In an attempt to reduce the budget shortfall, Wayne Swan yesterday announced a mini budget with significant changes to tax and superannuation. The tax commissioner has been allocated $390 million to collect an additional $2 billion dollars from business and superannuation schemes over the next four years. By 2016, the vast majority of companies that trade in Australia will have to pay their tax installments monthly rather than quarterly.
Key tax-related announcements in the update include:
• Monthly pay-as-you-go (PAYG) installments for large companies in Australia will be phased in (estimated saving of $8.3 billion over four years).
• In-house fringe benefits provided under salary sacrifice arrangements will no longer be eligible for concessional fringe benefits tax treatment. This measure will apply from 22 October 2012 for salary sacrifice arrangements entered into after the announcement, and from 1 April 2014 for salary sacrifice arrangements entered into prior to that time (estimated $445 million over four years).
• $390 million in funding will go to the ATO for further compliance activities to target profit shifting and high wealth individuals and to focus on non-lodgements in the micro and small business sector (estimated revenue increase of $1.6 billion over four years).
• Private Health Insurance rebate formula will change from 1 April 2013. The rebate will be calculated by reference to commercial premiums at that time (and indexed thereafter).
• Baby Bonus is to be reduced to $3,000 per child from 1 July 2013 for second and subsequent children. The payment will remain at $5,000 for the first child (estimated savings of $505.9 million over four years).
• Lost super account and unclaimed bank account and life insurance provisions will change to allow the ATO have earlier access to these funds, and data match lost income to active bank accounts.
• Self Managed Super Fund (SMSF) annual levy will rise from $191 to $259 (a 36% increase).
• Good news: Super tax certainty will increase for deceased estates. With effect from 1 July 2012, super fund trustees will be able to dispose of pension assets on a tax-free basis to fund the payment of death benefits.
Robert Gottliebson has written a great article on what he believes the hit list for the tax commissioner will be. What’s worth taking from this is that you need to take care with your taxation affairs and ensure you have received advice on your tax structures and position. Self Managed Super Funds will come under scrutiny and any that are non-compliant will be penalised.
We believe that a well managed SMSF remains the best wealth accumulation and tax mitigation strategy for Australians on higher incomes providing it has the correct investment strategy and is rigidly managed to ensure compliance.
From January next year, super accounts of $2,000 or less which have had no contributions for a year or more and the account owner cannot be contacted will be transferred to the ATO.The funds will be held in trust by the government, boosting their coffers by about $675 million over the next four years. Members are able to apply to reclaim these funds and the amount refunded will be adjusted to account for inflation. This could be an area of concern for people who have insurance policies purchased through superannuation which may be forfeited by the winding up of the fund.
If you know people with multiple smaller super accounts, it’s time for them to get them consolidated into a single fund. If they need assistance with this or advice on how to get the best returns from their super, Fusion would be happy to assist.