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USEFUL FORMULAS:

Where franking rate is 0.275, required fully franked dividend (RFD) can be worked out using this formula:  RFD = planned taxable income x 0.725. For example: given planned taxable income = 20542, what is the required fully franked dividend for a shareholder in a company with franking surplus? Answer: 14892.95 (=20542 x 0.725)

Franking credit formula:

  1. Franking rate = 27.5% => franking credit = fully franked dividend x (27.5/72.5)
  2. Franking rate = 30% =>  franking credit = fully franked dividend x (3/7)

.Changes to the CGT discount

The government introduced changes to the capital gains tax (CGT) discount, previously known as the ‘CGT 50% discount’.

Individuals, including beneficiaries of a trust and partners in a partnership, may no longer be entitled to receive the full CGT discount on a capital gain received after 8 May 2012 if they are:

  • foreign or temporary residents
  • Australian residents with a period of foreign residency.

A CGT discount worksheet is available to assist you and your clients determine their eligibility and calculate any CGT discount they may be entitled to.

For more information and to access the worksheet, refer to Capital gains tax discount for foreign resident individuals.

 

TAX FREE THRESHOLD

Effective from 1/07/2012:  (a) Tax free threshold is $18,200, (b) Low income tax offset: $445, (c) Effective tax free threshold: $21,884.

Note: effective tax free threshold for people aged 65 or above is $28,892

CHANGES AFFECTING SMSFs FROM 1 JULY 2014

  • Administrative penalties to specific breaches listed in section 166 of SIS Act range between an $850 penalty and a $10,200 penalty for each trustee individually (4 individual trustees, 4 penalties; corporate trustee, 1 penalty regardless of number of members)
  • Concessional contribution cap: $35,000 for taxpayers aged 50 and over; $30,000 for all others
  • Annual non-concessional contribution cap = $30,000 x 6 = $180,000;  $180,000 x 3 = $540,000 for non-concessional contributions under the bring forward rule
  • The CGT small business cap lifetime limits = $1,355,000
  • SGC rate increased to 9.5%
  • Superannuation insurance for members to be aligned with a SIS Regulation condition of release:
    • Death (item 102 of Schedule 1 of SIS Regs 1994;
    • Permanent incapacity (item 103 and Reg 1.03C);
    • Temporary incapacity (item 109 and Reg 6.01)
    • Terminal medcal condition (item 102A and Reg 6.01A)

Note:  Insurance policies acquired prior to 1 July 2014 will be granfathered so that SMSF can continue to hold existing insurance policies even if they do not align with the new rules.

SUPER GUARANTEE RATE

1/07/2010 – 30/06/2013:   9%

1/07/2013 – 30/06/2014:  9.25%

1/07/2014 – 30/06/2021:  9.50%

 

TAXABLE PAYMENT REPORTING

From 1 July 2012, businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year. You need to report these payments to ATO  on the Taxable payments annual report.

 Wn to report: 21 July each year BUT in the first year, 28 July 2013 for business with quarterly BAS lodgment.

 What payments to report: total amount paid to each contractor for building and construction services.

 Payments you do not report:

(1)    Payments on invoices for material only;

(2)    Unpaid invoices as at 30 June each year

(3)    Payments required to be reported in a Pay as you go (PAYG) withholding payment summary annual report or PAYG withholding where ABN not quoted annual report – for example,

  1. Employees, workers engaged under a voluntary agreement to withhold
  2. Workers engaged under a labour hire or on-hire arrangement
  3. Contractors who do not quote an ABN

 

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.

 SELF-MANAGED SUPERANNUATION – NEW TRUSTEE OBLIGATIONS

New regulations for self-managed super funds (SMSFs) took effect on 7 August 2012. They require SMSF trustees to:

  • regularly review their fund’s investment strategy
  • consider insurance for members as part of their fund’s investment strategy
  • value assets at market value for reporting purposes.

In addition, ATO are now able to enforce the requirement that the fund keep its money and assets separate to that held by trustees personally, or standard employer-sponsors.

For more information, refer to Obligations and responsibilities for self-managed super fund trustees.