Taxation & Tax Tips

Work Related Deduction Tips

January 8, 2018

Author – Anh To – Bishop Collins, Business Services, Client Manager.

“My friend said I can deduct…”

With a New Year upon us and tax lodgement looming, how often during a dinner party has a friend’s friend said “I was told” they could deduct almost anything as long as it is “work-related”?

Firstly, taking tax advice from a friend’s friend, would be your first mistake. Secondly, it is our experience that over the last few years the ATO has continued to warn taxpayers to avoid incorrect claims for work-related expenses. Improvements in technology and data matching, has resulted in the ATO using real-time data to compare taxpayers with other individuals in similar occupations and income brackets. They are on the lookout for higher than-expected claims related to expenses including vehicle, travel, internet and mobile phones, and self-education.

The key is understanding what you are eligible to claim before you lodge your tax return, based on facts (from your own adviser) and not what you’ve heard through the grapevine.

Some of the common myths we have come across include:

  1. “Surely I can claim my business clothing, like my suits and shirts, because I only wear them to work and it is required by my employer.”

What is wrong with this? Everyday professional clothes is considered private clothing and not a ‘uniform’, even if it is only used for work. To legitimately claim your uniform, it needs to be unique and distinctive. A uniform will have your employer’s logo, or will be specific to your occupation and not for everyday use, such as a chef’s pants or fluorescent safety vests.

  1. “I should be able to claim my travel between home and work, because if I didn’t travel to work, I wouldn’t be able to earn income… So obviously the travel is work-related, right?”

What is wrong with this? Generally you can’t claim a deduction for this because trips between home and work are considered private travel. However, you can claim deductions in some circumstances, for example some travel between two separate workplaces (provided one of the places isn’t your home).

  1. “I dry-cleaned my work clothes, this must be a work-related deduction.”

What is wrong with this? You can only claim a deduction for the cost of cleaning ‘occupation-specific clothing, protective clothing and unique, distinctive uniforms’. Again, everyday professional suits and shirts (without an employer logo) is considered private, and the dry-cleaning expenses for these articles of clothing would not be deductible.

  1. “I use my private phone to make work calls and check my work emails all the time. Therefore all my phone bills are definitely deductible.”

What is wrong with this? If you use your phone or internet for both work and private purposes, a reasonable ‘work use’ percentage must be calculated to support your claims. The ATO guidelines indicate that you would need to keep records for a four-week representative period in each income year, to claim a deduction of more than $50. This could include diary entries, electronic record and itemised bills. Furthermore evidence that your employer expects you to work at home or to make some work-related calls, would help to demonstrate your entitlement to the work-related portion of your phone and/internet use.

If you have any concerns over “tax myths” that you’ve heard over the years, feel free to book in a time to speak to any of our experienced staff at Bishop Collins for any questions you may have.

Financial & Retirement Planning SMSF & Superannuation

Are you an 8%’er?

January 3, 2018

We say it every year – “this year I am going to”… save money, reach my financial goals, cut back my debt, invest, be more money smart…

The list of New Year promises to ourselves is endless.

Somehow, the 50 motivational memes we have committed to memory encouraging us to break the spell and the enthusiasm we have in January to actually “DO IT” this year, often fall short of the task at hand and the promises we make to ourselves quickly become broken. In reality, studies show only 8% of us actually follow through and achieve our New Year’s Resolutions.

No matter what your financial goals are for this year, you will only achieve them with a plan. Saying “I’m going to save money” is a goal, but it can only be achieved with a plan.

The first step is to set your target early, so you know what to aim for. Make your target SMART: Specific, Measureable, Achievable, Realistic and Timely. It is important to give yourself hope of achieving your financial goals. By setting a realistic time frame to achieve your goal in, you will often work harder to make sure you succeed.

Breakdown big goals into smaller bite sized chunks. If your overall goal is to be debt free in 12 months and you have no stepping stones to achieve this, the chances are you could be in as much or more debt at the beginning of next year.

