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Newsletter January 2005

As previously advised, from 1 January 2005, the land tax threshold is to be abolished, and the current single marginal rate of 1.7% is to be replaced with the following marginal rate scale:

• A land value of less than $400,000 will pay a land tax rate of 0.4%
• A land value of between $400,001 and $500,000 will pay a land tax rate of $1,600 plus 0.6% on the value of land above $400,000.
• A land value above $500,000 will pay a land tax rate of $2,200 plus 1.4% on the value of land above $500,000

The provision of relief from land tax where the amount of tax owed is less than $100.  This gives an effective threshold of $25,000.  The effect of the land tax changes is that all properties other than principal place of residence, primary production land and boarding houses need to be registered for land tax.

Please notify us immediately if you have any properties that are required to be registered so that an initial land tax return can be lodged and the property be assessed for land tax as at 31 December 2004.

A new initiative aimed at reducing the amount of time small businesses spend on bookkeeping was launched recently.

ABNLook-up provides businesses with a free, simple and quick way to verify the ABN details of other companies by automating what was previously a time-consuming and repetitive process.

This means businesses do not need to manually key in ABNs each time they re-check business details.  Details are entered only once in a spreadsheet and from then on the process is automated.

ABNLook-up can be downloaded for free at http://www.abr.business.gov.au

Superannuation is paid on allowances that are paid to employees that are not expended in the course of the employees work (eg. Height, dust, danger & locality allowance).

Superannuation is not payable on expense allowances that are expected to be fully expended in deriving income (eg. Car allowances paid to employees) as they are considered a reimbursement.

28 January 2005 is the final date for payment of 9% superannuation guarantee contributions for employees for the quarter 1 October 2004 to 31 December 2004.
Please note that a written report must be provided to employees within 30 days of making the final contribution for the quarter.

The Taxation Office has recently released a ruling regarding the GST treatment of transactions carried out by "tax law partnerships".  The ruling focuses on the leasing of co-owned properties and the GST implications for the individual partners.

The ruling explains that a "tax law partnership" is an association of natural persons in receipt of ordinary or statutory income jointly and that it is formed from the time that the persons jointly commence an activity from which income is, or will be, received jointly.

Once a "tax law partnership" comes into existence, it is a GST entity separate from its partners.  Consequently, it may carry on an enterprise, make supplies or acquisitions and have assets and liabilities.

The ruling has a wide application and has the potential to affect any persons jointly holding property and would include property syndicates and family member partnerships.

The main impact of the ruling for most clients is to prevent rental income in excess of $50,000 being shared so as to avoid the need to register for GST.

The Taxation Office has confirmed that several commonly used superannuation tax reduction strategies will not attract the anti-avoidance provisions of the law.  Two of the strategies that are allowable under the law included:

• An individual taxpayer withdrawing an ETP from their superannuation fund and then re-contributing a similar amount to the same fund or another fund (eg spouse's fund) for the purpose of establishing a superannuation pension. 
• An individual taxpayer making a large un-deducted contribution to their superannuation fund before they receive an ETP.

Both strategies give a tax advantage to the law's concessional ETP treatment.  The first strategy reduces the assessable portion of the annual pension, while the second reduced the amount of tax payable on the ETP.