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Go For Research & Development Grants 100 ISSUES
by Paul St. Clair, F.C.A., Peter Small, B. Bus, F.C.A., and Avinash Lakhan, BFA/LLB. C.A We are proud to provide you with the 100th Edition of • The Australian dollar was a regulated currency (it was our Client Newsletter. Our first newsletter was sent to clients in April, 1981. The newsletter has always been Our February, 1984 lead article advised clients on the a free service to our clients and to associates. new health system called – Medicare. In May 1985 we Looking back at our first issue in 1981 we had some argued against the introduction of Capital Gains Tax. In interesting articles for that era. The article “What is our September, 1987 newsletter we stated the following Word Processing?” discussed and outlined the on the Australian Stock Market – “.Investors… should advantages of computerised word processing as now be adopting investment strategies appropriate to the opposed to using a typewriter. Another article was on mature stage of this investment cycle.” In December, how IBM was working on a supercomputer with the 1987 our lead article was “Responding to the Crash”. In potential to have a capacity of a dozen of the largest June 1992 we advised clients on the compulsory computers in a space of about the size of a grapefruit. superannuation guarantee charge coming into effect in Technology indeed has changed in the last 27 years. the 1992-1993 financial year. Interestingly our lead Considerable changes have also occurred in the article in June 1992 was “The Recession Has Bottomed” taxation, accounting and the business landscape. When Our “one last thought” item has some classic quotes. • there were no taxes on capital gains, fringe benefits. “Always look ahead – there are no regrets in that • sales tax applied but was substituted and expanded with the introduction of Goods and Services Tax. “A smile is a shortest distance between two persons” • company income was subject to double taxation, and “If anyone believes that the world owes him a living, • business entertaining was tax deductible, and there However our “one last thought” item in our first were no penalty tax rates on children’s investment newsletter remains as applicable today as it was in • interest rates on bank overdrafts were between 12.5% “We, in Australia live in a privileged corner of a poverty stricken world. We have one of the highest living • pensions were not included as taxable income, and the standards in the world and custody of one of the richest superannuation system was not subject to tax. inflation countries. To countless millions elsewhere our lot is was 9.2% and the All Ordinaries Index was below 800 SUPER NEW STRATEGIES July,
The start of the new financial year on 1st July, further by the Superannuation Guarantee rules, superannuation. It is appropriate to summarise which oblige employers to pay superannuation the new rules, and to consider strategies that contributions for most employees, at the rate of 9% of salary for each eligible employee. GETTING IN ON SUPERANNUATION
WITHIN THE SUPERANNUATION
ENVIRONMENT
Participation in the superannuation system is encouraged by tax concessions. Employers and Provided the superannuation fund complies the self employed are eligible to claim tax with all applicable rules, its earnings are taxed at a rate no higher than 15% (the term income includes concessional contributions). Capital (including salary sacrifice arrangements) can be contributed for a person each year (known eligible for a one-third discount, so reducing as concessional contributions). Between 1st the effective tax rate on gains made by a fund July, 2007 and 30th June, 2012 a transitional to 10%. As well, income used to make pension concession cap of $100,000 will apply to payments is tax exempt, so if a fund is only persons aged 50 years and over. As well, non- paying pensions, its earnings are tax-free, and concessional contributions of up to $150,000 this exemption also extends to capital gains. per person may be made each year (three years These tax concessions make superannuation worth can be accumulated into one, giving a the best structure in which to hold long-term GETTING OUT OF SUPERANNUATION
businesses are eligible to be rolled over into superannuation, instead of being subject to tax under the Capital Gains Tax (CGT) provisions. superannuation system must stay there until This effectively defers CGT until retirement the person reaches age 55. Withdrawals of (and may even eliminate the CGT entirely, if benefits by retirees from age 60 are tax-free, the benefit is paid out tax-free, as described whether taken as a lump sum or pension (a rebate applies for retirees aged between 55 and 60). Taking retirement benefits in the form of a Low income earners are further encouraged to pension is generally the better strategy, since make non-concessional contributions, by a the earnings on an invested lump sum would Government Co-Contribution. Contributions represent taxable income, whereas the pension made by those on low incomes are matched by is not taxable. It is not necessary to retire from a Co-Contribution Payment of $1.50 for every benefits, although benefits taken prior to Contribution of $1,500 each year (for eligible contributions made during the 2006 year, a Previously, the rules required retirees to one-off Co-Contribution Bonus of $1.50 has withdraw their accumulated benefits whether been announced, bringing the total for that they wanted to or not. These rules have been year to $3 for every $1 contributed). The Co- relaxed, so money can now stay within the Contribution is available for those with superannuation environment indefinitely. incomes up to $58,000 (the full amount is payable on incomes up to $28,000, and then In our next issue we will look at some
phases out until income reaches $58,000). strategies designed to take advantage of the
new rules.
