On 3 February 2009, the federal government made a series of policy announcements aimed at stimulating the Australian economy. From a financial planning perspective, the most relevant announcements included one-off lump sum payments for:
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eligible Australian workers earning $100,000 or less of taxable income in 2007/08
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single income families
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low to middle income families with school aged children
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students and those not employed intending to return to study.
Additionally, an increased tax break for businesses acquiring or improving certain assets is proposed. Bonuses
Eligible Australian taxpayers:
A lump sum bonus of up to $900 will be payable to Australian resident taxpayers who earned $100,000 or less in the 2007/08 tax year.
To be eligible for the bonus, an individual must:
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be an Australian resident taxpayer
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enter their 2007/08 tax return by the end of June 2009 (or have an arrangement already approved by the commissioner to submit a late return)
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have a net tax liability in 2007/08
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have taxable income up to and including $100,000 in 2007/08
If the individual is a minor they must be an excepted person (e.g. a double orphan or blind) and/or have excepted income in 2007/08 (e.g. employment income) to qualify for the bonus.
The amount of the bonus depends on an individual’s taxable income as outlined below:
Taxable income Bonus amount:
<= $80,000 $900
$80,001 - $90,000 $600
$90,001 - $100,000 $250
An individual will have a net tax liability if their tax payable plus Medicare levy and Medicare levy surcharge minus any tax offsets (including franking credits) is greater than zero.
Please note that Family Tax Benefits are not considered offsets. No application needs to be made. The ATO will automatically start making the payments by direct debit or cheque from April 2009.
Other details
The bonus is non-assessable, non-exempt income (i.e. it is tax free). Additionally, it is not assessable as income for Centrelink or Department of Veterans’ Affairs (DVA) purposes.
Single income families
A lump sum bonus of $900 per family will be payable to eligible families who rely predominantly on one income earner.
Basic qualification:
To qualify for the bonus, a family must qualify for Family Tax Benefit (FTB) Part B for the period including 3 February 2009. Those who receive FTB Part B periodically as well as those who receive it as a lump sum will be eligible.
For those who receive FTB Part B periodically, the payments will commence to be made from 11 March 2009.
Other details
The bonus payment is exempt from tax and is not assessable for social security or DVA purposes. Those eligible for FTB Part B for a past period (that includes 3 February 2009) will qualify for the bonus. Similarly, a bereavement claim can be made where an eligible child dies who entitled an individual to receive FTB Part B for the period including 3 February 2009.
If the family receives FTB Part B at a reduced rate due to the implementation of:
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A shared care percentage, and/or
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A blended family determination
Then the bonus payment will be split according to the percentages (or if both situations apply, the multiple of the two percentages).
Where FTB Part B takes into account more than one child and is received at a reduced rate due to a shared care percentage, the greater percentage is applied to the $900.
Back to school bonus
A lump sum bonus of $950 per eligible child will be payable to eligible low to middle income families with school aged children.
Basic qualification:
To qualify for the bonus, a family must qualify for FTB Part A in the period including 3 February 2009. $950 will be payable per school-aged child (4-18 years of age inclusive).
Those who receive FTB Part A periodically as well as those who receive it as a lump sum will be eligible. For those who receive FTB Part A periodically, the payments will commence to be made from 11 March 2009.
Additionally, individuals receiving the carer payment or disability support payment for the period including 3 February 2009 and who were under 19 years of age on 3 February 2009 will receive the bonus.
The back to school bonus can only be paid once in respect of any individual.
Other details
The bonus payment is exempt from tax and is not assessable for social security or DVA purposes. Those eligible for FTB Part A for a past period (that includes 3 February 2009) will qualify for the bonus. Similarly, a bereavement claim can be made where an eligible child dies who both entitled an individual to receive FTB Part A, and was aged 4 to 18 (inclusive), in the period including 3 February 2009.
The bonus is only payable in respect of FTB children, not regular care children.
