FirstTech Pocket guide. Adviser use only

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1 FirstTech Pocket guide FirstTech was ranked 1st by advisers for Technical Support in the 2011 Wealth Insights Fund Manager Service Survey.

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3 Contents Income tax rates 2 Capital gains tax (CGT) 8 Tax offsets (rebates) 10 Family benefits 15 Superannuation contributions 18 Superannuation benefits 21 Income streams 25 Employment termination payments (ETPs) 29 Social security 32 Important dates 41 Contacts for advisers IBC Note: The rates and thresholds in this guide are for the financial year unless otherwise noted. 1

4 Income tax rates Resident individuals Income Rate $0 $6,000 0% $6,001 $37,000 15% over $6,000 $37,001 $80,000 $4, % over $37,000 $80,001 $180,000 $17, % over $80,000 $180,001+ $54, % over $180,000 Note: Rates shown do not include the Medicare levy of 1.5%, payable where taxable income exceeds a certain level, the Medicare levy surcharge (see page 7) or the flood levy. Flood levy Taxable income Flood levy on this income $0 $50,000 Nil $50,001 $100,000 Half a cent for each $1 over $50,000 $100,001+ $250 plus 1c for each $1 over $100,000 Notes: W Applies to income for the financial year only. W In the case of couples, both members will be assessed individually for flood levy purposes based on their own taxable income. W Employment termination payments (ETPs) and certain superannuation benefits paid to your clients under age 60, that are taxable income, will also be included. W The levy will not apply to income which is exempt from income tax; for example, superannuation benefits paid to a person over the age of 60 years that are non-assessable and non-exempt income and not subject to tax. W This levy applies to the taxable component of super withdrawals within the low rate cap $165,000 for which is subject to a tax rate of nil. 2

5 Non-resident individuals Income Rate $0 $37,000 29% $37,001 $80,000 $10, % over $37,000 $80,001 $180,000 $23, % over $80,000 $180,001+ $60, % over $180,000 Notes: W A non-resident is generally only taxable on Australian sourced income. W Non-residents do not pay the Medicare levy or the Medicare levy surcharge. Minors (resident individuals) Income tax on eligible taxable income is calculated as follows: Taxable income Tax payable $0 $416 Nil $417 $1,307 Greater of: W 66% of the excess over $416, and W difference between tax on the whole of taxable income and tax on non-eligible taxable income $1, % on the whole of the eligible taxable income Notes: W Rates shown do not include the Medicare levy, the Medicare levy surcharge or the flood levy, where applicable. W Eligible taxable income is generally income derived by a minor that is not from their personal exertion. It is generally taxed at the top marginal tax rate and is not eligible for the low income tax offset (LITO). Eligible taxable income may include dividends, rent, royalties, and managed fund and family trust distributions. W Non-eligible taxable income (excepted income or where a minor is an excepted person, for example a disabled minor) of the minor is taxed at general resident tax rates (or at non-resident rates where the minor is a prescribed non-resident). This income is eligible for LITO. Excepted income may include income from work, compensation payments and inheritances. W As a result of the 1 July 2011 changes in minors eligibility for LITO, the effective tax-free threshold of a minor is $416 (compared with $3,333 before the change). 3

6 Other tax rates Company, fund or benefits Tax payable Company 30% Insurance bonds (issued by life insurance company) 30%* Friendly society bonds 30%* Complying superannuation fund 15% Non-complying superannuation fund 45% Fringe benefits 46.5% * Investor tax offset is 30% on assessable withdrawals. Withholding tax for non-resident individuals Income type Comments General rate Franked W Generally exempt from 0% dividends withholding tax Unfranked dividends # Interest Royalties # Other income (eg capital gains on taxable Australian property, rent) W Double tax agreement (DTA) with country of residence W No DTA W Unless a DTA provides a lower ratel W DTA with country of residence W No DTA W No withholding tax, but subject to non-resident income tax rates (see page 3) 15% 30% 10% 10% 30% N/A Distributions W From non-taxable Australian property, N/A from managed eg realised capital gains on listed funds (excluding shares no withholding tax franked W Other income, eg from rent and dividends, realised capital gains on taxable unfranked Australian real property dividends, resident in information exchange 7.5% interest and country royalties) other 30% 4

7 Income type Comments General rate Departing W Tax-free component 0% Australia W Taxable component Superannuation untaxed element 45% Payment (DASP) taxed element 35% Superannuation lump sums (taxed funds) W If age 60 or over W If under age 60 Superannuation W If aged 60 or over pension payments W If aged under 60 # Refer to specific DTAs for any variations in the general rates shown. 0% Super member benefits tax rates (not including Medicare) 0% Depends on DTA 5

