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Newsletter November 2008

The recent NSW Government Mini-Budget contained the following tax measures;

Land Tax – a marginal land tax rate of 2% (rather than 1.6%) will apply to land tax payers with total taxable land holdings in excess of $2.25 million. Land value less than the $2.25 million threshold will remain taxable at the 1.6% rate. This will apply for the 2009 land tax year (ie land held at 31 December 2008) and onwards.

Stamp Duty – The abolition of stamp duties was scheduled to be abolished as of 1 January 2008 on the transfer of unquoted marketable securities (eg unlisted shares), mortgage duty on business loans from 1 July 2009, and transfer duty on non-land business assets from 1 January 2011. The abolition of these duties is now to be deferred until 1 July 2012.

From 1 January 2009, nominal duties (which apply to duplicate documents, changes of trustee, transfers under will, etc) will increase from $2 to $10, and from $10 to $50, while the duty for trust deeds will increase from $200 to $500.

First Home Owners Scheme – an additional $3,000 will be available for first home buyers purchasing a newly constructed home in the next 12 months, increasing the total amount available to such first home buyers to $24,000. From 1 July 2009, the scheme will not be available to assist first home owners acquiring a home valued at more than $750,000.

Parking Space Levy – From 1 July 2009, the parking space levy will increase from $950 to $2,000 per year for the Sydney, North Sydney, and Milsons Point business districts. In the business areas of St Leonards, Chatswood, Parramatta, and Bondi Junction, the levy will be increased from $470 to $710 per year.

In an attempt to stop a stampede of withdrawals from unguaranteed institutions, and to make other investments seem relatively more attractive, the federal government will limit its free guarantee on bank deposits to amounts of $1 million or less.

The government is making the prospect of shifting large sums from non-guaranteed institutions into guaranteed banks, credit unions or building societies less attractive by charging a fee. The guarantee will be free for deposits up to $1 million.

The cost of providing a Christmas party is tax deductible only to the extent that it is subject to Fringe Benefits Tax (FBT). Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) or not declared on an annual FBT return cannot be claimed as a tax deduction.

If an entity is not using the 50:50 method of recording entertainment costs, the costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. A taxable fringe benefit will arise in respect of an associate of an employee who attends the party if not otherwise exempt under the minor benefits exemption.

If an entity is not using the 50:50 method of recording entertainment costs, the provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300.

If not using the 50:50 method, the costs of entertaining clients are not subject to FBT and are not income tax deductible. This also means that GST input tax credits cannot be claimed.

The superannuation guarantee legislation requires employers to provide a minimum level of superannuation support for their employees. Currently, the prescribed level of support is 9% of an employee’s notional salary. Since 1 July 2008, an employee’s notional salary earnings base is the employee’s ordinary times earnings (OTE).

The following table details whether some of the more common earnings are included or excluded from OTE. It is important to note that salary and wages are used in calculating an employee’s individual shortfall component if the employer has failed to make the minimum level of superannuation contributions by the due date.