Salary Sacrificing Tax Strategy - Reminder on the Super Contributions changes!

For those that are salary sacrificing contributions into their superannuation, its important to review the concessional contributions cap for this Financial Year (12/13). The cap has decreased for everyone to a maximum of $25,000 in super contributions per financial year.

The concessional contributions cap includes the before-tax payments into your superannuation such as:

• Employer contributions of 9% of your ordinary times earnings
• Any salary sacrificing contributions
• Personal contributions claimed as a tax deduction by a self-employed person

Even if you have more than one super fund, all your contributions into each super fund will count towards the cap.

Last Financial Year (11/12) the cap for people aged over 50 years was $50,000, but this has changed from the 1st July 2012.

So, if you used to contribute more than $25,000 into your super each financial year and haven't decreased your contributions this Financial Year, now is a good time to review as the tax penalties for going over the caps are quite severe.

The extra contributions over $25,000 are taxed at an additional 31.5% plus the 15% before-tax super contributions which totals a tax of 46.5%.

Its important to remain under the contributions cap of $25,000 for salary sacrificing into your superannuation to be an effective tax strategy.

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Working Mums & Dads: Eligibility for Flexible Work Arrangements

One of the things I have truly appreciated since having kids is flexibility with my work. This stood out for me a few weeks ago when I attended my sons first school assembly and there were hardly any parents there, even though we got texted the night before about it. All the new kids, including my son, were called out to the stage to receive a certificate and I felt really privileged to be able to share this moment.

I thought I'd take the time to detail the Flexible Working Arrangements which employees may be eligible for. These minimum conditions are part of the National Employment Standards which cover everyone in the national workplace system.

Flexible Working Arrangements include:

• working less hours or changing the start and finish times
• working from home
• job sharing or splitting work shifts

Eligibility: 

• Parents who care for school children or disabled children under 18 years of age; AND
• Employed with current employer for at least 12 months or a casual employee who has been employed regularly and systematically for at least 12 months and is likely to continue working regularly.

Negotiating Flexible Working Arrangements:

The legislation requires employees to ask their employer in writing, giving details of the change you want and reasons why you're asking for the change.

Your employer has 21 days to accept or refuse your request. Employers are only allowed to refuse on 'reasonable business grounds' and they have to provide reasons.

Tips - Fair Work Australia encourage employees and employers to talk about their working arrangements and where possible reach an agreement that meets both their needs. In negotiating a win/win scenario highlight the ways the arrangement could benefit the employer, don't just talk about how good it will be for you because you can work in your pyjamas all day. Possible positives for the employer could include increased productivity, decreased costs such as office space or wages, establishing a positive culture and moral, decrease in staff turnover.

Reasonable business grounds to refuse?

Employers need to look at the following issues to justify refusing a flexible working arrangement:

• how the change would affect the workplace's finances, efficiency, productivity and customer service
• how easy it is for current staff to cover work
• how easy it is to find someone else to do the work
• the arrangements needed to accommodate the employees request.

If you would like to read more about Flexible Working Arrangements click here.

Good-luck with your negotiations!

School Kids Bonus - Did you receive your payment?

So its February and school is back! (Yipee). With much anticipation and excitement my son has started Reception this year. Along with this has come the many purchases that I will have to make for the next 13 or so years.... School shoes, uniform, sports clothes, a hat, a backpack that's almost the same size as him and the list could go on!

Did you know about the Schoolkids bonus payments that were paid in January to help eligible families with education costs? The Schoolkids bonus replaces the Education Tax Refund. The Education Tax Refund was claimed when you lodged your tax return and you had to keep all your receipts.

Now, the School Kids Bonus is a payment of $410 a year for each primary student, paid in two instalments of $205 in January and July and $820 a year for each secondary student, paid in two instalments of $410.

To be eligible, you need to be receiving Family Tax Benefit A. There is a table from the Australian Government website which shows the maximum income your family can earn before the Family Tax Benefit A stops at the bottom of the below web page.

http://www.humanservices.gov.au/customer/enablers/centrelink/family-tax-benefit-part-a-part-b/ftb-a-income-test

FTB A eligibility depends on the number of kids, the age of kids as well as your combined income.

