2013 post budget presentation v6 on scree nl

2011-2012 Budget Update 12 May 2011

2013 Post Budget, Pre Financial Year End Client Update

30 May 2013 Jamie Towers & Chris Campbell

Mobile Phones – please turn off or to silent

Bathroom – far side of reception

Lucky Door Prize – Bottle of wine – business card draw

House Keeping

Vision

Hanrick Curran is renowned across Queensland for delivering innovative solutions to grow and protect the wealth of our SME, Corporate and Personal clients by empowering our skilled creative professionals to deliver comprehensive expert advice.

Audacious Goal

1. Be No. 1 in Service and Quality to our Clients2. Be the No. 1 Place to Work3. Be No. 1 in our Chosen Markets 4. Achieve Top Quartile Financial Results

Each of you play a very important part in our journey to reach our Vision by 2018 We need and value your feedback We’ve built the practice on client and associate referrals, please keep this up!

Budget Snapshot

2012 – 2013 – forecast surplus - $1.5 Billion (now $19.4 Billion deficit) 2013 – 2014 – forecast deficit - $18 Billion 2015 – 2016 – balanced budget 2016 – 2017 – surplus

Large spending cuts required Tax Cuts planned for 2015-16 now deferred indefinitely

Key Policy Measures

Gonski Education Reform

National Disability Insurance Scheme

Tax Cuts Deferred

International Tax Reform

Funding ATO to keep everyone honest

Key Opposition Policy Measures

Abolish Carbon Tax (but retain personal income tax levels)

Abolish Mining Tax

Cut Red Tape

Delay increase in superannuation rate by 2 years

May not oppose any of the Budget ‘savings’

What’s in it for me? Individuals & Families

Baby Bonus Scrapped from 1 March 2014 – replaced with $2,000 additional Family Tax Benefit Part A payment ($1,000 for subsequent children)

Up front Discounts on HECS/HELP debts scrapped (1 January 2014)

Medicare Levy Increase to 2% to fund Disability Insurance Scheme

Tax Rate Cut Deferred Indefinitely

Individuals & Families – Tax Rate Cuts Deferred Indefinitely (until Carbon price gets above $25)

2012/13 2015/16 2015/16 (previous)

Tax Thresholds Threshold Rate Threshold Rate Threshold Rate

1 18,201 19% 18,201 19% 19,401 19%

2 37,001 32.5% 37,001 33% 37,001 33%

3 80,001 37% 80,001 37% 80,001 37%

4 180,001 45% 180,001 45% 180,001 45%

Individuals - Non-Resident Tax Rates

2012/13 2015/16 2015/16 (previous)

Tax Thresholds Threshold Rate Threshold RateThreshold Rate

1 0 32.5% 0 33% 0 33%

2 37,001 30% 80,001 37% 80,001 37%

3 80,001 37% 180,001 45% 180,001 45%

4 180,001 45%

Individuals – Net Medical Expenses Tax Offset to be phased out – Use it of Lose it!

Currently can claim 20% of excess over $5,000 of out of pocket medical expenses

Only eligible to claim it in 2014 year if you claim it in 2013 year

If considering a procedure and 2013 expenses are currently below $5,000 – bring the procedure forward (or at least pay for it) by 30 June 2013 to get over the limit and keep your eligibility open for future years.

TAX

TIP

Will be phased out altogether by 2019

Individuals – Self Education Expenses Capped at $2,000

Currently Self Education Expenses are uncapped

Proposal to Cap expenses at $2,000 from 1 July 2014

If paid by employer and not ‘salary sacrificed’ the rules will not apply

Remuneration Planning – Employers Offer to pay for education for all key employees as a ‘standard’ benefit (not salary sacrificed) (Ask Availlio for Assistance to redesign remuneration policy)

Subject to consultation

BUSINESS

Research & Development – R & D Tax Offset

R & D Tax Incentive removed for Businesses with turnover > $20 Billion

Turnover < $20 Million still able to claim refundable tax offset

From 1 January 2014 – can claim the refundable tax offset on a quarterly basis

Lodge 2013 return and R & D Tax offset early to ensure immediate availability of quarterly offsets in 2014 year

TAX

TIP

Large Companies (>$1 Billion turnover) will pay PAYG (company tax) instalments monthly from 1 January 2014

Will apply to all entities with >$20 Million turnover from 1 January 2016.