Most importantly, whether you have large or small financial New Year’s Resolutions, you need to be able to ask for help. What seems impossible to you may be a simple affordable fix for an expert. Too often we give up on our “saving money” goals because we neglect to seek help on the best way to do it.

Simple steps you can take now to start saving straight away are:

  • Do a budget. I know, “yuck”. But a budget is the simplest way to making a plan to save money. ASIC has a great online budget planner which is simple to use and will really help you stay on track. You can find it on their website or follow this link: Budget planner
  • Check your insurance policies. The New Year is a great time to do an online search to compare other policies with yours. Make sure you are not paying more for the same thing.
  • Organise your debt into manageable bite sized chunks. Start with the smallest and most achievable and focus on getting this paid. Then move onto the next smallest. You will stay motivated when you see how achievable this is.
  • Find a high interest savings account where you can watch your money growing.
  • Consolidate your Super. Consolidating multiple super funds into one will save you money on fees and help you grow your lump sum faster.

Once you see where your money is being spent, simple adjustments to your habits will ensure you don’t fall into the 92% category of failed New Year’s resolutions.

We want to see you achieving your financial goals this year. Be an 8%’er, ask for help and see where you land. It’s your year for success.

Taxation & Tax Tips

Accountant or Taxation Reform?

September 26, 2017

Ian Rodrigues ReformBy Ian Rodrigues – Director Bishop Collins

Taxation reform – the real and significant kind – has eluded us for some time now. There are of course many strongly held views about taxation at every end of the spectrum. Every tax, or proposal to make any change is hard to get consensus. Even when to objective and unbiased observers, a fair and common sense change is mooted, there is a vested interest or a political opponent seeking to argue the point with the aim of keeping the status quo. So where can you actually find a thorough, fair and unbiased opinion on tax reform? Does one even exist? We have had our share of government requested reviews, this often means their independence can become “politically tarnished” whether they have good ideas or not. Little of the recommendations from these reviews have actually been followed through and some of the attempts at them have been “politically bruising”. It seems to be the way the system works for now and there does not appear to be any real change on the horizon.

As an adviser, we can only guide our clients and suggest that:-  the current rules are what they are; they present opportunities to ensure you pay the correct amount of tax through legitimate tax planning, such as super, negative gearing and timing your capital gains. We don’t make the rules. For the tax policy purists, a clean sheet design would never come up with the system we have! We have a tax system where the tax outcome on the same property transaction can result in tax payable of 0% 10% 15% and in between up to basically 50%. Remember, on the same economic transaction you can get a tax outcome of between 0% and 50%.

So what should you do? Simply put, get ADVICE and PLAN ahead. Your accountant is well placed to help. Without this you can easily end up paying more than your fair share of tax.

Taxation & Tax Tips

Negative Gearing – Why all the Talk?

August 29, 2017

Ian RodriguesBy Ian Rodrigues – Director Bishop Collins

Never let the facts get in the way of a good story or so the saying goes. In 2017 Australian politicians have an interesting relationship with the facts when it comes to taxation and especially negative gearing. So, let’s try and get some facts and then use some logic to see what the situation really looks like.

Let’s face it, no tax is popular, but tax policies should always meet the tests of efficiency, simplicity, equity, consistency and transparency. Arguably the current negative gearing of property meets these. It is not a special policy or an allowance – it’s just what happens when you make a loss in the early years, with the aim of making profits over the investments timeframe. There is no special rule or magic here, this is what happens when you buy any investment or run a business. In almost all cases property that starts out with a tax loss will, over time, make a profit and be taxed. If not, then why would you bother? In the early years your loss is offset against your other income. The latest policy suggestion is to allow these losses only to be applied when the investment makes a profit. So, this allows you the same deductions but just in later years – so why? In theory, the proponents suggest this will raise more tax from those that can afford to pay it (income redistribution). But, how can this be when the same deductions are allowed over time (timing difference)? What happens if this discourages modest and first- time investors from seeking to build their own financial future, reducing future reliance on government support?

