Employers with fewer than twenty (20) employees need to be “superstream” compliant by 1 July 2015!

The advent of “superstream” will enable employers to make a single payment for superannuation to a nominated superannuation ‘clearing house’, which itself will distribute to the various funds used by employees.  As far as the employer is concerned, after the upfront registration of employees’ preferred fund detail is incorporated in the process, the employer simply inserts the relevant amounts for each employee then makes only one online payment.

The use of the clearing house should facilitate compliance with legislated superannuation obligations and do so with minimum time, paperwork and cost!

To register with a clearing house the employer will need to provide it with the following detail:

ABN

Email address

Employee detail

–        tax file number

–        employment start date

–        fund’s bank account information

–        electronic service delivery address for receipt of contribution data messages

Essentially, the process requires employers to remit contributions electronically in a standard format with linked data and payments!  Employees with self-managed superannuation funds need to provide their employer with the fund’s ABN and bank account details together with an ‘electronic service address’ or ‘alias’ to enable the fund to receive confirmation of amounts and reference details.

The ‘electronic service address’ is different to a regular email address and may be obtained from various ‘message providers’ – a list of registered SMSF message providers is available online at www.ato.gov.au/superstream.

The Australian Taxation Office provides a free online service through the Small Business Superannuation Clearing House and registration can be undertaken online through www.ato.gov.au.

The MYOB AccountRight version 2015.2 software ‘PaySuper’ currently being released complies with superstream requirements.

Contact Us for any advice or assistance you may require in the introduction of these new procedures.

Concessional / Deductible Contributions by Employers for Employees

Maximum contributions for each employee up to 75 years of age, including “salary sacrifice” (needs to be proactive) and superannuation guarantee payments without incurring excess concessional contributions tax:  $30,000*

Condition: Over 65 years must satisfy the work test, over 70 years work test applies and only contributions received before the 28^th day after the end of the month in which member turns 75 are deductible.

Concessional / Deductible Personal Contributions by Individual Taxpayers, including Investors

Maximum contribution by each individual up to 75 years of age without incurring excess concessional contributions tax:  $30,000*

Conditions:

• Less than 10% of assessable income including reportable employer superannuation contributions and reportable fringe benefit amounts are attributable to employment.
• The individual must notify the fund of intention to claim a deduction (form NAT 71121) and the fund must acknowledge the notice.
• Contribution cannot create or increase a loss (deduction cannot exceed taxable income).
• Over 65 years must satisfy work test.
• Only contributions received before the 28^th day after the end of the month in which member turns 75 are deductible.

*Transitional Concessional / Deductible Employer and Personal Contributions

The concessional limit in 2014/2015 is $35,000, for persons 49 years or over on 30/06/2014.

 High Income Earner Contributions (Division 293)

From 1 July 2012, an additional 15% “contributions tax” is applied to those with adjusted taxable incomes (broad definition) exceeding $300,000.

Non-Concessional / Non-Deductible Contributions by Individual Taxpayers

Maximum contribution by each individual up to 75 years of age without incurring excess non-concessional contributions tax:  $180,000

Note:   Over 65 years the work test will need to be satisfied.

Note:   An individual taxpayer who is under 65 years of age in an income year can bring forward two years’ entitlements and make one contribution of $540,000 without exceeding the cap ─ i.e. no further contributions over the three years.

Note:   The annual maximum amount will be indexed and remain at six times the concessional amount.

Excess Concessional / Deductible and Non-Concessional / Non-Deductible Contributions

An excess contributions tax of 31.5% and 46.5% was previously payable in respect of concessional and non-concessional contributions which exceeded the maximum amount allowed; however, from 1 July 2013 excess concessional (only) contributions will be taxed at the member’s marginal tax rate and an interest charge applied.  The excess may be withdrawn from the fund.

The punitive taxes remain for excess non-concessional contributions.  The tax rate for excess non-concessional contributions increased from 1 July 2014 to 47%.

Government Co-Contributions

The co-contribution made by the Government of up to $500 is available to employees and the self-employed less than 71 years of age at the end of the income year who make non-concessional/undeducted personal superannuation contributions of up to $1,000 and whose total income (assessable, reportable employer superannuation contributions and reportable fringe benefit amounts) is less than $49,488; the lower threshold of $34,488 allows for the full co-contribution 50c/$1.

Conditions:

• 10% or more of the person’s total income is attributable to employment or carrying on of a business.
• Salary sacrifice superannuation contributions are included in assessable income from 1 July 2009.

