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A Grade Tax News Personal Newsletter
Tax Time is again upon us. Please ring for an appointment to complete your Tax Returns this year with either Donna, Tynna, Peter or Max.
It is important that anyone considering an investment proposal seeks our advice with regard to the taxation consequences and
options available to minimize taxation. For example there can be very significant tax advantages available by holding an
investment in a Self Managed Super Fund rather than your own name.
We provide a full range of taxation services including:
- Advice regarding the best tax structure for the formation of new businesses. It is always best to discuss your new business proposal before committing to any new venture.
- Company and Family Trust returns.
- Formation and administration of Self Managed Super Funds ( SMSF ).
- Investment property tax advice.
- Our mobile lending service offers a wide range of finance options for home&investment loans plus asset financing.
Please review our checklist and tax tips on the following pages to assist with the preparation of your returns.
See you soon and thank you again for your referrals over the past year.
B.Comm FIPA JP
2013 - 2014 BUDGET UPDATE
The Federal Treasurer, the Hon Wayne Swan MP, handed down his sixth, and depending on the upcoming election in September, his last, Budget last night. Although promising a return to surplus in the 2012/13 financial year when making his Budget announcement last year, and even as recently as last November’s mid-year economic forecasts, struggling revenues and higher expenditure have dented current year’s performance with estimates now placing the 2012/13 deficit at $20bn, a turnaround from last year’s forecast of nearly $22bn. Although the Treasurer was at pains to stress that the turnaround is due to a revenue shortfall of $17bn, it did not go without notice that revenue collections had actually risen from the 2011/12 financial year by more than 6%. Expenses however remained constant with that in 2011/12, resulting in the blow out to the budget numbers.
Spending increases are expected to continue in coming fiscal years with expected increases in revenues eventually offsetting these increases, although we will need to wait and see if the Government can return to power in the forthcoming September election to determine if these Budget numbers are just an election window dressing of the numbers before a new Treasurer needs to deal with the mounting debt.
The Treasurer announced a return to surplus is now not forecast for 4 years, and Australia is expected to endure deficits totalling $18bn in 2013/14 and a further $11bn in 2014/15, with a balanced Budget expected for 2015/16. Australia will now need to wait until 2016/17 before a return to surplus.
Although the major packages in the Budget were, the already detailed Gonski education reform package and the National Disability Insurance Scheme, the Treasurer’s focus was also on Growth and Jobs, although the Shadow Treasurer could not refrain from pointing out that the current Budget forecast a reduction in both key politically sensitive indicators.
Back in 1995, Self Managed Super Funds (SMSFs) made up less than 8% of superannuation industry assets. But a swag of appealing characteristics has sent their market share soaring.
The growth in self-managed super funds has been spectacular over the past 19 years. In all important areas – assets under management, membership growth, number of funds and average account balance – SMSFs are thrashing the professionals.
In 1994, there were about 80,000 SMSFs in Australia, with about $11 billion in assets. ATO data shows that in September 2012, there were 478,000 SMSFs, with 913,550 members and a total of $439 billion in assets. That’s almost one-third of the $1.4 trillion Australians have socked away for retirement.
The remarkable growth of SMSFs shows no sign of slowing. Australians are now pouring $26.5 billion into SMSFs every year – that’s just over $500 million into SMSFs every week.
What is driving the growth of the self-managed super fund sector now? With SMSFs typically set up by people approaching retirement, Australia’s large baby boomer generation is having an obvious impact. However, Tax Office figures also point to a noticeable increase in people under 45 joining small funds.
As the following list makes clear, there’s not one simple explanation for the growth of self-managed super funds.
But for both young and old Australians, the appeal of having their retirement fate in their own hands is undeniable.
An SMSF gives investors the ability to apply the same principles to their retirement assets as they apply to their own home.
2. Avoiding larger organisations’ performance problems
The low income super contribution (LISC) is a government payment to help low income earners save for their retirement.
From the 2012-13 income year, your LISC is 15% of the concessional (before tax) super contributions you or your employer make. The maximum payment you can receive for a financial year is $500 and the minimum is $20.
You are eligible for a LISC if:
- You have concessional contributions for the year made to a complying super fund
- Your adjusted taxable income does not exceed $37,000 (if you are required to lodge a tax return)
- You are not a holder of a temporary resident visa (New Zealand citizens in Australia do not hold temporary resident visas and are therefore eligible for the payment)
- 10% or more of your total income is derived from business or employment
- The amount payable is $20 or more.
The ATO will pay a LISC directly to your complying super fund. Make sure your fund has your tax file number as it cannot accept a LISC on your behalf without it. It may take up to 14 months from the end of the financial year for the payment to reach your fund.
Your super fund will show the LISC on your member statement.
For more information about the low income super contribution, refer to Low income super contribution.
See A Grade Tax Accountants Penrith for all your Taxation Services and Self Managed Super Fund advice.
The government have announced a restriction on the tax concessions available to super funds in pension phase. From 1 July 2014, future earnings (such as dividends and interest) on assets supporting pensions will be tax free up to $100,000 a year for each individual. Earnings above $100,000 will be taxed at the same concessional rate of 15% that applies to earnings in the accumulation phase.
This $100,000 threshold will be indexed annually with CPI and will increase in $10,000 increments.
