Newsletter – March 2009

$42 BILLION NATION BUILDING & JOBS PACKAGE

The Rudd government announced this plan on February 3, 2009 to support jobs and invest in future long term economic growth. The legislation was passed by the Senate on Friday 13 February, 2009 and was not supported by the Coalition.

Key features include:

• Small Business Tax Break will be available for businesses with a turnover of less than $2 million.

These businesses can claim an additional 30% tax deduction for eligible assets costing $1,000 or more that they acquire from December 13, 2008 to June 30, 2009 and install prior to June 30, 2010.

So a small business that buys a $2,000 computer before June 30, 2009 can claim an additional $600 deduction in its 2008/2009 tax return, or a small business that buys a $60,000 backhoe can claim an additional $18,000 deduction.

This additional 30% deduction falls to 10% for acquisitions made between July 1, 2009 and December 31, 2009.

Eligible assets for the allowance are generally depreciable or capital allowance assets and includes new expenditure on existing income producing assets.

Businesses with a turnover greater than $2 million receive the same deductions for eligible assets costing more than $10,000.

• $900 – $950 Cash Bonus will be paid as a one off payment to 5 different groups.

Working Australians who earned less than $100,000 in the 2007/2008 financial year who paid tax after all offsets and rebates.

The payment will be made automatically by the Australian Taxation Office and the amount decreases for those earning over $80,000 in the 2007/2008 financial year. Where taxable income is between $80,000 and $90,000 the payment is $600 and for those with an income between $90,000 and $100,000 the payment is $250.

Single Income Family Bonus of $900 will be paid to those who are eligible to receive Family Tax Benefit Part B.

Centrelink will automatically make payments to those eligible from March 11, 2009.

Those who claim Part B annually via their tax return will be paid after the lodgement of the 2008/2009 tax return. $950

Farmers Hardship Bonus will be paid to 21,500 drought affected farmers and farm dependant small business owners.

$950 Back to School Bonus will provide a one off, up-front bonus to be paid to families eligible for Family Tax Benefit Part A.

This measure is in addition to the Education Tax Refund.

The Training and Learning Bonus is also a one off payment of $950. Two categories exist:

a) Recipients of Youth Allowance (students and apprentices), Austudy and Abstudy as well as Sickness Allowance and Special Benefit recipients.

b) A temporary supplement (January 1, 2009 to June 30, 2010) to the Education Entry Payment (EdEP). The EdEP provides assistance to those on income support returning to study. There is also a temporary extension of EdEP to Youth Allowance and a relaxation of the requirement to be receiving social security from 12 months to 1 month.

In total about 440,000 students and people returning to study will be paid this one off bonus.

• Free Ceiling Insulation for 2.7million homes from July 1, 2009 owner-occupiers without ceiling insulation will be eligible for free product and installation of up to $1,600.

The program will run for 2½ years only and eligible owner occupiers who install ceiling insulation between February 3, 2009 and June 30, 2009 can apply to be reimbursed.

In addition to this measure the Energy Efficient Homes investment and Solar Hot Water Rebate will be increased from $1,000 to $1,600 from February 3, 2009. The Low Emissions Plan for Renters rebate will increase also from $500 to $1,000.

• 9,540 School Building’s Upgrade program will cost a total of $14.7 billion. A new building or large scale infrastructure work will be carried out in every primary school, special school or K-12 school in Australia.

Part of this program also includes an allowance of up to $200,000 for every school for maintenance and minor building works.

• 20,000 New Social and Defence Homes to be built from April 2009 through to March 2011. Areas where these will be built include Adelaide, Brisbane, Canberra, Darwin, Melbourne, Hobart, Townsville, The Hunter, Ipswich, Sale, Wagga Wagga, Wodonga, Nowra and Toowoomba.

• $890 million Black Spot, Boom Gate, Regional Roads and Community Infrastructure program will also be commenced.

This program should improve safety on our roads and rail crossings and improve local road networks.

OCTOBER 2008 ECONOMIC SECURITY PACKAGE

In response to the global credit crunch the Federal Government outlined last year a $10.4 billion economic stimulus package to provide support and growth to the Australian economy.

There were 5 essential elements to this package:

• Pensioners Christmas Bonus totaling $4.8 billion. Under this proposal a lump sum payment of $1,400 for single pensioners and $2,100 for pensioner couples was made to recipients of the following:

•  Age Pensions;
•  Disability Support Pensions;
•  Carer Payments;
•  Wife and Widow B Pensions, Partner, Widow and Bereavement Allowances;
•  Veterans Affairs Service Pensions;
•  Veterans Income Support Supplement;
•  Veterans Affairs Gold Card holders eligible for Seniors Concession Allowance;
•  Those of age pensioner age who receive Parenting Payment, Special Benefit, or Austudy; and – Eligible Self Funded  retirees holding a Commonwealth Senior Health Card (CSHC).

The payments were made automatically through Centrelink and the Department of Veterans Affairs in the fortnight beginning 8 December 2008.

In addition to this people who are receiving a Carer Allowance also received $1,000 for each eligible person being cared for.

