Hanrick Curran 2013 Post-Budget Presentation (May 2013)

2011-2012 Budget Update 12 May 2011
2013 Post Budget, Pre Financial Year End
Client Update
30 May 2013 Jamie Towers & Chris Campbell

 Mobile Phones – please turn off or to silent
 Bathroom – far side of reception
 Lucky Door Prize – Bottle of wine – business card draw
House Keeping

Vision
Hanrick Curran is renowned across Queensland for delivering innovative solutions to
grow and protect the wealth of our SME, Corporate and Personal clients by
empowering our skilled creative professionals to deliver comprehensive expert advice.
Audacious Goal
1. Be No. 1 in Service and Quality to our Clients
2. Be the No. 1 Place to Work
3. Be No. 1 in our Chosen Markets
4. Achieve Top Quartile Financial Results
Each of you play a very important part in our journey to reach our Vision by 2018
 We need and value your feedback
 We‟ve built the practice on client and associate referrals, please keep this up!

Budget Snapshot
 2012 – 2013 – forecast surplus - $1.5 Billion (now $19.4 Billion deficit)
 2013 – 2014 – forecast deficit - $18 Billion
 2015 – 2016 – balanced budget
 2016 – 2017 – surplus
 Large spending cuts required
 Tax Cuts planned for 2015-16 now deferred indefinitely

Key Policy Measures
 Gonski Education Reform
 National Disability Insurance Scheme
 Tax Cuts Deferred
 International Tax Reform
 Funding ATO to keep everyone honest

Key Opposition Policy Measures
 Abolish Carbon Tax (but retain personal income tax levels)
 Abolish Mining Tax
 Cut Red Tape
 Delay increase in superannuation rate by 2 years
 May not oppose any of the Budget „savings‟

What’s in it for me? Individuals & Families
 Baby Bonus Scrapped from 1 March 2014 – replaced with $2,000
additional Family Tax Benefit Part A payment ($1,000 for subsequent
children)
 Up front Discounts on HECS/HELP debts scrapped (1 January 2014)
 Medicare Levy Increase to 2% to fund Disability Insurance Scheme
 Tax Rate Cut Deferred Indefinitely

Individuals & Families – Tax Rate Cuts Deferred
Indefinitely (until Carbon price gets above $25)
2012/13 2015/16 2015/16 (previous)
Tax Thresholds Threshold Rate Threshold Rate Threshold Rate
1 18,201 19% 18,201 19% 19,401 19%
2 37,001 32.5% 37,001 33% 37,001 33%
3 80,001 37% 80,001 37% 80,001 37%
4 180,001 45% 180,001 45% 180,001 45%

Individuals - Non-Resident Tax Rates
2012/13 2015/16 2015/16 (previous)
Tax Thresholds Threshold Rate Threshold Rate Threshold Rate
1 0 32.5% 0 33% 0 33%
2 37,001 30% 80,001 37% 80,001 37%
3 80,001 37% 180,001 45% 180,001 45%
4 180,001 45%

Individuals – Net Medical Expenses Tax Offset
to be phased out – Use it of Lose it!
 Currently can claim 20% of excess over $5,000 of out of pocket
medical expenses
 Only eligible to claim it in 2014 year if you claim it in 2013 year
 If considering a procedure and 2013 expenses are currently below
$5,000 – bring the procedure forward (or at least pay for it) by 30
June 2013 to get over the limit and keep your eligibility open for
future years.
 Will be phased out altogether by 2019

Individuals – Self Education Expenses Capped at $2,000
 Currently Self Education Expenses are uncapped
 Proposal to Cap expenses at $2,000 from 1 July 2014
 If paid by employer and not „salary sacrificed‟ the rules will not apply
 Remuneration Planning – Employers Offer to pay for education for all
key employees as a „standard‟ benefit (not salary sacrificed) (Ask
Availlio for Assistance to redesign remuneration policy)
 Subject to consultation

