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This newsletter contains details of Amendments to Tax Law information that we think will be usefull to you. If you would like to discuss any of these matters in more details please do not hesitate to contact us. Deductibility of Self-education Expenses In a recent decision, the Federal Court held that a taxpayer who was receiving the Youth Allowance was entitled to a deduction for self-education expenses incurred. The taxpayer was studying a teaching degree and did not derive any income from employment as a teacher. The court said that the taxpayer’s ultimate motive in undertaking the degree was irrelevant to the characterisation of the expenses. Rather, its opinion was that the expenses were incurred as a necessary incident of deriving the Allowance. Accordingly, the court held that the expenses were deductible. The Commissioner’s established view is that, generally, recipients of Commonwealth educational assistance schemes payments are not entitled to a deduction for self-education expenses. This is because the expenses are not incidental and relevant to the payments. Superannuation Warning The Tax Office has released a Taxpayer Alert in which it warns self-managed superannuation funds (SMSFs) with pre-existing interests in unit trusts of arrangements involving the transferring of benefits associated with the in-house assets transitional provisions. The Tax Office says that such arrangements may involve superannuation regulatory issues and taxation issues. Broadly, the in-house assets rules restrict a regulated superannuation fund from having more than 5% of the total market value of its assets in a related party of the fund. However, transitional provisions may apply to exclude an asset from the in-house asset rules.
PAYG Instalments The Federal Government has announced that it will cut the quarterly PAYG instalments for the 2009/10 income year for taxpayers who calculate their instalments using the Gross Domestic Product method. The reduction will also benefit businesses that pay their GST quarterly. Data Matching Projects The Tax Office has released details of three data matching projects it will carry out. The information collected from the projects will be electronically matched with the Tax Office’s data holdings to identify non-compliance with lodgment and payment obligations. Motor vehicles The Tax Office will request and collect details of individuals and entities that have acquired a motor vehicle valued at $10,000 or higher from relevant state and territory departments. Personal services income The Tax Office will request and collect information on amounts paid to personal service entities from labour hire firms, placement agencies and computer consultancies. Contract payments from mining companies The Tax Office will also request and collect information on amounts paid by mining companies to contractors and sub-contractors. Superannuation Rates and Thresholds The Tax Office has released key superannuation rates and thresholds for the 2009/10 income year. The concessional contributions cap will be $55,000 ($50,000 for 2008/09). Concessional contributions are essentially contributions that are included in the assessable income of a receiving superannuation fund. The non-concessional contributions cap will be $165,000 ($150,000 for 2008/09). Non-concessional contributions include contributions that are not included in the assessable income of a receiving superannuation fund. Proposed Amendments to the Tax Law The Federal Government has introduced Tax Laws Amendment (2009 Measures No 2) Bill 2009 into Parliament. The amendments contained in the Bill include:
Small business CGT concessions The Bill will allow a taxpayer who holds a passively held CGT asset which is used in a business by the taxpayer’s affiliate or a connected entity to access the small business CGT concessions, subject to certain conditions. The Bill will also allow partners in a partnership to access the concessions for CGT assets owned by the partners that are used in the business of the partnership but are not interests in assets of the partnerships, provided certain requirements are satisfied. Further, the Bill will refine and clarify aspects of the existing small business CGT concessions, including:
The Bill will also clarify that a partner in a partnership cannot be a small business entity. Generally, the amendments will apply to CGT events happening in 2007/08 and later income years. Tax benefits and capital gains tax The Bill will ensure that a capital gain or loss that a taxpayer makes from a CGT event arising from a tax offset, deduction or similar benefit will be disregarded. For example, the exemption will apply if a taxpayer has a right to receive a reduction in land tax available under an Australian law. The amendment will apply to the 2009/10 and later income years. Tax exemption for certain grants The Bill will exempt from income tax the Clean-up and Restoration Grants paid to small businesses and primary producers affected by the recent Victorian bushfires. This amendment will apply to grants paid in the 2008/09 and 2009/10 income years.
Reminder: Individual Tax Rates from 1 July 2009 The resident individual tax rates will change for the 2009/10 income year. The new rates are:
Low-income tax offset The maximum amount of offset an individual resident taxpayer will be entitled to will increase to $1,350 for 2009/10 ($1,200 for 2008/09). Please refer to our website for more information. |