Small Business (Currently unaffected)

Monthly PAYG Instalments

Mining Exploration Deduction Tightened

Currently an immediate deduction for exploration expenses and cost of obtaining mining rights and information

Will be restricted to only Mining Rights and Information acquired from Governments and those costs incurred directly

Mining Rights and Information acquired second hand (eg acquiring a tenement) will be deductible over the lesser of 15 years or life of the asset

Trusts

ATO given a further $67.9 Million to target trusts to pick up an additional $379 Million in revenue (Good investment?)

Tax avoidance through mischaracterising and concealing income

TAX

TIP Plan 2013 trust distribution resolutions before 30 June to ensure they legally and effectively distribute income to achieve family goals

International Measures

Thin Capitalisation – ‘safe harbour’ debt level reduced from 3:1 to 1.5:1, BUT an exemption is allowed for debt deductions of less than $2 Million pa (increased from $250,000)

10% withholding tax for non-residents disposing of taxable Australian assets (excludes residential real estate of < $2.5 Million)

Further review into offshore profit shifting – waiting on OECD report

Charities

Removal of Tax Concessions for ‘commercial activities’ of charities where funds not directed back to altruistic purposes – delayed by another 2 years

New proposed start date 1 July 2014

Proposed small scale exemption of $250,000

SMALL BUSINESS

Not many changes from last year

Small Business = <$2 Million turnover

Can claim 100% of assets costing $6,500 as an immediate deduction (from 1 July 2012)

Can claim the first $5,000 of the cost of a car as an immediate tax deduction with the balance written off in a depreciation pool at 30% (15% first year) (Consider financing costs – Chattel Mortgage v Lease)

Tax Planning Initiatives for Financial Year End 2013

TAX

TIP

SMALL BUSINESS

Consider pre-paying expenses to claim the expense this year (not effective for larger businesses)

If selling a business / key business asset, speak to us first to access the small business CGT concessions to minimise tax


TAX

TIP

ALL BUSINESS

Loss Carry Back Rules

Not yet law but supposed to apply from 1 July 2012

If business profit and paid tax in 2012 year but loss in 2013 – carry back the loss and amend 2012 tax return to receive a refund

Deferring income / bringing forward expenses may have an even greater effect on cashflow


TAX

TIP

ALL BUSINESS

Defer income until after 30 June

Bring forward expenditure (subject to prepayment rules)

Ensure employee superannuation is paid before 30 June to get deduction this year


TAX

TIP

ALL BUSINESS

Review asset registers and scrap / write off old assets no longer used

Review stock and write down / off obsolete stock Can value individual items of stock differently

Review Debtors and write off Bad Debts before 30 June (reduces income and claim GST back)


TAX

TIP

ALL BUSINESS

Division 7A – Deemed Dividend Rules

Ensure interest has been paid and minimum repayments made to avoid a deemed dividend.

Consider paying an actual dividend to make the repayment


TAX

TIP

ALL BUSINESS

R & D Tax Offset

Contact us early to have the 2013 claim prepared

Quarterly Credits commence 1 January 2014


TAX

TIP

INDIVIDUALS & FAMILIES

Prepay Interest on your investment loans

Maximise Super Contributions Salary Sacrifice June salary (must organise this before you ‘earn’

the salary, or it will not be effective) Spouse Contribution Co-Contribution


TAX

TIP

INDIVIDUALS & FAMILIES – Employee Share Schemes

If receive employee shares or options – nearly always result in a tax liability in the year the taxing point arises

Adjust salary withholding to reduce the cash flow impact

Consider tax effective investments (incl prepaying interest) to defer the taxing point


TAX

TIP

INDIVIDUALS & FAMILIES – Capital Gains

Review Share / Investment Portfolio and consider selling any shares with underlying capital losses to offset gains made earlier in the year

Speak to a broker or other licensed adviser to review strategies


TAX

TIP

INDIVIDUALS & FAMILIES - Trusts

Review family income to end of May and likely income in June to formulate a trust distribution strategy to minimise family income

