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Newsletter June 2006

Superannuation Contributions
In order to claim a tax deduction for the year ending 30 June 2006, superannuation contributions must be paid and reach the complying superannuation fund by year 30 June 2006.  Penalties apply where superannuation guarantee contributions for the quarter ending 30 June 2006 are not paid by 28 July 2006.

Bad Debts
In order to claim a tax deduction for the year ending 30 June 2006, bad debts must be written off as bad before the year end.  Taxpayers must produce a written record prior to the year end outlining the decision to write off the debts from the accounts.

Employee Bonuses
Employee bonuses are generally only deductible if they are incurred by year end.  That is, there must be a legal liability to pay the bonuses to the employees and the amount must be able to be reasonably estimated.  The commitment to pay the bonus should be documented before 30 June 2006.

Asset Write-Off & Capital Allowances
Depreciating assets that are not used and that are scrapped by year end can result in an immediate deduction for their remaining tax written down values.

Amendments to the capital allowance regime will allow an increase in the rate for the diminishing value method from 150% to 200% for assets started to be held on or after 10 May 2006.

Prepayments
For corporate taxpayers, deductions for most prepayments are no longer available, except where they are;

• less than $1,000 (GST exclusive)
• required to be made by law or under a court order,
• under a contract of service, (i.e. salary and wages),
• incurred by a STS taxpayer.

Averaging of land values - for the 2007 land tax year, the taxable value of each parcel of land will generally be the average of the land applying for the current tax year and the land values that applied for the previous two years.

Averaging of land tax threshold - for the 2007 and future land tax years the land tax threshold will be averaged.  The threshold will be average of the 'indexed amount' for the new tax year and the previous two land tax years, as calculated annually by the Valuer General.  As the land tax threshold was abolished for the 2005 land tax year, a 'notional' threshold of $342,000 will be used for that year.

The car parking threshold for the FBT year commencing 1 April 2006 is $6.62 (up from $6.43 from the previous year).

There are a number of conditions that must be met before car parking facilities provided by an employer to an employee will be subject to FBT.  Two of these conditions are that a commercial car parking station is located within a 1km radius of the employer provided car park, and the lowest fee charged by the operator of that car park is more than the car parking threshold.

Small business employers will receive an exemption for car parking benefits if the car is not parked at a commercial parking station and the employer's income for the income year ending most recently before the start of the FBT year is less than $10 million.

The eligibility requirements for the small business tax relief provisions will be aligned from 1 July 2007 as follows;

• the Simplified Tax System (STS) average annual turnover threshold will be increased from $1m to $2m,
• the $3m depreciating assets test will be removed from the STS eligibility requirements,
• the net assets threshold for the CGT small business relief will be increased from $5m to $6m.  STS taxpayers will be eligible for the concessions without having to satisfy the net assets threshold,
• the cash accounting turnover threshold for the GST small business concessions will be increased from $1m to $2m.  The government will also discuss the simplified GST accounting method with the Commissioner and suggest that the threshold be aligned with other thresholds at $2m,
• STS taxpayers will be able to pay quarterly PAYG instalments on the basis of GDP-adjusted notional tax.  

The energy grants credits scheme helps cut fuel costs for businesses, particularly in regional and rural Australia, by providing a grant for fuel used for specified activities.  The energy grants credits scheme replaced the diesel fuel rebate scheme and diesel and alternative fuels grants scheme on 1 July 2003.  You can claim fuel purchased under the energy grants credits scheme provided the claim is made within three years of the date of the purchase and the fuel was purchased for use in an eligible activity.

Eligible activities include road transport, agriculture, fishing, forestry, mining, marine transport, rail transport, nursing and medical, generating electricity, other specified industrial processes, or burner use.

Eligible fuels include diesel, alternative fuels and like fuels which include heavy fuel oil, light fuel oil, and all fuels that attract the same rate of duty as diesel.