NetActuary

Ensuring Correct SMSF Tax Outcomes

While NetActuary will diligently work to ensure administrators achieve appropriate ECPI outcomes taking recent changes into account, this note will provide useful background information – especially with “deemed segregation” and “disregarded small fund assets”.  No comments will be included below on funds that include legacy defined pensions (a separate note will be prepared for those).

 

Elected or Deemed Segregation

Until the 2017/18 year it was common practice to issue an unsegregated actuarial certificate as long as there was an accumulation account at some stage in the financial year.  The ATO’s view – which they will now enforce from the 2017/18 and subsequent years – is that one can have segregation under sec 295.385 of the ITAA 1997, even if the period fully in retirement phase is for only part of a year.  Consequently, one can have both segregated and unsegregated components in the same financial year.  In fact, one can have a number of segregated periods, each having to be separately accounted for – including asset revaluations – but only one residual unsegregated actuarial certificate.  The extra administrative effort can be avoided (which may or may not be in the client’s best interest).

Elected segregation is the old fashioned, conscious decision to segregate and separately account for some of the assets.

We need to be careful about what is exempt and what is not.  A new term – “retirement phase liabilities” has been introduced.  So, we have:

Retirement phase liabilities being:

• Account based pensions
• Market-linked income streams
• Transitional retirement income streams (TRIS) in retirement phase; and

Non-Retirement phase liabilities being:

• Accumulation account
• A Reserve Account
• A TRIS not in retirement phase.

A TRIS is in retirement phase and counts towards tax free earnings after age 65 or once the trustee has been notified that a nil cashing restriction condition of release has been satisfied.  A Transfer Balance Account credit notification must be made.  The TRIS in retirement phase is still not an ABP, although some practitioners feel this should be fixed up.  The same applies to issues around death benefit income streams.

 

Disregarded Small Fund Assets

If at 30/06/2017 (and each subsequent period) a member was in retirement phase and had a Total Superannuation Balance (TSB) above $1.6m in any fund and there was a retirement phase benefit in the fund at any time in 2017/18, the SMSF is classified as having “Disregarded Small Fund Assets”.  In this situation the fund is not allowed to use the segregated method for ECPI.  One will note that is necessary to ask clients what their superannuation assets are in all their funds.  Unsegregated assets are covered in section s295.390 of ITAA 1997.  If the trustees want to claim ECPI they need to get an actuarial certificate.  The calculated ECPI proportion applies to assessable income and net capital gains earned on assets which were not segregated.  Where the value of pension assets has grown above $1.6m it is possible that an actuarial certificate is needed – even if solely in pensions i.e. 100% exempt.

 

Avoiding Deemed Assets

Having to account for and revalue assets for a number of periods within a year is more administration work.  This can be avoided if (say) $100 was kept in an accumulation account at all times during the year.

The issue is that – just like the elected segregation – one or other option may give a better tax outcome.  If there are non-uniform gains or losses e.g. a property sale, the extra administration may be worth it.  Even items such as dividends may not be uniform over the year.  This area is interesting but more of a strategic plan ahead issue rather than an actuarial certificate production issue.    There are many actions that optimize tax and TBC outcomes.  These can be as simple as making pension commencements and Lump Sum Accumulation withdrawals early in the year and contributions late in the year.  From a TBC perspective, it’s better to have amounts above minimum payment requirements as a commutation, not as a pension.

The unsegregated ECPI percentage is used also to claim an expense deduction.  It is important to observe we are talking about tax calculations and the trustees may adopt a different approach for member allocations.

 

Keeping It Simple

Most funds will not have the above issues.  An innovation on the NetActuary data-forms (and in evaluating the SMSF admin general ledgers submitted) is only to ask the usually required questions and have a “less usual” checklist advice.  These are also the areas we watch out for in that they may affect outcomes and require more information.