BEATING WINTER BLUES
As a business person, you are too busy to catch colostrums. It is thought to play an important a cold at this time of the year. Why not prepare role in the defence mechanisms against bacteria, fungi and viruses by enhancing the immune system. Colds are caused by viruses that are easily passed on through sneezing and other contact. With no cure yet developed for the common cold, antibiotics are ineffective against cold and Once garlic is consumed and broken down in flu viruses. The best prevention for a cold is the body, its by-products are released through having overall good health. During the winter the lungs, where the antimicrobial action helps months, a good general multivitamin and some extra anti-oxidant protection will help to boost your immune system. The following natural remedies may help to fight against the dreaded Zinc in the gluconate form needs to be taken when symptoms first appear and then continuously for the duration of the cold. For treating colds, zinc is best taken in the form of Echinacea is the most commonly used herb for colds because of its ability to stimulate natural immunity. It is also antibacterial, antimicrobial, antiseptic and antiviral. Olive leaf has antibiotic, antibacterial and antiviral properties that make it potentially Despite the huge amount of research, debate Overall, a good diet and a healthy lifestyle still rages over the effects of vitamin C in keeps you away from cold and flu in winter: preventing or treating the common cold. Some researches showed that taking large doses of vitamin C can stimulate the immune system, secretions thin and prevent dehydration. shorten the duration of cold and reduce the severity of common-cold symptoms.
Avoid mucus-forming foods such a dairy
Avoid central heating because it dries out Lactoferrin is an important natural immune GO FOR RESEARCH & DEVELOPMENT GRANTS
If your company has an R & D project where year through its grants, loans, venture capital you can fund half the R & D cost, and show proven business success, you may be eligible for funding through AusIndustry R & D For further information contact Avi Lakhan grants. Assistance worth nearly $2 billion is made available to 9,000 businesses every CARBON TRADING
What is Carbon Trading?
“The increasing weight of scientific evidence environmental regulator firstly determines damaging growth in the level of greenhouse total acceptable emissions that a company or gases arising from human activity. This will group can emit and then divides this total into How does it work?
infrastructure and a range of industries, Participants that emit pollutants must obtain sufficient tradeable units to compensate for their emissions. Companies or groups whose emissions are below their given ‘cap’ will growing acknowledgment that governments, have surplus units which then may be sold or individually and collectively, should act to ‘banked’ for future usage. Companies or mitigate the emission of greenhouse gases. groups that pollute beyond their allowances must buy credits or face penalties. This transfer is referred to as a trade. The scheme basically rewards companies and groups for companies and groups for emitting carbon dioxide and other greenhouse gases in the What is the intention of Carbon Trading
environment. The overall intention of the ‘Task Group on Emissions Trading’ reported that:- SMOKING BAN
In October, 2004, the then NSW premier Bob The laws came into place as at 2nd July, Carr announced that smoking in indoor areas of 2007 and all hotels, clubs and nightclubs licensed premises would be phased out by July, 2007. This plan has been implemented in 4 phases; on 3rd January, 2005, 4th July, 2005, 3rd July, 2006 and finally on 2nd July, 2007. As of 2nd July, 2007 the following law comes into place, “All enclosed areas of hotels, clubs and nightclubs that are open to the general public must be completely non-smoking, and all areas of Star City Casino with the exception of the negatively affect businesses. This is due to smoking”. The Star City Casino exception is the frequent the venues, non-smokers will be TAX BRIEF Page

TAX RATES - 2007
A reminder that the personal income tax rates for the year ending 30th June, 2007 are:-
Current tax thresholds to 30/6/07 Tax rate
New tax thresholds from 1/7/07
Income range ($)
Income range ($)
The income tax rate for companies remains unchanged at a flat 30%.
LOAN REPAYMENTS SUBJECT TO TAX
A recent Court decision has major implications for those who operate their business in a corporate
structure. The Court decided, surprisingly, that repayments by the business of loans made to it by its
owners constituted taxable fringe benefits. While this decision may be, and hopefully will be,
overturned on appeal, taxpayers who are employees of their business are warned to take steps to avoid
demonstrating the critical factors that led to the Court’s finding. In short, these factors were: no
salaries were paid by the business to the owners, the business yielded only small profits, and the
repayments covered the regular expenses of the owners. Accordingly, the Court decided that the loan
repayments were, in fact, fringe benefits that were made in place of salaries to the owners as a reward
for their employment in the business.
We therefore suggest that all owners who work in the business should be paid a reasonable salary for
their work. Salary payments should be made on a regular basis, the same as for other employees with
tax withheld. Payments should not be made by the employer for the owners private expenses. These
should be paid from the owner’s personal bank account. Repayments of the loan account, when
required, should show the characteristics of loan transactions: the owner should make a written request
to the employer for repayment of a portion of the loan, the repayment requested should be a lump sum,
and the entry in the accounting records of the business should describe the payment as “repayment of
loan”.

