For business owners Accounting & Tax Investment Management Strategy & Planning. tax facts

Transcription

1 For business owners Accounting & Tax Investment Management Strategy & Planning tax facts

2 ... for individuals, their superannuation and their businesses. For individuals 1.1 Income tax rates 1.2 Medicare levy surcharge 1.3 Low income tax offset 1.4 Minor tax rates 1.5 Motor vehicle business deductions 1.6 Maternity payment 1.7 Private Health Insurance rebate 1.8 Higher Education Loan Programme For businesses 2.1 Company tax 2.2 Business Activity Statements 2.3 Goods and Services Tax 2.4 Fringe Benefits Tax 2.5 Payroll tax 2.6 Superannuation guarantee 2.7 Important dates 2.8 Capital Gains Tax and other concessions for small business entities 2.9 Capital allowances 2.10 Company loss carry-back For superannuation 3.1 Income tax rates 3.2 Superannuation contributions 3.3 Employment Termination Payment 3.4 Redundancy or early retirement 3.5 Low rate cap withdrawal amount 3.6 Minimum annual pension payments 3.7 Transition to retirement 3.8 Preservation age 3.9 Maximum superannuation contribution base 3.10 Self-Managed Superannuation Fund Supervisory levy 3.11 Stronger superannuation review measures Additional information 4.1 Payment and lodgement dates 4.2 Capital Gains Tax 4.3 Stamp duty 4.4 Transfer of property Useful contacts Australian Taxation Office Department of Human Services APRA ASIC State Revenue Offices

3 for individuals Income tax rates Resident tax rates / * Taxable income Tax on this income 0 $18,200 Nil $18,201 $37, c for each $1 over $18,200 $37,001 $80,000 $3, c for each $1 over $37,000 $80,001 $180,000 $17, c for each $1 over $80,000 $180,001 and over $54, c for each $1 over $180,000 Non resident tax rates / Taxable income Tax on this income 0 $80, c for each $1 $80,001 $180,000 $26, c for each $1 over $80,000 $180,001 and over $63, c for each $1 over $180,000 * Add 1.5% Medicare levy except for low income earners. NB From 1 July 2014, the medicare levy is proposed to increase from 1.5% to 2%. 1.2 Medicare levy surcharge An additional Medicare levy surcharge is payable by taxpayers without adequate private patient hospital insurance. The surcharge is calculated based on your adjusted taxable income Medicare levy surcharge Income thresholds Rate of Income year Individual Family surcharge Tier 0 Up to $88,000 Up to $176,000 0% Tier 1 $88,001 $102,000 $176,001 $204,000 1% Tier 2 $102,001 $136,000 $204,001 $272, % Tier 3 $136,001 and above $272,001 and above 1.50% 1.3 Low income tax offset Effective Income Max Full tax free year offset entitlement threshold Phasing out $445 Income < $37,000 $20,542 $37,000 $66, $445 Income < $37,000 $20,542 $37,000 $66, Minor tax rates Special rates apply to children under the age of 18 who receive unearned income such as investment income. Featured rates apply to minors who are residents of Australia, are not excepted persons, and have no excepted income. Minors cannot use the low income tax offset to reduce tax on unearned income. Other income Tax rates $0 $416 Nil $417 $1,307 Nil+66% of the excess over $416 Over $1,307 45% of the total amount of income that is not excepted income 1.5 Motor vehicle business deductions 2013 tax return Alternatives available for expense claims for individuals: a Up to 5,000 business use kilometres Ordinary engine Rotary engine Per km rate 1.6 litre 0.8 litre 63 cents (1,600cc or less) (800cc or less) litre litre 74 cents (1,601 2,600cc) (801 1,300cc) litre litre 75 cents (2,601cc and over) (1,301cc and over)

