Blog

Qualifying as an interdependent or financial dependant

24 February 2024

A question that often gets asked when dealing with death benefit nominations is whether a person will qualify under the interdependency or financial dependency definitions. This is an important consideration as meeting the dependency criteria will enable potential beneficiaries to qualify as a dependant and therefore allow them to receive a death benefit.

Interdependency relationship

Put simply, an interdependency relationship exists between two people if all of the following conditions are met:

They have a close personal relationship
They live together
One or both provides the other with financial support
One or both provides the other with domestic support and personal care.

However, if two people satisfy the close personal relationship requirement but cannot satisfy the other three requirements, they can still satisfy the interdependency relationship if:

Either or both of them suffer from a physical, intellectual or psychiatric disability, or
They are temporarily living apart (eg, overseas or in gaol).

Continue reading “Qualifying as an interdependent or financial dependant” →

Who can I nominate as my super beneficiary?

24 February 2024

Your superannuation death benefits must be paid to someone when you die. That somebody will usually be your estate or your nominated beneficiary (also known as your dependants).

Paying death benefits to your estate

Unlike other assets such as shares and property, your superannuation and any insurance benefits you have in superannuation do not form part of your estate. That’s because your superannuation is not held by you personally, rather it is held in trust for you by the trustee of your superannuation fund.

However, you can direct your superannuation death benefit to your estate by nominating your “legal personal representative” (LPR), who will usually be the executor of your estate.

If you nominate your estate or LPR, you must also specify in your Will who you want to distribute your superannuation money to. This can include eligible beneficiaries (see below) as well as anyone else you wish to leave your death benefits to.

As such, it’s important that the directions stated in your Will are up to date so your LPR pays out your death benefits (as well as your other estate assets) as per your wishes.

Paying death benefits to a beneficiary/dependant

If you want your superannuation death benefits to be paid to a person, that person must be a “dependant” for superannuation purposes.

The meaning of dependant is important as it determines who can receive a death benefit, whether the death benefit will be taxed and what form your death benefit can be paid out (ie, lump sum, income stream, etc). In particular, superannuation law determines who can receive your superannuation directly from your superannuation fund without having to go through your estate. These people are your superannuation dependants. Tax law on the other hand determines who pays tax on your superannuation death benefit. These people are considered tax dependants.

The following table summarises the difference between:

A superannuation dependant and tax law dependant, and
The types of death benefit that can be paid to each category of dependants.

Continue reading “Who can I nominate as my super beneficiary?” →

Gifting and the age pension

11 February 2024

Many people gift assets to their family or friends to give them a helping hand. However, care must be taken to ensure any gifting does not impact your current or future social security entitlements, such as the age pension.

What are the gifting rules?

For Centrelink purposes, gifting refers to selling or transferring income or assets for less than it’s worth or without receiving anything in return. If you receive adequate compensation, such as payment for an asset to the same value, it is not considered a gift.

Gifting limits

Although you can gift as much income or assets as you like, Centrelink imposes gifting limits to discourage retirees from giving away their wealth to qualify for more age pension income.

The gifting rules allow you to gift up to $10,000 each financial year or a maximum $30,000 over five financial years without this impacting your entitlement to government benefits.

Continue reading “Gifting and the age pension” →

Returning to work after retirement

4 February 2024

Most people look forward to retirement as it is a chance to finally take time to relax, enjoy life and do things they never had time for when they were working. But sometimes things change and some people feel the urge to return to work. If a return to work is inevitable, it is important to understand the superannuation retirement rules when it comes to working and accessing your superannuation.

Introduction

Many new retirees find that after a few months the novelty of being on ‘permanent vacation’ starts to wear off. Some people may miss their sense of identity, meaning, and purpose that came with their job, the daily structure it brought to their days, or the social aspect of having co-workers.

In fact, figures from the Australian Bureau of Statistics (ABS) have revealed financial necessity and boredom are the most common factors prompting retirees back into full or part-time employment^[1]. As such, it is not uncommon to want to return to work after retirement, even if only on a part-time or casual basis. Whatever your reasons or motivations might be, there are a range of factors to consider if you wish to return to work depending on your age.

There are three ways in which you can retire, access your superannuation and then return to work, which are summarised below.

Continue reading “Returning to work after retirement” →

Lost or destroyed tax records? Don’t panic!

21 January 2024

Now and then, taxpayers may find themselves in a situation where they simply have no records to back up a tax claim. There can be many reasons for this, such as losing documents (either paper or electronic) when moving home, or technology failures that end up with the same result (or worse, destroyed records).

