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We provide insight into various tax topics month to month and sometimes on a more regular basis for general information and reference purposes. Clients that require further information and clarification on any of the topics should not hesitate to call us.
Education tax refunds - keep your receipts
In two separate but related media releases, the Government and the Tax Office reminded parents to keep receipts relating to expenses incurred on their children’s education if they wish to claim the education tax refund.
From 1 July 2008, eligible families can receive a maximum refund of $375 for each child undertaking primary studies and $750 for each child undertaking secondary studies.
The Tax Office states that only expenses which are paid for by parents will qualify for the refund. It also states that if an item is used for different purposes, only the amount that relates to a child’s education is eligible for the refund.
Main residence exemption
In a recent case, the Administrative Appeals Tribunal held that the CGT main residence exemption was not available to a husband and wife (the taxpayers) on a unit they acquired with the intention of it being their main residence, but which they ultimately never lived in.The taxpayers purchased a unit in June 2000 with the intention of residing in it. However, due to the nature of the husband’s work, they said that it only became practicable for them to reside in the unit in January 2006. The Tribunal’s view was the taxpayers did not move into the unit when it was first practicable to do so. It was also the Tribunal’s view that the nature of the husband’s work was not sufficient to enable the main residence exemption to be invoked.
TIP: The Commissioner has stated in a Taxation Determination that the mere intention to occupy a dwelling as a main residence is insufficient to obtain the exemption.
Early access to Superannuation benefits
The Tax Office has released an Alert warning people of arrangements offering early release of their superannuation benefits. Broadly, the arrangements involve the rollover of superannuation benefits into a self-managed superannuation fund (SMSF). The benefits are then released from the SMSF by the organisers of an arrangement without a condition of release as prescribed by the superannuation law being satisfied.
The Tax Office says that these arrangements may involve a breach of taxation and superannuation laws. Generally, superannuation benefits must be preserved in a member’s superannuation fund until a condition of release, such as the member permanently retiring and reaching her or his preservation age (which depends on the member’s date of birth).An early access of benefits is only permitted in certain restricted circumstances. For example, severe financial hardship and compassionate grounds.
SMSF and financial assistance
The Tax Office has released an SMSF Ruling in which it explains the prohibition on trustees of SMSFs giving financial assistance to a member of a fund (or a relative of the member) using the resources of the fund.
The Ruling reinforces that providing financial assistance to a member (or a relative of the member) will contravene the superannuation legislation, regardless of whether such assistance was requested by the member or given through a third party
According to the Ruling, financial assistance includes any arrangement or transaction whereby the assets of the SMSF are converted into other assets, diverted, diminished or put at risk, or there is prejudice to the financial position of the SMSF.SMSF and Sole Purpose TestThe Tax Office has also released an SMSF Ruling, which outlines the Commissioner's approach to the application of the sole purpose test in the superannuation legislation.
The objective of the sole purpose test is to limit the provision of superannuation benefits to a range of prescribed retirement or retirement-related circumstances, such as on or after a member retiring or attaining 65 years of age. Where an SMSF is maintained for other purposes, it will contravene the sole purpose test.
The Tax Office says that in determining the purpose for which an SMSF is being maintained requires a survey of all of the events and circumstances relating to its maintenance.
Medicare Levy Surcharge
Medicare levy surcharge of 1% applies where the following thresholds are exceeded in the 2010-2011 year:
- for individuals $77,000;
- and for families from $154,000
For more information, please contact this office.
Excess Superannuation Contributions
According to the Tax Office, it has identified "potential" cases of individuals exceeding the
$1 million cap on non-concessional superannuation contributions made during the transitional period from 12 May 2006 to 30 May 2007.
Individuals who exceed the superannuation contributions cap in a financial year are liable for the excess contributions tax.
To identify the actual excess contributions tax assessments to be issued, the Tax Office said that it will conduct a pilot investigation of 200 representative cases.
Minors and tax-free threshold
The maximum "unearned income" that a resident minor can earn for the 2011-12 income year is $416 (2010-2011 was $3,333).
Effectively, a resident minor can receive up to $416 in trust distributions for 2011/12 before incurring a tax liability, unless the minor has other sources of income.