Tax News For Individuals

Tax Return Lodgment Dates - Don't Panic

The Tax Office has granted many individual tax clients of Hill & Co Accountants up until the 15th of May 2010 to lodge their 2009 Income Tax Returns. This means that our clients enjoy an extended period to lodge their Income Tax Returns. We encourage clients who do not need to lodge their Return between July - October to take full advantage of this extension and lodge outside of peak periods. Also, if you haven't lodged your return by December we will contact you at different times throughout the year giving you a reminder of your lodgment dates.

Our business clients will be contacted well before the due lodgment dates for their Business Activity Statements, Trust, Superannuation, Partnership and Company Tax Returns.

What Documents Do I Need To Bring?

It is important that you refer to the document checklist before coming in for your appointment. Alternatively, if this is inconvenient, why not do what many other clients do, forward your information to us by mail, fax or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Individual Documentation

Current Tax Rates

Residents

The following rates apply to those individuals who:

• Are residents of Australia for tax purposes for the full financial year
• Did not leave full-time education for the first time for the full financial year

Tax Rates 2009/2010

Taxable Income	Tax On Taxable Income
$0 - $6,000	Nil
$6,001 - $35,000	15c for each $1 over $6,000
$35,001 - $80,000	$4,349 plus 30c for each $1 over $80,000
$80,001 - $180,000	$17,848 plus 38c for each $1 over $80,001
Over $180,000	$55,848 plus 45c for each $1 over $180,001

(Source: ATO Website)

Tax Rates 2008/2009

Taxable Income	Tax On Taxable Income
$0 - $6,000	Nil
$6,001 - $34,000	15c for each $1 over $6,000
$34,001 - $80,000	$4,200 plus 30c for each $1 over $34,001
$80,001 - $180,000	$18,000 plus 40c for each $1 over $80,001
Over $180,001	$58,000 plus 45c for each $1 over $180,001

(Source: ATO Website)

Note: The above rates do not include the 1.5% Medicare levy

Non - Residents

If you are a Non-Resident for the full financial year the following tax rates apply:

Tax Rates 2008/2009

Taxable Income	Tax On Taxable Income
$0 - $34,000	29c for each $1
$34,601 - $80,000	$9,860 plus 30c for each $1 over $34,001
$80,001 - $180,000	$23,660 plus 40c for each $1 over $80,001
Over $180,000	$63,660 plus 45c for each $1 over $180,000

(Source: ATO Website)

Non - Residents

If you are a Non-Resident for the full financial year the following tax rates apply:

Tax Rates 2006/07

Taxable Income	Tax On Taxable Income
$0 - $25,000	29c for each $1
$25,001 - $75,000	$7,250 plus 30c for each $1 over $25,000
$75,001 - $150,000	$22,250 plus 40c for each $1 over $75,000
Over $150,000	$52,250 plus 45c for each $1 over $150,000

(Source: ATO Website)

Note: Non-Residents are not required to pay the Medicare Levy

Budget - Superannuation Changes

The proposed generous changes to the Superannuation regime are a slight relief for most taxpayers and accountants. Some commentators have even gone to the lengths of saying that this is an evolution in the Superannuation industry. Which ever way you look at it, the liberality of the changes now makes retirement planning much simpler and straightforward so that an interpreter of the laws is not as crucial as it was before.

In short, as from the 1st July 2007, Superannuation contributions and income generated within the super fund continue to be taxed at 15% while withdrawing funds for retirement purposes when aged 60 and over, will not attract any income tax liability. Not only that, there will also be no cap on how much can be paid tax-free whether the benefit is taken as a lump sum or as a pension.

As with any major change in the tax system, new and interesting ways of taking full advantage of the new amendments may arise. Specialised Tax Planning Strategies are one of our core strengths that we encourage our clients to utilise throughout the year.

Hybrid Trusts

When determining the most tax-effective structure for an investment property, shares or business activity, one should not overlook the advantages associated with a Hybrid Trust.

A Hybrid Trust takes the best features of a discretionary trust and the best features of a unity trust, and blends them together to create a unique tax-planning vehicle. In its broadest sense, a Hybrid trust allows unit holder rights to be respected while at the same time maintains income and capital distribution flexibility. Hybrid trusts attract less legal, accounting and administrative costs than companies and are often the tax specialist's preferred option for property and share investments.

