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Updates to the unclaimed superannuation money protocol

Posted on January 15, 2020 by KAW Accounting

The Superannuation (Unclaimed Money and Lost Members) Act 1999 (SUMLMA), more commonly known as the unclaimed superannuation money protocol, has been updated recently to provide a clearer structure going forward. SUMLMA provides guidance on in relation to unclaimed money, lost member accounts, superannuation accounts of former temporary residents and their associated reporting and payment obligations. The update has now added content on inactive low balance accounts. The act now clearly defines what is an inactive low-balance account, how statements and payments work, the registering of lost members and various rules for special cases. It is important to note that the information in the protocol does not apply to super providers that are trustees of a state or territory public sector super scheme, in which: The state or territory has laws requiring the reporting and payment of unclaimed super money to the state or territory government. Or; The state or territory public sector super scheme complies with relevant state or territory laws. The protocol provides administrative guidance only and should not be taken as a replacement for the law or technical reporting specifications.

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What are franking credits?

Posted on by KAW Accounting

Franking credits are a kind of tax credit that allows Australian companies to pass on the tax paid at a company level to shareholders. Franking credits can reduce the income tax paid on dividends or potentially be received as a tax refund. Where a company distributes fully franked dividends (and those dividends are included in the taxable income of the taxpayer) the taxpayer can claim a credit against their taxable income for the tax that has already been paid by the company from which the dividend was paid. Since the 2016-17 income year, the standard formula for calculating the maximum franking credits is: Franking credit = (dividend amount / (1-company tax rate)) – dividend amount Franking credits are paid to investors in a 0-30% tax bracket, proportionally to the investor’s tax rate. If an individual’s top tax rate is less than the company’s tax rate, the ATO will refund the difference. Therefore, an investor with a 0% tax rate will receive the full tax payment paid by the company to the ATO as a tax credit. Franking credit payouts decrease proportionally as an investor’s tax rate increases. Investors with a tax rate above 30% do not receive franking credits with […]

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SMSF schemes for illegal access of super

Posted on January 13, 2020 by KAW Accounting

The ATO has issued a warning for Australians to be aware of scheme promoters that promise to allow you to withdraw your superannuation early, and illegally. Individuals can legally withdraw super when they turn 65, even when they haven’t retired, are at their preservation age and retire, or under the transition to retirement rules while continuing to work. Super can only be accessed early under circumstances that mainly relate to specific medical conditions or severe financial hardship. The ATO is taking action to shut down promoters who tell people they can gain access to their super before they are eligible to by setting up a self-managed super fund (SMSF), which is illegal. There has been a number of schemes that encourage individuals to channel money inappropriately and deliberately to avoid paying tax. Penalties for involvement in illegal super schemes include fines up to $420,000 for individuals and up to $1.1 million for corporate trustees. An individual may also lose their right to be a trustee of their superannuation fund or, in some cases, jail time up to five years. Fund trustees or members who have knowingly been involved in a scheme or been approached by anyone claiming that they can […]

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Tax implications of buying a holiday home

Posted on January 9, 2020 by KAW Accounting

Buying a holiday house can seem appealing, whether it’s to rent out for income, for your own holidays or both. However, it is important to be aware of the different tax implications for how you choose to use your holiday house. If you own a holiday house and do not rent it out, you cannot claim any expenses relating to the property. If you decide to sell the property, you will need to calculate your capital gain or loss. Even though you don’t need to include anything in your tax return while you own the property, it is still important to keep all records to determine the capital gains tax implications for when you sell it. If you own a holiday house and rent it out to others, you have to include the income you receive from rent as part of your income in your tax return. Deductions can be claimed on expenses incurred for the purpose of producing rental income, such as cleaning, advertising costs, pest control, insurance, maintenance and repairs. The cost of repairs and renovations cannot be claimed immediately, but are deductible over a number of years. You are only able to claim deductions for the periods […]

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Removal of the main residence exemption for non-residents

Posted on by KAW Accounting

The government has changed capital gains tax (CGT) rules for foreign residents under the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, which was granted assent on 12 December 2019. The law change no longer allows foreign residents to claim the CGT main residence exemption, which will impact people who are overseas or will be going overseas and want to sell residential property in Australia while they are a tax non-resident of Australia. However, this may not apply if you were a foreign resident for tax purposes for a period of six years or less during a CGT event occurrence on your Australian residential property, and a ‘life event’ occurred, including if: You, your spouse or your underaged child had a terminal medical condition. Your spouse or underaged child died. The CGT event involved the distribution of assets between you and your spouse because of divorce, separation or other maintenance agreements. Individuals who will be impacted by the changes are non-tax residents who: Sell a property bought after 9 May 2017 and do not experience a ‘life event’. Sell property after six years of becoming a tax non-resident of Australia, regardless of a life event. If you […]

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Do you have insurance with your super?