• Are there legacy defined pensions?                    
• Is there “deemed or elected segregation” in the year?     
• Are there “disregarded small fund assets”?      
• Did the fund commence or wind up in the year?               
• Does the fund have a reserve account?           
• Is there any non-arms length income?
• Did a member pass away during the year or have insurance proceeds been received?       

 

NetActuary is the renamed company in the previous Bendzulla group of companies that provided actuarial certificates.  In recommencing these services, we have the ambition to be the pre-eminent source of quality support for the area.  That includes funds with legacy defined pensions.

Please ‘phone Brian Bendzulla on (03) 6224 1145 if we can help.

COME CELEBRATE WITH NETACTUARY

NetActuary is back in the SMSF Actuarial certificate business! Yes, this has been a long wait!! That is even more reason for a celebration you too can share.

A number of initiatives are planned for the coming months. As an opening special all account-based pension actuarial certificates submitted in the first week of July will be processed for a fee of only $11 inclusive of gst.

The 2017-18 actuarial certificates need a different approach to previous years. It is no longer adequate to mechanically process them. Many fund circumstances have alternative possible approaches and strategies that need to be evaluated to determine which is in the client’s best interest. While NetActuary will use extensive production system support, this will be combined with a careful actuarial judgement. All calculations will be undertaken personally by the qualified actuary who signs the certificate. The turnaround will be prompt, but always subject to what needs to be done.

Will this cost more. No!! Our account-based pension actuarial certificate maximum price will be $132 inclusive of gst. There will be a guarantee of no fee increases in the next two years. Lodgement is simple – on NetActuary.com.au is a data form or simply send us the general ledger download from any of the SMSF accounting systems.

We also have a profound interest in helping with all types of legacy pension aspects including actuarial adequacy and tax exemption reports. For more information see the website or phone Brian Bendzulla on 03-6224 1145.

 

 

 

 

Items to consider before 30 June 2017

This blog considers some actions that may need to be taken before 30^th June, 2017

CONTRIBUTIONS BEFORE JUNE 2017

The Concessional contribution cap in 2016/17 is $30,000 for people aged under 49 and $35,000 for those 49 and over.  From 1 July, 2017 this will reduce to $25,000 p.a. for all taxpayers.  The Division 293 extra contribution cap will have the threshold reduced from $300,000 to $250,000.

Likewise, the non-concessional contribution cap will reduce from $180,000 p.a. to $100,000 p.a. with no non-concessional contribution allowed for taxpayers with more than $1.6m in superannuation.  The $540,000 bring forward will apply for those eligible i.e. under age 65 and not previously triggered in the relevant period.  One needs to be careful with transitional rules for not full bring forwards and also for taxpayers approaching the $1.6m limit.

If a taxpayer wants to get extra contributions – including in specie transfers – into a superannuation fund, consideration should be given to using the opportunity to make higher contributions that apply until 30 June, 2017.

 

TRANSFER BALANCE CAP (TBC)

From 1 July, 2017 superannuation fund members will be subject to a $1.6 million transfer balance limit on assets eligible for tax exemption for funding superannuation pensions.  Amounts in excess of this will need to be held in accumulation phase and taxed at 15% or withdrawn from the superannuation system.

Existing superannuation steams will count but TTR pensions, the Age Pension and overseas pensions are excluded.  A transfer balance account operates.  Account based pensions result in a credit to the account at market value.  Lifetime defined pensions are valued as 16 times 2017/18 income.  Life expectancy and market linked pensions are valued as the annual entitlements times the remaining term.  If the excess is not commuted, the entire income stream will not be eligible for the tax exemption for earnings from assets supporting the income stream.  Also attracts “notional earnings” of the bank bill rate plus 7%.

Some non-commutable income streams have special rules.  The additional income tax consequence is determined by reference to a taxpayer’s “defined benefit income cap” which is the general transfer cap divided by 16 i.e. $100,000 in 2017/18.  Untaxed elements are not eligible for the 10% tax offset and taxed at full marginal rate.  The taxed element or tax free element has 50% of the amount exceeding the defined benefit income cap included in assessable income.

