Budget superannuation changes on the way
The Federal Government has been consulting on draft legislation to give effect to most of its 2016–2017 budget superannuation proposals. Here are some of the key changes.
Deducting personal contributions
All individuals up to age 75 will be able to deduct personal superannuation contributions, regardless of their employment circumstances. Of course, such deductible contributions would still effectively be limited by the concessional contributions cap of $25,000, proposed from 1 July 2017.
Pension $1.6 million transfer balance cap
The total amount of accumulated superannuation an individual can transfer into retirement phase (where earnings on assets are tax-exempt) will be capped at $1.6 million from 1 July 2017. Those with pension balances over $1.6 million at 1 July 2017 will be required to “roll back” the excess amount to accumulation phase by 1 July 2017 (where it will be subject to 15% tax on future earnings).
Concessional contributions cap
This cap is to be reduced to $25,000 for all individuals (regardless of age) from 1 July 2017. The concessional cap will be indexed in increments of $2,500 (down from $5,000 increments). Contributions to constitutionally protected funds and untaxed or unfunded defined benefit superannuation funds will be counted towards an individual’s concessional contributions cap. However, any excess concessional contributions in respect of such funds will not be subject to tax, but instead limit the individual’s ability to make further concessional contributions.
Note that the Government has decided to:
• dump the proposed $500,000 lifetime cap on non-concessional contributions (which would have been backdated to 1 July 2007) – instead, the lifetime cap will be replaced by a reduced non-concessional cap of $100,000 per year for individuals with superannuation balances below $1.6 million;
• not proceed with the proposal to remove the work test for making contributions between ages 65 and 74; and
• defer to 1 July 2018 the start date for catch-up concessional contributions for superannuation balances of less than $500,000.
TIP: The government says it intends to introduce the proposed changes in Parliament “before the end of the year”. It remains to be seen if the changes will pass smoothly through Parliament. In any case, it would be prudent to check in with your professional adviser to see if and how the proposed changes would affect your retirement savings strategy.
Personal middle income tax rate cut on the way
The Federal Government has introduced a Bill which proposes to implement its 2016 Budget proposal to increase the third personal income tax threshold that applies to personal income taxpayers. The rate of tax payable on individuals’ taxable incomes from $80,001 to $87,000 would fall from 37% to 32.5%.
Shortly following the Bill’s introduction in Parliament, the ATO issued new PAYG withholding tax schedules that reflect the lowered personal tax rate in the Bill. Effective from 1 October 2016, employers will be required to lower the amount of tax withheld for affected taxpayers to factor in the new lower tax rate. Any tax overpaid beforehand will be refunded by the ATO on assessment after the end of the 2016–2017 financial year.
Cars & Tax
From 1 July 2016 the following car threshold amounts apply.
There's an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.
The car limit for 2016-17 is $57,581.
Goods and services tax (GST)
Generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount. Therefore, the maximum amount of GST you can claim is $5,234.
You can't claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.
Luxury car tax
From 1 July 2016 the luxury car tax threshold for luxury cars increased to $64,132.
The threshold for fuel efficient luxury cars for 2016-17 remains at $75,526.
In general, the value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.
ATO Data matching real property transactions
The ATO has gazetted a notice specifying that it will acquire details of real property transactions for the period 20 September 1985 to 30 June 2017 from various State Revenue offices and tenancies boards. Information to be obtained will include: rental bond number of identifier for rental bond; unique identifier for the landlord; full name of the landlord; full address of the landlord; period of lease; date of property transfer; property sale contract date; settlement date; and valuation details.
The ATO expects that around 31 million records for each year will be obtained. Based on current data holdings, the ATO estimates that records relating to 11.3 million individuals will be matched. The purpose of this data matching program is to ensure that taxpayers are correctly meeting taxation and other obligations administered by the ATO in relation to their dealings with real property. These obligations include registration, lodgement, reporting and payment responsibilities.
Note that the ATO intends to continue this data matching program from 2017. In the 2013–2014 Federal Budget, the Government announced that it would legislate to make the reporting of real property transfers to the ATO mandatory in the future. The current Government confirmed that it would proceed with this proposal. Amending legislation to implement the proposal is contained within the Tax and Superannuation Laws Amendment (2015 Measures No 5) Act 2015.
Helping Taxpayers Get it Right this Tax time on Rental Properties
This tax time the ATO is increasing its focus on rental property deductions and is encouraging all rental owners to double-check their claims before lodging their tax return.
We are paying particular attention to excessive deductions claimed for rental properties, especially those located in popular holiday destinations around Australia.
There are a few simple rules rental property owners should follow to avoid making mistakes on their tax return.
Firstly - it is important for all property owners to keep accurate records. This helps to ensure they declare the right amount of rental income and they have evidence for claims made.
Secondly - rental property owners should only claim deductions for the periods the property is rented out or is genuinely available for rent. If a property is rented at below market rates, for example to family or friends, deduction claims must be limited to the income earned while rented.
Australian Tax Office Warning about Phone Scams
The ATO Media Release update on the 20th of August 2015
The ATO issued a Media Release titled Protect yourself again phone scammers, which warns the public of aggressive phone scammers, who attempt to force people to pay a fake tax debt over the phone by threatening arrest if they don’t comply. This information is then used or sold to other criminals to commit identity fraud. This can happen immediately or even months or years later.
It is important clients are aware that scammers try to collect personal information to steal their identity, including:
- tax file numbers
- dates of birth
- myGov user name and password
- bank account and credit card details
- Drivers licence, Medicare and passport details.
The Assistant Commissioner said that the ATO would never contact taxpayers in a threatening manner compelling them to pay a tax debt with threaten jail or arrest and does not email, call or SMS asking for credit card or bank details to issue a refund. They may tell clients that there is a warrant out for their arrest or offer to send a taxi to take them to a post office so that they can make a payment.
The ATO has urged taxpayers to protect their personal details.
Taxpayers who receive a phone call from the ATO are concerned about providing their personal details over the phone should request the caller’s name and phone back them back through the ATO’S switchboard on 13 28 69.