PHASING OUT Net medical expenses tax offset

Net medical expenses tax offset is phasing out
Draft legislation introduced in 2013 Budget to phase out net medical expense tax offset (NMETO) now passed into law. 

It means that the offset will disappear by the end of the 2018-19 income year, with some interim transitional arrangements put in place between now and July 1, 2019.

Part of the transitional regime includes that only those who claimed NMETO in 2012-13 will be eligible to claim the offset in the 2013-14 income year. Similarly, only those who claimed the NMETO in 2013-14 will be able to claim it in the 2014-15 income year.

All other taxpayers (those who made no previous claims) will be restricted to out-of-pocket expenses exceeding the relevant thresholds for specific expenses, including disability aids, attendant care or aged care only (more details on this to follow).

The NMETO for the 2012-13 income year allowed an offset of 20% of net medical expenses that are over $2,120 for:  Read more…

CGT Exemption when you own two homes?

CGT exemption when you own two homes
It is generally accepted that an exemption to capital gains tax applies to the family home, or "main residence", and the exemption usually applies for only one home at any given time. 

But there is a rule  that allows for a taxpayer to have two main residences and still maintain that CGT-free status for both premises for a temporary period.

Known as the "six month rule", this states that two properties can be claimed as a main residence at the same time where a taxpayer acquires a dwelling that becomes their new main residence before they dispose of the original. Read more…

TAX LAW What's a 'spouse'?

Tax and marriage
GJB's tips on nuptial know-how.

Every couple's "big day" will of course be marked more by flying champagne corks and numerous speeches of questionable quality, instead of the tax implications that go along with swapping rings.

Having a general understanding of what it means to be a "spouse" under tax law can change the approach taken to certain financial arrangements, clarify potential pitfalls and allow clearer planning.

Meaning of "spouse" under tax law
Broadly speaking, the tax law defines a "spouse" as:

  • another individual, of any sex, who is in a relationship registered under state or territory law (that is, married), or
  • if not registered, lives with another on a genuine domestic basis as a couple (a de facto relationship).

Some general tax implications from being a tax law "spouse" are as follows:  Read more…

DECEASED ESTATES Some essential information

Dealing with a deceased estate is a task many will shoulder at some stage
So having some familiarity with what's involved beforehand will hopefully ease the burden.

It is worth remembering that the law that applies to the assets and income of a deceased person depends in large part on which state or territory they lived in when they died. Also note that the information presented here mainly looks at tax responsibilities (which are a federal obligation). Speak to this office for guidance on the best avenue of inquiry when administering an estate.  Read more…

SMSF TRUSTEES New penalty regime in force

SMSF trustees take note
The new penalty regime is now in force

We reported about the changes to the penalties able to be handed down to self-managed superannuation fund (SMSF) trustees some months ago, but just as a timely reminder – a new penalty regime for SMSFs is now in effect and pertains to the activities of all SMSF trustees.

With its new regulatory powers, the Tax Office will be able to issue trustees with a direction to rectify contraventions, enforce mandatory education when there is non-compliance with superannuation law and impose administrative penalties that will be payable by the trustee, not out of the assets of the fund.

The last mandated power of the Tax Office has attracted the most attention with SMSF trustees now liable to fines of up to $10,200 for failing to adhere to superannuation law. To refresh your memory, below are the breaches, their corresponding penalty units, and the amounts SMSF trustees would be liable for.

Click here to read the full schedule of penalties in our July newsletter.

Contact our office on 02 9686 3130 to ensure you are on the right side of the law starting from July 1 this year.

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BITCOIN All you need to know

All you need to know about Bitcoin
Bitcoin is spreading to every corner of the world and transforming the very essence of monetary transactions.

Bitcoin is a five-year old computer-driven virtual currency traded on peer-to-peer networks. The currency is largely unregulated, nor is it managed by a central bank, instead relying upon an open source cryptographic protocol for the creation, storage and transfer of currency. It is highly volatile, having fluctuated from lows of $US2 to highs above $US1,200. At the time of writing, one Bitcoin was worth around $US590. 

The question is however, is it safe to use Bitcoin in business transactions and what are the tax implications of doing so? A few things to keep in mind are:  Read more…

Thinking about winding up an SMSF?

How to wind up an SMSF
Recently, we compiled the questions you have to ask yourself before deciding to establish a self-managed super fund (SMSF). 

But what if you already have one that you want to wind up? There could be many reasons you may need to wind up your SMSF:

  • there are no members left
  • there are no assets left
  • divorce
  • insufficient funds
  • relocation overseas
  • old age
  • death

Once the decision to wind up an SMSF has been made, there are certain obligations and requirements trustees must satisfy - both for the fund's members and for the SMSF regulator, the Tax Office. Read your superannuation fund's trust deed, as it may contain vital information about winding up your fund.

Do remember however, once a fund is wound up, it cannot be reactivated. We outline the four steps you need to take below. Click here to read the full article on page 7:  Read more…

BUILDERS Taxable payments reporting due 21 July

Businesses in the building and construction industry, take note
21 July 2014 deadline to report total payments made to each contractor you enlisted the services of in 2013-14.

You will need to report these payments to the Tax Office on the Taxable payments annual report.

The taxable payments reporting system was initially introduced to address longstanding compliance issues by contractors in the building and construction industry. Tax compliance issues that were identified included non-lodgement of tax returns, income being omitted from tax returns that were lodged, non-compliance with goods and services tax (GST) obligations, failure to quote an Australian business number (ABN), and use of an invalid ABN.

The pointers below will help you adequately prepare for the looming deadline.

Work out if you need to report
You need to report if all the following apply:  Read more…

Wanting to set up an SMSF? Read on

Super and tax provisions offer incentives to save for retirement
These savings may be handed over, typically to a public offer fund to manage on one's behalf, or they may be managed directly by you.

Managing your own retirement savings however is a huge responsibility and one that should not be viewed lightly.  How you live and how comfortable your life will be when you're no longer earning an income will depend largely on your efforts of saving and the investment performance and management of your super fund. And while there is no greater way to take control of your retirement savings than setting up a self-managed superannuation fund (SMSF), this is not something that can be recommended for everyone.

We consistently report on matters pertaining to SMSFs, from compliance requirements to tax obligations. For those who are interested in establishing an SMSF but do not currently have one, the following may provide some insight into managing such a fund.

There are strict rules and tangible risks to setting up an SMSF, but at the same time you can choose how to invest your fund's money and exercise full control as well as having greater flexibility over your investment choices. With an SMSF, you are responsible, you are the trustee of your own fund, you need to comply with the superannuation laws and regulations and you wear the consequences of all your investment and compliance decisions.

While SMSFs will be suited to many people, they are certainly not for everyone. The Tax Office asks all prospective SMSF trustees to consider the following aspects before deciding whether they should manage their own super:  Read more…

INVESTMENT Don't let the tax tail wag the dog

Your sharemarket portfolio and tax
There's a warning that sharemarket investors will hear at least once in their lives in some form or other - base decisions on investment merit, not on trying to save tax.

It's a maxim that has been put a more colourful way: Don't let the tax tail wag the investment dog.

Wise words; but don't wipe "tax" off the whiteboard just yet. It is still an important element to factor into your total investment outcome.

There are taxation consequences for everyone who earns assessable income, and that includes profits made from sharemarket investments (both from dividends and increases in market value that have been realised through share sales).

If you buy and then sell a parcel of shares and they have gone up in price, you will make a capital gain - and tax will usually have to be paid on this gain.  Read more…