One needs to identify if the TBC is going to be relevant and what course of action will be adopted.  Taxpayers in excess of $1.6 million in superannuation will be required to use the unsegregated method to calculate the tax the fund must pay on earnings.  Another change from 1 July, 2017 is that partial commutations will not count towards a person’s minimum drawdown requirement under the new rules.

 

TRANSITION TO RETIREMENT PENSIONS

From 1 July, 2017 superannuation fund members will lose the tax exemption of earnings on assets that support a transition to retirement pension (TTR).  Members will still be able to start or maintain existing TTRs, but they should be reviewed.  Whether it is worthwhile to continue with this strategy will depend on age and objectives of the strategy.

 

CGT RELIEF

Capital Gains Tax (CGT) relief has been introduced to provide amelioration for individuals who will have to reduce the assets currently supporting superannuation income streams in order to comply with the TBC or TTR reforms.  The relief effectively “locks-in” the CGT treatment of these assets up to 30 June, 2017.

The concept is simple, but the implementation is surprisingly complex.  It may not be in the taxpayer’s interest to claim the relief.

Certain eligibility conditions must be met.  The assets must have been held at 9 November, 2017 and continue to be held.  There are different measures for segregated versus unsegregated assets methods of working out tax.  Mostly, the unsegregated method will be used.  The trustee can choose relief for some or all eligible assets.  The assessable proportion is based on the fund’s exempt current pension income proportion for 2016/17.  The trustee has the option to pay the tax on the notional gain in 2016/17 or defer the tax on the notional gain until the asset is sold.  If this issue is relevant, I suggest you start to evaluate the issues without delay, even though the final aspects can’t be finalised until year end.

 

Brian Bendzulla

Child Dental Benefits Scheme

A compassionate, decent society would not leave people – especially a child – with toothache due to inadequate resources.  In Australia, some 30,000 children per year have to be hospitalized for dental treatment under general anesthetic.  Many of these admissions could be avoided with preventative dental treatment.  Consequently, I was thrilled to see a newspaper article about The Child Dental Benefits Scheme, but dismayed at reported Government inaction to promote it to save money.  We (in the financial sector) could do this in our newsletters, blogs and other communications with the general public.

The scheme provides $1,000 worth of Medicare funded dental care every two years for families eligible for Family Tax Benefit A.  It can be used to get free or reduced cost dental care from a family dentist.  The Government tried to shut the scheme or reduce its benefits, but was unsuccessful.  Family Tax Benefit has an eligibility determined by the child’s age, immunization status and an income test.  The income test is complex but is as high as between $100,000 to $240,000 before it phases out completely (depending on the number of children).

Here is a link if you would like more information:

https://www.humanservices.gov.au/customer/services/medicare/child-dental-benefits-schedule.

Let us play our part in ensuring that the children of Australia get a comfortable visit to the family dentist for preventative dental care instead of a trip to hospital in pain.

Brian Bendzulla

Word Processors and the Web

In the 1980’s – and into the 1990’s – the dominant word processing program was WordPerfect, with more than 50% of the worldwide market.  However, by 2000 Microsoft Word had taken over 95% of the market share.  One needs to adapt quickly.  My suggestion is that even if you use dedicated web programmers, you should be able to make modifications yourself to your website personally.

The core of any financial planning firm that is worth its salt is the ability to mathematically model alternative options to evaluate optimal paths for the client.  This again means your website must have the functionality to assist in achieving this.  NetActuary is assisting by making white label calculators available.  A total rewrite is nearing completion.  More than forty thousand lines of code have been written.

The purpose of this blog is to highlight the HTML you need to link into this resource.  The first thing to note is that the URL (uniform resource locator) can have a “query string”.  We use this on the end of a calculator link to note information about what branding to effect i.e. ?ID=companycode.