8 Medicare levy thresholds Income category * Entitled to senior Australians tax offset W Individual W Married or sole parent For each dependent child or student, add Entitled to pensioner tax offset W Individual W Married or sole parent For each dependent child or student, add All other taxpayers W Individual W Married or sole parent For each dependent child or student, add Relevant taxable Phase-in limit income threshold (full levy payable (no levy payable) over this limit) $30,685 $44,500 $2,919 $30,439 $31,789 $2,919 $18,839 $31,789 $2,919 $36,100 $52,352 $3,434 $35,810 $37,398 $3,434 $22,163 $37,398 $3,434 * figures not available until June Notes: W The full levy is 1.5% of taxable income; however, this varies for low income earners according to circumstances as shown above. There are also some exempt groups of taxpayers. W For individuals, a reduced levy is calculated at 10 cents for every dollar above the relevant taxable income threshold amount, but at or below the phase-in limit shown in the table. W Reduced levy calculations, based on family income (combined taxable income of taxpayer and spouse) and number of dependent children, are more complex. 6

9 Medicare levy surcharge (MLS) Individuals and families on incomes above the MLS thresholds are liable to pay the MLS for any period during that they did not have private patient hospital cover. This is calculated at the rate of 1% of taxable income. The MLS is in addition to the 1.5% Medicare levy. The MLS is payable for any period during that the taxpayer and his or her dependants did not have private patient hospital cover and had income for MLS purposes greater than: W $80,000 for a single person with no dependants, or W $160,000 (combined for the taxpayer and their spouse) plus $1,500 for the second and each subsequent dependent child, for a member of a family. The income test used to determine a person s eligibility for the MLS includes taxable income, reportable fringe benefits, reportable superannuation contributions and total net investment losses. Note: If there is more than one dependent child, these thresholds are increased by $1,500 for each child after the first. The single threshold is indexed to average weekly ordinary time earnings and increased in $1,000 increments (rounded down) and the couples thresholds are double the relevant singles threshold. 7

10 Capital gains tax (CGT) Capital gains tax treatment of assets disposed of on or after 21 September 1999 Owner Individual, company, trust Superannuation fund Any Any Acquisition date Before 20 Sept 1985 Before 30 June 1988 From either of the above dates (as applicable) to 20 Sept 1999 On or after 21 Sept 1999 Asset held for Any length of time More than 12 months More than 12 months 12 months or less More than 12 months Assessable capital gain Generally no CGT payable Choice of: 1. disposal proceeds frozen cost base* / **, or 2. 1/3 x (disposal proceeds cost base*) Choice of: 1. disposal proceeds frozen cost base**, or 2. discount % x (disposal proceeds cost base # ) Disposal proceeds cost base # Discount % x (disposal proceeds cost base # ) * Cost base is the greater of the asset s market value on 30 June 1988 and the original purchase price. ** Cost base indexed by an indexation factor = CPI for quarter ending 30 Sept 1999 CPI for quarter in which asset acquired See page 9 for Consumer Price Index (CPI) numbers. # Cost base not indexed. 8

11 Notes: W Discount % varies with owner 50% for individuals and trusts, 33.3% for superannuation funds; companies are not eligible for CGT discount. W Special rules apply for assets acquired through a deceased estate and some other special categories of assets, eg main residence. W Net capital gain is included in assessable income and taxed at marginal tax rates for individuals and trusts, 15% for superannuation funds, and 30% for companies. CPI numbers for CGT calculations Year March quarter June quarter September quarter December quarter Note: CGT indexation frozen at September quarter 1999 figure. 9

12 Tax offsets (rebates) Low income tax offset (LITO) Taxable income (TI) Reduction in offset (RI) Maximum offset $0 $30,000 Nil $1,500 $30,001 $67,499 (TI $30,000) x 0.04 $1,500 RI $67,500+ $1,500 Nil Senior Australians tax offset (SATO) Family situation Maximum tax offset level Income shade-out threshold Income cut-out threshold Single $2,230 $30,685 $48,707 Couple (each) $1,602 $26,680 $39,496 Couple separated $2,040 $29,600 $45,920 because of illness (each) Notes: W Other eligibility criteria: W age pension age or service pension age or more on 30 June 2012 W eligible to receive an age or service pension, even if no pension actually paid, and W not in prison for the whole income year. W For a whole-of-year couple, offset eligibility of each partner is determined by their combined taxable income level, ie less than $78,992 or less than $91,840 if illness-separated, whereas offset entitlement is calculated on the basis of individual taxable income. W Offset reduces by 12.5 cents for each dollar of taxable income in excess of the shade out threshold. W Partnered senior Australians can transfer any unused portion of their tax offset to their partner. Refer to the SATO or Pensioner Tax Offset calculator on (partner must be eligible for senior Australians or pensioner tax offset). W Medicare levy is not payable for taxable income below shade-out threshold. W Income includes taxable income + reportable super contributions + net investment losses + the taxpayer s adjusted fringe benefits total. 10

