Last, but not least, in the tax tips series this year are five additional savings for businesses. If you need assistance please call to discuss 02 8090 4112
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Six Super Tips
Make the most of the tax concessions around super with these tips this June.
Call Lindsay to discuss on 02 8090 4112.
Six Year End Tax Tips for All
More Free Money from the Government
Believe it or not there is still the possibility to get some free money from the government. The superannuation co-contribution is hanging on in there for a little longer so make use of it if you can and grab up to $500 of free cash.
To access the co contribution you need to fulfil the eligibility criteria, the main three being as follows
- The work test… At least 10% of your income must be from employment or running a business. It is not available for stay at home mums unfortunately.
- The income test …. Your total income must be less than $50,454 to access some co-contribution and below $35,454 to get the full co-contribution.
- The age test …. You must be under age 71, and if over age 65 you must also satisfy the work test of 40 work hours in 30 days.
The maximum co-contribution is 50c for every dollar you contribute as an after tax personal contribution to a maximum of $500.
ACTION
It’s easy, transfer up to $1000 of money from your personal bank account to your superfund as a personal contribution before 30 June. The tax office calculates the co-contribution and puts it in your superfund when you lodge your 2016 tax return. There are no forms to fill in.
Budget Update 2016 – 7 Main Points
Morning, below is a summary of the changes to the budget relating to super. This being the area of most change. Remember these changes are not yet legislated and mostly will not come into force until 1 July 2017.
None of the changes suggest you should remove any money from super. It will continue to be more tax effective to have super as your savings structure rather than assets in your own name; just not as tax effective as it was.
1. Div 293 tax – the threshold for this tax, which is an extra 15% tax on contributions made, has been reduced from the current $300k to $250k. It reduces (but does not eliminate) the tax savings of making contributions for higher earners. The tax savings being the difference between the top tax rate and 30%.
2. Concessional contributions – the caps will be reduced to $25k pa (currently $30k and $35k depending on age) from 1/7/2017. From this date those with balances under $500k will have the opportunity to carry forward some unused caps for five years.
3. Work test – this is to be abolished from 1/7/2017, great news as it means we can utilise non-working spouses caps more easily.
4. Transition to Retirement Pensions – the lovely TRP strategy for those over 55 but not yet retired won’t work after 1 July 2017 as the earnings within the fund will be taxed at accumulation rates. So enjoy for the next year while it lasts and then we will look at rolling the balances back into accumulation phase. It will generally still be better tax wise than having investments in your own name, subject to your other income.
5. The Non concessional cap – (currently $180k p.a.) will be reduced to a lifetime limit of $500k. This limit starts today. Don’t panic if you have already contributed over $500k, you are not going to have to take it out or be taxed on it, it just means you can’t put in any further non-concessional amounts.
6. Pension Limits – the amount transferred into pension phase will be capped at $1.6m from 1 July 2017. So if you have a pension bigger than this already, we will need to roll some of it back into super by 1 July 2017 (the later the better).
7. Small Business Concessions – no changes to this, so it looks as though if you sell a business and retire we will still be able to contribute those funds to super in addition to the concessional and non-concessional caps above. (Subject to the CGT lifetime limits already in place)
That is pretty much all the important areas covered, so lets see what actually gets legislated and then we can adjust those long term plans.
Easter Eggs and Huge Tax Bills!
This post comes as we hopefully enjoy some time off and lots of chocolate over the Easter weekend. Hubby is away and I am not sure where he has hidden my Easter egg, but I am sure he has put it somewhere and not forgotten!
But for some, unfortunately this time of year is not all beer and skittles. It is also the time for what can appear to be a never ending stream of payments to our friends at the ATO.
So what is going on?
Well there are two things happening at this time of year that can catch you by surprise. The first is that the balance of any tax due for the 2015 year is normally due to be paid about now. The exact amount and due date will be on your notice of assessment (NoA) and we send calendar reminders with the NoA to help you remember to pay.
Secondly, the ATO may adjust your quarterly instalments for the 2015/16 year based on estimates derived from your recently lodged 2015 return. This is standard practice for the ATO, but the method used to calculate the instalment can catch you by surprise.
To explain further let’s use an example.
The ATO have estimated that Fred needs to pay a total of $100k in instalments for the 2015/16 year. They believe this will cover his 2016 tax liability, assuming Fred’s financial position is similar to the prior year.
Fred has already paid two instalments of $10k each and is waiting in anticipation for his Q3 March instalment notice to appear in his mygov inbox. Fred loves the way the new mygov system requires the use of email, sms codes and a web browser to access a single piece of paper. It can take him all day!
However, Fred’s enjoyment is quickly wiped out when he sees how much he owes. The ATO want $55k for the March instalment – how can this be!
Well the ATO want 3/4 of the annual amount due by the third instalment. So in this case they want $75k by quarter three. As Fred has only paid $10k x 2 to date, the top up required to bring the cumulative total to $75k is a huge $55k. Which unfortunately falls due at about the same time as his balance of 2015 tax.
Sobbing quietly, Fred resorts to eating vast amounts of chocolate!
Fred’s future instalments will drop down to 1/4 of the total due ie $25k, but that doesn’t make April any easier.
Nobody likes surprise bills, so to assist, we provide timelines which detail when and how much tax will need to be paid over the year. These can be used to manage cashflows, can be hung on the fridge as a constant reminder of your upcoming payments, or can be used for dart practice. Whichever is more useful to you and makes you feel good.
So hopefully having digested this you now have a better understanding of the system, and will be prepared, and may I suggest seated, when you open your Q3 instalment notice.
Have a great Easter
Lindsay
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Hi
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