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Newsletter July 2007

Payroll tax is payable in NSW where the taxable wages exceed $600,000 on an annual basis. The definition of salary and wage includes bonuses, commissions, contributions to shares and option schemes, directors fees, the grossed up FBT benefit, superannuation including salary sacrifice, eligible termination payments paid to an employee, payments to contractors under relevant contracts, allowances, except the exempt proportion of a motor vehicle and overnight accommodation allowances.

From the 1st July 2007 NSW and Vic have introduced legislation to harmonize the payroll tax of both states. There have been a number of changes to both NSW and Victorian Legislation. The changes to the NSW legislation include; 

1. Grouping Provisions – grouping provisions are applied where two or more employers are grouped for the purpose of payroll tax. The test for determining controlling interest is “more than 50%”.
    
   There are tests for inter-use employees. There is also a Commissioner’s discretion to exclude a member.
   
   
2. Motor Vehicle & Accommodation Allowances – The exempt rate of motor vehicle allowance and overnight accommodation allowances will no longer be based on award rates. They will now be based only on the rates used by the Australian Taxation Office.
    
   On 1st July 2007 the exempt rate will be $0.70 per business kilometre travelled for the use of the employees own motor vehicle. The amount paid in excess of $0.70 per kilometre will be liable to payroll tax.
    
   Accommodation Allowances has been set at $201.25 for overnight accommodation.
   
   
3. Wages for work performed overseas – wages paid in NSW for services performed in another country for more than 6 months, will be exempt from payroll tax.
   
   
4. Adoption/Maternity Leave – wages paid to employees on maternity leave or adoption leave will be exempt from payroll tax.
   
   
5. Contractors – contractor provisions will no longer have an exemption for payments that equal or exceed $800,000 pa unless a payment is made under an exempt contract. All payments under the contract will be liable to payroll tax irrespective of the amount. 
    
   Contracts will only be exempt where the Chief Commissioner is satisfied that the contractor provides services in course of conducting a genuine independent business which stands in a market place and actually renders like services to a range of clients in each financial year.
   
   
6. Employment Agencies – there has been a removal of an exemption provided to employment agencies that on hire staff to clients with wages below the $600,000 tax free threshold. Wages paid by an employment agency to a person on hire to a client of that employment agency, who’s annual wages are below the tax free threshold under an employment agency contract, are now liable to payroll tax.
   
   
7. Financial Planners – removal of exemption for wages paid to financial planners under the relevant contract provisions.
   
   
8.  Portable Long Service Leave and Redundancy Schemes – contributions to Portable Long Service Leave Scheme and a redundancy or severance scheme will no longer be liable to payroll tax.
   
   
9. Trust Distributions – trust distributions, made in lieu of wages, to a worker who is a beneficiary of a trust or related trust for services provided to a trustee of a business will not be liable to payroll tax.

From 1 July 2007, the benchmark interest rate is 8.05% (up from 7.55% for the previous year). The benchmark rate can be used to;

• determine if a loan made to a shareholder is taken to be a dividend,
• calculate the amount of the minimum yearly repayment for the 2007/2008 income year on an amalgamated loan taken to have been made prior to 1 July 2007.

The GST registration turnover threshold has been increased to $75,000 ($150,000 for non-profit bodies) with effect from 1 July 2007.

An entity is required to be registered for GST if it is carrying on an enterprise and its GST turnover meets the registration turnover threshold. Prior to 1 July 2007, the threshold was $50,000 ($100,000 for non-profit bodies).

The motor vehicle cost limit for depreciation purposes for 2007/2008 is $57,123 (GST inclusive). This is up from $57,009 for 2006/2007.

The luxury car tax threshold for 2007/2008 is also $57,123. Motor Vehicles defined as ‘luxury cars’ are subject to luxury car tax on the portion of the value of the vehicle exceeding $57,123.

Overtime Meals – Overtime meal allowance claims up to an amount of $22.60 per meal are considered reasonable for the 2007/2008 income year where the meal allowance is paid under an industrial instrument.

Domestic and Overseas Travel – A domestic or overseas travel allowance expense claim is considered to be reasonable if the amount of the claim covered be the allowance received by an employee does not exceed the relevant reasonable amount shown in the table of the new determination http://www.wearne.com.au/forms/tax_form_list.html TD 2007/21. Different allowance amounts apply to employees at three separate salary levels.