Here at Gotsis Rubic & Barbariol Chartered accountants we have summarised below some of the major tax measures proposed in the 2010/11 Federal Budget.  As always, please bear in mind that the Budget announcements are proposals only and require the passage of legislation before becoming effective.  In addition, most of the proposals in the Budget will be largely dependant on the re-election of the Labour Government and many of the proposals are not due to be implemented for some years.

Individuals and Family Tax Measures

Proposed measures commencing 1 July 2010

* The low income tax offset will increase from $1,350 to $1,500.  This will mean a tax-free threshold of $16,000 for salaries up to $30,000.
* The 20% medical expenses tax offset threshold will increase from $1,500 to $2,000 and will be indexed annually.
* The annual Child Care Rebate will be capped to $7,500 per child and indexation of the cap paused for 4 years.

Proposed measures commencing 1 July 2011

* Individuals will pay tax on only half of total interest generated from savings, on up to $1,000 of interest income.

Proposed measures commencing 1 July 2012

* Individuals will have the option of claiming a standard deduction of $500 for work related expenses and the cost of managing their tax affairs, rather than itemizing individual deductions.  The amount of the deduction will increase to $1,000 from the 2013-14 year.  This may be of benefit to taxpayers who have only salary income and limited deductions, but may not assist taxpayers who have other income (for example, income from rental properties or businesses) or large amounts of deductions.

Companies & Businesses

Proposed measures commencing 1 July 2012

* Instant asset write off is available for small business assets under $5,000.
* For small businesses, the company tax rate will be reduced to 28% and be implemented from 1 July 2012 with a stepped reduction for other companies.

GST

Proposed measures commencing 1 July 2012

* Small businesses accounting for GST on a cash basis will be able to claim input tax credits up front in relation to hire purchase arrangements.  This change will assist those businesses that have been forced into high cost chattel mortgages following the introduction of GST.

Superannuation

Proposed measures commencing 1 July 2010

* The Government Co-contribution Scheme will be reduced permanently to 100% of eligible contributions, with the maximum co-contribution that is payable on an individual’s eligible personal non-concessional superannuation contributions capped at $1,000.  For the 2010-11 and 2011-12 years, the co-contribution begins to phase out once the taxpayer’s income reaches $31,920 and cut out once the taxpayer’s income reaches $61,920.

Proposed measures commencing 1 July 2012

* Concessional contribution cap of $50,000 for individuals aged 50 and over with superannuation balances less than $500,000 to be continued beyond 30 June 2012.
* Government contribution of up to $500 for low income workers with income up to $37,000.

Proposed measures commencing 1 July 2013

* Superannuation guarantee age limit to be increased from 70 years to 75 years.
* Increase in superannuation guarantee rate from 9% to 12% in seven increments (to 2019-20 year).

The long anticipated Henry Report on our tax system was released by the Government on 2 May 2010. Sydney tax accountants, Gotsis Rubic & Barbariol, note that only a small number of the 138 were adopted by the Government at the present moment, some others maybe dealt with in the budget to be presented by the Government on Tuesday, 11 May, 2010 (Latest Budget Updates in detail: see http://www.budget.gov.au), some have been left in abeyance and still some have been rejected outright.

Changes approved by the Federal Government but Subject to Passage by Parliament

Company Tax and Small Business Benefits

• The Company rate of tax to be reduced to 28% as from 2012/13 financial year for small business (currently 30%)
• For other businesses, the rate will reduce to 29% from 2013-14 and to 28% from 2014-15
• Small Businesses will also be able to write-off (i.e. claim a deduction) of assets that cost less than $5,000 in the year of purchase instead of depreciating them over a period of years.
• In addition, small businesses will be able to depreciate all other assets at the rate of 30% per annum. The Government intends to have these measures apply from 1 July, 2012.

