2009/10 Key Tax Changes

Tax cut – The threshold for the 30% rate is being lifted from $35,000 to $37,000 and the tax rate on income between $80,000 and $180,000 is being cut from 38% to 37%

From 1 July 2011, individuals will be able to claim a standard deduction of $500 for work-related expenses and costs of managing their tax affairs.

In 2012-13 and later years, the standard deduction amount will rise to $1,000. Taxpayers with expenditure above these amounts will continue to be able to make claims in usual manner.

From 1 July 2011, eligible individuals will receive a discount up to $500 – equal to 50% - of the interest they earn from deposit accounts.

Standard Business Reporting (SBR) will be introduced in the ATO from July 2010. By using SBR-enabled software, you will be able to complete and lodge forms within your software, based on your financial, accounting and payroll records. You can lodge BAS, TFN declarations and fringe benefits tax returns.

Introduction of AUSkey – From July 2010, business with an AUSkey will be able to use Standard Business Reporting (SBR) enabled software to lodge and report directly to participating government agencies.

Safe harbour provisions – From 1 March 2010, under the safe harbour provisions, taxpayers who use a registered tax agent or BAS agent, and provide them with relevant information, will not be liable for a penalty for making a false or misleading statement that results in a shortfall amount if the shortfall occurred because tax agent didn’t take reasonable care and not lodging a document on time where you provided the tax agent with the information soon enough for tax agent to lodge on time.

Also from 1 March 2010, new laws affecting the registration and regulation of tax agents and anyone providing business activity statement (BAS) services for a fee came into effect. Under the Tax Agents Services Act 2009, only registered tax agent or registered BAS agent to continue to provide BAS services for a fee or other reward.

e-Record will no longer be available to download. All support for e-Record will cease after 30 September 2010. Clients who use e-Record should consider moving to other commercially available softwares.

Medicare levy low-income thresholds – This will be increased to $18,848 for individuals and $31,196 for families. The threshold increases by $2,865 for each dependent child or student. For pensioners below the age pension the threshold will increase to $27,697. These changes are to be apply from the 2009-10 income year.

Deadlines for business tax break for small business with annual turnover of less than $2 million bought an eligible asset before 31 December 2009 have until 31 December 2010 to first use, install or improve the asset to qualify for the additional deduction. You will then be able to claim 50% tax deduction in the income tax return for the year in which you first used, installed or improved the asset.

Delay in processing tax returns – You may still experience some delay in processing in tax returns as ATO is getting to grips with new computer system bugs.

Division 7A – Amendments to the non-commercial loan rules apply from 1 July 2009. One of the changes that may affect private companies concerns shareholders or their associates who use company assets for free, or for less than their market value. These arrangements will now be treated as payments for the purpose of Division 7A.

Stricter rule apply obtaining an ABN. Individuals are generally only entitled to register for an ABN if they are carrying on an enterprise in Australia or have a clear business intent. This came about as many business are incorrectly treating employees as contractors and pressuring them to get an ABN so they can reduce labour costs.