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The dangers of failing to declare income or lodge returns

23rd October 2024

There are many adverse consequences associated with failing to lodge income tax returns or omitting income from those returns if the ATO finds out.

The ATO has increasingly sophisticated technology to track such matters and catch people out – including “data matching” programs where it compulsorily obtains masses of information from certain authorities (eg, banks, insurance companies, real estate bond boards etc).

And on top of this, the ATO does not even have to actually look at the information too closely – as a computer program does this for the Commissioner.

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Making contributions later in life

14th October 2024

Superannuation laws have been simplified over recent years to allow older Australians more flexibility to top up their superannuation. Below is a summary of what you need to know when it comes to making superannuation contributions.

Adding to super

The two main types of contributions that can be made to superannuation are called concessional contributions and non-concessional contributions.

Concessional contributions are before-tax contributions and are generally taxed at 15% within your fund. This is the most common type of contribution individuals receive as it includes superannuation guarantee payments your employer makes into your fund on your behalf. Other types of concessional contributions include salary sacrifice contributions and tax-deductible personal contributions. The government sets limits on how much money you can add to your superannuation each year. Currently, the annual concessional contribution cap is $30,000 in 2024/25.

Non-concessional contributions are voluntary contributions you can make from your after-tax dollars. For example, you may wish to make extra contributions using funds from your bank account or other savings. As such, non-concessional contributions are an after-tax contribution because you have already paid tax on these funds. Currently, the annual non-concessional contribution cap is $120,000 in 2024/25.

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Can I add to my super pension?

27th September 2024

A common question that is often asked is whether amounts can be added to a superannuation pension account once it has commenced.

The short answer

Unfortunately, the answer is no. Although your pension account can continue to increase due to investment earnings, such as interest and dividends, any further capital cannot be added to the current pension account. As such, once a pension (usually an “account-based pension”) has commenced, you cannot add any more contributions or money to that same pension account.

To recap, an account-based pension is a regular income stream bought with money from your superannuation when you retire. It is the most common type of superannuation pension as they offer regular, flexible and tax-effective income from your superannuation benefits.

The benefit of commencing an account-based pension is that investment earnings are tax free and once you turn 60, your pension payments will also be tax free. However the main trade-off for these tax concessions is that you have to withdraw a fixed amount of your pension balance each year based on your age.

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Changes to preservation age

3rd August 2024

Since 1 July 2024, the age at which individuals can access their superannuation increased to age 60. So what does this mean for those planning on accessing their superannuation upon reaching this age?

What is preservation age?

Access to superannuation benefits is generally restricted to members who have reached ‘preservation age’ which is the minimum age at which you can access your superannuation benefits.

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The importance of “Tax Residency”

3rd August 2024

Whether you are a resident of Australia or non-resident of Australia for tax purposes has significant consequences for you.

Primarily, if you are a resident of Australia for tax purposes you will be liable for tax in Australia on income you derive from all sources – including of course from overseas (eg, an overseas bank account, rental property, an interest in a foreign business etc).

On the other hand, if you are a non-resident of Australia for tax purposes, you will only be liable for tax on income that is sourced in Australia (including capital gains on certain property such as real estate in Australia).

And while there may be difficulty in determining the source of income in some cases, if you are a resident for tax purposes, the principle of liability for tax in Australia on income from all sources remains clear.

Resident of Australia for tax purposes

So, what does it mean to be a resident of Australia for tax purposes?

Well, broadly, it means you “reside” in Australia (as commonly understood), unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

However, a recent decision of the Federal Court has shed some light on this matter – especially the often-misunderstood presumption that “connections with Australia” is all that counts.

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Small business energy incentive

3rd August 2024

A little known tax incentive that is aimed at encouraging businesses to improve energy efficiency is the small business energy incentive (SBEI).