Superannuation

• Starting from 1 July, 2013 the Superannuation Guarantee (SG) Contribution rate paid by employers to their employees will increase from the current rate of 9% to 12% by the 2019-20 year. The table below shows the gradual increase.

• From 1 July, 2013, the SG age limit will be raised to 75 which mean that workers aged from 70 to 74 will have SG contributions made on their behalf by employers. This change matches the age limit for contributions by the self-employed.
• From 1 July, 2012, the Government will match concessional contributions made by taxpayers with adjusted incomes of up to $37,000. The Government’s maximum contribution will be $500p.a. This will be in addition to the existing contribution scheme.
• Concessional Superannuation Contributions
• At present, employees aged 50 or over can contribute up to $50,000 without exceeding the limit as set by the Government up to the year ending 30 June, 2012. Now the Government has extended it beyond 30 June, 2012. As from July 2012, taxpayers over 50 will be able to continue contributions up to $50,000 p.a. provided the money in their superannuation account is less than $500,000.

Tax on Resources “Super” Profits

From 1 July, 2012, a new tax called “Resource Super Profits Tax” (RSPT) will be imposed, at the rate of 40%, on profits made from the exploitation of non-renewable resources in Australia. Understandably, this proposed measure is meeting with fierce resistance from the mining giants and there is already speculation that the Government may be receptive to changes so that the measure can be acceptable to those who are affected by it.

“Gotsis Rubic & Barbariol look after all of our personal and business tax and accounting matters including GST, PAYG, Workers Compensation and BAS.

They have also provided important property investment advice. I am very happy with their services. They are an experienced and professional team and are up-to-date on all of the latest tax developments.

Their expertise and timely advice has been extremely valuable to us and our business”.

Silvanna

Client Problem
Due to the lack of sufficient space in one of our client’s businesses, they decided they needed new larger premises. There was some concern among the Directors of the business as to whether they should rent a larger facility or purchase their own facility, either in the company’s name or the Director’s name. They came to tax accountants Sydney, Gotsis Rubic & Barbariol, to consider the options available to them.

Tax Effective Recommendations

In order to reduce their overall tax liability, the Directors followed the tax saving recommendations provided to them by Gotsis Rubic & Barbariol. They created their own Self-Managed Superannuation Fund (SMSF) and sought to acquire a facility that had the space needed for their business.

The Directors took the funds they had in external superannuation funds and rolled them over into the newly created SMSF. By doing so, the SMSF had the funds needed for a deposit to purchase the property needed.

A Custodian Company was created in order to meet the SMSF regulations. This company then acquired the property on behalf of the SMSF.

Real Tax Benefits
Rent is now paid by the parent company into the SMSF (as the beneficial owner of the property). The parent company sees a tax deduction benefit in the rents paid, which is equivalent to a 30 year saving. The SMSF is only taxed at 15% for the rent received; thus there is an immediate 15% tax savings. An additional benefit to this is that it allows the Directors to build up their assets for retirement. As a member of the SMSF, once the Directors reach the age of 60, they are able to make withdrawals from their SMSF, completely tax-free.

Client Problem
A client that had sold an investment property that netted them a Capital Gain in excess of $1.6 million approached business accounting Concord firm, Gotsis Rubic & Barbariol. They were enquiring as to whether there are provisions in the tax laws that they could take advantage of in order to reduce their tax liability to Capital Gain.

Tax Effective Recommendations

Once we had completed a thorough examination of the history of the property that had been sold, including its usage during the years they owned it and other pertinent factors, our clients were stunned when we gave them the results that would effectively reduce their Capital Gains Tax to zero.

• The first thing that helped our clients was that being individuals and having had ownership of the property for more than a year they were entitled to a 50% concession on the Capital Gain.
• The second thing was the remaining 50% concession on the balance, as our clients met the “active asset” test.
• And finally, our clients had no tax liability of any kind on the Capital Gain as they were entitled to take advantage of the “used for retirement” provision.

