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Monthly Archives: May 2016

DOUBLE TAX DEDUCTION for Life Insurance

You can get a double tax deduction when you pay for life insurance through superannuation. How does it work? Your business contributes your premiums to your super fund and the business gets the tax deduction. On top of that the super fund gets the tax deductions for the life insurance premiums it pays. Option 1 – Pay $5,000 premium outside of super. No tax deduction. Option 2 – Pay $5,000 Life Insurance premium inside super. Business pays the super fund as a contribution. Tax deduction. At 49% tax rate that is a $2,450 tax saving. Contribution is income in the fund @ 15% = $750 tax payable Life Insurance premium is deduction in the fund @15% = $750 tax refund. NET TAX SAVINGS $2,450 What do you need to make sure you can get this tax deduction: – A business or an employer that allows you to salary sacrifice to super.
– Super
– A chat with one of our team.
– To take action before 30th June. FAQ’s Why are life insurance premiums not tax deductible outside of super? You are not allowed to claim the premiums outside of super because you don’t pay tax on the money that you receive. How much would I have to earn pre-tax outside of super for that premium? If you are on the highest marginal tax rate of 49% you would have to earn $9,803. But even if you are on the 34.5% tax bracket you would have to earn $7,633. Does this strategy apply to other insurances? This strategy can apply to TPD (Any Occupation) and Income Protection Insurance as well. Income Protection insurance is tax deductible outside of superannuation also. Other insurances such as Home, Car & Pet insurances are not able to be paid through superannuation.

Help us save over a $1M in tax for Small Business!

Don’t pay unnecessary tax this year! Plan ahead and Save 30th June isn’t far away!!
Too often, we end up suffering because we have procrastinated and not made a positive decision to do something. Last Year we were able to help our clients save over $800,000 in tax. We want you to join them and help us get to $1 million. So, over the coming weeks, we will be listing a number of strategies to help you reduce your tax legally. Why?
If you leave your tax planning until the end of June, quite frankly there may not be enough time to do anything significant to legally reduce your tax.
So for 2016, start planning to save tax. So over the next few weeks keep an eye out for our tax planning strategies that can help you save big and save more for your families wealth creation. How our Tax Planning Process works First of all, we request from you details of your expected income and business profits for the 2016 tax year (1 July 2015 to 30 June 2016). This includes all wages / employment income, interest and dividends and rental income received, business profits / losses, and any capital gains / losses you expect to make. Based on this information, we estimate your taxable income and your tax payable BEFORE any tax planning strategies. For example, we may calculate (based on your information) that you may have a taxable income of $100,000 for 2016. Secondly, we discuss all of your tax planning options. Some of these may be things to do in your business, and some of these may be investment / wealth creation options. Thirdly, we provide you with a report that explains in plain English the tax planning strategies we recommend and exactly how much tax you will save. Finally, we provide you with an easy-to-follow Action Plan to ensure that both you and us can do everything that needs to be actioned before 30th June.

Federal Budget 2016 – Making Super difficult & giving to business

This is just a quick rundown of the budget and the things most likely to impact our clients. It isn’t a fully comprehensive review of everything in the budget. Something to remember is that none of the budget is law and now that Labour has given its response, it looks like they won’t be supporting all of the reforms that are set out the budget, especially the retrospective super reforms and generous increase to turnover size for classification of small business. We will be having a federal election soon, in which the full senate will be elected. This could see a substantial shift in the senate and the ability of the government to pass any legislation. Superannuation Effective Immediately Lifetime cap for non-concessional (after-tax) contributions. A lifetime cap has been set at $500,000 taking into account all after-tax contributions from 1 July 2007. Yes, that means in order to make sure you don’t breach the cap, you will have to go back almost 10 years and work out exactly what has been contributed since then. I am sure that everyone is looking forward to that. How has it changed? Previously, this limit was $180,000 per year and individuals under 65 could bring forward 2 years to make it $540,000 over 3 years. This is a massive shift that is designed to stop people being able to make large contributions to their fund. Super changes effective 1 July 2017 Allow catch-up concessional super contributions Balances less than $500,000 will be allowed to make additional concessional (pre-tax) contributions based on unused cap amount in previous years. The unused amounts start accruing from 1 July 2017 and can only be carried forward on rolling basis for a period of five years. I think this change is welcome and fantastic for people with lower balances and really help people get the funds that they need into super in their later years. Transition to Retirement Income Stream (TRIS) – Taxing earnings Previously, all income streams (pension) assets in a super fund were exempt from the 15% earnings tax. This will no longer be the case, with the income earned from assets supporting a TRIS to be taxed at the 15%. The TRIS scheme was supposed to be there to help people supplement their incomes, should they decide to start working part time before retirement. Due to its nature though, it was a great way to save tax and put those extra funds into Super to boost savings. If this stays, these strategies will need to be reviewed. Reducing Concessional Contributions Cap Pre-tax contributions and employer contributions cap will be reduced to $25,000 from $35,000 for those aged over 50 and $30,000 for everyone else. Changes to contribution rules for those aged 65 to 74 This is the removal of the work test, meaning that those in that age will be able to make contributions to their Super again, regardless of whether they are working or not. Tax deductions for personal super contributions This allows people to make contributions personally to Super and claim a deduction. Previously there was a 10% test in which only substantially self-employed individuals were able to claim this deduction. Change to the double contribution tax rule for high income earners As from 1 July 2017, the threshold will be reduced from $300,000 to $250,000 where high income earners have to pay an extra 15% on Super Contributions Tax. Improve Superannuation balances of low income spouses Low Income Super Tax Offset is available where spouse now earns up to $37,000 (up from $10,800). The offset is gradually reduced up until an income of $40,000. $540 tax offset is available for the contributing spouse. Low Income Super Tax Offset The point of this offset is so that people on lower incomes don’t pay more tax on their super contributions then they do outside of super. This will apply to people who have an adjusted taxable income of up to $37,000 and is up to $500. This replaces Labour’s Low Income Superannuation Contribution (which is almost identical). Business & Tax cuts Personal Income Tax Cuts The 32.5% personal income tax threshold will increase from $80,000 to $87,000. Increasing Small Business Income Tax Offset Increase in the current offset from 5% available to non-incorporated business to 8% but no increase the cap amount of a $1,000. Reduction in Company Tax Rate Reduction in Company Tax Rate effective 1 July 2016 for small business to 27.5%. The plan is to reduce it to 25% over the next 10 years. Increase in small business entity turnover threshold Starting 1 July 2016, the turnover threshold is to go from $2M to $10M. Labour have said they oppose this. We will have to wait and see it if makes it.