Newsletter October 2007
Print NewsletterIn this issue we look at:
Land Tax threshold for 2008
The NSW land tax threshold for the 2008 land tax year has been determined to be $359,000, an increase from $356,000 in 2007. The threshold applies to land owned on 31 December 2007.
You may be liable for land tax if you own or part-own;
- vacant land, including vacant rural land,
- a holiday home,
- investment properties,
- company title units, or
- residential, commercial or industrial units.
In general, your principal place of residence or land used for primary production (a farm) is exempt from land tax.
Tax File Numbers and Superannuation
From 1 July 2007, employer contributions made to new superannuation accounts without a tax file number will be taxed an additional 31.5%. This is on top of the 15% tax paid already.
For existing accounts, the additional 31.5% will generally be payable on all contributions once the contributions for the year reach $1,000. For accounts created after 30 June 2007, the additional 31.5% will be payable regardless of the amount contributed. It is not compulsory for a member to provide their tax file number to their fund however to avoid additional tax members must provide their tax file number.
New Tax File Number Declaration Forms
Changes to superannuation laws and tax file numbers (TFN) mean that a new TFN declaration form is now being used. You should order the new forms and destroy old stocks.
The change means that when an employee completes a TFN declaration form their employer must pass on the TFN to their superannuation fund if the employer makes superannuation contributions on their behalf. If an employer doesn’t pass on the employee’s TFN within the set timeframe, the employer could face penalties.
The new TFN declaration forms can be ordered online from the ATO website www.ato.gov.au, can be ordered over the telephone 1300 720 092, or collected from selected newsagents.
Changes to Non-Resident Trust Beneficiaries
Generally, the net income of a trust is taxed in the hands of the beneficiaries who are presently entitled to the trust’s income. To assist in the collection of tax, in some cases the trustee is assessed in relation to a beneficiary – including where a beneficiary is a non-resident at the end of an income year.
Recent changes have been made to ensure that a trustee is assessed on a non-resident trustee beneficiary’s share of the net income of a trust. The trustee is only assessed on that part of the income that is Australian-sourced but will not be assessed on dividends, interest and royalties that are within the scope of the withholding tax rules.
The rate of tax that a trustee pays in relation to a non-resident trustee beneficiary is the top tax rate for a non-resident individual (currently 45%).
The changes apply to income years starting on or after 1 July 2006.
Superannuation Guarantee Compliance made simpler for business
The superannuation guarantee charge is a charge employers have to pay if they:
- do not pay enough (9%) super contributions for their employees (this is called a super guarantee shortfall)
- do not pay super contributions by the cut off date for payment
- do not pay super to their employee’s chosen super fund (this is called a choice liability), or
- pay super contribution to a fund after the cut off date for payment.
Superannuation is payable quarterly with payments due on the 28th October, 28th January, 28th April and 28th July.
Payments for the previous quarter received after these dates are late.
Currently, an employer can only elect to offset late superannuation contributions paid to a fund if they were made within one month after the due date.
This means that employers who pay superannuation contributions to a fund more than one month late could be required to pay the contribution twice; once to the fund and once to the Tax Office. These current laws have caused much confusion among employers.
The proposed law change will give relief to employers from this double payment situation, while still maintaining a range of penalties that apply to employers who do not pay superannuation contributions for their employees on time.
Under the proposed new laws, if an employer is unable to pay by the cut-off date, they need to complete a Superannuation Guarantee Charge Statement and pay the superannuation guarantee charge to the Tax Office.
Personal Superannuation Deductions - The 10% Rule
A recent court decision has highlighted a need to remind predominately self employed persons of the 10% rule in claiming income tax deductions for superannuation payments on behalf of themselves.
A person who receives only small amounts of employer superannuation support (ie a substantially self-employed person) may be eligible to claim a deduction for personal superannuation contributions if the “10% rule” is met. To qualify, the person’s assessable income, exempt income and reportable fringe benefits from eligible employment must be less than 10% of the person’s total assessable income and reportable fringe benefits. For this purpose, income received from one or more employers who are required to provide superannuation support is aggregated.
In the recent court case, a taxpayer claimed deductions for personal superannuation contributions and argued that his employment income included unpaid leave entitlements which did not attract superannuation support and therefore should not be included in the 10% calculations. However, the courts agreed with the ATO’s argument that the unpaid leave entitlements formed part of ‘all income attributable to employment income, and therefore would disqualify the taxpayer from passing the 10% rule.
If you require details about any of the items in this newsletter or would like more information, please contact us. Items in this Bulletin are general comments only. They do not constitute advice and should not be used as a substitute for business planning, financial or taxation advice.
