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ATO advice for SMSF members with a market-linked pension

Posted on June 28, 2018 by admin


The Australian Tax Office (ATO) has recently been made aware of circumstances where a member of a SMSF commences a new market-linked pension and unintentionally exceeds their transfer balance cap. An individual may have exceeded their transfer balance cap if they were receiving a life expectancy or market-linked pension just before 1 July 2017 (which was a capped defined benefit income stream) and then commuted the pension on or after 1 July 2017 and the transfer balance debit is nil under the special value rule in Income Tax Assessment Act 1997 subsection 294-1245(1); and then commenced a new market-linked pension. The ATO has acknowledged these are unintended consequences associated with the current law and will not take compliance action at this stage provided an individual’s circumstances align with the above situation and: if a fund does not report the transfer balance account events of the commutation or the commencement of the new market-linked pension; where the fund has reported the transfer balance debit for the commutation as other than nil.


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Personal Income Tax Plan passed

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The Personal Income Tax Plan announced as part of this year’s Federal Budget has been passed by Parliament. The plan introduces: – a new low and middle-income tax offset to reduce the tax payable by low and middle-income earners in the 2018-19, 2019-20, 2020-2021 and 2021-2022 income years – a new low-income tax offset from the 2022-23 income year – changes to income tax rate thresholds in the 2018-19, 2022-2023 and 2024-2025 income years Income tax rate thresholds for the relevant income years are as follows: 2018-19, 2019-20, 2020-21 and 2021-22 income years: Increase the top threshold of the 32.5 per cent tax bracket from $87,000 to $90,000. 2022-23 and 2023-24 income years: Increase the top threshold of the 19 per cent tax bracket from $37,000 to $41,000. Increase the top threshold of the 32.5 per cent bracket from $90,000 to $120,000. 2024-25 income year onwards: Increase the top threshold of the 32.5 per cent tax bracket from $120,000 to $200,000.


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SMSFs: reporting change

Posted on June 22, 2018 by admin


Self-managed super funds (SMSFs) are required to provide an accumulation phase value (APV) on their transfer balance account report for 30 June 2017 in certain circumstances. SMSFs should note, APV is often different to the account balance of the SMSF member’s accumulation phase assets. This is due to the exit and administration fees and realisation costs that would be taken into account if the SMSF member would voluntarily close their account. APV is a component of a member’s total super balance which shows the value of the member’s assets in the accumulation phase at 30 June. Providing a member’s APV is conditional for SMSFs in the 2016-17 financial year. The member’s APV will be calculated as the difference between the closing account balance from the SMSF annual return and the value of the member’s transfer balance account for the SMSF at 1 July 2017 if not provided. SMSFs need to provide their APV if the SMSF member has interests in the accumulation and retirement phase at 30 June 2017 where the member has a capped defined benefit income stream or a flexi-pension in that SMSF. It is also mandatory to provide the APV where the difference between the APV and […]


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Claiming clothing this tax time?

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The Australian Tax Office (ATO) is cracking down on claims for work-related clothing and laundry expenses this tax time. Last year total claims for work-related clothing and laundry expenses totalled nearly $1.8 billion. The ATO has acknowledged that many of these claims are legitimate. However, it is unlikely that half of all taxpayers would have been required to wear uniforms, occupation-specific clothing or protective clothing. The Tax Office is in the view that many taxpayers are either making mistakes or deliberately over-claiming. Common mistakes that are observed include: – Claiming for something without having spent the money – Not being able to explain the basis for how the claim was calculated – Claiming ineligible clothing (eligible clothing is occupation-specific, protective or uniform) Another concern facing the ATO is the number of claims which totalled exactly $150. This amount is the threshold that requires taxpayers to keep detailed records. The ATO is reminding taxpayers the $150 limit is not an automatic entitlement for everyone; it is in place to reduce recordkeeping burden. Normal clothing is another deduction under scrutiny. Claiming for normal clothing such as a suit or black pants is not legitimate, even if you only wear it to work, […]


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Changes to SMSF 2017-18 annual return

