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…

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…

ASSET CLASS What does it mean and why is it helpful?

What the term 'asset class' means, and why this can be helpful
The term "asset class" describes a set of investment options that are grouped into a similar area or type.

The main asset classes are cash, fixed interest, property and shares.  There is also a group of investment products that have tended to be labelled "alternative" as they don't readily fit into the parameters of the other asset classes.

The reason why it can be helpful to have an understanding of the different asset classes is that each has different levels of risk and return. Knowing what to expect can help you decide the type of investments that will suit your circumstances. You will also be able to judge your investments based on whether you prefer growth or income assets. The other thing people tend to overlook is how the different classes will be taxed, which is surprising because the after tax cash flow is perhaps a better measure for the return an investor can expect to earn.

Every investment carries an element of risk, and the main reason that people need to be confronted with risk is that it generally becomes inextricably linked to the level of return on any investment.

The trade-off between risk and return is well established – generally, the higher the risk an investor is able or willing to take, the higher the potential rewards (or return). Put another way, if a particular investment offers huge returns, this can be an indication that it will come with equally huge risks.  Read more…

Planning to enter aged-care accommodation?
Do so sooner rather than later.

Aged care is likely to get a lot more expensive from July 1, 2014 when means testing for the government accommodation supplement will be based on income and assets of the recipient as opposed to just income-testing alone.

The current income-tested care fee – which is based on assessable income – will be replaced by a means-tested care fee that will be based on both assessable income and assets (which may include your home).  The government will either pay the maximum accommodation supplement or a part accommodation supplement, depending on the recipient's assessed financial circumstances. For many, this will mean ongoing care fees will be higher if entering into an aged care facility on or after July 1, 2014.

Further, the manner to which payment for the accommodation should be made, the amount of accommodation fees payable and any on-going care fees will also be affected. Critically, the family home may also impact the accommodation fees payable.

The table on the following page summarises the current situation and the post July 1 changes.

The changes will not affect people who are already living in aged care facilities or those who are already receiving care at home - unless they leave care and re-enter after a period of 28 days, or if they change facilities and decide to re-enter under the new rules. However, anyone now receiving care at home who enters aged-care accommodation on or after July 1 would have to enter into a new agreement with the new provisions.

What should you do?  Read more…

EOFY TAX AND SUPER Planning tips for individuals

End-of-financial year tax and super tips for individuals
With 2013-14 financial year close, now is ideal for individuals to undertake tax and super planning for the year.

tax refundOur checklist outlines some pertinent matters to consider and provides planning tips for the 2014-15 financial year. The list is by no means exhaustive so speak with us for specific tax and commercial advice as the situation differs according to personal circumstances:

Dividend income

  • Has all dividend income been included in the individual's assessable income upon receipt?  Read more…
Recent changes to Paid Parental Leave, Family Tax Benefit and other entitlements
The recent passage of the Social Services and Other Legislation Amendment Bill has given rise to changes across a range of entitlements. 

Due to the delayed passage of the bill however, several amendments will take effect from a later date than initially proposed. We run through the various changes below and what they mean for you.

Paid Parental Leave
The Paid Parental Leave has generated much debate in the business community.  This is perhaps why the government has decided to ease the administrative burden on businesses by removing the requirement for employers to provide government-funded parental leave pay to their eligible long-term employees.

From July 1, 2014 (initially March 1, 2014), the Department of Human Services will directly pay employees their parental leave, unless you as an employer opt in to provide parental leave pay to employees and an employee agrees for their employer to pay them.

Pension Bonus Scheme
From July 1, 2014 (initially March 1, 2014), registrations will close for the soon-to-be phased out Pension Bonus Scheme.  Read more…

A very popular deduction, but have you got it right?

Car expenses
A very popular deduction, but you've got to get it right!

Vehicle expenses are a very regulated area for claiming deductions, so good guidance on making car expense claims is essential to stay on the right side of the taxman. It is not generally allowed, for example, to claim the cost of trips between home and work, even if you do minor work-related tasks on the way.

This is also the case where you may be called into work while otherwise at home, or if you worked shifts that are outside usual work hours. The fact that there happens to be no public transport near where you work also generally doesn't make a difference.  Read more…