Autumn 2002 Newsletter

SALARY SACRIFICING TO SUPER

Anyone wanting to salary sacrifice their income/remuneration into superannuation should seriously consider doing so before 30 June this year, for two main reasons.

First, the Government has announced that the concessional contribution caps (i.e., the maximum amount of deductible superannuation that can be contributed to a superannuation fund in respect of a particular member that is only taxed at 15%) will be halved from 1 July 2009, basically:

· to $25,000 (indexed p.a. for individuals aged under 50 (from the existing $50,000 to indexed amount); and

· to $50,000 (non-indexed) p.a. for individuals aged 50 or more (from the existing $100,000).

Editor: The cap on non-concessional contributions (i.e., undeducted contributions from after-tax dollars) will remain $150,000 p.a. for the 2010 income year.

Secondly, from 1 July 2009, reportable superannuation contributions, including salary sacrificed superannuation, will be taken into account when evaluating a taxpayer’s entitlement to a number of benefits, including the superannuation co-contribution, the Baby Bonus, and dependant tax offsets, as well as various liabilities, such as the Medicare Levy Surcharge and child support.

Contributions received by the super fund on or before 30 June 2009 will be assessed against the existing concessional contribution caps, and will not be included in ‘adjusted taxable income’.

SMALL BUSINESS TAX BREAK BOOST

The Small Business and General Business Tax Break has been increased to 50% for small business entities (or SBEs)-i.e., basically small businesses with an annual turnover of less than $2 million.

A deduction of 50% (instead of the 30% or 10% deduction) will be available to SBEs that order an eligible asset between 13 December 2008 and 31 December 2009, and install it ready for use by 31 December 2010.

Editor: Note that, even though the 50% deduction may be available for assets purchased after 30 June 2009, it can only be claimed in the 2009 tax return if the asset is acquired and installed by 30 June 2009 (otherwise, it may still be claimed, but in a future tax return).

All other businesses can continue to access the Tax Break at 30% for eligible assets contracted for prior to 30 June 2009 (and installed by 30 June 2010), and 10% for eligible assets that they commit to investing in between 1 July 2009 and 31 December 2009 (which are installed by 31 December 2010).

INCOME TAX:

2008/9 CENTS PER KM RATE

The 2008/09 cents per kilometer rates for claiming deductions for car expenses have been released.

Engine capacity (non-rotary)	Engine capacity (rotary engine)	Rate (cents)
0 – 1,600cc	0 – 800cc	63
1,601 – 2,600cc	801 – 1,300cc	74
2,601cc+	1,301cc+	75

2009 FEDERAL BUDGET

OTHER CHANGES

Further initiatives announced in the 2009 Federal Budget include:

· From 1 July 2009, the income tax exemption for foreign employment income will basically be abolished;

· From 1 July 2010, the Private health insurance rebate will effectively be reduced to nil for single taxpayers with a taxable income greater than $120,000 and couples with joint taxable incomes greater than $240,000;

· The age pension age (for both men and women) will be gradually increased from age 65, commencing July 2017, and reaching age 67 on 1 July 2023;

· Taxation of shares or rights acquired under Employee Share Schemes will be reformed;

· From 1 July 2009, the deemed dividend rules will be extended to include situations where a shareholder of a private company (or their associate) uses company assets such as real estate, cars and boats, for free or at a discounted rate;

· The Government will halve the minimum payment amounts for account-based pensions for 2010 (e.g., the current minimum 4% drawdown for people under the age of 65 will be reduced to 2%).

SUPERANNUATION SCAMS

The Government is warning people to exercise extra care in protecting their superannuation account statements and personal details, in response to NSW Police Force information that a Sydney-based fraud syndicate is using stolen identities to steal from victims’ superannuation accounts.

The syndicate has allegedly stolen superannuation statements and used other counterfeit identity documents to operate SMSFs, open bank accounts linked to the fraudulent SMSF, and then arrange for cash to be ‘rolled over’ from legitimate funds into the fraudulent accounts.

