RESOURCES

Australian Business Number
Capital Allowances
Capital Gains Tax
Education Tax Refund
Investment Property Tax
PAYG Instalments
Personal Tax
Small Business Entities
Taxpayer Penalties

The Australian Business Number (ABN) provides an identifier when dealing with the ATO and other government agencies. You need your ABN when contacting the ATO concerning:

To qualify for an ABN, you must be carrying on a business in Australia. You will need the ABN if:

• GST;
• Luxury Car tax;
• Fuel taxes;
• Applying for endorsement as deductible gift recipient or income tax exempt charity;
• PAYG instalments;

You wish to register for GST and be able to claim GST credits;

The Uniform Capital Allowances system (UCA) provides a set of general rules that apply across a variety of depreciating assets and certain other expenditure. They provide a mechanism that taxpayers can use to deduct certain capital expenditure over time, including expenditure on the acquisition of capital assets.

The effective life of a depreciating asset is limited and can be reasonably be expected to decrease over its useful life. Land, trading stock and most intangible assets (excluding intellectual property and in-house software) are not considered depreciating assets.

There are two options for calculating the decline in value of an asset under the UCA system:

• Prime cost method – the decline in value is calculated a s a fixed % of the initial installed cost each year of the assets life;
• Diminishing value method – the decline for each income year is calculated as a % of the balance after the previous year’s decline has been deducted;

The ATO allows recalculation of the effective life of an asset if the circumstances of use change and the original effective life is no longer accurate. Any improvement to an asset that increases its cost by 10% or more in  year may result in  an obligation to recalculate the effective life of the asset.
The decline in value of certain depreciating assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. The decline in value of depreciating assets in the pool is calculated at an annual  diminishing value rate of 37.5%

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Capital Gains Tax

Capital gains tax (CGT) is the tax you pay on any capital gain you make when selling or disposing of any asset you acquired after 19 September 1985. The most common capital gains are made on shares and investment properties. Your capital gain is included in your income tax return for the year that the gain is made. It is added to your other income and taxed at the marginal tax rate applicable for that year.

Your net capital gain is calculated as total capital gains less total capital losses less any CGT discount or small business concessions you may be entitled to.

You can calculate a capital gain using one of these methods:

• Indexation method – for assets acquired before 21 September 1999 and owned for 12 months or more. The method allows you to increase your cost base by an inflation factor.
• Discount method – For any asset you have owned for 12 months or more, an individual taxpayer can discount the capital gain by 50%.
• Other method – If neither the indexation or discount method apply, generally you subtract the cost base from your capital proceeds.

There are four CGT concessions for small businesses. We list them here but you should request more details from our office or the ATO website

• Small business 15-year exemption;
• Small business 50% active asset reduction;
• Small business retirement exemption;
• Small business rollover;

From the 2008/09 financial year, eligible parents, carers, guardians and independent students can claim the Education Tax Refund to help meet the costs of educating their primary and secondary students.

Taxpayers can claim 50% of eligible expenses up to:

• $750 per eligible child in primary school – ie a refund of $375 per child
• $1,500 for each eligible child in secondary school, or for an independent student – ie a refund of up to $750 per child

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

• Laptops, home computers and associated costs
• Computer related equipment such as printers, USB drives and disability computer aids for students
• Home internet connections
• Educational software
• Word processing, spreadsheet, database and presentation software, internet filters and antivirus software
• School textbooks, other paper-based school learning materials – ie stationery
• Trade tools and safety equipment for secondary school trade courses

The ATO focus is on the following four areas:

• Allowance for capital depreciation 
  An allowance of 2.5% of building costs is allowed on residential buildings where building commenced after 16 September 1987.
  An appropriate report form a qualified Quantity Surveyor is recommended.
  
• Borrowing costs
  Borrowing costs including legal expenses of mortgage documents, approval fees, valuation fees, mortgage insurance and stamp duty on loans may be claimed over a 5 year period.
  
•  Repairs and maintenance 
  A deduction is allowed for the cost of repairs to premises, part of premises or a depreciating asset used for income producing purposes. Initial repairs to an asset immediately after its purchase are considered capital expenditure and would ordinarily be included in the assets cost base.  
• Interest   
  Deductions for the portion of interest on an investment loan are limited to the portion of the property and year that the property was available to be rented or was rented. Split loans whereby part of the loan is for investment purposes and part for private purposes require special care to assess the deductible component.

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Personal Tax

For 2009- 10 the tax rates are:

For 2010 – 2011 the tax rates are:

  Small Business Entities