The November edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• Christmas Gifts
• Small Business Benchmarks
• Record-Keeping for Business
• ATO’s New Property Web Page
• Pacific Seasonal Workers’ Tax Rate Reduced

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the November Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au) and I will be more than happy to forward a copy on to you.

A new Bill has been introduced into parliament to establish a payroll tax rebate scheme which is intended to encourage the employment of people with disabilities (as opposed to the general dis-incentive payroll tax offers for employing people).

The Payroll Tax Rebate Scheme (Disability Employment) Bill 2011 will provide employers with a payroll tax rebate of up to $4,000 per eligible employee.

The $4,000 rebate will be paid in 2 equal instalments – $2,000 after 3 months of employment and a further $2,000 after 6 months of employment.

Eligible workers are new employees that have completed the Family and Community Services funded Transition to Work program and are working a minimum of 12 hours a week, on average.

More information on how to apply for this rebate will be available later in the year and so we’ll keep you updated.

TaxWise Business News is published each quarter. The September, 2011 issue of TaxWise Business is now available from the main site.

This quarter’s issue includes the following articles:

• ATO Compliance Target Areas 2011-12
• Taxing Carbon
• Managing Tax Debts
• Proposed Not-for-profit Reforms
• Car Fringe Benefits Rules Changed
• Excess Super Contributions Tax
• CGT Small Business Conscessions Tool

Remember that you can subscribe to the Enewsletter version of TaxWise Business News to have it emailed to you each quarter. Simply head to the newsletter sign up page or enter your details into the Subscription Box on your right.

Did you know you can still access previous editions of all our newsletters in our newsletter archive? Check them out below.  

TaxWise Individual News

TaxWise Individual News is currently published bi-annually and emailed (or snail-mailed) out to all interested personal tax clients. You can download each issue in PDF format or click the links to read through individual articles online.  

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TaxWise Business News

TaxWise Business News is produced quarterly and emailed (or snail-mailed) out to interested clients. Visitors to our site can access individual articles online by using the links provided or download complete issues in PDF format.  

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Business Plus+ Newsletter

The aim of this newsletter is to give you some useful articles, tips and pointers that will make a difference to your business, irrespective of it’s size or ownership structure. Follow the links to browse through individual articles or download the latest edition in PDF format.  

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Tax Update Monthly

Our monthly Tax Update newsletter is written in an easy and relaxed style to keep you up-to-date with important tax changes. This particular newsletter is available exlusively to clients for download. Please log in for download links.  

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The September edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• ATO Clamps Down on GST Fraud and Cash IncomeMeaning of ‘Cost Price’ of a Car for FBT Purposes
• ATO Data Matching: Flood and cyclone reconstruction levy
• Is an Investment Made by a Trustee Always on Capital Account?
• Government Committed to Superannuation Reforms
• ATO Warning About Illegally Accessing Super Early

This particular newsletter is available for download exclusively for clients and Facebook Fans (a username and password is required).

If you are not a client and would like a copy of the September Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au) and I will be more than happy to forward a copy on to you.

The ATO will collect names and addresses of approximately 735,000 individuals who received the Australian Government Disaster Recovery Payment, and New Zealand citizens holding a special category visa who received an ex-gratia payment from Centrelink.

This latest data matching effort, called the Temporary Flood & Cyclone Reconstruction Levy Data Matching Project (what a mouthful that is!) will electronically match information with certain sections of ATO data holdings.

The program will allow the ATO to automatically exempt individuals from the Temporary flood and cyclone reconstruction levy and also identify non compliance with lodgment obligations under tax law.

The August edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• ATO Focus on SMSFs
• Warning: Investing in Overseas Property
• New This Year to Family Tax
• Superannuation: Common Mistakes Made by Employers
• Car Depreciation Limit for 2011/12
• Reasonable Overtime Meal Allowance Amounts 2011/12

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the August Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au) and I will be more than happy to forward a copy on to you.

New tax thresholds were introduced at the start of the financial year for payroll tax in NSW. The annual payroll tax threshold is now $678,000 and the rate is currently 5.45%.

From 1 July 2011, the monthly threshold is:

Remember that your monthly payment is due just 7 days after the end of each month. Annual reconciliations are due 21st July.

I was at the NSW Office of State Revenue website earlier in the week and noticed they have an online payroll tax course to help employers unnderstand payroll tax. I must admit, I haven’t had time to check it out yet  but if you are registered for Payroll Tax (or think you might need to be), it could be worth a look at http://elearning.osr.nsw.gov.au/payrolltax/.

The NSW Government is also introducing the Jobs Action Plan from 1 July as an incentive for businesses to employ more workers (as opposed to the big, fat dis-incentive payroll tax offers you ). If your business employs staff in positions that are new jobs, you may be eligible to receive a payroll tax rebate.