Research & Development – R & D Tax Offset
 R & D Tax Incentive removed for Businesses with turnover > $20
Billion
 Turnover < $20 Million still able to claim refundable tax offset
 From 1 January 2014 – can claim the refundable tax offset on a
quarterly basis
 Lodge 2013 return and R & D Tax offset early to ensure
immediate availability of quarterly offsets in 2014 year

 Large Companies (>$1 Billion turnover) will pay PAYG (company tax)
instalments monthly from 1 January 2014
 Will apply to all entities with >$20 Million turnover from 1 January
2016.
 Small Business (Currently unaffected)
Monthly PAYG Instalments

Mining Exploration Deduction Tightened
 Currently an immediate deduction for exploration expenses and cost
of obtaining mining rights and information
 Will be restricted to only Mining Rights and Information acquired from
Governments and those costs incurred directly
 Mining Rights and Information acquired second hand (eg acquiring a
tenement) will be deductible over the lesser of 15 years or life of the
asset

Trusts
 ATO given a further $67.9 Million to target trusts to pick up an
additional $379 Million in revenue (Good investment?)
 Tax avoidance through mischaracterising and concealing income
Plan 2013 trust distribution resolutions before 30 June to ensure
they legally and effectively distribute income to achieve family
goals

International Measures
 Thin Capitalisation – „safe harbour‟ debt level reduced from 3:1 to
1.5:1, BUT an exemption is allowed for debt deductions of less than
$2 Million pa (increased from $250,000)
 10% withholding tax for non-residents disposing of taxable Australian
assets (excludes residential real estate of < $2.5 Million)
 Further review into offshore profit shifting – waiting on OECD report

Charities
 Removal of Tax Concessions for „commercial activities‟ of charities
where funds not directed back to altruistic purposes – delayed by
another 2 years
 New proposed start date 1 July 2014
 Proposed small scale exemption of $250,000

SMALL BUSINESS
 Not many changes from last year
 Small Business = <$2 Million turnover
 Can claim 100% of assets costing $6,500 as an immediate deduction
(from 1 July 2012)
 Can claim the first $5,000 of the cost of a car as an immediate tax
deduction with the balance written off in a depreciation pool at 30%
(15% first year) (Consider financing costs – Chattel Mortgage v
Lease)
Tax Planning Initiatives for Financial Year End 2013

SMALL BUSINESS
 Consider pre-paying expenses to claim the expense this year (not
effective for larger businesses)
 If selling a business / key business asset, speak to us first to access
the small business CGT concessions to minimise tax

ALL BUSINESS
 Loss Carry Back Rules
 Not yet law but supposed to apply from 1 July 2012
 If business profit and paid tax in 2012 year but loss in 2013 – carry
back the loss and amend 2012 tax return to receive a refund
 Deferring income / bringing forward expenses may have an even
greater effect on cashflow

ALL BUSINESS
 Defer income until after 30 June
 Bring forward expenditure (subject to prepayment rules)
 Ensure employee superannuation is paid before 30 June to get
deduction this year

ALL BUSINESS
 Review asset registers and scrap / write off old assets no longer used
 Review stock and write down / off obsolete stock
 Can value individual items of stock differently
 Review Debtors and write off Bad Debts before 30 June (reduces
income and claim GST back)

ALL BUSINESS
 Division 7A – Deemed Dividend Rules
 Ensure interest has been paid and minimum repayments made to
avoid a deemed dividend.
 Consider paying an actual dividend to make the repayment

ALL BUSINESS
 R & D Tax Offset
 Contact us early to have the 2013 claim prepared
 Quarterly Credits commence 1 January 2014

INDIVIDUALS & FAMILIES
 Prepay Interest on your investment loans
 Maximise Super Contributions
 Salary Sacrifice June salary (must organise this before you „earn‟
the salary, or it will not be effective)
 Spouse Contribution
 Co-Contribution

INDIVIDUALS & FAMILIES – Employee Share Schemes
 If receive employee shares or options – nearly always result in a tax
liability in the year the taxing point arises
 Adjust salary withholding to reduce the cash flow impact
 Consider tax effective investments (incl prepaying interest) to defer the
taxing point

