Super Reforms: Changes to the Contribution Caps

There were too many caps, but now balance has been restored. While caps still have a role to play in the contribution space they will be closely aligned to the total super balance.

The total super balance is only a relevant number on 30 June each year as it dictates our ability to make non-concessional contributions and utilise the bring-forward provisions, make spouse contributions and be eligible for Government Co-contributions. It will also be relevant for those seeking to carry forward unused concessional contributions as the catch up rules take effect from 1 July 2018.

Contribution Caps:

Concessional Contribution Cap (Before Tax)

From 1 July 2017, the concessional contribution cap reduced to $25,000 for everyone from $30,000 for under 50s and $35,000 for over 50s in 2016/2017 year, however you will be able to ‘carry-forward’ any unused concessional contributions cap on a rolling 5 year basis. This means carried forward amounts will expire after 5 years.

Non Concessional Contribution Cap (After Tax)

The after tax contributions cap has reduced from $180,000 to $100,000 per year. You will still be able to bring forward up to three times the cap to make larger one-off contributions, if you are under age 65 and have not reached the new transfer balance cap. The full benefit you bring forward may not apply if your total super balance is close to the transfer balance cap.

Superannuation Balance and Contributions

Individuals with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional (after tax) contributions from 1 July 2017. This limit will be tied and indexed to the transfer balance cap.

These measures mean that with their annual concessional contributions, Australians will be able to contribute $125,000 each year and, if taking advantage of the non-concessional ‘bring forward’, up to $325,000 in any one year until such time as they reach $1.6 million.

Who will the 2017 super changes affect?

Low income earners

If you are earning less than $40,000 or are self-employed, working part time or don’t have constant income, it can be hard to save for retirement. Changes to super tax offsets and more flexible super contribution arrangements make it easier to add more to your super.

Spouse super contributions

If your spouse earns less than $37,000 p.a. and you make a contribution to their super, you can claim a tax offset equal to 18% of the contributions, up to $540. Even if they earn up to $40,000, you could still be entitled to a partial super tax offset. Other restrictions apply, however this change allows couples to get greater benefits from adding to each other’s super.

Carry your super cap forward

A new ‘carry forward’ rule for before tax (concessional) contributions has been introduced that can help you catch up on before tax contributions later.

If you’ve had time out of the workforce, work part-time or have irregular work patterns and have contributed less than your before tax (concessional) cap, you can rollover the unused portion of your concessional contribution cap for up to 5 years, allowing you to make additional contributions in future years.

High income earners

Higher income earners may be affected by a reduction in both before and after contribution limits. If your combined income and super contributions exceed $250,000 you may have to pay extra tax known as Division 293 tax. The previous threshold for Div. 293 tax was $300,000.

Tax deductions for personal super contribution

Self-employed people and those that earn less than 10% of their income from salary or wages, can claim a tax deduction for any contributions they make to super. The contributions are then treated as ‘before tax (concessional) contributions’.

On 1 July 2017, the 10% rule was removed, making it easier for more people to make use of their concessional contributions cap.

One thing for sure, we are all going to be far more reliant on the ATO to accurately record information which means we will be far more reliant on the superannuation industry accurately reporting information.

Sources:

https://www.moneysmart.gov.au/tools-and-resources/news/superannuation-changes-1-july-2017

http://growyourwealth.com.au/grow-your-wealth1/2016/11/25/super-changes-they-will-affect-you

Wills

From time to time we hear horror stories of people who have not prepared Wills, dying intestate. This can result in an expensive exercise for an Administrator to settle the estate.

Wills should be reviewed regularly, something like every 5 years is recommended. In particular when getting married, divorced and with changes in family circumstances such as sudden death with close relatives who benefit from a Will. Always seek legal advice to make sure you have a valid & binding Will and to assist in avoiding challenges by aggrieved family members.

There are circumstances where a person may need the assistance of the court to prepare their Will. In these circumstances legal advice must be obtained to guide the Will instructions correctly.

Copyright: nixken / 123RF Stock Photo

Enduring Power of Attorney

Enduring Powers of Attorney are used by people (the donor) who need someone (the donee) to intervene in looking after their financial affairs because they are unable to do so themselves. It is an important part of planning for the orderly conduct of the donor affairs. A power of Attorney ceases on death.

