Tax Office (ATO) Christmas New Year Present?

There has been talk about a 20% tax break for the December Quarter BAS. Could this be a Cbristmas New Year present? Its actually a deferral not a cut.

Its only in relation to the income tax paid in advance, known as Pay As You Go Instalment (PAYGI). This is paid as part of your BAS payment for December. Normally the income tax in advance is calculated by the Tax Office as a fixed amount or as a certain percentage of your income ex GST.

According to the Prime Minister the 20% reduction is available to small businesses with annual turnover of less than $2 million. This effects about 1.2 million businesses. It is not that significant in that you can reduce the instalment manually in some cases in any BAS statement.

Here are some extracts from the press release.

“While there is a tolerance in the existing provisions that allows taxpayers to vary instalments down of their own accord, many small businesses are reluctant to do so, especially those with unpredictable income streams. This action by the Government will reduce uncertainty for those small business taxpayers and relieve them of the cost of doing their own calculations.”

and another extract outlining how it will apply

“How will it apply?

The 20 per cent reduction applies to the instalment amount shown on the Business Activity Statement (BAS) dispatched by the Australian Taxation Office (ATO) in December 2008 for the quarter ending on 31 December 2008. This instalment amount is due on or before 28 February 2009 (which will be extended to 2 March 2009 as 28 February 2009 falls on a weekend) for most small business taxpayers. For some small business taxpayers (for example, small businesses which elect to report and pay the goods and services tax on a monthly basis), this due date is 21 January 2009. As such, for the quarter ending 31 December 2008, small business entities are only required to pay 80 per cent of the instalment amount shown on the BAS on 21 January 2009 or 2 March 2009.

Small businesses can further vary their instalments based on the reduced amount in accordance with the existing law.

This reduction does not apply to taxpayers who calculate their instalments based on the instalment rate notified by the ATO. Their payments will automatically adjust when they apply the given rate to their actual income for the quarter.”

If you have a cash flow issue this will be welcome, however you still have to pay the tax at the end of the year.

So not really a present but maybe a gift which has to be returned.

Regards,

Glenn Wallace
Business Adviser
Chartered Accountant
CPA
Australian Registered Tax Agent
Superannuation

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HELP …..Debt

This is a hip term the Tax Office has come up with “HELP Debt” (HELP – Higher Education Loan Programme).

It used to be known as HECS ( Higher Education Contribution Scheme).

Generally speaking, HELP is similar to tax withheld on wages.

As with tax on wages it appears to be compulsory to withhold the amounts from the regular pays as opposed to paying it at the end of the year.

It’s a bit like asking to pay your income tax at the end of the year and not have the tax deducted every pay.

If your taxable income is going to be lower from a rental loss or some other deduction or you only worked part of the year(basically your taxable income is goingto be lower than if you received the current pay all year) then you could vary
your overall PAYGW obligations.

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