Real Tax Benefits
No taxes were due and payable by our clients on a Capital Gain of more than $1.6M. What surprised our clients the most was that, as they said, there were no tax schemes, no complex arrangements, etc. To put it simply, the appropriate tax recommendation given by tax accountants Concord, Gotsis Rubic & Barbariol, allowed them to take advantage of the tax law provisions and the Small Business Concessions.

With the fourth quarter (April to June) now almost upon us, we are writing to remind you of some important dates relating to your taxation lodgement obligations:

April 2010

Monday 22nd

• The March 2010 monthly activity statement due for lodgement and payment.

Monday 29th

• Quarterly instalment notice due for lodgement and payment.

• Employer Superannuation Guarantee contributions for period 1st January 2010 to 31st March 2010 payable by this date.

May 2010

Monday 17th

• Last date for lodgement of most tax returns.

Friday 21st

• Monthly activity statement for April 2010 due for lodgement and payment.

Wednesday 26th

• Quarterly activity statement for January to March 2010 due for lodgement and payment. (ELS or via the tax agent portal)

• Friday 28th

• Fringe Benefits tax returns due for lodgement and payment.

June 2010

Monday 7th

• The May 2010 monthly activity statement due for lodgement and payment.

Should you have any queries in relation to the above, please do not hesitate to contact us.

In June 2010 we will communicate with you again to advise you of the 2010/11 taxation lodgement obligations.

With best regards.

Yours sincerely

DIMITRI GOTSIS

Client Problem
A high net worth individual client was paying high tax rates. He approached Gotsis Rubic & Barbariol to consider his circumstances and advise him on to how to reduce his tax liability. The client was not very keen to acquire shares as he felt that he would have no control over his investment in this area. He wanted to start building up his assets but in such a way that he remained in control of his investments.

Tax Effective Recommendations

Following a detailed review of our client’s circumstances, his goals and aspirations, the client decided to buy a block of land on which he could build an investment property. His builder advised him that it may take two to three years for the property to become income-producing.

Real Tax Benefits
The interest, however, would be tax deductible to him from the time he took out the loan to buy the land, even though he did not receive any income from the property for some years. He was then able to reduce his tax liability, substantially, by deducting the loss on the property from his employment and other income.

21st December 2009

• Last day for lodgement of monthly activity statements for November 2009.

15th January 2010

• Lodgement of income tax returns for taxable large/medium business taxpayers.

21st January 2010

• Last day for lodgement of monthly activity statements for December 2009.

28th January 2010

• Last day for payment of superannuation guarantee contributions for the quarter October to December 2009.

21st February 2009

• Last day for lodgement of monthly activity statements for January 2009.

28th February 2009

• Last day for lodgement of the quarterly activity statements for the quarter October to December 2009.

• Income tax return for non-taxable large/medium business taxpayers.

• Income tax return for new registrant large/medium business taxpayers.

• Income tax return for new registrant (taxable and non-taxable) self- managed superannuation funds.

21st March 2010

• Last day for lodgement of Monthly activity statements for February 2010.

31st March 2010

• Lodgement of income tax returns for Companies and superannuation funds with total income in excess of $2 million shown in the latest year lodged.

• Lodgement of income tax returns for individual and trusts which were tax level 6 as per latest year lodged.

21st April 2010

• Last day for lodgement of monthly activity statements for March 2010.

28th April 2010

• Payment of quarterly income tax instalments.

• Payment by employers of Superannuation Guarantee Contributions for the quarter January to March 2010

Towards the end of March, 2010 we will communicate with you again to inform you of your taxation lodgement and compliance requirements for the period May to June 2010.

50% Tax Break Ends

If a small business (turnover of less than $2m) buys an eligible asset or commits to buy the asset, by 31st December, 2009, it will be eligible to claim a 50% deduction in the 2009/2010 tax return. This 50% deduction is in addition to the normal depreciation of the asset which will start from the actual cost of the asset. Therefore, the total deduction over the life of the asset will be 150% of its purchase price.

