Getting a Double Deduction for your Super Contributions?

Each year we are entitled to a tax deduction for a certain amount of superannuation contributions. The tax deduction is available to your employer if they contribute on your behalf but it can also be available to you personally when you make extra contributions to super.

The amount that you can claim as a tax deduction is limited to what is known as your Concessional Contributions Cap. There is a standard Cap of $25,000, though that is increasing to $27,500 on 1st July 2021. There are certain people that can add amounts that haven’t been used in previous years to this cap amount.

If you go over your Concessional Contributions Cap, the excess contributions are merely added to your taxable income so you don’t get any tax benefits out of the contribution.

For example, let’s say your Concessional Contributions Cap is $25,000 but you make $35,000 in concessional contributions. The extra $10,000 will be added to your taxable income but you will receive a credit for the $1,500 in contributions tax paid by the super fund.

But there is a little known trick to allow you to “bring forward” a tax deduction for your concessional contributions. This “hack” is commonly known as a Contributions Reserving Strategy and it has been approved by the Tax Office. If done correctly it allows you to take some of next year’s Concessional Contributions Cap and bring it into this financial year. But it must be done correctly and if you take advantage of it, you need to lodge a specific form with the Tax Office to let them know. The ATO will almost certainly audit what you have done.

It is also important to note that it is really only achievable to do this strategy with a Self Managed Superannuation Fund. It is also important to note that you are merely bringing forward your contribution (using it this year) and that you won’t be able to use that amount next year, so careful planning is also needed.

This type of strategy is used by people who will have an unusually higher taxable income this year than they will next year. So, for example, you might have a large capital gain this year or you might be retiring and have no taxable income next year.

Leaving it until the new year to discuss this strategy is way too late and it absolutely cannot be done after late June so it is essential that you talk to us if you feel next year’s taxable income will be a lot lower than this year.

Downsizer Contributions – What Are They?

If you are aged 65 years or older, you are currently able to make downsizer contributions of up to $300,000 into your superannuation fund from the sale of your main residence (as of 1 July 2018).
The Federal Budget recently announced that the age limit for downsizer contribution payments will be reduced from 65 to 60 once the relevant legislation has been passed.

This means that you can increase your super fund’s balance without impacting on your contribution caps (as it is not a non-concessional contribution), and this contribution can still be made even if your superannuation balance exceeds $1.6 million. It does however count towards your transfer balance cap, which is currently set at $1.6 million (increasing to $1.7 million for most people on 1 July 2021).

The downsizer contributions scheme can only be accessed once, so it can only apply when you sell or dispose of one home, including selling a part interest in a home. It is a one-time deal essentially and is not a tax-deductible amount.

You can however make multiple downsizer contributions from the proceeds of a single sale, but the total of the contributions cannot exceed $300,000 less than any other downsizer contributions that you have made.

You and your spouse can (in certain circumstances) both make downsizer contributions from the sale of the home even if the house was only owned by one of you, provided you both meet all the requirements.

These contributions will also come into account for determining whether or not you are eligible to receive the age pension.

If you would like more information on how to proceed with downsizer contributions, are looking to sell your home and wanting to continue with downsizer contributions from the sale, or just looking for guidance, we can help. Come speak with us.

Don’t Copy/Paste Your Tax Return From Last Year

Due to the impacts of COVID-19, how Australians claim work-related expenses on their tax returns every other year is sure to be different this year. The ATO is warning Australians that they will be watching what is claimed and how the impacts of COVID-19 are reflected in tax returns.

During the 2020 tax return season, up to 8.5 million Australians claimed nearly $19.4 billion in work-related expenses, with new trends and figures of claims reflected in their returns.

Expenses in the 2021 tax return season are expected to reflect the changing nature of how Australians work, given the ongoing impact of COVID-19 is still being felt by workers.

In 2020, the value of car and travel-related expenses decreased by nearly 5.5% (as a result of lockdowns, office closures and the pandemic). There was a slight increase of up to 2.6% in terms of clothing expenses (in part a result of frontline workers’ first time needs for items such as hand sanitiser and face masks so that they could continue doing their jobs.

As an example, though working from home claims are expected to rise in this year’s tax returns, the ATO would not expect to see a marked increase in claims for travelling between worksites, laundering uniforms or business trips in those same returns for someone who was predominantly based at home, and not working out and about.