If the family receives FTB Part A at a reduced rate due to the implementation of:
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A shared care percentage, and/or
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A blended family determination
Then the bonus payment will be split according to the percentages (or if both situations apply, the multiple of the two percentages).
Training and learning bonus
A lump sum bonus of $950 will be payable to eligible student social security recipients.
Those eligible to receive:
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Youth allowance (only full-time students and apprentices)
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Austudy
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ABSTUDY (if payment includes an amount identified as a living allowance)
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An education allowance under the Veterans Children Education Scheme
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An education allowance under the Military Rehabilitation and Compensation Act Education and Training Scheme
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FTB Part A (see below)
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Sickness Allowance
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Special Benefit (if under age pension age on 14 October 2008)
For the period including 3 February 2009 will qualify for the bonus payment.
FTB Part A
A $950 bonus is payable for each child aged 21-24 (inclusive) used to calculate an individual’s rate of FTB Part A for the period including 3 February 2009. The children as a result of whom the bonus is paid must have qualified for a back to school bonus had they been aged 4-18 (inclusive) on 3 February 2009.
Other details
The bonus payment is exempt from tax and is not assessable for social security or DVA purposes. If a student establishes eligibility for a back to school bonus, they will not qualify for a training and learning bonus as well. Additionally, each individual can only qualify for one training and learning bonus.
Increased education entry payment
From 1 January 2009 until 30 June 2010 (or later if legislated by the Minister), recipients of the Education Entry Payment (EdEP) will receive an additional payment of $950. The continuous period an individual has to have been in receipt of an income support payment to qualify for the EdEP will be reduced from one year to four weeks from 1 January 2009 until 30 June 2010 (or later is legislated by the Minister).
Those who may receive the EdEP include recipients of the following payments:
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Newstart Allowance
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Parenting Payment
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Youth Allowance (other – see below)
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Partner Allowance
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Widow Allowance
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Carer Payment
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Disability Support Pension
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Special Benefit (in some circumstances)
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Widow B Pension
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Wife Pension
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DVA partner service pension, invalidity service pension or income support supplement (subject to conditions in the Veterans’ Entitlements Act1986).
Youth Allowance (other)
Those who receive Youth Allowance who are not designated as students or new apprentices may still qualify for the EdEP (and supplement). If they enrol in a qualifying course, have been continuously receiving an income support payment for four weeks and have not received an EdEP within the last 12 months, they will receive the bonus.
Other details
The EdEP supplement will be exempt from tax and is not assessable as Centrelink or DVA income.
Administrative scheme
The bill creating the bonus payments also creates an administrative scheme. This scheme allows payments to be made that are similar to the aforementioned bonus payments should the legislated payments not fulfil the intentions of the Minister. Any additional payments must be legislated by the Minister.
One class of persons specifically mentioned, and whom therefore may receive payments under this scheme, are those receiving FTB Part A payments as a result of a child or children aged 19 or 20 on 3 February 2009.
Business tax break
Businesses will be able to claim a 30% tax deduction on the price of certain assets purchased, or on expenditure on certain existing assets, above set thresholds in the 2008/09 tax year. This deduction is in addition to the normal capital allowance deduction claimable for the asset.
Thresholds:
For business which have an annual turnover of less than $2,000,000, expenditure of $1,000 or more will qualify for the deduction. For other businesses the expenditure will need to be $10,000 or more to qualify.
Purchase and installation:
Assets will need to be purchased after 12 December 2008 and before 1 July 2009. They will need to be installed, ready for use by the end of June 2010.
Eligible assets:
Assets eligible for the deduction are new tangible depreciating assets (which are defined in section 40-30 of the income tax assessment act 1997) as well as new expenditure on existing assets defined under the same section.
Assets which will not qualify include:
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land
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trading stock
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intangibles
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certain rights
The deduction is claimed through the taxpayer’s tax return.
For more information please contact Apex Partners on 1300 856 338.