MOTOR VEHICLE EXPENSE CLAIMS
The new rates for motor vehicle expenses using the cents per kilometre method for the 2006/2007 year
are:
Engine capacity (cc) #
Rate per Kilometre (cents)
Conventional engines only; half these rates for rotary engines.
REMINDERS FOR EMPLOYERS
Employers are reminded that the rate of superannuation contributions required to comply with the Superannuation Guarantee Charge (SGC) laws is 9%, and that contributions must be made every quarter to comply with the rules. As well, employees must be notified, within 28 days of the last contribution each quarter, of the amount contributed for their benefit. There are very few exemptions from SGC (the most common is for those who earn less than $450 in a month), and substantial penalties apply to breaches. Superannuation contributions are only tax deductible when paid. If you fail to make the mandatory contributions, you are liable to pay the SGC, for which no tax deduction is available. Pay As You Go (PAYG) Payment Summaries must be issued to employees by 14th July, 2007. The originals of these summaries, and the necessary reconciliation statement, must be forwarded to the Tax Office by 14th August. Details of fringe benefits provided must be disclosed on employee PAYG Summaries issued for the 2007 year. WHAT WE NEED TO PREPARE YOUR TAX RETURN July,
Whilst gathering your tax information for preparation by us, you may like to check the undermentioned items to see if you have included them in your summary of information. Although the following list is not exhaustive, it will serve as a useful guide. ASSESSABLE INCOME
PAYG Payment Summaries
Share transactions (full details)
Interest and royalties
Rent received
Business/Partnership – income and expenses
Sale of any asset where the asset was acquired
Commissions received
Trust income
Termination payments received (with
Allowances, benefits, earnings, tips and accompanying
Social Security benefits received
Dividends, including imputation details
Pension/Annuity payments
ALLOWABLE DEDUCTIONS
Advertising
Leasing costs
Bad debts (written off during the year)
Legal expenses (in certain cases - full details)
Bank charges applicable to earning income
Losses of previous years in certain cases.
Business Expenses
Motor vehicle expenses (including business use
Commissions paid
Convention/Seminar expenses
Newspapers essential to your business
Contributions to approved superannuation,
Plant, furniture, fittings, motor vehicles etc.,
provident or retirement funds (generally subject to depreciation (limited to $57,009 for a vehicle purchased during the 2007 year) Donations & gifts over $2.00 (approved)
Stationery, postage, printing costs
Education expenses - for income producing
Superannuation contributions
Subscriptions to trade, business or professional
Film investments
Home office expenses
Sun protection, where exposure is a risk.
Telephone expenses applicable to the earning
Purchases for resale
Rates and taxes on income producing property
Travelling expenses (including overseas with
Repairs to income producing property (not
Insurance premiums (business)
Tools of trade
Interest on borrowings for business
Tax agent fees, accounting and audit fees
Wages and salaries
These claims are subject to the substantiation provisions, where applicable. • REBATES
Spouse and dependants (subject to any amount Net Medical expenses over $1,500 in total
Sole Parent
Franked dividends
OTHER
Family Tax Benefit - names and dates of birth Private Health Insurance - rebate and surcharge
for dependant children under the age of 21 details required, as well as Fund membership (25 if in full time education). Details of Family Tax Payments received from Stock value at 30th June, 2007 (valued at cost or Centrelink. Spouse’s taxable income and childrens income and education status if Trade creditors (at 30th June, 2007, listed under
Trade debtors (at 30th June, 2007)
N o t i c e b o a r d
AUSTRALIAN economy. The latest WORKPLACE information. From
economic data doesn’t get much better. In the first 20th July, 2007 every employer in the federal three months of this year the economy grew at 3.8 workplace relations system must provide a copy percent on an annual basis, the fastest in three years. of the “Workplace Relations Fact Sheet” to all At the same time inflation actually eased. The their existing employees within three months and unemployment rate dipped yet again to a 32 year low to new employees within seven days. This of 4.2 percent. Despite a tight labour market the cost requirement applies to all corporations who are of labour actually fell in real terms by 1.4 percent. In employers and those employers who are covered March, 2007, 40,000 new jobs were created. As a by a federal award or instrument. If this applies to result of inflationary pressures easing, again interest you and you want copies of the “Workplace rates did not rise. Part of the answer to this great news Relations Fact Sheet” do contact Karen Huynh on is that immigration is growing at the fastest rate in 17 years and in this coming year growing even faster. AUSSIE dollar.
