Posted on April 4, 2020
In our HCG October’s session of Tax on the Couch, various strategies were discussed to obtain the maximum benefit from salary packaging.
Salary Packaging: Strategies to use to your advantage
Here are the types of benefits that may be tax effective in a salary packaging strategy:
Super Contributions – generally limits tax on salary sacrificed super contributions to 15% (unless your taxable income is above $300,000). This is dependent on the relevant concessional contribution cap not being exceeded, and the employee not accessing their super until they reach preservation age.
Car Fringe Benefits – High income earners may benefit from salary packaging a car under the statutory formula method as a result of concessional valuation rules applied and the employer’s ability to claim GST credits for car expenses.
Employees with high business percentage use may benefit from a car fringe benefit valued under the operating cost method.
Immediate depreciation write-off – Where an employer reimburses (under a salary sacrifice agreement) the cost of acquiring a depreciating asset eligible for immediate write-off, the employee may be able to claim a deduction for the cost of the asset in their tax return.
Otherwise deductible expense – an employee may package expenses relating to rental property to benefit from the GST credits that will be claimed by the employer (such as property repairs, real estate management fees or strata levies).
Although salary packaging can be a good strategy to make tax savings, the circumstances of each individual are different. We invite you to get in touch with us to discuss your specific situation.
Written by Grace Shideh
Posted on April 4, 2020
Our clients often hear that they can access their superannuation benefits when they reach preservation age. This topic was covered in our September HCG Tax on The Couch training.
Change of Preservation Age – what does this mean to you?
Preservation is a restriction that prevents a member from accessing superannuation benefits until retirement or until satisfying a condition of release. Either you retire or go into transition to retirement (TRIS) so PRESERVATION AGE is an important timing for your future retirement planning.
The recent change in preservation age, therefore, is important for all Australians who were born after 1/7/1960. It is critical for SMSF trustees to be aware of the age at which super can be accessed so they don’t accidentally pay benefits to a member who is not eligible.
A member who turns 55 between July 1 2015 and 30 June 2016 cannot start a TRIS during the 2015-16 financial year. If born between 1 July 1960 and 30 June 1961 the earliest you can elect to start a TRIS is during the 2016-17 financial year.
The preservation age continues to rise until it reaches 60. For members born from 1 July 1960 to 30 June 1961 the age is 56. If born between:
1 July 1961 and 30 June 1962, it’s 57 and a TRIS can start in 2018-19
1 July 1962 and 30 June 1963, it’s 58 and a TRIS can start in 2020-21
1 July 1963 and 30 June 1964, it’s 59 and a TRIS can start in 2022-23.
The preservation age will be 60 for those born after 30 June 1964 and a TRIS can start from the 2024-25 year and onwards.
If you have any questions regarding the above change, please give us a call.
Posted on April 4, 2020
Our continuous professional development is a key focus of the team and management at HCG.
As part of our training program we subscribe to the NTAA Tax on The Couch which is a lively review of tax changes during the month.
Here is what we learned this month:
Small Business Benchmark
The ATO has recently updated its small business benchmarks. The benchmarks are designed to:
help business owners to work out how their business performance compares to other businesses in the same industry;
help business owners to estimate their turnover based on the labour and materials used and check whether the records accurately reflect their income;
identify businesses that may be competing unfairly by avoiding their tax obligations by not reporting some or all of their income. If these businesses are audited and there is not enough evidence to support their returns, benchmarks can be used to determine income that hasn’t been reported.
As tax agents, we use these benchmarks as a tool to help you improve your business bottom line and check your business health before lodging your activity statements or tax return.
SuperStream Contribution Standards
From 1 July 2015, small employers with 19 or fewer employees will need to start making contributions using SuperStream. Full compliance will be in force from 1 July 2016. Employers can meet Super Stream by either using a software solution that conforms to super stream or a service provider who can arrange SuperStream compliance on their behalf.
Employee with SMSF needs to provide Fund’s ABN, Bank Account Details, Electronic Service Address and Employee TFN to their employer to meet the SuperStream requirement. If the information is not provided, the employee will be deemed as not having provided sufficient details for the choice fund to be accepted and the employer may redirect their contributions to the employer’s default fund.
The failure to comply may result in an administrative penalty imposed on the trustee of an SMSF or an employer, and ATO is also able to give trustees and employer a direction requiring them to address a contravention of the standard or take action to avoid contravening the standard.
You can find more details by visiting the website below or wait for our detailed letter with instructions:
Wait for our next month’s Tax on The Couch series update!