpayers whose prior year’s tax was less than $8000 can elect to pay their instalment annually. The instalment for 2000/2001 will be payable in March 2002.
Companies and Superannuation Funds whose prior year’s tax was less than $8000 who elect to pay their instalment annually will pay their instalment on 15th December 2001.
In order to ensure that you obtain a deduction for any particular bad debt, you are reminded that the debt must be physically written off prior to 3o June 2001 ie: deleted from your debtor’s listing.
If you haven’t done so already, please ensure that the required superannuation payments for your employees are made to an eligible superannuation fund by no later than 28 July 2001. In fact, if you want the payments to be claimed as a tax deduction this year, then payment will need to be attended to prior to 30 June 2000.
If the contributions are not paid by 28 July 2001, then a non-deductible payment for an equivalent amount plus a 10% penalty will need to be made to the Taxation Office - it makes no sense not to meet your superannuation obligations.
For your convenience I have included a timetable showing the annual increases in the chargeable percentages up to and beyond the financial year 2002/03.
|
Financial Year |
Charge Percentage % |
|
2000/2001 |
8 |
|
2001/2002 |
8 |
|
2002/03 and subsequent years |
9 |
The deduction limit is determined by reference to a taxpayer’s age.
The limits for the 2000/01 year are:
|
Age in Years |
Deduction Limit $ |
|
Under 35 |
11,388 |
|
35 to 49 |
31,631 |
|
50 and over |
78,445 |
A limit is placed on the depreciable cost of motor cars and station wagons (including four-wheel drive vehicles) over a certain price.
The limit applies whether the vehicle is new or second hand.
For the 2000/01
year the motor vehicle depreciation cost limit is $55,134.
Resident individuals are liable to pay a Medicare levy based on the amount of their taxable income for the income year. The rate of the Medicare levy for the 2000/01 income year is 1.5% of taxable income.
No Medicare levy is payable by any person whose taxable income for 2000/01 is less than $13,807
Please note that a 1% surcharge on the Medicare levy will apply in the 2000/01 year for single individuals with taxable income exceeding $50,000 or couples and families with taxable incomes exceeding $100,000 who do not have private hospital cover through private health insurance.
Your Private Health Care Provider will soon be sending you an Annual Tax Summary. This Tax Summary contains certain information that will be relevant to the preparation of your Income Tax Return for the year ending 30 June 2001.
As soon as you receive it please take note to either include it in the information that you compile for use or just send it in to use now so that we may keep it on your file.
SUPERANNUATION CONTRIBUTION
SURCHARGE
Any tax-deductible contributions made to a superannuation fund which when added to the individual’s taxable income result in the person’s adjusted taxable income exceeding $98,955 are subject to an additional 15% tax (payable by the superannuation fund).
Where a person’s income is between $81,493 and $98,955 per annum the surcharge phases in progressively.
If your income is below $81493 you should also be careful as the following will be included in income which could push you above the limit.
1. Realising a capital gain - the entire amount is added to your income;
2. Franked Dividends – the grossing up of franking credits will increase your income;
3. If you leave your employment unused annual leave and termination payments are taken into account.
4. Reportable Fringe Benefits.
For the 2000/01 financial year, the rate of company tax has decreased to a flat rate of 34%.
For the 2001/02 financial year, the rate of company tax will decrease to a flat rate of 30%.
PERSONAL TAX RATES
The general rates of tax applicable to resident individual taxpayers for the 2000/2001 year remain unchanged and are as follows:
|
1999/2000 taxable income (column 1) |
Tax on column 1 |
% on excess (marginal rate) |
|
6,000 |
Nil |
17 |
|
20,000 |
2,380 |
30 |
|
50,000 |
11,380 |
42 |
|
60,000 |
15,580 |
47 |
This Newsletter is issued in summary form for your
information. It should not be relied
upon as a substitute for detailed advice or as a basis for formulating business
decisions.