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What is superannuation?

Superannuation is a way of saving for your retirement. Both you and your employer can make contributions that accumulate over time andsuper this money is then invested in shares, government bonds, property, or other appropriate investments.                                 

On retirement, or after disability or death you then receive the money (less charges and taxes) as regular periodic payments (ie, a pension), a lump sum payment, or a combination of both.

Employers must contribute to an employee’s superannuation fund. This is called the Superannuation Guarantee, which came into operation on July 1, 1992.

The amount of the contribution is 9 per cent of an employee’s wages (excluding overtime, leave loading and fringe benefits).

Some employees are left out. The Superannuation Guarantee (Administration) Act says that employers do not have to pay the Superannuation Guarantee in certain circumstances.

Some of the exceptions are:
• employees earning less than $450 per month;
• employees under the age of 18 who work 30 hours per week or less;
• employees over 70 years of age;
• anyone paid to do domestic or private work for 30 hours per week or less.

Can the employer pay more?

An employer can make payments above the compulsory superannuation guarantee as:
• a reward for a worker’s performance;
• a type of co-payment, where the employer’s contribution increases in line with the employees voluntary contribution; or
• a ‘salary-sacrifice’ – this is where the employer makes a contribution that would otherwise be paid as salary.

Note, there are limits to the amount of salary sacrifice that can be made in a financial year.

If you want your employer to pay more, you should get advice from a financial advisor, but keep in mind that employers are limited in the amount that can be claimed as a deduction for superannuation contributions made for a particular employee.

Check with your superannuation fund or the Australian Tax Office to find out what these limits are – they change each year.  www.ato.gov.au

Should I contribute too?

If you have money left over after your weekly expenses, and you want to save for the future, you may want to consider making superannuation contributions as compared to other forms of investment.

Note, there are aged base limits that affect whether or not you can contribute to superannuation – for details, see the Australian Taxation Office web site.

Some of the advantages are:
• generally, you pay less tax on interest from superannuation savings than bank interest;
• with a ‘salary sacrifice’ the superannuation contribution is taken straight out of your wages, so you are not tempted to use it for purposes other than savings.

There are limits to the amount that you can “salary sacrifice”;
• the interest on superannuation savings is ‘compounded’, that is, interest earned by the superannuation fund is added to the total investment, so the interest earns more interest.

The Australian Prudential Regulation Authority estimates that a sum of money ‘compounded’ at 7 per cent a year will double in value in ten years; and
• you may be able to access the benefits of the low income super rebate and low income spouse rebate.
• you may be able to access financial incentives offered by the Government such as the co-contribution scheme. Under this scheme Government will contribute up to $1500 (depending on your income) when you contribute to your fund.

Check the Australian Taxation Office web site for details.

Ultimately, the pros and cons of contributing to superannuation is something you should get advice about.

What are the tax advantages?

The maximum tax rate for your employer’s contribution is 15 per cent.

The income you earn through the fund’s investments is also taxed at a maximum 15 per cent rate.

Salary sacrifice contributions will be taxed at 15 per cent.

Once you reach 60 you can withdraw your superannuation as a lump sum or income stream tax free.

There are also tax advantages if you contribute to your spouse/de facto’s super fund. The set off depends on their income. Check the Tax Office for details.

What laws apply?

The main laws that apply to superannuation are the:
• Superannuation Industry (Supervision) Act and Regulations (regulates most private superannuation funds);
• Superannuation Guarantee (Administration) Act and Regulations (tells employers the minimum contribution they must pay);
• Income Tax Assessment Act,.

The jargon

Accumulation funds – money is invested and the final benefit depends on the total contributions, plus earnings of the fund.

Annuity – like a pension. You receive regular periodic payments for either fixed amount of time or until you die.

Benefit – the money paid to you out of the superannuation fund or held on your behalf within the fund.

Contribution – the money paid into the superannuation fund by either you or your employer.

Defined benefit funds – the final benefit is paid on the basis of a specific formula, so the employer carries the risk if the growth of the fund does not cover the benefit.

Lump sum – money received in a single payment.

Preserved – money that you cannot withdraw from your fund until retirement or certain other events, eg reaching a certain age and leaving employment either temporarily or permanently. This includes money paid by your employer, interest earned on that money or contributions paid by a self-employed person which have been claimed as a tax deduction and any undeducted contributions you make after 1 July, 1999.

Rollover – transferring money from one fund to another.

