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Newsletter July 2008

Contribution caps

Concessional contributions cap – Concessional contributions include employer contributions and personal contributions claimed as a tax deduction by a self-employed person. For 2008/09, the amount of the cap is $50,000.

Transitional arrangement for the concessional contributions cap – Between 1 July 2007 and 30 June 2012, a transitional concessional contributions cap of $100,000 will apply for people aged 50 or over. For persons with more than one fund, all concessional contributions made to their funds are added together and count towards the cap.

Non-concessional contributions cap – Non-concessional contributions include personal contributions for which a person does not claim an income tax deduction. For 2008/2009, the amount of the cap is $150,000. People under 65 years of age can use a ‘bring forward’ option, which means they can make non-concessional contributions of up to $450,000 over a three-year period.

Minimum annual pension payments – Once a person starts a pension on or after 1 July 2007, a minimum amount is required to be paid each year. There is no maximum amount (except if a person starts a ‘Transition to Retirement’ pension). The following table shows the minimum annual pension percentages for each age group;

Age	Minimum % Withdrawal
Under 65	4%
65 – 74	5%
75 – 79	6%
80 – 84	7%
85 – 89	9%
90 – 94	11%
95 or older	14%

The High Court of Australia has held that GST is now payable on forfeited deposits. The High Court overturned the previous decision of the Full Federal Court.

The High Court decision was based on a recent case involving a taxpayer who entered into a contract to sell real property. In accordance with the terms of the contract, a 10% deposit was paid by the purchaser. The contract provided for the forfeiture of the deposit upon default by the purchaser. The purchaser subsequently failed to pay the balance of the purchase price on settlement date

The ATO has announced that taxpayers who have not accounted for GST on forfeited deposits on the basis of the Full Federal Court’s decision have until 4 September 2008 to amend their business activity statements in order to avoid ATO penalties and general interest charges.

The car cost limit for capital allowance purposes for 2008/2009 is $57,180 (up from $57,123 for 2007/2008). So, for cars first held in the 2008/2009 year, the deduction for the decline in value of the car is calculated as if the cost were only $57,180. The claiming of GST input tax credits is also limited to $5,718 (10% of the car limit). The luxury car tax threshold for 2008/2009 is also $57,180.

For the year of income beginning 1 July 2008, the benchmark interest rate is 9.45% (up from 8.05% for the previous year). The benchmark interest rate is relevant to private company loans made or deemed to have been made after 3 December 1997. It is used to;

• determine if a loan made in the 2007/2008 income year is taken to be a dividend, and
• to calculate the amount of the minimum yearly repayment for the 2008/2009 income year on an amalgamated loan taken to have been made prior to 1 July 2008.

From 1 July 2008, employer-nominated superannuation funds (also known as default funds) must offer minimum levels of life insurance death cover to members. An employer-nominated super fund is the fund that an employer chooses to pay an employee’s super guarantee contributions to if the employee does not choose a fund.

There are some instances where employer-nominated super funds do not need to meet the life insurance requirements, for example, if the employer is making contributions under a federal award, if the employer arranges insurance cover for employees outside the superannuation system, or if the employer is unable to obtain life insurance from the fund due to the employee’s health, occupation, or hours worked.

From 1 July 2008 most businesses can claim fuel tax credits for the taxable fuel they acquire and use in a range of business activities, machinery, plant, equipment and heavy vehicles.

The only fuels that are not eligible are aviation fuels, alternative fuels and fuels used in light vehicles of 4.5 tonne gross vehicle mass (GVM) or less travelling on a public road (for example, a car or small van). This means even if businesses weren’t eligible before, they may be able to claim fuel tax credits for fuel they acquire, manufacture or import for use in their business activities from 1 July 2008.

The amount businesses can claim is 18.51, 19.0715 or 38.143 cents per litre depending on how they use the fuel. Businesses must be registered for GST and fuel tax credits before they can make a claim on their BAS. If you are already claiming fuel tax credits, you can check to see if more of your fuel is now eligible.

Depending on your circumstances, you may need to:

• meet one of the environmental criteria for heavy diesel vehicles, if they were manufactured before 1 January 1996, and/or
• join the Greenhouse Challenge Plus program, if your fuel tax credits are likely to exceed $3 million in a financial year.