INDIVIDUALS & FAMILIES – Capital Gains
 Review Share / Investment Portfolio and consider selling any shares
with underlying capital losses to offset gains made earlier in the year
 Speak to a broker or other licensed adviser to review strategies

INDIVIDUALS & FAMILIES - Trusts
 Review family income to end of May and likely income in June to
formulate a trust distribution strategy to minimise family income
 Consider commercial / asset protection and other issues (not just tax)
when resolving who to distribute to
 Ensure the trustee resolution is in accordance with trust deed and is
effective from a tax perspective (should be recorded in writing by 30
June in some instances to be effective) – Hanrick Curran can assist

INDIVIDUALS & FAMILIES – Medical Expenses
 Consider bringing forward planned procedures to ensure your 2013
tax offset can be claimed ($5,000 minimum out of pocket)
 If no claim in 2013 – no further claims (Use it or Lose it)

Superannuation Update:
 Impact of Federal Budget 2013/ 2014 changes
 Other recent changes & announcements
 Financial year end tips & traps

 Superannuation policy changes were announced on Friday 5
April 2013 by Minister for Superannuation, Bill Shorten
 No Superannuation changes in Federal Budget 2013/2014!
 Released early due to damaging press speculation about super changes
 Some measures are “effective” from 5 April 2013

Concessional Super Contribution Caps (tax deductible)
 Proposal to increase concessional cap to $50,000 over age 50 if < $500K in super
 Increase to concessional cap to $35,000 over 2 years:
* You need to be at least 59 as at 30 June 2013
Federal opposition, if elected:
 Committed to eventually restoring $100,000 concessional cap from age 50
(subject to “affordability” i.e. inherited state of Federal finances)
Opposition Senator
Mathias Cormann
“The Terminator”

Reform to Excess Contributions Tax Laws
Budget proposal:
 Allow withdrawal of excess concessional contributions; &
 Tax at the individuals marginal personal tax rate (instead of a flat 46.5%)
Current rules for Excess Contributions Tax (ECT)
 Exceed concessional contribution cap: 15% + additional 31.5% = 46.5%
 Exceed non-concessional contribution cap: 46.5%
 Exceed both caps: 15% + 31.5% + 46.5% = 93.0%
 Only current relief is : One time only allowance for excess contributions up to
$10,000
 No mention of reform on taxation of excess concessional non-concessional
“undeducted”contributions. i.e. Private savings (which you have already paid tax
on) contributed to super in excess of $150K or $450K over 3 years if under age
65, is taxed at 46.5% as a deterrent.
 99.999% of all such excess contributions are “genuine mistakes” however the
ATO will not accept that argument or allow rectification of mistakes. Beware!

No tax on investment earnings of pension fund assets!
 Tax free interest
 Tax free capital gains
 Tax free dividends & franking credits refunded (30%
company tax – nil super tax = 30% tax refund)
 No limit on tax free earnings & capital gains!
Superannuation Pensions
Current Taxation of Pension Funds:
Income stream (pension)
Pension: Age 60+: Tax free
Age 55 to 59: 15% tax rebate *
*based on individual circumstances
Superannuation fund
investment earnings:
 Interest, rent
dividends on shares
realised capital gains

Superannuation Pensions
Current Taxation of Pension Funds:
:
No tax on investment earnings of pension fund assets!
 Tax free interest
 Tax free capital gains
 Tax free dividends & franking credits refunded (30%
company tax – nil super tax = 30% tax refund)
 No limit on tax free earnings & capital gains!
Superannuation fund
 Interest, rent

Superannuation fund
 Interest, rent
Proposed changes to tax exemption on pension fund earnings:
 Only the first $100,000 of investment earnings of a super fund per
member will be tax free
 Remainder of fund earnings taxed at 15% (10% capital gains > 1 year held)
 Proposed date: 1 July 2014
Proposed Taxation of Pension Funds

