2015 Budget Reforms for Families, Superannuation, Pension and Businesses

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The upcoming 2015/2016 Federal Budget is believed to be filled with incentives for families and small businesses, but it is a different story for high income earners, people who earn income abroad, and own a huge asset base. Our PJS Accountants May 2015 Newsletter discusses the budget reforms / changes for:

  • Families
  • Superannuation
  • Pension
  • Businesses

There will also be new taxes as well as reforms on existing taxes, all intended to lower the budget deficit. Read up on:

  • GST on Online Purchases and Services
  • “Googletax” (Multinational Tax Crackdown)
  • Bank Deposit Tax

Download our May Newsletter here

Access the Budget 2015 Summary here

If you are one of those who will be heavily impacted in the new federal budget, talk to an expert about your concerns. PJS Accountants have specialist advisors who you can consult with regarding tax planning and compliance, accounting and other bookkeeping services, superannuation, and more. Call us on (07) 3245 5726 or visit us here.

Status of Current Government Tax Reforms and How These Will Impact Business, Superannuation and Australian Individuals

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It’s the start of another year and the question that typically crops up at this time of year is: “What can we expect – economy and business wise – in 2015?” This month’s PJS Accountants Newsletter tackles the same question and provides some answers to help you navigate the rather uncertain economic climate in 2015.

This month’s newsletter gives an update on the status of current government tax reforms and how it will impact:

  • Businesses
  • Superannuation
  • Australian individuals

Download the February Newsletter here:

There’s not much to be happy about with the low interest environment, declining Australian dollar and slow economic growth. But there is still a ray of sunshine amid an uncertain economic future. What businesses and individuals can do is to have a sense of where opportunities can be found and what dangers lurk in 2015.

If you feel like you need support in making your way through the uncertainties and tough times ahead, or simply have a question or want more information, please contact PJS Accountants on (07) 33903177 or click here to contact us.

Where Does Your Super Go When You Die?

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Many people believe that it is a given that superannuation does not become a part of your estate unless you make it a part of your Will, but this is not always the case. The importance of taking care of all of the details before you die is an important part of having your affairs in order, regardless of when you think it might happen.

Who Gets What?

As a general rule, the superannuation goes directly to the nominated beneficiaries of the Fund and not to the estate, on your death, but a recent case that went to the Supreme Court, demonstrates that this is not always the case.

What If You Die Intestate (without a Will)?

James tragically died intestate, at the age of 40, survived by his mother and father who had separated when he was 5, and divorced less than 2 years later. Normally when a child dies intestate, the estate is shared equally between his parents. In this case, James’ estate was worth about $80,000 and his super over $450,000.

At the time of his death James had lived with his mother for 30 of his 40 years (a relationship of financial and emotional dependency as James was bipolar) sharing expenses. She applied for Letters of Administration and Probate to manage his estate in the absence of a Will. As the administrator of the estate, she was obligated to  maximise the size of the estate, using the best endeavours that she could”. Her lawyers had advised her that superannuation does not form part of the estate so she sought to have his Super distributed to her in her personal capacity (rather than the estate). Despite the fact that she was not a nominated beneficiary for James’ Super, she did so as a non-binding beneficiary on the basis of their interdependent relationship. Eventually James’ superannuation was paid to his mother via three different funds due to the financial and emotional dependency of their relationship.

Meanwhile, James’ father’s lawyers questioned his mother’s intentions for his Super benefits, stating that her own self-interest was a breach of her fiduciary duties as administrator of the estate. The response that her lawyers gave was that the Super was not an asset of the estate, and the case when to court.

Because James’ mother had been granted Letters of Administration to deal with the estate, (making it her duty to maximise the value of the estate) the court ordered that her own self-interest should not have come before her responsibility as administrator. The court ordered that the superannuation benefits become a part of the estate and were split equally between James’ mother and father.

In this case, if James had a binding death benefit nomination in place for his Super to go to his mother, and a Will naming her as executor, the outcome could have been different.