13 Beneficiary tax offset Payable to those receiving certain taxable non-pension Centrelink benefits. Taxpayer s Centrelink benefit amount Beneficiary tax offset $0 $6,000* Nil $6,001* $37,000 15% x (benefit amount $6,000*) $37, % x (benefit amount $6,000*) + 15% x (benefit amount $37,000) * $6,000 is the taxpayer s tax-free threshold reduced accordingly if a part-year resident. Note: Payable to persons receiving certain taxable Centrelink benefits and allowances including Newstart and Sickness Allowances, Mature Age Allowance (granted on or after 1 July 1996), Youth Allowance, Austudy and Abstudy payments, Partner Allowance and Parenting Payment (partnered). 11

14 Medical expenses tax offset When net medical expenses exceed $2,000, a 20% tax offset is available to resident taxpayers on the excess amount. Expenses can be incurred on behalf of the taxpayer or their dependants. There is no upper limit on the amount that can be claimed. Private health insurance tax offset W A refundable tax offset. W 30% of premiums paid to purchase an appropriate private health insurance policy. The offset increases to 35% if the policy covers a person aged from 65 to 69 and 40% if the person is 70 or older. Note: Can be claimed in the form of a reduction in premiums or a direct payment. Spouse contributions tax offset Receiving spouse s relevant income (RI) Maximum rebatable contributions (MRC) Maximum offset (18% of lesser of) $0 $10,800 $3,000 MRC or actual $10,801 $13,799 $3,000 (RI $10,800) MRC or actual $13,800+ Nil Nil Notes: W Tax offset of 18% on up to $3,000 in spouse contributions. W Maximum offset available to contributor is $540. W Relevant income is assessable income + reportable fringe benefits total + reportable employer super contributions. W Eligible spouse must be under 70. If aged 65 to 69, they must be gainfully employed at least 40 hours in a period of not more than 30 consecutive days in that financial year. 12

15 Mature age worker tax offset (MAWTO) The maximum amount a working person can receive is $500. The basic eligibility requirements for MAWTO are that the person must: W be an Australian tax resident W be aged 55 or more at the end of the financial year, and W have received net income from working *. MAWTO entitlement The actual amount of MAWTO payable depends upon the amount of the person s net income from working*, as follows: Net income from working* Amount of MAWTO $0 $9,999 5% of net income from working $10,000 $53,000 $500 $53,001 $62,999 $500 reduced by 5 cents per dollar of income over $53,000 $63,000+ Nil * Net income from working is the total of amounts of assessable income that are mainly a reward for personal efforts or skills, less any relevant deductions (see s ITAA97). Net income from working also includes reportable employer super contributions + reportable fringe benefits. 13

16 Superannuation pension and annuity tax offset Age of member Under preservation age Preservation age or more and under age 60 Age 60 or more Type of pension Element of taxable component Taxed Untaxed Tax offset Death or 15% of taxed element disability Nil Other Taxed Nil Untaxed Nil Any Taxed 15% of taxed element Untaxed Nil Any Taxed N/A not subject to tax Untaxed 10% of untaxed element 14

17 Family benefits Child care tax rebate Rebate 50% of out-of-pocket child care expenses ** Maximum expenses claimable $7,500 per child per year ** These are approved child care expenses in excess of the amount of child care benefit and Jobs, Education and Training Child Care Fee Assistance (JETCCFA) received. Eligibility criteria W Must be assessed as eligible for the Child Care Benefit (CCB) even if the person won t receive a CCB due to their income test assessment. W The claimant and their partner must be working, studying or looking for work. W The child care provided must be from an approved child care service provider. W Not means tested. For more information visit Baby Bonus The Baby Bonus payable to eligible recipients is $5,437 (indexed by CPI on each 1 July), paid in 13 fortnightly instalments from the date of claim. Eligibility for the Baby Bonus is means tested and limited to families with an adjusted taxable income of $75,000 or less in the six-month period after the baby s birth (equivalent to an annual income of $150,000). Families with newly adopted children aged under 16 years are also eligible for the Baby Bonus. The Baby Bonus is not taxed. 15

18 Paid Parental Leave A Government-funded Paid Parental Leave scheme has been available for eligible recipients from 1 January The parental leave payment is equal to the federal minimum wage (currently $ per week), and can be for up to 18 weeks. The primary carer must have adjusted taxable income of $150,000 or less for the financial year prior to the child s birth or adoption, and have satisfied a work test. The work test requires the person to have worked at least 330 hours in the preceding 10 months, which equates to one full-time day per week. They must also have worked continuously for 10 out of the 13 months preceding the birth or adoption; therefore the work test cannot be satisfied by only working full-time for two months prior to the birth of a child. The Baby Bonus will not be payable to those claiming Paid Parental Leave. Neither will other family assistance payments, such as Family Tax Benefit Part B, dependent spouse, child-housekeeper and housekeeper tax offsets, for the period of payment of the Paid Parental Leave. In the case of multiple births, the Baby Bonus would still be payable for the second child. The payment will form part of the person s taxable income, and can be transferred to an employee s eligible spouse or de facto partner. Education tax refund A 50% education tax refund (ETR) applies to eligible educational expenses. The refund is limited to $397 per primary school child and $794 per secondary school child for These amounts are indexed annually on 1 July. The refund is available to parents who receive Family Tax Benefit Part A for the child, or whose school children receive Youth Allowance, Disability Support Payment or a related payment. The ETR payment can be claimed through a person s income tax 16

