Autumn 2002 Newsletter

SMALL BUSINESS AND GENERAL BUSINESS TAX BREAK

The Treasurer has stated that the Government will introduce an investment tax break for all Australian businesses, which it is calling the ‘Small Business and General Business Tax Break’.

Small businesses

Small businesses can claim an additional 30% tax deduction for eligible assets costing $1,000 or more that they acquire from 13 December 2008 to 30 June 2009, and install by 30 June 2010.

For eligible assets costing $1,000 or more that they acquire from 1 July 2009 to 31 December 2009, they can claim a 10% deduction where they are installed by 31 December 2010.

This deduction is on top of the usual capital allowance deduction (i.e., depreciation) claimable for the asset in the taxpayer’s income tax return.

To benefit from this tax break a small business must have a turnover of $2 million a year or less.

Other businesses

Other businesses can receive the same deductions for eligible assets greater than $10,000.

Which assets are eligible?

Assets eligible for the allowance are most new tangible depreciating assets and new expenditure on existing assets used in carrying on a business.

Land and trading stock are excluded from the definition of depreciating assets, and will not qualify for the deduction.

Example

A small business that buys and installs a $2,000 computer before the end of June 2009 can claim an additional $600 deduction (i.e., 30%) in its 2008/09 tax return.

TAX BONUSES

The Government will be providing five one-off payments in March and April 2009 for low and middle income households and individuals as part of its $42 billion ‘Nation Building and Jobs Plan’.

1. Tax Bonus for Working Australians

This bonus payment will be available to Australian resident taxpayers who paid tax in the 2007/08 financial year (after taking into account available tax offsets and credits).

The payment is subject to an income threshold test which determines that a:

$900 bonus will be paid to eligible taxpayers with a 2008 taxable income of up to $80,000;

$600 bonus will be paid to eligible taxpayers with taxable incomes exceeding $80,000 and up to $90,000; and

$250 bonus will be paid to eligible taxpayers with incomes exceeding $90,000 up to and including $100,000.

Taxpayers will not need to apply for the payment: the ATO will automatically make the payment after determining eligibility. However, the tax bonus will only be paid to those who have their 2007/08 return in by 30 June 2009.

2. Single Income Family Bonus

This one-off bonus payment of $900 is for families with children that have one main income earner (i.e., families who, on 3 February 2009, were eligible to receive Family Tax Benefit (FTB) Part B).

The payments will be made automatically by Centrelink from 11 March 2009.

3. Farmer’s Hardship Bonus

The government will provide a one-off payment of $950 to farmers and rural-dependent small business owners who, on 3 February 2009, are receiving certain income support and exceptional circumstances relief payments.

The payments will be made in the fortnight commencing 24 March 2009.

4. Back to School Bonus

This payment of $950 is for families eligible for FTB Part A on 3 February 2009 for each eligible child of school age (aged 4-18 on 3 February 2009).

5. Training and Learning Bonus

This $950 payment consists of two categories, the first being for eligible students, and the second being an additional incentive for social security recipients to return to education and training.

TAX EDUCATION REFUND

Parents are being advised to ‘keep their receipts’ for education expenses in light of the commencement of the Education Tax Offset from 1 July 2008.

How much can be claimed?

Eligible families (generally parents entitled to Family Tax Benefit (FTB) Part A) will be able to claim a 50% tax offset every year (in their tax return) for key education expenses up to:

$750 for each child undertaking primary studies (i.e., maximum refund of $375 per child, per year); and

$1,500 for each child undertaking secondary studies (i.e., maximum refund of $750 per child, per year).

What items are covered?

v Eligible expenses include:

v Laptops, home computers and associated costs;

v Printers;

v Home internet connections;

v Education software;

v Trade tools for use at school;

v School text books; and

v Stationery.

FRINGE BENEFITS TAX (FBT)

FBT returns for the year ended 31 March 2009 will soon be due for lodgment in April and May. If you would like us to prepare your FBT return we ask that you collect all relevant FBT records relating to any benefit provided, such as:

Motor vehicles;
Entertainment;
Expense payments; and
Living away from home allowances.

Together with travel claims, employer declaration, etc. Once these records have been gathered together please forward them to our office. Alternatively, please contact our office to discuss what is required.

FINANCIAL FITNESS CHECKLIST

Ask yourselves the following questions.

Are you spending more and more of your income to pay debts?

Are you making only the minimum payments due on loans and credit cards each month?

Are you near, at or over the credit limit on your credit cards?

Are you paying your bills with money intended for other things?

Are you borrowing money or using credit cards to pay for things you used to buy with cash?

Do you often pay your bills late?

Are you dipping into your savings to pay current bills?

Do you put off visits to the doctor or dentist because you can’t afford them?

Has a collection agency called recently about overdue bills?

Are you working overtime or holding a second job to make ends meet?

If your spouse lost their job, would you be in financial trouble right away?

Do you worry about money a lot?

One or two “yes” answers, while not necessarily a sign of impending doom, can be a warning sign of potential problems.

Three to five “yes” answers could mean financial trouble. It’s imperative that you get their spending under control right away. A monthly budget needs to be drawn up and followed. Put away all credit cards and cut out all unnecessary spending until you can answer “no” to all questions on the Financial Fitness Checklist.

“Yes answered to more than five of the questions on the Financial Fitness Checklist, may mean there is already serious financial trouble.

What We Can Do To Assist

ü Undertake a review of all specific obligations.

ü Contact creditors to let them know about difficulties. Communicating is important.

ü Create a spending plan.

ü Look at reducing expenses – Eating out, public transport, etc.

ü Look at using savings and other assets to pay down debts.

ü Look at government assistance which may be available such as drought relief assistance.

It is vitally important that you do not “bury your head in the sand” if the Financial Fitness Checklist indicates an issue.

MANAGED INVESTMENT SCHEMES (MIS)

ATO TEST CASE DECISION

Following the full federal government’s decision in favour of the taxpayer in this test case the ATO has released a Decision Impact Statement. They have stated that they accept the courts decision and will not be appealing.

The test case revolved around Tax Ruling 2007/08 and a private ruling to test the Commissioner’s view. The court allowed the taxpayers deductions in relation to their investment in an almond MIS. Subsequently, the ATO have announced they will be withdrawing this ruling.

In the Decision Impact Statement the ATO said “retention of ownership by individual members, of the produce of the scheme, was of critical importance in the matter”.

DEFINITION OF BEER!

The ATO has recently released ATO ID 2009/10 “Definition of Beer : Hops” for the purposes of the Excise Tariff Act 1921. It is nice to know they are concerned with these matters!

The ID states that the Commissioner considers that the provision that beer contains hops, extracts thereof, or other bitters, in sufficient quantities, measurable by common industry testing methods, so as to satisfy the bitterness requirement. We just thought it was because beer tasted good!

HALL JACKSON SERVICES

We would like to remind our clients that we offer the following services through referral to our valued contacts.

Financial planning, investment and retirement advice;

Business succession, estate planning and risk insurance; and

Residential and commercial lending (including short-term financial), asset purchase and refinancing.

Please contact our office if you would like to discuss any of the above services. A full list of services can be found on our website at www.halljackson.com.au

QUOTE FOR THE SEASON

“The best and safest thing is to keep a balance in your life, acknowledge the great powers around us and in us. If you can do that, and live that way, you really are a wise man.”

- Euripides (484 BC– 404 BC) -