Simply, the confusion and misunderstanding is often enough to deter investors. Maybe an honest debate, based on fact may assist – maybe not, but watch this space as it will hot up again.

Ian Rodrigues has extensive experience in commercial and taxation matters related to business and property. Ian is also a significant contributor to his profession where he was the 2011 NSW State Chairman of the Institute of Chartered Accountants in Australia (ICAA).
Business Coaching

CHANGES TO CONTRIBUTION LIMITS

August 3, 2017

Taking effect from 1 July 2017, the concessional contribution cap is now $25,000 for everyone, so ensure any reserving and salary sacrifice strategies are appropriate.

The annual (after tax) non-concessional contributions cap is $100,000, and the 3-year bring-forward cap is $300,000. This has changed from the 2016/2017 year, where the annual after-tax contributions cap as $180,000, and the 3-year bring-forward cap was $540,000.

From 1 July 2017, if your total superannuation balance exceeds $1.6 million as at 30 June 2017, then you cannot make non-concessional contributions. Further, you can only take full advantage of the bring-forward rules if your total superannuation balance (TSB) is less than $1.4 million as at 30 June 2017, and partial advantage of the bring-forward rules if your total superannuation balance is more than $1.4 million but less than $1.5 million.

If you are older than 65 you will need to meet a work test to contribute to super in most cases. You need to work for at least 40 hours during 30 consecutive days at any time during this financial year to make tax deductible and non-deductible contributions to super.

From 1 July 2017, most people, regardless of their employment arrangement, will be able to claim a full deduction for personal super contributions they make to their super fund until they turn 75. Individuals who are aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction.

If you wish to claim a tax deduction for personal contributions, you must complete and lodge a notice of intent with your super fund and have this notice acknowledged (in writing) by your fund.
These changes are quite complex, so if you are unsure before you make any contributions to your SMSF please do not hesitate to contact our super team to confirm your eligibility.

Business Coaching

Why every business needs a cash flow forecast

June 18, 2017

People choose to work for themselves for many reasons. They like to be their own boss or want the freedom that comes with being able to set their own path. But running your own show, especially once you take on staff and grow from a single operator to a small and medium business brings with it many challenges. One of those challenges has always been cash flow.

We have all heard the statistics that 9 out of 10 businesses fail due to poor cash flow. Cash flow is the life blood of a business and without it the business will die. If it is that critical why don’t most businesses manage their cash flow like they do other operations in the business like marketing or purchasing?

What is a cash flow forecast?

Simply, a cash flow forecast measures the amount of money (cash) coming into a business, against what goes out and when. It is commonly prepared for the year in advance and shows the expected bank balance at the end of each month.

If you don’t measure it, you don’t manage it

You can’t manage something if you aren’t measuring it. Many businesses don’t believe they have a cash flow problem. However, they are regularly putting their own money into the business, have an overdue tax bill or are paying themselves less than an appropriate salary for their role in the business. This happens because they are not measuring their cash flow. If you aren’t measuring your cash flow then you can’t manage the activities that are having the biggest impact on your cash flow. This results in decisions being made based on how much money is in the bank account rather than on cash flow, profitability or strategy.

Setting up your cash flow forecast

Building a system to monitor your cash flow must be simple, fast and easy to understand to ensure quality decisions are made. Whilst a cash flow forecast can be prepared manually through programs such as Microsoft excel, a number of software programs can save you time by linking directly to your accounting system to not only prepare the forecast but report on actual performance.

If you would like our assistance in preparing and reporting on a cash flow forecast for your business, speak to one of our directors today.

Business Coaching

Business Structure – Which one is right for me?

May 12, 2017

“I’m thinking of starting a business, what structure should I do this in?”