Unrestricted or non- preserved amount – money that can be paid to you at any time form your superannuation fund

Rights to information

You are entitled to certain information from your superannuation fund. This includes:
• a member statement which shows the amount of your benefit at the start and end of the relevant period, the amount that is preserved and contact details (generally provided annually);
• a fund report which shows the fund’s financial position (generally provided annually);
• notification of changes that affect you, e.g. a change to the superannuation fund’s rules; and
• a statement that shows your benefit, including death benefits when you leave.

Source  :  www.news.com.au

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The strategy :  To work out how the changes to the health insurance rebate affect me.

I suppose it means I’ll be paying more for my health insurance. That’s the gist of it though it will depend on whether Opposition leader Malcolm Turnbull delivers on his threat to block the legislation. As you may have picked up from the federal budget, the Government needs to find savings to fund higher pension payments.

One proposed measure is means testing the health insurance rebate, which currently allows you to claim a tax rebate of 30 per cent of the cost of your health insurance if you’re aged under 65, 35per cent if you’re 65 to 69 and 40 per cent if you’re 70 or older.

Most people ask their health fund to reduce their premiums to take account of the rebate rather than paying the full premium and claiming the rebate in their tax return. For someone under 65, a monthly insurance premium of $250 could be reduced to $175. That won’t change if you earn up to $75,000 if you’re single and $150,000 for families. But if your income is higher, your rebate will be reduced or cut out altogether.

How will that work? Let’s look at singles first. If you earn $75,001-$90,000, your rebate will be reduced to 20 per cent. If you earn $90,001-$120,000, the new rebate will be 10 per cent.

Once your income exceeds $120,000 you will be ineligible for the rebate.

For families, the combined income limits are $150,001-$180,000 for the 20per cent rebate, $180,001-$240,000 for the 10 per cent rebate and the rebate will disappear altogether once family income exceeds $240,000.

All income thresholds will be indexed to wages and will be adjusted for families with one child in the same way that thresholds are already adjusted for determining whether you have to pay the Medicare levy surcharge if you don’t have private health cover. The threshold is currently lifted by $1500 for each dependent child.

The Government says the definition of your income for the rebate will be the same as for the Medicare levy surcharge. Challenger’s head of technical services, Alex Denham, says this definition is changing from July 1 to include your taxable income, reportable fringe benefits, salary sacrificed to super or any personal deductible super contributions made and net investment losses. So higher-income earners won’t be able to use strategies such as salary sacrifice to get or increase their rebate.

Would I be better off dropping my health insurance and paying the Medicare levy surcharge? The proposed measures also include a rise in this surcharge precisely to stop this sort of behaviour.

The 1 per cent surcharge will rise to 1.25per cent once income exceeds $90,000 for singles or $180,000 for couples and to 1.5 per cent for incomes exceeding $120,000 or $240,000. That extra tax may cancel out any savings from dropping your health cover.

MLC’s head of technical services, Andrew Lawless, says a better option may be to make changes to your policy, such as increasing the excess you pay before claiming on the cover or reducing cover on ancillary benefits. However, to avoid the surcharge you must have hospital cover with an excess of $500 or less for singles or $1000 or less for families or couples per calendar year.

When will the changes come in? Not until July 1 next year, so you have time to check the final details if the measures are passed and weigh up your options.

It’s worth noting that the Medicare levy surcharge income limits will be indexed from their current levels of $70,000 for singles and $140,000 for couples to the new $75,000 and $150,000 levels at this time.

Source : www.watoday.com.au

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The Education Tax Refund (ETR) is a new government initiative to help with the cost of educating primary and secondary school children. It means eligible parents,tax refund carers, legal guardians and independent students could get 50% back on some education expenses. This includes items like computers, educational software, textbooks and stationery.

Most people are eligible for the ETR because they receive Family Tax Benefit (FTB) Part A. However, there are some payments that prevent you from receiving FTB Part A, but which still entitle you to receive the refund. You can also claim the refund if you are an independent student.

You can claim the ETR each financial year for children in primary and/or secondary school, or if you are an independent student. You will be able to claim the refund from 1 July 2009 for the 2008/09 financial year. This means you can claim for items purchased from 1 July 2008. Remember to keep your receipts as they will help you calculate your entitlement and you may be required to produce them as proof of purchase.

You can claim the ETR even if you are not required to lodge a tax return.