Posted on June 15, 2018 by admin


There is a number of changes to the 2017-18 Self-managed super fund annual return (SAR) thanks to the super changes which came into effect on 1 July 2017. Transition to retirement income stream (TRIS) accountThe ATO has included a new label for the number of TRIS accounts an SMSF member has in accumulation phase. A TRIS account is in accumulation phase unless the SMSF member has reached 65 years of age or has met another ‘nil’ cashing restriction condition of release (i.e., permanent incapacity, retirement or a terminal medical condition) and has advised their fund. Limited recourse borrowing arrangements (LRBA)New questions focused on the use of LRBAs and extra borrowings have been added to section H, items 15e and 16. SMSFs that hold assets under LRBAs will be required to complete these questions. Correct calculation of a member’s total superannuation balance (TSB)New labels to allow the make-up of the ‘closing account balance’ to be reported to support a more efficient calculation of a member’s TSB have been added. The member’s TSB may affect their non-concessional contributions cap as well as other super caps from 30 June 2017. Cessation of the temporary budget repair levyCertain tax rates for superannuation entities have […]


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Importing goods worth $1,000 or less?

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Overseas businesses that meet the GST registration threshold (A$75,000) will be required to charge GST on goods purchased from the 1 July 2018. Specifically, GST will be charged on goods that are: less than A$1,000 (low-value); not GST-free (i.e., alcohol or tobacco products); and imported into Australia. Individuals who purchase low-value goods (which they import) will be required to pay GST if they are not registered for GST or importing goods for personal use (even if they are GST registered). However, individuals can avoid paying GST if they are: registered for GST; import low-value goods for business use in Australia; and provide their ABN to the supplier and a statement that they are GST registered. Individuals charged GST incorrectly will need to contact the supplier to advise them they are registered for GST, and need to request a refund.


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Superannuation Guarantee Amnesty

Posted on June 7, 2018 by admin


In a bid to tackle non-payment of employee superannuation, the Minister for Revenue and Financial Services announced the beginning of a 12-month Superannuation Guarantee Amnesty (the Amnesty) on 24 May 2018. The Amnesty provides employers with a one-off chance to self-correct past super guarantee (SG) non-compliance without incurring a penalty and is available until 23 May 2019 (subject to the passage of legislation). Employers who take advantage of the Amnesty will avoid: penalties and charges that may apply to late payments; and are entitled to deductions for catch-up payments made during the Amnesty period to the employee’s regulated super fund or to the ATO (should employers require a payment plan). To make use of the Amnesty, employers must: voluntarily admit the amounts of prior SG shortfalls including nominal interest during the Amnesty period; and not be the subject of an audit for SG for the relevant periods. The ATO is encouraging employers to pay their SG shortfall amounts in full, including the nominal interest straight into the employee’s super fund. Failure to either remain current with SG payment duties or declare SG shortfalls in this period could result in higher penalties later on.


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Preparing for tax time

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With the end of the financial year fast approaching, preparing ahead will help to take off the pressure of running your business and organising your tax affairs this tax season. Business owners can benefit from gathering and sorting their records now, including cash, EFTPOS, bank statements, credit or debit card transactions that relate to sales and other business income. Records of expenses that can be claimed as business deductions, such as operating expenses, business travel, staff wages and contractor expenses should also be compiled. For those who have changed over their record keeping software in the past year, now is a good time to check all the information has transferred over correctly. Sole traders are reminded to lodge an annual return even if their income is below the tax-free threshold. Those that lodge PAYG instalments would benefit from lodging activity statements and paying all PAYG instalments before lodging their return so their income tax assessment takes into account the instalments paid through the year.


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Managing risk in your SMSF

October 12, 2018

SMSFs provide the trustee autonomy and an increased opportunity to maximise your retirement savings. However, an investment strategy must be accompanied by a risk management plan should some of your investments come up short.

Consider the following risk management strategies:

Diversification
Diversification reduces risk by investing in many different assets including property, annuities and equities. By spreading your earnings across several investments you minimise the risks to your retirement nest egg that can occur if one investment suffers a loss or a disappointing return. Organise your target returns according to your asset class and establish the accepted variation range from this target. This allows you to track your investment portfolio and whether it is setting you on the right financial path.

Liquidity
If you tie up your money in assets like property, then you may run short on cash. It is important that you have cash to cover the costs of running your SMSF and in the case of a member’s total and permanent disablement. If you’re also forced to sell an asset to get this cash the market conditions may not be ideal, and you could receive a disappointing return because you need cash in a rush.