‘I’m thinking of starting a business, what structure  This is a common question we are asked by our clients who are considering starting their own business! This is a great question because the structure in which you operate your business will have wide ranging consequences from how well your assets are protected to the overall tax payable.

It is important to understand the advantages and disadvantages of each structure and to consider the structure that is most suitable to you based on your circumstances

Some of the major items to consider include:

– Estimated future turnover and net profit

– Fees to establish and maintain structure

– If you have significant personal assets

– If significant business assets will be required and protected

– If the business activity to be conducted is in a high risk environment

– The ability to assess tax losses in the future

Different business structures will have their advantages and disadvantages. For example while operating as a sole trader you will have minimal establishment and compliance costs, the individual operating the business has unlimited liability and any profits will be taxed at their marginal tax rates. This could be unfavorable in the event of a litigation where your personal assets are at risk. As the the business becomes profitable you will likely be taxed at the highest marginal tax rates. In contrast, structures such as a company or a discretionary trust offer limited liability in the event of a litigation and may reduce the overall tax payable on large amounts of profit. These structures however however typically expensive to establish and have complex regulatory and compliance costs compared to the sole trader.

It is also important to note that circumstances may change and that after trading through a structure for a period of time another structure may become more appropriate. In this situation it may be ideal to consider a re-structure. The costs and benefits of a re-structure should be carefully examined to determine if the benefits outweigh any costs. We note depending on your personal circumstances there may be tax concessions or rollovers that may significantly reduce the costs of a re-structure.

Whether you are starting a business for the first time or have been operating a business for a period of time it is always important to assess or re-assess the most appropriate business structure that best suits your current circumstances. There is no cookie-cutter way of determining the best structure as the circumstances of each person and business are different.

If you are interested in starting a new business or considering a re-structure speak with one of our Directors today.

Taxation & Tax Tips

The biggest tax concession in perspective

April 28, 2017

The PPOR exemption is for many of us the single biggest tax concession we have in our country.

Taxpayers are paying around 50% at the top rate of income tax with associated levies and charges. Capital gains are given a 50% discount on the amount taxed, which is in some ways generous but also under review by politicians seeking to increase the overall tax raised.

For all the noise about the negative gearing tax concession, it is rarely highlighted that it is only a TIMING difference. Investments typically become cash flow positive and taxable in time and tax is being paid over the investment cycle.  Bringing forward a tax collection is not going to fix the need to increase the tax take in the long run. It is plausible to argue, it may actually reduce the tax take! Less investors becoming self-funded retirees is a nightmare for the government’s future budgets.

Superannuation is taxed at 15% on the way in, 15% while it is there and in many cases no tax on the way out!

While paying tax is never popular, the reality is we all ultimately should accept paying taxes as it provides the funds for all the services and expenses of our country and communities. Much oxygen and argument takes place over who should pay, how much and how it should be spent, but let’s not go there! Most people want to know they are only paying a fair share and not more than they should.

To the main point – if you want the single biggest tax concession we have, make sure you are using and protecting your PPOR concession. It is easy to compromise it, by not fully understanding the rules. Make sure you understand them and how you will maximise your use of this big tax concession.

Bookkeeping FAQ’s

5 reasons to move to cloud

February 11, 2017

But first, what is the cloud?

“The cloud” is most likely a phrase you have heard many times before, but what exactly does it mean?! The cloud is a term used to describe storing your data remotely by utilising the internet. Sounds complicated, however the hard work has already been done for us.

Small business owners are constantly being challenged, you are challenged by time constraints, to stay competitive and to grow your business. This can mean that manual tasks such as daily processing and invoicing become painfully time consuming.

Automation can play a key role in making your business more efficient and cloud based software can eradicate the need for manual processing. Giving you back the precious time you need to run your business as you see fit.

Here are five reasons why your business would benefit from a cloud based accounting solution:

Collaboration

Traditional accounting software only allows for a single user, cloud based accounting software allows multiple users access to real time financial data. User access on cloud based systems can be customised to suit the team members needs and makes it easy for your team to collaborate.

