Superannuation Guarantee Increases
From 1 July 2013 the minimum rate for super guarantee payments on behalf of employees will increase from 9% to 9.25%.
Over the coming years the superannuation guarantee rate will be increasing from 9% to 12%.
Low Income Super Contribution (LISC)
The low income super contribution (LISC) is a government super payment of up to $500 per financial year to help low income earners save for their retirement.
The LISC is 15% of the concessional (before tax) contributions you or your employer makes from 1 July 2012. The maximum payment you can receive for a financial year is $500 and the minimum is $20.
Are you eligible for the low income super contribution?
You are eligible for the low income super contribution (LISC), if you satisfy the following requirements:
- you have concessional contributions for the year made to a complying super fund
- your adjusted taxable income does not exceed $37,000 (if you are required to lodge a tax return)
- you are not a holder of a temporary resident visa (New Zealand citizens in Australia do not hold a temporary resident visa and, as such, are eligible for the payment)
- 10% or more of your total income is derived from business or employment
- the amount payable is $20 or more.
You will be eligible for the super co-contribution if all of the following apply:
- you make one or more eligible personal super contributions during the financial year into a complying super fund or RSA, and don’t claim a deduction for all of them
- you pass the two income tests
- your total income (minus any allowable business deductions) for the financial year is less than the higher income threshold
- 10% or more of your total income comes from eligible employment-related activities, carrying on a business or a combination of both
- you are less than 71 years old at the end of the financial year
- you are not the holder of a temporary visa at any time of the financial year, unless you are a New Zealand citizen or holder of a prescribed visa
- you complete the A3 government super contribution labels your tax return for the relevant financial year.
For more information regarding eligibility please refer to the following link
From the 2012-13 income year:Small business concessions: changes to simpler depreciation rules apply from 2012-13
- The small business instant asset write-off threshold has increased from $1,000 to $6,500
- Small businesses can claim an accelerated initial deduction for motor vehicles acquired in 2012-13 and subsequent years
- The long life small business pool and the general small business pool have been consolidated into a single pool to be written off at one rate.
These amendments only apply to you if you are a small business that has an aggregated turnover of less than $2 million. Your aggregated turnover includes the annual turnover of your small business and the annual turnovers of any connected or affiliated businesses.
Can you claim an instant asset write-off?
From the 2012-13 income year onwards, you can choose to use the capital allowance provisions in Subdivision 328-D to immediately write-off (that is, claim a deduction for) a depreciating asset that cost less than $6,500.
You can write the depreciating asset off at the end of the income year where you either:
- Start to use it for a taxable purpose
- Have it installed ready for use for a taxable purpose.
Can you claim an accelerated deduction for motor vehicles?
From the 2012-13 income year, you can choose to use the capital allowance provisions in Subdivision 328-D to calculate the deduction for a motor vehicle costing $6,500 or more that you start to use, or have installed ready for use, for a taxable purpose.
The cost of the motor vehicle is added to the general pool but unlike other assets, the deduction is $5,000 plus 15% of the remaining amount.
Tax planning strategies
- Subject to cash flow requirements, consider deferring income until after 30 June, especially if you expect lower income for 2013/14 compared to 2012/13. Most businesses are taxed on income when it is invoiced. Some small businesses may be taxed only when income is received.
- Bad debts must be written off in your accounts before 30 June.
- Employer and/or self‐employed superannuation contributions must be paid to, and received by, the super fund before 30 June and must be within the contributions cap (generally $25,000 per individual).
- Depreciation can be claimed for assets first used, or installed ready for use, before 30 June.
- Small businesses (turnover less than $2 million) can claim expenses prepaid up to 12 months in advance – for larger businesses, this is generally limited to expenses below $1,000.
- Wages paid to your spouse or family members must be reasonable for the work performed.
- Review valuations of trading stock in the lead up to 30 June. Best practice is generally to value stock at the lower cost or market selling value. This may change if you expect a tax loss for 2012/13, or substantially higher income in 2013/14 compared to 2012/13.
- Consider realising capital losses if you have already realised capital gains on other assets during 2012/13. Conversely, consider realising capital gains if you have unrecouped capital losses, or you expect substantially higher income in 2013/14 compared to 2012/13. Remember capital gains are assessed on contract date not settlement date.
- Make all donations in the name of the higher income earner.
For personalised tax planning strategies please contact our office to arrange an appointment.
Tax rates 2013/14
The following rates for 2012-13 apply from 1 July 2012.
|Taxable income||Tax on this income|
|0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $80,000||$3,572 plus 32.5c for each $1 over $37,000|
|$80,001 – $180,000||$17,547 plus 37c for each $1 over $80,000|
|$180,001 and over||$54,547 plus 45c for each $1 over $180,000|
The above rates do not include the Medicare levy of 1.5%
Changes to private health insurance rebate and Medicare Levy Surcharge
A number of changes have been introduced to the private health insurance rebate. From 1 July 2012:
- You are income tested on your share of the payments made for a private health insurance policy (whether you made the payments or not).
- Payments to private health insurance are tested against three new income thresholds to determine if you are entitled to a rebate from the government.
This means that if you have private health insurance both of the following apply:
- The amount of private health insurance rebate you are entitled to receive is reduced if your income is more than a certain amount.
- The ATO determine the amount of private health insurance rebate you are entitled to receive when you lodge your tax return.
This may result in you receiving a refund or a liability depending on how you claim your rebate.
If you do not have an appropriate level of private patient hospital cover, and your income is more than a certain amount, a higher rate of Medicare levy surcharge may apply.
Income test thresholds for 2012-13
The private health insurance rebate and Medicare levy surcharge are income tested against the income thresholds in the table below.
Table 1: Income thresholds
|Tier 1||Tier 2||Tier 3|
|Private health insurance rebate entitlement|
|Under 65 years old||30%||20%||10%||0%|
|65-69 years old||35%||25%||15%||0%|
|70 years old or over||40%||30%||20%||0%|
|Medicare levy surcharge|
* The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child.
Improving access to company losses
In the 2012-13 Federal Budget, the government announced its intention to provide tax relief for companies by allowing them to carry-back tax losses so they receive a refund against tax previously paid.
A one-year loss carry-back will apply in 2012-13, where tax losses incurred in that year can be carried back and offset against tax paid in 2011-12. For 2013-14 and later years, tax losses can be carried back and offset against tax paid up to two years earlier.
Loss carry-back will:
- be available to companies and entities taxed like companies who elect to carry-back losses
- be capped at $1 million of losses per year
- apply to revenue losses only
- be limited to the company’s franking account balance.