Highland Accounting Services

There is a common belief that if you own a 1 ton Ute you are exempt from keeping a log book and can claim 100% tax deduction for the Ute if used for work, with no adjustment for personal use.

The ATO still expects to see a reduction of claim if you are using the Ute for personal use, A log book will need to be kept to show substantiation off claim.

Below it part of a transcript issued by the ATO on Work Related Expense.

We are also finding that many taxpayers are claiming 100% of the expenses for a 1 tonne vehicle without regard to private use. These expenses must be apportioned if the vehicle is used for private purposes. So the taxpayer still really does need to keep a logbook in this instance.

Please visit the link below to see more information on Work Related Expense

http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00167542.htm

You want to buy you first house, is the First Home Saver Scheme for you, first I will tell you about the scheme and then I will give you my thoughts.

About the scheme:

• The First Home Saver Scheme account must be in an Individuals name, and can not be a joint account.
• Deposits must be made from after tax earnings
• If you change your mind about buying a house, the money will be rolled into a super fund.
• You have to deposit at $1000 per year for 4 years, not necessarily in consecutive years) before you can withdraw the funds. This is known as the “4 year rule”.
• The Government will contribute 17% of your deposits up to $850
• Your maximum deposits for the current year ending June 2009 is $75k, The Government will only pay the 17% up to 5k
• Your maximum deposits and Government contributions will be indexed over time.
• The account is taxed at 15%, and the tax is paid by the provider of the account.
• To withdraw the funds you must pass the “4 year rule”, withdraw all the funds and you must live in the house for at least 6 month in the first 12 months of ownership.

My thoughts on the scheme:

The First Home Saver Scheme will suit you if you are definately going to buy your house, but if you change your mind and think the money could be used on a holiday, new car, or if a relationship fails. The money saved is put into your super fund, and tied up till you are 60.

For the year ending June 2009 at $34k the tax rate goes from 15% to 30%, so if you are earning less than $34k and taking in to account the low income tax offset the schemes account will be paying more tax than what you would pay on the same earnings had you money been in a normal investment.

To withdraw the funds you must pass the “4 year rule”, so if the opportunity to buy the house comes along in 3 years, you will have to miss that chance.

So if you are determined to buy the house in at least 4 years time and you income is greater than the current theshold of $34k then the scheme is made for you. If not, I would suggest you explore other options.

Introduction of new law applying to the demutualisation of health insurers

On 26 June 2008, the Government introduced a Bill into Parliament to change the law relating to the capital gains tax (CGT) treatment of policy holders of health insurers who receive cash or shares when their health insurer demutualises.

The proposed changes are contained in Tax Laws Amendment (2008 Measures No. 4) Bill 2008. This Bill will become law when passed by both Houses of Parliament and approved by the Governor General.

Under the proposed law, policy holders will disregard any capital gains and losses that arise when a private health insurer demutualises.

The changes to the law are proposed to take effect from 1 July 2007, and if enacted, will apply to the demutualisation of MBF.

The Tax Office will continue to provide regular updates on the progress of the changes through Parliament, and how they will apply to you.

Taxation treatment of your cash payment from MBF

Until the proposed new law is enacted, there is some uncertainty about what amount, if any, should be included in your tax return as a result of the demutualisation. In light of this uncertainty, the Tax Office will allow you to lodge your 2007/2008 tax return without including any capital gain from the receipt of cash from the MBF demutualisation at this stage.

The Tax Office and MBF will let you know what amount (if any) to include in your tax return and how to do this at a later time.

Frequently asked questions

Will I be affected by the proposed changes when they become law?

Yes. The proposed changes are intended to take effect from 1 July 2007, and if enacted, will apply to the demutualisation of MBF.

What are the tax consequences for me under the proposed changes if I receive a cash payment as a result of MBF’s demutualisation?

When the proposed changes become law there will be no tax consequences for Participating Contributors who receive a cash payment under MBF’s demutualisation. Therefore, the proposed changes will allow you to disregard the amount received when completing your 2007-2008 tax return.

The Australian Taxation office has sent you a letter saying that you now have to pay PAYG Instalments. This has happened because, your gross business or investment income has been greater than $2000.

If previously your gross business or investment income has been greater than $2000 and you have not bee put on PAYG instalments, it would have been because:-

• your tax payable was less than $500
• your notional tax is less than $250, or
• you are entitled to the senior Australian tax offset or pension tax offset.

You have some shares that were from the demutualisation of an insurance company. I have compiled a list of shares that I frequently get asked what the original cost of the share was. Below is a list of those shares:-

Bear in mind that some of these companies have now have been taken over, and you will now own shares in the new company.

The cost base remains the same, if you owned 1000 shares in Colonial Mutual, the cost base of $3310 will apply the the sale price of you Commonwealth Bank Shares (CBA).

Are you selling your Telstra 2 Shares that you bought in 1999.  The original instalment was $4.50 on the 15/10/1999.  The second instalment of $2.90 was on the 2/11/2000. The total purchase price being $7.40 bought on the 15/10/1999.

Are you selling your Telstra 1 Shares that you bought in 1997.  The original instalment was $1.95 on the 3/11/1997.  The second instalment of $1.35 was on the 13/11/1998. The total purchase price being $3.30 bought on the 3/11/1997.

What tax bracket are you in, below is a table that shows the current rates for the financial year ending on the 30th June 2009.

MYTH:

The tax rate applies to all income once you are over the threshold, if your income is $50,000 then your tax rate would be 30% of the whole $50,000. This would calculate as being a total of $15,000 in tax, plus the medicare levy.

FACT:

The tax rate applies the income in the the bracket only, so if your income is $50,000 then $6,000 is not taxed, $28,000 is taxed at 15% and $14,000 is taxed at 30%. This would calculate as being a total of $8,400 in tax plus the medicare levy.

What is included as income from a rental property?

• The obvious is of course, is the rent that is paid. The rent paid needs to be included in the year that you or your real estate agent recieved it.
• Bond money that is used to cover repairs, maintenance and lost rent.
• Tenants payments for excess water usage.

If you took out a Student Financial Supplement Loan between 1993 and 2003, you will have an amount to repay if your repayment income is greater than the thresholds in the table below.

The repayment income is your taxable income plus any net rental losses, total reportable fringe benefits amounts and exempt foreign employment income.

Hopefully you have told your pay office that you have the debt so that they can take extra tax out on your behalf to cover your obligations. For the 2008 - 09 year your employer will start withholding SFSS if your wages exceed $799 per week.

Unfortunately with the SFSS there is no provision to make any voluntary payments.

At the end of the year when you do your tax return, based on your reparment income the ATO will calculate how much SFSS will need to be paid

The SFSS that is calculated and the extra tax that has been taken out of your wages by your pay office is in most cases enough to offset each other.

2007 - 08