The website also encourages people to contact the government for a more accurate assessment as to FTB A eligibility and that income limits are indicative only.

So, if you didn't received any School Kids Bonus from the Government in your bank account in January than I would highly encourage you to double check your eligibility as every cent counts!

For more information go to australia.gov.au/schoolkidsbonus or call 132 468.

Goodluck to all the school kids!

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Small business tax deduction claims - did you miss these changes? Change 1.

If you are purchasing any assets for your business than you need to be aware of the changes to the depreciation rules. Whilst your Accountant may take care of the depreciation, its important for you to know the basics of the rules as your choice in asset could have significant tax implications.

From July 2012, there were three changes to the simplified depreciation rules for small businesses. The changes allow small businesses to accelarate the depreciation of their business assets. Theses changes affect sole traders, partnerships, companies or trusts that carry on business activity with an aggregated turnover of less than $2 million in the Financial Year.

The three changes you may have missed were:

• Immediate write-off for purchased assets costing less than $6,500
• Accelerated $5,000 deduction for motor vehicles
• Simplified depreciation rate of 30%

1. Immediate write-off for purchase assets costing less than $6,500

Under the simplified depreciation rules small business can now claim an outright deduction (write-off) for most purchased depreciating assets that cost less than $6,500. Small business used to be able to only claim an immediate write-off for assets less than $1,000. These changes now apply for the 2012/2013 income year and onwards.

The asset must obviously be used for a taxable purpose or be installed ready to be used for taxable purpose in order to be written off at the end of the income year.

For example:
Susie's Snack Bar bought a commercial coffee machine on the 1st July 2012 for $5,000. As the coffee machine is is a depreciating asset and costs less than $6,500 the business can claim an immediate $5,000 deeduction for the 2012-13 income year.

This change may have significant tax implications if you are deciding on whether to choose an asset that costs $6,000 or a different brand at $7,000. From a tax depreciation perspective, it may be advantageous for you to choose the $6,000 asset as you will be able to right the whole amount off, whereas the $7,000 asset gets depreciated at 15% the first year and 30% thereafter (this is the 3rd change).

I will explain the second and third change in my next post. If you were not aware of these changes, than I would definitely recommend seeing an Accountant who communicates tax changes to you through newsletters, emails or their blog!

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6 quick tips to get your finances into shape this year!

Here are my 6 tips to getting your finances into shape for 2013.

Make sure you read them all, as one of these tips could save you, or even make you, thousands:


1. Pay off your Credit Cards 

With exhorbitant interest rates charged on credit cards, this is a priority. A great way to manage paying off the balance is to divide the total amount outstanding by 12 and commit to paying this each month. You will also need to stop using the credit card and switch to a debit card. If its too tempting having the flashy gold, platinum or brightly coloured card calling out to you in your wallet, then 'hide' it in your top draw or even the freezer to avoid purchasing things you can't really afford. I love the freezer idea as you have time to think whether its really an emergency purchase whilst the card thaws out!

2. Make extra repayments on your Mortgage

Commit to paying off an extra $50 or $100 (or whatever amount you can manage) a week off your mortgage. This will reduce the loan term significantly and also save you thousands in interest. If you can't afford the extra $50 or $100 than with the recent decreases in interest rates, make sure you maintain the same repayments to reduce your loan term and interest costs.

3. Sort out your Super

Do you have 10 super accounts and possibly thousands in lost super accounts? In Australia, there are approximately 5.8 million lost super accounts worth $18.8 billion. Click here to search the ATO database for your lost super accounts. Compare your super funds to see how the funds are performing and consolidate to save on fees and paperwork. For more information about how to judge a super funds performance and consolidating super accounts, check out ASIC's guide here.