The most common advantages associated with Hybrid Trusts include:

• Negative Gearing Tax Effectiveness for Unit Holders;
• Stamp Duty savings for property transfers;
• Asset Protection for discretionary beneficiaries;
• Cost Effectiveness in comparison to companies; and
• Flexible nature and ease of operation.

How To Save On Your Tax Fees

Here is our official guide on how to keep the accounting bill for preparing your tax returns to a minimum.

1. Please advise us when making the appointment whether you require any tax planning, business or investment advice.
2. Ensure that you provide us with all the right information the first time, in an easy to understand format
3. If you have plies or receipts or expenses, summarise these by expense categories, eg; stationary, self education costs, motor vehicle expenses, clothing expenses, donations etc
4. Finally the most cost effective tax return service that Hill & Co offers, is where you forward or drop off your information to our office, and we prepare it and contact you for finalisation.

Top 10 Tax Tips

1. Keep all your tax receipts
2. Pre-pay certain tax deductible expenses before the end of the financial year
3. Split interest income legally with your spouse or children
4. Explore salary sacrifice arrangements
5. Use borrowed funds to invest in shares or property
6. Ensure you are covered by adequate health insurance
7. Be aware of your superannuation Age-Based Contribution Limit
8. Remember that if your incur medical expenses greater than $1,500 you receive a rebate of 20% of the excess in your return
9. Obtain income protection insurance and benefit from a tax deductibility
10. Explore other tax effective investment structures such as a Family & Discretionary Trusts

Self-managed super funds

Do you want more control over your super? You should consider having your own self managed super fund (SMSF). This sector has grown at a 20% compound rate over the past 10 years, with almost 300,000 SMSFs now in existence controlling $110 billion.

You may have up to 4 members who are also the trustees of your fund. This means that you are entrusted to direct operations of your own fund. As a result you need to have a well considered investment strategy covering diversification, risk, liquidity, tax etc. After all, it's your future. To gain the benefits you must also follow the rules as severe penalties apply if these are disregarded. One of the main rules is that SMSF assets must be regarded as being held solely to fund your retirement. This means you cannot benefit from them until you retire. Under recently proposed legislation, on reaching retirement age after July 1st 2005 you may be able to keep working and still access your SMSF money.

Having your own SMSF has several advantages with alternative investments becoming readily available. For instance your SMSF can (part) own the business premises from which your company operates, if this is in line with your investment strategy.

Low tax is a feature of the super environment. The tax on super contributions (for which a tax deduction is obtained) and earnings are usually only 15% with tax reduced to 10% for capital gains. When you retire, tax reduces to zero. For example, if you are to sell an investment property owned by your SMSF after you retire, the proceeds of this are then CGT free.

Superannuation Co-Contribution

This is an extremely generous offer by the government that will help ramp up a taxpayer's retirement savings in a tax effective manner provided that they satisfy certain criteria. In order to receive the co-contribution, you have to make a super contribution from your after-tax income by the 30th June and meet some eligibility requirements. To be eligible for the maximum co-contribution of $1,500 you must earn less than $28,000 and receive at least 10% of your income as an employee. If you satisfy these criteria, for every $100 contribution made up to $1,000, the ATO will contribute $150 to a maximum of $1,500.

The other winners here are the ones who earn between $28,000 - $58,000 as they will receive a partial co-contribution. In these cases they will not receive the maximum matching co-contribution of $1,500, but will receive a co-contribution of between $0 - $1,500.

Family Trusts

The trust structure dates back to the feudal times when wealthy English knights would leave their land in trust for their family so that they could go off and fight in battle. The modern day trust is based on these early principles and works much in the same way.

A Trust involves a legal right for the trustee to hold assets for the benefit of the beneficiaries of the trust. A trust deed spells out the rules and conditions of the arrangement and the trustee must act in accordance with these guidelines. The precise wording of the document will be influenced by the taste of the solicitor or accountant drafting the document, however in general, most trust deeds bare many of the same clauses. These days trusts are becoming more and more popular and are no longer strictly for the top end of the town. The benefits of a Family Trust include:

• Parents giving children some of the family wealth without losing control over the assets;
• Protection certain key assets from potential creditors;
• Creating a tax effective structure for income;
• Creating a tax effective structure for capital gains;
• Assisting in retirement planning; and
• Providing privacy of ownership as ownership details of a trust are kept out of the public eye

As a counterpoint, there are also many disadvantages of trusts that include complexity, administration headaches and costs.

Disclaimer: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in this website is for guidance only and should not be relied upon without obtaining professional advice having regard to your specific circumstances.