A Grade Tax News Personal Newsletter

Superannuation and the 2012/13 Budget

Superannuation Penrith

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.

Deductibility of Property Investment Loan Interest

Rental Property Advice, A Grade Tax Penrith

The Australian Taxation Office has flagged it will crack down on property investors claiming deductions for interest expenses on certain types of loan arrangements.

Property owners using some or all of the rental income from an investment property to pay off their own home loan while adding the interest from the investment loan to the principal of the investment loan and claiming it as a deduction would come under the scrutiny of the Australian Tax Office.


In a determination last month, the ATO said it would reject such arrangements.

The capitalisation of interest on an investment loan while the loan repayments are used to pay down the principal of a private loan is now under the spotlight.

The ATO's determination will apply retrospectively and could affect a landlord's past income and deductions, potentially costing them thousands of dollars.

A conservative approach should be adopted and property investors would be well advised to avoid claiming deductions for any compounding interest on their investment loan.

For further information contact A Grade Tax Accountants Penrith (02) 4731-1405.

Medicare Levy and Medicare Levy Surcharge Changes

A Grade Tax Penrith NSW

As a result of the 2009-10 Federal Budget, the government will be introducing an income test for the Private Health Insurance Rebate to apply from 1 July 2012.The rebate, which can be received as a reduction in policy premiums or as a rebate on your tax return, is currently 30%. From 1 July 2012 that rebate and AND the Medicare Levy Surcharge will be income tested against three income tier thresholds.

The ATO says the  "Higher income earners will receive less private health insurance rebate or, if they do not have the appropriate level of private patient hospital cover, the Medicare levy surcharge may increase."

The table below illustrates the income thresholds and rates to apply:


Unchanged

Tier 1

Tier 2

Tier 3

 Singles

$84,000 or less

$84,001-$97,000

$97,001-$130,000

$130,001 or more

 Families

$168,000 or less

$168,001-$194,000

$194,001-$260,000

$260,001 or more

Rebate

Aged under 65

30%

20%

10%

0%

Aged 65-69

35%

25%

15%

0%

Aged 70 or over

40%

30%

20%

0%

Medicare levy surcharge

Senior Citizens and Stamp Duty Concessions

Retirement Planning, Penrith Accountant

If you are a Senior who owns property in New South Wales or is thinking of purchasing a property in New South Wales you need to be aware of the new legislation passed through Parliament exempting you from the payment of stamp duty in certain circumstances.
 
This important piece of legislation is called the Duties Amendment (Senior’s Principal Place of Residence Duty Exemption) and will be in effect from 1st July, 2011 to the 1st July, 2012. This legislation contains good news for Senior Citizens who are looking to relocate to smaller accommodation.
 
What is the Senior’s Principal Place of Residence Duty Exemption?
 
The Senior’s Principal Place of Residence Duty Exemption is an exemption from stamp duty for Senior’s between the age of 55 and 65 years purchasing a new house which has never been occupied before or purchasing an off the plan home.
 
How long is the stamp duty exemption available?
 
The Senior’s stamp duty exemption is only available for contracts entered into after 1st July, 2011 and before 1st July, 2012.
 
How do I qualify for the stamp duty exemption?
 
To be eligible to receive the Senior’s stamp duty exemption you must satisfy the following criteria:
 
1. Be between the ages of 55 and 65 years.
 2. Enter into a contract for the purchase of a new house which has never been occupied before or an off the plan home between the 1st July, 2011 and the 1st July, 2012.
 3. Move into the house within twelve months of the settlement of the purchase and occupy the house as your principle place of residence for a continuous period of twelve months.
 4. Owned and occupied a home in New South Wales in the previous twelve month period and sell this property within six months of entering into the contract for their new home.

Accessing Your Super Early

A Grade Tax Penrith - Superannuation

There are special circumstances where super savings can be legally accessed early. These include:

    Severe financial hardship,
    Certain compassionate grounds,
A terminal medical condition,
    Permanent or temporary incapacity.

If a taxpayer legitimately needs some of their preserved super early, they should start by contacting their super fund for more information.

Severe penalties apply if taxpayers illegally access their super early. They will have to pay tax on the money they access early and other penalties may also apply depending on their involvement in the scheme. Recently, two promoters were both sentenced to two years imprisonment for a scheme that involved accessing super benefits early.


For more information, refer to Accessing Your Super Before Retirement at:

http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00250233.htm&page=27&H27

Contact A Grade Tax Penrith on (02) 4731-1405 offering a full range of taxation, accounting, superannuation, tax returns, tax planning and advice to Personal and Business clients.