For more information on the new scheme and to find out if you’re eligible for the Jobs Action Plan, visit the Rebate Scheme (Jobs Action Plan) page at NSW OSR.

The July edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• Occupations in the spotlight for the 2011 income year
• Tax laws amended to allow income ‘streaming’ by trusts
• Flood levy exemption declaration
• Deductions for study and job seeking expenses
• ATO warning: Unpaid directors fees
• ATO focus on unpaid present entitlements owed to companies
• Deductions for TPD insurance 

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the July Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au).

The recent spate of “get private health cover before 30 June or get taxed” campaigns really irritate me. I have nothing against Private health Cover and if you’re likley to be up for the Medicare Levy Surcharge (MLS), you should look into it.

What bugs me is that unless you read the itty-bitty fine print on the bottom of screen, you may not realise that even if you got approriate cover on 29 June, you’ll still have to pay the MLS for the other 364 days of the year you did not have it.

They don’t make that fact crystal clear – in fact, the whole campaign implies that there is an urgency to get it then (ads running during June) in order to avoid this additional penalty that financial year.

It’s then up to the accountant to explain this concept to you. You try to tell the accountant, “But I rushed out to purchase it because the ad said….”  

Are you really going to accept tax advice based on nothing but a 30 second television commercial? Always read the fine print or check with a tax professional if you’re uncertain (preferably not the company who is trying to sell you the product).

If you did rush out and grab it during June, it’s not a bad thing. You won’t be taxed MLS for the days you were covered and, if you keep it up, you won’t have to worry about the surachge at all next financial year. 

Just don’t abuse your accountant if you didn’t get health cover until June and are liable to pay a portion of the surcharge for the preceding days in the financial year.

Higher education does not come cheap…. I could have cried when I saw my latest HELP statement. Ouch!

If you have a HELP debt, you must start repaying that debt when your ‘repayment income’ is above the threshold for compulsory repayment.

The following rates and thresholds apply for the 2010-11 financial year:

Your HELP repayment income is made up of your taxable income, total net investment losses, reportable fringe benefits amounts, reportable super contributions and any exempt foreign employment income.

The ATO’s HELP repayment calculator can give you an estimate of your compulsory repayment.  This is automatically calculated when your tax return is processed.

The voluntary repayment calculator gives you an estimate of the benefit you’ll receive when you make a voluntary repayment towards your HELP debt.

The Medicare Levy is currently paid by taxpayers at a rate of 1.5% of taxable income.

Low income individuals or families might be eligible for an exemption or reduction from paying the Levy, based on family income.

The 2010-11 Medicare Levy Low income thresholds for individuals and families are outlined below:

Single Taxpayer

Threshold: If you are under the threshold amount, no Medicare Levy is payable.

Phase in: Medicare Levy is payable at 10% of the excess above the threshold.

1.5%: Once you have reached this income, the full 1.5% Medicare Levy applies to the entire amount of taxable income.

Families

DIY

If you are preparing your own tax return and wish to claim an exemption or reduction based on family income, you can do this at item M1 – just pop in the number of dependent children at label Y.

Last year a significant number of employers incorrectly reported Reportable Employer Superannuation Contributions (RESC) on Payment Summaries. 

It is important that employees check their Payment Summaries carefully. If your boss has filled out the RESC incorrectly, it could affect the amount of child support you pay or receive and your eligibility for certain Centrelink benefits.

The most obvious mistakes we came accross again and again involved recording compulsory super guarantee contributions under the RESC label.

Reportable employer super contributions are:

• contributions made under a salary sacrifice agreement
• additional amounts paid to an employee’s super fund (for example, an annual bonus paid to super)
• employee negotiated increases in super contributions as a part of their salary package (for example, under individual employment contracts).

They do not include contributions that are made by employers to meet super guarantee or industrial agreement obligations. The Goverment recently amended the definition of RESC.

If you believe you’ve incorrectly been attributed an RESC amount, you should speak with your employer; they will need to issue you an amended Payment Summary.

Last year the post titled Low Income Tax Offset for 2010  proved to be one of the most popular topics. With Tax Time just around the corner, it’s time we update that information and take a look at LITO for 2011.

This year, adult taxpayers do not pay tax until their income is above $16,000.

I’ve prepared a short video in order to explain LITO for the 2010-11 year, including examples on working out your entitlement.

See the video below or scroll down to get right to the facts.

For the 2010-11 year, the maximum low income tax offset (LITO) is $1,500.

This reduces by four cents for every dollar of taxable income above $30,000. It erodes entirely at a taxable income of $67,500.

Here’s how it looks:

To be eligible for LITO, you must be a resident for tax purposes and have a taxable income below the cut-off threshold.

