Welcome to the June 2011 Accrue Chartered Accountants Newsletter. In this edition, we provide:
• A review of the major announcements in the recent federal budget
• Tips to help minimise your tax in 2011
• An update on superannuation matters
• Guidelines on how to complete an accurate motor vehicle log book
• Trusts in the ATO line of fire
Please contact us should you require any assistance with your tax planning needs prior to 30 June 2011
2011 – 2012 Budget Update
This year’s budget contained a number of announcements which will have an impact on client
affairs in the coming year. Some of the more important announcements are summarised below:
Unearned Income of Minors: Currently, minors (children under the age of 18) are able to offset
tax payable from their unearned income, such as trust income, against the Low Income Tax
Offset (LITO). This allows approximately $3,300 of income to be distributed to minor
beneficiaries each year without tax.
From 1 July 2011, minors will NOT be able to access the LITO to offset their unearned income.
This means that unearned income of minors over $416 will be subject to tax at 46.5%.
This measure will not affect unearned income of children over the age of 18. It will still be
possible to direct trust distributions and dividends to them and they will benefit from LITO
subject to income levels.
Small Business write-off for Motor Vehicles: From 1 July 2012, small businesses (turnover less
than $2m) will be entitled to claim an immediate deduction of up to $5,000 for motor vehicle
purchases. The remainder of the vehicle value will be added to the general small business pool
and depreciated at 30% p.a.
The Flood Levy: Taxpayers with taxable income between $50,001 and $100,000 will pay a levy
of 0.5% of their taxable income above $50,000. Taxpayers with taxable income over $100,000
will pay a levy of 0.5% of their taxable income between $50,001 and $100,000 and 1.0% of their
taxable income over $100,000.
Car Fringe Benefits Using the Statutory Method: The taxable value of all cars using the
statutory method to calculate the fringe benefit provided which have been purchased after
budget night (10 May 2011) will eventually reach 20%. That is, 20% of the car’s value will be
used to determine the value of the fringe benefit, regardless of the kilometres travelled. Cars
which do low kilometres will be better off under this reform.
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The change in the rates used in the statutory method calculation will occur in a phase-in process. The following table
summarises the new rates and the phase-in program:
Distance Statutory rate % (multiplied by the cost of the car to
travelled determine a person's car fringe benefit)
during the New contracts entered into after 7:30pm (AEST)
FBT year (1 Existing on 10 May 2011
April – 31 contracts From 10 May From 1 April From 1 April From 1 April
March) 2011 2012 2013 2014
0-15,000km 26 20 20 20 20
15,001-25,000km 20 20 20 20 20
25,001-40,000km 11 14 17 20 20
More than 40,000km 7 10 13 17 20
Reporting Taxable Payments from 1 July 2012: Certain businesses in the building and construction industry will have
to report annually on payments made to contractors to the ATO, along with the contractor's ABN. This will allow
data matching, thus reducing revenue loss due to non-reporting and underreporting of taxable income.
Tax Planning Opportunities
With 30 June fast approaching, the following strategies can assist with planning for the current financial year and
subsequent years. Tax Planning strategies include, but are not limited to:
It is important to note that there are age limits which apply to the making of superannuation contributions. Generally
contributions may be made by or on behalf of individuals aged 64 and below. Those aged 65 or more but less than 75 will
need to satisfy the work test.
Contributions should also be made well before 30 June 2011 to ensure they are processed by the superannuation fund by
30 June 2011. We recommend contributions be made by Friday 24th June 2011 at the latest.
There are severe penalties in getting the caps wrong and you should consult with us if you are in any doubt as to the
making of superannuation contributions.
There have been no changes in the Superannuation Contribution Limits during the 2011 Financial
Year. The details are as follows:
Concessional Contributions Cap - $25,000 These are contributions that are made by employers
(including employer contributions made under salary sacrifice arrangements) and by individuals
able to claim them as personal tax deductions.