4 b Over 5,000 km business use kilometres One third of total expenses; or 12% of cost of car (subject to luxury car limit) * ; or Cents per kilometre rate limited to 5,000 business use kilometres. c Log book method regardless of distance Business usage as established by log book applied to actual expenses. NB Motor vehicle depreciation cost limit $57,466. A higher limit of $75,375 applies to certain fuel efficient cars after 3 October The luxury car tax is only paid on cars valued over $60,316 ( ) and $59,133 ( ). 1.6 Maternity payment Centrelink offer a tax free payment on the birth of a child. A Baby Bonus Income Test applies and the family income limit for the six months following the birth of the child is $75,000. If your child was born or adopted before 1 July 2013 A total payment of $5,000 is made in 13 fortnightly instalments. If your child was born or adopted after 1 July 2013 The total payment will be either $3,000 or $5,000, depending on your situation: If the child is your first child, you receive $5,000. If the child is not your first child, you receive $3,000. Payments are made in 13 fortnightly instalments. The Baby Bonus will be replaced from 1 March 2014 with a corresponding increase in the rate of Family Tax Benefit Part A. Paid Parental Leave Scheme The Australian government introduced a Paid Parental Leave Scheme which was effective from 1 January The scheme involves an income test of $150,000 based on the primary carer s previous year adjusted taxable income. Payments are taxable and set at the Federal Minimum Wage which is currently $ a week, for up to 18 weeks. If a new mother is not eligible for Paid Parental Leave she may still be eligible for the Baby Bonus. The Baby Bonus and Paid Parental Leave are mutually exclusive and both cannot be paid for the same child. From 1 January 2013 the Paid parental Leave Scheme was expanded to include a new two week payment for working fathers and partners. 1.7 Reduction in Private Health Insurance (PHI) rebate 2014 Base Tier 1 Tier 2 Tier 3 Singles $88,000 or less $88,001 $102,000 $102,001 $136,000 $136,001 or more Families * $176,000 or less $176,001 $204,000 $204,001 $272,000 $272,001 or more Rebate Aged < 65 30% 20% 10% 0% Aged % 25% 15% 0% Aged 70 > 40% 30% 20% 0% * The family income threshold is increased by $1,500 for each dependent child after the first child. 1.8 Higher Education Loan Programme (HELP) Repayment thresholds and rates HELP Repayment Income (HRI * ) Repayment rate Below $51,309 Nil $51,310 $57,153 4% of HRI $57,154 $62, % of HRI $62,998 $66,308 5% of HRI $66,309 $71, % of HRI $71,278 $77,194 6% of HRI $77,195 $81, % of HRI $81,257 $89,421 7% of HRI $89,422 $95, % of HRI $95,288 and over 8% of HRI * HRI = Taxable income plus any total net investment loss (which includes net rental losses), total reportable fringe benefits amounts, reportable superannuation contributions and exempt foreign employment income.

