Urgent Tax Time Alert

As we are only days away from the end of the financial year, so this is your last chance to make your Super contributions at the current caps, if that is your intention.

For the 2016/2017 year:
 There are 2 annual concessional contributions caps, namely:

  • $30,000 cap for anyone aged 48 or under as at 30 June 2016.

  • $35,000 cap for anyone aged 49 years or over as at 30 June 2016.

For the 2017/2018 year: The annual concessional contributions cap is reduced to $25,000, and you need to be aware of this lower cap (compared with the higher caps applicable for the 2016/2017 year) when considering before-tax contributions strategies. The cap applies to all age groups, which means there is NOT a special higher cap for older Australians.

Taking effect from 1 July 2017, the annual non-concessional contributions cap is $100,000, and the 3-year bring-forward cap is $300,000. For the 2016/2017 year, the annual after-tax contributions cap is $180,000, and the 3-year bring-forward cap is $540,000.

If an individual intends to claim a tax deduction for personal super contributions (treated as concessional contributions) in their tax return, they will need to lodge the appropriate form with their super fund. If you are planning to make tax-deductible super contributions, ensure you verify your position with an accountant or the ATO. Note that the 10% rule will no longer apply from 1 July 2017.

For any clarification or urgent advice, call our SMSF specialist Tes on 08 9267 3800.

Budget changes update (Super, Tax, Property Investors & SMSF)

Many clients have made contact with the WAI Group team to discuss the changes from the recently announced Federal Budget, and how those changes will impact them and their SMSF.

This post is a run down of some of the more important changes to aid in your understanding.


Superannuation Changes

Under the new superannuation law, from 1 July 2017, every SMSF member is limited to $1.6 million in their pension account where the investment income is tax free. Members with amounts in excess of $1.6 million in their pension account are required to either retain the excess in the accumulation phase or withdraw the money as a lump sum benefit. Earnings accumulated in the pension account can remain if the account grows in excess of $1.6 million. If the pension account reduces due to poor investment performance, members will not be able to “top-up” their pension account back up to $1.6 million.

Things to consider

  • SMSF members with multiple pensions can choose which pension to commute. Members under the age of 60 may prefer to commute the pension with the higher taxable component to minimise the tax payable on their pension income.
  • Members also need to consider whether their pension commenced prior to 1 January 2015 so as to preserve their entitlements to the age pension and the Commonwealth Seniors Healthcare Card.
  • If withdrawing an excess amount (over the $1.6 million cap) from your SMSF, you need to weigh up the benefit of the $18,200 tax free income threshold compared to the 15% superannuation tax rate.
  • The new reduced non-concessional contributions limit (i.e. $100,000 pa) may make future contributions to your SMSF more difficult.

The transfer balance cap is indexed in increments of $100,000 in line with Consumer Price Index. If an individual has not fully utilised their transfer balance cap and chooses to transfer their funds, after an indexation increase has occurred, then the balance cap amount will be subject to a proportioning formula based on the highest balance of the member’s transfer balance account compared to the member’s personal balance cap.


Income tax rates for 2017/2018 financial year

The tax-free threshold is the first $18,200 of your income. You can earn up to $20,542 before any income tax is payable, when taking into account the Low Income Tax Offset.

For the 2017/2018 year, your top marginal rate of income tax rate can be 0%, 19%, 32.5%, 37% or 45% (plus Medicare levy).

Note 1: For the 2017/2018 and 2016/2017 years (and future years), the 37% marginal tax rate takes effect when your taxable income exceeds $87,000. For previous financial years (before July 2016), the threshold for the 37% tax rate is $80,000.

Note 2: From 1 July 2017, the top marginal rate will drop back to 45%, from the previous rate of 47%. See the 2016/2017 financial year section, later in the article for background on the 47% tax rate.

Income tax rates update for 2017/2018 financial year

Income                   Marginal tax rate       Tax payable

$0-$18,200                   0%                        Nil

$18,201- $37,000          19%                       19 cents for each $1 over $18,200*

$37,001-$87,000          32.5%                    $3,572 plus 32.5 cents for each dollar over $37,000

$87,001-$180,000        37%                       $19,822 plus 37 cents for each dollar over $87,000

$180,001 +                    45%                      $54,232 plus 45 cents for each dollar over $180,000

The government’s plan is, that from 1 July 2017, eligible Australians will be able to make voluntary superannuation contributions of up to $15,000 a year, and a maximum of $30,000 over more than one year, to their superannuation account for the purposes of purchasing a first home. The voluntary super contributions will be concessional (before tax) contributions, which means you will need to arrange with your employer to salary sacrifice super contributions, or claim the super contributions as a tax deduction in your income tax return.

From 1 July 2018, an Australian aged 65 years or over will be able to make non-concessional (after tax) contributions into a super fund account (accumulation account), up to a maximum of $300,000, from the proceeds of selling his or her home. If a couple sells their home, they can contribute up to $300,000 each.

Note: A person is only eligible for this measure if they have owned their principal place of residence for a minimum of 10 years.


SMSF Trustees will face bigger penalties from 2017/18

SMSF trustees can expect harsher fines from the next financial year (2017/2018 year) onwards with administrative penalties of up to $12,600 per trustee (including corporate trustee) for a breach of the super rules. A value of a penalty until will increase to $210 (from the current $180) from 1 July 2017.
 

Property investors will have some negatives in the proposed budget changes

The 2017 Federal Budget includes proposed changes which will affect residential property investors Australia-wide.

The Australian Tax Office (ATO) allows owners of income producing property to claim depreciation deductions for the wear and tear that occurs to a building’s structure and the plant and equipment assets within.

