A Grade Tax News Personal Newsletter
Boost your super at tax time
Here are some tips to help you boost your super and benefit from superannuation's favourable tax treatment:
- You can claim up to $500 in government co-contributions if you’re a low to middle income earner and you make after-tax contributions of up to $1,000 to your super.
- You can receive a tax offset of up to $540 if your spouse is a low income earner and you contribute up to $3,000 in after-tax contributions towards their super.
- You can contribute up to $30,000 in before-tax contributions to your super at the ‘concessional’ tax rate of 15% — or $35,000 if you’re aged 50 or over.
- You can contribute up to $180,000 a year (or $540,000 over three years) in after tax-contributions. Since this is from your after-tax income the full contribution reaches your super account, and no tax is deducted when the contribution reaches your super fund.
- You can start a transition to retirement strategy once you’ve reached your super preservation age (the age at which you can access your super, which will be between 55 years to 60 years of age depending on your date of birth)—this can allow you to draw up to 10% of your super as a pension.
If you need any clarification on the taxation implications in respect of superannuation, contact us at A Grade Tax Penrith on 4731 1405.
SMSF Limited Recourse Borrowings & Pension Phase
Can a SMSF engage in limited recourse borrowing while in pension phase?
While there may be good reasons for an SMSF which is in pension phase not to engage in limited recourse borrowing – for instance, if the borrowing arrangement will be cash flow negative – the issue is whether the SIS Act or Regulations prevent a SMSF in pension phase from engaging in a limited recourse borrowing.
It has been suggested that SIS Regulation 1.06(9A)(d) which states that “the capital value of the pension and the income from it cannot be used as a security for a borrowing” prevents a SMSF in pension phase from engaging in limited recourse borrowing.
Our view is that SIS Reg 1.06(9A)(d) is directed to the mischief of a member attempting to charge their pension rights rather than being directed to the trustee (or holding trustee) imposing a charge on the assets of the fund as permitted by s67A. The expression “capital value of the pension” means, for account pensions, the pension account balance rather than the assets underlying the pension.
Consequently, it seems that this prohibition does not preclude a SMSF from entering into or maintaining a limited recourse borrowing arrangement if one or more members are in pension phase or if one or more members convert to pension phase while the borrowing arrangement is on foot.
Should you require clarification on this or any other tax related matter, don't hesitate to contact A Grade Tax Accountants Penrith.
The Schoolkids Bonus is a payment from the Federal Government to a parent or carer receiving Family Tax Benefit Part A for a dependent child in primary or secondary education. It provides $422 a year for each child in primary school and $842 for each child in secondary school. This year, from 1 January 2015, payments will be subject to an income test and will only be payable to families with an adjusted taxable income of $100,000 or less. You can find out more about eligibility at the Department of Human Services website.
Assistance for Isolated Children
If you have a child at primary or secondary school-age who can’t go to a state school because of geographical isolation, disability or health reasons, the Assistance for Isolated Children scheme may provide tax-free payments exempt from income and assets tests. Find out more at the Department of Human Services website.
Please ring for an appointment to complete your Income Tax Returns with either Donna, Tynna or Max.
It is important that anyone considering an investment proposal seeks our advice with regard to the taxation consequences and options available to minimise taxation. For example there can be very significant tax advantages available by purchasing an investment property within 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 with us before committing to any new venture.
- Company and Personal Tax Returns.
- Formation and administration of Self Managed Super Funds.
- Investment property tax advice.
- Our mobile mortgage broker offers a wide range of finance options for home and investment loans plus vehicle financing.
Please review our attached Personal Checklist and tax tips to assist with the preparation of your income tax returns, prior to your appointment with A Grade Tax Accountants Penrith.
The Australian Taxation Office (ATO) has announced changes to the number and types of tax deductions available to investment property owners, including a clarification of which items in a rental property can be claimed as depreciating assets.
The changes are contained in a Taxation Ruling, which offers an updated list of more than 150 individual rental property assets that can be classified as ‘depreciable’, provides the depreciation rates of these assets, and specifies how non-listed items should be treated.