5 for businesses Company tax Company tax rate 30% Division 7A benchmark interest rate (2014) 6.20% Prescribed interest rate PSLA 2010/4: Option % Quarterly Pay As You Go (PAYG) instalments 1st 2nd 3rd 4th 28/10/13 28/02/14 28/04/14 28/07/14 Monthly Pay As You Go (PAYG) instalments Jul Sep 21/08/13 23/09/13 21/10/13 Oct Dec 21/11/13 23/12/13 21/01/14 * Jan Mar 21/02/14 21/03/14 22/04/13 Apr Jun 21/05/14 23/06/14 21/07/ Business Activity Statements (BAS) BAS are required to be lodged by taxpayers to report and pay their tax obligations, including: GST Pay As You Go (PAYG) withholdings FBT instalments Pay As You Go (PAYG) instalments 2.3 Goods and Services Tax (GST) rate * 10% Annual turnover * threshold for registration $75,000 ($150,000 for non-profit organisations) Annual turnover^ for accrual accounting $2,000,000 Annual turnover^ threshold for monthly payments $20,000,000 # * Calculated as 1/11th of the GST inclusive value. ^ Annual turnover includes taxable and GST free supplies connected with Australia. May choose to register if turnover is below registration turnover threshold. # If GST turnover is $20,000,000 or more, activity statements must be lodged electronically. * Small business clients (that is, less than $10m turnover) may lodge on 21 February Instalments are only payable if the taxpayer has received an instalment rate notice from the Commissioner. Options are available for calculating instalments and the number of instalments payable each year according to the Commissioner s guidelines. Companies with substituted accounting periods that report quarterly pay PAYG instalments on the 28th day after each quarter end. Any balance of tax payable is due on lodgement of company tax return. The Gross Domestic Product (GDP) adjustment used to calculate PAYG instalments will decrease from 6% to 3%. Extensions available using self-assessed deferral. 2.4 Fringe Benefits Tax 1 April March 2014 Rate % Fringe benefits gross up factor * Return and payment due^ 28 May 2014 Benchmark interest rate % Instalment threshold $3,000 Reportable fringe benefits threshold $2,000 (per employee) # Record keeping exemption threshold $7,779 In-house FBT-free threshold $1,000 Car parking threshold $8.03 Minor infrequent benefits ** Less than $300 * If an employer was entitled to an input tax credit for the benefits provided otherwise the rate of will apply. ^ Instalment payments are due with quarterly Business Activity Statements. # Reportable fringe benefits threshold grossed up $3,738. ** Minor benefits may include welcome gifts, health assessments or meal entertainment 2 3 times per year. The ATO warns infrequent or irregular should not be equated with isolated or rare.

6 Motor vehicle statutory formula The existing percentage scale for valuing car fringe benefits will be replaced with a single statutory rate of 20%. The changes will be phased in as follows: FBT statutory rate method Distance travelled Statutory rate during FBT year From 1 April 31 March x cost of car to determine person s car fringe benefit Existing New contracts from contracts* 10/5/11 1/4/12 1/4/13 1/4/14 Less than 15,000km 26% 20% 20% 20% 20% 15,000 24,999km 20% 20% 20% 20% 20% 25,000 40,000km 11% 14% 17% 20% 20% 40,000km and over 7% 10% 13% 17% 20% * Existing contracts prior to 10 May NB The proposal by the former Labor government to scrap the statutory method for car fringe benefits for new or varied contracts will not go ahead under the new Liberal government. 2.5 Payroll tax VIC NSW QLD SA TAS WA ACT NT Threshold ( 000) , , ,750 1,500 Rate on excess 4.9% 5.45% 4.75% 4.95% 6.1% 5.5% 6.85% 5.5% Monthly payroll 45,833 ^ threshold * 91,666 50,000 # ** 62, , ,000 * Amounts above these thresholds may be liable for payroll tax. ^ NSW monthly payroll threshold varies on the days in the month: 28 days $57,534, 30 days $61,644, 31 days $63,699. # Tasmania monthly payroll threshold is calculated by: Number of days in the month, divided by days in the year, multiplied by $1.01 million. ** The Tasmanian State budget announced an increase to the Payroll Tax per annum threshhold from $1.01m to $1.25m for the financial year. This change is subject to the passage of legislation. 2.6 Superannuation guarantee Minimum level of support * 9.25% Minimum (per month) salary $450 Maximum contribution base $48,040 for each quarterly period Due dates for contributions 28/10/13 28/01/14 28/04/14 28/07/14 * The government announced changes in the 2010 budget that will gradually increase the SGC rate from 9% to 12% from 1 July Important dates Quarterly BAS & IAS Paper Electronic agent Jul Sep 28/10/13 25/11/13 Oct Dec 28/02/14 28/02/14 Jan Mar 28/04/14 26/05/14 Apr Jun 28/07/14 25/08/14 * * To be confirmed. NB Where date falls on a weekend or public holiday, lodgement is the next business day. Monthly BAS & IAS Jul Sep 21/08/13 23/09/13 21/10/13 Oct Dec 21/11/13 23/12/13 21/01/14 * Jan Mar 21/02/14 21/03/14 22/04/13 Apr Jun 21/05/14 23/06/14 21/07/14 * The December 2013 monthly BAS for small business clients (with less than $10 million turnover) is due on 21 February Payment Summaries ( ) Issued to employees 14/07/14 Lodged to ATO * 14/08/14 * Unless concessions apply. 2.8 CGT and other concessions for small business entities Eligible businesses may choose which concessions suit their circumstances, however additional conditions may apply. There are four small business Capital Gains Tax (CGT) concessions: a Small business 15 year exemption Provides total exemption of a capital gain if CGT asset owned for at least 15 years and significant individual is aged 55 or over and retiring, or is permanently incapacitated. b Small business 50% active asset reduction Provides 50% reduction of a capital gain from the disposal of a CGT asset that qualifies as an active asset. c Small business retirement exemption Provides exemption of capital gains up to a lifetime limit of $500,000. If eligible individual is under 55 years of age, payment must be paid into a superannuation (or similar) fund.