Consider commercial / asset protection and other issues (not just tax) when resolving who to distribute to

Ensure the trustee resolution is in accordance with trust deed and is effective from a tax perspective (should be recorded in writing by 30 June in some instances to be effective) – Hanrick Curran can assist


TAX

TIP

INDIVIDUALS & FAMILIES – Medical Expenses

Consider bringing forward planned procedures to ensure your 2013 tax offset can be claimed ($5,000 minimum out of pocket)

If no claim in 2013 – no further claims (Use it or Lose it)


TAX

TIP

Superannuation Update: Impact of Federal Budget 2013/ 2014 changes

Other recent changes & announcements

Financial year end tips & traps

Superannuation policy changes were announced on Friday 5 April 2013 by Minister for Superannuation, Bill Shorten

No Superannuation changes in Federal Budget 2013/2014!

Released early due to damaging press speculation about super changes

Some measures are “effective” from 5 April 2013

Concessional Super Contribution Caps (tax deductible)

Proposal to increase concessional cap to $50,000 over age 50 if < $500K in super Scrapp

ed Increase to concessional cap to $35,000 over 2 years:

* You need to be at least 59 as at 30 June 2013

Federal opposition, if elected:

Committed to eventually restoring $100,000 concessional cap from age 50(subject to “affordability” i.e. inherited state of Federal finances)

Opposition Senator Mathias Cormann “The Terminator”

Reform to Excess Contributions Tax Laws

Budget proposal: Allow withdrawal of excess concessional contributions; &

Tax at the individuals marginal personal tax rate (instead of a flat 46.5%)

Current rules for Excess Contributions Tax (ECT)

Exceed concessional contribution cap: 15% + additional 31.5% = 46.5%

Exceed non-concessional contribution cap: 46.5%

Exceed both caps: 15% + 31.5% + 46.5% = 93.0%

Only current relief is : One time only allowance for excess contributions up to $10,000

No mention of reform on taxation of excess concessional non-concessional “undeducted”contributions. i.e. Private savings (which you have already paid tax on) contributed to super in excess of $150K or $450K over 3 years if under age 65, is taxed at 46.5% as a deterrent.

99.999% of all such excess contributions are “genuine mistakes” however the ATO will not accept that argument or allow rectification of mistakes. Beware!

No tax on investment earnings of pension fund assets! Tax free interest

Tax free capital gains

Tax free dividends & franking credits refunded (30% company tax – nil super tax = 30% tax refund)

No limit on tax free earnings & capital gains!

Superannuation PensionsCurrent Taxation of Pension Funds:

Income stream (pension)

Pension: Age 60+: Tax free

Age 55 to 59: 15% tax rebate *

*based on individual circumstances

Superannuation fund investment earnings:

Interest, rent

dividends on shares

realised capital gains

Superannuation PensionsCurrent Taxation of Pension Funds:

:





No tax on investment earnings of pension fund assets! Tax free interest

Tax free capital gains

Tax free dividends & franking credits refunded (30% company tax – nil super tax = 30% tax refund)

No limit on tax free earnings & capital gains!


Interest, rent

dividends on shares







Interest, rent

dividends on shares


Proposed changes to tax exemption on pension fund earnings: Only the first $100,000 of investment earnings of a super fund per

member will be tax free

Remainder of fund earnings taxed at 15% (10% capital gains > 1 year held)

Proposed date: 1 July 2014

Proposed Taxation of Pension Funds

Capital Gains Tax relief:

For Super Fund assets purchased prior to 5 April 2013

Can sell tax free up to 1 July 2024, then

Gain that accrues from 1 July 2024 until sold is included

For Super Fund assets purchased from 5 April 2013,

Can sell tax free up to 1 July 2014, then


For Super Fund assets purchased from 1 July 2014,


Details of proposed change

Each member’s pension super balance must earn over $100K (excluding contributions) before any tax is payable

Government’s simplistic example:

Pension SMSF: Dad $1M + Mum $1M = $2M @ 5% earnings = $100K so all tax free

However, what about a large capital gain realised? e.g. on:

Real estate such as your business premises in an SMSF; or

Listed shares, managed funds & other investments

Transitional rules i.e. “grandfathering” of exemption on capital gains. Some realised capital gains may be included in $100K per member fund earnings threshold.