For more information, see  http://www.educationtaxrefund.gov.au/about-the-ETR/

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In a welcome move, the Australian Government has said it will legislate to extend the validity period of subclass 410 Retirement visas to 10 years, and remove the working restriction on these visas.

Subclass 410 Retirement visas ceased to be available to new applicants at the end of June 2005, but there are nevertheless some 8,700 410 visaholders in Australia at the moment.

The 410 visa is a long term temporary residency visa, with an initial validity period of 4 years. Initially renewals of this visa were required every 2 years, and there was a no work condition attaching.

Work rights were relaxed in 2003, and relaxations to the health requirements upon renewal of 410 visas were announced later that year.

In 2005 the rollover period for 410 visas was extended from 2 years to 4 years.

Successive Immigration Ministers appear to be sympathetic to the position in which Retirement visaholders find themselves. Many 410 visaholders are now long standing members of Australian communities, and granting permanent residency is a natural next step – the present Minister appears willing to listen to representatives of the 410 cohort, and in extending the renewal period to 10 years is (we would submit) providing quasi-permanent residency to affected individuals.

Full access to Medicare appears to be the main issue with this visa category, together with an ongoing requirement to maintain private health insurance.Indeed, with temporary visaholders being able to structure their personal tax affairs such that overseas source income (including UK source pensions) are not subject to tax in Australia, some would contend that 410 visaholders are in a good place visa and tax wise.If you are a subclass 410 visaholder and would like to discuss your personal tax and financial position please contact us at our Perth or Geelong office. Go Matilda Accounting and Tax is one of the few firms of advisors that have consultants with knowledge across the UK and Australian jurisdictions, and are therefore ideally placed to assist with the preparation and lodgment of UK and Australian Tax Returns, and to provide strategic advice on personal tax planning.

We also recommend that Retirement visaholders visit the internet discussion group that lobbies for the interests of individuals holding subclass 410 visas – British Expat Retirees In Australia, or BERIA: see the weblink below.

  http://groups.yahoo.com/group/BERIA/  Source : www.gomatilda.com 

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WESTERN Australia’s Liberal Government has handed down its first Budget, delivering a $647 million surplus but warning the state will be in deficit by 2012.

Treasurer Troy Buswell today delivered his first Budget since the Liberal Government came to power last year.

He said the 2008/09 surplus of $647 million would shrink to $409 million in 2009/10, and just $23 million the following year.

By 2011/12 the state will be in deficit to the tune of $513 million.

“Over the past months, as the global economy has been in decline, the state has been hit by large downward revisions to projected taxation revenue, GST grants from the Commonwealth and mining royalties,” Mr Buswell told parliament.

“Since the mid-year review, the Budget has lost a massive $4 billion in forecast revenue from these sources.”

Last year, then treasurer Eric Ripper delivered a surplus of more than $2 billion on the back of a booming commodities sector.

Economic growth remained high at 8 per cent for the 2008/09 financial year.

But forecasts predicted growth would fall into negative territory in 2009/10, with unemployment expected to peak, and business investment to fall by 17.5 per cent.

Mr Buswell said the Government would provide a one-year payroll tax rebate to small businesses with payrolls of up to $3.2 million to help protect jobs.

“Some 6,700 small businesses will be eligible for this payroll tax rebate, which will fully offset payroll tax for around 68,000 employees,” he said.

“The cost of this rebate is estimated at $100 million.”

A $47 million jobs training and skills package, and a $8.3 billion spend on infrastructure in the next financial year are key components of the Budget.
Mr Buswell said law and order were also strong focuses, in line with the Government’s election promises to boost funding for police and pump more money into prisons

Mr Buswell said the Government’s election promise to toughen up sentencing laws and introduce mandatory sentencing for people who assault police was underpinned in the Budget by a significant investment in prison capacity.

 

A total of $655 million will be invested in 2012/13 to create an extra 1657 prison beds across the state.

A record $5.1 billion spend on health services in the next year – rising 5.9 per cent, or $282 million from last year – will include the fast tracking of forward works for a new children’s hospital, the construction stage of the Fiona Stanley Hospital, and new hospitals in two regional centres.

Mr Buswell said the Government would push ahead with public sector reforms in a bid to achieve improved performance and efficiency.

The first stage of the economic audit committee promised by the Government during the last election was complete and a range of hard decisions had delivered $7.6 billion over the forward estimates, Mr Buswell said.

“I am looking forward to the second stage of the economic audit to identify strategies for broader reform over the longer term, so we can ensure the budget stays in surplus,” he said.

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