19 return, or an ETR for individuals 2012 claim form if they do not need to lodge a tax return. If expenses exceed a person s refund limit for the year, any excess can go towards the following year s refund claim as long as the person is still eligible. Family tax benefits For more information on rates, thresholds and eligibility refer to the Family Assistance Office Guide to Payments at 17

20 Superannuation contributions Contributions caps Concessional contributions Age at 30 June 2012 Annual cap Tax rate Under 50 $25,000 (indexed to average weekly ordinary time earnings (AWOTE), in $5,000 increments) 50 and over $50,000 (between 1 July 2009 and 30 June 2012) 15% (additional 31.5% if no TFN provided or where contributions exceed cap) Note: Concessional contributions which exceed the concessional cap also count towards the non-concessional cap. Concessional contributions include: Superannuation guarantee (SG) contributions including SG shortfall, industrial award and certified agreement contributions, additional employer contributions, salary sacrifice contributions, personal deductible contributions and the taxable component of a directed termination payment (DTP) that exceeds the $1 million cap (refer to page 29). Budget announcement operation of higher concessional cap for those over 50 from 1 July 2012 The Government has amended its previous announcement regarding a permanently higher concessional cap for those aged 50 or over with a total super balance of less than $500,000. The Government has now proposed that the higher concessional cap for eligible clients will be $25,000 higher than the standard concessional cap. This replaces the Government s original proposal that a non-indexed cap of $50,000 would apply. At the time of writing legislation to make this effective had not been introduced to Parliament. 18

21 Non-concessional contributions Age as at 30 June 2012 Annual cap Tax rate Under (work test met) $150,000, or $450,000 over a three-year period, under bring forward provision $150,000* Nil (46.5% where contributions exceed cap) * Unless a prior bring forward provision applies. Note: Non-concessional contributions include: personal contributions for which no tax deduction is claimed, spouse contributions and the non-taxable portion of a foreign pension transfer. Proceeds from the small business 15-year exemption and capital gains subject to the small business CGT retirement exemption and contributed to super (CGT contributions) generally will not be taxed by the fund, but will be treated as non-concessional contributions unless they count towards and do not exceed the CGT cap. CGT contributions above the CGT cap will count towards the non-concessional cap. CGT cap Income year Amount of cap $1.205 million Note: The CGT cap is a lifetime limit and is indexed annually to AWOTE in $5,000 increments. Superannuation co-contributions Total income (TI) Reduction in co-contribution (RI) Maximum co-contribution $0 $31,920 Nil $1,000 $31,921 $61,919 (TI $31,920) x $1,000 RI $61,920+ $1,000 Nil Notes: W Available to both employees and the self-employed. W Payment rate is $1 for $1 of personal contributions made by eligible individuals up to a maximum co-contribution of $1,000. W A person s co-contribution entitlement is the lesser of: W the actual non-concessional contributions made during the financial year, and W the person s maximum co-contribution limit as calculated above. 19

22 W Total income (TI) is assessable income plus reportable fringe benefits plus reportable employer super contributions (eg salary sacrifice contributions) less business deductions (other than work-related expenses or personal super contributions). W To be eligible to receive the co-contribution, a person must earn at least 10% of their assessable income plus reportable fringe benefits plus reportable employer super contributions from eligible employment and/or carrying on a business. W The matching rate of 100% and the maximum co-contribution that is payable on an individual s eligible personal non-concessional contribution of $1,000 will be permanently retained. W The income threshold above which the maximum superannuation co-contribution begins to phase down will be frozen for and Superannuation guarantee 9% of each eligible employee s ordinary time earnings (OTE) is to be paid to a complying super fund. The maximum OTE of an employee on which an employer is obliged to make super guarantee contributions is $43,820 per quarter ($175,280 pa) for , indexed to AWOTE on 1 July each year. 20

