As a self-employed business person, you are not required to contribute to a super fund. However, you may wish to consider super as a way of saving for your retirement.
From 1 July 2007, most self-employed people will be able to claim a full tax deduction for contributions they make to their super until age 75. You may also be eligible for the Super Co-contribution payment.
You also need to make sure you give your super fund (or ensure your super fund has) your tax file number, otherwise:
- Your super may be taxed an additional 31.5%, and
- Your fund wont be able to accept member contributions from you, which may mean you'll miss out on any super co-contibutions you may be eligible for from the government
A Grade Tax Accountants Penrith on (02) 4731-1405 offer a full range of taxation and accounting services, bookkeeping, tax returns, superannuation advice and planning.
You are generally only entitled to an ABN if you are carrying on an enterprise in Australia or have a clear business intent.
Contractors differ from employees and holding an ABN means that you:
•have entered the business tax system and are now responsible for reporting your income and paying your tax and super entitlements
•may be responsible for your own workers compensation.
Just having an ABN doesn’t make you a contractor.
Contractors are paid for the result they achieve rather than the time they work. Contractors do not normally have to work during hours set by an agreement or award and the employer does not provide them with the tools to do their work or direct their work.
If you are an employee, then your employer must withhold tax from any salary, wages, commissions, bonuses or allowances they pay you.
Your employer may also have Superannuation Guarantee Surcharge (SGS)obligations.
For further information on all your taxation and accounting services, superannuation, bookkeeping, tax return, tax advice and planning contact A Grade Tax Accountants Penrith on (02) 4731-1405.
Employers must pay super contributions to a complying super fund for all eligible employees by the quarterly deadlines. These contributions are in addition to the employees’ salaries and wages, and must be calculated based on ordinary time earnings.
Employers also need to pay super contributions for contractors you pay under a contract for labour, because they are considered employees for the purpose of super guarantee. This includes contractors who quote an Australian business number (ABN).
The Australian Tax Office also have a range of publications, tools and calculators to help you understand and meet your tax and super obligations at:
For further tax advice on all types of taxation services please contact A Grade Tax Accountants Penrith on (02) 4731-1405 or visit our website www.agradetax.com.au
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.
For many years, the humble tax agent, who consistently and legitimately has been able to claim
$’000s more in tax deductions than taxpayers doing it on their own, has been a thorn in the side of
the Government and the Tax Office.
This is the background to the new ‘standard deductions’ and the Government’s and Tax Office’s
desire to try and elbow tax agents to the sidelines – tax agents claim too much and they don’t like
So, taxpayers applauding the proposed introduction of ‘standard deductions’ may rue the day they
allowed the Government and Tax Office to lead them down this slippery slope.
“A slippery slope that we believe will inevitably lead to the abolition of Tax Returns and Tax
Refunds”, said Andrew Gardiner, spokesperson for the NTAA.
“The Treasurer himself has forewarned that this is a ‘step’ towards a tick and flick system of
returns. If it is this Government’s first step, what’s next?”
Taxpayers love receiving their annual income tax refund. It’s a form of self-imposed, forced
savings. If taxpayers want to ensure they continue to receive their refunds, they would be better
off to reject this proposal for standard deductions outright, unless they make sure it comes with an
iron-clad guarantee that their right to receive annual tax refunds is permanently locked into law.
“History is our teacher”, said Andrew, “and history teaches us that you cannot trust Governments
that bring in standard deductions”.
“In the 70’s, taxpayers were entitled to claim deductions for doctor, medical, hospital and chemist
expenses, education of dependants and self education, life insurance, rates and taxes on their
home, and a deduction for funeral expenses.”
“However, the government of the day criticised the tax system as too complex and introduced a
‘standard deduction’. That deduction was turned into a rebate and then the rebate was abolished
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.
Beware of Identity Crime
Your Tax File Number (TFN) is a key part of your identity while you are in Australia.
It is an important form of identification when you start a new job, open bank accounts and apply for government benefits. Keep it secure.
Protect your identity by protecting all your personal details, including your TFN. Keep your passwords and TFN safe and never record or store them where they could be stolen, such as in your purse or wallet.
Only certain people and organisations can ask for your TFN, the most common being:
- the Tax Office when discussing your tax records
- your employer after you start work
- your bank or other financial institutions
- your superannuation fund.
If you think someone else has used your Tax File Number, or it has been stolen, phone the Tax Office on 1800 060 062.
Ring A Grade Tax Accountants in Penrith on (02) 4731-1405 providing a full range of accounting, taxation services, bookkeeping, business setup and ongoing tax advice, tax returns, planning and tax advice to personal and business clients.
Employees who salary sacrificed into super in the lead up to 30 June 2009 to take advantage of the $100,000 and $50,000 concessional contribution caps which were halved from 1 July 2009 may unwittingly be hit with excess concessional contributions tax in the current financial year.
The extra tax will be imposed because for many employees the salary sacrifice super amounts deducted from their pay during the June 2009 quarter may not have been paid by their employer into the superannuation fund until the following July. This means that these contributions will be counted towards the lower $50,000 and $25,000 contribution caps in the current financial year.
It should be noted that the compulsory 9% superannuation guarantee contributions paid by employers are also included in the concessional contribution caps.
Peter is an anaethetist aged 54 and employed by a public hospital. He salary sacrificed $20,000 into super just before 30 June 2009 to take advantage of the higher contribution limits. This $20,000 was paid by the hospital into the super fund in July 2009. Peter has so far salary sacrificed $40,000 into super this financial year.
On this basis Peter’s super fund has received $60,000 in salary sacrificed contributions this financial year meaning that he has already exceeded his $50,000 concessional cap this financial year by $10,000. In addition to the 15% contributions tax that will be deducted from Peter’s super balance, excess concessional contributions tax of 31.5% will be paid on the $10,000. Peter will also be hit with excess concessional contributions tax of 31.5% on the super guarantee contributions made by the hospital as they are also counted in the $50,000 concessional cap.
UNIVERSITY undergraduates will be able to claim educational expenses as a tax deduction after a former student had a landmark win against the Tax Office in the Federal Court recently.
A former Australian Catholic University student, was successful in her bid to claim $920 as self-education expenses after fighting the Australian Tax Office through a number of jurisdictions over the past three years.
While studying as a primary teacher full-time, Ms Anstis worked as a part-time sales assistant for retail chain Katies, where she earned $14,946. She also received a Youth Allowance of $3622 during the 2006 income year.
In a bold move she claimed education expenses including travel costs, supplies for children during teaching rounds, student administration fees and depreciation of her computer.
The Tax Office rejected the claim, so Ms Anstis and her father, Michael, who is a qualified solicitor but does not work as a lawyer, fought them.
The full bench of the Federal Court upheld an earlier decision that because the former student had to be enrolled in a full-time course of study to get her assessable income of Youth Allowance, any costs incurred in the course of studying should be deductible.
Tax experts say hundreds of thousands of university students who receive Youth Allowance could benefit from the ruling, but they will need to generate a taxable income above $15,000.
About 440,000 students receive Youth Allowance or Austudy, according to government figures. Many of these students would earn enough with the addition of part-time work to have a tax liability, according to Dale Boccabella from the Australian School of Business at the University of NSW.
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