Though some work-related expenses may still be the same this year, the ATO is warning against simply copy-pasting tax returns from previous years, as without significant evidence or record of the claim, you may find yourself in legal difficulties.

So how can you ensure that you’re doing the right thing when making claims on your tax return? Knowing exactly how COVID-19 may have affected what exactly you can claim on your tax return is a good starting point.

As a result of COVID-19, the ATO introduced the temporary shortcut method to quickly calculate the expenses of working from home at an all-inclusive rate of 80 cents per hour for every hour that you work from home. All you need to do is multiply the hours worked at home by 80 cents, keeping a record such as a timesheet, roster, or diary entry showing the hours you worked.

Personal protective equipment that you may have purchased for use at work, paid for by you and not reimbursed by your work, can be claimed as a work-related expense on your tax return. These items could include gloves, face masks, sanitiser or anti-bacterial spray but must be linked back to use at your workplace. You must have a record to support the claim, but this can be done simply with a purchase receipt.

Similarly, with the marked decrease in the value of work-related expenses for cars, travel, non-PPE clothing, and self-education due to the introduction of travel restrictions and limits on the number of people who could gather in groups, tax returns are expected to reflect your claims regarding these amounts. If you are working from home due to COVID-19 but need to travel to the regular office sometimes, you will not be allowed to claim the cost of travel from home to work in this instance as these are private expenses.

If you are unsure about any of the expenses that you are looking to claim on your tax return this year or are concerned about claiming for the wrong expenses, you can come and speak with us for clarification on what you can and cannot claim on your tax return this year.

Removing Superannuation’s Minimum Income Threshold Limit

From 1 July 2022 employees will no longer need to meet the monthly minimum income threshold of $450 to receive superannuation guarantee payments from their employers due to the Federal Budget’s recently announced changes to superannuation.

Previously, employers did not need to pay employees superannuation guarantee payments if they did not earn $450 per month. Employees who worked for multiple employers but did not earn the same amount from a single employer were not eligible for superannuation guarantee payments.

Close to $125 million of contributions was not being made due to employees not satisfying the minimum income threshold of $450. An estimated 300,000 Australians were reported to have been missing out on those contributions each year.

For employees who worked in lower-income jobs or in part-time or casual employment that may not reach that minimum income threshold, this meant that they were missing out on critical payments to their super. With women making up a more significant proportion of these workers, it also caused the gender gap in superannuation already present to widen further.

The removal of the minimum income threshold means now that these employees will be able to accrue super through the payments made by their employer and help address a long-term equity issue that had been in place in superannuation for years.

These changes should come into effect by July 2022 and, though they may not necessarily improve the retirement outcomes of individuals, the savings resulting from these payments into super will be boosted and all workers will as a result be provided with superannuation coverage, regardless of whether or not they earn more than $450.

Supposing that you are an employer who will now have to pay superannuation guarantee payments to your employees and did not have to do so before. In that case, you can speak with us to ensure that you are meeting your compliance requirements with super for your employees.

Removing Superannuation’s Minimum Income Threshold Limit

From 1 July 2022 employees will no longer need to meet the monthly minimum income threshold of $450 to receive superannuation guarantee payments from their employers due to the Federal Budget’s recently announced changes to superannuation.

Previously, employers did not need to pay employees superannuation guarantee payments if they did not earn $450 per month. Employees who worked for multiple employers but did not earn the same amount from a single employer were not eligible for superannuation guarantee payments.

Close to $125 million of contributions was not being made due to employees not satisfying the minimum income threshold of $450. An estimated 300,000 Australians were reported to have been missing out on those contributions each year.

For employees who worked in lower-income jobs or in part-time or casual employment that may not reach that minimum income threshold, this meant that they were missing out on critical payments to their super. With women making up a more significant proportion of these workers, it also caused the gender gap in superannuation already present to widen further.

The removal of the minimum income threshold means now that these employees will be able to accrue super through the payments made by their employer and help address a long-term equity issue that had been in place in superannuation for years.

These changes should come into effect by July 2022 and, though they may not necessarily improve the retirement outcomes of individuals, the savings resulting from these payments into super will be boosted and all workers will as a result be provided with superannuation coverage, regardless of whether or not they earn more than $450.

Supposing that you are an employer who will now have to pay superannuation guarantee payments to your employees and did not have to do so before. In that case, you can speak with us to ensure that you are meeting your compliance requirements with super for your employees.