 The next bit of HTML you need is an ability to create a hyperlink – a link from one page to another.  This is the <a> tag.  It looks like this:

 <a href = “http://netactuary.com.au/calculators/WLdefault.aspx”>OurCalculators </a>

Other attributes can be embedded in the <a> tag.  A very useful one is to include target = “_blank”.  This causes the calculator to be opened in a new window.  So, when the user closes the calculator, your website is still visible.

For the next week or two we will be working progressively with our white label clients to ensure they have all links working and have considered which of the new capabilities they would like to implement.

 

Brian Bendzulla

The $1.6 million transfer balance cap

Now that the Age Pension changes from 1 January 2017 have the management strategies well developed, it time to think of the next major advisory changes facing advisers.    Among the changes to superannuation was the introduction of a $1.6 million transfer balance cap which limits the tax exemption for assets funding superannuation pensions.

This new limit on superannuation will apply from 1 July 2017 and creates additional responsibilities for SMSF trustees. The main issues one needs to be aware of are:

• All super fund members who are receiving a pension on 1 July 2017 will have a transfer balance cap of $1.6 million created at that time.
• Those not receiving a superannuation pension on 1 July 2017, but will in the near future, their transfer balance cap will be created when they first receive a superannuation pension.
• The amount of tax-exempt assets available to fund a super pension under the cap is determined by a system of debits and credits which are recorded in a transfer balance account.
• Credits are created by:
  - The value of super assets supporting income streams on 30 June 2017;
  -  Starting new superannuation income streams from 1 July 2017 onwards;
  -  The value of reversionary income streams where an individual becomes entitled to them; and
  -  Notional earnings accruing to excess transfer balance amounts.
• Debits are created by:
  -  Commutations of superannuation pensions;
  -  Structured settle payments contributed to superannuation; and
  -  Certain payments arising from family law splits, fraudulent or void transactions.
• Reversionary pensions will count towards the cap, but members will have a 12 month period from the date of death to deal with the reversionary pension before a credit arises and counts towards their cap.

Going over the $1.6 million transfer balance cap will require the excess amounts to be removed from the retirement phase which will likely require the commutation of the relevant pension which has exceeded the cap.

Defined benefit pensions and certain pre-2007 superannuation pensions have special rules for the transfer balance cap recognising their non-commutable nature.

Any amounts in excess of a member’s personal transfer balance cap can continue to be maintained in their accumulation account in their fund.  This means if one has more than $1.6 million in super you can maintain up to $1.6 million in pension phase and retain any additional balance in accumulation phase.

Approaching 1 July 2017 people may wish to structure their asset holdings to be in a position to optimise the $1.6 million transfer balance cap, especially between spouses.

It is also important to know that there is transitional capital gains tax relief for superannuation assets that are affected by any changes you might need to make by 1 July 2017 to comply with the new rules.  This capital gains relief will ensure that any capital gain accumulated on affected superannuation assets will be deferred to a later time when the asset is sold.

Taxpayers with in excess of $1.6 million in superannuation will be required to use the unsegregated method to calculate the tax their fund must pay on earnings when they have assets in retirement phase and assets in excess of $1.6 million.

The indexation of the $1.6m will be less than the earnings.   I want to research how “crystallising” the value earlier may allow one to maximise the amount it is possible to get into pension phase.  At the moment, it’s a gut feel about the potential optimisation – it needs to be looked at carefully.  Those on public sector life time pensions and those with old legacy pensions are two further areas for consideration that jump out.

The Net Actuary Team

Are Actuarial Certificates Gone?

Scott Morrison, The Treasurer, and Kelly O’Dwyer introduced three Bills into the House of Representatives in the past few days.  This paragraph was included:

“3.337 A regulation will be made for the purposes of subsection 295-390(7) to determine liabilities in respect of account based income stream benefits for the proportionate method.  This means that superannuation funds who use the proportionate method but whose only superannuation income stream benefit liabilities arise from account based superannuation income stream products will also not be required to obtain an actuary’s certificate for the purpose of determining their exempt current pension income.”