4. Create an additional Income Stream

Its a new year, so now is a great time to pursue a passion, skill or idea and make some additional money. With the unemployment rate creeping up and media announcements about layoffs occurring on a daily basis, having an additional income stream can be a great way to getting your finances in shape. You never know where a hobby might take you. A lot of successful businesses have started off on the kitchen table, in the garage or home office as a "side project".

5. Invest in your Education

Research shows that over their lifetime, Uni Graduates are likely to earn $1 million more than people who didn't finish high school. Increase your level of employment or earning capacity by studying. It is never too late to start! If cost is a factor, than see if your employer can subsidise any of this, check what government grants are available, or if it relates to your existing employment you could possibly claim the education costs as tax deductions. Click here for more information about the Skills for All South Australians government initiative which provides free courses for eligible people.

6. Lodge outstanding Tax Returns  

I saw many clients last year that had put off lodging their tax returns for quite a few years. Most of them ended up with substantial tax refunds. If you think you may owe the tax office money, have lost paperwork, or just want the maximum refund, then see a quality and affordable accountant to get the maximum refund possible. Why not use your tax refund to pay off a credit card or some of your mortgage too!

ATO announces help for bushfire affected people and businesses

The ATO has announced help for individuals and businesses that have been affected by the recent bushfires across Australia.

The tax support includes access to extensions for lodgment and payment of forms usually due around this time or in the coming months.

The ATO has also stated that if you have been affected by a natural disaster and are not ready to deal with any documentation received by the ATO, you should get in contact with them and they will make arrangements with you.

Click on Dealing with disasters to read a full summary of the ATO's tax support available and also National Bushfires - January 2013.

Baby Bonus vs Paid Parental Leave: making the right choice

With the baby bonus payment decreasing from July 2013 onwards, I thought I'd explore the government payments available for parents with new babies. I hope I can empower any mothers, fathers or expecting parents to make the choices that will best benefit their finances and take advantage and maximise the government payments available.

The Baby Bonus changes will affect parents who have already had their first baby and are having a further baby due after 1 July 2013. The payment for subsequent babies will now be $3,000. It will remain at $3,000 until 1st July 2015, when it will be indexed with CPI.

There are a few eligibility tests to claiming the baby bonus. The main one that is worth noting is that the bonus is payable if the family's estimated taxable income is $75,000 or less in the six months AFTER your child is born or enters your care. Its important to note that the threshold is your taxable income. This means that its your assessable income (what your gross income is on the payslips) minus any tax deductions. If you're close to the threshold, its always great to be maximising all tax deductions legally possible. A quality Accountant should be able to assist with this.

Its also important to note here that families CANNOT claim both the Baby Bonus and the Parental Leave Pay. It is either one or the other, or in some cases, it might be neither.

The recent cuts to the Baby Bonus payment DO NOT affect the Parental Leave Pay. There are actually increases to the Parental Leave Pay in the form of Dad and Partner Pay from January 2013. I have blogged about this recently.

Parental Leave Pay is payments of up to 18 weeks of paid leave at the National Minimum Wage of $606.50 per week, which equates to $10,917 before tax (you will be taxed at your marginal tax rates). There are a few tests to satisfy eligibility for the Parental Leave Pay.

Importantly, the income test is that you have to have an individual adjusted taxable income of $150,000 or less in the financial year before the date of birth, adoption or claim (whichever is earlier). As stated already, its the taxable income that determines eligibility, so if your salary is on or near this amount, its definitely worth seeing an Accountant to make sure you are maximising all your possible tax deductions to decrease your taxable income. .

Another tip to helping your family swiftly claim any family government payments is that you generally need to have all your tax returns lodged and up to date. If you're due to welcome baby soon and you or your partner have a few years of tax returns outstanding, now's the time to get moving on these. Centrelink generally won't let you claim the Childcare Rebate or Benefits unless all your tax returns for both yourself and your partner have been lodged.

Finally, the following info sheet from the Australian Government can help you when choosing between the Baby Bonus and the Parental Leave Pay. It also contains info about the 'work test' - another extremely important test to qualify for the Parental Leave Pay. I encourage you to check it out.