The Government announced a package of measures designed to ease the burden of taxation in these exceptionally turbulent times. The Bill has now been introduced into Parliament but, broadly, the measures include:
Income Tax
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Provisional tax will be calculated on 100% of the previous year's liability rather than 105% (all instalments from 01/04/09, including 2008/09);
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Interest charged on late paid tax will be reduced from 14.24% to 9.73% (from 01/03/09);
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Legal expenses of $10,000 p.a. or less will be automatically deductible;
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Non-individuals (trusts and companies) will be allowed to calculate their interest income and deductions on a cash basis (rather than an accruals basis).
Planning
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Contact us if you think we need to review your Provisional Tax;
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Consider delaying the settlement of legal transactions on capital purchases until after 31/03/09 so that associated legal expenses can be deducted.
GST
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The threshold for being able to account for GST on a payments basis (rather than on an invoice basis) is increased from $1.3 million to $2 million;
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The GST registration threshold is increased from $40,000 p.a. to $60,000 p.a.;
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The threhold for filing GST returns on a six monthly basis is increased from $250,000 to $500,000 per annum.
Planning
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Review turnover levels to see if a switch can be made to the payments basis to gain a cash-flow advantage;
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With low turnover, consider whether or not to de-register;
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Changing to six monthly basis GST will mean that you automatically change to twice yearly Provisional Tax.
Employers
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The threshold for having to file PAYE monthly is increased from $100,000 p.a. to $500,000 p.a.;
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The threshold for being able to file annual FBT returns is increased from $100,000 p.a. to $500,000 p.a.;
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There is to be an option for close companies to file FBT returns annually if the only fringe benefit provided to shareholder-employees is a motor vehicle (limited to two motor vehicles);
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The threshold for being able to provide minor benefits to employees without incurring FBT liabilities is increased from $200 to $300 per quarter ($15,000 p.a. per employer to $22,500 p.a. per employer);
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The rate of interest on FBT loans is reduced from 10.9% to 8.05% (from 01/01/09).
Planning
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Review thresholds to consider whether a switch to less frequent filing will be of advantage;
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Soften the blow of lower pay rises or help with staff retention by increasing the number of small gifts and benefits to employees (e.g. gym membership);
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Review loan agreements where the rate of interest on FBT loans determines the rate of interest (shareholder loans, inter-company loans, superannuation loans etc).
Other Business Measures
These measures are expected to be effective from 01/04/09 unless an earlier start date has been indicated.
If you have any queries regarding any of these measures then please do not hesitate to call your usual contact at Leech & Partners Ltd.
