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Newsletter October 2011

The Government announced in the 2011 Federal Budget, the proposed changes to the way that small businesses can claim their depreciation expenses. From the 2012/13 income year the proposed amendments will allow small businesses to:

• Immediately write-off assets valued at under $6,500 (up from $1,000 presently),
• Immediately write-off up to $5,000 for motor vehicles acquired from the 2012/13 income year, with the remainder to be written-off at a rate of 15% in the first year and 30% in the following years,
• Write off other assets in a single depreciation pool at a rate of 30% (15% in the first year).

The Government has proposed that individual tax payers may claim standard tax deductions for work-related expenses and the cost of managing tax affairs. The proposed changes provide for a standard deduction of $500 for 2012/13, rising to $1,000 for 2013/14 and subsequent years.

The standard deduction will replace work-related expenses and the cost of managing tax affairs for those taxpayers whose claims for these expenses are less than the standard deduction. Taxpayers whose claims for these expenses exceed the standard deduction will still be able to claim those deductions.

The tax office has reminded us that members of superannuation funds should understand the bring-forward provisions when making non-concessional (undeducted) contributions to their superannuation funds.

A member can use the bring-forward provision if they exceed the non-concessional cap and are less than 64 years of age on 1 July of the financial year. If a member makes non-concessional contributions of more than $150,000 in a particular financial year, they will automatically trigger the bring-forward provision. Once this happens, the normal non-concessional contributions cap does not apply to the next two years. Instead, the total contributions a member can make over the next two years cannot be greater than $450,000 (less the contributions that were made in the year the bring-forward provision was triggered).

You can access your super;

• When you reach your preservation age and retire
• When you turn 65
• Under the transition to retirement rules (if you are eligible) while continuing to work.

There are also limited circumstances in which you may also be able to access your super before you retire. These circumstances may include

• Severe financial hardship
• Compassionate grounds
• Terminal medical condition
• Permanent and temporary incapacity

Your preservation age depends on when you were born.
 

Super benefits you receive are tax-free if you receive them from a taxed source and you’re 60 years of age or over (unless you are eligible for the transition to retirement rules). This means when you receive a super lump sum, or payments from a super income stream, you get them tax free.

If your super benefits won’t fully support you when you retire, you may also qualify for;

• Government support such as age and service pensions or benefits,
• Concessions
• Tax Offsets

From 1 July 2011, eligibility for the dependent spouse tax offset will be confined to taxpayers with a dependent spouse born before 1 July 1971.

Taxpayers who maintain an invalid or permanently disabled spouse, support a carer or who are eligible for the zone, overseas forces or the overseas civilian tax offsets are exempt from the new age limit and will still be able to claim the value of the dependent spouse tax offset via an expanded invalid spouse, zone, overseas forces or overseas civilian offset.

Taxpayers may also be eligible to claim the family tax benefits offered by the Family Assistance Office.

Land tax is a tax levied on the owners of land in NSW as at midnight on 31 December of each year. In general, your principal place of residence (your home) or land used for primary production (a farm) is exempt from land tax. You may be liable for land tax if you own or part-own:

• vacant land, including vacant rural land
• land where a house, residential unit or flat has been built
• a holiday home
• investment properties
• company title units
• residential, commercial or industrial units, including car spaces
• commercial properties, including factories, shops and warehouses
• land leased from state or local government.

Land tax is calculated on the combined value of all the taxable land you own above the land tax threshold. The rate of tax is $100 plus 1.6% of the land value between the threshold and the premium rate threshold and 2% thereafter.

If land is owned by a trustee of a special trust the land tax threshold does not apply and land tax will be charged at a flat rate of 1.6% of the taxable land value up to the premium threshold of $2,366,000 and then 2% thereafter.

If the combined value of your land does not exceed the threshold, no land tax is payable.

The Valuer General has determined that the land tax threshold for the 2012 land tax year is $396,000. The premium land tax threshold for the 2012 land tax year is $2,421,000.