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Income Tax Rates

From the 1^st July 2008, income tax rates have been adjusted to the following new rates for resident taxpayers:

Tax Rates 2008-09

Taxable Income	Tax on this income
$0 - $6000	Nil
$6,001 - $34,000	15c for each $1 over $6,000
$34,001 - $80,000	$4,200 plus 30c for each $1 over $34,000
$80,001 - $180,000	$18,000 plus 40c for each $1 over $80,000
$180,001 and over	$58,000 plus 45c for each $1 over $180,000

Tax Rates 2009-10

Taxable Income	Tax on this income
$1 - $6000	Nil
$6,001 - $35,000	15c for each $1 over $6,000
$35,001 - $80,000	$4,350 plus 30c for each $1 over $35,000
$80,001 - $180,000	$17,850 plus 38c for each $1 over $80,000
Over $180,001	$55,850 plus 45c for each $1 over $180,000

Changes to Medicare Levy Surcharge

A Taxpayer not covered by a private health insurance have to pay 1% of Medicare levy surcharge, which is on top of 1.5% Medicare levy if:

Taxpayer is single and has taxable income plus reportable fringe benefits of $70,000 or more
Taxpayer is married and has taxable family income plus reportable fringe benefits of $140,000 or more for 2009 financial year.

The family threshold increases with number of dependant kids.

Number of dependant children	Surcharge income threshold
0-1	$140,000
2	$141,500
3	$143,000
4	$144,500
More than 4 dependant children	$144,500 plus $1500 for each additional child

Motor Vehicle Expenses

Rates per business kilometre

Engine Capacity

Cents per kilometre

Ordinary Car	Rotary engine car	2008-09 income year
1600cc (1.6 litre) or less	800cc (0.8 litre) or less	63 cents
1601cc - 2600cc (1.601 litre - 2.6 litre)	801cc - 1300cc (0.801 litre - 1.3 litre)	74 cents
2601cc (2.601 litre) and over	1301cc (1.301 litre) and over	75 cents

Family Tax Benefit (FTB)

With effect from 1 July 2009, Family Tax benefits can only be claimed directly from Centrelink and not through the tax return for all current and previous claims.

Alienation of Personal Services Income – The 80/20 Rule

If you are part of a partnership, company or trust and obtain your work from one main client that incorporates 80% of your turnover, you may be taxed as an individual regardless of your entity setup. From July 1, 2000, businesses that fall within this category need to apply for a determination from the Australian Taxation Office if they wish to continue to distribute income to other parties. There are 3 main tests that need to be satisfied if you are to gain approval from the Tax Office.

The Unrelated Clients Test – you must provide services to 2 or more unrelated entities and the services provided must be a direct result of making offers or invitations to the public.

The Employment Test – you must engage one or more entities during an income year and they must perform at least 20% of the market value of the turnover for the year, or you must employ one or more apprentices for at least 50% of the income year.

The Business Premises Test – must be a premises that is used exclusively for producing personal services income, is physically separated from any other premises that is used for private purposes and must be physically separated from the premises of any of your clients.

If you cannot satisfy one of these tests it is unlikely that a positive determination will be issued. There are a few exceptions to the rule, however application must still be made. If you do not pass the relative tests, personal services income will be declared in the tax return of the person performing the work and only certain deductions will be allowed.

Non Commercial Losses - Deferral of Deductions

As from the 2001 Income Year, tax losses incurred by individuals (sole traders) or partners of a partnership from carrying on a business will not be deductible against other income unless the following can be satisfied:

The Business meets one of the following tests:

Assessable Income Test – the business earns assessable income of at least $20,000
Profits Test – the business has produced a taxable income in 3 out of the last 5 years
Real Property Test – the value of the real property (e.g.. land & buildings) used in the business is at least $500,000
Other Assets Test – the value of other assets used in the business is at least $100,000 (excluding motor vehicles)

The sole trader or partner can satisfy the exception of being a primary producer or a professional artist where the individual’s assessable income from other sources (e.g.. wages) is less than $40,000;

The Commissioner has exercised his discretion to allow the tax loss to be deducted. This generally may be granted in one of the following situations:

special circumstances – where the business has been affected by circumstances out of it’s control (e.g. drought, flood, fire etc.); or
due to the nature of the business, it is not expected to generate a profit for a certain period of time (e.g. olive farm etc)

If the above tests cannot be satisfied, then the losses made from the business will not be deductible against other income and must be deferred until the business actually makes a profit. Once a profit is generated by the business, it may then deduct its carried forward losses from previous years. The tests must be evaluated each year to determine whether there will be a deduction allowed or not.

Depreciation/Capital Allowances

There have been significant changes to the Depreciation regime over the past few years. In brief, deductions will be allowed as follows:

Employees & Landlords
Taxpayers may elect to depreciate items of plant costing less than $1000 through a low-value pool at a diminishing rate of 37.5%. Any new items added to the pool during an income year will be depreciated at 18.75%. The immediate write-off for items under $300 still applies where certain conditions are met. If the low-value pool is not elected, then items of plant will be written off on the basis of effective life – new rates apply depending on when the asset is purchased.

