BELL & BELL F.G.
CERTIFIED PRACTISING ACCOUNTANTS
ABN 30 725 213 728
MAY 2012 NEWSLETTER
Inside this month we look at Tax Return Lodgments due, Savings in high income
tiers, Tax Planning, Deferring income, Maximising deductions, CGT & FBT &
more, including
SPECIAL ARTICLE - Superannuation Check prior to 30
June 2012.
For assistance with any of the information contained in this newsletter, talk to
us today.
IMPORTANT!!!
Last days to lodge your 2011 Tax Returns without penalties.
CONTACT our office immediately if you have not provided your 2011
Tax Information.
1. Savings – Private Health Insurance In High Income
Tiers
Possible savings can be made if you are in the high income Tiers
A taxpayer who expects to exceed the surcharge income thresholds in the
2012-13 income year might consider pre-paying private health insurance
premiums in the current year. While there is nothing in the Tax Act to
prevent the pre-payment of private health insurance premiums before 30
June 2012, it is not entirely clear whether this strategy will preserve an
entitlement to a full tax offset. However, the Minister for Health, Tanya
Plibersek, has indicated that a taxpayer who may be ineligible for the offset
after 1 July 2012 but who prepays their 2012–13 insurance premiums
before 30 June 2012 would be entitled to the offset in the 2011-12 year. If
your family income is in excess of $260,000, on a policy costing $4,500,
prepaying your private health insurance would generate savings of $1,350.
This is a once-off saving opportunity!
Tier
1
Below is a table showing the income and rebate levels for the coming year:
Table: Private Health Insurance Incentive Tiers from 1 July 2012
Income ($)
Private health insurance rebate
Singles
Families
Under 65
65-69 years
70 years or
yrs old
old
over
Medicare
levy
surcharge
0 – 84,000
0 – 168,000
30%
35%
40%
Nil
84,001 –
97,000
168,001 –
194,000
20%
25%
30%
1%
2
97,001 –
130,000
194,001 –
260,000
10%
15%
20%
1.25%
3
130,001 +
260,001 +
0%
0%
0%
1.5%
2. Tax planning
Simply put, tax planning is the arrangement of a taxpayer’s affairs so as to
comply with the tax law at the lowest possible cost. This involves objectively
assessing and actively managing tax risk. Common tax planning techniques
include deferring the derivation of assessable income and applying
techniques to bring forward deductions.
3. Deferring Income
• Income received in advance of services to be provided will generally not be
assessable until the services are provided.
• Taxpayers who provide professional services may consider, in consultation
with their clients, rendering accounts after 30 June to defer the income.
• A taxpayer is required to calculate the balancing adjustment amount
resulting from the disposal of a depreciating asset. If the disposal of an asset
will result in assessable income, a taxpayer may want to consider
postponing the disposal to the following income year.
4. Maximising deductions
Business taxpayers
• Debtors should be reviewed prior to 30 June so that any bad debts can be
identified and written-off.
• A deduction may be available on the disposal of a depreciating asset if a
taxpayer stops using it and expects never to use it again. Therefore, asset
registers may need to be reviewed for any assets that fit this category.
• Review trading stock for obsolete stock for which a deduction is available.
Non-business taxpayers
• Outgoings incurred for managed investment schemes may be deductible.
• Assets costing $300 or less may qualify for an immediate deduction,
subject to certain conditions.
• A deduction for personal superannuation contributions is available where
the 10% rule is satisfied.
5. Capital Gains Tax
• A taxpayer may consider crystallising any unrealised capital gains and
losses in order to improve his or her overall tax position for an income year.
6. Small business entities
• From 2012–13, the small business instant asset write-off threshold will be
increased from $1,000 to $6,500.
• Consider whether the requirements to be classified as a small business
entity are satisfied to access various tax concessions, such as the simpler
depreciation rules and the simpler trading stock rules.
• Eligible small business entities can access a range of concessions for a
capital gain made on a CGT asset that has been used in a business,
provided certain conditions are met.
7. Companies
• Companies should ensure that all dividends paid to shareholders during
the relevant franking period (generally the income year) are franked to the
same extent to avoid breaching the benchmark rule.
• Loans, payments and debt forgiveness by private companies to their
shareholders and associates should be repaid by the earlier of the due date
for lodgment of the company’s return for the year or the actual lodgment
date. Alternatively, appropriate loan agreements should be in place.
• Companies may want to consider consolidating for tax purposes prior to
year end to reduce compliance costs and take advantage of tax opportunities
available as a result of the consolidated group being treated as a single
entity for tax purposes.
• Companies should carefully consider whether any deductions are available
for any carry forward tax losses, including analysing the continuity of
ownership and same business tests.
8. Trusts
• Trustees must decide to either make a note or Trustee Minute as to the
distribution of income & capital BEFORE 30 June 2012. VERY IMPORTANT
• Taxpayers should review trust deeds to determine how trust income is
defined. This may have an impact on the trustee’s tax planning. VERY
IMPORTANT
• Avoid retaining income in a trust because the income may be taxed at
46.5%.
• If a trust has an unpaid present entitlement to a corporate beneficiary,
consideration should be given to paying out the entitlement by the earlier of
the due date for the lodgment of the trust’s income tax return for the year or
the actual lodgment date to avoid possible tax implications.
• Trustees should consider whether a family trust election (FTE) is required
to ensure any losses or bad debts incurred by the company will be
deductible and to ensure that franking credits will be available to
beneficiaries.
9. Personal services income
• Individuals operating personal services businesses should ensure that they
satisfy the relevant test to be excluded from the Personal Services Income
regime or seek a determination from the Commissioner.
