There is no change to end of year due dates.

PERSONAL TAX RATES MOVEMENTS IN THE 2008 BUDGET

Budget 2008 announced that personal tax cuts are to take effect from 1 October 2008.

• The bottom personal tax rate will be reduced from 15% to 12.5%, and the thresholds at which personal rates apply are to be raised over a period of three and a half years. On 1 October 2008, the beginning of a three-year programme, workers will get tax cuts of between $12 and $28 a week. At the end of the third year, April 2011, the cuts will have risen to between $22 and $55 a week.
  
• The tax cuts are being brought in through a reduction in the bottom tax rate and changes in the thresholds, which will rise in stages. At the end of the programme, the top tax bracket of 39 cents which now applies to income over $60,000 will cut in at $80,000.
  
• In addition, superannuation for married couples will increase by $45.88 a fortnight on October 1 and by $23.84 for single people.
  
• Complementary changes to Working for Families tax credits will increase the amount of entitlement to the family tax credit and raise the income threshold at which abatement starts.
  

Specifically, the tax cut programme will deliver:

• A new low tax rate of 12.5 per cent;
  
• A lifting of the 21 per cent threshold by $10,500 to $20,000;
  
• A lifting of the 33 per cent threshold by $4,500 to $42,500;
  
• A lifting of the 39 per cent threshold by $20,000 to $80,000;
  
• A boost to the Family Tax Credit and an increase to the Working for Families Tax Credit income threshold from 1 October, worth $14 per week for a family with two young children on the average wage; and
  
• A further expected increase to the Family Tax Credit and income threshold from 1 April 2011, worth an additional $16 per week for this same family.
  The Government announcement also states that:
  
• A couple on the current average household income of $72,000 (split two thirds/one third) with two children aged 11 and 8 will be better off by $2223 a year ($43 a week) from 1 October rising to $4397 a year ($85 a week) from 1 April 2011.
  
• At full implementation, the programme will cut personal tax by roughly one quarter at the current level of the full-time minimum wage ($1,130 per year), one sixth at the current level of the full-time average wage ($1,670 per year) and one eighth at $80,000 a year ($2,870 per year).
  The effects of the changes to personal tax rates and Working for Families credits are set out in the following tables.

Table 1: Table of Tax Thresholds

Table 2: Working For Families Tax Credits

Table 3: How the Tax Cuts will Affect After-Tax Income (excluding the ACC levy)

Table 4: Weekly gain from tax cuts and Working for Families indexation

BUSINESS TAX CHANGES IN THE 2008 BUDGET

A Tax Bill will be introduced in June to reduce tax-related compliance costs, which include:

• Raising the PAYE once-a-month filing and payment threshold from $100,000 to $250,000.
• Raising the FBT annual return filing threshold from $100,000 to $250,000.
• Allowing closely-held companies to file FBT returns annually if their FBT liability arises solely from the provision of up to two vehicles to shareholder-employees.
• Raising the GST registration threshold from $40,000 to $50,000.
• Raising the GST six-monthly return filing threshold from $250,000 to $500,000.
• Other threshold changes relating to provisional tax, low-value trading stock and accounting for tax in respect of financial arrangements.

PROPERTY INVESTING/ ASSOCIATED PERSONS/ TAINTING

Section CB 5 to Section BC 13 of the Income Tax Act has several provisions which make sale and purchase of land taxable.  Section DB 5 states :

An amount that a person derives from disposing of land is income of the person if they acquired the land:

• for 1 or more purposes that included the purpose of disposing of it,
• with 1 or more intentions that including the disposing of it

Section CB 5 of the Income Tax Act does not include a time limit of ten years from the date of purchase.  That is, if a taxpayer purchases a property with the intention of disposing of it at a later date, any gain on sale will be taxable at the date the property is sold.

Section CB 6 of the Act provides:

An amount that a person (Person A) derives from disposing of land is income to Person A if:

** both the following apply:

• at the time Person A acquired the land they, or an associated person , carried on a business in dealing in land, and
• Person A acquired the land for the purpose of the business, or,

** both the following apply:

• at the time Person A acquired the land they, or an associated person, carried on a business of developing land or dividing land into lots, and
• Person A acquired the land for the purpose of business, or

** all the following apply:

• at the time Person A acquired the land they, or an associated person, carried on a business erecting buildings, and
• Person A acquired the land for the purpose of business of the business, and
• before or after acquiring the land Person A, or the associated person, made improvements to it.

Section CB 8 of the Income Tax Act relates to land development and subdivision in land and provides:

That an amount that a person derives from disposing of land is income of the person if:

• they dispose of the land within 10 years of acquiring it, and
• at the time they acquired the land, they carried on a business of developing land or dividing land into lots , whether or not the land was acquired for the purpose of the business  

A consequence of this is if a taxpayer is in the business of developing land that any property owned by that taxpayer, or an associated person, is liable for income tax (even a rental property), if sold within 10 years of acquisition.

Furthermore if the property is transferred to an associated person there is taxable income if the land is sold within 10 years of acquisition.

The tests of association that generally apply for the purposes of land disposal provisions are:

** any two companies are associated where there is a group of persons:

• the aggregate of whose voting interests in each company is 50% or more
• where a market value circumstance exists for either company, the aggregate of whose market value interests in each company is 50% or more, or
• who have control of both companies by any other means

** any company and any non-corporate person (including the persons spouse, civil union partner (or from 1/4/2007 de facto partner) infant child and the trustee of a discretionary trust for either of them, where together they have:

• a voting interest of 25% or more
• where a market value circumstance exists for the company, a market value interest in the company of 25% or more

** any two persons are associated if one of them is:

• the spouse, civil union partner (or from 1/4/2007 de facto partner) or infant child of the other person
• the trustee of a trust associated with the person

** a partnership or any of its partners are associated, plus a partnership associated with one of the partners