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What is exempt current pension income?

Posted on August 29, 2018 by admin

Any ordinary and statutory income a self-managed super fund (SMSF) earns from assets held to support retirement phase income streams is exempt from income tax – this income is commonly referred to as Exempt current pension income (ECPI). This form of income does not include assessable contributions or non-arm’s length income. Individuals can choose to claim their ECPI in the SMSF annual return. However, to do so, they must ensure their SMSF assets are valued at current market value. This requirement also applies when a transition to retirement income stream (TRIS) moves into retirement phase. There are two methods an individual can use to calculate their ECPI – they are the segregated method and the proportionate method. Generally, an individual uses the segregated method when their fund is 100 per cent in retirement phase (provided the assets are not disregarded small fund assets). If the fund has disregarded small fund assets, then the proportionate method must be applied.

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TPRS extension to contractors

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From 1 July 2018, businesses that supply cleaning or courier services must report payments made to contractors (if payments are for cleaning or courier services) via the Taxable payments annual report (TPAR) each year. However, the ATO does not require taxpayers to lodge their TPAR during the period up until the proposed law change is passed by Parliament. Instead, they are expected to keep appropriate records to ensure a TPAR could be prepared and lodged as soon as practical (after the law is enacted). After the new law is enacted taxpayers will need to check payments, they have made to contractors from 1 July 2018 and then complete and lodge a TPAR for the 2018-19 income year. The ATO does not require those taxpayers who recorded their payments and lodged their TPAR (in accordance with the changes) to do anything else. Those who did not record their payments (to contractors) must review their records and form a summary of all payments made after 1 July 2018 and the required details for each payment. Businesses who also supply road freight, security, investigation, surveillance or IT services must report payments made to contractors (if payments are for road freight, security, investigation or […]

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Avoid being short changed with your super

Posted on August 22, 2018 by admin

With recent regulatory changes to super contributions, it is easier than ever to ensure your employer is paying you the super you are entitled to. There are specific steps you can take to ensure you are being paid correctly. Consider the following: Understand your entitlements Employers have to put 9.5 per cent of an employee’s wage into their superannuation account. As of July 2017, these contributions must be made quarterly through the super clearing house. This was introduced by the ATO to prevent dishonest employers from ripping off their employees. If you have not received a quarterly payment by the 28th of the following month, contact the ATO, and they will investigate this on your behalf. Consolidate your accounts If you have had various jobs throughout your working life, there is a good chance you have more than one super account. If you do, you will be paying excess account fees. You should look to roll over your funds into one account and close the leftover accounts. Research It is advantageous to do your research and be informed regarding your super. This will guarantee you a fund that will provide you with the financial security you deserve when it comes […]

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Tax deduction for landcare operations

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You may be able to claim a tax deduction for capital expenditure on a landcare operation in Australia in the year it is incurred. Providing you are a primary producer, a rural land irrigation water provider who incurred the expenditure on or after 1 July 2004, or a business using rural land for taxable uses (excluding mining and quarrying businesses) you are eligible to claim a deduction. Many operations fall under the category of a landcare operation. For instance, when you primarily and principally: – eradicate, exterminate or destroy plant growth detrimental to the land. – put in fences to keep animals from areas affected by land degradation to prevent or limit further damage and assist in reclaiming the areas. – eradicate or exterminate animal pests from the land. – construct drainage works to control salinity or assist in drainage control. – prevent or combat land degradation by means other than fences. Other operations the ATO defines as a landcare operation include: – constructing a levee or similar improvement – erecting fences to separate different land classes as set out in an approved land management plan – for expenditure incurred on or after 1 July 2004, a structural improvement or […]

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Super contribution caps: the basics

Posted on August 21, 2018 by admin

Making contributions to your superannuation fund is a great way to grow your nest egg, however, there are caps on the amount you can contribute every financial year to be taxed at lower rates. Once you go over these caps, you may be required to pay additional tax. The cap and extra tax amount will vary depending on your age, the financial year the contributions relate to, and whether the contributions are concessional (before tax) or non-concessional (after tax). Concessional contributions Concessional contributions include compulsory employer contributions and salary sacrifice amounts. There is a cap on the amount you can make, and payments are taxed at 15 per cent. Non-concessional contributions These are after-tax income contributions and are not taxed in your super fund. However, like concessional contributions, caps also apply to non-concessional payments. From 1 July 2017, the cap was reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years providing they meet the work test. The cap is indexed in line with the concessional contributions cap. The non-concessional cap is also nil for a financial year if you have a total super balance greater than or equal to the […]