In particular, the ruling takes a stricter approach to which items can be classified as depreciable and which must be treated as part of the building. This means a key area of the draft ruling is determining which assets in a residential rental property fall within Division 40 (for depreciating assets) and which are subject to Division 43 (for capital works) of the Income Tax Assessment Act 1997.
In the draft ruling the number of assets that can be claimed as a tax deduction (based on assets normally found in residential properties) has increased, and in some instances there have also been changes made to the period of time over which deductions can be claimed for those assets.
Depreciation of an asset allows a tax deduction for the cost over the asset’s life.
However, while the changes may benefit some investors, others may find that assets they have claimed for in the past are no longer eligible under the new depreciation rates, or else should not have been claimed for in the first place.
The ATO has also introduced a recommended useful life for dishwashers (10 years) and freestanding outdoor furniture (5 years), while other items have had their recommended effective lives changed, including hot water systems (reduced from 20 years to 12 to 15 years) and washing machines (increased from 6 2/3 years to 10 years). The changes to useful lives apply to assets acquired on or after July 1, 2004.
Looking to Buy Property?
The ATO says it is increasing its focus on rental property deductions. It says common errors made by rental property owners include:
Claiming rental deductions for properties not genuinely available for rent;
Incorrectly claiming deductions for properties only available for rent part of the year such as a holiday home;
Incorrectly claiming structural improvement costs as repairs when they are capital works deductions, such as re-modelling a bathroom or building a pergola;
Overstating deduction claims for the interest on loans taken out to purchase, renovate or maintain a rental property.
The ATO has also released a series of short videos which explain the tax implications of buying, owning and selling a rental property.
This is good news for property buyers and homeowners, who are taking advantage of low interest rates to get ahead. There has been a lot of activity in property markets across the country, with high auction clearance rates a feature during the busy autumn selling season and investors leading the way amongst buyers.
One of the major factors influencing the RBA to keep the cash rate unchanged at its historically low level is the high Australian dollar, which is impacting our export markets and general economic recovery. Analysts agree that we can expect interest rates to remain low as long as this situation continues.
In light of the low interest rate environment, there is a lot of competition in the loan market. Lenders are offering some great deals to those looking to purchase their first home, invest or refinance. To find out more about how the low interest rates could help you get ahead, give us a call at A Grade Tax Penrith to arrange an obligation free appointment in the comfort of your own home with our mobile finance broker.
The concessional super contributions cap has increased to $35,000 for:
the 2013-14 financial year - for individuals turning 60 years or older
the 2014-15 financial year - for individuals turning 50 years or older.
The general concessional cap for everyone else remains at $25,000 in 2013-14.
The higher cap of $35,000 replaces the previously announced cap that was to apply from 1 July 2014 for individuals aged 50 years and over with superannuation balances below $500,000.
Excess concessional contributions made on or after 1 July 2013 will be included in an individual’s assessable income and taxed at their marginal tax rate (plus an interest charge) rather than at the top marginal tax rate.
To assist individuals in paying the additional tax bill and charge, they can release up to 85% of their excess concessional contributions from their super fund. Members will also receive a non-refundable tax offset of 15% of their excess concessional contributions. When an amount is released from the fund, it will no longer be counted as non-concessional contributions.
The existing refund of excess concessional contributions measure now only applies to excess contributions made in the 2011-12 and 2012-13 financial years.
The high Australian dollar is one of the major contributing factors influencing the RBA's decision to keep the official cash rate on hold. The economy is showing a slow response to the RBA's fiscal policies and the dollar looks set to impact our tourism, export and commodities markets for some time.
Meanwhile, excellent auction clearance rates throughout the spring period indicate that the Australian property markets are starting to heat up in time for summer. We can expect further improvement in 2014 as interest rates will continue to remain low, at least until the RBA reviews the cash rate again during its next meeting on the first Tuesday in February.
Have you reviewed your home loan this year? If you would like a no obligation review of your home loan, A Grade Tax Penrith can organise an appointment in the comfort of your home with our mobile home loan broker.
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