Small Business Taxpayers
Small Business Taxpayers that elect to use Small Business Depreciation Concessions are allowed an immediate write-off for Low Cost Assets costing less than $1000. Other assets can be written off through a General Depreciation Pool at a diminishing rate of 30% (effective life of asset must be less than 25 years). However, new assets added to the pool during an income year are only eligible for a 15% deduction in the first year regardless of when the item is purchased. Assets with an effective life of longer than 25 years may be allocated to a Long Life Pool with a rate of 5% (2.5% in the first year).

Capital Gains
Legislation introduced on 11am 19^th September 1999, entitles individuals to a 50% exemption (discount) on a capital gain if the asset has been held for more than 12 months and is sold after 19^th September 1999. There is a choice between calculating the gain/loss by using indexation method (frozen at September 1999 quarter) or the discount method. This option is also available when gains flow down to beneficiaries through a trust distribution but is not available to companies. Super Funds are eligible for a discount of 1/3 of their gain.

Small Business and General Business Tax Break

Small businesses can claim an additional 50% tax deduction for eligible assets costing $1000 or more (exclusive of GST) that they acquire from 13 December 2008 to 31 December 2009 and the asset is installed or ready to use by 31 December 2010.

This depreciation is in addition to the usual capital allowance deduction claimable for the asset in the taxpayers usual tax return.

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

Which assets are eligible?

Assets eligible for the allowance are new tangible depreciating assets and new expenditure on existing assets used in carrying on a business for which a deduction is available under the core provisions of Division 40 (Capital Allowances) in the ITAA 1997.

Large Business and General Business Tax Break

Businesses that have turnover greater than $2 million can benefit from a 30% tax deduction when they spend more than $10,000 (exclusive of GST) on eligible assets.

To be eligible the commit to invest in the asset between 13 December 2008 and 30 June 2009 and start to use of have installed ready for use by June 2010.

These businesses will be able to claim a bonus deduction of 10% for eligible assets costing $10,000 or more (exclusive of GST) if they commit to investing in between 1 July 2009 and 31 December 2009 and start to use or have installed ready for use by 31 December 2010.

50% Education Tax Refund

The Education Tax Refund (ETR) aims to help families, with children undertaking primary or secondary school studies to meet the costs of school education through assistance with certain education expenses.

Under the Government's ETR, eligible families will be able to claim:

a 50% refundable tax offset every year for up to $750 for each child undertaking primary school, (that is, a refund of up to $375 per child, per year);
a 50% refundable tax offset every year for up to $1500 for each child undertaking secondary school, (that is, a refund of up to $750 per child, per year)

For the purposes of the ETR, eligible educational expenses are:

laptops, home computers and associated costs (including repair and running costs of computer equipment and lease costs), home internet connection and printers and paper;
education software;
school textbooks and material (including prescribed textbooks, associated learning materials, study guides and stationery); and
prescribed trade tools.

Eligible expenses that have been incurred by a parent or guardian with more than one child with an ETR entitlement can be pooled and claimed against the children's combined ETR entitlement, provided that the children all have access to the purchased items.

Education expenses in excess of what can be claimed in a financial year (that is, expenses over $1,500 per annum for a secondary school student or $750 for a primary school student) are able to be carried over in the following financial year. Eligible expenses that are not utilised for the purpose of claiming the ETR in the financial year that they occurred or the subsequent financial year would automatically lapse.

The refundable tax offset will apply to eligible expenses incurred from 1 July 2008. Parents cannot claim the offset in 2008, but they should start keeping records after 1 July 2008 to enable their ETR claim to be made in their 2008-09 income tax return.

www.educationtaxrefund.gov.au

Reduced Concessional Contributions Cap

The superannuation concessional contributions cap has been reduced to $25,000 per annum (from $50,000) from 1 July 2009. This cap will be indexed.

The transitional concessional contributions cap for those aged 50-74 (applicable to the 2010, 2011 and 2012 tax years) will be reduced to $50,000 per annum (from $100,000)

From 1 July 2012, the concessional contributions cap for those aged 50 and over will revert to the lower $25,000 cap (or applicable indexed amount at that time).

Non Concessional Contributions Cap

The non-concessional contributions cap will remain at $150,000 for the 2010 financial year (or $450,000 over 3 years). In future the non-concessional contributions cap will only increase when the new lower $25,000 cap is increased by indexation. It will be calculated at 6 times the level of the indexed concessional cap.

Super Co-contribution

If you earn less than $60,342 a year, make personal superannuation contributions and are otherwise eligible, the government will match your personal contribution with co-contribution up to certain limits.

For 2008/2009 financial year taxpayers with an income up to $30,342 are eligible of maximum co-contribution. The amount phases out by five cents for each dollar that the taxpayer's income exceeds the amount of $30,342. The co-contribution stops when the taxpayer's income reaches $60,342.

The following table explains it in more detail:

Assessable income and reportable fringe benefits (AI)	Maximum Government Co-contribution
$0 to $30,342	$1500
$30,343 to $60,341	$1500 - [(AI - $30,343) x 5%]
$60,342+	$0

Temporary Changes to Matching Co-contribution

As announced in 2009 buget, from 1 July 2009 there is a temporary reduction in super co-contribution matching amounts.

The new matching rates will be:

Rates	Financial Years	Maximum Amount
100%	2009-2010, 2010-2011 and 2010-2012	$1000
125%	2012-2013 and 2013-2014	$1250
150%	2014-2015 onwards	$1500

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