“Over 50s” Transitional Concessional Contributions Cap - $50,000 An increased concessional
contributions cap applies until 30 June 2012 for people 50 years old or over. If you are 50 years
old or over, the annual cap for the 2010-11 and 2011-12 financial years is $50,000. If you have
more than one fund, all concessional contributions made to all your funds are added together and
count towards the cap.
From 1 July 2012 the concessional superannuation contributions cap for individuals aged 50 and over with total
superannuation balances of less than $500,000 will still be able to contribute up to $50,000.
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Non-Concessional Contributions Cap - $150,000 This cap applies to personal contributions
which have not or cannot be claimed as a tax deduction. Also counted within this cap are excess
concessional contributions. It is possible to bring forward two years non-concessional
contributions (that is a total of $450,000) provided certain age conditions are met.
Super Tips to be considered:
1. An employer is required to make a prescribed minimum level of contributions for any
employee each quarter. It is important to remember that where an employee works
for multiple employers during the income year, a breach of the cap may be
2. Life Insurance premiums paid under a Super Fund are considered to be contributions
and are included in your total contributions calculation.
Prepaying expenses, accelerating deductions
Consider prepaying deductible expenses by 30 June 2011. Small businesses (turnover less than $2m) and individuals are
able to prepay expenses and bring forward deductions on expenses such as interest and rent. Note that you cannot
claim a deduction for prepaid expenses that exceed 12 months.
Write off any bad debts
You can deduct a debt that you write off as bad in the income year if it was included in your
assessable income for the current or an earlier income year.
Resolve bonus payments
Bonuses to staff should be documented in writing before 30 June 2012 to be effective and
deductible in the 2010/11 year.
Defer the earning of income
Defer invoicing clients until the new financial year.
If you would like to discuss any of the above strategies or any other tax planning needs
please contact us prior to 30 June 2011.
End of transitional relief in relation to Temporary & Permanent Disability (TPD) premiums deductibility
The transitional relief to defer the application of the rewritten provisions in the tax law governing deductibility of
insurance premiums for superannuation disability benefits will end on 30 June 2011. The current industry practice for
deducting TPD premiums may change as the new law has a specific definition of superannuation disability benefits. For a
super fund to be able to claim a deduction for TPD premiums, the disability definition within the insurance policy will
need to match the definition of disability superannuation benefit in the Act.
Many industry experts argue that this means TPD premiums paid on ‘own occupation’ policies will be only partially
deductible from 1 July 2011. In contrast, TPD premiums paid on what is often referred to as ‘any occupation’ policies will
continue to be tax deductible.
We recommend you review and discuss your policy with your insurance broker.
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Excess concessional contributions
In the recent Federal Budget, the Government has announced it will provide a refund
option for eligible individuals who breach the concessional contributions cap by up to
$10,000. This measure will take place from 1 July 2011. Individuals will be given the
option to take excess concessional contributions out of their super fund and have them
assessed as income at their marginal tax rate, rather than the excess contributions tax
rate of 31.5% (in additional to the 15% contribution tax for the super fund). We are
expecting the Government to release guidance on the implementation of the proposal.
Minimum pension drawdowns relief: 25% reduction for the 2011/2012 year
The Government has announced a 25% reduction in minimum pension payments for the
2011/2012 year (e.g. a 4% minimum requirement will be reduced to 3%). The pension
drawdown relief, which was introduced as a result of the GFC, will be phased out
completely by the 2012/2013 financial year.
Employer Obligations - Superannuation
Under the superannuation guarantee system employers must pay superannuation
contributions for eligible employees at a minimum rate of 9% of their ordinary time
Superannuation payments have to be paid to funds on at least a quarterly basis (many
employers choose to pay on a monthly basis). The cut-off date to make superannuation
payments is 28 days after the end of each quarter.
