Archived News

The government has proposed changes to the non-commercial loss rules effective 1 July 2009.

Previously, where an individual incurred business losses, they were able to use these to offset other income (such as salary or wages) where one of the following tests were met:

1. The assessable income test (the loss business turns over at least $20,000)
2. The profits test (the loss business has returned profits in at least 3 of the past 5 years)
3. The real property test (the loss business owns and uses property worth at least $500,000)
4. The other assets test (the loss business owns and uses assets worth at least $100,000)
5. The loss business is a primary production business and your income from other sources is less than $40,000
6. The commission has applied his discretion to allow the losses to be claimed

However, the government now proposes that an additional test will be imposed.  The Adjustable Taxable Income test requires that one of the above test is met AND the individuals adjustable taxable income (that is income plus fringe benefits, plus superannuation contributions plus net investment losses) cannot be more than $250,000.

The above summary does not cover all intricacies of the non-commercial loss provisions.  However, if you believe that you may be affected by these changes, please do not hesitate to contact our office to discuss your situation in more detail.

The government has proposed changes to the Employee Share Acquisition Scheme (ESAS) rules effective 1 July 2009.

The proposed changes generally require that any discount received via an ESAS must be reported on the employees tax return in the year the share are received (i.e. the employee is taxed up-front on the discount).

A $1,000 exemption will be available where the following conditions are satisfied:

1. The person acquiring the shares in an employee
2. The employees taxable income plus fringe benefits, plus superannuation contributions plus net investment losses is less thatn $180,000
3. The scheme is offered to at least 75% of the permanent employees
4. The shares offered are ordinary shares and there is no real risk of forfeiture of the shares
5. The shares must be held for at least three years, or until the employment ceases
6. Some other less usual conditions

Basically, in these cases the exemption reduces the discount by up to $1,000 (if the discount was less than $1,000 no amount needs to be reported).

There are also proposed changes to shares acquired through salary sacrifice.

The above summary does not cover all intricacies of the employee share scheme rules.  If you believe that you may be affected by these changes, please do not hesitate to contact our office to discuss your situation in more detail.

The ATO has announced that shareholders should take care when reporting losses on the sale of shares.  The ATO are closely reviewing arrangements where taxpayers attempt to claim losses on capital investments against revenue income (such as salary and wages) by re-characterising their investment. 

Capital losses are only able to be used to offset capital gains.  However, losses from share trading can be used to offset other income (provided the non-commercial loss rules are met).

If you require assistance in correctly distinguishing between share trading and share investing, please contact our office to discuss your situation in further detail.

PWA Financial Group are proud to announce we are now licensed Stratacore Business Advisors.

As a licensed Stratacore Business Advisor, our valued clients can access additional business growth services in a cost effective manner that will increase your business knowledge and provide ongoing business support to you.
Stratacore are business growth experts who in 2007 received $325,400 from AusIndustry to conduct training for small businesses. As Stratacore was founded by a Chartered Accountant, they have now developed a program for accountants to help their clients.
As part of the Stratacore Business Growth program, you will receive a Business Health Check Report on your business which will highlight areas that need attention and provide actions that should be undertaken in order to improve your business performance.
The Stratacore Business Health Check will cover key business areas including Business Planning and Strategy, Financial Management, Marketing, Information Technology, Intellectual Property, Human Resource Management, Debtors Management, Business Continuation, Corporate Wills & Owners Agreements, Management Skills and Processes, and Business Exit Strategies.
Key members of our team have been trained in those areas and, in addition, we have access to the highest level experts to assist in specific areas of need. Other services we can offer you include very cost effective training days given by those experts as well as assistance in the implementation and fixing of any issues your business is facing.
Together we can improve the foundations of your business, which is so important during this difficult economic time. We will also support you to capitalise on opportunities available.

Contact our office to arrange for a Stratacore Business Health Check to be conducted on your business or for any further information.

The government has recently changed the rules applicable to Australian residents working overseas, effective 1 July 2009.

Prior to 1 July 2009, many Australian residents who worked overseas for more than 90 days at a time were not required to report their income on their Australian tax returns, limiting their tax to that paid in the foreign country.  However, the proposed changes have reduced the number of employees that will now be exempt.

