News

Tax changes and the ‘stimulus’ package

$900 tax bonus for working australians

The Federal Government will provide eligible taxpayers with a tax bonus payment of up to $900.

The bonus will be available to Australian resident taxpayers who paid net tax in the 2007-08 financial year.

Taxpayers will not need to apply for the payment. The Australian Taxation Office will make the payment to taxpayers after determining eligibility for the 2007-08 financial year.

Taxpayers must lodge their tax returns for the 2007-08 financial year by 30 June 2009 to be eligible.

This measure will benefit around 8.7 million taxpayers.

How much will I get?

  • A $900 bonus will be paid to taxpayers with taxable income up to and including $80,000
  • A $600 bonus will be paid to taxpayers with income exceeding $80,000 to $90,000
  • A $250 bonus will be paid to taxpayers with income exceeding $90,000 to and including $100,000.

When and how will it be paid?

  • Payments will begin being made from April 2009 for those who have lodged a 2007-08 tax return
  • Taxpayers will not need to apply for the payment. The Australian Taxation Office will make the payment to taxpayers after determining eligibility for the 2007-08 financial year. The vast majority of taxpayers have already lodged their tax returns
  • Taxpayers who have not already lodged their 2007-08 income tax return should do so by the end of June 2009 to obtain the bonus
  • The bonus will be a direct payment to taxpayers including through electronic transfer or cheque. The bonus will not be used to offset a taxpayer’s tax liability.

Pension drawdown relief for retirees

The Government has announced relief from minimum account-based pension draw down requirements.

The measure responds to concerns that meeting the minimum draw down amount in 2008-09 will mean having to sell investments assets and realise losses in a depressed market.

The minimum drawdown requirement for account-based pensions for the second half of 2008-09 will be suspended. This will occur through a 50% reduction in the minimum payment amount for 2008-09.

The temporary relief also addresses the concern that the minimum draw down requirement was set based on asset values as at 1 July 2008, when equity values were higher.

For those people who have already taken half of the current minimum payment for 2008-09, the annual nature of the minimum payment rules means that a further payment will not be required until the end of the 2009-10 year.

Currently, it is a requirement that minimum payments be made from a superannuation account-based pension at least annually. Minimum payments are determined by age and the value of the account balance as at 1 July each year. The minimum annual payment rule is designed so that retirees draw down on their superannuation capital over their retirement. This rule recognises that superannuation is designed as a retirement savings vehicle with substantial tax concessions.

The temporary suspension of the minimum payment requirement will apply to account‑based annuities and pensions (payable since 1 July, 2007); allocated annuities and pensions (pre-dating the Better Super changes); account-based and allocated pensions payable from Retirement Savings Accounts, and market-linked (term allocated) annuities and pensions.

Small business and general business tax break

Businesses will be able to claim an additional 30% tax deduction for eligible assets.

Small businesses will be able to claim a bonus deduction of 30% for eligible assets costing $1,000 or more that they:

  • acquire or start to hold under a contract entered into between 12:01am AEDT 13 December 2008 and the end of June 2009, or start to construct between these times
  • have installed ready for use by the end of June2010.

Small businesses will be able to claim a bonus deduction of 10% for eligible assets costing $1,000 or more that they:

  • acquire or start to hold under a contract entered into between 1 July 2009 and the end of December 2009, or start to construct between these times
  • have installed ready for use by the end of December 2010
  • a minimum expenditure threshold of $10,000 will still apply to all other businesses.

To benefit from this tax break a small business must have a turnover of $2 million a year or less.

Other businesses can receive the same deductions for eligible assets greater than $10,000.

Eligible assets

The tax bonus will apply to tangible assets used in carrying on a business, for which a deduction is available under the core provisions of Division 40 (Capital Allowances) of the Income Tax Assessment Act 1997 (ITAA 1997), except for intangibles and rights that would otherwise be included by subsections 40-30(2), (5) and (6).

Cars will not be disqualified from the allowance merely because they use the 12% method.

Land and trading stock are excluded from the definition of depreciating assets, and will not qualify for the deduction.

Expenditures above the threshold which are capitalised into an existing asset as a second element of cost will also qualify for the deduction.

Claiming the tax bonus

The deduction will be available to the taxpayer who is entitled to the capital allowance deduction under Division 40 of ITAA97 in respect of the asset.

The deduction is on top of the usual capital allowance deduction claimable for the asset as part of the taxpayer’s income tax return.

The deduction will be able to be claimed based on the applicable rate (30%or 10%) and the asset’s first and/or second elements of cost in terms of Subdivision 40-C.

The deduction is claimable in the income year in which the asset is installed ready for use.

Further Information

Brian Madigan
Tax Accounting Manager
(03) 8600 6016

bmadigan@aitken.com.au