The Budget has made changes that reflect that the current superannuation system is at a kilter with individuals current lifestyles, with the introduction of more flexibility to address this.
Individuals under the age of 75 will now be able to claim tax deductions for personal superannuation contributions. From 1 July 2017, individuals can make concessional super contributions up to the concessional cap. This will benefit partially self-employed individuals and partially wage and salary earners whose employers do not offer salary sacrificing.
The Budget will improve the superannuation balances of low-income spouses as the current spouse tax offset is extended to assist more families in accumulating superannuation. The current income threshold for the receiving spouse (whether married or de facto) will be lifted from $10,800 to $37,000.
A contributing spouse will be eligible for an 18 per cent offset worth up to $540 for contributions made to an eligible spouse’s superannuation account.
Catch-up concessional superannuation contributions will be introduced to allow those with lower contributions and interrupted work patterns to make ‘catch-up’ payments to boost their nest egg. This will apply to those with account balances of $500,000 or less whereby allowing unused concessional contribution caps to be carried forward on a rolling basis for up to five years.
Contribution rules removed for older Australians
Australians aged 65 to 74 will be able to access the bring-forward of non-concessional contributions, minimum work requirements for voluntary superannuation contributions and restrictions on spouse contribution from 1 July 2017. The incentive is to assist older Australians to make superannuation contributions appropriate to their circumstances.
Retirement income products
Barriers are being removed to endorse innovation in the creation of retirement income products. These income products can enhance the flexibility and choice for retirees to better manage risk and improve their standard of living in retirement.
From 1 July 2017, the tax exemption on earnings in the retirement phase will be extended to products such as deferred lifetime annuities and group self-annuitisation products.
This year’s Federal Budget is based on a ten-year enterprise tax plan designed to stimulate more small business activity by boosting new investment, creating jobs and increasing real wages.
One of the key features of this plan is that the small business entity annual turnover threshold will be increased from $2 million to $10 million from 1 July 2016. The increased threshold will not apply for the purpose of accessing existing small business capital gains tax concessions.
The Government will also reduce the corporate tax rate for businesses with a turnover of less than $10 million per year to 27.5 per cent from 1 July 2016. This lower rate will be progressively reduced to 25 per cent over 10 years.
An 8 per cent unincorporated tax discount will be provided to unincorporated businesses with turnover less than $5 million per annum, capped at $1,000 per year from 1 July 2016 for the following eight years. The discount will increase to 16 per cent in increments from 2024 to 2026 to coincide with the staggered reductions in the corporate rate.
All Australian small businesses from 1 July 2016 with an annual turnover of less than $10 million will have access to:
Simplified depreciation rules
These include immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017.
Simplified trading stock rules
New rules will give businesses the option to avoid end of year stocktake if the value of their stock has changed by less than $5,000.
A simplified method of paying PAYG instalments
Instalments will be calculated by the ATO, removing the risk of under or overestimating PAYG and the resulting penalties that may be applied.
The option to account for GST
Small businesses will have the option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.
Other tax concessions
Other tax concessions that are currently available to small businesses, such as fringe benefits tax (FBT) exemptions (from 1 April 2017 to align with the FBT year).
A trial of simpler BAS
The trial is to reduce GST compliance costs, with a full roll-out from 1 July 2017.
These threshold changes will not affect eligibility for the small business capital gains tax concessions, which will remain available for businesses with annual turnover of less than $2 million or that satisfy the maximum net asset value test.
The Budget’s plan to enhance wage subsidies is set to benefit both job seekers and businesses in Australia.
As part of Budget reforms, existing wage subsidies (including those for youth, parents, Indigenous, mature age, and the long-term unemployed) will be streamlined to make them more accessible for employers.
Wage subsidy arrangements will be simplified to be much more flexible and provide job seekers with incentives to break into the Australian workforce.
Employers will have wage subsidies available to them from the first day of a job seeker’s employment. Employers will also have the flexibility to choose how often instalments are paid (fortnightly, monthly or another arrangement) and over what time period.
Rather than being paid out over 12 months, wage subsidies will now be paid out over six months at a flat rate instead of pro-rated instalments.
The Budget has introduced a series of changes to superannuation tax arrangements that are intended to align superannuation with the purpose of providing income in retirement.
The key elements of the superannuation changes include:
Introducing a transfer balance cap
There will be a $1.6 million superannuation transfer balance cap on the total amount of super that individuals can transfer into retirement phase accounts. While this limits taxpayer support for tax-free retirement phase accounts, it does not restrict the savings that can accumulate outside of superannuation.
