Budget 2013-14 snap shot

On 14 May 2013, the Treasurer handed down the 2013-14 Federal Budget. Below are some of the measures of immediate relevance to everyday Australians.

PERSONAL

2015 tax -free threshold increase “deferred” 

The already legislated increase in the tax-free threshold to $19,400 from 1 July 2015 will not proceed and will instead be “deferred.” The already legislated increase in the second marginal tax rate from 32.5% to 33% from 1 July 2015 will still go ahead. 

FTB Part A change to age of eligibility 

The Government announced it will change eligibility for FTB Part A for children aged 16 years and over. FTB Part A  will only be paid until the end of the calendar year in which a child completes school. This change will start from 1 January 2014. 

HEALTH  

Medicare levy increase to 2% confirmed to fund Disability Care 

The Medicare levy will be increased by 0.50% to 2% with effect from 1 July 2014, to help fund the Government's proposed National Disability Insurance Scheme (NDIS), now renamed DisabilityCare Australia. 

Phase-out of medical expense tax offset 

The Government is to phase out the net medical expenses tax offset, with transitional arrangements for those currently claiming the offset. 

Baby Bonus to be abolished and replaced 

The Government announced that it would replace the Baby Bonus from 1 March 2014. Instead, it will increase Family Tax Benefit Part A (FTB Part A) payments by $2,000, to be paid in the year following the birth or adoption of a first child or each child in multiple births, and $1,000 for second or subsequent children. 

EDUCATION 

Confirmation that self-education expenses to be capped 

The Government will introduce a $2,000 cap on tax deduction claims for work-related self-education expenses per person from 1 July 2014. 

HELP discounts to be abolished 

The Government will remove the discounts applying to up-front and voluntary payments made under the Higher Education Loan Program (HELP) from 1 January 2014. 

BUSINESS  

Increased funding for trusts taskforce

The Government will provide $67.9m over 4 years to the Tax Office to undertake compliance activity in relation to trust structures. The taskforce will target the exploitation of trusts to conceal income, mischaracterise transactions, artificially reduce trust income amounts and underpay tax. 

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

How much super can you contribute before 30 June 2013?

Whether you are employed or self employed knowing the maximum amount you can contribute to your superannuation funds is important and staying within the caps is vital as exceeding the caps may result in you paying as much as 93% of your superannuation contributions in tax.

The superannuation contribution caps that apply to you for the 2012/13 financial year are as follows:

• Concessional (before-tax) contributions - $25,000. Concessional contributions include compulsory employer contributions, salary sacrifice payments, contributions that are allowed as an income tax deduction, etc.
• Non-concessional (after-tax) contributions - $150,000. If you are under the age of 65, you can bring forward up to the next two years' non-concessional contributions. This means you can contribute up to $450,000 as non-concessional contribution over three years or you are allowed to contribute up to $450,000 non-concessional contributions in one financial year but then you would not be allowed to make any further non-concessional contributions in the next two financial years.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

A new way for tax office to target cash economy

The tax office has obtained or will obtain data identifying all motor vehicles sold, transferred or newly registered in the 2011/12 and 2012/13 income years where the transfer and/or market value is $10,000 or greater from the various state and territory motor vehicle registering bodies.

The data obtained will be matched against tax payer records to identify those participating in the cash economy, and/or those who may not be declaring all their income or deliberately avoiding their tax obligations. 

The tax office is already matching interest, wages, and dividend data declared by the taxpayers against data provided by employers, banks and share registries.

This measure is aiming at identifying those skimming some or all of their cash takings, running part of their business "of-the-books", or in other ways not reporting all their income. 

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

Changes to depreciation rules that every business should know about

A couple of changes have been introduced by the government effective 1 July 2012 and would affect the income years 2012/13 onwards. These changes only apply to you if you are a small business that has an aggregated turnover of less than $2 million. If you retail fuel, your non-fuel sales should be less than $2 million per year.

1. Increase in instant asset write off. You can now claim an immediate deduction (write-off) for most depreciating assets purchased that cost less than $6,500. Previously you could write-off an asset costing less than $1,000.
2. Accelerated deduction for motor vehicles. If you buy a motor vehicle for use in your business, you can now claim an immediate $5,000 deduction. The remainder of the cost goes to a depreciation pool to be depreciated at 15% for the first year and 30% for later years.

