June 2009

Budget 2009

The Rudd Government delivered its second Budget on 12 May 2009 under very different circumstances to those existing at the time of its first Budget.

The main tax and superannuation-related changes are summarised in this Update. If you would like to discuss how the Budget directly affects you, please contact our office.

The clock is ticking for salary sacrificing to super

Anyone intending to salary sacrifice their income/remuneration into superannuation should seriously consider doing so before 30 June this year, for two main reasons.

Firstly, the Government has announced that the concessional contribution caps will be halved from 1 July 2009:

• to $25,000 (indexed) p.a. for individuals aged under 50 (from the existing $50,000 indexed amount); and
• to $50,000 (non-indexed) p.a. for individuals aged 50 or more (from the existing $100,000).

The concessional cap is the limit on the amount of deductible Superannuation Contributions which are taxed at 15% in the hands of the fund.

The cap on non-concessional contributions, or undeducted contributions from after-tax dollars, will remain $150,000 p.a. for the 2010 income year.

Secondly, from 1 July 2009, reportable superannuation contributions, including salary sacrificed superannuation, will be taken into account when evaluating a taxpayer's entitlement to a number of benefits, including the superannuation co-contribution, the Baby Bonus, and dependant tax offsets, as well as various liabilities, such as the Medicare Levy Surcharge and child support.

Contributions received by the super fund on or before 30 June 2009 will be assessed against the existing concessional contribution caps, and will not be included in 'adjusted taxable income'.

Although there is only a month left until the end of the 2009 income year, some clients may wish to discuss sacrificing, this year, unearned future income beyond 30 June 2009.

Super co-contribution reminder

Super fund members who are eligible to receive the Government's super co-contribution of up to 150% of their personal contributions (up to $1,500) need to make their contributions before 30 June 2009.

Eligibility to receive a co-contribution requires a taxpayer's ‘total income’ (assessable income plus reportable fringe benefits) to be less than $60,342, with at least 10% of that total income coming from employment (e.g., salary and wages) or business activities.

Budget update: From 1 July 2009, the co-contribution matching rate will be reduced from 150% to 100% (i.e., the maximum co-contribution will be $1,000).

Small Business Tax Break Boost

The Small Business and General Business Tax Break, or Investment Allowance, has been increased to 50% for small business entities, (“SBEs”). In general terms, an SBE is a business with an annual turnover of less than $2 million.
 
A deduction of 50% (instead of the 30% or 10% deduction) is available to SBEs that order an eligible asset between 13 December 2008 and 31 December 2009, and install it ready for use by 31 December 2010.

If you wish to claim the deduction in your 2009 tax return, the asset must be installed or ready for use by 30 June 2009. An asset is eligible for the investment if it is new and it is a tangible asset used principally in the business. Cars are eligible, software is not.

Businesses other than SBEs can continue to access the Tax Break at 30% for eligible assets contracted for prior to 30 June 2009 (and installed by 30 June 2010), and 10% for eligible assets that they commit to investing in between 1 July 2009 and 31 December 2009 (which are installed by 31 December 2010).

If you are considering taking advantage of the Investment Allowance, call Matt Duryea or Steve Gatto at ESV Finance Solutions for assistance and advice with financing the purchase.

Watch out for superannuation scams...

The Government is warning people to exercise extra care in protecting their superannuation account statements and personal details, in response to NSW Police Force information that a Sydney-based fraud syndicate is using stolen identities to steal from victims' superannuation accounts.

The syndicate has allegedly stolen superannuation statements and used other counterfeit identity documents to operate SMSFs, open bank accounts linked to the fraudulent SMSF, and then arrange for cash to be 'rolled over' from legitimate funds into the fraudulent accounts.

As a general rule, you should:

• shred any personal financial information you are disposing of;
• be cautious about what personal information you provide over the phone and to whom you provide it; and
• make a habit of checking your paper-based and online super fund statements to ensure there are no unauthorised transactions.
  
  
  

...and dodgy tax schemes

The Tax Office is conducting a national awareness program to help taxpayers protect themselves against promoters marketing dodgy tax schemes.

In the current financial climate, they are concerned promoters may increase the marketing of high risk tax schemes and scams, taking advantage of the recent financial vulnerability of many taxpayers.

Concerned individuals may wish to consult the Tax Office's fact sheet 'Tax planning – investigate before investing', which provides warnings to investors.

Liability limited by a scheme approved under Professional Standards Legislation.

The information in this newsletter is quite general in nature and anyone intending to apply it practically to their own circumstances should seek professional advice to verify it’s individual applicability. 

If you have any queries regarding the information contained in this
update please do not hesitate to contact us.

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