23 Superannuation benefits Superannuation member benefits tax rates Tax-free component In all cases, a tax-free component is not assessable and not exempt income and is not subject to tax. Taxable component Taxed element of taxable component Super income Super lump sum stream Age Amount Maximum rate of tax Tax treatment 60 and above Whole component 0% Not subject to tax Preservation age to 59 Below preservation age First $165,000 (indexed # ) Balance over $165,000 0% 15% Marginal tax rate (MTR) less a 15% tax offset Whole component 20% MTR (no tax offset)* # low rate cap is indexed annually. * Death and disability superannuation income streams also receive a 15% tax offset, see page 14. Note: For all non-zero tax rates, the Medicare levy also applies. The flood levy applies to the taxable component of super withdrawals including that within the low rate cap of $165,000 for , which is subject to a tax rate of nil. 21

24 Untaxed element of taxable component Super lump sum Age Amount 60 and above First $1.205 million # 15% Balance over $1.205 million Preservation age to 59 Below preservation age Super income stream Maximum rate of tax Tax treatment Highest MTR First $165,000 (indexed*) 15% Amount from $165,000 30% to $1.205 million Balance over $1.205 million Highest MTR First $1.205 million 30% Balance over $1.205 million Highest MTR MTR less a 10% tax offset MTR (no tax offset) MTR (no tax offset) # $1.205 million untaxed plan cap amount, per superannuation plan, indexed annually. * low rate cap indexed annually. Note: For all non-zero tax rates, Medicare levy also applies. Preservation age Date of birth Preservation age Before 1 July July 1960 to 30 June July 1961 to 30 June July 1962 to 30 June July 1963 to 30 June On or after 1 July

25 Rollovers to a taxed fund Rollover of super benefit (untaxed element) Rollover of super benefit (taxed element) Tax treatment First $1.205 million 15%* (paid by receiving fund) Excess highest MTR (withheld by paying untaxed fund) Nil * Medicare levy does not apply. Note: The tax-free component is not subject to tax when rolled over. Superannuation death benefits tax rates Superannuation death benefits paid to a dependant* Age of deceased Type of death benefit Age of recipient Taxation of taxable component Any age Lump sum Any age Not subject to tax Aged 60 and above Below age 60 Below age 60 Income stream Any age Taxed element: not subject to tax Untaxed element: MTR less 10% tax offset Income stream Age 60 and above Income stream Below age 60 Taxed element: not subject to tax Untaxed element: MTR less 10% tax offset Taxed element: MTR less 15% tax offset Untaxed element: MTR * A dependant for tax purposes is a spouse, including a de facto, a former spouse, or a same sex spouse, a child under the age of 18, a financial dependant or a person in an interdependency relationship. Note: The tax-free component is not assessable and not exempt income and is not subject to tax. 23

26 Superannuation death benefits paid to a non-dependant Age of deceased Type of death benefit Age of recipient Taxation of taxable component Any age Lump sum Any age Taxed element: 15% Untaxed element: 30% Any age Income stream Any age Not applicable* * Superannuation death benefit income streams generally cannot be paid to non-dependants. Notes: W For all non-zero tax rates, the Medicare levy also applies. W The tax-free component is non-assessable and non-exempt income, and is not subject to tax. 24

27 Income streams Minimum payment amounts for account-based, allocated and market linked (term allocated) pensions will be set at 75% of legislated minimums for and will then return to 100% in The minimum annual income payment for an account-based pension will be calculated as a percentage of the account balance as follows: Minimum annual payment Age Under 65 2% 3% 4% % 3.75% 5% % 4.5% 6% % 5.25% 7% % 6.75% 9% % 8.25% 11% 95+ 7% 10.5% 14% No maximum annual income payment applies unless the pension is a pre retirement pension. Note: These limits are calculated at the commencement of the pension and at the start of each subsequent financial year. Pro rata rule and 1 June rule Where an income stream commences part way through the financial year, the minimum income payment is pro-rated based on the days remaining in the year. The 1 June rule may also apply, which means that no payments are required to be made until the following financial year for an account-based pension or annuity commenced after 1 June in a financial year. 25

28 Pre-retirement pensions The minimum annual income payment for a pre-retirement pension is calculated in the same way as for account-based pensions. The maximum annual income limit is 10% of the account balance on commencement of the pension and at the start of each subsequent financial year. The maximum payment is not required by legislation to be reduced on a pro-rata basis if the transition to retirement pension is started or commuted part way through the financial year. Lump sum withdrawals are not permitted until a condition of release is met (except if there is an existing unrestricted non-preserved amount). Term allocated pensions A pensioner may vary the amount of pension by plus or minus 10% of the calculated annual payment. Note: For , the Government amendment to minimum payment amounts (refer to page 25) will allow pension payments between 67.5% and 110% of the annual calculated payment. 26

