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Setting Australia's direction
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The new Federal Government has handed down its first Budget, and in keeping with its promise to be fiscally responsible, the Budget shows a strong cash surplus of $21.7 billion for the 2008-09 financial year. A key feature of the Budget is a package of tax measures targeted at assisting families with expenses such as education and child care while at the same time also ‘means testing’ various Government payments such as the Baby Bonus and Family Tax Benefit Part B. The Budget also offers assistance to first home buyers through targeted savings accounts. Read more | | | |
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Future tax system review
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The Government has announced that it will provide $10 million over two years so that a comprehensive review of Australia’s tax system can be conducted. The review is to recommend a tax structure that positions Australia to deal with the demographic, social, economic and environmental challenges of the 21st century and enhance Australia’s economic and social outcomes. Read more |
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Capital Gains Tax: Scrip for Scrip Rollovers
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‘Scrip for scrip’ rollovers allow a company to acquire shares in another company by issuing shares in itself without triggering Capital Gains Tax for the shareholders in the target company. Read more |
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Taxation of Financial Arrangements
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Reintroduction of TOFA Stages 3 and 4
The Government plans to proceed with Taxation of Financial Arrangements (TOFA) Stages 3 and 4 which represent the final stages of the TOFA reforms. The Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2007 (2007 TOFA Bill), which was introduced into Parliament last year, contained the TOFA Stages 3 and 4 measures. The Bill lapsed when the 2007 Federal election was called. Read more |
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Current election of taxation treatment
Under the current law, a taxpayer may elect to be assessed on any discount received on employee shares or rights in the income tax year in which the shares or rights are acquired. Read more | | | |
Managed Investment Trusts: Final withholding tax
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Distributions of income from Managed Investment Trusts (MITs) to non-residents (apart from interest, dividends and royalties) are currently subject to a non-final withholding tax of 30%. New rules will ultimately replace this with a final Withholding Tax of 7.5% on these distributions, and the rules will cover distributions made directly from MITs to foreign residents as well as distributions made through other intermediaries (including custodians). Read more |
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Managed funds: Changes to the eligible investment rules
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As part of the Government’s policies to attract international investment in Australian managed funds and to maintain the competitive neutrality between businesses conducted by companies and trusts, the 2009 Budget announces measures to clarify the application of the ‘public trading trust’ rules contained in Division 6C of the Income Tax Assessment Act 1936. Read more |
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Depreciation of computer software
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The Government will increase the period over which capital expenditure on in-house computer software is depreciated. Read more |
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Family Trusts: Reversing the concessions
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The Budget announcement followed up on the current Government’s election promise to wind back the increased flexibility of family trusts enacted by the former Government. Family trusts that have appointed inappropriate Read more |
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Capital Gains Tax: Small Business Concessions
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The Government has announced that it will extend small business capital gains tax (CGT) concessions to partners in a partnership and entities owning CGT assets used by a related entity where the partnership or related entity passes the small business entity test. Read more |
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Superannuation: Easing the administrative burden
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Superannuation Clearing House Facility
The Government will provide $16.1 million to the Australian Taxation Office to fund a Superannuation Clearing House Facility from 2009-10, to assist managing employers’ obligations to provide superannuation choice to employees. A Superannuation Clearing House allows an employer to pay their contributions to a single location. The clearing house will then distribute the contributions to the superannuation funds chosen by each employee. Read more |
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Fringe Benefits Tax
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The Budget measures on Fringe Benefits Tax (FBT) are by and large ‘integrity measures’ to combat what the Government perceives as an erosion of the fairness of the FBT system through tax planning arrangements and changes in technology. Read more |
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GST: Key issue
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Increased integrity measures surrounding the sale of real property, the GST-free status of international telecommunications and abandoning the previously announced package of GST relief for charities are the key GST issues arising from the 2008/09 Federal Budget. In addition, the GST refund provisions will be amended to clarify their operation and to restore the intended four year time limit on refunds. Read more |
Expansion of the Export Market Development Scheme
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The Treasurer announced an expansion of the popular Export Market Development Scheme, committing an extra $50 million in 2009/2010. The increased funding is in addition to the broadening of the eligibility criteria which takes effect from 1 July 2008. This measure is likely to have the effect of opening up the scheme to many previously ineligible companies. Read more |
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Customs duty & excise changes
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The Government has indicated that a number of changes will occur in respect of the customs duty and excise regime.
