Reduction In Company Tax Rate

The company tax rate will be reduced from 34% to 30% from 1 July 2001.
Franking balances also changed from 1 July 2001.
Dividends paid prior to 1 July 2001  will carry franking credits at the higher rate (34%).

Stamp Duty and Financial Institutions Duty (FID)

Stamp duty on listed securities and FID (which is currently charged on deposits with financial institutions) will be abolished from 1 July 2001.

Motor Vehicle Input Tax Credit

The Government announced that a full input tax credit will be available on motor vehicle purchases from 23 May 2001 (previously only available from 1 July 2002).

The GST input tax credit entitlement for luxury cars is limited to 1/11 of the luxury car limit (currently $55,134).

Older Australians

The following concessions/tax cuts will apply to older Australians:

•    a one off tax free payment of $300 for people of age pension age who receive income support, or are outside the taxation and social security system;

•    an increase in the effective tax free threshold for people who have reached pension age to $20,000 (singles) and $32,612 (couples). This measure applies from 1 July 2000; and

•    an increase in the Medicare levy threshold, to $20,000 for those who have reached pension age and $15,970 for other pensioners. This measure also applies from 1 July 2000.
BAS Lodgement Extensions

Quarterly BAS and Instalment Activity Statement (IAS) lodgement and payment deadlines have been permanently extended as follows:

•    April–June quarter —
28 July;

•    July–September quarter — 28 October;

•    October–December quarter — 28 February; and

•    January–March quarter — 28 April.

Where due dates fall on a weekend or public holiday, payment may now be made on the next working day without penalty.

Eligible Termination Payments (ETPs), Surcharges and Excessive Components

The termination payments surcharge will continue to be levied on the post 19 August 1996 element only. This was originally going to cease on
19 August 2001.

ETP recipients will only be required to include a pro-rata amount in income when applying the termination payments surcharge threshold.

Additionally, the excessive component of an ETP
will cease to be subject to
the termination payments surcharge, resulting in a maximum tax rate of 48.5%.

Uniform Capital Allowances Regime

The Uniform Capital Allowances regime applied from
1 July 2001.

It provides a set of general rules for calculating tax deductions for the notional decline in value of most depreciating assets. Pooling of assets will continue to apply for certain expenditure, including software and low value items. There are also special rules for farmers and miners.

Periodic write offs are available for various black hole expenditures, including feasibility studies, site preparation, capital raising, certain intellectual property, and business restructure and takeover costs, but not for goodwill.

Capital Gains Tax (CGT) Relief

The Budget announcements contain minor CGT amendments, including:

•    shares or rights acquired under an employee share scheme via a trust after
27 February 2001, will be treated in the same manner as shares or rights held directly; and

•    shareholders in listed investment companies (LICs) will be able to access the 50% CGT discount on disposals by the LIC of tangible assets it has held for more than 12 months. The 50% discount is not otherwise available to distributions from a company

Thin Capitalisation Reform

The Thin Capitalisation rules set a limit on the amount of total debt that can be used to finance an entity’s operations, denying an interest deduction on any excess.

There will now be an exemption from the new rules for taxpayers with total annual debt deductions of less than $250,000.

The reforms apply to Australian entities which control foreign entities, or which have a foreign permanent establishment, as well as to inward investment.

The rules will apply to limit the total debt of the Australian entity, not just its foreign debt. Grouping rules apply in some circumstances.

Exclusions apply where the taxpayer satisfies either a safe harbour test, an arm’s length test or, for outward investment, a worldwide gearing test.

The safe harbour test requires that debt must make up no more than 75% of the entity’s net asset value, excluding certain equity in related entities, and non debt liabilities (e.g. most provisions).

These measures will apply from 1 July 2001.
 

DHC GROUP