Self Managed Superannuation Fund - Parent and Children Members

Family Members in Superfund

The investment risk profile for parents is not the same as that of their children.

Accordingly, the potential for problems when including your children in your Self Managed Superannuation Fund is significant and could be an unwanted trigger to unrest amongst the family.

Possible problems include:

  • Trustee decisions have to be unanimous and therefore parents have to seek approval from the children members with regard to the investment strategy and distribution of their retirement savings.
  • Children members may feel disadvantaged from a conservative investment strategy preferred by their parent members.
  • Possible complications from divorce are more likely with both parent and children members and their respective spouses having a claim on the investments of the SMSF.

The different risk and investment strategies, the lack of investment and life experience and the influence by outside parties, suggest that parents should maintain conrol of their retirement savings away from the influence and involvement of their children.

Children may also have the inherent motivation to keep the parents retirement savings in the fund for as long as possible to maximise their own inheritance.

Contact A Grade Tax Accountants Penrith on (02) 4731-1405 for tax accounting, bookkeeping, superannuation, tax returns, tax planning and advice for Personal and Business clients.

Reductions to the Superannuation Co-Contribution Scheme

A Grade Tax Penrith,  Co-Contribution Scheme

In the 2011-12 Federal Budget, the government announced that the freeze of the indexation applied on the superannuation co-contribution income thresholds will apply for an additional year.

As part of Mid-year economic and fiscal outlook (MYEFO) 2011-12, the government announced further reductions to the co-contributions scheme, for personal contributions made from 1 July 2012.

From 1st July 2012 the current $1,000 Government Co-Contribution will be reduced to $500.This co-contribution will phase out progressively if your income is above $31,920 and will cease altogether once your income reaches $46,920 previously $61,920.


 These proposed changes are not law as they have not yet been passed by parliament or received royal assent.

Contact A Grade Tax Accountants Penrith (02) 4731-1405 for tax accounting, superannuation and retirement planning for Individual and Business clients.
 

Superannuation Guarantee Contribution increasing to 12%

Superannuation Penrith

More Money in Retirement - an Historic Boost to Superannuation

In the biggest change to superannuation in 20 years, around 8.4 million Australians will have their superannuation savings boosted as a result of the superannuation guarantee rate legislation introduced into the Parliament today.

The Superannuation Guarantee (Administration) Amendment Bill 2011 increases the superannuation guarantee (SG) rate from nine per cent to 12 per cent.

The Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said "This is an historic reform. Today, the Gillard Labor Government has taken another important step towards increasing the adequacy and fairness of retirement incomes for Australian workers."

"Australians should not have to work hard and retire poor. Nine per cent super is simply not enough."

An employee aged 30 earning around $70,000 today will retire with an extra $108,000 in superannuation under these reforms.

The increase in the SG will boost the superannuation savings of Australian workers by around $500 billion by 2035. A proportion of these savings will be channelled back into the Australian economy to fund jobs and nation-building infrastructure.

The revenue from the MRRT will go towards funding the increase in the SG which will comes at a cost to Government revenue of an estimated $740 million over the forward estimates.

Contact A Grade Tax Penrith for superannuation tax advice.

Reserve Bank Interest Rate Decision

A Grade Tax Penrith, Planning Advice

At its meeting yesterday, the Reserve Bank Board decided to leave the cash rate unchanged at 4.75%.

The situation in global financial markets continues to be unsettled, with uncertainty increasing about the prospects for a solution to the sovereign debt and financial problems in Europe and the outlook for global economic growth.
  

The RBA release stated that it will take more time for evidence of the effects of the recent European and US financial turbulence on economic activity in other regions to emerge.

Indications are that most economic activity is continuing to expand in China and most of Asia, however forecasters have reduced their estimates for global GDP growth.  

Extract from the RBA: media release 04/10/2011.

Contact A Grade Tax Penrith on (02) 4731-1405 for all your tax accounting, bookkeeping, tax returns, superannation, tax planning and advice for Personal and Business clients.

First Home Owners Stamp Duty Concession

Penrith Accountants - Tax Advice & Planning


 
The NSW State Government announced on 6th September 2011 that as of 1st January 2012 stamp duty concessions will only be available to first home buyers purchasing a brand new home or vacant land intended to be used as a site for a first home. So purchasers of established properties will no longer receive a stamp duty concession as of 1st January 2012.

For further information contact A Grade Tax Accountants in Penrith on (02) 4731-1405 for tax advice, planning, accounting, bookkeeping, tax return, superannuation, SMSF advice for Personal and Business clients. 

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