7 d Small business rollover Provides deferral of all or part of a capital gain if you acquire a replacement asset, or you make a capital improvement to an existing asset, subject to timing conditions. For further information or advice on the small business CGT concessions, please contact your advisor. Other available concessions Simplified depreciation rules. Simplified trading stock rules. Immediate deduction for certain prepaid business expenses. Choice to account for GST on a cash basis. Annual apportionment of GST input tax credits. Choice to pay GST by instalments. PAYG instalments based on Gross Domestic Product (GDP) adjusted notional tax. FBT car parking exemption. 2.9 Capital allowances Asset acquired Rate Pre 21/9/1999 Accelerated Post 21/9/1999 Effective life Cost less than $1, % diminishing if pooled * Diminishing value method Diminishing value method allows taxpayers a higher decline in value deduction earlier in the effective life of depreciating assets and eligible project pools. The formula for diminishing value method is: Decline = Base value x Days held x 200% in value 365 Asset s effective life 2.10 Company loss carry-back From the income year, a company can claim a loss carry-back refund against its tax liability for either of the previous two years. The limit of the claim is the lowest of: Sum of the loss carry-back components for the earliest year and middle year; The franking account balance at end of income year you make the claim; or $300,000 ($1,000,000 deduction x 30% company tax rate). If you have net exempt income in the current year, prior year tax losses must be reduced against the net exempt income before you determine the amount of tax losses to carry back. * 18.75% for first year in pool. Different rates apply to Simplified Tax System taxpayers. Business establishment and many other business related costs are deductible over five years. Building write-off 2.5% per annum if construction started before 22 August 1984 or after 15 September Limited post 26 February 1992 construction may be eligible for a 4% deduction. Subject to certain conditions, items costing $100 or less may be fully deducted in year of purchase. Diminishing value assets with a Written Down Value (WDV) less than $1,000 can be moved to the low value asset pool and depreciated at 37.5%.