We recommend putting one in place to guard against the unexpected and the link below should explain a bit more.

http://www.lawhandbook.sa.gov.au/ch02s01.php

Always consult your solicitor.

Advanced Care Directives

It is not always a conversation that we have amongst family members, but letting your loved ones know what medical treatment you would like to receive in the event you are not making the decision is important. Advanced Care Directives have been in use since 2014 to document future healthcare wishes.

Follow the link to be better informed on this legal document and consider speaking to your lawyer.

https://advancecaredirectives.sa.gov.au/information-for-you/information-for-you

Copyright: jossdiim / 123RF Stock Photo

Changes to Small Business Entity Aggregated Turnover Threshold

In the 2016-17 Budget, the Government announced an increase to the small business entity (SBE) aggregated turnover threshold from $2 million to $10 million commencing from 1 July 2016. The amended version of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 was passed by a majority of the Senate on 31 March 2017. This Bill will receive Royal Assent and become law when Parliament resumes in early May 2017. This means that SBEs that had aggregated turnover between $2 million and up to $10 million will be able to access accelerated depreciation tax concessions that were not previously available to them as follows:

– Immediate deductions for assets that cost less than $20,000 that are acquired and installed ready for use, up to and including, 30 June 2017. These accelerated depreciation rules apply to both new and second hand assets. Excluded assets are horticultural plants including grapevines, in-house software allocated to a software development pool and capital works.

– The assets acquired and installed ready for use, up to and including, 30 June 2017 for $20,000 or more must be pooled and depreciated at 15% in the first year and 30% each year thereafter.

– Primary producers can claim immediate deductions for capital expenditure on water facilities including dams, tanks, bores, irrigation channels, pumps, water towers and windmills; and fencing assets.

– Primary producers can also claim fodder storage assets such as silos and tanks used to store grain and other animal feed assets over 3 income years.

The current $2 million turnover threshold will be retained for access to the small business capital gains tax concessions.

Hospitality business owners be warned – your industry is being digitally disrupted!

Long gone are the days when orders are taken with pen and paper and rung up on a cash register whilst the business owner wiles away doing their bookkeeping on a desktop software accounting product like MYOB weeks after the fact. In the hospitality industry where long hours are worked and margins are tight there has to be a better way and technology is the key.

Have you noticed those hospitality businesses that take orders on digital devices? Have you met an owner that knows on a daily basis how their profits are tracking? Technology is currently transforming the hospitality industry and we know that businesses with high digital engagement enjoy a 20% increase in revenues1.

Don’t you want that to be your business? So where do you start …

Sales is the key driver for any business so let’s start there. Utilising social media and reservation systems to get people into your establishment is great but what next? You need to be able to take orders quickly and accurately. Utilising point of sale systems based in the cloud, such as Kounta, enables you to take orders accurately (with less human error) and more efficiently. Linking your point of sale to your payment terminal by utilising products such as CBA’s Albert, also saves time and improves accuracy.

What next? Purchases are one of the highest costs in a hospitality business so another good place to get the biggest bang out of your change buck would be to improve your purchasing systems by utilising technology.

• Do you know the profit you make on every meal?
• Are you keeping track of stock?

If not you may be unknowingly watching your profits walk out the door. Track your purchases and stock and even recipes through a software product like Kounta, providing real time data on stock and profit margins, as well as tracking wastage.

Wage costs can be significant so why not use cloud software like Deputy to manage and track employee costs giving you the ability to roster staff to meet demand and customer service expectations.

Utilising cloud based accounting software like Xero which is easy to use and enables automation of your accounting back end will help to deliver real time reporting to enable better decision making.

Why cloud based products? So you can link and integrate your systems to talk to each other. The cloud is the next evolution of the internet, it’s accessible anywhere, anytime and provides low price monthly subscriptions with little to no hardware costs.

Implementing these changes in your business might seem daunting but with the right help and support it can be seamless. We know as we specialise in hospitality and have helped many of our clients move to the cloud. The time for change is now, don’t let the excuses of I’m too busy or I’ve always done it that way hold your business back any longer as it will be left behind, take up the opportunity for change today and put profits back in your pocket!

1 : Deloitte Access Economics: Connected Small Business – How Australian small businesses are growing in the digital economy