29 Life expectancy table Age Males Females Age Males Females Age Males Females

30 Age Males Females Age Males Females Age Males Females Source: Australian Government Actuary, Australian Life Tables

31 Employment termination payments (ETPs) Tax-free component In all cases, is not assessable and not exempt income and is not subject to tax. Taxable component (untaxed element) Age Maximum rate of tax ETPs Transitional rules** ETP cashed prior to 01/07/2012 Transitional rules** DTP (directed termination payment) contributed to super prior to 01/07/2012 Over preservation age (PA) First $165,000*: 15% Above $165,000: highest MTR Under PA First $165,000*: 30% Above $165,000*: highest MTR Over PA First $165,000*: 15% $165,000 to $1 million # : 30% Above $1 million # : highest MTR Under PA First $1 million # : 30% Above $1 million # : highest MTR Any age 15% * ETP cap amount for indexed to AWOTE in $5,000 increments. ** Employment termination payments paid due to entitlement in a contract, law or workplace agreement as at 9 May # Not indexed. Note: For all non-zero tax rates, the Medicare levy also applies (except for DTPs). The taxable component of a DTP that exceeds the $1 million cap will count towards the concessional cap. These thresholds may be reduced in certain circumstances. PA means preservation age and is assessed on the last day of the financial year. 29

32 Death benefit ETPs taxable component (untaxed element) Age Maximum rate of tax Paid to dependant Any age First $165,000*: not subject to tax Above $165,000*: highest MTR Paid to nondependant Any age First $165,000*: 30% Above $165,000*: highest MTR * ETP cap amount for indexed to AWOTE in $5,000 increments. Note: For all non-zero tax rates, the Medicare levy also applies except where paid to the deceased employee s estate. Genuine redundancy and early retirement scheme payments Tax-free amount $8,435 + ($4,218 x each completed year of service) is not subject to tax, not classified as an ETP and cannot be directed to a super fund. Balance of the payment: W is an ETP and may be split into a tax-free and a taxable component (see table on page 29 for tax treatment) W cannot be directed to a super fund unless it is a transitional termination payment, and W if directed to a super fund, is a preserved benefit. 30

33 Unused long service and annual leave payments Maximum Type of payment Assessable tax rate Unused annual leave On resignation or retirement W Pre 18 August 1993 service 100% 30% W Balance of service 100% Marginal tax rates On genuine redundancy, invalidity or early retirement W All service 100% 30% Unused long service leave On resignation or retirement W Pre 16 August 1978 service 5% Marginal tax rates W 16 August 1978 to 17 August % 30% W Balance of service 100% Marginal tax rates On genuine redundancy, invalidity or early retirement W Pre 16 August 1978 service 5% Marginal tax rates W Balance of service 100% 30% Notes: W A tax offset (the lump sum rebate) applies, so the taxpayer pays no more than the lower of their marginal rate and the maximum tax rate shown. W For all non-zero tax rates, the Medicare levy also applies. 31

34 Social security Age pension payment rates Family situation Pension rate pf Transitional pf Single $ $ Couple (partnered rate) $ $ * These rates include the pension supplement and are current as at 20 March 2011 and are adjusted twice a year on 20 March and 20 September. For current rates, refer to Pension income test Family situation For full pension pf # Cut-off limit Transitional cut-off limits Single up to $150 less than $1, less than $1, Couple (combined) up to $264 less than $2, less than $2, # Income over these amounts reduces the rate of pension payable by 50 cents in the dollar for a single person and 25 cents in the dollar each for a couple. For transitional or saved cases income over these amounts reduces the rate of pension payable by 40 cents in the dollar for a single person and 20 cents in the dollar each for a couple. These thresholds are current as at 1 July 2011 and are adjusted in line with the CPI. For current thresholds refer to 32

35 Pension assets test Assets test For full pension Cut-off limit Transitional cut-off limit Single homeowner $186,750 $673,000 $620,750 Single non-homeowner $321,750 $808,000 $755,750 Couple homeowner $265,000 $998,000 $966,000 (combined) Couple non-homeowner $400,000 $1,133,000 $1,101,000 (combined) Illness-separated couple $265,000 $1,237,500 $1,133,000 homeowner (combined) Illness-separated couple non homeowner (combined) $400,000 $1,372,500 $1,268,000 Note: The pension will reduce by $1.50 per fortnight for every $1,000 of assets above the lower threshold. These thresholds are current as at 1 July 2011 and are adjusted in line with the movement in the CPI. For current thresholds, refer to Allowance payment rates (eg Newstart, Partner) Family situation Single, 21 or over, no children Single, 21 or over, with children Single, 60 or over, after 9 months Allowance rate pf Allowance rate pa $ $12, $ $13, $519.80* $13, Couple, 21 or over $ each $11, each Note: Rates shown are for the period 20 March 19 September * Includes $6.00 Pharmaceutical Allowance. 33