8 for superannuation Income tax rates Complying superannuation fund 15% *^ Non-complying superannuation fund 45% Tax rate non-arms length income and 45% private company dividends * Rate applies to superannuation funds in accumulation mode; funds in pension mode attract 0%. For funds with members in both accumulation and pension, funds in accumulation mode taxed separately. ^ The federal government announced in its budget that from 1 July 2014, members in pension mode with earnings over $100,000 will have earnings over $100,000 taxed at 15%. The $100,000 earnings threshhold will increase with CPI per year. Concessional Contributions cap Aged 60 years Aged 50 years Year General cap and over cap and over cap $25,000 $35,000 $25,000 NB From 1 July 2012, individuals whose adjusted taxable income exceeds $300,000 will have their contributions taxed at a rate of 30%. Concessional Contributions (CC) include employer contributions (including salary sacrifice) and personal contributions claimed as a tax deduction by a self-employed person. 3.2 Superannuation contributions Age Ability of fund to accept contributions Under 65 All types of contributions Mandated (award and Super Guarantee) employer contributions Or if member passes work test * : Employer contribution other than mandated Member contributions Spouse contributions Mandated (award and Super Guarantee) employer contributions^ Or if member passes work test * : Employer contribution other than mandated Member contributions Contributions other than mandated employer contributions must be received by the fund no later than 28 days after the end of the month in which the member turns 75 years of age 75 and over Mandated (award and Super Guarantee) employer contributions only^ Non-Concessional Contributions cap $150,000 Non-Concessional Contributions (NCC) include personal contributions not claimed as a tax deduction and amounts in excess of the CC cap. For the year, the cap is $150,000. If aged under 65 years, non-concessional contributions of up to $450,000 can be made within a three year period. Small business CGT cap amount Under the small business CGT cap, you can exclude from your annual non-concessional super contributions cap an amount up to the CGT cap during your lifetime. The CGT cap applies to all excluded CGT contributions, whether they were made between 10 May 2006 and 30 June 2007 or after 30 June The CGT cap amount is indexed in line with AWOTE, in increments of $5,000. Income year Amount $1,315,000 * To satisfy the work test members must be gainfully employed during the financial year for at least 40 hours in a period not more than 30 consecutive days. ^ From 1 July 2013, there will no longer be an age limit on employees for whom employers have Super Guarantee obligations.

9 3.3 Employment Termination Payment (ETP) Post 30/6/1983 Preservation age ETP component Under Over Non-genuine Up to $180,000 30% * 15% * hardship income cap Over $180,000 45% * 45% * income cap * Excludes Medicare levy of 1.5%. NB From 1 July 2012, individuals who receive an ETP relating to genuine hardship (genuine redundancy, early retirement scheme or certain compensation) may still be able to access the ETP tax concessions up to an ETP cap of $180,000 for the year. ETPs, other than Transitional Termination Payments, cannot be rolled into superannuation and must instead be taken in cash. 3.4 Redundancy or early retirement Tax free amount = $9,246 + ($4,624 x years of service) The balance of a redundancy or early retirement payment is taxed as an ETP. 3.5 Low rate cap withdrawal amount Income year Amount $180,000 The low rate cap is the limit set on the amount of the taxable component of a super lump sum benefit that you can receive at a lower or nil tax rate. The low rate cap applies if you have reached your preservation age but are below 60. The cap is indexed in line with AWOTE, in increments of $5,000 (rounded down). 3.6 Minimum annual pension payments From 1 July 2007, a minimum amount is required to be paid each year. There is no maximum amount other than your superannuation balance. For 2014 the government announced that the 25% drawdown relief will not continue. Age Required payments Under % % % % % % 95 and over 14.0% 3.7 Transition to retirement A member who has reached their preservation age may commence a transition to retirement pension without having to retire. The assessable component of the income stream is taxed at marginal rates. A tax offset of 15% of the taxable component is available to the recipient. From 1 July 2013 to 30 June 2014 a pension can range between a minimum of 4% and a maximum of 10% of the member balance. 3.8 Preservation age Generally you must reach preservation age before you can access your super. Date of birth Preservation age Before 01/07/ /07/ /06/ /07/ /06/ /07/ /06/ /07/ /06/ After 30/06/

