A new bill was introduced into parliament to increase compulsory super contributions. The Bill also proposes to increase the age of an employee at which the super guarantee no longer needs to be provided from 70 to 75. If it passes thye upper house the first increase will be next year, when super contributions will go from 9 to 9.25%.

Another amendment has been introduced to make a "low income superannuation contribution". If it gets through will apply to eligible concessional contributions of an individual for the 2012-13 income year. What is it?
A person will be entitled to the low income superannuation contribution if:
  • the person has "concessional contributions" for the year; the amount payable for the individual is $20 or more.
  • the individual's "adjusted taxable income" does not exceed $37,000;

  • the individual is not a holder of a temporary resident visa. Note that New Zealand citizens in Australia do not hold a temporary resident visa and are as such eligible for the payment;

  • the individual satisfies an income test in which 10% or more of their total income is derived from employment activities or carrying on a business;
The amount payable by the Government will be calculated by applying a 15% rate to the total eligible "concessional contributions" made by or for eligible individuals during 2012-13 and later income years. The maximum amount payable will be $500. This will effectively offset the 15% contributions tax payable by a superannuation funds on superannuation guarantee contributions up to that amount (IE $37,000 x 9% x 15% = $500)
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First home saver accounts offer a tax-effective way of saving for your first home through a combination of government contributions and low taxes. You need to open a special account that is like a term deposit.

Benefits

  • The government will make a contribution equal to 17% of your personal contributions for the financial year, up to a maximum amount each year.

  • Earnings on your first home saver account are taxed at 15%

  • You don't have to report any income you earn from your account on your tax return.

  • The first home saver accounts are not taken into account in the income and assets tests that apply to various government benefits, including family tax benefit.


Eligibility

  1. You must be aged 18 to 65 and not have owned a house in Australia

  2. You must be an Australian resident for income tax purposes for at least part of the financial year.

  3. Contributions are made before you buy or build your home

  4. You can still apply for a first home owner grant if you decide to open a first home saver account. (While it lasts)

Opening an account

Banks, building societies, credit unions, life insurance companies, friendly societies and trustees of public-offer super funds can all offer first home saver accounts.

Not all first home saver accounts are the same. Before you choose an account, you should read the account's product disclosure statement (PDS), which the account provider can give you.

Building your account

Once you've opened an account, you can make personal contributions. Other people (such as your parents or other family members) can also help you out by contributing to your account.

If you close your first home saver account to buy or build your first home and the purchase or construction does not eventuate, you can open a new first home saver account within six months of closing the old one.


Catches?

  1. To withdraw your funds, you need to meet a condition for release and you can't just withdraw some of your money - you must withdraw the full amount and close the account.
  2. If you change your mind about buying a home, you cannot simply close your account, withdraw your funds and spend the money. You must close your account and transfer the balance to your superannuation (unless you are aged 60 or over in which case the balance can be transferred directly to you).
  3. You have to keep the money there for a minimum period of time. Once that time has passed and you make the decision to buy or build your first home, you have to withdraw all the money at once and close the account. You need to use the money you save as a deposit or to meet other costs you incur in buying or building your first home. The minimum qualifying period is four years from when you buy your home, but you can count: A) Any previous years where you contributed at least $1,000;  B)  the year you bought your home.
  4. Your first home saver account is an individual account, not a joint account. However, if you want to buy a home jointly, you can do so whether or not the other joint buyers have a first home saver account.
  5. There is a limit as to how much can go into the account. For the 2011-12 financial year, the cap is $85,000.





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Suppose that every day, ten men go out for beers and the bill for all ten comes to $100…
If they paid their bill the way we pay our taxes, it would go something like this…
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do...

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beers by $20”. Drinks for the ten men would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what aboutthe other six men ? How could they divide the $20 windfall so that everyone would get his fair share?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, that's not going to work!
So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.
“I only got a dollar out of the $20 saving,” declared the sixth man. He pointed to the tenth man,"but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, (journalists, and government ministers), is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
 
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible!
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The following was taken from a financial planner website. It makes you think: "Is the media just giving us the 'feel' of gloom about shares?"
In what has been a tumultuous period for investment markets, a cash buffer may have served you well, however if you refer to the graph below you will see the long term returns of cash through different markets:

$100,000 invested in Term Deposits and Australian Industrial Shares since 1982

From an income perspective the purple bars above represent the increasing dividends on $100,000 invested in Australian Industrial shares over the long-term. The blue bars show a comparison of the interest received over the years from a Term Deposit investment. On the left hand scale you will note the great variance over time in the amount of income produced by Term Deposits compared with Australian shares and that Term Deposits fall a long way behind as the years progress.

From a capital value perspective on the right hand scale, the green line shows the value of a $100,000 share investment growing over the years where the red line demonstrates that Term Deposits do not increase in value. It should be noted that this is before the eroding effect that inflation has on the real value of the investment.