“Clever” strategies will no doubt emerge (depends on legislation as not seen yet)

Fund investments:

“Segregated” investments are permitted for each member (costly to administer)

Periodically selling listed shares that are accruing capital gains, before they get too large then re-buying those shares? ATO says may be tax avoidance

Member balances:

In SMSFs one spouse often has more benefits that the other

Re-allocation of “minimum benefits” is not permitted within a fund

Spouse contribution splitting (up to 85% of concessional contributions)

Withdrawal of lump sum & non-concessional re-contribution in spouses name

Must have access to large withdrawals e.g. retired & eligible to re- contribute?

? Multiple Super Funds paying pensions?

The Upside?If net capital gains realised added to other fund investment income is less than $100k earnings share per member threshold, all will still be tax free.

Even if threshold is exceeded, the excess of earnings to be taxed are taxed at 15% & 10% for capital gains (realised after 12 months)

These tax rates are the same as your current “accumulating” superannuation fund.Accumulation fund tax rates are still generally superior to tax rates for:Personal investingUse of trusts or companies


From 1 July 2012:30% tax on Concessional Contribution for individuals with “income” over $300,000

“expanded” definition of notional income to include: Gross “assessable” income + concessional superannuation contributions + Reportable fringe benefits Reportable Super Contributions (salary sacrifice) Add back investment losses

15% tax only applies to the amount of contributions that take notional income over $300,000

Concessional Contribution Caps:

Taxed at 15% in receiving superannuation fund(instead of up to 46.5% personally) e.g. 46.5% - 15% = 31.5% tax saving)

Taxed at 30% in receiving superannuation fund(46.5% - 30% = 16.5% tax saving)

Legislation still not tabled but is still to be effective for year ending 30 June 2013

Example 2012/2013:Salary: $275,000Fringe benefits: $10,000Compulsory super (9%): $16,000Salary sacrifice super: $9,000Total super contrib: $25,000Notional assessable income: $310,000

Contributions tax:Notional income: $310,000Income threshold: $300,000Excess over threshold: $10,000Tax on contributions:$25,000 @ 15% =$3,750$10,000 @ 15% = $1,500Total $5,250

Effective tax rate = $5,250/ 25,000 = 21% (46.5% - 21% = 25.5%)

Superannuation Update:

Financial year end tips & traps

Things to do by 30 June 2013

Give key staff a pay rise

from 1 July 2013?

Top up your super

contributions?

Contemplating

“off-market “

transfer of listed

shares to SMSF?

SMSF in pension phase?

Have you drawn your

minimum pension?

SUPER

TIPS

Super Contribution Tax Deductions

Top up super

contributions?

Rules for Excess Contributions Tax (ECT)

Exceed concessional contribution cap: 15% + additional 31.5% = 46.5%

Exceed non-concessional contribution cap: 46.5%

Exceed both caps: 15% + 31.5% + 46.5% = 93.0% One time only allowance for excess contributions up to $10,000

More than one source of income & super contributions?

Contribution cap is are your personal limit from all sources

Deductible limits do not apply to employers

Up to taxpayer (not employer) to ensure Contribution Cap is not exceeded

Add up

concessional

contributions

made to date

Super Contribution Tax Deductions

ATO Tax Ruling TR 2010/1: When is a super contribution

considered to have been made?

Cheque?

When the cheque is “in the hands of the trustee of the super fund”. Even if not banked e.g. by 30 June, is still “made” unless cheque is subsequently dishonored. However, Commissioner says in TR 2010/1 if cheque dated on or before 30 June in an income year, must be banked within a few business days”)

Electronic funds transfer?

Only when credited to receiving fund’s bank a/c, NOT when transferred from the contributors account. Beware internet transfers between different banks which may be next “working” day

Transfer of Assets?

“Made” when legal or beneficial ownership passes to the superannuation fund. e.g. shares, when fund receives off- market transfer form, not on later processing at share registrye.g. real estate, only when the fund is registered at the owner (titles registration)

Top up super

contributions?