• Low and Middle Income Families received $3.9 billion in support payments.

The support was delivered to families through a one-off payment of $1,000 for each eligible child in their care. Those who received the support include:

– Families who receive Family Tax Benefit Part A; and

– Families with dependent children who receive Youth Allowance, Abstudy or a benefit from the Veterans’ Children’s Education Scheme payment.

In all, around 3.9 million Australian families receive a $1,000 one-off payment.

Most families received their full payment automatically in the fortnight beginning 8 December 2008 on each family’s regular family tax benefit payment day. These payments were completed by 19 December 2008.

Families who receive their family payments as a lump sum at the end of the financial year will receive their additional payment when they make their claim.

Payments will be tax exempt and not included for income-testing purposes.

If you believe your entitled to one of these payments but not yet received your funds please contact Centrelink or our office for assistance.

• The Federal Government’s First Home Owners Boost scheme to $1.5 billion to assist first home buyers purchase a home. First home buyers purchasing established homes will receive $14,000, the new grant will apply from 14 October 2008 and in order to qualify, the contract must be entered into before 30 June 2009.

First home buyers purchasing newly constructed homes that meet State energy efficiency and sustainability standards will still be eligible for the existing $7,000 grant.

Accordingly we can summarise the position as follows:

There are substantial penalties for knowingly making false or misleading statements in connection with an application for any of the above benefits.

Some concessions are still available for eligible purchasers where a property is purchased jointly and one party is ineligible for the concession.

This initiative together with the state government’s first home buyers stamp duty concessions for acquisitions up to $500,000 (representing a potential saving of $17,990) is envisaged to bring more home buyers into the market and boost economic activity generally.

• New Training Places will be created at a cost of $187 million.

This measure will double the Productivity Places Program numbers from 57,000 to 113,000.

• The Nation Building Program of the federal government will be fast tracked.

Key areas to be of focus include

• Education and Research
• Health and Hospitals
• Transport and Communications

THE NSW MINI BUDGET

On November 11, 2008 key changes to state government taxes and charges were announced as part of the NSW Mini Budget:

• Share transfer duty will now be abolished from July 1, 2012 instead of the previously announced January 1, 2009.

• Mortgage duty on business loans to be abolished from July 1, 2012 instead of the previously announced July 1, 2009.

• Transfer duty on business assets to be abolished on July 1, 2012 instead of the previously announced January 1, 2011.

• Land Tax will increase for the 2009 land tax year (in respect of land owned at December 31, 2008) to a new marginal rate of 2% for land owners with total taxable land holdings above $2.25million. Land below the premium threshold will continue to be taxed at 1.6% above the $368,000 threshold.

• Nominal duties will also increase from January 1, 2009. Duplicates and transfers will increase from $2 each to $10 each. Change of trustee from $10 to $50 each and initial settlement of trust deeds to increase from $200 to $500 each.

• Mining royalties to increase from January 1, 2009 as follows:

•  From 7% to 8.2% for open cut mining.
•  From 6% to 7.2% for underground mining.
•  From 5% to 6.2% for deep underground mining.

Those of you with a memory will recall that most of these state taxes and charges were to be abolished with the introduction of the GST which was on July 1, 2000, almost a decade ago!

• State Payroll Tax Changes were recently announced. Currently payroll tax is levied at a rate of 6% on all salary wages and superannuation payments above the threshold of $50,000 per month or $600,000 annually. From January 1, 2009 the rate will drop to 5.75% and the annual threshold increased to $623,000.

• The Payroll Tax Incentive Scheme was introduced to assist new and existing businesses to establish and grow in locations where unemployment is above the state average.

The scheme provides a rebate to offset the payroll tax paid by eligible employers for employees working in eligible locations over a five year period.

The scheme assists

•   start-up businesses in their first year of operation
•  businesses relocating from interstate or overseas
•  businesses expanding their payroll and becoming liable to pay payroll tax for the first time.

It is not available to an employer or group who was liable for payroll tax in pervious years.

OTHER TAX MATTERS

• The Henry Review was commissioned by the federal government to review the “root and branch” of the Australian Tax System. While this review is only the start of the process the Henry Review has highlighted that Australia has at least 125 taxes and only 10 of these make up 90% of revenues collected.

• Land Tax Assessments for the 2009 land tax year (based on land holdings and valuations as at December 31, 2008) will issue from the office of State Revenue (OSR) over the next few months. Given the state of the property market land holders should review the OSR valuation and consider objecting if the value is completely off the mark.

• Finance & Interest Rates should be reviewed in these tough times. While the banks have passed on the majority of the Reserve Bank of Australia’s cut in official rates to the residential property market sector the same can not be said for commercial or business finance sector.

A review of a client’s finances prior to Christmas showed a 2% gap on a commercial property facility when compared to the available commercial bill rate. That gap has  since dropped to 1.6% but that saving on a $3 million facility is generating an annual interest saving of $48,000.

 Advice

Should you or a friend or colleague require some advice on these or any other matter please feel free to make an appointment.