Capital Gains Tax relief:
For Super Fund assets purchased prior to 5 April 2013
Can sell tax free up to 1 July 2024, then
Gain that accrues from 1 July 2024 until sold is included
For Super Fund assets purchased from 5 April 2013,
Can sell tax free up to 1 July 2014, then
For Super Fund assets purchased from 1 July 2014,
Details of proposed change
Each member‟s pension super balance must earn over $100K (excluding contributions)
before any tax is payable
Government’s simplistic example:
Pension SMSF: Dad $1M + Mum $1M = $2M @ 5% earnings = $100K so all tax free
However, what about a large capital gain realised? e.g. on:
Real estate such as your business premises in an SMSF; or
Listed shares, managed funds & other investments
Transitional rules i.e. “grandfathering” of exemption on capital gains. Some realised
capital gains may be included in $100K per member fund earnings threshold.

“Clever” strategies will no doubt emerge (depends on legislation as not seen yet)
Fund investments:
 “Segregated” investments are permitted for each member (costly to administer)
 Periodically selling listed shares that are accruing capital gains, before they get
too large then re-buying those shares? ATO says may be tax avoidance
Member balances:
In SMSFs one spouse often has more benefits that the other
Re-allocation of “minimum benefits” is not permitted within a fund
 Spouse contribution splitting (up to 85% of concessional contributions)
 Withdrawal of lump sum & non-concessional re-contribution in spouses name
 Must have access to large withdrawals e.g. retired & eligible to re- contribute?
? Multiple Super Funds paying pensions?
The Upside?
If net capital gains realised added to other fund investment income is less than
$100k earnings share per member threshold, all will still be tax free.
Even if threshold is exceeded, the excess of earnings to be taxed are taxed at
15% & 10% for capital gains (realised after 12 months)
These tax rates are the same as your current “accumulating” superannuation fund.
Accumulation fund tax rates are still generally superior to tax rates for:
Personal investing
Use of trusts or companies

From 1 July 2012:
30% tax on Concessional Contribution for individuals with “income” over $300,000
“expanded” definition of notional income to include:
 Gross “assessable” income +
 concessional superannuation contributions +
 Reportable fringe benefits
 Reportable Super Contributions (salary sacrifice)
 Add back investment losses
15% tax only applies to the amount of contributions that take notional income over $300,000
Concessional Contribution Caps:
 Taxed at 15% in receiving superannuation fund
(instead of up to 46.5% personally) e.g. 46.5% - 15% = 31.5% tax saving)
 Taxed at 30% in receiving superannuation fund
(46.5% - 30% = 16.5% tax saving)
Legislation still not tabled but is still to be effective for year ending 30 June 2013

Example 2012/2013:
Salary: $275,000
Fringe benefits: $10,000
Compulsory super (9%): $16,000
Salary sacrifice super: $9,000
Total super contrib: $25,000
Notional assessable income: $310,000
Contributions tax:
Notional income: $310,000
Income threshold: $300,000
Excess over threshold: $10,000
Tax on contributions:
$25,000 @ 15% = $3,750
$10,000 @ 15% = $1,500
Total $5,250
Effective tax rate = $5,250/ 25,000 = 21% (46.5% - 21% = 25.5%)

Superannuation Update:
 Financial year end tips & traps

Super Contribution Tax Deductions
Rules for Excess Contributions Tax (ECT)
 Exceed concessional contribution cap: 15% + additional 31.5% = 46.5%
 Exceed non-concessional contribution cap: 46.5%
 Exceed both caps: 15% + 31.5% + 46.5% = 93.0%
 One time only allowance for excess contributions up to $10,000
More than one source of income & super contributions?
 Contribution cap is are your personal limit from all sources
 Deductible limits do not apply to employers
 Up to taxpayer (not employer) to ensure Contribution Cap is not
exceeded