Some businesses have interpreted this to be an additional deduction to the already existing depreciating rules, that is surely NOT the case. You still get the same deductions over time, the newer rules are simply making more deductions to be claimed sooner.

 
BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

How the superannuation system works

Most of us whether employed or self employed would become members of a superannuation fund in our working lives. What amazes me however is how so many of us still don't know how the superannuation system works . So here is a quick snap shot of how it works.

The superannuation system was designed to help people save money for their retirement. Money is contributed during your working life in order to provide you with a source of income once you retire. 

Most people are entitled to compulsory superannuation contributions from their employers that should be made to a superannuation fund of their choice at least once every three months. The amount of contribution is calculated as a percentage of your income, which is currently set as a minimum 9%. You or your employer can also choose to contribute additional funds to your superannuation account at any time. If you are self employed, you would be able to contribute for yourself and the contributions may be tax deductible when you lodge your tax return.

The superannuation fund invests the money you have in your account on your behalf to maximise the return for the associated risk profile that you specify. The superannuation fund will charge you fees to manage and grow your super balance.

Except under exceptional circumstances you do not have access to your super money until you retire or turn 65. When you retire, you can obtain the money from your superannuation fund in a lump sum or as an income stream.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

How owning a rental property affects your tax position.

One of the recurring questions I get asked is "If I buy a rental property, how does that affect my tax position?" Here is how.

• Rent and other associated payments (e.g. Bond) that you receive would be declared on your tax return as rental income
• You can claim a deduction for certain expenses you incur relating to the rental property. The most common of these expenses are interest on the loan, council rates, water charges, insurance, property agent fee/commission and depreciation on capital items.
• If the rental income is more than the deductible rental expenses then the net rental income would be added to your other income (e.g. Salary and Wage, Business Income, etc) to determine your taxable income.
• If the rental income is less than the deductible rental expenses, then the net rental loss would be taken away from your other income (e.g. Salary and Wage, Business Income, etc) to determine your taxable income.
  

Example:

Salary income of $50,000, rental income of $25,000 and rental expenses of $15,000. The amount of income you would have to pay tax on is $60,000 (i.e. $50,000 + $25,000 - $15,000).

If the rental expenses in the above case were $30,000 then the amount of income you would have to pay tax on would be $45,000 (i.e. $50,000 + $25,000 - $30,000).

BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Adelaide, South Australia.

 

 www.taxfirst.com.au

 

 

Mistakes people make when starting and running a business

In my role as a business adviser, here are some of the common mistakes I see people making when they start or are running a business:

1. Going in partnership with a friend or family. Most people who don't have the capital required to start a business normally approach friends and/or family and ask them to start a business jointly. Most people who have gone down this road soon realize what a big mistake this was. Barely a few months go by and they start having disagreements about the direction of the business, work load and profit sharing. If you want to be in business, go solo!
2. Having family as employees. At the start of business when you want to keep costs low, it may sound like a good idea to ask a friend or family member to be an employee of the business but in the long run it doesn't work out. Even if you have to pay them more, hire unrelated people in your business for their skills not their relationship with you.
3. Setting up the wrong business structure. Setting up a wrong business structure at the start can cost you hundreds of thousand of dollar in extra taxes over the life of the business. There are various business structures available out there from sole traders to partnerships, from trusts to companies and depending on your circumstances any one or combinations of a few would suit you. Don't ask your business friends what structure they have got and replicate it, go to an expert and let them analyse your situation and recommend whats best for you.
4. Trying to do everything by yourself. Don't waste your time in doing things like designing your own website or trying to design your business cards. If you do, you will soon realize that you would be wasting a lot of your time on these activities rather than using time on developing and growing your business.There are professionals out there who specialize in these and other services that you may require to start up and run a business, use them.
5. Wasting your time on monitoring competitors.  Many businesses waste a lot of time trying to monitor what their competitors are doing and try to beat them. If you really want to succeed then you must differentiate yourself from the competitors.The best way to do this is by ignoring what they are doing and running your own business in your own way and not be influenced by the competitors.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Adelaide, South Australia.

 

 www.taxfirst.com.au