In summary the graph demonstrates that historically cash over the long term is not an investment that delivers the returns Australian shares can potentially provide, from both a growth and income perspective, even though cash can offer short term relief from the volatility of the sharemarket. (Remember the past is not always indicative of the future)

Whilst it is not suitable for everyone to have their investments wholly in shares, having your entire investment in cash will leave you a long way behind in the long term. In light of the current market conditions we would like to discuss how we may be able to assist you in the review of your portfolio or any other needs you may have.

Please do not make an investment decision based on information in this email. To ensure that your investment strategy remains appropriate, please contact us on 1800 622 892 to further discuss your situation.

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Travelling in own car? A recent case held that the cost of travel from full-time place of employment to his part-time place of employment was deductible (ie work to work). Remember, however, that an employee cannot deduct the ordinary cost of travel to and from their usual place of employment. If you must carry very large bulky work items then maybe you can claim to and from home.

Here's an idea:
Ask your employer to give you a travel allowance, especially if you are in the building game. The award often has provision for this.  You are entitled to claim reasonable travel expenses if incurred in the course of gaining income. And there is no direct evidence to be kept by you, so long as you claim less than the reasonable amounts in the tables of Taxation Determination TD 2010/19.

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The Tax Office has indicated that they will be checking more carefully the 20010/11 tax year returns, and only allow appropriate work-related expenses. Contact us if you want to be sure you are claiming the correct tax deductions.

Remember, the expense must be incurred within the year you are claiming it, and must be incurred in gaining or producing assessable income. If the total of expense is greater than $300 then you will need to keep substantiation papers.

If the expense is private or capital in nature;or has been reimbursed by an employer then it cannot be claimed as a tax deduction.


As usual the Tax Office are targeting specific occupation areas. This year it is:

Earth-moving plant operators;

Flight attendants;

Carpenters and joiners, including apprentices and trainees; and

Real estate employees.

The Tax Office has released some guides that explain in detail what can and what cannot be claimed. Copies of these can be accessed here.


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Operation of the concessional contributions cap for over 50s (1/7/2012)The $50,000 transitional concessional contributions cap will be extended permanently for individuals aged 50 or over with total superannuation balances of less than $500,000. The general cap for under 50’s remains at $25,000, and will be indexed to CPI whilst the over 50’s cap will remain a set $25,000 above this figure.
Superannuation co-contribution income thresholds – Indexation Freeze
Under the superannuation co-contribution scheme, the Government provides a matching contribution for contributions made into superannuation using after-tax income. The matching contribution is up to $1,000 for individuals with total income of up to $31,920 in 2010/11, with the amount available phasing down for incomes up to $61,920. Simply put, these levels will not be indexed in line with CPI for a further 2 years.
Superannuation information on pay slips
The government will legislate to ensure that employees receive information on their pay slips regarding the amount of superannuation paid into their account. Employees and employers will receive quarterly notification from their superannuation fund if regular payments cease.
Removing minor’s (children) eligibility for low-income tax offset - on unearned income such as dividends, interest, rent, royalties and other income from property. Income actually earned by minors from work will still be eligible for the full benefit of the LITO. The exception to this rule is minors who are orphans or disabled, or compensation payments and inheritances received by minors. This measure will discourage income splitting (family trusts) to children. 
HECS (Higher Education Contribution Scheme) – reduction in discounts from 20 to 10 percent for students electing to pay their student contribution up-front (effective 01/01/2012).

Phasing out dependant spouse tax offset for taxpayers with a dependant spouse born on or after 1 July 1971 (exception to rule is invalid or disabled spouses, carers, etc).


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You may incur tax penalties and extra tax if you:

1) pay personal expenses from your company’s money without repaying it
2) don’t pay for the use of certain company assets
3) don’t declare money you have taken from your company as personal income.
Examples:
Jim owns and operates a plumbing company.

He regularly uses the company cheque book to pay personal expenses like his mortgage and bills. Jim also decides to use company money to take his family on an overseas holiday. He figures since he runs the company, he can spend the money any way he chooses.

Jim’s accountant advised him to keep the money he uses for private purposes separate from his company’s money, to avoid having to pay penalties and extra tax.

Jim’s accountant advises him of the following options:

Draw a salary from the company, pay tax on it and use that money for day-to-day living expenses such as groceries and mortgage payments.
Repay the company money he has used to pay his private expenses.
Pay for his family’s holiday using money he borrows from the company under an arm’s length loan agreement that he repays in regular instalments.

Example 2

Gary’s company owns a car. Although Gary is not an employee he is allowed to use the car. From 1 July 2009 Gary’s use of the car will be taxed if he does not pay an arms length value to the company for its use. If Gary was an employee, fringe benefits tax may apply. If Gary is not an employee and the exceptions above do not apply, he must declare its use as personal income.

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