As a general rule, people should:

ü Shred any personal financial information they want to dispose of;

ü be cautious about what personal information they provide over the phone and to whom they provide it; and

ü make a habit of checking their paper-based and online super fund statements to ensure there are no unauthorized transactions.

SMSFs AND BORROWING MONEY

Trustees of self managed superannuation funds (SMSFs) are generally prohibited from borrowing money except in specific circumstances (Editor: such as under the new rules for certain limited recourse loans, where the lender only has a claim against a certain asset of the SMSF).

Because there has been some confusion about this, the Tax Office (ATO) has explained what a ‘borrowing’ is, and how to determine whether an SMSF contravenes this general prohibition.

Borrowing money

A borrowing is an arrangement that exhibits two necessary characteristics:

a temporary transfer of an amount of money from one entity (the lender) to another (the borrower); and

an obligation or an intention on the part of the borrower to repay that amount to the lender (which may be satisfied by the provision of an asset).

When does an arrangement contravene the prohibition?

Examples of transactions or circumstances that are a ‘borrowing’ based on common terms and conditions include:

v a loan of money whether secured or unsecured (and whether or not it is a ‘limited recourse loan’, although such loans may be exempt if they satisfy the new rules);

v a margin lending account once drawn upon; and

v a bank overdraft once drawn upon.

Examples of transactions or circumstances that are not a ‘borrowing’ based on common terms and conditions include:

v bona fide contributions to SMSFs that are accepted and dealt with in accordance with the superannuation rules;

v the liability of an SMSF to pay benefits to members as they fall due;

v arrangement under which expenses are paid on behalf of the SMSF trustee by an agent or any other person where reimbursement is immediately sought from, and made by, the SMSF; and

v normal commercial delays in the payment of expenses incurred by an SMSF trustee.

Note: Even if an arrangement is not a borrowing, or falls within one of the specific exceptions, trustees must also make sure they don’t fall foul of other superannuation rules, including the sole purpose test and the prohibition against granting a charge against an asset of the SMSF.

PROJECT WICKENBY

FURTHER 12 PEOPLE CHARGED

Twelve people have faced Court in Sydney as a result of an investigation into a $10 million offshore tax evasion and money laundering scheme.

A total of 153 charges have been laid against a Sydney accountant, her husband and 10 of her clients.

It will be alleged in court that a 62-year-old Warriewood woman devised, promoted, facilitated and implemented tax evasion schemes which involved incorporating companies in Vanuatu on behalf of Australian-based clients.

Fees were paid to these companies by Australian-based companies, which then claimed these false expenses as deductions in tax returns.

No actual services were provided by the offshore companies and the funds held offshore were then laundered to individuals in Australia, but were not disclosed as income in tax returns.

The total amount allegedly laundered by these 12 people is approximately $5.2 million.

The 62-year-old woman has been charged with a total of 34 counts of conspiracy for defrauding the Commonwealth, obtaining a financial advantage by deception and money laundering.

These offences carry maximum penalties of 10 years and 20 years imprisonment.

The other 11 persons have been charged with a variety of similar offences.

FBT: BENCHMARK INTEREST RATE

The benchmark interest rate for the FBT year commencing 1 April 2009 is 5.85% p.a. (replacing the rate of 9.00% that applied for the previous FBT year).

Editor: The ATO has also released the following for the 2009/10 FBT year:

Ø the amounts that are considered to be a reasonable food component of a living-away-from-home allowance (LAFHA);

Ø the indexation factors for the purpose of valuing non-remote housing.

Please contact our office if you would like to know more about these.

HALL JACKSON SERVICES

We would like to remind our clients that we offer the following services through referral to our valued contact

Financial planning, investment and retirement advice;

Business succession, estate planning and risk insurance; and

Residential and commercial lending (including short-term financial), asset purchase and refinancing.

Please contact our office if you would like to discuss any of the above services. A full list of services can be found on our website at www.halljackson.com.au

QUOTE FOR THE SEASON

“A place for everything and everything in its place.”

- Isabella Mary Beeton -