The wording in the ITAA for 295-390(7) is:

“295-390(7) Subsections (4), (5) and (6) do not apply in working out the amounts to be used in the formula in subsection (3) if, at all times during the income year, the liabilities of the fund in respect of  superannuation income stream benefits payable at those times were liabilities in respect of superannuation income stream benefits that are prescribed by the regulations for the purposes of this subsection.”

Basically, the legislation is already in place to abolish actuarial certificates by regulation.  The vast majority of this work is for account based income streams.  The old legacy defined pensions have been steadily reducing.  If this is the case – and you can see from the above that it is not a careless statement, but rather a thought out course of action – there are going to be a lot of disappointed actuaries moving on to the next challenge.  It will not take admin providers and software developers long to provide the tools to do these rather simple cash weighted calculations.

We will only know with certainty when the regulations are published, but the intent certainly seems to be to remove the actuary’s certificate for account based pensions.  I will keep you posted on developments in this area.

The NetActuary Team

Closing Corporate Defined Benefit Plans

It has been quite a few years since most corporate defined benefit plans have been closed to new members.  As the membership is run down, a point is reached where the cost of operating the arrangement is expensive on a per member basis.  In such a situation the company naturally would like to consider closing the plan by converting the remaining members to an accumulation arrangement.

To obtain the consent of the affected members involves designing the transfer value offer and future contribution levels.  Often a top up amount is involved and this has the potential to trigger excess contribution tax.  The expected tax impact for the member needs to be incorporated in the calculations.

The illustrations for the member need to be on a year by year basis as the resignation benefit in the defined benefit arrangement may not smoothly link to the early retirement benefit design.  When considering whether the new arrangement is likely to be better, death and salary continuance benefits need to be factored in, as one must for administration fees.  At a practical level the member will want reassurance that the new covers will not be subject to medical requirements.  There is potential for the individual to redirect this resource to retirement asset build up if that is their preference.

Benefit projections should be on a number of bases to allow the affected member to judge variability of outcomes.  It’s important to point out that these alternatives do not indicate upper or lower bounds of all possible outcomes.

It’s right and proper that the accumulation design should have a greater expected retirement sum.  The member has more risk, for example, that at retirement returns may be poor – what is called sequence of return risk.  Where I find this risk difference really problematic is when a member is giving up pension rights.  Here the member is taking over the payment duration risk (mortality risk), the rate of return that can be achieved (market risk), inflation risk etc.

From an employer sponsor point of view, these exercises are facilitated by the existence of a decent surplus.  Interestingly, there is a parallel at the SMSF level.  A point may be reached where the cost of SMSF structures do not offset the tax advantages – especially since tax free thresholds and SAPTO may mean little tax on non-super assets.  With a shorter planning duration, the interest component in each payment is less.

The NetActuary Team

The Budget 15/16– What is in it for you?

The Government has recently announced the Federal Budget for 2015/2016 with a focus on “fairness and family”. Treasurer Joe Hockey has encouraged Australians to “get out there and have a go”, recharging labourers and entrepreneurs to strengthen the economy and assist in restoring Australia to a sustainable fiscal position.

 The main emphasis was on growing jobs and supporting small businesses ($5.5 billion package), a families support package with focus on child care ($4.4 billion package), and ensuring fair tax and social security settings.

 Despite the iron ore price nearly halving and $52 billion in tax receipts write downs to 2017/2018 since the last Budget, the Government continues to progress budget repair in a way that is claimed to be “responsible, measured and fair”. The Government is predicting a Budget deficit of $35.1 billion in 2015/2016 (2.1% of GDP) with no surplus predicted in the Government's medium term projections but with the Budget deficit reduced to $6.9 billion by 2018/2019.

 The Federal Budget has outlined targeted changes towards the nation’s savings and expenditure that may have an impact on you and your family. We have summarised these points below, noting that these are subject to the passing of legislation and should be discussed with your Financial Planner.

Small Business Support

The Government will significantly expand accelerated depreciation for small businesses by allowing small businesses with aggregate annual turnover of less than $2 million to immediately deduct assets they start to use or install ready for use, provided the asset costs less than $20,000.