Stamp Duty Tax – The Invisible Cost To Purchases

When you’re buying a property, there’s a high likelihood that you’re going to need to pay a tax known as stamp duty on top of the price originally agreed on for that property. Stamp duty is a tax levied by all Australian states and territories on property purchases. It is considered one of the most expensive costs you will encounter when buying a property in Australia. It may also be incurred for motor vehicle registrations, insurance policies, leases and mortgages, hire purchase agreements and transfers of property.

The amount that a buyer pays for stamp duty when it comes to a property, for example, is based on the property purchase price, location and loan purpose and can vary in rate depending on which state the property is purchased in.

As a rule of thumb, the more expensive the property is when buying, the higher the amount of stamp duty to be paid. What you pay for stamp duty may vary depending on the state, as it depends on factors such as first home buyer benefits and concessions that some states may not currently have in place.

A property that is worth $500,000 for example may incur an estimated stamp duty tax of over $11,000 in the ACT. Still, in South Australia, a property priced the same may have to pay an estimated $25,000 in stamp duty tax instead.

The revenue from the stamp duty tax is added to the state government’s budget, and then redirected to other government sectors to finance further improvements.

Under certain circumstances, concessions or exemptions from paying stamp duty may be available to you.

In NSW for example, there is a stamp duty concession for first home buyers where they are exempt from paying stamp duty on new and existing homes valued up to $650,000.

Buyers of first homes that were used as a residential property and which are worth between $650,000 and $800,000 could be eligible for stamp duty discounts of several thousand dollars.

These rules vary depending on the state or territory, so it’s crucial to find out what applies to you to save you money. We may assist you with finding out whether or not you may be eligible for concessions or exemptions, so come speak with us.

Stamp Duty Tax – The Invisible Cost To Purchases

When you’re buying a property, there’s a high likelihood that you’re going to need to pay a tax known as stamp duty on top of the price originally agreed on for that property. Stamp duty is a tax levied by all Australian states and territories on property purchases. It is considered one of the most expensive costs you will encounter when buying a property in Australia. It may also be incurred for motor vehicle registrations, insurance policies, leases and mortgages, hire purchase agreements and transfers of property.

The amount that a buyer pays for stamp duty when it comes to a property, for example, is based on the property purchase price, location and loan purpose and can vary in rate depending on which state the property is purchased in.

As a rule of thumb, the more expensive the property is when buying, the higher the amount of stamp duty to be paid. What you pay for stamp duty may vary depending on the state, as it depends on factors such as first home buyer benefits and concessions that some states may not currently have in place.

A property that is worth $500,000 for example may incur an estimated stamp duty tax of over $11,000 in the ACT. Still, in South Australia, a property priced the same may have to pay an estimated $25,000 in stamp duty tax instead.

The revenue from the stamp duty tax is added to the state government’s budget, and then redirected to other government sectors to finance further improvements.

Under certain circumstances, concessions or exemptions from paying stamp duty may be available to you.

In NSW for example, there is a stamp duty concession for first home buyers where they are exempt from paying stamp duty on new and existing homes valued up to $650,000.

Buyers of first homes that were used as a residential property and which are worth between $650,000 and $800,000 could be eligible for stamp duty discounts of several thousand dollars.

These rules vary depending on the state or territory, so it’s crucial to find out what applies to you to save you money. We may assist you with finding out whether or not you may be eligible for concessions or exemptions, so come speak with us.

What Does The Non-Concessional Cap Increase Mean For You?

The Federal Budget dropped on Tuesday, 11 May, with many announced amendments and changes that affected the superannuation and SMSF sectors. Non-concessional contributions increased maximum limits were announced and would come into effect as of 1 July 2021, increasing the cap from $110,000, up from the previous cap of $100,000.

Personal Contributions made into an SMSF from after-tax income on which no tax deduction is claimed, known as Non-Concessional Contributions. Non Concessional Contributions are personal contributions made into your SMSF from your own personal Bank Account and not contributions to your super made by your Employer.

You will be able to put non-concessional contributions into super (including using the bring-forward rule) up until age 74, without there being a need for you to work.

The bring-forward rule is a provision that allows Members of a superannuation fund to make non-concessional contributions that amounted to more than the contributions cap of $100,000 in one year by utilising the cap for the next two years. It has been amended to reflect the Budget’s rulings and come into effect on 1 July 2021.