There is nothing you need to fill in on your tax return to apply for the Low Income Tax Offset. The ATO will automatically apply this offset to your assessment for you if you’re entitled to it.

If you have any questions, simply post a comment below and I’ll get back to you as soon as I can. 

I’m hoping to cover one offset or entitlement each weekend for the next couple of months. If you have any suggestions on what you want to see featured next, don’t be shy about letting us know!

The June edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• Budget 2011
• ATO Focus on Employer Super Contributions
• Compliance Project: Government Stimulus Payments
• FBT Car Parking Thresholds
• CGT Improvement Thresholds

With tax time just around the corner, I’ve also prepared an Individual Tax Return Checklist (lots of hints on deductions) and a Year End Checklist for Business. These can both be download from the same area of the site.  

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the April Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au).

A lot of our clients have received an unexpected additional tax refund as a result of the ATO amending tax returns of eligible Youth Allowance recipients to include a deduction for study expenses. This came about thanks to the High Court decision in  Commissioner of Taxation v. Anstis.

In the same way that the ATO did this for Youth Allowance recipients, they are now amending the tax returns of eligible Austudy and Abstudy clients. Tax assessments for the 2007, 2008, 2009 and 2010 income tax years will be amended to include a tax deduction of $550 for study expenses for each year of eligibility.

Deductions can be claimed for the 2011 year for study expenses incurred by Austudy, ABSTUDY and Youth allowance recipients.

Keep in mind that this is likely to be the last time you can claim a deduction against an assistance payment. The government announced its intention in the recent Budget to change the law to prevent deductions being claimed against all government assistance payments from 1 July 2011.

The federal government announced changes to the operation of a number of offsets and rebates in this Budget. Some of these changes are effective as of Budget night. You should consider the application of these changes to your circumstances closely and carefully.

• From 10 May 2011, the dependent spouse rebate will be phased out for spouses aged less than 40 years of age. As of 10 May 2011, any individual with a spouse born on or after 1 July 1971 will not be eligible for this rebate.

• The low income tax offset (LITO) is a tax rebate for individuals on lower incomes. From 1 July 2011, the LITO will increase from 50% to 70% of total entitlements. This will not lead to an increase in the total offset available, but will lead to an increase in the percentage of the tax offset that will be available throughout the year. The rest of the tax offset will still be available as a cash lump sum at the end of the year.

• From 1 July 2011, the ability of children under 18 years of age (minors) to access the low income tax offset to reduce tax payable on their unearned income (such as dividends, interest, rent, royalties and other income from property) will be limited. This change will have the effect of significantly reducing the amount of passive income that you can distribute to a child effectively tax free. Income earned by minors from work will still be eligible for the full benefit of the low income tax offset.

• From 1 July 2011, self-education expenses will no longer be deductible against government assistance payments of any nature. As a result, students who receive Youth Allowance will still be entitled to claim a deduction for expenses incurred in gaining that payment for the 2010-11 income year. The Commissioner of Taxation has previously determined that students who have incurred such expenses in the 2006-07 to 2009-10 income years but have not retained receipts to substantiate these expenses will be entitled to a deduction of $550 per income year. Such students can make higher claims if the claims can be substantiated.

• From 1 July 2011, families in receipt of Family Tax Benefit Part A will be eligible for an advance of up to 7.5% of their annual Family Tax Benefit Part A entitlement (up to a maximum of $1,000). As above, this will not change the total value of your entitlement, but will allow you to access it at an earlier time. 

• The Family Tax Benefit Part A and Part B supplements, and the family payment higher income thresholds and limits, will effectively be held at their present levels for the next three years, that is, they will not be indexed as in the past. This change may have the effect of limiting or cancelling your entitlement to these benefits, depending on your circumstances.

• From 1 January 2012, the eligibility for Family Tax Benefit Part A will be limited to children up to the age of 21 years. This change may have the effect of limiting or cancelling your entitlement to these benefits, depending on your circumstances.

• From 1 January 2012, students electing to pay their HECS student contribution up-front will have their applicable discount reduced from 20% to 10%, and the bonus on voluntary payments to the ATO of $500 or more will be reduced from 10% to 5%. As such, you should consider whether reducing any outstanding HECS bills or settling any such fees incurred up-front for the remainder of the 2011 calendar year may be beneficial for you. 

This post appears in our Budget Edition of Taxwise Business News.

If you want to stay updated on the latest in tax news for business operators, be sure to subscribe to our popular Taxwise Business News newsletter. This newsletter is produced four times each year; February, June, September and November. It’s completely free and you can cancel your subscription at any time.

On Friday, the ATO released  ’100 People,’ a  representation of all the individual taxpayers in Australia as though they were just one hundred people.  