Period Cut-off date
1 July - 30 September 28 October
1 October - 31 December 28 January
1 January - 31 March 28 April
1 April - 30 June 28 July
If the required superannuation contributions are not paid by the relevant quarterly cut-off dates, the superannuation
contribution will not be tax deductible. A superannuation guarantee charge statement together with the superannuation
guarantee payment, interest and an administration charge will need to be sent to the ATO - not the fund.
Note that superannuation payments are deductible in the financial year when paid. When paying superannuation for the
June quarter (or month), in order to claim a deduction in the 2010/11 year, the payment must be made before 30 June
2011. It is not sufficient to merely write a cheque prior to 30 June 2011 - the funds must be withdrawn from the bank
In the recent federal budget, it was announced that from 1 July 2011 company directors will be personally liable for their
company’s failure to pay employee superannuation guarantee amounts. This includes:
• 9% of each employee’s salary or wage
• SGC administration fee for each employee (currently $20 per quarter); and
• Interest on any shortfall amount.
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Log Books and Work Related Car Travel
The ATO is emphasising the importance of maintaining accurate log books to support the business use of cars. Without a
valid log book, deductions claimed using the log book method can be disallowed by the ATO and penalties imposed.
Once a log book has been completed it is valid for five years. If you have a log book that was completed in the 2005/06
year, or earlier, you will need to complete a new log book before 30 June 2011 for it to be valid and used in determining
car deductions for the 2010/11 year.
When completing a log book, it is important to understand which trips are business related and which are private. Below is
a summary of common trips undertaken by both employees and business owners. The green (broken) arrows represent
business related travel and the red (solid) arrows represent private travel. Note that the trip from home to work, and work
to home, will in most cases always be private.
Log Book Tips
For a log book to be valid, it must be maintained for a period of 12 continuous weeks and
contain the following information:
• When the log book period begins and ends
• The car’s odometer readings at the start and end of the period
• The total number of kilometres the car travelled during that period
• Certain details related to each business journey, as follows:
• The dates on which each journey began and ended
• The kilometres travelled, and
• The purpose of each journey (note: an entry merely indicating “business” or
“miscellaneous business” will not be sufficient).
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Trusts in ATO Line of Fire
The tax landscape for trusts continues to toughen with the following changes over the last 12 months.
1. The recent Federal Budget reducing the amount that can distributed to children;
2. Changes to how taxable income is allocated amongst beneficiaries of a trust. Much more care
is required before each year ends to determine how much and what type of income is allocated
to each person/entity and how the allocations are documented. This has been brought about
by the Bamford case as well as current draft legislation;
3. Where a distribution of income is made to a company, changed ATO interpretation of the trust
tax law means that income must now be paid within prescribed time periods to the company.
Generally this is about 2 years after the income is earned. If not paid by then, interest will also
need to be paid to the company. This can have significant cash flow implications and requires
proactive forward planning ensuring the trust continues to have adequate cash/capital.
We believe trusts continue to be an effective entity for a number of commercial and taxation reasons,
although require much more forward planning – we will ensure for our clients with trusts that the
above matters are carefully managed and optimum outcomes are achieved.
We are currently reviewing trust deeds and some may need to be amended. We will provide further
advice regarding this in the near future.
Wealth Creation and Financial Planning
Would you like:
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and during retirement?
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• Assistance in ensuring your will and estate planning strategies are up to date and suitable for your circumstances?
Kathy Martiniello and the team at Accrue Wealth manage the financial planning division within our office. We are pleased
to be able to provide a fully integrated service combining business advice, tax and financial planning, wealth creation,
retirement strategies and estate planning to our clients.
If you would like to discuss your finances or would like assistance with any of the above financial planning opportunities,
contact Kathy on 62854441 or email firstname.lastname@example.org
Kathy Martiniello and Accrue Wealth Pty Ltd are authorised representatives of Australian Unity Personal Financial Services Limited
(ABN 26 098 725 145) AFS Licence No. 234459, 114 Albert Road, South Melbourne VIC 3205
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