10 3.9 Maximum superannuation contribution base The maximum superannuation base is used to determine the maximum limit on any individual employee s earnings base for each quarter of any financial year. You do not have to provide the minimum support for the part of earnings above this limit. Income year * Per quarter 2014 $48, $45, $43, Stronger superannuation review measures From 7 August 2012, a number of new regulations for SMSFs were implemented. These include: Consideration of insurance for member s as part of the fund s investment strategy; and That the fund s investment strategy is regularly renewed. * Indexed in line with AWOTE each income year Self-Managed Superannuation Fund Supervisory levy The levy will be $191 for the year, increasing to $259 for subsequent years. The payment of the levy will be brought forward so that it is both levied and collected in the same year (instead of in arrears). Under a transitional arrangement, the levy is payable over two years meaning that self managed superannuation funds (SMSFs) will pay: Half of the levy in the return; and The other half in the return. Return year Levy payable Total levy payable % of levy ($191) $321 50% of levy ($130) % of levy ($129) $ % of levy ($259) % of levy ($259) $259

11 additional information Payment and lodgement dates Payment Lodge Taxable large/medium 01/12/13 15/01/14 companies and super funds Substituted Accounting Period 1st day of 15th day of (SAP) companies and 6th month 7th month super funds after year end after year end Individuals and Trusts (Tax level 6) 31/03/14 Other taxable businesses 15/05/14 Non-taxable businesses 05/06/14 (excluding large/medium businesses) Individuals and trusts (not mentioned above) 05/06/14 * * Provided lodgement and payment is made by this date. NB New registrants or taxpayers with returns outstanding at 30 June 2011 may have different lodgement dates to the above. 4.2 Capital Gains Tax (CGT) Exemption/Discounts Amount Discount on capital gains for 50%^ Individuals and Trust * Discount on capital gains for 33.3% Superannuation Funds * Net asset threshold for CGT $6,000,000 small business exemptions Turnover threshold for $2,000,000 small business concessions Retirement exemption on capital gains $500,000 Indexation number # Stamp duty At the time of publishing this document various state governments had committed to reducing stamp duty. Please consult your advisor prior to relying on these rates. Entities holding properties should also consider land rich entity laws. 4.4 Transfer of property Maximum stamp duty rates State Consideration Duty payable VIC * Over $960, % NSW ** Over $1,000,000 $40,490+$5.50 for every $100 excess QLD *** Over $1,000,000 $38,025+$5.75 for every $100 excess SA Over $500,000 $21,330+$5.50 for every $100 excess TAS^ Over $725,000 $27,810+$4.50 for every $100 excess WA^^ Over $500,000 $19,665+$5.15 for every $100 excess NT^^^ Over $525, % ACT # Over $1,000,000 $48,050+$7.25 for every $100 excess ACT ## Over $1,650, % * Applies to transfer of real property. ** Premium property duty of 7% is payable on excess over $3m of residential properties. *** Concession rates apply for home buyers. ^ Applies from 1 October ^^ Residential rate $28,453+$5.15 for every $100 excess over $725,000. ^^^ Where dutiable value is over $3m, duty is 5.45% of that amount. # From 6 June 2012 to 4 June ## From 5 June CGT improvement threshold To be confirmed ** * Assets must be held for at least 12 months other limitations apply. Other small business concessions may apply. ^ The capital gain discount for non-residents has been removed. # Indexation frozen from 30 September ** For the 2013 year, this was $134,200.

12 ... useful contacts. Useful contacts Phone Web Australian Taxation Office Business Info Line Superannuation Info Line Personal Info Line Department of Human Services Older Australians Line (eg retirement) Families & Parents Line National Business Gateway APRA ASIC State Revenue Offices Victoria NSW Queensland WA Tasmania South Australia Northern Territory ACT

13 Fordham Business Advisors Pty Ltd ABN Liability limited by a scheme approved under Professional Standards Legislation Level 35, Rialto South Tower, 525 Collins Street, Melbourne Victoria fordhamgroup.com.au Disclaimer This information has been prepared by Fordham Business Advisors based on information sourced from the Australian Taxation Office as at September It contains general information only and is not intended to provide you with advice or take into account your objectives, financial situation or needs. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Perpetual Group means Perpetual Limited ABN and its subsidiaries. Fordham Business Advisors is part of the Perpetual Group