The numbers are drawn on information from Taxation statistics 2008-09, which is summary of tax returns, and other tax data for that financial year.

Transcript Highlights

Twelve point three million people sent their tax returns to us in the 2009 income year. Below we represent the millions of tax returns we received as 100 people.

We received 52 from males and 48 from females.

We received tax returns from five different generations:

• 6 from generation Z
• 21 from generation Y
• 33 from generation X
• 30 from baby boomers
• 10 from seniors.

People lodged their tax returns in different ways:

• 71 through a tax agent
• 19 using e-tax
• 10 by paper.

 After we assessed the tax returns:

• 84 people received a refund
• 12 people owed tax
• 4 balanced perfectly.

Ten people received the government superannuation co-contribution.

Eight people operated a business in their own name

• 2 made a loss
• 6 made a profit.

Below we show the proportion of all net tax paid when we ranked our 100 people by their taxable incomes.

• People with the top three taxable incomes paid 31% of all net tax.
• The next six paid 18% of all net tax.
• The next 31 paid 41% of all net tax.
• The next 35 paid 10% of all net tax.
• The last 25 didn’t pay any tax.

The above is copied from the presentation at the ATO website. ’100 People’ can be viewed in it’s entirety at www.ato.gov.au/100people

“The aim of the ’100 People’ concept is to provide an easy to understand and entertaining insight into taxation system statistics,”  Tax Commissioner, Mr D’Ascenzo said.

“This new concept gives people a better understanding of our country’s tax system. It’s a good way for people to get a greater appreciation of how our community is represented in our tax system and also allows people to see how their personal circumstances fit in with everyone else’s.

“’100 People’ shows, for instance, which states and territories taxpayers live in, their broad occupational groupings, which generations they belong to, how many have car salary packaging, who pays the majority of the income tax and how many people make tax-deductible gifts.

“I encourage the community to take advantage of this innovative and informative resource.”

IMHO, I think the concept of making plain the Tax Stats for the general public is a great idea. I look forward to more like this! What do you think?

There won’t be a “Ratio to Know” cast today as I’m heading out of town for the funeral of a family member. 

I would encourage you instead to take a look at the Key Issues Announced in the Budget. This article was included in the special Federal Budget 2011 issue of  our Business Plus+ newsletter. It contains a brief overview of those issues which are likely to impact upon small business.

Regarding the Budget, I have received a number of queries this week concerning changes to HECS. I will update you on this and other ‘individual taxpayer’ issues when I return. Until then, if there is anything you would like more information on concerning proposed budget changes, let us know.

I was met with a mix of both scepticism and delight this week as I contact taxpayers who have received an unexpected, addition tax refund as a result of the Anstis case. (Let’s face it, it’s not often I call people to say “Hey, the Tax Office have sent us money for you although you weren’t expecting it”).

The case received a fair amount of coverage at the time. Essentially, the High Court decided that the taxpayer was permitted to claim education expenses against their Youth Allowance income. As a result, the ATO have been amending eligible taxpayers assessments with a standard additional $550 deduction for each of the 2007 – 2010 years they were eligible.   

This has been a positive for many of our client base who’s refund payments are starting to flow through now

Don’t get used to it, though. According to budget papers, the Government will amend the tax law to prevent deductions being claimed against all government assistance payments, with effect from 1 July 2011, in response to the 2010 High Court decision in Commissioner of Taxation v Anstis.

Commencing the measure from 1 July 2011 will allow individuals who receive Youth Allowance (Student) to claim a deduction for expenses incurred in gaining their payment for the 2010/11 income year. This is to ensure individuals who have maintained records of their expenditure following the High Court decision are not precluded from claiming a deduction.

The Government will phase out the tax offset for dependent spouses currently aged less than 40 to help encourage more Australians into paid employment.

This reform will mean that from 1 July 2011 taxpayers with a dependent spouse born on or after 1 July 1971 will no longer be eligible for the dependent spouse tax offset (DSTO). This means the DSTO will be gradually phased out as the population ages.

Dependent spouses with children are not affected by this measure because they are eligible for Family Tax Benefit B rather than the DSTO.

The change will also not affect taxpayers whose dependent spouse is a carer, who is an invalid or permanently unable to work; and taxpayers eligible for the zone, overseas forces or overseas civilian tax offsets.

This change recognises that dependent spouses who may have been out of the paid workforce for many decades would find it more difficult to find jobs, so they will continue to be eligible for the DSTO.

This reform to the DSTO forms part of the Government’s Building Australia’s Future Workforce package.

The Federal Treasurer, Mr Wayne Swan, presented the Gillard Government’s budget on 10th May 2011. None of the items contained within the budget will become law until they have been passed by the House of Representatives and the Senate, and signed by the Executive Council.