The government has indicated that this reform is expected to affect only around 16,000 Australians who have balances around or above $2,000,000.
Special provisions will apply to capital gains incurred on assets purchased prior to 1 July 2014:
For assets purchased prior to 5 April 2013, the reform will only apply to capital gains that accrue after 1 July 2024;
For assets purchased between 5 April 2013 and 30 June 2014, individuals will have the choice of applying the reform to the entire capital gain, or only that part that accrues after 1 July 2014; and
For assets purchased from 1 July 2014, the reform will apply to the entire capital gain.
Persons therefore have approximately ten years to determine how they will restructure their superannuation assets to account for the new reforms.
These new reforms will not affect the taxation of superannuation withdrawals, these continue to be tax free after age 60.
2012 Personal Tax Return Checklist
It will assist us to maximise your refund if you review the following checklist and bring all relevant information with you to your appointment.
- Payment summaries for wages.
- Centrelink Statement in respect of:
- Tax-free Exempt Pension income received. (e.g., Disability Support Pension, Carer payments and Invalidity Service Pension etc.)
- Taxable support payments such as Newstart
- Payment summaries for superannuation pensions, lump sums and employment termination payments.
- Payment summaries for govt pensions & allowances.
- Interest received from banks etc.
- Dividends received or reinvested (bring statements).
- Partnership and/or Trust income.
- Managed Funds (investments) Tax Statements.
- Details of business income and expenses, including GST information where applicable.
From 1 July 2012, if you have a dependent spouse born on or after 1 July 1952, (that is less than 60 years old at 1/7/2012) you may no longer be entitled to claim the dependent spouse tax offset. The offset is being gradually phased out as the population ages (and the Federal Government tries to balance the budget).
Commencing from 28 September 2012, the ATO will send letters directly to affected taxpayers, to make them aware of the change.
If you were claiming the maximum rebate in 2012 for your dependant spouse who is less than 60 years of age at 1st July 2012, this change will reduce your 2013 Income Tax Refund by $2,355.
Contact us at A Grade Tax Accountants Penrith on (02) 4731-1405 for all your taxation, accounting and tax advice for business and individual clients.
The 2012-13 Federal Budget scrapped the Education Tax Refund (ETR) for 2012 and replaced it with the School Kids Bonus, to commence in January 2013.
The much talked about transitional “ETR Payment” will replace the ETR entitlement that would have been available in the 2012 tax return. This transitional ETR Payment will be paid in June 2012.
The ETR Payment lump-sum amount will be paid to all families entitled to Family Tax Benefit Part A on May 8th this year for a school aged child, as well as to young people in secondary education who are receiving certain student income support payments on May 8th and to eligible recipients under the Veterans' Children Education Scheme or the Military Rehabilitation and Compensation Act Education and Training Scheme.
The one-off ETR payment will be $409 for a child in primary school and $818 for a secondary school child - the same maximum amounts that would have been available in the 2011-12 tax return.
No adjustments or apportionments will apply to the transitional ETR Payment for children who started or finished school in the 2011-12 financial year.
So, for parents entitled to FTB Part A on 8 May 2012, if you have a child who started primary school in 2012 you will receive the full primary payment. Similarly, a child who is participating in a school based apprenticeship, will be entitled to the full Secondary payment.
The School kids Bonus will be available from 2013 to families receiving Family Tax Benefit Part A, plus young people in school receiving income support payments such as youth allowance, ABSTUDY, disability support pension and veterans' educational allowances, on the eligibility test date.
As part of the 2012 Federal Budget, the government announced that from 1 July 2012, eligibility for the mature age worker tax offset will be confined to taxpayers born before 1 July 1957.
This means taxpayers must have turned 55 prior to 1 July 2012 to receive this offset.
The $500 tax offset remains unchanged in all other respects.
Contact us at A Grade Tax Accountants Penrith on (02) 4731-1405 for all your taxation services, accounting, bookkeeping, tax returns, superannuation, retirement planning and tax advice for business and individual clients.
A Grade Tax as a leading firm of Penrith Accountants, are able to assist clients with their SMSF requirements.
DEFERRAL OF THE HIGHER CONCESSIONAL CONTRIBUTION CAPS
There were two announcements made in the budget that will impact superannuation members, the higher tax rate on contributions for high income earners and the deferral of the higher concessional contribution cap for individuals aged 50 and over. The deferral of the higher cap is by far of greatest significance as individuals nearing retirement have watched as the Government has stripped away the amount able to be contributed over the past few years.
Having originally cut the concessional cap in half in 2009/10, to take effect from 1 July 2012 for those aged 50 and over, the Government then announced they were increasing the concessional cap to $50,000, as long as an individual’s superannuation balance was less than $500,000. Having determined that this is now too difficult to implement by 1 July 2012, they have postponed the measure until 1 July 2014.
The end result is that an individual aged 50 or over is now limited to $25,000 from 1 July 2012 regardless of their account balance. This is compounded by the fact that the Government have frozen indexation of the concessional cap until 1 July 2014, a measure announced late in 2011.
To further discourage individuals aged 50 and over who earn income greater than $300,000 they will be taxed at an additional rate of 15% on their $25,000 contribution which means they will end up paying the same tax on $25,000 as they would have previously on $50,000. That leads us to the second announcement that we had all expected.