Cloud accounting systems allow for greater and more frequent collaboration with your financial advisors. Providing your accountant with access to your ledger can mean errors are picked up more quickly, information transfer becomes seamless and tax time doesn’t need to be a chore.

Integration

The cloud isn’t just reserved for accounting software, innovation in the cloud software space has enabled the development of entire business solutions, meaning all your business functions can be carried out in the cloud.  Many business tools and software can directly integrate with cloud accounting ledgers. Gone are the days where businesses had multiple systems performing different business functions, when a cloud based solution can ensure all your financial data is synchronized across one platform.

Accuracy

Manual processes and functions can lead to mistakes and discrepancies, and when found it can be a time consuming process to rectify. Cloud based accounting ledgers can help automate manual processing, save time and provide you with a real time view of your business.

Security  

Cloud technology has always been ‘clouded’ by the notion that your financial data is not secure. However cloud technology provides automatic backup of your data on a daily basis to prevent the possibility of data loss. Furthermore data privacy can be controlled as user access can be controlled and customised and each cloud accounting ledger maintains an audit trail to manage fraud.

Efficiency

Utilising cloud accounting software can improve your business’s overall efficiency and in turn improve your productivity. As a business owner your time is better spent driving sales, not worrying about the processing. Cloud ledgers provide business owners with real time view of their business meaning you can make informed business decisions quickly and more accurately than ever before.

These are the benefits our cloud clients are seeing when they switch to cloud software. If you’re interested in exploring how cloud technology can help your business speak to one of our Directors today.

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SMSF & Superannuation

How to benefit from the Superannuation reforms 2016?

December 16, 2016

Superannuation reforms 2016 – most significant super reforms in a decade and how to benefit from the opportunities it brings

After months of uncertainty, consultations and amendments, the superannuation reforms announced in the 2016 Budget finally received Royal Assent. These changes are being hailed as the most significant super reforms in a decade since the Simplified Superannuation reforms of 2007. It’s important that you understand the impact of these changes and plan your finances in the best possible way moving forward.

These changes mean that some opportunities are only available to you prior to 30 June 2017.  This may be the last opportunity if you are under age 65 to contribute up to $540,000 or $1,080,000 as a couple to your super accounts this financial year. This also creates a chance for some couples where one partner has a lot more in super than the other, to even up your balances before 30 June.

Other reforms introduced such as the Low-Income Superannuation Tax Offset, improving access to concessional contributions, allowing catch-up concessional contributions, extending the spouse tax offset and enhancing the choice in the retirement income products, will provide enhanced opportunities after 30 June 2017.

Some of these changes and related strategies to consider prior to 30 June 2017 have been summarised below:

After-tax / Non-Concessional Contributions

  1. Contribution Cap and ‘Bring Forward’ rule

Rules which apply this Financial Year (Prior to 30 June 2017)

The contribution cap is $180,000 a year with an option to make 3 years of contributions in one year ($540,000) if you are under 65 years of age. This cap is not impacted by your super balance. The only factor considered is how much you have already contributed and when you triggered the “Bring Forward” rule.

Rules which will apply from next Financial Year (Post 1 July 2017)

From 1 July 2017, the contribution cap will be $100,000 a year with an option to make 3 years of contributions in one year ($300,000) if you are under 65 years of age. There will be transitional arrangements available and the cap will be adjusted based on when you triggered the “Bring Forward” rule. This cap will further be impacted by your super balance and anyone with more than $1.6M in super will not be able to make any contributions.

Strategy for this Financial Year (Prior to 30 June 2017)

This may be the last opportunity if you are under age 65 to contribute up to $540,000 or $1,080,000 as a couple to your super accounts this financial year. This also creates a chance for couples where one partner has a lot more in super than the other, to even up their balances before 30 June.

Speak to your Adviser to work out HOW MUCH capacity you have to contribute!