Take Care of the Details Today

Regardless of when you think you are going to die, it is important to always have your affairs in order. Check who is nominated to receive your superannuation benefits when you die, and ensure that the right person is nominated according to your wishes. Ensure that you have a current Will, and update it whenever circumstances change in your life. Be aware of who you have nominated as the legal representative of your estate, and ensure that this nomination is current.

Often people will put off taking care of the details, but as the case in question has shown, there is ‘no time like the present’ to sort out your affairs. So give us a call if you need help structuring your assets or managing your Super, and get it done today.

If you feel like you need support in making your way through the uncertainties and tough times ahead, or simply have a question or want more information, please contact PJS Accountants on (07) 33903177 or click here to contact us.

Why Appoint a Corporate Trustee for a Self-Managed Superannuation Fund (SMSF)

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When establishing an SMSF, one important factor to consider is who will act as trustee of the Fund.  Some people may believe that the best option would be to appoint themselves as trustee and another individual with them (in the case of a sole member), as a cheaper alternative to using a corporate trustee. However,this is not always the case. While it does sound like the best option, it can prove to be a very costly decision especially when weighed up against the minimal costs of establishing a company and therefore a corporate trustee of the SMSF.

Costs of Establishing a Company

To establish a company, the cost ranges from $500 to $1000, including the ASIC registration fee. A corporate trustee for an SMSF is known as a special purpose company, so the annual review fee charged by ASIC would be approximately $45. These costs may appear to be expensive at face value, but the advantages of following this route (and appointing a corporate trustee) will ensure that the benefits of the fund are paid out according to your wishes. The other alternative can be very messy, and may cause suffering for the family members who are left behind after your death, as they argue about who gets what.

Benefits of Appointing a Corporate Trustee

One of the most important concerns for people when establishing an SMSF is who will take over control of the fund after their death. By appointing a corporate trustee of the fund, you ensure that the payment of benefits from the fund, are allocated according to your wishes. When establishing a sole member fund, you do not need to appoint a co-trustee of the fund, but appointing the wrong person could allow for benefits from the fund to be reallocated against your wishes.

What Can Happen in the Absence of a Corporate Trustee?

A case that demonstrates the importance of appointing a corporate trustee is that of Katz v Grossman [2005] NSWSC 934. In this example, following the death of his wife, Mr Katz appointed his daughter as co-trustee of his SMSF. Following his own death, Mr Katz daughter appointed her husband as co-trustee of the Fund, but her brother challenged the appointment. The court held that the appointment was valid and the superannuation benefits were paid solely to his daughter, rather than according to his wishes for them to be shared equally between his son and daughter.

Had Mr Katz used a company as the trustee of his Fund, making himself the sole director and sole shareholder, his daughter would not have been left in control of the Fund after his death but rather, would have been both his daughter and son, the legal representatives based on his Will.

Another case that demonstrates the importance of having a corporate trustee of an SMSF is that of Wooster v Morris (2013) VSC. Mr Morris remarried, but had two daughters from his previous marriage that he wanted to receive his superannuation benefits from his SMSF. He and his ‘new’ wife were both members and trustees of his Fund. Two years before his death, Mr Morris made a binding nomination that on his death, his superannuation benefits would be paid to his two daughters.

Following his death, his current wife appointed her own son as co trustee of the SMSF and upon obtaining advice that the binding nomination was invalid, they appointed a company controlled by the wife. This company decided to pay Mr Morris’ superannuation benefits to his wife against his Will, and not to his daughters. His daughters embarked on extensive litigation and succeeded in proving that the binding nomination was valid. But all of this could have been avoided had he retained his superannuation benefits in a separate Fund, and appointed a company as trustee of the fund. His will that appointed both his daughters as his Executor would have left them in control of payment from the Fund.

Other benefits for appointing a corporate trustee can be seen in the case of the death of one spouse/partner. In this example the surviving partner would not need to consider who to appoint as a co-trustee as all assets would remain registered in the name of the company, which continues as trustee.

These cases demonstrate the importance of making the right choice of an appropriate trustee for an SMSF, highlighting the benefits of seeking advice when planning for the future of the estate.

If you feel like you need support in making your way through the uncertainties and tough times ahead, or simply have a question or want more information, please contact PJS Accountants on (07) 33903177 or click here to contact us.