Government Contributions for Low Income Earners

From 1 July 2012, concessional contributions made by or on behalf of individuals with adjusted taxable incomes of up to $37,000 will be matched by the Government up to an annual maximum amount payable of $500.

Contributions for Spouse – Tax Offset

A taxpayer making a personal non-concessional/non-deductible contribution for his/her non working or low income spouse is eligible for a tax offset of up to $540 where a contribution of up to $3,000 is made for a spouse whose assessable income, reportable fringe benefit and reportable superannuation contribution amounts do not exceed $10,800.  The offset is phased out at $13,800.

Condition:

No work test is applied if the spouse is under age 65, but between 65 and 70 years the spouse must satisfy the work test.  No offset over 70 years of age.

Fund Acceptance of Contributions – Age and Work Test

A regulated superannuation fund may accept contributions as follows:

• If the member is under age 65
  – all contributions made.

• If the member is 65 or more but under 70 years
  – mandated employer contributions
  – employer or member contributions provided the work test is satisfied.

• If the member is 70 or more but under 75 years
  – mandated employer contributions
  – employer or member contributions up to the 28th of the month in which the member turns 75 and the member satisfies the work test.

• If the member is 75 years or more
  – mandated employer contributions.

A person satisfies the work test if gainfully employed at least 40 hours in a period of not more than 30 consecutive days in that financial year.

Superannuation Guarantee Contribution Rate

From 1 July 2014, the contribution rate has increased from 9.25% to 9.5%, and will remain so until 1 July 2021 when it will increase by 0.5% each year until the rate is 12%.

Reportable Employer Super Contributions (RESC)

From 1 July 2014, the payment of salary sacrifice superannuation and other additional* superannuation over and above the compulsory superannuation guarantee charge of 9.5%, paid by employers for employees, will need to be recorded on employees’ year end PAYG summaries.

*where employee influences the rate or amount of employer contributions.

An employee is considered to have the capacity to influence if he or she can directly negotiate the rate or amount of employer contributions.

As a guideline, the capacity to influence may be shown by:

1. The employer’s relationship with the employee. For example, the employee is the spouse of the employer.
2. The employee’s involvement in negotiations/preparation concerning the terms of any industrial agreement governing super contributions.
3. The amount contributed for the employee relative to the compulsory contributions the employer is required to make.
4. The employer’s super contribution arrangements for other employees.
5. Any non-arm’s length dealings.

Contact Us for any advice or assistance you may require in the introduction of these new procedures.

Have you received distressing phone calls regarding your taxation affairs?

Several of our clients have recently been subjected to aggressive, even threatening, telephone scam attempts by persons purporting to represent the Australian Taxation Office.  In each case, the conduct of the scammer was quite distressing to our clients with accusations of fraud and immediate legal sanctions which could only be overcome by a significant payment!  There had been no previous approach or correspondence, and these clients were up to date with lodgements, had no outstanding tax returns and had no amounts owing on their income tax and/or integrated client accounts with the ATO.  We were able to assure our clients that the ATO most certainly did not conduct business in that manner and if there was any further contact, the caller should simply be referred to us, the tax agent.

In our role as tax agent we are the first point of call for the ATO in any circumstances relevant to our clients’ taxation affairs.   Further, the ATO has a disciplined and lengthy process which it follows, so there will never be a direct, initial call to any taxpayer on our tax agent’s listing.  Also, as your tax agent, we have online access to the ATO income tax and integrated client accounts in your name, hence any allegations of monies owing can be instantly refuted.

In the event that you receive such a call, refer the caller to us on 08 9204 3733

 www.ato.gov.au

www.scamwatch.gov.au

Negative Gearing Perth – what does it really mean?

Negative gearing is an often used and sometimes misunderstood phrase in relation to investment and borrowings.  When boiled down to its basics, negative gearing refers to the practice of accepting a short-term loss from an investment with a view to converting that loss ultimately to a capital gain.

An investment is said to be negatively geared if, after taking into consideration the interest cost of the investment, the investment shows a negative return.

Whilst all taxpayers can negatively gear a property or other investment, it is typically more appealing to taxpayers with higher marginal rates of income tax.  This is because the Australian Taxation Office allows an offset of the loss from the holding of a negatively geared investment against other income.  Therefore, the higher a taxpayer’s marginal tax rate, the greater the benefit from a gearing strategy.