  1. Tax Offset for Spouse Contributions

Rules which apply this Financial Year (Prior to 30 June 2017)

There is a tax offset available where the recipient spouse has an assessable income less than $13,800. Age and work tests apply.

Rules which will apply from next Financial Year (Post 1 July 2017)

The tax offset is available where the recipient spouse has an assessable income less than $40,000. Age and work tests will continue to apply. Further, no tax offset will be available if the recipient spouse has exceeded their non-concessional contribution cap or their balance is $1.6M or more.

Strategy for this Financial Year (Prior to 30 June 2017)

While the scope of receiving this offset may be higher next financial year, it is still applicable this year.

Speak to your Adviser to work out if you could benefit from the tax offset by making a super contribution into your spouse’s account.

Pre-tax/ Concessional contributions (included Superannuation Guarantee, Salary Sacrifice and personal tax deductible contributions)

  1. Contribution Cap

Rules which apply this Financial Year (Prior to 30 June 2017)

$30,000 if you are under the age of 49 and $35,000 if you are over age 49 on 30 June 2016.

Rules which will apply from next Financial Year (Post 1 July 2017)

$25,000 for everyone irrespective of their age.

Strategy for this Financial Year (Prior to 30 June 2017)

From next year, the amount of tax deductible contributions will be reduced by as much as $10,000 for some people.

Speak to your Adviser to work out if maximising your concessional contributions this year will be tax effective.

  1. Options to Catch-up on Concessional contributions

Rules which apply this Financial Year (Prior to 30 June 2017)

You can only contribute up to your annual cap mentioned above each year. If you do not use the cap, you do not have any catch-up option available.

Rules which will apply from next Financial Year (Post 1 July 2017)

No change for the next financial year (2017-2018). However, if your super balance is less than $500,000 on 30 June 2018, you can make catch-up super contributions on a rolling 5-year basis from 1 July 2018.

Strategy for this Financial Year (Prior to 30 June 2017)

N/A as this change is effective 2018.

  1. Tax Deduction for Personal Contributions

Rules which apply this Financial Year (Prior to 30 June 2017)

Currently an income tax deduction for personal superannuation contributions is only available to people who earn less than 10% of their income from salary or wages.

Rules which will apply from next Financial Year (Post 1 July 2017)

From 1 July 2017, anyone under 75 who makes a personal super contribution will be able to claim an income tax deduction (subject to the work test for those aged 65 or more).

Strategy for this Financial Year (Prior to 30 June 2017)

While the scope of claiming this deduction will be available to more people next financial year, it is still applicable to those who are substantially self-employed this year.

Speak to your Adviser  to ensure you are maximising your contributions and related deductions.

Division 293 Threshold

Rules which apply this Financial Year (Prior to 30 June 2017)

Anyone with an adjusted taxable income of more than $300,000 pays 30% tax on their concessional super contributions.

Rules which will apply from next Financial Year (Post 1 July 2017)

This threshold is being reduced and from 1 July 2017, anyone with an adjusted taxable income of more than $250,000 will pay 30% tax on their concessional super contributions.

Strategy for this Financial Year (Prior to 30 June 2017)

N/A

Pension Phase

  1. Account Based Pension

Rules which apply this Financial Year (Prior to 30 June 2017)

Currently there is no limit on how much you can transfer into the pension phase. The income generated by the assets supporting the Pension account is currently tax free. No CGT is payable on the sale of these assets either.

Rules which will apply from next Financial Year (Post 1 July 2017)

There will be a cap of $1.6M on the amount of superannuation that can be transferred in to a tax-free retirement account. This cap is applicable irrespective on when you started the pension account. Any amount more than this amount can be retained in accumulation super account or withdrawn from super. Fluctuation in retirement accounts due to earnings growth or pension payments will not count towards the cap. The transfer cap will be indexed in line with CPI and will increase in $100K increments. You may have capacity to add funds to the pension account based on the percentage of the cap you still have available. This $1.6M transfer cap is impacted by any Defined Benefit pension you receive as well. Cost base of the assets above $1.6M may be reset to current market value to reduce the tax on gains you accrue in the future.