Increasing the 15 per cent tax rate on concessional contributions
Those with combined incomes and super contributions greater than $250,000 will now be required to pay 30 per cent tax on their concessional contributions. This extends the current treatment of people with combined incomes and superannuation contributions over $300,000. Superannuation fund members who are affected will still have significant incentives to save for their retirement alongside other provisions.
Lowering the superannuation concessional contributions cap
The superannuation concessional contributions cap will be lowered to $25,000 per annum to provide more flexibility and accommodate modern working arrangements. Reducing the caps will only affect around three per cent of superannuation fund members, who will still be able to make enough contributions during their working life to be self-sufficient in retirement.
Introducing a $500,000 lifetime cap for non-concessional contributions
The lifetime cap will limit the extent individuals can use superannuation for tax minimisation and estate planning. Less than one per cent of Australian superannuation fund members have made contributions above this cap since 2007.
Introducing the Low Income Superannuation Tax Offset
The Low Income Superannuation Tax Offset (LISTO) will replace the Low Income Superannuation Contribution when it expires on 30 June 2017 to continue to support the accumulation of superannuation for low-income earners. The LISTO will allow individuals with an adjusted taxable income of $37,000 or less to receive a refund of the tax paid on their concessional contributions, up to a cap of $500. The LISTO will, in particular, assist women to build their superannuation savings.
The Government is now giving individuals a greater incentive to work without being taxed more by making a start to personal income tax relief.
The changes will take place from 1 July 2016 and will prevent average full-time wage earners from moving into the second top tax bracket until 2019-2020, by increasing the 32.5 per cent tax threshold from taxable incomes of $80,000 to $87,000. This will affect around 500,000 taxpayers who will no longer face the 37 per cent marginal tax rate.
The policy objective is designed to keep those earning average wages in the middle tax bracket for longer. This measure will reward hard working Australians for doing more overtime, picking up more shifts, taking a promotion or a better new job, without being penalised by paying more tax through the higher rate.
In addition, the Government will increase the low-income thresholds for the Medicare levy and surcharge from the 2015/16 income year, so that low-income taxpayers can continue to be exempted from paying the Medicare levy.
With so many charities competing for donations, it can pay to spend time researching to make sure your money is used for the cause you want to support. Just as important to making sure that the charity you donate to actually receives your donation. Here are some aspects to consider before you make a donation:
Choose a charity wisely
Regardless of what motivates you to support one charity over another, you should feel comfortable with your chosen charity’s activities and how it plans to use its donations. Donating directly to an overseas-based charity can be risky since it can be difficult verifying the information found on the charity’s websites or social media profiles.
How you will donate
There are a number of ways people can donate to charity. Some people feel comfortable making a regular set donation, whereas others prefer one-off donations. Individuals can also support a charity through automatic deductions from their salary. For example, if an employer has a workplace giving scheme, an employee’s donation can be deducted from their pay and sent directly to their preferred charity.
Those who opt to do this earn tax benefits at the time of donation and get a summary of payment at the end of the year. However, individuals should ensure that they can only participate in a workplace giving program if the charity has deductible gift recipient (DGR) status.
Another method of donating is to leave a bequest in your will. To do this, individuals need to contact the charity directly to discuss their plans.
Check if it is a legitimate charity
If the name of a charity seems unfamiliar, individuals should ask for more information about it, like where it is based, what its donations used for and if donations are tax deductible. Even if you have heard of the charity before, it can pay off to check that the person who contacted you is authorised to represent the charity.
Also, be wary of giving out your credit card details, as there are other ways of donating if it is a reputable charity contacting you.
Check if your donation is tax-deductible
A donation will only be tax deductible if it is donated to a charity that has been endorsed by the ATO as a deductible gift recipient (DGR) organisation.
Tax deductions are only given for donations that are $2 or more and claimed in the person’s tax return for the income year in which the donation was made.
Small businesses operating in an ever-changing environment increasingly need to ensure they get flexible working schemes right. Finding the right balance can be mutually beneficial for both your business and employees.
Business owners are responsible for effectively implementing and managing flexible working arrangements that ensure all employees are satisfied. Here are some things to consider when approaching flexible working schemes:
Flexible working arrangements not only make commercial sense but employers are legally obliged to consider the arrangement where an employee applies. Therefore, consideration needs to be given to all employee requests and when assessing applications you must make sure that they are not unfairly disadvantaged by their personal circumstances.