The Government will also deliver a tax cut to all small businesses through a 1.5 percentage point tax cut for small companies and a five per cent tax discount on income from unincorporated small business activity. Eligible small businesses will also be able to change legal structure without attracting a capital gains tax (CGT) liability at that point. CGT roll-over relief is currently available for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability.

Small Business Start-Up

For small business start-ups, business registration will be streamlined, with one website acting as a one-shop stop for setting up a small business.

The Government will also allow small businesses to deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice.

Superannuation

The 2015/2016 Federal Budget remained largely quiet on superannuation, however there were minor budget measures regarding unclaimed superannuation and conditions of release for terminal illnesses.

Terminal Medical Decision

From 1 July 2015, the Government will extend access to superannuation for people with a terminal medical condition from 12 months to 24 months.

Lost and unclaimed superannuation

From July 1 2016, the Government will introduce a package of measures that will remove redundant reporting obligations and will streamline lost and unclaimed superannuation arrangements. The changes will make it easier for individuals to be reunited with their lost and unclaimed superannuation.

Centrelink, Dept. of Veteran Affairs and Families

Low Income Support

The Government has announced that it will cease the Low Income Supplement from 2017, currently helping low-income families with an annual payment of $300 to assist with household costs.

Income Test Deeming Rate Thresholds

The Government has announced that it will not proceed with the 2014/2015 Budget measure to reset the Income Rate Deeming Rate Thresholds, which according to the Department of Social Services would have seen around 530,000 pensioners worse off.

Defined Benefit Income – caps to social security testing

From 1 January 2016, the Government has announced that it will introduce measures to cap the proportion of Defined Benefit income that can be excluded from any income test at 10%. Under current arrangements, some defined benefit superannuants are able to have in excess of 50% of their superannuation income excluded from the pension income test.

Social security assets test – rebalance asset test thresholds and taper rate

The Government will increase the asset test threshold and withdrawal rate at which pensions are reduced once the threshold is exceeded. The assets-test free threshold from 2017 for homeowners will be increased to $250,000 for singles and to $375,000 for couples and the tapering rate will be increased from $1.50 per $1000 over the asset test threshold to $3.00 per $1000 over the assets test threshold.

Pensioners who lose their pension entitlement as a result of these changes will automatically be issued with a Commonwealth Seniors Health Card or a Health Care Card for those under Age Pension age.

The Government has also announced that it will not proceed with the 2014-15 Budget measure to index the Pension by the Consumer Rate Index. Instead, the Pension will continue to be indexed under the current arrangements, that being the average male weekly earnings.

Widow Allowance

In the 2014/2015 Federal Budget, the Government announced that a “One-Week Ordinary Waiting Period to all Working Age Payments (Widow Allowance, Newstart Allowance, Sickness Allowance, Parenting Payment and Youth Allowance). The Government has now amended this measure to exclude new claimants of Widow Allowance from this requirement.

Paid Parental Leave Scheme

From July 1 2016, individuals calming an employer-sponsored Paid Parental Leave Scheme will no longer have access to the Government assisted (minimum wage) tax payer funded scheme. Previously, individuals were able to take payments from both their employer and the Government.

The Government will ensure that all primary carers have access to parental leave payments that are at least equal to the maximum PLP benefit (currently 18 weeks at the national minimum wage).

Family Tax Benefit (FTB) Part A – Large Family Supplement

From July 1 2016, the Government will remove the additional FTB Part A Large Family Supplement, currently providing large families with up to $12.32 a fortnight for their third child, and each additional child after that.

Family Tax Benefit (FTB) Part A – Reduced Portability

The Government has elected to reduce the amount of time FTB Part A will be paid to recipients who are outside Australia. From 1 January 2016, families will only be able to receive FTB Part A for six weeks in a 12 month period while they are overseas. Currently, FTB Part A recipients who are overseas are able to receive their usual rate of payment for six weeks and then the base rate for a further 50 weeks.

