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Newsletter January 2009

The government has announced a temporary Investment Allowance in the form of an additional tax deduction which applies to most new tangible depreciating assets (which includes most items of plant and equipment) over $10,000 which are acquired or ordered from 13 December 2008 to 30 June 2009.

This means a business can receive an additional 10 per cent tax deduction of the cost of qualifying asset purchases. To be eligible for the allowance, certain criteria must be met;

• The investment allowance will apply from 12.01am AEDT 13 December 2008 until 30 June 2009. To be eligible for the investment allowance, a taxpayer must hold the asset under a contract entered into between those times, or start to construct the asset between those times. Assets must also be installed ready for use by 30 June 2010.
• The investment allowance will be confined to new assets and new expenditure on existing assets, used in Australia. Assets that have previously been used or held for use will be excluded.
• The investment allowance will apply to tangible assets used in carrying on a business, for which a capital allowance deduction (depreciation) is available.
• Cars are included but the investment allowance is limited to $5,718, (10% of the luxury car limit). Land and trading stock are excluded from the definition of depreciating assets, and will not qualify for the investment allowance. Capital Assets (eg Buildings) will not qualify for the investment allowance.
• Assets for which deductions can be obtained under other Subdivisions of the Tax Act will not qualify for the investment allowance. These assets are already subject to special treatment.
• The allowance can be claimed through the income tax return in which the first capital allowance is claimed for the asset.
• A minimum expenditure threshold of $10,000 will apply. Where an asset is partly used for private or non-taxable purposes, only the portion that is used for a taxable purpose in carrying on a business will count toward meeting the threshold. The investment allowance will be paid at a rate of 10 per cent of the asset's first element of cost (this is generally the amount paid by the taxpayer in order to hold the asset, eg its purchase price.)

Recently, income tax and superannuation legislation has been altered to remove the same-sex discrimination relating to a broad range of income tax and superannuation issues. The amendments will take effect from 1 July 2008.

The definitions of ‘spouse’ and ‘child’ in the Superannuation Industry (Supervision) Act 1993 (SIS Act) have been amended to ensure equal treatment between opposite-sex and same-sex de facto couples and their children.

New spouse definition – the definition of ‘spouse’ includes “another person who, although not legally married to the person, lives with the person on a genuine domestic basis in a relationship as a couple”.

New child definition – the definition of ‘child’ of a person includes;

• a stepchild, an ex-nuptial child or an adopted child of the person
• a child of the person’s spouse, and
• someone who is a child of the person within the meaning of the Family Law Act 1975

The government has announced that it will cut the quarterly Pay-As-You-Go (PAYG) income tax instalment payable on 28 February 2009 by 20% for small businesses. The 20% PAYG income tax instalment reduction will apply to ‘small business entities’ as defined in the tax law. In general, a ‘small business entity’;

• carries on a business, and
• satisfies the $2m aggregated turnover test.

The NSW Office of State Revenue has reminded taxpayers of the recent amendments to the Payroll Tax rates and thresholds;

• From 1 July 2008 to 30 June 2009 the payroll tax threshold is $623,000. The monthly thresholds being;
• 28 days = $47,792
• 30 days = $51,205
• 31 days = $52,912
• From 1 January 2009 to 30 June 2009 the rate of payroll tax will be 5.75%.

Employers, or a group of related businesses, whose total Australian wages exceed the current NSW monthly threshold, are required to pay NSW payroll tax.

Land tax is a tax levied on the owners of land in NSW as at midnight on 31 December of each year. In general, your principal place of residence (your home) or land used for primary production (a farm) is exempt from land tax. If you own property other than your principal place of residence or primary production land, you need to register. Please contact this office if you need assistance.

Land tax is calculated on the combined value of all the taxable land you own. The land tax threshold for 2009 is $368,000. Your land tax assessment is calculated on the combined value of all the taxable land you own above the threshold. The rate of tax is $100 plus 1.6 per cent of the land value between the threshold and the premium rate threshold.

If land is owned by a trustee of a special trust, or is owned by a company classified under Section 29 of the land tax legislation as a non-concessional company, the land tax threshold does not apply and land tax will be charged at a flat rate of 1.6 per cent of the taxable value. From the 2009 tax year, a new premium land tax marginal rate of 2 per cent will apply if your total taxable land value is above $2,250,000.