Issue 130, 30 June 2006

Welcome to the latest issue of Thomson’s Tax & Accounting Insight, your free news service for tax and accounting professionals.

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Articles in this edition include:

• Medicare levy threshold

• Tax Commissioner on small business compliance

• Main residence CGT exemption

• Thomson special offers and product alert

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Medicare Levy Threshold

From 1.7.06, the Medicare levy low-income phase-in rate will be cut from 20% to 10% and the Medicare levy threshold for taxpayers who are eligible for the senior Australians tax offset will be increased from $21,968 to $24,867.

The Medicare levy income threshold will be increased as shown:

This summary article appeared in the July 2006 Recent Developments of Thomson’s The Accountant’s Manual. For over 25 years, thousands of practitioners have turned to The Accountant’s Manual for non-legalistic assistance covering tax and accounting issues.

Complete with email alert service, subscriber helpline, subscriber webpage, tax rates and tables, handy tax tools plus more, this valuable resource keeps you aware of and on top of all your crucial responsibilities. To find out more, click here 

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Tax Commissioner on small business compliance

The Tax Commissioner gave a speech to the Council of Small Business Organisations of Australia (COSBOA) in Melbourne yesterday [Mon 26.6.2006]. He talked about the Australian Tax Office's approach to small business compliance and what the Tax Office is doing to make it easier for business to comply with its taxation obligations. Some points from that speech included:

• in 2004-05, the Tax Office collected about $4 billion of the total net tax receipts of $214 billion — the rest came in as voluntary compliance, supported by systems such as PAYG;
• the Tax Office’s approach to administering the tax system is threefold: (i) it wants to maximise the number of taxpayers who choose to voluntarily comply by providing service excellence and by making it as easy as possible for them to understand and meet their obligations; (ii) the Tax Office seeks to treat taxpayers fairly in accordance with the law; and (iii) at the same time, it has strategies to deter, detect and address non-compliance;
• Tax Office research has shown the majority of people starting a new business do not get information about tax obligations early enough. In response, the Tax Office has just released on its website an updated checklist for people new to business;
• while 95% of micro-businesses use tax agents to prepare their income tax returns, over 50% prepare their own activity statements;
• Tax Office staff answering phone calls now have a complete history of interactions with taxpayers onscreen in front of them;
• in June 2004, the Tax Office gave small businesses with debts under $25,000 an opportunity to clear their debt under favourable terms. As at 5 May 2006, the Tax Office has negotiated some 2,000 promises to pay by instalments or in full to the value of approximately $50 million.

This article appeared in ATP’s daily Latest Tax News (Tuesday 27h June). With tax fast moving and ever changing — EVERY DAY, practitioners rely on Thomson ATP's daily Latest Tax News for quick, accurate, comprehensive information — no compromises. When you need to know what's new in tax and related news every day, there's only one place to look — LTN. To find out more, click here.

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Main residence CGT exemption

A person’s main residence will generally be exempt from CGT upon disposal.

A Tax Office fact sheet indicates that, in certain circumstances, the full exemption may not apply and only a partial main residence exemption may be available. This will occur when the taxpayer’s partner and/or dependants have separate homes, part of the property has been used to produce assessable income, or the land area is more than two hectares.

As a general rule, a person is only entitled to the exemption on one property for any particular period. However, where a person purchases a new home before disposing of an old one, both dwellings may be treated as the person’s main residence for up to six months.

TIP: Taxpayers should carefully consider the tax treatment of their residential premises.

This article appeared in Thomson’s Client Alert Newsletter Service. Client Alert is a monthly newsletter that promotes your business and develops your client’s awareness of upcoming tax issues. To find out more, click here.

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Thomson special offers and product alert

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