Free Webinars about SMSF’s (Self Managed Super Funds)

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The Tax Office is running a series of webinars about Self Management Super Funds. The best part is IT’S FREE and there are numerous times available right up to mid December. Whether your interested in establishing your own SMSF or you currently have one and want to find out more information these webinars are a good place to start.

To assist trustees, the ATO has set up these webinars to assist you in your compliance with these rules and regulations covering the following:

  1. Overview of SMSFs for trustees
  2. SMSFs – accepting contributions and managed investments
  3. Accessing your super

Each webinar runs for approximately 1 hour and each topic covers:

Overview of SMSF for trustees

There are plenty of people pushing SMSF as a vehicle to for various investment schemes. This is an ideal webinar for those of you wanting to explore the option of Setting Up a fund further or for people that currently have a fund and want to know more about their responsibilities as a trustee of a SMSF.

SMSFs – accepting contributions and managed investments

Now that you have set up your SMSF and have an investment plan what is the next step and how do you get your money into your SMSF, whether that be by making contributions or rolling over your funds from a Retail Fund and managing your investments.

Accessing your super

What’s the point of contributing to super if you cannot access your funds? This webinar focuses on the rules that you need to know about when you can access your super, whether that be via an income stream, lump sum withdrawal or “transitioning to retirement” and the tax implications with each of these methods.

How do you register?

Registration is easy, follow the link below to the ATO website to view available webinar times and dates.

register button

 

If you would like more information about your specific Fund or interested in establishing a Super Managed Super Fund, please contact PJS Accountants today on 07 3390 3177 or Contact Us online by following the link.

Newsletter for November 2014

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Purchasing Property within an SMSF. Top Mistakes to Avoid!

There are plenty of spruikers out there at the moment targeting SMSFs for various investment schemes that may seem too good to be true.

The old saying “if it’s too good to be true, then it probably is” applies here just as importantly as anywhere else.

The team, at PJS Accountants all too often deal with the after effects of these decisions that have been made.

Ensuring that you get the right advice before committing your super savings to any investment opportunity, will ensure:

  • You understand your compliance requirements.
  • You understand what type of property can be purchased using a SMSF.
  • Ensuring the super funds capacity to maintain ongoing compliance costs.
  • The correct structure is set up from the establishment of the fund.
  • Ensuring that the investments are aligned with the funds Investment Strategy.
  • Contracts for the property purchases are in the correct name.

Download the November Newsletter here

If you need help with your SMSF, have any questions or want additional information please call PJS Accountants today on (07) 33903177 or Click Here to contact us.

Newsletter for October 2014

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Already a quarter of the way through the 2014/15 financial year and what a busy start it has already been. This month our PJS Accountants Newsletter explores company tax and “Are big companies getting a better tax deal” and how if at all can smaller companies and individuals get a better deal. We also explore the Budget Cutbacks and what has changed since the budget and what is still up for debate.

Download our October Newsletter here (PDF)

 A few important dates for October and November are:

  • 21 Oct 14 – Monthly activity statements due
  • 28 Oct 14 – July to Sept 14 – quarterly BAS is due for lodgment and payment
  • 28 Oct 14 – July to Sept 14 – Superannuation guarantee – payment cut-off date

If you wish to discuss any of these matters further or need advice around the information contained in the attached newsletter please do not hesitate to contact one of the team in the office.

The Hidden Danger of Salary Sacrifice Agreements

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8If you haven’t reviewed your salary sacrifice arrangement for a while then two recent changes should have spurred you into action.

The first is the increase to the super guarantee (SG) rate from 1 July 2013. While the increase from 9% to 9.25% doesn’t sound like a lot, it can have a big impact. The problem is the concessional contribution caps.

Take the example of 55 year old Wilbur who earns $160,000 per annum. Before 1 July, Wilbur’s employer paid the SG amount of 9% ($14,400) and Wilbur salary sacrificed $10,600 to use his full concessional cap. From 1 July, Wilbur will need to reduce the amount he sacrifices by $400 or breach his cap.