And with a hot summer predicted, let’s not forget the very real danger of natural disasters and the devastation these can have on people’s lives, not just their financial concerns.

It’s true that in these modern times the ATO’s systems are able to pre-fill quite a lot of data, and this is only going to increase over time, which can mean that taxpayers can relax a little more about having to stay on top of record keeping. But there can still be situations where essential back-up documents or other evidence is required that may be unavailable for one reason or another.

If your records are damaged or destroyed or simply missing, there are ways to a remedy, or at least an acceptable outcome. First of all, be assured that we will hold quite a substantial amount of required information, so your first and perhaps best inquiry could be to your friendly tax professional.

Continue reading “Lost or destroyed tax records? Don’t panic!” →

Give yourself a super gift this Christmas

18 December 2023

Give yourself the ultimate gift that doesn’t cost a thing – a super to-do list which is a gift that will benefit you now and in the future.

Consolidate your super

With over 10 million unintended multiple superannuation accounts, these multiple accounts are costing Australians an extra $690 million in duplicated administration fees and $1.9 billion in insurance premiums per year, which is eroding many Australians’ hard earned superannuation benefits. If you are one of these individuals with multiple superannuation accounts, there may be benefits to rolling your accounts onto one superannuation fund.

Consolidating your superannuation is now easier than ever, using ATO online services or your myGov account. If you’re not sure whether you might have other superannuation accounts, you can search for lost or unclaimed super via the ATO or by logging into your myGov account linked to the ATO and clicking on Manage my super.

However before you consolidate your funds, there are a few things you should do, such as:

consider whether you have any insurance cover which may be lost when transferring benefits to a new fund, and
check on other details such as fees, insurance premiums, variety of investment options available, performance data, and tax implications from consolidating your superannuation to ensure the transfer provides you with better value and meets your needs.

Continue reading “Give yourself a super gift this Christmas” →

Gifting to employees

18 December 2023

Some employers, especially at Christmas time or for birthdays, give small gifts to their employees or the employee’s associates (i.e. spouses). These gifts typically take the form of bottles of wine, movie tickets, gift vouchers etc. The tax treatment of these gifts from an employer standpoint, depends upon a range of factors including:

To whom the gifts are provided (e.g. employees or clients?)
Whether the gifts constitute entertainment
The dollar value of the gifts, and
The frequency with which they are provided.

Continue reading “Gifting to employees” →

Getting the most benefit from fringe benefits

30 November 2023

The most cost-efficient benefit an employer can give an employee is one that is both deductible for income tax purposes and exempt from Fringe Benefits Tax (FBT).

One such type of benefit is the ‘work-related item’ FBT exemption.

Like all concessions, there are some requirements that must be met to take advantage of it.

What is as a work-related item?

For FBT purposes, a work-related item is a portable electronic device, an item of computer software, an item of protective clothing, a briefcase, or a tool of trade.

In practice, most of these are self-explanatory and need no further explanation – the exception being the first category of items, portable electronic devices.

Continue reading “Getting the most benefit from fringe benefits” →

Is that ute really exempt from FBT?

30 November 2023

Recent media reports suggest the ATO may have concerns that some tradies could be taking liberties with the FBT exemption available for utes and panel vans where private use is claimed to be minimal. Utes have been selling like hotcakes for some time and are now the biggest selling new cars on the Australian market. These vehicles (the dual cabs in particular) often include features that are promoted to make them appealing for family and recreational use.

If you provide vans or utes to employees principally for work related purposes on the basis that such vehicles are exempt from FBT because the employees rarely use the vehicle for private travel and are relying on the ATO’s reduced record keeping concession, here’s a refresher on exactly how the FBT exemption works. Because if things don’t pass muster, it’s the employer who will be on the hook for any FBT found to be payable.

Continue reading “Is that ute really exempt from FBT?” →

Are you eligible to make a personal deductible superannuation contribution?

18 October 2023

Personal deductible contributions can allow individuals to claim a tax deduction for contributions they have made to superannuation provided they meet certain requirements. So what are these requirements and what should you look out for?

Eligibility requirements

You will be eligible to claim a deduction for your personal superannuation contributions if:

You meet the aged based rules
Your taxable income is more than the amount you want to claim as a deduction (ie, your deduction can’t give you a tax loss)
You make the contribution to a complying superannuation fund
You give a special notice to your fund telling the trustee how much you want to claim
You give your fund that notice within strict timeframes
Your fund sends you an acknowledgement confirming your notice has been received and is valid

You must meet all of the above criteria otherwise you won’t be eligible to claim a deduction for your contributions.

Continue reading “Are you eligible to make a personal deductible superannuation contribution?” →