A Grade Tax News Business Newsletter
The announcement on the continuation of the transitional concessional contribution cap from 1 July 2012 as part of the Government’s response to the Henry Tax Review recommendations has reinstated the importance of super splitting.
The Government has extended the transitional concessional contribution cap of $50,000 past 30 June 2012 to clients over age 50 but there is a catch. Your client’s superannuation account balance (including pension interests) must be less than $500,000.
Super investors should consider using super splitting to ensure they have access to the higher concessional contribution cap past age 50.
Prior to the abolition of reasonable benefit limits, super splitting was a powerful tool to minimise excessive benefits for clients who are high income earners and/or achieved superior investment returns over time. The focus of super splitting has now changed to clients:
•with balances below $500,000;
•who will need to make concessional contributions (including salary sacrifice) above the standard concessional contribution cap of $25,000 which is reduced by employer superannuation guarantee contributions; and
•who are married or in a de-facto relationship.
Super splitting will form part of a long-term strategy for younger clients so they can gain the maximum benefit post age 50. The partner who is the lower income earner or will have an absence from the work force will certainly benefit from the strategy.
Accessing the higher concessional contribution cap past age 50 will provide the opportunity to avoid excessive contributions and a significant boost to the tax-effectiveness of a transition to retirement strategy.
Henry Review – Update
On 2 May 2010, the Government released to the public, the “Henry Report” on the future of Australia’s taxation system.
In all, there are 138 recommendations – more than 100 of which the Government has put its response to, on the “back-burner”, probably until after the next election.
Many of the recommendations will cost taxpayers dearly should they become law. For example, recommendations still “live” include:
Taxing fringe benefits in the hands of employees;
Removing important small business concessions (e.g., the 50% active asset reduction and the 15 year exemption);
Taxing superannuation contributions in the hands of employees; and
Changing the nexus rules making it more difficult to claim personal tax deductions.
Below is a summary of the taxation measures actually announced by the Government, as part of its response to the Henry Report.
1. Taxation measures announced by Government
1.1 Increasing the Superannuation Guarantee (‘SG’) contribution rate
The SG contribution rate will be increased to 12% by 2019-20 (from the current 9%), with gradual increases commencing on 1 July 2013, as outlined in the following table.
Income Year SG contribution rate (%)
1.2 Increasing the SG age limit from 70 to 75
Generally, motor vehicles provided to employees or their associates are subject to FBT if they are used or are available for private use.
Each year the ATO publishes a comprehensive but not exhaustive list of motor vehicles which may be eligible for an exemption from FBT.
The ATO stresses that vehicles that are included in the listing are not automatically exempt from FBT, but rather depend on whether the eligibility criteria for the exemption are met.
To be eligible for the exemption, an employee’s private use of a taxi, panel van, utility or other commercial vehicle must be limited to:
a. Travel between home and work;
b. Incidental travel in the course of ordinary duties of employment; or
c. Where the private use is minor, infrequent and irregular.
In most cases, panel vans, utility vehicles and other commercial vehicles would be eligible for this exemption.
Following is the link to the Tax Office's latest list of eligible exempt motor vehicles:
Or visit the Tax Office website at www.ato.gov.au
Ring (02) 4731-1405 A Grade Tax Accountants Penrith for a full range of taxation and accounting services to small and medium business enterprises across a diverse range of industries.
In the 2009 Budget, the government announced changes to the non-commercial losses rules. These changes will further restrict the deductibility of business losses incurred in relation to non-profitable business activities. The measure will ensure excess deductions from unprofitable business activities cannot be used to reduce salary, wage and other income of high income earners.
From 1 July 2009 deductions from unprofitable business activities cannot be used to reduce salary, wage and other income of high income earners by tightening the application of the non‑commercial losses rules. Taxpayers with an adjusted taxable income of over $250,000 will instead have excess deductions quarantined to the business activity. The existing rules will continue to apply to taxpayers with an adjusted taxable income of $250,000 or less.
Taxpayers will still have the ability to apply to the Commissioner of Taxation for relief from the rules if there are exceptional circumstances or because the nature of the activities means that they are temporarily carrying on an unprofitable business but the activities they are undertaking are nonetheless independently assessed as commercially via.
A Grade Tax Accountants Penrith on (02) 4731-1405 for personal and business clients full range of taxation and accounting services.
With the growth of our practice, it will assist us if you could ring and make an appointment for the preparation of your 2009 Tax Return.
