Frost Crane & Co

Small business concessions: removal of the entrepreneur’s tax offset from 2012-13

by Yin Zhong on April 2, 2012 · 0 comments

From 2012-13, the entrepreneur’s tax offset can no longer be claimed.

The entrepreneur’s tax offset may still be applied to assessments for applicable income years up to and including 2011-12.

The entrepreneurs tax offset (ETO) is a tax offset equal to 25% of the income tax payable on your business income if you have an aggregated turnover of $50,000 or less.

If your aggregated turnover is more than $50,000, the ETO is phased out so that the tax offset stops once your turnover reaches $75,000.

From 2009-10 if you are an individual you must meet an additional income test. Broadly, the new income test applies if you are a small business sole trader, a partner in small business partnership, or a beneficiary of a trust that is a small business. The new income test reduces the ETO entitlement for:

  • individuals who are single with income for ETO purposes over $70,000
  • individuals with a family whose income for ETO purposes is over $120,000.

The ETO can only reduce the amount of tax you must pay each year. That is, we cannot:

  • refund any unused tax offset
  • defer it to reduce your tax in a later income year, or
  • transfer it to another taxpayer to reduce their tax.

Small business concessions: changes to simpler depreciation rules apply from 2012-13

by Yin Zhong on April 2, 2012 · 0 comments

From 2012-13:

  • the small business instant asset write-off threshold has been increased from $1,000 to $6,500
  • the long-life small business pool and the general small business pool have been consolidated into a single pool to be written off at one rate
  • small businesses can claim an accelerated initial deduction for motor vehicles acquired in 2012-13 and subsequent years.

These amendments only apply to small businesses that have an aggregated turnover of less than $2 million. Aggregated turnover includes the annual turnover of the small business and the annual turnovers of any connected or affiliated businesses.

Research and development tax incentive: Q&A

by Yin Zhong on January 9, 2012 · 0 comments

Under the Income Tax Assessment Act 1936, an accounting period is generally a period of 12 months ending on 30 June. However, the Act allows for a substituted accounting period (SAP) to balance on some other date.

If you use a SAP, the answers to these frequently asked questions will help you work out your eligibility for, and how to claim, the research and development (R&D) tax incentive.

Can I claim the R&D tax incentive in my 2011 income tax return if my 2011 income year begins before 1 July 2011 but ends after 1 July 2011?

No, the start date for the R&D tax incentive is determined by when your income year begins, not when it ends. If your 2011 income year begins before 1 July 2011, you cannot claim the R&D tax incentive until your first year of income beginning on or after 1 July 2011.

Example:

Company A has a late-balancing September SAP. Company A’s 2011 income tax return will be lodged for the period 1 October 2010 to 30 September 2011. As its 2011 income year begins on 1 October 2010, which is before 1 July 2011, it will not be able to claim the R&D tax incentive until its 2012 income year, beginning on 1 October 2011.

Can I claim the R&D tax incentive in my 2012 income tax return if my 2012 income year begins before 1 July 2011?

No, if your 2012 income year begins before 1 July 2011, you will not be able to claim the R&D tax incentive until your first year of income beginning on or after 1 July 2011.

Example:

Company B has an early-balancing December SAP. Company B’s 2012 income tax return will be lodged for the period 1 January 2011 to 31 December 2011. As its 2012 income year begins on 1 January 2011, which is before 1 July 2011, it will not be able to claim the R&D tax incentive until its 2013 income year, beginning on 1 January 2012.

I have an early-balancing December SAP with a year of income from 1 January 2011 to 31 December 2011. Can I claim the R&D tax concession from 1 January 2011 to 30 June 2011 and the R&D tax incentive from 1 July 2011 to 31 December 2011?

No, the R&D tax incentive applies to years of income beginning on or after 1 July 2011. You cannot claim the R&D tax incentive for an income year beginning before this date. If eligible, you will be able to claim the R&D tax concession for your 2012 income year and claim the R&D tax incentive for your 2013 income year.

Not-For-Profit reform-getting up to date

by Yin Zhong on January 5, 2012 · 0 comments

From 1 July 2012 many of the functions currently undertaken by the Australian Taxation Office (ATO) in relation to the administration of charitable endorsement will be undertaken by the ACNC. In preparation for this transition the ATO is encouraging all charities and NFP entities to ensure that their details are up to date, particularly their contact details.

 

When the ACNC starts operation on 1 July 2012, the responsibility for determining charitable status will move from the ATO to the ACNC. Those entities currently endorsed as charities by the ATO will become registered by the ACNC.

 

This will be a seamless transition, but will be greatly assisted if the details of entities are as up-to-date as possible.

 

To help the ATO protect your entity’s privacy and provide office bearers with access to the information they need to perform their duties, please notify the ATO of any changes to your entity’s registration details.

 

If you are an authorised contact person that the ATO has on its records for your entity’s ABN, or would like to check whether you are the contact person, you can phone the ATO on 1300 130 248. If you are not an authorised contact person, you will need to ask for a Change of registration details form (NAT 2943).

 

 

 

 
 
 

 

Transfer pricing

by Yin Zhong on July 29, 2011 · 0 comments

 

If you are part of a Multinational Enterprise (MNE) and have international dealings with other associates or branches within the MNE, this information may be relevant to you.

Where a tax treaty exists, ATO usually raise a transfer pricing or profit reallocation adjustment under both of the following:

  • Division 13 of the Income Tax Assessment Act 1936 (ITAA 1936)
  • the Associated Enterprises article (usually Article 9) of the relevant treaty.

The Associated Enterprises article contains its own provisions to deal with profit shifting arrangements and also mandates the ‘arm’s length’ principle for international dealings between associated enterprises.

ATO may apply the provisions of Division 13 and the Associated Enterprises article when making a transfer adjustment. The results should be consistent as Division 13 and Associated Enterprises article are both based on the arm’s length principle, though the precise wording of the treaty should be considered. If the results are inconsistent, the treaty provisions will apply, unless the treaty itself gives precedence to the domestic law – refer to section 4(1) of ITAA 1936).

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