36 Allowance income test Family situation Single, 21 or over, no children Single, 21 or over, with children Single, 60 or over, after 9 months For full allowance pf For part allowance pf # up to $62 less than $ up to $62 less than $ up to $62 less than $959.67* Couple, 21 or over up to $62 each less than $ each Notes: W Fortnightly income from $62 to $250 (inclusive) reduces fortnightly allowance by 50 cents in the dollar. For income above $250 pf, fortnightly allowance reduces by 60 cents in the dollar. Partner income which exceeds cut-out point further reduces fortnightly allowance by 60 cents in the dollar. W These rates apply to Newstart, Partner, Widow, Sickness, and Mature Age Allowances. # These figures may be higher if eligible for Pharmaceutical Allowance or Rent Assistance. Effective 20 March * Includes $6.00 Pharmaceutical Allowance. Allowance assets test Family situation For any allowance* Single homeowner up to $186,750 Single non-homeowner up to $321,750 Couple homeowners (combined) up to $265,000 Couple non-homeowners (combined) up to $400,000 * Allowance cuts out where assets exceed these limits; there is no gradual phasing out. Effective 1 July

37 Pension Bonus Scheme The pension bonus scheme is closed to new entrants from 19 September Clients registered prior to closure will continue accruing entitlements as previously. The formula for the calculation of the pension bonus amount is: Annual basic pension entitlement x (9.4% x years in scheme) x years in scheme Years worked (age Maximum bonus payable* pension deferral period) Single Partnered (each) 1 $1, $1, $6, $5, $15, $11, $27, $20, $42, $31, * Based on maximum basic pension as at 20 March Work Bonus A work bonus has been introduced in place of the pension bonus scheme from 20 September The work bonus operates as a pension income test concession for people of age pension age. The concession means that only 50% of the first $500 of employment income per fortnight is counted for income test purposes. At a 50 cent taper rate, this concession equates to a maximum increase in age pension entitlement of $3,250 pa (single or couple combined). 35

38 Changes to the work bonus from 1 July 2011 The change to the work bonus is designed to allow your clients to use up the maximum annual discount of $6,500. Even if the client works only occasionally it will allow them to work for short periods with little or no affect to their pension. There are two components to the change. First, eligible pensioners will be credited with $250 per fortnight regardless of how much they earn. Presently, for clients earning up to $500 per fortnight the work bonus halves the assessable income. Second, when clients do not earn $250 in a particular fortnight, the unused amount of work bonus will be added to their work bonus balance. As the balance accrues it will be used to reduce any future assessable employment income which exceeds $250 per fortnight. The changes will mean that wages up to $250 per fortnight will be reduced to zero and those between $250 and $500 in a fortnight will be reduced by the $250 work bonus amount. A pensioner earning $400 per fortnight will only have $150 ($400 $250) included in their income test as opposed to $200 prior to 1 July Clients earning under $250 in a fortnight will have the unused part of the work bonus saved in their balance for use at a later time. However a client who earns $250 every fortnight ($6500 per year) will get the same benefit as someone who earns $6500 over two months, if they had no other wages for 12 months. 36

39 Deeming thresholds and rates Family situation Amount and rate Single person $0 3% Pensioner couple (combined)* $0 3% Non-pensioner couple (each)** $0 3% All above categories 4.5% * At least one member receives a pension. ** Neither receives a pension. Maximum amount held in financial investments* only to receive full rate of pension Single $101,533 Couple $177,333 * Financial investments include: cash, term deposits, managed investments, listed shares and securities, bonds, debentures, unsecured notes, bank bills, loans made to individuals, shares in unlisted public companies, gold and other bullion, investments in superannuation and rollover funds held by those who are over age pension age, deprived assets and asset tested income streams (short-term). Figures are based on deeming rates and thresholds above and are subject to change if either of these amounts change. Effective 1 July Pension qualifying age W Men born before 1 July 1952 are eligible at age 65. W Women born before 31 December 1945 have reached the qualifying age for Age Pension. For women born between 1 January 1946 and 1 July 1952, see the table on page

40 Pension qualifying age for women Women born between Eligible for Age Pension at age 1 July 1947 and 31 December ½ 1 January 1949 and 30 June For both men and women born on or after 1 July 1952, see the table below. People born between Eligible for Age Pension at age 1 July 1952 and 31 December ½ 1 January 1954 and 30 June July 1955 and 31 December ½ 1 January 1957 and later 67 Department of Veterans Affairs (DVA) DVA service pension age for male and female veterans is five years younger than the Centrelink age pension age. For non-veteran spouses, it is the Centrelink age pension age above. For more information refer to DVA Fact sheet IS44 on DVA Types of benefits Benefit Means tested Taxable Service Pension Yes Yes Partner Service Pension Yes Yes Permanent Impairment Payment No No Disability Pension No No War Widow Pension No No Income Support Supplement (ISS) Yes Yes Incapacity Benefit No No Defence Force Income Support Allowance (DFISA) n/a Depends on tax status of ISS* * The taxable status of DFISA will be the same as the taxable status of the income support payment for which your client qualifies. 38