From 1 July 2009 your foreign income is to be included on your Australian tax return (and will therefore be taxed at Australian tax rates) unless the earnings were derived from continuous foreign service (over 90 days) and that work was attributable to one of the following activities:

1. the delivery of Australian official development assistance by your employer
2. the activities of your employer in operating a public fund declared by the Treasurer to be a developing country relief fund; or a public fund established and maintained to provide monetary relief to people in a developing foreign country that has experienced a disaster
3. the activities of your employer as a prescribed institution that is exempt from Australian income tax
4. deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplined force
5. an activity of a kind specified in the regulations

This is a technical area of the tax law as many issues need to be considered, including whether you are a resident of Australia (if you are not your foreign income is not generally assessed in Australia). 

If you earn income from a foreign source please contact our office to discuss your situation in further detail.

The government introduced a rebate to assist families with the cost of children’s education expenses incurred after 1 July 2008.  If you are eligible, the offset can be claimed when lodging your 2009 income tax return.

You are able to claim up to 50% of the cost of eligible expenses up to $750 per primary school student (i.e. a $375 rebate) or $1,500 per secondary school student (i.e. a $750 rebate).

To be eligible you need to be entitled to Family Tax Benefit Part A (there are limited exceptions)

Eligible expenses include the purchase, lease, hire, repair or running costs of:

1. Computers
2. Computer equipment such as printers, software etc
3. Internet connections
4. School textbooks and resources
5. Tools of trade

If you may be eligible please ensure you include details of the costs incurred during the year when providing your 2009 tax records.  If you have any questions regarding eligibility please contact our office to discuss your situation in further detail.

The Pension Bonus Scheme is a program designed to reward people who defer claiming the age pension and continue to remain engaged in the workforce after reaching age pension age. For those who qualify, a lump sum payment of up to $34,818 for a single, and up to $29,077 each for couples, is payable once a person qualifies and commences to receive the age pension.
To be eligible for the Pension Bonus Scheme a person must register with Centrelink once reaching age pension age and then keep a log of the hours they work.  The minimum work requirement is 960 hours per annum (equivalent to 20 hours per week over a 48 week period each year).
The Pension Bonus Scheme can deliver a much needed lump sum boost for a retirement nest egg but importantly, to receive a bonus payment, a registered applicant must be eligible to receive the pension at the time they eventually cease working.
In the May 2009 Federal Budget, the Government announced the Pension Bonus Scheme would cease for new applicants effective from 20th September 2009.

Twice each year, in March and again in September, Centrelink reviews the rate of payment for range of income support benefits including the age pension. 

On 20th September 2009, the full single pension will be increased by $64.98 per fortnight.  This increase includes the promised $30 per week increase for single pensioners announced in last May’s budget. Couples will receive an increase of $20.28 per fortnight, combined.

These increases are in addition to the regular indexation of pensions.

In previous years, pensioners have received a Telephone and Utilities Allowance paid quarterly, however, from 20th September this year, these Allowances are being rolled into a new Pension Supplement, payable fortnightly.  The GST Supplement and Pharmaceutical Allowance are also included in the Pension Supplement.

The final quarterly payments of Telephone and Utilities Allowance will be paid in September 2009 along with the first payment of the Pension Supplement.

There are a number of changes to the Pension Income Test that will also take effect from 20th September.  These include:
Change to taper rate
Where income exceeds the minimum threshold, pension entitlements currently reduce by 40 cents for each $1 of income over the income threshold (currently $142 per fortnight for singles, and $248 for couples).  From September, the taper rate will increase to 50 cents for each dollar of income over the income test threshold.
Pension Bonus Scheme 
The Pension Bonus Scheme that applies to pensioners who continue in the workforce and defer claiming the age pension will be abolished from 19th September 2009. See our separate article in this edition of Timely Tips for details of the changes to this Scheme.
Income test “free area” for dependent children
The current income test ‘free area’ for dependent children (currently $24.60 per child) is to be removed from 20th September 2009.
Transitional payment rates
Current pensioners will be assessed under both the current and the new rules.  Where the new rules would result in a reduced pension being paid, the pensioner will be paid a transitional rate so as not to incur a reduction in their payment.  Pensioners receiving a transitional rate will receive an estimated $20.28 pension increase (singles and couples combined).  The transitional rate will be indexed to Consumer Price Index in March and September each year. This will continue until such time as the pension assessment under the new rules results in the same, or a higher pension being payable under the new rules.