Posted on by KAW Accounting

Most super funds offer insurance as part of their super plan. It is important to be aware of what types of insurance you are covered by through your super fund to help you determine if you need extra cover outside your super and if you have adequate support in the event that you cannot work. There are three types of insurance that can be available through super funds: Life insurance (also known as death cover):This is the most common of all personal super insurances, and is part of the benefits your beneficiaries will receive when you die. Life insurance is typically applied to your super account by default. It is not compulsory with your super, however, if you have a self-managed super fund (SMSF), then you are required to consider insurance as part of your investment strategy. Total and permanent disability (TPD) cover:This insurance pays a lump sum if you become permanently disabled and are unable to work again, protecting you against the risk that your retirement income is cut unexpectedly short. TPD cover is often automatically joined with life insurance as a default cover. Income protection (IP) cover:This pays you an income stream for a period of time that […]

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Proposed measures to increase retirement savings 

Posted on December 11, 2019 by KAW Accounting

Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they meet the ‘work test.’ This means they must report themselves to be working a minimum of 40 hours over a 30 day period within the financial year to qualify. The government has proposed that from 1 July 2020, individuals aged 65 and 66 will be able to make voluntary concessional and non-concessional superannuation contributions without meeting the work test. This approach will enable participants nearing retirement to increase their superannuation savings regardless of their working arrangements. As well as this, the government also proposes to increase the age limit for receiving spouse contributions from 70 to 74, to be implemented on 1 July 2020. Currently, people aged 70 and over cannot receive any contributions made by another person on their behalf, and the change will give older Australians greater flexibility to save for their retirement.

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Tax on gifts and donations

Posted on by KAW Accounting

Individuals can claim tax deductions when giving gifts or donations to organisations that have the status of deductible gift recipients (DGR). To be eligible to claim a tax deduction for a gift, the ATO stipulates that it must meet the following four conditions: The gift must “truly be a gift”; that is, a voluntary transfer of money or property where the giver receives no material benefit or advantage. The gift must be made to a deductible gift recipient (DGR). The gift must be money or property, this can include financial assets such as shares. The gift must comply with any relevant conditions. For some DGRs, the income tax law adds extra conditions affecting the types of deductible gifts they can receive. What you can claim:The amount an individual can claim for a gift or donation depends on the type of gift given. For gifts of money, individuals can claim the total amount of the gift, as long as it is $2 or more. Different rules exist for gifts of property, and the amount of the tax deduction depends on the value and type of property. There are special circumstances where donations to Heritage and Cultural programs can also be deductible […]

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2019 Updates to the Pension Loan Scheme 

Posted on December 4, 2019 by KAW Accounting

Changes have been made to the Pension Loan Scheme (PLS) under the federal government that came into effect 1 July 2019. The updates aimed to improve the previous scheme and help more retirees boost their retirement income and pay for extra expenses such as home care. The key features of the new Pension Loan Scheme are: Extended eligibility to all Australians of age pension age, now including those currently received the maximum rate age pension. The maximum PLS income stream will be the difference between your current age pension payment and 150% of the age pension rate. A single person will be able to borrow up to $36,000 a year and a couple could potentially borrow up to $54,000 per year, paid in monthly instalments. PSL loans are not taxable and are not counted in the age pension income test. The interest rate is 5.25% pa compound, which has been the same since 1997. There are no establishment fees or monthly account fees. To be eligible for the PLS, the following criteria must be met: You or your partner have reached age pension age. You own real estate with enough equity to secure a loan. You have adequate insurance covering […]

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Paying tax on term deposits

Posted on by KAW Accounting

The interest you earn from term deposits is subject to tax, just like your regular income. You have to declare investment income on your tax return, including interest in the year it was credited or received. The amount of tax you need to pay depends on the amount of interest you earn on your term deposit as it is part of your overall taxable income and will, therefore, be taxed at the same marginal tax rate that applies to the rest of your income. The ATO’s marginal tax rates for the current financial year are: $0 for an income of $18,200 19c for each $1 over $18,200 for an income of $18,201 – $37,000 $3,572 plus 32.5c for each $1 over $37,000 for an income of $37,001 – $90,000 $20,797 plus 37c for each $1 over $90,000 for an income of $90,001 – $180,000 $54,097 plus 45c for each $1 over $180,000 for an income of $180,001 and over If you decide to roll over your interest earnings into a new term deposit, you will still need to declare the interest on your tax return if you choose to reinvest the money instead of accessing it. Term deposits run under […]

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