Families Package – Childcare

Over the next 5 years, the Government will provide additional funding to support families in obtaining flexible, accessible and affordable child care so that they can move into or return to work, stay in work, train, study or undertake other recognised activities.

A new single Child Care Subsidy (CCS) will also be introduced on 1 July 2017 which will replace the current Child Care Benefit (CCB), Child Care Rebate (CCR) and the Jobs, Education and Training Child Care Fee Assistance payments.

The existing CCB, CCR and Jobs, Education and Training Child Care Fee Assistance Programme will continue until the start of the CCS in 2017. The Department of Human Services will contact families directly and provide information on current entitlements and how they may change under new arrangements.

Nannies Trial Scheme

From 1 January 2016, a new Interim Home Based Carer Subsidy Programme will subsidise care provided by a nanny (within the family home). This pilot programme will extend the current fee assistance to the parents of approximately 10,000 children. Families selected to participate will be those who are having difficulty accessing child care with sufficient flexibility.

Youth Payment Testing Arrangements

Over the next 5 years, the Government has elected to amend parental income testing arrangements to provide more support for families with dependent young people who qualify for certain income support payments, including Youth Allowance, ABSTUDY Living allowance (ABSTUDY), and the Assistance for Isolated Children Scheme.

Higher Education Loan Help (HELP)

From 2016-17, HELP debtors residing overseas for six months or more will be required to make repayments of their HELP debt if their worldwide income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia.

Aged care

Means testing arrangements

The government is refining the aged care means testing arrangements for new residents entering aged care from 1 January 2016.

The measure will remove the rental income exemption under the aged care means test for aged care means test for aged care residents who are renting out their former home and paying their aged care accommodation by periodic payments. Existing protections such as annual fee caps and lifetime fee caps remain.

Home Care Program

The Government will provide $73.7 million over four years to increase consumer choice and flexibility for older Australians in receipt of a Commonwealth funded Home Care Package.

This measure includes $19.9 million over two years in capital funding to enhance the My Aged Care Gateway functionality to manage the allocation of Home Care Packages to consumers.

Increasing short term restorative care places

The Government will incorporate short term restorative care places into the aged care planning ratio from 1 July 2016.

This measure will result in an overall increase in the number of short term restorative aged care places to support older Australians regain mobility and confidence to live safely at home after a period of hospitalisation and reduce the number of premature admissions into permanent residential care.

Taxation

Medicare Levy low-income threshold for families

The Government will increase the Medicare Levy low-income threshold for singles, families and single seniors and pensioners from 2014-15.The threshold for singles will be increased to $20,896. For couples with no children, the threshold will increased to $35,261 and the additional amount of threshold for each dependent child or student will be increased to $3,238. For single seniors and pensioners, the threshold will be increased to $33,044.

Work-related car expenses

The Government will modernise the methods of calculating work-related car expense deductions from the 2015-16 income year. The '12 per cent of original value method' and the 'one-third of actual expenses method' will be removed. The 'cents per kilometre method', will be modernised by replacing the three current rates based on engine size with one rate set at 66 cents per kilometre to apply for all motor vehicles, with the Commissioner of Taxation responsible for updating the rate in following years. The 'logbook method' of calculating expenses will be retained. These changes will not affect leasing and salary sacrifice arrangements.

Zone Tax Offset

The Zone Tax Offset applies to individuals in recognition of the isolation, uncongenial climate and high cost of living associated with living in identified locations.

From July 1 2015, the Government will now exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ (FIFO) workers from the Zone Tax Offset where their normal residence is not within a ‘zone’.

Changes to residency tax rules for temporary holiday workers

The Government will change the tax residency rules from 1 July 2016 to treat most people who are temporarily in Australia for a working holiday as non-residents for tax purposes, regardless of how long they are in Australia. This means they will be taxed at 32.5% from their first dollar of income up to $80,000.

