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Newsletter February 2008

Duty was abolished on lease instruments first executed on or after 1 January 2008. The abolition of duty on leases does not affect any obligation to pay duty in respect of a lease instrument and a variation of a lease instrument executed before 1 January 2008.

The 2007 State Budget announced the staged abolition of mortgage duty. Mortgage duty will be abolished in three stages;

• 1 September 2007 – duty will not be chargeable on advances made on or after this date in connection with owner occupied housing,
• 1 July 2008 – duty is not chargeable on advances made on or after this date for investment housing,
• 1 July 2009 – mortgage duty will be abolished. NSW mortgage duty will not be chargeable on any advances made on or after 1 July 2009.

Minor Benefits Exemption
The minor benefits exemption for the year commencing 1 April 2007 is $300. The threshold was previously $100. Under this exemption, ‘infrequent’ and ‘irregular’ benefits and rewards that have a notional taxable value of less than $300 can be provided to employees without the employer incurring any FBT liability.

In-house Benefits Exemption
The in-house benefits exemption for the year commencing 1 April 2007 is $1,000. The threshold was previously $500. Under this exemption, the taxable value of in-house benefits can be reduced by up to $1,000 per employee per year without the employer incurring any FBT liability.

For pensions that commenced before 1 July 2007, you must continue to pay them under the previous pension payment standards unless the pension is an allocated pension. With allocated pensions, you can choose to start paying them under the new minimum standards any time after 1 July 2007, without having to commute and start a new pension, provided this is permitted by the rules of your fund.  

For pensions that commenced between 1 July 2007 and 19 September 2007, you can choose to pay the pension under the previous or the new pension rules, provided it is permitted by the rules of your fund. All pensions that commence after 19 September 2007 must meet the new minimum pension standards.

The new minimum standards mean that the superannuation pensions you pay must satisfy all of the following requirements:

• The pension must be account-based, except in limited circumstances.
• You must pay a minimum amount at least annually.
• You cannot increase the capital supporting the pension using contributions or rollover amounts once the pension has started.
• The pension can be transferred only if a member dies, to one of their dependants.
• You cannot use the capital value of the pension nor the income from it as security for borrowing.
• Before you can commute a pension, you must pay a minimum amount in certain circumstances.

There is no maximum draw down limits for new pensions commencing after 19 September 2007, except for transition to retirement income streams. The following table shows the minimum relevant percentage factor based on the member’s age. 

Income is personal services income if it is mainly a reward for an individual’s personal effort or skills. Personal services income will be treated as your income and you must include it in your individual tax return, regardless of whether the income is received directly by you or received through a company, trust, or partnership (personal services entity). The laws do not apply to personal services income earned by an employee, except where the individual is an employee of a personal services entity.

Personal services income measures do not apply if;

• you meet the results test. Under your contract or arrangement:
  • the income paid is to achieve a specified result or outcome,
  • you have to provide any necessary tools or equipment (if any) to do the work, and
  • you liable for rectifying defects in the work.

If, in a given income year, 75% or more of your personal services income meets all three conditions, you pass the results test for that year.

• less than 80% of your personal services income in an income year comes from each client and you meet one of the three personal services business tests’
  • Unrelated clients test - the individual doing the work has personal services income from two or more clients who are not associated with each other or with you.
  • Employment test - you have employees, apprentices, or engage sub-contractors who perform at least 20% (by market value) of the principal work?
  • Business premises test – at all times of the year, your business premises is physically separate from your private residence and separate from the business address of your clients, or their associates.
• you obtain a determination from the Tax Office.