New Transfer Balance Cap for Pension Phase Super Accounts

8 March 2017

From 1 July 2017, there is a limit on how much of your super you can transfer from your accumulation super account to a tax-free “retirement phase” account to receive an account-based pension income.

This is known as the super “transfer balance cap”. If you have more than one super account, the cap applies to the combined amount in all of your pension phase accounts. You will be able to make multiple transfers into the retirement phase as long as you have available cap space.

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Home office deductions: What substantiation will the ATO accept?

18 February 2017

Home office expense claims are subject to the same general substantiation requirements as other deductions – that is, it is a requirement that records should be kept for at least five years.

But in practice, full compliance with the substantiation rules may be difficult. It may be simple to keep a receipt for a printer purchased for a home business, but not so easy to prove the deductible proportion of a specific utilities bill. So the ATO has provided some administrative guidelines to ease this burden.

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Substantiation for Mobile, Home Phone and Internet Costs

2 February 2017

The ATO has issued guidance on making claims for mobile phone use as well as home phone and internet expenses.  It says that if a taxpayer uses any of these for work purposes, they may be able to claim a deduction if there are records to support claims. But the ATO points out that use for both work and private use will require a taxpayer to work out the percentage that “reasonably relates” to work use.

Substantiating claims
The ATO requires that records are kept for a four-week representative period in each income year to claim a deduction of more than $50. These records can include diary entries, including electronic records, and bills. “Evidence that your employer expects you to work at home or make some work-related calls will also help you demonstrate that you are entitled to a deduction,” its guidance says.

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Is an SMSF right for you?

2 December 2016

Do-it-yourself superannuation, in one form or another, has been around for about 30 years. But it has only been over the last few years that SMSFs have made an indelible mark on Australia’s retirement savings landscape.

The SMSF sector now claims a bigger slice of the super pie than it ever has, in terms of asset values and number of funds. The close to 600,000 SMSFs in the country have an average balance that is generally in excess of $1 million. With more than $594 billion of superannuation assets, SMSFs represent roughly a third of Australia’s total.

This stunning data is contained in the ATO’s statistical report on SMSFs up to the end of December 2015, released in February 2016, so the above figures have only improved since then.

By asset value, SMSFs have now surpassed retail and industry super funds. The regulator of superannuation, the Australian Prudential Regulation Authority (APRA), says retail funds account for around 29% of total superannuation assets, industry funds about 24%, but that SMSFs accounted for the biggest slice – more than 32%.

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Travel to a workplace: What’s in, what’s out

2 December 2016

A recurrent topic of conversation and enquiry when it comes to possible tax deductions is when taxpayers travel to a work location, and the eligibility or otherwise of certain claims in regard to that travel.

Work-related travel is a hot focus area of the ATO as taxpayers can often get claims wrong.

While trips between home and work are generally considered private travel, you can claim deductions in some circumstances, as well as for some travel between two workplaces.

If your travel was partly private and partly for work, it is the general rule that you can only claim for the part related to your work.

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5 tips to get home office deductions right

2 December 2016

You might be sick of the daily commute, or want more flexibility of hours – or it could be that you have a talent or skill and feel sure that this can translate into a fulfilling career in your own business. Or it could just be that the idea of working from home seems to offer a better work/life balance.

So if you’re in the position to be able to have your cake and eat it too, there just may be icing for that cake in the form of tax advantages.

Indeed Australian Bureau of Statistics (ABS) reports indicate that home-based work is prevalent in the Australian community. The 2006 Census showed that 426,523 Australians said they worked from home, and the 2011 survey had 443,939 similarly employed. The upward trend is expected to continue, and it will be interesting to see what data comes out of the recently completed 2016 Census.

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Renting out part or all of your home

2 December 2016

Generally, if you rent out part or all of your home, the rent money you receive is  assessable. This means that you must declare your rental income in your income tax return, but you can also claim deductions for any associated expenses.

However, be warned. If you rent put part of your home, such as one room, you also may not be entitled to the full main residence exemption from capital gains tax (CGT). This means you will be required to pay CGT on part of any capital gain made when you sell your house.

Goods and services tax (GST) typically doesn’t apply to residential rents, so you’re not liable for GST on the rent you charge.  However, you also can’t claim GST credits for associated costs.

Income and expenses

If you rent out your home at normal commercial rates you will generally be able to claim tax deductions for associated expenses, such as the interest on your home loan. But if only part of your home is used to earn rent, the ATO generally only allows deductions for the part of your expenses that relate to the rental income. As a general guide, you should apportion expenses on a floor-area basis – that is, based on the area solely occupied by the tenant, together with a reasonable figure for their access to the other general living areas.

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How to Apply for an Australian Business Number (ABN)

3 November 2016

It’s not mandatory for a business to have an Australian business number (ABN), but there are a few good reasons why you should. Foremost among them will be that without one, your business will probably feel a whole lot poorer than it should.How to get an Australian business number

Other businesses that deal with you are legally bound to withhold tax from any payments they make to you if your business does not quote an ABN on invoices – and they must withhold it at a rate of 47%.

Having an ABN also gives your business the ability to claim back goods and services tax (GST) credits, claim fuel tax credits you quality for, register to use the pay-as-you-go withholding system, be able to offer fringe benefits to employees, and just generally make dealing with other businesses much smoother.
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Controversial super change scrapped — but other proposals need to be watched

15 October 2016

The new Parliament has released the first batch of proposed changes to the superannuation regime, and among these was the announcement that the proposed $500,000 lifetime non-concessional cap is to be scrapped.   Recall that these measures were previously announced in the Federal Budget earlier this year before the election.

These proposed changes are still in exposure draft form and may be subject to further tweaking.

The government also revealed that:

  • the non-concessional contributions cap is going to be $100,000 per year, starting from July 1, 2017 (instead of the current $180,000 cap)
  • taxpayers with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional contributions from the same date.

Also, some of the previously announced measures will not proceed, and have been postponed or abandoned altogether. These include:

  • commencement of catch-up contributions using the unused caps from the prior five years for people with balances of $500,000 or less is postponed and to start from July 1, 2018
  • harmonisation of acceptance of contribution rules for those aged 65 to 74 will not proceed at all.

The proposed rules that remain intact and will continue:

  • the rule allowing fund members to “bring forward” three years’ worth of non-concessional contributions for individuals aged under 65, and
  • the requirement to meet the “work test” for individuals over the age of 65 in order to make non-concessional contributions.

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