It’s such a minor amount but without this change the ATO will include the excess $400 contribution in Wilbur’s assessable income, which will then be taxed at Wilbur’s marginal tax rate with additional penalty interest charges applying. If you have a salary sacrifice arrangement in place and are close to your contribution cap, then the increase to the SG might be enough for you to breach your limits.

The second change relates to the increase in the concessional contributions cap. This financial year, the concessional contributions cap is $35,000 for those 59 and over on 30 June 2013 and $25,000 for everyone else. The higher cap will allow an additional $10,000 to be salary sacrificed into super for those eligible.

If you feel like you need support in making your way through the uncertainties and tough times ahead, or simply have a question or want more information, please contact PJS Accountants on (07) 33903177 or click here to contact us.

What Does the New Government Mean To You?

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What does the new Government mean to you?

On the first day of the Coalition Government, the new Prime Minister Tony Abbott instructed the Department of Prime Minister and Cabinet to draft legislation to remove the Carbon Tax (to be completed within a month), with the intention of introducing the legislation on the first day of the new Parliament. It was the first foray into a myriad of tax and structural changes promised during the campaign. Let’s take a look at what changes you can expect and how to capitalise on the timing of change:

Will change occur?

The new Government’s major problem with bringing about legislative change is the Senate – they do not have a majority. This election was a half Senate election and as such, the Greens will control the balance of power until 30 June 2014 and then micro parties will hold control.

For controversial changes, such as the abolition of the Carbon Tax, the Government will not have the support of the Greens and the Labor Party have stated that they will not support the abolition of the tax – although a compromise position is possible. So either the Government can negotiate with the micro parties and their myriad of vested interests or call a double dissolution – but even then there is no certainty that the end result will give them greater control in the Senate.

Tax and Tax reform

There are a number of tax changes we know the Government intend to make. These include:

  • Abolition of the Minerals Resource Rent Tax (mining tax) and a series of related measures including the loss carry back scheme, increase to the instant asset write off, accelerated depreciation and rephrasing of the planned increases to the superannuation guarantee rate.
  • Abolition of the Carbon Tax
  • Company tax rate cut by 1.5% from 1 July 2015
  • Parental leave levy – 1.5% levy on companies with a taxable income above $5 million (and apply to taxable income in excess of $5 million).

And of course, there are the changes that will never happen that were announced by the Rudd Government during the election campaign including the abolition of the statutory formula method for calculating the taxable value of car fringe benefits.

Then there are the tax changes we don’t know. As part of their reform agenda, the Government intend to create a “comprehensive” White Paper on tax reform. There has been a lot of recent speculation about the intended reforms including a potential increase in the GST rate – since ruled out by the Prime Minister.

Business

If you are in small business, be aware that some tax concessions available to you are planned to be removed and some planned taxes will be removed. If you can take advantage of the tax concessions available under the former Government, do it now. As long as the changes are not retrospective (which is unlikely), whatever you can take advantage of, you get to keep. For example, the loss-carry back rules will be abolished in conjunction with the mining tax but you can utilise these measures until the law changes. The loss carry back rules offer a way for many businesses to offset tax they have paid in previous years against current year losses. So, if your company is likely to be in a loss position for the 2013 income year and paid tax in the 2012 income year, we encourage you to send in your tax return information as soon as possible as the company may be entitled to a cash refund from the ATO.

For small business, if you need to buy depreciating assets in your business – computers, machinery, cars, etc., – then the there is currently an upfront write-off of $6,500 per item up for grabs between now and when the law changes. Currently, if your business qualifies as a small business and can access the simplified depreciation rules, any depreciating assets you buy below $6,500 can be written off in the year of purchase. If your business is registered for GST the $6,500 is GST exclusive, if not, the $6,500 is the GST inclusive amount. The write off will potentially reduce back to $1,000 when the law changes.

It’s also worth noting the likely impact on business when and if the Carbon Tax is abolished. The Government has already warned that fines of up to $1.1m will apply to entities “that introduce or maintain price increases, surcharges attributable to the carbon tax.” So, If your business ever published any sort of commentary blaming the carbon tax for your price increases – and let’s face it, there was a stage there when the Carbon Tax was blamed for just about everything short of the high level of teenage pregnancy in Australia – then you might want to pay attention.