Strategy for this Financial Year (Prior to 30 June 2017)

Market fluctuations, CGT considerations not just now but in the future, future estate planning, are just a few of the factors which will need to be assessed to ensure you make the most of the changed rules.

Speak to your Adviser to work out what is the best way forward if you have more than $1.6M in pension phase.

  1. Transition to retirement (TTR) Pension

Rules which apply this Financial Year (Prior to 30 June 2017)

Currently there is no limit on how much you can transfer into the TTR pension phase. You need to withdraw between 4%-10% as a pension payment. The income generated by the assets supporting the Pension account was tax free. You could treat certain super income stream payments as lump sums for tax purposes. No CGT is payable on the sale of these assets either.

Rules which will apply from next Financial Year (Post 1 July 2017)

There will be no limit on how much you can transfer into the TTR pension phase. You need to withdraw between 4%-10% as a pension payment. However, the income generated by the assets supporting the Pension account will now attract a 15% tax (same tax rate as applicable in the accumulation phase). Further, you will not be able to treat certain super income stream payments as lump sums for tax purposes. CGT will also be payable on the sale of these assets. However, you may be able to reset the cost base of the assets supporting the TTR to current market value to reduce the tax on gains you accrue in the future (subject to LCG 2016/D8).

Rules which will apply from next Financial Year (Post 1 July 2017)

Even though there will be tax payable on the income generated, TTR pensions may still be appropriate for some people. You may have reduced your hours at work or may wish to supplement your income with a super pension.

Speak to your Adviser to work out what is the best way forward and if a TTR is still appropriate for your needs going forward.

Miscellaneous

  1. Defined Benefit Schemes

Rules which apply this Financial Year (Prior to 30 June 2017)

Defined benefit schemes, as compared with accumulation schemes, pay benefits based on length of service and final salary. The tax payable is dependent on if you are part of a funded or unfunded scheme. Funded defined benefit schemes are taxed on contributions and earnings but pay tax-free benefits. Unfunded defined benefit schemes pay pensions that are taxed at the individual’s marginal tax rate less a 10% tax offset. There is no cap on how much income you can receive from these schemes.

Rules which will apply from next Financial Year (Post 1 July 2017)

From 1 July 2017, a defined benefit pension of $100,000 per annum will use up the recipient’s transfer balance cap of $1.6M. If they have any funds invested with another industry fund or SMSF which are in pension phase, they will have to move these funds back into accumulation or withdraw them from super. Further, 50% of the pension over $100,000 per annum paid to a person aged 60 and over from a funded defined benefit will be included in the recipient’s assessable income. Pensions from an unfunded scheme over $100,000 per annum will be taxed at full marginal rates with no offsets available.

Strategy for this Financial Year (Prior to 30 June 2017)

Besides the additional tax payable by some, these changes will impact those who have a defined benefit scheme and have money invested in industry funds or SMSFs.

Speak to your Adviser to assess how your defined benefit pension will impact your other superannuation accounts.

  1. Anti-Detriment Payment

Rules which apply this Financial Year (Prior to 30 June 2017)

As per current rules, an anti-detriment payment (the refund of contributions tax paid during a fund member’s lifetime, which is then paid as a lump sum to certain dependents of a deceased fund member) is tax deductible.

Rules which will apply from next Financial Year (Post 1 July 2017)

Deductibility of Anti-Detriment Payments will be abolished from 1 July 2017. However, these will be still be available if the member had died prior to 1 July 2017 and if the payment is made by 30 June 2019.

Strategy for this Financial Year (Prior to 30 June 2017)

Ensuring a SMSF can pay out the anti-detriment payment is complex.

Speak to your Adviser to see if you can access this concession.

Disclaimer: This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (“Prime”). Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.

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