41 Aged care rates For more information, refer to the FirstTech Residential Aged Care Booklet or the FirstTech Aged Care Quick Reference Guide, or visit Low income health care card thresholds To be eligible for a low income health care card, average gross income must be below the applicable limit for the eight-week period prior to application. Status Weekly income Eight-weekly income Single $470 $3,760 Couple (combined, $816 $6,528 no children) Single or couple with one child $816 $6,528 For each additional child add $34 $272 Once a low income health care card has been issued, weekly income must not exceed the limits below during the entitlement period (from the date of issue of the card to its expiry date). Status Weekly income Eight-weekly income Single $ $4,650 Couple (combined, $1,010 $8,080 no children) Single or couple with one child $1,010 $8,080 For each additional child add $42.50 $340 Income limits are for the period 20 March 19 September

42 Commonwealth seniors health card Eligibility is based on whether adjusted taxable income is within limits below. Annual adjusted taxable income limits Single $50,000 Couple (combined) $80,000 Couple, illness-separated (combined) $100,000 For each dependent child add $ Note: Adjusted taxable income is the sum of: W taxable income W adjusted fringe benefits W target foreign income W net investment losses, and W reportable superannuation contributions (ie salary sacrifice and personal deductible super contributions). 40

43 Important dates Superannuation guarantee (SG) dates for payment of charge and penalties 9% of each eligible employee s ordinary time earnings is to be paid to a complying super fund. The table below sets out the due dates in SGQ Due date for payment of SG contributions 1 Jul 30 Sept 28 October 28 November 1 Oct 31 Dec 28 January* (Saturday) Due date for lodgement of SG statement, payment of SG charge and late contributions to offset SG charge 28 February 1 Jan 31 Mar 28 April* (Saturday) 28 May 1 Apr 30 Jun 28 July* (Saturday) 28 August Notes: W Maximum quarterly contribution base for is $43,820 (ie $175,280 pa) per employee. An employer does not have to provide superannuation support on that part of an employee s salary/wage which exceeds this level. W Failure to contribute within 28 days of the end of the relevant quarter will incur the SG charge, payable to the ATO by the 28th day of the second month following the end of the relevant quarter. W Tax Laws Amendment (2008 Measures) No. 2 Act extends the date by which late contributions can be used to offset the SG charge to up to four years after the end of the relevant quarter. The employer must still lodge an SG charge statement and will still be liable for the administration fee and interest component of the SG charge. * Refer to footnote on page

44 Other lodgement dates 31 October 2011 Final date for lodgement of individual, partnership, and trust income tax returns, unless an approved substituted accounting period has been granted. 31 March 2012 Due date for lodgement of tax returns by individuals who use a tax agent (Saturday).* 21 May 2012 Due date for lodgement of 2012 fringe benefits tax (FBT) return and payment if required. 30 June 2012** End of financial year (Saturday). * Where a due date falls on a day that is not a business day (that is, the due date is a Saturday, a Sunday or a public holiday), lodgement or payment may be made on the first business day after the due date without incurring a penalty or general interest charge (GIC). A public holiday is a day that is a public holiday for the whole of any state or territory in Australia. ** Friday 29 June 2012 may be the last day of the financial year on which a super fund can accept a contribution for

45 2011 July M T W T F S S September M T W T F S S November M T W T F S S August M T W T F S S October M T W T F S S December M T W T F S S

46 January M T W T F S S March M T W T F S S May M T W T F S S February M T W T F S S April M T W T F S S June M T W T F S S

47 Contacts for advisers FirstTech FirstNet adviser For client and account information, status of transactions, and product features Visit the FirstNet adviser site at colonialfirststate.com.au Colonial First State adviser service centre For client and account information, status of transactions, and product features Australian Taxation Office super infoline For super benefits, lost members register, and superannuation guarantee Website Centrelink Employment services Seniors Website Department of Veterans Affairs (DVA) General enquiries Website Aged care Information line Website Government Reviews Stronger Super strongersuper.treasury.gov.au Future of Financial Advice futureofadvice.treasury.gov.au Australia s Future Tax System taxreview.treasury.gov.au 45

48 The information contained in this document is based on the understanding Colonial First State Investments Limited ABN , AFS Licence (Colonial First State) has of the relevant Australian laws, regulators comments and Government announcements as at 1 July 2011 and on the assumption that there will be no changes to these during the financial year unless stated otherwise. The information is for adviser use only and is not a substitute for investors seeking advice. This document does not constitute advice (including taxation or superannuation) and advisers should form their own views on this information and how it affects their clients. This document is not financial product advice and does not take into account any individual s objectives, financial situation or needs. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), no person, including Colonial First State or any other member of the Commonwealth Bank group of companies, accepts responsibility for any loss suffered by any person arising from reliance on this information /FS2911/0711