Search Site
Search

JANUARY/FEBRUARY 2009




Reduction of the December Quarter PAYG Instalment

The Rudd Government has cut, by 20%, the December 2008 quarter's PAYG instalment payable by small business entities who pay using the instalment amount method.

How will it apply?
The 20% reduction applies to the instalment amount shown on the BAS dispatched by the ATO in December 2008 for the quarter ending on 31 December 2008. It is intended to assist businesses experiencing liquidity problems after a difficult Christmas trading period.

This instalment amount is due for quarterly GST remitters on Tuesday, 3 March 2009. For those who report and pay GST on a monthly basis, this due date was 21 January 2009. The usual due date of 28 February has been extended nationally as there is a long weekend in some States.

As such, for the quarter ending 31 December 2008, small business entities are only required to pay 80% of the instalment amount shown on the BAS on 21 January 2009 or 3 March 2009.

Taxpayers who calculate their instalments based on the instalment rate notified by the ATO do not get a reduction on their instalment as their payments automatically adjust for cashflow fluctuations. This measure does not reduce

  • the actual tax eventually payable for the 2009 income year;
  • nor does it reduce the other liabilities payable on Business Activity Statements such as GST or PAYG withholding taxes.


New 'Investment Allowance' introduced

In December, the Government announced, with the blessing of the Opposition, that it will introduce a 10% temporary investment allowance to encourage capital investment by Australian businesses.

Under that announcement, the allowance was be in the form of an additional tax deduction equal to 10% of the cost of an eligible asset.

The measures apply to most new tangible depreciating assets – including most items of plant and equipment – costing over $10,000 which are acquired or ordered after 12 December 2008 and before 1 July 2009. The assets must be installed and ready for use by the end of June 2010.

Where an asset is partly used for private or non-business purposes, only the portion that is used for a taxable purpose in carrying on a business will count toward the $10,000 threshold.

As part of the new stimulus package announced in February, this incentive was upgraded so that small businesses would receive a 30% allowance for eligible assets which cost more the $1,000 and general business would receive 30% in respect of eligible assets acquired for more than $10,000. The 30% incentive will be in place for acquisitions up until 30 June 2009. The allowance will then drop to 10% for eligible assets acquired up until 31 December 2009.

For updates on the progress or application of these allowances, please contact us.



Time to review Superannuation fund investment strategies

The ATO has recently sent a reminder to trustees of Small and Medium Superannuation Funds (SMSFs) that they should regularly review their fund’s investment strategy, and ensure that their investment choices comply with it.

Trustees need to prepare and implement an investment strategy for their fund, and the investment strategy should be tailored to the requirements of that SMSF and its members.

It should be reviewed regularly and updated as required, and allow the trustees to be able to measure investment performance against their retirement income goals.

An investment strategy must reflect the purpose and circumstances of the fund and consider:

  • investing in such a way as to maximise member returns, taking into account the risk associated with the investment;
  • appropriate diversification and the benefits of investing across a number of asset classes (for example, shares, property, fixed deposit) in a long-term investment strategy;
  • the ability of the SMSF to pay benefits as members retire and pay other costs incurred by the fund; and
  • the needs of members (for example, age, income level, employment pattern and retirement needs).

All investment decisions must be made in accordance with the investment strategy.



SMSFs paying death benefits

Under superannuation legislation, trustees of super funds are generally prohibited from following directions or instructions from anyone else.

One exception to this rule is where members direct the fund’s trustee to pay death benefits to specific people.  This is called a binding death benefit nomination. 

An example of such a binding death benefit notification is where a member makes specific provision for payments to be made on his or her death to certain dependants or even directly to the legal personal representative of his or her estate.

The Tax Office has now confirmed that an SMSF's trust deed may permit members to make (lawful) death benefit nominations that are binding on the trustee, and can set out how they should be made.

However, trustees of super funds are still bound to generally only distribute to dependants or the deceased person's estate.



FBT exemption for laptop with upgrades

The Tax Office has confirmed that, where an employee is reimbursed by their employer for the purchase of a laptop computer, the cost of including additional memory in the computer (and similar upgrades) at the time of purchase will form part of the cost of the laptop for fringe benefits tax (FBT) purposes.

Reasons for Decision
The provision of certain 'eligible work related items', including 'a portable electronic device' (such as a laptop computer), by an employer to an employee can be exempt from FBT.

This exemption also applies to any computer upgrades made at the time of purchase involving built-in internal components which are not peripheral items and which are ordered and itemised on the one invoice (even at a separate cost), including:

  • additional memory;
  • bigger hard drive;
  • internal modem; or
  • wireless LAN module.

However, the Tax Office believes that this exemption does not extend to these items which the employee requests such as peripheral items like cables, modems, cradles or even an extension to the warranty that is offered, where these items come at an additional cost.



Assets in family trust not safe from ex-spouse

The High Court has held that the assets of a family trust were "property" of the parties to the marriage for the purposes of the Family Law Act 1975, and should therefore be taken into account in dividing the assets between the husband and wife.

In particular, it held that the husband made variations to the trust deed, and then basically distributed all of the property of the trust to the children, knowing the marriage was in trouble, and that he was "looking to defeat an anticipated order for property settlement" dealing with the property of the parties, including the assets of the Trust. 

Therefore, the Court was able to ignore that variation and distribution ("setting them aside") and then held that the assets of the trust should be included in the marriage's asset pool, and also upheld the order that the husband find some way of paying the wife an additional $2.2 million.



Did you know that ESV has upgraded its website?

When you visit www.einfelds.com.au you will discover a new look and feel to our website that makes it easier to navigate and provides a greater number of single-click solutions from the home page.

Client facilities can be accessed through log-in direct from the home page, and include a range of other services such as:

Liability limited by a scheme approved under Professional Standards Legislation.

The information in this newsletter is quite general in nature and anyone intending to apply it practically to their own circumstances should seek professional advice to verify it’s individual applicability. 

If you have any queries regarding the information contained in this
update please do not hesitate to contact us.

To receive future newsletters electronically please visit the
‘Latest News’ section of our website and ‘Subscribe’.