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Rental property and tax

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The Tax Office is reminding individuals who either own or are looking to purchase a rental property that there are essential record-keeping and taxation obligations that they must meet. Examples of records to keep (for the period the individual owns the property for and up to five years after it is sold), include: – Rental income – Contract of purchase and sale – Expenses – Loan and refinancing documents – Periods when the property was used for private use (i.e., family use) – Steps taken to rent out the property (i.e., advertising) Individuals must also declare all income they receive from renting out their property. Examples of income may include: – Rent received (before fees or expenses) – Reimbursement for deductible expenditure – Any fees collected from cancelled bookings – Insurance payouts – Booking or letting fees Individuals can claim many expenses related to the property as immediate tax deductions or deductions over a number of years. Immediate expense deductions include: – Repairs and maintenance on the property – Loan interest – Property management fees Expenses to claim as deductions over a number of tax returns include: – Depreciating assets – Capital works or improvements – Borrowing expenses Expenses accrued […]

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Protect yourself from early super release scams

Posted on August 7, 2018 by admin

When it comes to protecting your nest egg, avoid getting caught out by a promoter of an illegal early release super scheme. Early release super scheme scams will involve a promoter contacting you and offering to help you access your super early. They usually target individuals under significant financial pressure or those who are not knowledgeable about super laws and the repercussions and penalties involved in illegally accessing your super. You can only access your super when you meet a condition of release. Generally, when you: – Are 65 years old (even if you have not yet retired). – Reach your preservation age and retire. – Reach your preservation age and begin a transition to retirement income stream while still working. There are special circumstances where you may be able to access your super early. These special circumstances include: – Severe financial hardship – Temporary or permanent incapacity – Compassionate grounds – Temporary residents leaving Australia – Super death benefits (inheriting super) – Super less than $200 – Terminal medical condition To avoid falling for an illegal early super release scam, be wary if the promoter: – charges high fees and commissions; – requests identity documents; – claims you can […]

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Avoid these top tax misconceptions

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As tax time continues, the ATO has announced the top misconceptions many individuals make when completing their claims for tax deductions. Four popular tax misunderstandings include: 1. Individuals can give credit card statements as proof of claim Debunked: When making a claim, individuals must be able to show they spent the money, what the money was spent on, the supplier and the date the purchase was made unless record-keeping exceptions apply. 2. Individuals can automatically claim $150 for clothing and laundry, under $300 for work-related expenses or 5000 kilometres for car-related expenses Debunked: While taxpayers are not required to provide receipts relating to the above in certain circumstances, these are not ‘standard deductions’ everyone can just claim. An individual can only claim if they have spent the money, and the expense relates to earning their income. They must also be able to explain how they calculated the amount. 3. Individuals can claim home-to-work travel Debunked: Individuals can only claim home-to-work travel in limited situations, i.e., in some circumstances where they must transport bulky equipment. 4. Individuals can claim work clothes when required to wear a particular colour Debunked: Individuals can only claim a deduction for work clothes if they are […]

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Hiring temporary residents: employer super obligations

Posted on August 3, 2018 by admin

Employers are being reminded by the Australian Tax Office (ATO) not to forget that along with permanent residents; temporary residents are also entitled to super guarantee (SG). In most cases, an employer will be required to pay SG on top of their employee’s wages (temporary residents included) if they pay them $450.00 or more before tax in a calendar month. Providing the temporary resident has met all the requirements, they can submit their claim for the super that their employer has paid as a ‘department Australian superannuation payment’ (DASP) once they have left Australia. The ATO is encouraging employers to notify their temporary resident workers of the DASP application as it will be easier for these individuals to get the required supporting documents certified in Australia and then lodge once they have left the country.

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Cents per kilometre rate rises for work-related car expenses

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The Tax Office has confirmed the rate for work-related car expenses will rise to 68 cents per kilometre for the income year beginning 1 July 2018. The new rate will affect those eligible individuals who elect the cents per kilometre method when calculating the income tax deductions for their work-related car expenses for the 2018-19 income year. This rate also applies to the following income years until the Commissioner of Taxation deems it should be varied (these rates are reviewed each year). Taxpayers working out their car expenses for the 2015-16 year, 2016-17 year and the 2017-18 year should remember that the previous rate of 66 cents per kilometre still applies to their calculations. When selecting the cents per kilometre method, eligible individuals: – are not required to supply the ATO with written evidence of how many kilometres they have travelled; – may need to show how they worked out their business kilometres calculations; – cannot claim more than 5,000 business kilometres per car; – and cannot make a separate claim for depreciation of the car’s value. It is also important to note that the amount will take into account all the vehicle running expenses.

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What disqualifies you from an SMSF

May 20, 2019

SMSF’s are regulated by the ATO and have specific eligibility criteria that members and trustees must follow. While anyone 18 years old or over can be a trustee or director of an SMSF, they mustn’t be under a legal disability, such as mental incapacity, or a disqualified person.

The ATO can render an SMSF trustee as a disqualified person if they see the need, particularly in relation to illegal early access breaches. There are other ways a person may become disqualified and some may not even realise they have been. Continuing to act as an SMSF trustee or director of the corporate trustee while disqualified is an offence, further penalties may apply.

A person is disqualified if they:

The ATO has a Disqualified trustees register to see if an individual has previously been disqualified. The register provides information and easy search options to help determine whether a potential trustee has been disqualified. It is updated quarterly and includes all individuals who have been disqualified since 2012 (when the information was first published electronically).