Please review the following checklist to ensure you bring everything to assist me to maximise your refund. [ Tax Return Checklist ]
Medical Rebate: If you or your family has had out of pocket medical expenses in excess of $1,500 you may be able to claim a 20% tax rebate on the amount in excess of $1,500.
If you want to claim this tax rebate you will need to bring:
- Tax Statement from Medicare (phone Medicare on 132011&request a Tax Statement).
- Taxation Certificate from your Private Health Insurer detailing claims made and benefits paid.
- Statement of expenses from your Chemist (your regular Chemist can provide you with this) or a summary of your chemist receipts.
- Summary of other medical expenses, including Dental&Optical.
Payment of Refund: Please bring your BSB&Bank account details for electronic payment of your refund. This provides the fastest method of receiving your refund.
Education Rebate: If you would like to claim this tax rebate please complete the attached worksheet to determine your eligibility and amount of your claim.
Overtime Meal Deductions: Please bring in your payslip showing the rate paid per meal.
Living Away from Home / Travel Allowance: Please bring in your payslip showing the rate paid per night whilst away from home.
Car Deduction – Employment related&self employed
A trust is a relationship where a trustee (an individual or a company) carries on a business for the benefit of a range of people (the beneficiaries). It is commonplace for the trustee of a trust to be a company (a corporate trustee) for asset protection purposes.
A trust is not a separate legal entity. It is a relationship under which the trustee holds property for the benefit of the beneficiaries. For instance, a trustee may carry on a business for the benefit of a particular family and distribute the yearly profit to them. A trust may be discretionary (i.e. be able to benefit a range of people in the proportions that the trustee decides) or have fixed interests (i.e. will benefit certain people in fixed proportions). Trust income can be distributed among a wide range of people, often including the extended family of the business principal.
Advantages of a Trust
The Australian Tax Office has published a Superannuation Guarantee Ruling which changes the definition of "Ordinary Time Earnings" (OTE) used to calculate employers Superannuation Guarantee obligations.
Under the ruling, OTE means all earnings from "ordinary hours of work". Salary and wages paid in the "ordinary hours of work" do not extend to overtime payments, according to the ruling.
The ruling also maintains that all types of bonuses are now to be included in OTE other than:
- a bonus that is solely referable to work done in overtime hours; and
- some sign-on bonuses.
Payments in lieu of notice on termination of employment were also now included within the meaning of OTE.
Superannuation Guarantee Ruling SGR 2009
Contact A Grade Tax Accountants Penrith on (02) 4731-1405 for all your specific taxation needs.
There has been a change to the fuel tax credit rate for fuel used in heavy vehicles travelling on a public road. The rate to use when calculating claims will depend on when the fuel was acquired. This means:
- For fuel acquired from 1 January 2009 use the new rate of 17.143 cents per litre
- For fuel acquired before 1 January 2009 use the old rate of 18.51 cents per litre.
For further information contact A Grade Tax Accountants Penrith on (02) 4731-1405 for a full range of taxation services, accounting and bookkeeping for Individual and Business clients.
The Government has issued a new $4.7bn economic package to stimulate business investment and encourage capital expenditure.
As part of this the Government has introduced the following ‘capital investment allowances’ in relation to ‘depreciable assets’ (plant, equipment and motor vehicles) acquired between 13 December 2008 and 30 June 2009. To be eligible the assets must be ‘installed ready for use’ by 30 June 2010. This means:
- ‘Small businesses’ acquiring assets costing more then $1,000 will be allowed an additional tax deduction of 30 per cent of the assets’ cost; and
- Before preparing financial statements and income tax returns there are some issues that need to be addressed as a single asset might be subject to various depreciation treatments and may or may not be allowed the ‘investment allowance’ claim
These are some of the issues:
- The assets need to be ‘new’
- The ‘investment allowance’ is available where the depreciation claim is prepared under the depreciation provisions of Div 40 of the Income Tax Assessment Act 1997 (Cwlth)
- ‘Capital works’ do not qualify for the allowance (these claims are prepared according to Div 43 of the ITAA Act)
- The investment allowance is not ‘accounted for’ in the financial statements. It is a deduction which is claimed only in the tax return. Therefore, there will be a difference between accounting profit and taxable income
Note for car buyers
New cars and genuine demonstrator cars are eligible for the new investment allowance.
Ring (02) 4731-1405 A Grade Tax Accountants Penrith for your specific taxation and accounting needs.
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