10. FBT – car fringe benefits
• The four rates used in the statutory formula method for determining the
taxable value of car fringe benefits are being replaced with a single statutory
rate of 20% for fringe benefits provided after 10 May 2011. Taxpayers should
review contracts for changes to a “pre-existing commitment”.
11. Superannuation
• The ATO has reminded taxpayers to consider the superannuation
contributions caps when planning tax affairs to avoid excess contributions
tax.
• The Government has proposed that eligible individuals who breach the
concessional contributions cap by up to $10,000 will be allowed a once-only
option for the excess contributions to be refunded without penalty.
• The Government has proposed to temporarily “pause” the indexation of the
superannuation concessional contributions cap so that it will remain fixed at
$25,000 up to and including the 2013–14 financial year.
• For eligible individuals, a government low-income superannuation
contribution of up to $500 may be available from 1 July 2012.
• A member of an accumulation fund (or a member whose benefits include
an accumulation interest in a defined benefit fund) may be able to split
superannuation contributions with his or her spouse.
12. Individuals
• Individual taxpayers with a taxable income exceeding $50,000 in 2011–12
will have to pay an additional levy known as the temporary flood and cyclone
reconstruction levy, unless they fall within an exempt class of individuals.
• The Government is phasing out the dependent spouse tax offset. For 2011–
12, the offset will only be available to those born on or before 1 July 1971.
• The Government has proposed that from 1 July 2012, living-away-fromhome allowances will be taxed to the recipient as assessable income rather
than to the employer under the FBT rules.
• The Government has introduced legislation to extend the Paid Parental
Leave scheme by introducing a two-week “dad and partner pay”.
13. Superannuation check prior to 30 June 2012
SUPERANNUATION - To Think About (Quickly!) Before June 30th
2012
We are now less than eight weeks from a significant deadline, June 30th, that
all our clients who have self managed superannuation should know about.
There are changes to the superannuation scheme that kick-in on that date,
so now is the time to ensure you understand the consequences.
Concessional Contributions
From July 1st 2012 there will be significant changes in your ability to claim
the tax benefit for concessional contributions to self managed
superannuation. At present you can transfer up to $50,000 into your self
managed superannuation at a 15% tax rate. From July 1st this concessional
tax rate will only be available for transfers up to $25,000. Talk to us about
how this change will affect you, and whether you should make a greater
contribution now (before June 30th) to take advantage of the concession. For
instance, if you were intending to contribute $35,000 in the 2011-12
Financial Year, and the same again next Financial Year, it might be wise to
consider an extra $15,000 contribution before June 30th, and a reduced
contribution of $10,000 in the next Financial Year. This will allow the same
total contribution over two years, but will also maximise your tax benefit.
In Specie Transfers
Not all transfers to self managed superannuation are by way of cash.
Another way is by direct transfer of assets – this is called an “in specie
transfer”. There are restrictions on the type of assets that can be transferred,
but where possible (e.g. ASX listed shares and commercial property), it can
produce a significant tax saving. From July 1st there are changes that impact
on the ability to transfer listed shares. As at that date, you will have to
conduct the transfer through an existing market e.g. the Stock Exchange. In
this way an independent body can provide a market valuation for the share
on the day it is transferred. That means that you will incur a transaction
costs, both for the sale of the shares and their repurchase by the self
managed superannuation fund. There is also the possibility that this
transaction will incur a capital gains event, all the more reason to consider a
transfer prior to June 30th. We will be happy to discuss this with you.
Spouse Contributions
Partners can earn tax rebates on contributions for low income earning
spouses. The maximum rebate for a $3000 contribution is $540.
The spouse can earn up to $10800 for the full rebate to apply. The rebate
ceases when spouse income reaches $13800 .Note that addbacks such as
salary sacrifice or fringe benefits are added to spouses’ taxable income.
Co-Contributions
If you earn less than $61,920 per year (before tax), and make after-tax super
contributions, you are eligible to receive contributions from the government
called the “co-contribution”. If you earn $31,920 or less, that contribution
will be up to $1,000, and then reduced by 3.3 cents for every dollar up to the
limit of $61,290. The contribution is “matched”, so if you contribute $1,000,
the government will put in another $1,000 as well. But from July 1st the
maximum co-contribution is halved to $500, and is reduced to zero after
$46,920 (it falls by 3.3 cents for every dollar between $31,920 and $46,920).
There is, however, some good news for low income earners. From July 1st the
15% tax you previously paid on your Superannuation Guarantee
contributions will be refunded back to your self managed superannuation
fund if you earn less than $37,000. This money is paid directly to your
superannuation account by the Federal Government, and is called the Low
Income Super Contribution. That means there is no longer a penalty to be
paid by workers who pay less than 15% tax for contributions to their funds.
Time to review your super plan
Now is the right tome to think about your pension plan if you have hit one of
these landmark ages. 55 - (you can now think about a transition to
retirement pension);
60 - (if you’re aged 60 and retired, you can receive your superannuation
benefits tax-free — as a lump sum or as an income stream);
65 – (retirement age, super benefits are tax free).
Financial Saying of the Month
I finally know what separates man from other beasts: Financial
Worries!
The material and contents provided in this publication are informative in
nature only. It is not intended to be advice and you should not act specifically
on the basis of this information alone. If expert assistance is required,
professional advice should be obtained.
Bell & Bell F.G.
BELL & BELL F.G. CERTIFIED PRACTISING ACCOUNTANTS ABN 30 725 213 728
CPA Business
Level 1, 92 Union Street ARMADALE Vic 3143
PO Box 623 MALVERN Vic 3144 e-mail: info@bellbell.com.au
Tel: (03) 9509 6633 Fax: (03) 9509 6644 website: www.bellbell.com.au
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