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Newsletter February 2007

From 1 July 2007, there will no longer be ‘eligible termination payments’, the jargon will be replaced by ‘employment termination payments’. As well as a new name, there will be a new taxing regime, new rates and transitional rules that apply up to 30 June 2012. These changes result from the Government’s Simplified Superannuation policies.

An employment termination payment (ETP) is a lump sum paid by an employer to an employee in consequence of the termination of the employee’s employment or to another person because of the death of the employee.

From 1 July 2007, a life benefit termination payment, received in consequence of termination of employment, is taxed as follows;

• any part of the payment related to pre July 1983 service or to the employee’s invalidity is tax free, and
• for amounts in excess of the tax free amount;
  • if the employee has reached preservation age (at least 55 years), the first $140,000 (the ETP cap amount) is taxed at 16.5% and the amount in excess of $140,000 at the top marginal rate (i.e. at 46.5%), or
  • if the employee is less than 55 years, the first $140,000 is taxed at 31.5% and the excess at 46.5%.

 From 1 July 2007, taxation of a death benefit termination payment depends on whether recipient is a ‘death benefits dependent’ – defined as either:

1. the deceased person’s spouse or former spouse, or
2. the deceased person’s child aged less than 18 years, or
3. any other person with whom the deceased person had an interdependency relationship,
4. any other person who was a dependent of the deceased person just before he or she died.

The Commissioner of Taxation has assured people affected by the bushfires in Victoria and Tasmania during December and January that they do not need to worry about their tax affairs at this time. The tax office has reassured residents that they will take a sympathetic approach to their individual circumstances.

The tax office can help by;

• fast tracking refunds for people impacted by the fires,
• giving extra time to pay debts – without interest charges,
• giving more time to meet activity statement and other lodgement obligations,
• helping reconstruct tax records where documents have been destroyed, and
• offering personal visits from field officers to help reconcile lost records.

It has been reported that the number of self managed superannuation funds (SMSFs) has increased significantly over the past decade, and the tax office is now more concerned about whether trustees have enough information and understanding of their obligations to comply with superannuation law.

With the new superannuation legislation to take effect from the 1 July 2007, the Government aims to increase the tax office’s emphasis on making sure trustees of SMSFs know how to comply with their obligations.

Under the Government’s changes, there will be new streamlined reporting requirements for SMSFs, with new administrative penalties for late returns and false or misleading statements.

To assist trustees, the tax office aims to improve and strengthen the education and assistance available to trustees by providing information products, standard forms, and other initiatives, such as online reporting tools, as well as clarifying the reporting obligations for approved auditors.

The tax office has announced two automated services that can be used to search the Lost Members Register and other tax office records for lost superannuation. The services are;

• You can conduct a free online search using SuperSeeker which is available at www.ato.gov.au/super to locate your missing superannuation money. You will need to provide your name, date of birth and tax file number to start your search.
• Alternatively, you can phone the SuperSeeker self-help phone service on 13 28 65. Follow the prompts to enter your name, tax file number and date of birth.

The government has proposed and released a draft bill that will standardize the eligibility thresholds for small business tax concessions from 1 July 2007. Currently, separate eligibility tests exist for the Simplified Tax System, GST, CGT, PAYG instalments and FBT concessions.

Under the proposals, any business with annual turnover of less than $2m will be able to access any of these existing concessions subject to any additional criteria set out in the particular concessions.