For business with annual turnover of more than $2m the deduction is 10%.

Should you have any queries in relation to your taxation matters, please do not hesitate to contact us.

All of us at Gotsis Rubic & Barbariol, George, Graziella, Tammy, Peihua, Letteria, May, Nina, and Dimitri wish you and your family a happy festive season and a New Year of health, happiness and prosperity.

With best regards

Yours sincerely
DIMITRI GOTSIS

Some important dates relating to your lodgement and compliance requirements for the period December 2009 to March 2010.

21st December 2009

• Last day for lodgement of monthly activity statements for November 2009.

15th January 2010

• Lodgement of income tax returns for taxable large/medium business taxpayers.

21st January 2010

• Last day for lodgement of monthly activity statements for December 2009.

28th January 2010

• Last day for payment of superannuation guarantee contributions for the quarter October to December 2009.

21st February 2009

• Last day for lodgement of monthly activity statements for January 2009.

28th February 2009

• Last day for lodgement of the quarterly activity statements for the quarter October to December 2009.

• Income tax return for non-taxable large/medium business taxpayers.

• Income tax return for new registrant large/medium business taxpayers.

• Income tax return for new registrant (taxable and non-taxable) self- managed superannuation funds.

21st March 2010

• Last day for lodgement of Monthly activity statements for February 2010.

31st March 2010

• Lodgement of income tax returns for Companies and superannuation funds with total income in excess of $2 million shown in the latest year lodged.

• Lodgement of income tax returns for individual and trusts which were tax level 6 as per latest year lodged.

21st April 2010

• Last day for lodgement of monthly activity statements for March 2010.

28th April 2010

• Payment of quarterly income tax instalments.

• Payment by employers of Superannuation Guarantee Contributions for the quarter January to March 2010

Towards the end of March, 2010 we will communicate with you again to inform you of your taxation lodgement and compliance requirements for the period May to June 2010.

50% Tax Break Ends

If a small business (turnover of less than $2m) buys an eligible asset or commits to buy the asset, by 31st December, 2009, it will be eligible to claim a 50% deduction in the 2009/2010 tax return. This 50% deduction is in addition to the normal depreciation of the asset which will start from the actual cost of the asset. Therefore, the total deduction over the life of the asset will be 150% of its purchase price.

For business with annual turnover of more than $2m the deduction is 10%.

Should you have any queries in relation to your taxation matters, please do not hesitate to contact us.

All of us at Gotsis Rubic & Barbariol, George, Graziella, Tammy, Peihua, Letteria, May, Nina, and Dimitri wish you and your family a happy festive season and a New Year of health, happiness and prosperity.

With best regards

Yours sincerely
DIMITRI GOTSIS

Client Problem
Our client was expanding and their existing premises did not have sufficient space for its operations. The Directors were considering whether to rent out larger premises or buy new premises either in the company’s name or in the Director’s name. They approached us to consider these and other options.

Tax Effective Recommendations

Following the tax advice provided by Gotsis Rubic & Barbariol, the Directors agreed to acquire premises with sufficient space for their operations and to create their own Self-Managed Superannuation Fund (SMSF) in order to reduce their overall tax liability.

The Directors rolled over funds they had in external superannuation funds into the newly created SMSF. Their SMSF now had enough funds for a deposit to buy a suitable property.

In order to meet the SMSF regulations, they created a Custodian Company which acquired the property on behalf of the SMSF.

Real Tax Benefits
The family company now pays rent into the SMSF (as beneficial owner of the property). The rent paid is tax deductible to the family company which is equivalent to a 30 year saving. The rent received by the SMSF is taxed at 15% only, thus there is an immediate 15% tax saving. This also enables the Directors to build-up their assets for retirement. When the Directors reach the age of 60, as members of the SMSF, they may withdraw, absolutely tax free, funds from their SMSF.