The proposed changes relate to the depreciation of plant and equipment assets and the eligibility to claim this deduction. Currently, investors are eligible to claim qualifying plant and equipment depreciation on assets found in an investment property they purchase, even if they were installed by a previous owner.

“Under the new rules which are yet to be legislated by Parliament, investors will be able to depreciate new plant and equipment assets and items they add to their property, however subsequent owners will not be able to claim depreciation on existing plant and equipment assets,” said the Chief Executive Officer of BMT Tax Depreciation, Bradley Beer.

“This change will have a major impact on investors, essentially reducing the annual deductions they can claim therefore reducing their cash return each year. This could lead to investors being in a tighter financial position and may discourage future investors from purchasing a second hand residential property.”

“It is our understanding at this stage that if the property is new, they will be able to continue to depreciate plant and equipment as they were previously. We are seeking further clarification on this,” said Mr Beer.

Investors will still be able to claim capital works deductions also known as building write off, including any additional capital works carried out by a previous owner.

The budget notes were clear that existing investments will be grandfathered. This means that anyone who has purchased a property up until the 9th of May 2017 will be able to claim depreciation as per normal.


Questions and updates?

If you have any questions about how the budget will effect you and your situation, or ongoing changes as they happen, do not hesitate to email or call one of the team on (08) 9267 3800.

What do the APRA lending changes mean for SMSFs?

Summary

This week saw the introduction of new bank rules by the regulators, in an effort to curb the overheated property markets of Melbourne and Sydney.

Many of our new SMSF clients could be indirectly affected by these changes and the tightening in general APRA is encouraging on investment loans.

The rules primarily seek to reduce the amount of interest only loans being written by banks, and also increase the scrutiny of interest only loans above 90% LVR. This does not impact SMSF lending directly, however, they also have required investor lending by banks to stay below 10% growth.

How will this impact SMSF lending?

SMSF lending falls into the category of investor lending, and the bank lending changes from APRA will mean that it will take longer for SMSF clients to procure financing, and also, it will be harder for the top tier banks to lend to SMSF's and keep below their 10% growth in that segment.

What will we do?

WAI Group will continue to work with a wide variety of brokers, banks and lenders to ensure our clients have access to excellent funding options and strategies for their retirement outcomes.

Super Changes now through Senate

The Super reform Bill passed the Senate last night.

The Senate passed the key Bill which gives effect to the much discussed superannuation reforms. 

Summary of measures 

The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 contains the measures originally announced in the 2016/17 Federal Budget with subsequent amendments. The Bill was passed as introduced to Parliament without any changes. The majority of measures commence from 1 July 2017. 

The key measures include:

  • Introducing a $1.6 million transfer balance cap which limits the amount that can be transferred to the retirement phase, where earnings are tax-free. This measure will also apply to death benefit income streams.
  • Reducing the concessional contributions cap to $25,000 for all taxpayers.
  • Introducing a concessional contributions catch-up regime for those with total super balances of less than $500,000 from 1 July 2018.
  • Allowing a deduction for personal contributions without testing the proportion of employment income received (the 10% test).
  • Reducing the non-concessional contribution cap to $100,000 pa (or $300,000 under the bring forward provisions), limiting the ability to make NCCs to people who have a total superannuation balance of less than $1.6 million and introducing transitional rules for those who triggered the bring forward rule prior to 1 July 2017.
  • Introducing a low income superannuation tax offset to replace the low income superannuation contribution (which will be abolished from 1 July 2017).
  • Increasing the annual income threshold from $10,800 to $37,000 for eligibility for the spouse contribution tax offset.
  • Abolishing the anti-detriment payment.
  • Removing tax exempt earnings for transition to retirement income streams.
  • Lowering the income threshold for Division 293 tax to $250,000.

Next steps 

The Bill will now need to receive Royal Assent before it is formally law. This is generally accepted to be a mere formality.

Call us on 9267 3800 and ask for the Super team if you would like more information.

How is your Super going?

It is easy to ignore super in the day to day of life, but it is extremely important to check the performance and fees - especially as small changes can result in hundreds of thousands of dollars for your retirement.

An easy way to do this today - "Stockspot" has released their annual superannuation fund ratings so head here to check yours https://www.stockspot.com.au/fatcat/ and if if does poorly, it would be a good idea to give us a call!

Superannuation Changes Update

As the details are ironed out for Australian Superannuation changes, it is vitally important you position yourself now to ensure a comfortable retirement.

Our Super & SMSF experts, Nish Puri & Robert Howell are able to guide you through the changes, your options and help chart the best course for the transition. There is no excuse to not take full advantage of what the Government has setup to help your future, the sooner you plan, the more options you will have available.

Call us on 9267 3800 to make an appointment.

To read more on the changes that are taking place, read this article at the Australian Financial Review.

Tax Reduction in Perth

Looking to redirect some of your tax bill back into your own pocket - building a stronger future for you and your family? WAI Group can help.

We can provide licensed advice in the following areas, which all can work together to reduce your tax.

1. SMSF (Self Managed Super Funds) - Take control of your super, adjust allocations and use your super to the fullest extent.

2. Accounting - Use an accounting specialist that takes a holistic approach to your wealth, with experience in tax, as well as wealth building strategies.

3. Insurance & Risk Management - What would happen if disaster strikes? Personally, or with your belongings or assets? Our Insurance brokers will scour the market to find the best fitting insurance for you.

4. Property Investment - Capital growth and/or ROI? We can help strategise a solution to best suit your situation, and lead to great wealth building outcomes.

We would love to chat with you about building a better future, Call Courtney on 9267 3800 or send a message here.