It is important to remain up-to-date with the latest legal documents, contracts and processes to ensure your business complies within its legal requirements.
Adopt a specific policy
Introducing a specific policy so decisions are clear and consistent for all employees is vital to the success of flexible working schemes. Inform employees of your expectations when commencing an arrangement, such as using an ‘out-of-office’ message when away, sharing employee work schedules and online calendars etc.
Reviewing flexible arrangements on a regular basis is a great opportunity to provide feedback to your employees and make any necessary changes. Conducting performance reviews for staff on flexible arrangements should be the same as for anyone else. Business owners may also want to consider gaining feedback from colleagues as these arrangements need to work for the whole team to succeed.
Insurance arrangements in super can create a few surprise outcomes for members who leave big superannuation funds to start their own self-managed super fund yet leave a portion in their old fund.
Members need to be wary of the traps that can cause a loss of cover. As insurance is a complex financial product; members need to understand the benefits, risks and the costs entailed when entering into insurance cover in large superannuation funds.
Even though it may seem advantageous to access low cost insurance with a large super fund there are some circumstances that may cease insurance cover including:
Minimum balance requirements are not met
Most large super funds will require members maintain a minimum balance in their account to retain cover which can range from as low as $1,000 and up to $10,000.
Although most funds allow insurance cover to be kept providing premiums can be automatically deducted, some funds may cease cover once the account balance falls below the threshold and when no employer contributions have been made for six months.
No employer contributions
Some superannuation funds that offer automatic income protection insurance will terminate a member’s insurance cover if employer contributions cease for six months. Other funds may cease income protection insurance cover after 13 months from the date of the last employer contribution regardless of the account balance.
No longer working for a particular employer/industry
If you change employers or no longer work in a particular industry you may risk losing your insurance cover. Funds may require that a particular employer makes contributions to the account to retain total and permanent disability (TPD) and income protection cover.
No longer working in the public sector
Members who cease to work in the public sector may risk losing their cover from the day they officially cease employment with the relevant public sector. These public sector funds generally do not accept further contributions or rollovers if the member is no longer working for the relevant public sector employer.
Terminal illness payouts
Some super funds may pay out insurance at the TPD level upon terminal illness, which reduces any remaining life cover paid on death. This may result in a deprivation of funds to account for medical or palliative care before death. This style of cover is in stark contrast to other funds that pay out 100 per cent of life cover upon terminal illness.
The ATO has identified certain businesses it plans to target for potential tax audits. These businesses include the supermarket, bakery, computer system design and car retailing industries that often need more help to meet their tax and super obligations.
In response to this, the ATO has begun an education campaign for business owners in these industries to assist them better understand their responsibilities such as superannuation, pay as you go (PAYG) withholding and FBT.
From July 2016, the ATO will be undertaking audits of employers who continually fail to meet their obligations, particularly those who do not correctly meet their superannuation obligations.
The tax office will be examining:
– how much employers are required to pay
– if employers are meeting their quarterly deadlines
– if employers pay super for contractors
– if employers are keeping accurate records
– if employers pass on an employee’s TFN to their super fund within 14 days of receiving it
Posted on April 22nd, 2016 No comments
The ATO has issued a statement expressing its concern over recent misrepresentations of transition to retirement income streams (TRIS) and how they are meant to operate.
In its statement, the ATO said that under special circumstances a member can select under regulation 995-1.03 of the Income Tax Assessment Regulations (ITAR) 1997 to treat a TRIS payment as a super lump sum and access the low rate cap.
Members who choose to make this election for income tax purposes must recognise that the nature of the payment from the SMSF does not change for the purposes of the super regulatory law.
The tax office has warned that the complexity surrounding these transactions give rise to a number of issues that trustees need to consider to ensure their SMSF’s compliance with superannuation regulatory and income tax laws.
In particular, the ATO reminds trustees that:
it is the nature of a TRIS payment for superannuation regulatory law purposes that is relevant to a trustee’s compliance with the 10 per cent TRIS payment annual limit
if the TRIS payment is not a lump sum for super regulatory law purposes, it cannot be paid by an in-specie asset transfer
electing for a TRIS payment to be treated as a super lump sum for income tax purposes may affect the amount of the SMSF’s exempt current pension income for an income year and whether particular fund assets are segregated current pension assets
electing for a TRIS payment to be treated as a superannuation lump sum for income tax purposes will affect which super-related tax offset/s may apply to the payment