Customs duty on imported tobacco
The Government will amend the customs legislation to clarify that the ‘non-stick excise equivalent customs duty’ on tobacco is calculated on the total weight of the goods. This will have effect from the date of Royal Assent of the amending legislation.
Excise-equivalent goods
The Government has indicated that it will remove the unintended outcome where importers are able to avoid paying excise-equivalent customs duties on certain imported products by obtaining a Tariff Concession Order. The Government estimates that this will lead to an ongoing gain to revenue of $2.5 million over the forward estimates period. This will have effect from the date of registration of the amending regulations.
Crude oil excise: Condensate
Effective at midnight (AEST) on 13 May 2008, the Government will remove the current exemption of condensate from crude oil excise. Under the new arrangements, condensate production from petroleum fields located in the North West Shelf project area and onshore Australia will be subject to the same excise rates as those applicable to petroleum fields discovered after 18 September 1975.
Under the new arrangements, the first 4,767 megalitres (30 million barrels) of oil produced from a field is exempt. Past production of condensate will contribute towards meeting this threshold before crude oil excise becomes payable. This means that certain petroleum fields may not pay any crude oil excise as a result of this measure. These changes will also reduce the offshore petroleum royalty revenue which is shared between the Australian Government and the Western Australian Government. The Australian Government has indicated that it will provide the Western Australian Government with ongoing compensation.
Excise & customs duty: Other excisable beverages
The Government has increased the excise and excise-equivalent customs duty on ‘other excisable beverages not exceeding 10% alcohol by volume’ to the same rate as for full strength spirits, on and from 27 April 2008. Primarily this change will apply to certain ready-to-drink alcoholic beverages.
BDO Kendalls’ comment
It is pleasing that many of these changes are aimed at overcoming unintended consequences and ensuring integrity of the customs duty and excise system. It is interesting to note, in the case of the changes concerning ready-to-drink alcoholic beverages, that the Government is to some extent pursuing its social agenda through the broader taxation regime.
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Luxury Car Tax changes
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As was widely tipped, the Government has indicated that the Luxury Car Tax (LCT) rate will increase effective 1 July 2008. Read more |
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Personal Income Tax
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In recognition of the increased financial pressures and rising living costs for families, the Government will deliver in full the previously announced:
• Personal income tax cuts;
• Increase in the low income tax offset;
• Increase in thresholds for the Senior Australians Tax Offset; and
• Increase in Medicare Levy Surcharge thresholds. Read more |
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Means-testing for Government support
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The Government will expand the definition of ‘income’ used to determine eligibility for Government support programs. According to the Government the changes are designed to make income tests for assistance programs fairer and better targeted to those in need. Read more |
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First Home Saver Account
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Assisting Australians save larger deposits for first homes
The Government announced changes to the proposed First Home Saver Accounts (FHSA) regime following the consultation process around the discussion paper released on 8 February 2008 and the issues identified as a result. Read more |
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Capital protected borrowings
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As part of the Budget, the Government has announced changes to the benchmark interest rate used to determine the capital component of capital protected borrowing arrangements. Read more |
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Removal of differential treatment of same sex couples and their children
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The Government has announced that it plans to remove differential treatment of same-sex couples and their children from Commonwealth laws in many areas including taxation. In relation to taxation, all legislative changes are expected to take effect on 1 July 2009 with the exception of Fringe Benefits Tax (where the amending legislation will apply from 1 April 2009). Read more |
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Increased funding for the ATO
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The Government has announced that it will provide additional funding of $257 million over four years from 2008-09 to the Australian Taxation Office (ATO). The purpose of the additional resources is to enable the ATO to improve compliance activities, particularly for large businesses and high wealth individuals. The additional cost of the compliance activities is expected to increase revenue by $2 billion over four years. Read more | | | |
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Budget gives Australia green light
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Labor’s first budget has provided Australian businesses and households with a range of grants, subsidies and incentives aimed at tackling the issue of climate change. Read more |
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Holding pattern for innovation
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There were no surprises in the Federal Budget with respect to the Government’s innovation programs. Read more | | | |
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