Super Contribution Tax Deductions
ATO Tax Ruling TR 2010/1:
When is a super contribution
considered to have been made?
 Cheque?
When the cheque is “in the hands of the trustee of the super fund”. Even if
not banked e.g. by 30 June, is still “made” unless cheque is subsequently
dishonored. However, Commissioner says in TR 2010/1 if cheque dated on
or before 30 June in an income year, must be banked within a few business
days”)
 Electronic funds transfer?
Only when credited to receiving fund’s bank a/c, NOT when transferred
from the contributors account. Beware internet transfers between different
banks which may be next “working” day
 Transfer of Assets?
“Made” when legal or beneficial ownership passes to the superannuation fund.
e.g. shares, when fund receives off- market transfer form, not on later processing at share registry
e.g. real estate, only when the fund is registered at the owner (titles registration)

“Off-Market” transfers of listed shares
Contribution to SMSF by “off-market transfer of listed shares
 Timing
“Made” when legal or beneficial ownership passes to the SMSF i.e. when fund receives off-market transfer
form, not on later processing at share registry
 Transfer at arms-length market value
ASX price on the day of transfer
 Are you realizing a personal capital gain that will be taxable?
Off-market transfer of listed shares is a “disposal” by you for capital gains tax purposes
SMSFs no longer
permitted to acquire listed
shares via “off-market”
transfer from a related
party from 1 July 2013

Things to do by 30 June 2013
Increase of compulsory Superannuation Guarantee
Contribution rate from 9% to 12% by 1 July 2019
 From 1 July 2013 increase SGC to 9.25% of an
employee’s ordinary time earnings
 For salaried employees, consider “salary packaging” any
increases?
Example:
Cash salary: $80,000
+ SGC 9% $7,200
Total salary package $87,200
01/07/13 Pay increase: $3,000
+ SGC 9.25% $7,637
$90,200
cash salary increase $2,563
super increase $437
Total spend $3,000
01/07/13 Pay increase: $3,000
+ SGC 9.25% $7,637
$90,637
cash salary increase $3,000
super increase $437
Total spend $3,437
Salaried director of
your own business?
Quarterly SGC applies
to you, no exemption!

Drawing a retirement pension or transition to retirement pension from
your SMSF?
ATO gets serious about minimum pension payment requirements
 Minimum pension withdrawal “in cash” must be made by 30 June 2013
(no book entries or payment in kind)
 Drawing the minimum amount is a “condition” of a pension. If not
satisfied, your SMSF will not enjoy tax free investment earnings, and will
revert to being taxed at 15%
 ATO will only allow tax free earnings status if a shortfall in pension paid
if:
 Shortfall is no more than 1/12th of the annual minimum pension
 Is corrected within 28 days of a trustee of a SMSF “becoming aware”
 You can demonstrate was an honest mistake
 You can only “self assess” such a mistake once. If you do it again, you have to
apply to ATO to keep tax free pension earnings status
30 June 2013 is a Sunday! Beware last minute or weekend internet transfers
between different banks which may be next “working” day in July
Things to do by 30 June 2013

Please feel free to contact us with any queries:
Jamie Towers, Tax Partner:
Jamie.towers@hanrickcurran.com.au
Chris Campbell, Superannuation Director:
Chris.Campbell@hanrickcurran.com.au
07 3218 3900

Thank you
www.hanrickcurran.com.au
Disclaimer:
These notes contain factual information concerning taxation and superannuation matters. The notes
are intended as a guide only and may not apply to circumstances of particular individuals. Do not act
on the contents of these notes without first obtaining specific advice from a qualified tax or legal
professional about your particular circumstances.
Hanrick Curran Group, its associates and the presenter hereby disclaim any responsibility for
persons relying in whole or in part on these notes or the information presented at this seminar.
The Corporations Act 2001 deems superannuation funds, self managed superannuation funds
(SMSFs) and pensions to be “financial products” and may consider a recommendation to contribute
to a fund, establish or join a SMSF, or to commence a pension to be financial product advice as
defined by that Act. We are not licensed to give such advice. You should consider taking advice from
an AFS License holder before making a decision on any financial product.

Hanrick Curran 2013 Post-Budget Presentation (May 2013)

Recomendados

Recomendados

Más contenido relacionado

Más de Matthew Green

Más de Matthew Green (13)

Último

Último (20)

Hanrick Curran 2013 Post-Budget Presentation (May 2013)