Superannuation

The good news on superannuation is that the Government has stated that it “will not make any unexpected detrimental changes to superannuation…we won’t move the goalposts.”

For employers, the Government had flagged that it will slow the phased increase to superannuation guarantee in conjunction with the removal of the mining tax. In addition, the Government intends to give small business the option to remit compulsory superannuation payments directly to the ATO.

For all those concerned about inadvertently breaching the contributions cap, the Government has noted that it will develop a process that addresses all inadvertent breaches of the contribution caps where an individual can show that their mistake was genuine and the error would result in a disproportionate penalty.

For those with a SMSF, there will be a review of minimum pension payment levels.

Individuals & families

Sometimes no change can be a good thing. The Government has stated that it will not change the current income tax thresholds or pension and benefit fortnightly rates.

The SchoolKids bonus – that offers up to $820 per child to cover education expenses – will be abolished. The bonus was funded by the mining tax.

One of the most controversial of the Government policies during the election campaign was the introduction of a paid parental leave scheme at replacement wage. Scheduled for 1 July 2015, the scheme provides mothers with 26 weeks of paid parental leave at their full replacement wage or the national minimum wage (whichever is greater) plus superannuation. The replacement salary is capped at $150,000. Fathers will also be able to take 2 weeks paid parental leave (concurrently with mothers or separately) at their actual wage.

Australia is currently one of only two countries with a paid parental leave scheme that doesn’t base its payment on a woman’s actual wage.

The intention is to fund the paid parental leave scheme with a 1.5% levy on companies with a taxable income above $5 million (the levy applies to the taxable income above $5m).

Infrastructure

It’s worth noting the level of infrastructure projects the Government has committed to. In addition to delivering the troubled National Broadband Network, the Government has promised billions of dollars in roadway projects including the Bruce Highway, Pacific Highway from Newcastle in NSW to Brisbane, the WestConnex project in Sydney, the Gateway motorway in Brisbane, Swan Valley Bypass, complete the Perth Gateway, upgrade Adelaide’s North-South Road Corridor and a whole lot more.

How business operates and develops projects across State borders will be assisted by a planned one-stop-shop for environmental approvals. The initiative, if they can make it work, will overcome many of the horror stories of national projects.

SMSFs top half a million mark

The ATO regularly releases a statistical report on Self Managed Superannuation Funds (SMSFs). The latest report shows that the growth in SMSFs dropped by around 10% over the last 12 months but establishments remain high. There are now over half a million SMSFs in Australia with almost a million SMSF members.

Australian SMSFs hold assets worth approximately $495bn at June 2013. A majority of SMSFs have a total asset value of between $500k and $1m with the median asset value per member at over $292k.

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.

If you need expert advise in Accounting, Tax Services, Bookkeeping, Business Improvement SMSF, Succession & Estate Planning, Business Valuations and Asset Protection, contact PJS Accountants.

Quote of the month

“We are what we repeatedly do. Excellence, then, is not an act, but a habit.” –Aristotle

What changed on 1 July 2013

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Here’s a brief summary of what changed on 1 July:

  • The minimum rate for superannuation guarantee contributions increases from 9% to 9.25%. The rate will continue to increase steadily until it reaches 12% from 1 July 2019 onwards.
  • The upper age limit for super guarantee has been removed. That means eligible employees aged 70 and over will receive super guarantee.
  • For those aged 60 and over, you will be able to contribute more to superannuation with the concessional contributions cap increasing to $35,000 (up from $25,000). The concessional contributions cap for those aged 50 and over will increase to $35,000 from 1 July 2014.
  • An increased tax rate applies on contributions made by high-income earners with a ‘total income’ in excess of $300,000.
  • The net medical expenses tax offset (NMETO) will be abolished although there will be a transitional period for those currently claiming the offset. The NMETO previously allowed you to claim a tax offset for medical expenses above the threshold.
  • For the 2013 income year, companies will be able to carry back up to $1m of tax losses incurred in the 2013 income year to recoup tax paid for the 2012 income year. This change assumes the legislation makes it through Parliament. The refundable tax offset that can be claimed is limited to the company’s franking account balance for that year.