“Off-Market” transfers of listed shares

Contemplating

“off-market “

transfer of listed

shares to SMSF?

BANN

ED!

Contribution to SMSF by “off-market transfer of listed shares

Timing“Made” when legal or beneficial ownership passes to the SMSF i.e. when fund receives off-market transfer form, not on later processing at share registry

Transfer at arms-length market value ASX price on the day of transfer

Are you realizing a personal capital gain that will be taxable?Off-market transfer of listed shares is a “disposal” by you for capital gains tax purposes

SMSFs no longer permitted to acquire listed

shares via “off-market” transfer from a related party from 1 July 2013


Give key staff a

pay rise from

1 July 2013?

Increase of compulsory Superannuation Guarantee Contribution rate from 9% to 12% by 1 July 2019

From 1 July 2013 increase SGC to 9.25% of an employee’s ordinary time earnings

For salaried employees, consider “salary packaging” any increases?

Example:Cash salary: $80,000+ SGC 9% $7,200Total salary package $87,200

01/07/13 Pay increase: $3,000

Cash salary: $82,563+ SGC 9.25% $7,637

$90,200

cash salary increase $2,563 super increase $437Total spend $3,000

01/07/13 Pay increase: $3,000

Cash salary: $83,000+ SGC 9.25% $7,637

$90,637

cash salary increase $3,000 super increase $437Total spend $3,437

Salaried director of your own business?

Quarterly SGC applies to you, no exemption!

SUPER

TIPS

Drawing a retirement pension or transition to retirement pension from your SMSF?

ATO gets serious about minimum pension payment requirements

SMSF in pension

phase?

Have you drawn

your minimum

pension? Minimum pension withdrawal “in cash” must be made by 30 June 2013

(no book entries or payment in kind)

Drawing the minimum amount is a “condition” of a pension. If not satisfied, your SMSF will not enjoy tax free investment earnings, and will revert to being taxed at 15%

ATO will only allow tax free earnings status if a shortfall in pension paid if:

Shortfall is no more than 1/12th of the annual minimum pension Is corrected within 28 days of a trustee of a SMSF “becoming aware” You can demonstrate was an honest mistake You can only “self assess” such a mistake once. If you do it again, you have to apply to ATO to keep tax free pension earnings status

30 June 2013 is a Sunday! Beware last minute or weekend internet transfers between different banks which may be next “working” day in July


SUPER

TIPS

New salary sacrifice

agreement for super

contributions?

From 1 July 2013

$25,000 or

$35,000 (age 60)

Age 65 & over & retired?

Work test is required to

be eligible to contribute to

super

Paid work of at least 40

hours within 30

consecutive days before

you can contribute

SMSF owns your business

premises?

Ensure all rent has been

paid up to date and at arms

length rate and terms.

Is a rent review required by

the lease?


Double dividend ex-

div/cum-div strategies

to be banned from 1

July 2013

Stop it!

SUPER

TIPS

Questions?

Please feel free to contact us with any queries:

Jamie Towers, Tax Partner: [email protected]

Chris Campbell, Superannuation Director: [email protected]

07 3218 3900

mailto:[email protected]

mailto:[email protected]

Thank you

www.hanrickcurran.com.au

Disclaimer:

These notes contain factual information concerning the taxation and compliance implications of certain superannuation matters. The notes are intended as a guide only and may not apply to circumstances of particular individuals. Do not act on the contents of these notes without first obtaining specific advice from a qualified tax or legal professional about your particular circumstances.

Hanrick Curran Group, its associates and the presenter hereby disclaim any responsibility for persons relying in whole or in part on these notes or the information presented at this seminar.

The Corporations Act 2001 deems superannuation funds, self managed superannuation funds (SMSFs) and pensions to be “financial products” and may consider a recommendation to contribute to a fund, establish or join a SMSF, or to commence a pension to be financial product advice as defined by that Act. We are not licensed to give such advice. You should consider taking advice from an AFS License holder before making a decision on any financial product.

2013 post budget presentation v6 on scree nl

Documents

carbon tax

tax avoidance

refundable tax offset

medical expenses tax

personal income tax

additional family tax

mining tax cut red tape

exploration expenses