There may come a point when the owner of an investment decides to cash in on the capital growth their investment may have experienced over time.

It is at this point, when determining the tax to pay on the capital gain, that investors may appreciate the gearing versus capital gain outcomes.

Investors receive a tax deduction against other income on a dollar for dollar basis during the period that they hold their investment.  So a taxpayer on the top marginal rate of tax of 46.5% incurring a net loss on their investment is effectively having it subsidised at the rate of 46.5 cents for every dollar of loss incurred whilst they remain at the top marginal rate.

Conversely, due to the 50% discount that applies to capital gains for investors who hold investments in excess of 12 months, the tax payable on a capital gain made by a top marginal rate taxpayer in real terms equates to 23.25% maximum.

The secret to the gearing strategy lies in the ability of the investment to produce a capital gain over time where the investor can cash in on the gearing advantages whilst minimising tax payable on the gain.

PAYG Withholding Tax Variation

Taxpayers with negatively geared property or other investments may make application to vary the tax instalments deducted from salary or wages to enhance cash flow during the year rather than await a substantial tax refund on lodgement of their taxation return after financial year end.

The application needs to be lodged during May/June to allow for processing and approval, then notification to the relevant paymaster prior to commencement of the new financial year.

For assistance or advice please Contact Us to lodge on line and so bring forward the benefit of the reduced tax payable.

Bookstores and libraries around the world supply excellent instructional materials on books about business and money written by experts. The bestseller lists at Amazon are fantastic resources on books about business and money, so have a look and learn from the experts.

The Millionaire Next Door

Thomas J. Stanley, PhD, first published The Millionaire Next Door in 1996.  The latest edition was published in November 2010 and regularly appears on Amazon’s bestseller list.  Stanley debunks the myth that most millionaires drive luxury cars and live in classy neighbourhoods.  He says look around, and you will find rich people are conscientious, hard working people who live ordinary lives.  They carefully manage their money and budget thoughtfully. Rich people do not live beyond their means.  According to Stanley, most rich people did not inherit a fortune or win the lottery.

An Invisible Thread

In An Invisible Thread, Laura Schroff tells her true story of a wonderful friendship developed between a hard working sales executive and a homeless boy. On a busy New York City corner, the author swept by a young panhandler but suddenly felt the urge to go back.  She took the boy to lunch at a nearby McDonald’s.  Schroff continued to visit the boy which changed both their lives substantially.  It became a friendship that has spanned three decades and brought meaning to an over-scheduled professional and hope to a hungry and desperate boy living on the streets.  Nearly thirty years later, that young boy is married and has his own family.  Now he works to change the lives of disadvantaged kids, just like the boy he used to be.

Carrots and Sticks Don’t Work: Build a Culture of Employee Engagement with the Principles of RESPECT

Dr. Paul Marciano shares his wisdom on motivating employees in his book first published in 2010. Organisational leaders, trainers and human resource professionals will find seven drivers for employee engagement according to Marciano. He provides specific methods for assessing, troubleshooting and improving employee performance.  He recommends a respectful engagement of employees through coaching and mentoring to improve their performances. He also maintains that employees set up to succeed will reach the high expectations set by their leaders.

Zero to One: Notes on Startups, or How to Build The Future

On September 16 2014, Peter Thiel and Blake Masters published Zero to One: Notes on Startups, or How to Build the Future.  Thiel, a professor at Stanford, founded PayPal and Masters was his student who kept copious notes while attending his lectures. According to the authors, a bright future depends on asking questions that lead to find treasure in unpredictable spots.  Although reporters publish news of spectacular technological innovations, the authors maintain that the world is stagnant.  The authors note that a brighter future depends on innovators who uncover special secrets.  Mark Zuckerberg, Elon Musk and Jeff Immelt wrote positive reviews of Zero to One.

StrengthsFinder 2.0

The Gallup Organization, with author Tom Rath, published StrengthsFinder 2.0 in 2007 to help individuals discover their natural talents.  According to Rath, people do not have the opportunity to excel daily, for they concentrate on their weaknesses rather than developing their strengths.  The book includes an assessment tool that readers use to determine and build on their five most important talents.

Business leaders continue to develop skills throughout their careers, and the bestsellers provide wonderful resources to “sharpen the saw”, as Covey advised in Seven Habits of Highly Effective People.

Great books filled with invaluable advice arrive regularly in bookstores and libraries, and the bestseller lists often point the way to great reads filled with solid advice.  Have a look and see what you can learn about business and money.