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May 2004 Newsletter

The Office of State Revenue has announced numerous changes in the legislation including the assessment of Land Tax, Premium Property Tax, Premium Property Duty & Vendor Duty:

Land Tax - 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.

Premium Property Tax Abolished - The land tax charged on a principal place of residence where the land value exceeded the Premium Property Tax threshold ($1.97million in 2004) is abolished from 1 January 2005.

Premium Property Duty - This has been introduced to replace the Premium Property Tax by increasing the marginal rate of purchaser transfer duty from 5.5% to 7% on the part of the purchase price of a residential property that exceeds $3 million, effective from 1 January 2005.

Vendor Duty - From 1 June 2004, a Vendor Duty of 2.25% will apply to consideration received on the sale or disposal of property, other than on the sale or disposal of a principal place of residence or farm.  Liable properties will be exempt from the duty where the vendor's sale price or value on disposal does not exceed the purchase price or value on acquisition by more than 12%. This exemption phases out between 12% and 15%.

The effect of the land tax change is that all properties other than principle place of residence need to be registered for land tax.  Please notify us 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.

The following is a summary of some of the relevant taxation issues dealt with in the 2004 Federal Budget.

Personal Tax Cuts - These cuts will be delivered by raising the income thresholds for the 42 and 47 per cent tax brackets.

• The 42 per cent threshold will be raised from $52,001 to $58,001 from 1 July 2004 and raised to $63,001 from 1 July 2005.
• The 47 per cent threshold will be raised from $62,501 to $70,000 from 1 July 2004 and raised to $80,000 from 1 July 2005.

Superannuation Surcharge - The rate will be lower to 12.5 per cent in 2004-05, 10 per cent in 2005-06 and 7.5 per cent for 2006-07 and following years.

More Flexible Superannuation - Allowing people who have not retired to access their superannuation as a non-commutable income stream once they reach their preservation age with effect from 1 July 2005. 

Worthless Shares and Other Securities Declaration - These measures will simplify the capital gains tax rules to allow any insolvency practitioner to declare shares and other securities in a company to be worthless for CGT purposes.  Currently, only a liquidator can declare shares in a company to be worthless for CGT purposes. 

Non Commercial Loan Rules - The Government will modify the non-commercial loan rules to allow private companies until the due date of lodgement of their tax return to repay loans or put loans on a commercial footing.  This measure brings private companies into line with the new measures applying to trusts.

"A fine is a tax for doing wrong and a tax is a fine for doing well."

www.osr.nsw.gov.au This website has further details on the land tax changes detailed above.  In addition, you can download the "Land Tax Initial Return" form.

www.moneymanager.com.au This site combines the latest in financial news and investment advice from Fairfax publications.