Cap for not-for-profit salary sacrificed benefits

The Government will cap the amount employees of public benevolent institutions and health promotion charities can salary sacrifice for meal entertainment benefits to a separate single grossed up amount of $5,000. All use of meal entertainment benefits will become reportable and this measure will apply prospectively from 1 April 2016.

Employee share schemes

From 1 July 2015 the Government brings in changes to the taxation of employee share schemes. These changes were designed to make employee share schemes more attractive and accessible for all companies in Australia, and provide additional tax assistance to eligible companies through a start-up concession.

GST - applying to digital products and services imported by consumers

The application of the GST will be extended to cross border supplies of digital products and services imported by consumers from 1 July 2017.

Other

Unclaimed Monies Provisions

From December 31 2015, the Government will improve the way unclaimed money in savings accounts and life insurance policies are managed.

The Government will restore the time before they are transferred to the Government from three years to seven years, reversing the changes made by the previous Government in 2012. Children’s bank accounts will also be exempt to ensure funds put aside in these accounts will never be transferred to the Government.

The Government will also make changes to enable genuine inactive accounts to be transferred to ASIC to address concerns around identity theft and to stop unscrupulous people preying on vulnerable Australians.

A new drought preparedness framework

The Government will allow all primary producers to immediately deduct capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills.

The Government will also allow primary producers to depreciate over three years all capital expenditure on fodder storage assets such as silos and tanks used to store grain and other animal feed.

National Security

With home-grown terrorism a major concern for the Government, the Budget sets aside $450 million to boost national security by giving various intelligence agencies more resources. This includes boosting the technological capabilities of the countries intelligence-gathering agencies and providing additional training to border protection officers.

Foreign Investment

Tougher enforcement and penalties for foreign investment law breaches, especially related to real estate, as well as significant new application fees will assist the Government in raising revenue in excess of $651 million over the next four years.

Commonwealth Penalty Units & SMSF Administration Penalties

The Government will increase the value of all Commonwealth penalty units (the amount payable for fines under Commonwealth Laws) from $170 to $180, with effect from 31 July 2015. This will mean increases in all existing penalties under the SMSF administrative penalty regime.

Multinational Tax avoidance

The Government will introduce a new targeted anti-avoidance law in the Income Tax Assessment Act 1936 aimed at multinationals that artificially avoid having taxable presence in Australia earning a global revenue of $1 billion or more.

The Government also expects to collect $350 million from the “Netflix Tax”, which applies GST to foreign businesses selling digital products, such as downloaded movies, games, and e-books.

The NetActuary Team

 

Brian Replaces Senator Cormann!

 

Oh what fun we would have if Tony Abbott gave me the ministerial responsibility for superannuation!  Here is what I would do on Day One: 

• I would abolish the requirement that the option for the Australian Receiving fund to pay the tax on an overseas transfer only exists if the overseas fund is fully cleared out.  Actually, come to think of it – let’s totally abolish limits on monies coming in from legitimate overseas funds – the more overseas monies coming into Australia the better!
  
  
• I would make the tax deduction generated by anti-detriment payments tax refundible.  The ATO deducted the tax – give it back! 
  
  
• Where the minimum pension payment is not made, I would make the ECPI deduction denied the same proportion.  The “cliff effect” would be fixed.
  
  
• I would get the Trans Tasman Portability to apply to SMSFs so we have more than the embarrassing single Australian fund.  (That might not happen on the first day because I could get an all expenses business class ticket to Wellington on that one!) 
  
  
• I would fix up FIF/FAF for superannuation, including putting in transitional provisions for the naughty people who didn’t meet FIA requirements!

This is just the agenda for Day One.  Wait until you see Day Two!  Remember how we saved a considerable amount of red tape and bureaucracy when the RBL system was abolished and entry contribution limits were relied upon?  On Day Two I would do the same thing to Centrelink and the ATO by paying everyone the Age Pension and then clawing it back via the tax system for people with more money.

Oh what fun!

 

The NetActuary Team