These changes will apply to people receiving the Age Pension, Disability Support Pension, Carer Payment, Widow B Pension, Wife Pension, and Bereavement Allowance.  Those receiving the Parenting Payment Single and Disability Support Pension under 21 and without dependants, and who receive income that exceeds the income test ‘free area’, will generally not be affected by these changes.

It is fair to suggest that understanding the rules relating to the payment of Government income support benefits can be complex and difficult to understand.  Your financial adviser can generally assist in working your way through this complex area.

Information on these changes can be accessed at www.centrelink.gov.au
Source | Professional Investment Services | August 2009

The government announced in its latest budget that the concessional contribution limits (tax deductible contributions) will reduce from $50,000 to $25,000 (or for those over the age of 50 in any year until 2012, $100,000 to $50,000).  These changes were legislated recently and will be effective from 1 July 2009.

It is important that the limits are not exceeded as additional contributions can result in excess contributions tax on the contributions of up to 93% tax.

For anyone contributing to superannuation, whether personally or by salary sacrifice, we recommend you contact your accountant or financial planner as soon as possible to discuss how this will affect you.

People already registered, or who register prior to the close off date in September, will continue to be eligible to recieve a Pension Bonus Scheme benefit. The current Pension Bonus Scheme will be replaced with “work bonus”.

The new arrangement, which will take effect from 20th September 2009, will reward people over pension age (presently 65 for men, and 63½ for women) who continue to be engaged in the work force. The new work bonus is simply a modification to the current income test.  For those who derive income from employment, only 50% of the income they receive, up to $250 per fortnight, will be counted under the income test.  In simple terms, a person of age pension age who earns $500 or more per fortnight will have $250 of that income disregarded for income testing purposes.  If, on the other hand a person earned (say) $350 per fortnight, $175 would be disregarded.

In many ways the new work bonus will deliver a more practical and potentially more beneficial outcome as it will not require people to register with Centrelink and defer claiming the age pension until a future date. The work bonus will apply from the time a person reaches age pension age and can be varied as income fluctuates during their retirement. There will, however, be an obligation to report employment income to Centrelink to ensure that the correct entitlement to the concessional income test treatment is being applied. 

The work bonus is not in addition to the Pension Bonus Scheme. The existing scheme will apply to those people of age pension age who register prior to 20th September 2009.  The new scheme will apply once a person reaches age pension age, and to those of age pension age or older who have not registered under the pension bonus scheme.

For people who will be of age pension age before 20th September 2009 and intend to continue working for at least one year after reaching age pension age, there may still be a benefit in registering under the Pension Bonus Scheme prior to the cut off date.   

Further information on applying for the Pension Bonus Scheme and the Work Bonus can be found at www.centrelink.gov.au
Source | Professional Investment Services | August 2009

The government announced an investment allowance for businesses in December last year for new asset purchases made between 13 December 2008 and 31 December 2009.

The allowance will be 50% for small businesses (those with a turnover of less than $2,000,000) provided the asset is purchased prior to 31 December 2009. This applies to all assets over $1,000.

For all other businesses the allowance was 30% for assets purchased before 30 June 2009, and will drop to 10% for assets purchased after this date, but before 31 December 2009. This applies to all assets over $10,000.

In all instances the asset must be installed ready for use by 31 December 2010 (or 30 June 2010 for large businesses eligible for the 30% allowance).

More information can be found on the ATO website http://www.ato.gov.au/businesses/content.asp?doc=/content/00193790.htm

There are quite a few complexities involved with the allowance with regard to private use, finance arrangements, the timing of the purchase and the install. We recommend you contact your accountant before purchasing any new assets to discuss your eligibility with them.