Employers and Government seeing the need for are the effects? At time of writing the Aussie skilled employees have targeted migrants adjusting is heading towards US90 cents. On the basis of visa requirements. There is a good balance in these information available and on the opinion of most numbers. If the supply of workers keeps up with the experts on this subject the Aussie is heading demand of employers, then inflation is kept in check. TAX hit list. The Taxation Office has advised Australian view point in a boom economy,
of the following occupation hit list for the 2007 tax
depending on inflation numbers, there is upward year – motor mechanics, electricians, hospitality pressure on interest rates which puts upward workers, mining workers, factory hands, store pressure on the Aussie. Being in the midst of a workers, IT professionals, accountants and high minerals boom further upward pressure is on the wealth individuals. The Taxation Office would pay Aussie dollar. If we go back to the last minerals special attention to the explosion in work-related boom the Aussie dollar well exceeded its present expense claims. The average work-related expense value against the US dollar. In brief our interest rates and minerals boom is sucking in foreign capital. On the other hand the US dollar is weaker ECONOMIC cycle. A common question as a result of its big budget and trade deficits.
on the minds of investors is “has the economic cycle
There are winners and losers with a rising Aussie peaked for the sharemarket and will it now favour dollar. Exports are dearer and imports are the property market?” The sharemarket has cheaper. Cheaper imports may save us from an certainly been breaking records and at the time of interest rate rise this year. Not all exporters are writing, shares are down. There are pointers hurting with a rising Aussie dollar. Those that indicating that the share cycle has still not peaked. make their sales in US dollars are not hurting, for Whilst the market has risen over 10 percent this year example BHP Billiton and Rio Tinto operate in it is still well supported by strong company earnings. US dollars. It could be said that despite the Share yields are about 3.6 percent compared with weakness in the US dollar it is still a de facto property at about 2.8 percent in Sydney. The overall price earnings ratio of the sharemarket is around 18; GOLDEN rules applied by Christine
a high but not excessive multiple. The current Manfield of Modern Food Pty Ltd, to good living downturn in the sharemarket is a natural and business:- consequence after a big run. In general share prices are still reasonable. On the property side of the economic cycle that market has seen poor returns over the last four years particularly in NSW. This 3. Stay true to your dreams. may be about to change since vacancy rates on rental properties have fallen from 4.5 percent to 1.3 percent 5. Don’t ever be scared of jumping into the in NSW. This is a strong indicator but with a possibility of a rise in interest rates this casts a Finally, “It’s nice to have money, because it gives shadow over a residential property pick up. We may you the freedom to make choices, and that’s well be moving closer to an economic cycle change where (on occasions) happiness comes from.” in the share/property markets but not just yet.
The national unemployment rate for June, 2007 is 4.3%. The inflation rate for the year to June, 2007 is 2.1%, whilst the balance on current account is a deficit of $15.561 billion.
Sydney now ranks as the world’s 21st most expensive city in which to live, with Moscow in first place followed by London and Seoul. In terms of cost of housing affordability, Sydney now ranks as the world’s 7th most expensive city, behind Los Angeles at the top of the list.
Australia’s superannuation nest-egg increased by 19.2% in the 12 months to December 31, 2006, and has now passed the $1 trillion (that is $1,000 billion) mark. Australia now has the fourth largest pool of superannuation savings in the world, behind the US, Luxembourg and France.
The second five-yearly Intergenerational Report has found an easing in Australia’s ageing population, resulting from an increase in the birth rate and increases in skilled migration.
Researchers studying housing affordability have concluded that the rate of population increase is double the rate of housing construction, resulting in continued pressure on housing prices and rents.
A decision by the High Court has found that an investor who bought shares in a company was entitled to damages for being “misled” by the company, because he bought the shares at a time when the company failed to disclose its dubious financial position.
In supermarkets, the more a product jumps out at you the more expensive it is likely to be.
A social survey has revealed that working long hours does not destroy marriages but where a husband works part-time marriage failure is nearly twice as likely.
According to a new report, the rate of payment fraud in Australia is low by world standards, but we have topped the world for the number of cars stolen each year on a per capita basis. And even on a total basis, we rank number 8 in the world.
An American study has forecast that Western asset values could halve in the short to medium term as a result of ageing populations, with baby-boomers starting to realise their assets to fund retirement lifestyles. This could, in turn, put downward pressure on real estate and share prices.
Australians paid an average of $11,976 in taxes to the Commonwealth in 2006, a rise of 5.6% on the previous year. When State and local taxes are added in, the total paid to government in 2006 reached $14,551 per person.
The world has more billionaires then ever before, and they are getting younger. Forbes magazine lists 946 billionaires in 2007 (793 last year) with an average age of 62 (64 last year). Bill Gates tops the list ahead of Warren Buffett. Russians and Indians made up the greatest number of additions to the list. ONE LAST THOUGHT
When the Tax Office make a mistake, they call it an error.
When a taxpayer makes a mistake, they call it negligence

Source: http://www.stclairco.com.au/newsletter100.pdf