You will still need to meet the work test if you wish to make tax-deductible contributions. Still, this outcome may provide some excellent planning opportunities for you regarding removing taxes from the death benefits that your adult children will pay on any benefits paid out to them from your superannuation.

As an example, with the increase to the age limits, there are many ways that you can take advantage of this to boost your super. Let’s say that you have extra cash that you would like put into the superannuation system that you weren’t previously able to, such as $100,000 that you wanted to put in when you turned 67 but were unable to because the age limit for non-concessional contributions had been reached.

With the increase, you will be able to put non-concessional contributions into your super up until you reach 74, which could amount to a hefty sum if you contribute the maximum cap limit amount each year.

We can offer you advice on how best to utilise this new non-concessional contributions cap to your advantage and our knowledge of strategies that we can use for non-concessional contributions to potentially save your children tens of thousands of dollars in death benefits taxes (currently taxed at 15%) if you wish to leave any of your super to your adult children.

Speak with us to find out more about the other ways that you can benefit from the newly released Federal Budget’s outcomes and announcements involving superannuation.

What Does The Non-Concessional Cap Increase Mean For You?

The Federal Budget dropped on Tuesday, 11 May, with many announced amendments and changes that affected the superannuation and SMSF sectors. Non-concessional contributions increased maximum limits were announced and would come into effect as of 1 July 2021, increasing the cap from $110,000, up from the previous cap of $100,000.

Personal Contributions made into an SMSF from after-tax income on which no tax deduction is claimed, known as Non-Concessional Contributions. Non Concessional Contributions are personal contributions made into your SMSF from your own personal Bank Account and not contributions to your super made by your Employer.

You will be able to put non-concessional contributions into super (including using the bring-forward rule) up until age 74, without there being a need for you to work.

The bring-forward rule is a provision that allows Members of a superannuation fund to make non-concessional contributions that amounted to more than the contributions cap of $100,000 in one year by utilising the cap for the next two years. It has been amended to reflect the Budget’s rulings and come into effect on 1 July 2021.

You will still need to meet the work test if you wish to make tax-deductible contributions. Still, this outcome may provide some excellent planning opportunities for you regarding removing taxes from the death benefits that your adult children will pay on any benefits paid out to them from your superannuation.

As an example, with the increase to the age limits, there are many ways that you can take advantage of this to boost your super. Let’s say that you have extra cash that you would like put into the superannuation system that you weren’t previously able to, such as $100,000 that you wanted to put in when you turned 67 but were unable to because the age limit for non-concessional contributions had been reached.

With the increase, you will be able to put non-concessional contributions into your super up until you reach 74, which could amount to a hefty sum if you contribute the maximum cap limit amount each year.

We can offer you advice on how best to utilise this new non-concessional contributions cap to your advantage and our knowledge of strategies that we can use for non-concessional contributions to potentially save your children tens of thousands of dollars in death benefits taxes (currently taxed at 15%) if you wish to leave any of your super to your adult children.

Speak with us to find out more about the other ways that you can benefit from the newly released Federal Budget’s outcomes and announcements involving superannuation.

The Federal Budget 2021-22: Low & Middle Income Tax Asset Rebate Extension Announced

The Low and Middle Income Tax Offset has been extended for another 12 months, meaning that taxpayers whose wage earnings situate them within a certain income bracket will again be able to receive a little extra cash back into their pockets again this year.

Tax offsets are also known as rebates and directly reduce the amount of tax payable on your taxable income. Sometimes, this can lead to the payable amount lowering to zero, but these rebates cannot be used on their own to get a refund.

You are only able to receive this amount after you have filed your tax return at the end of the financial year and in a lump sum amount that is in accordance with which wage bracket you are in and the amount you will receive.

You don’t need to complete anything in your tax return for your low or low and middle-income tax offset to be worked out for you. Instead, the amount of tax offset you will receive is worked out for you once your tax return is lodged.

If you earn under $37,000 this financial year, you will receive an offset of $225. For those who earn between $37,001 and $48,000, you will receive $255, with an additional 7.5 cents to every dollar above $37,000 up to a max of $1,080.

Those who earn between $48,000 and $90,000 a year are set to get the best deal, with up to $1,080 on the cards.

If you have any tax-related questions that the Federal Budget announcements have brought to your attention, speak with us for assistance.