You will have to jump through a few hoops to qualify, but depending on what sort of depreciating assets you have acquired between 1 July 2023 and 30 June 2024 (the bonus period), you may be entitled to a bonus deduction of 20% of the cost of acquiring up to $100,000 of eligible equipment. This is over and above what you would ordinarily claim, so it’s bit like the old investment allowance, but with a $20,000 cap. That’s up to $9,400 extra in your pocket, which may make it worth a look.

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Division 293 tax – will you be caught?

If you’re a high income earner, you may soon be asked to pay an extra 15% tax on the amount of concessional contributions that exceed the $250,000 threshold.

What is Division 293 tax?

Division 293 tax is an additional 15% tax that is payable when your income and concessional contributions exceed $250,000 in 2023/24.

To recap, concessional contributions are before-tax contributions and are generally taxed at 15% within your fund. This is the most common type of contribution individuals receive as it includes superannuation guarantee payments your employer makes into your fund on your behalf. Other types of concessional contributions include salary sacrifice contributions and tax-deductible personal contributions.

It’s worth noting that the extra 15% Division 293 tax is payable in addition to the standard 15% tax that is paid on concessional contributions.

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Super guarantee increases to 11.5%

3rd July 2024

The increase to the superannuation guarantee (SG) rate from 1 July 2024 will see more employees (and certain contractors) entitled to additional SG contributions on their pay. But what happens when income earned before 30 June is paid after 30 June 2024 – will employees be entitled to the higher SG rate of 11.5%?

SG is based on when an employee is paid

On 1 July 2024, the SG rate increased from 11% to 11.5%. In some cases, an employee’s pay period will cross over between June and July when the rate changes.

However, the percentage employers are required to apply is determined based on when the employee is paid, not when the income is earned. The rate of 11.5% will need to be applied to all ordinary time earnings (OTE) that are paid on and after 1 July 2024, even if some or all of the pay period it relates to is before 1 July 2024.

This means if the pay period ends on or before 30 June, but the pay date falls on or after 1 July, the 11.5% SG rate applies on those salary and wages. The date of the salary and wage payment determines the rate of SG payable, regardless of when the work was performed.

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How myGov can help you track your super

22nd June 2024

Keeping track of your superannuation balance is key as it impacts how much you can contribute to superannuation and whether you are entitled to other superannuation concessions and measures.

Introduction

Your total superannuation balance (TSB) is an important concept as it impacts your eligibility for up to six favourable superannuation-related measures, including the:

  • Bring forward non-concessional contribution (NCC) cap
  • Carry forward concessional contributions
  • Superannuation spouse tax offset
  • Government co-contribution, and more.

In a nutshell, your TSB includes:

  • Your superannuation accumulation account balance(s)
  • Your superannuation pension account(s), and
  • The outstanding limited recourse borrowing arrangement amount in your SMSF that you entered into from 1 July 2018 (in certain circumstances).

Your TSB for the current year is measured on 30 June of the previous financial year (ie, 30 June 2023) when determining your eligibility to make or receive certain types of superannuation contributions.

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Don’t lose your super to scammers

1st June 2024

Don’t be another victim – be on the lookout for scammers who call you about your superannuation!

ASIC on the lookout

The number of cold callers is on the rise. The Australian Securities and Investments Commission (ASIC) are urging people to hang up on cold callers and scroll past social media click bait that may be offering to help you compare and switch superannuation funds.

How cold callers operate

In many cases, cold callers will convince you to buy a product or sign up to a service. This could relate to any financial investment, product or service, but there has been a focus on scammers approaching people about their superannuation.

A typical superannuation cold calling experience includes:

  • A call from someone you don’t know to see if you ‘qualify’ for a free review of your superannuation.
  • Contact from a cold caller who convinces you your existing superannuation fund is not performing.
  • A statement of advice (SOA) prepared by a financial advice firm the cold caller has an existing arrangement with.
  • ‘Cookie cutter’ advice that is expensive, often unnecessary, doesn’t consider your individual needs, and may leave you in a worse position.

The cold caller may benefit by getting a cut of the financial advice fees, which are deducted from your superannuation balance. In the end, you could end up paying for advice that may not even be right for you.

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