Changes to tax laws for business
Tax laws are forever changing. Here are some changes that business owners and managers should know about.
Excess super contributions tax
Applying for the first time in 2012 will be the opportunity for a taxpayer who has made excess superannuation contributions to get a refund of the excess and avoid excess contributions tax liability.
The refund option can only be used once and is available for the 2012 and later income years. It is applicable to those taxpayers who have exceeded their cap by a maximum of $10,000 for the first time in the 2012 financial year. The refund is only available to those who lodge their tax returns within one year after the year of income.
After the individual's tax return is lodged, the ATO will write to the taxpayer and advise of the excess contribution. The taxpayer may then elect, within 28 days, to have their excess contributions refunded.
If an election is made, 85% of the excess amount will be paid from the superannuation fund to the ATO and it will be credited to the taxpayer's account. The remaining 15% will have been paid by the superannuation fund to the ATO as contributions tax, and this will also be credited to the taxpayer's account. At this point the ATO will issue an amended assessment to the taxpayer to include the excess component in their 2012 income, and increase their tax payable accordingly. The amount transferred from the superannuation fund will be applied to the increased tax, and any other taxes outstanding for the taxpayer. Any amount remaining will be refunded to the taxpayer.
If you are an employer, this once off option will not impact your superannuation obligations to employees should they exceed the contribution cap.
Maximising the concessional contributions cap for over 50s
For taxpayers aged 50 and over, there is an increased concessional (before-tax) contributions cap of $50,000 that applies until 30 June 2012. The cap will reduce to $25,000 in the 2013 financial year. Before 30 June 2012 you can still make the most of this higher concessional contributions cap. However, please note that if you are contributing to more than one super fund, all concessional contributions made to all your funds are added together and count towards the cap. When calculating how much you can contribute, don't forget that the limit includes your 9% compulsory super and all deposits into the fund during 2011/12 including deposits in July 2011 that may relate to the previous financial year.
Superannuation reporting on payslips
Proposed legislation will make it compulsory to report the date on which the superannuation amounts are paid or are expected to be paid to the superannuation fund, on employees' payslips. This is in addition to the current requirements to show the amount and the name of the fund. Payments made by salary sacrifice arrangements would be included but payments to defined benefits funds excluded. It is proposed to apply from 1 July 2012 and we expect that accounting software providers will cater for this additional requirement.
Immediate write-offs for depreciable assets
Small businesses (SBEs) with an aggregate turnover of $2 million or less will be able to claim an immediate write-off for depreciable assets (excluding buildings) costing $6,500 (currently $1,000) or less from 1 July 2012. These new provisions will be available to all businesses that qualify for the SBE provisions irrespective of whether the business is conducted through a company, trust or a sole trader. The immediate write-off is only applicable to assets used for business purposes. If the asset is used private purposes, it should be apportioned accordingly.
Assets acquired in the 2013 financial year costing $6,500 or more can be allocated to a single depreciation pool at a rate of 15% in the first year and 30% for each subsequent year. Those small businesses with assets already existing in a pool prior to 1 July 2012 can roll these assets into this single pool. When the pool balance drops below $6,500, the entire pool balance can be written off. These simplified depreciation provisions will be significant. Small businesses planning on purchasing depreciable assets in the near future should consider delaying the purchases until the 2013 financial year to maximise the most tax effective outcome.
Accelerated motor vehicle deductions
Also, as of 1 July 2012, accelerated deductions for motor vehicles for small businesses will be introduced. These provisions will allow an immediate $5,000 write-off on purchases of motor vehicles costing $6,500 or more. Again, the immediate write-off will be restricted to the business use of the motor vehicle. The remaining cost of the motor vehicle after deducting the immediate write-off of $5,000 will be pooled and depreciated at the rates mentioned above.
Published : 24 May 2012