Call us on 1300 794 893

Your Money

The fine print

The fine print

Budget night and the day after always catch a lot of media attention, but I always look forward to the weekend after when the smartest guys and gals in accounting firms and financial institutions get to have a look at the so-called devil in the detail.

The one surprising thing that struck after years of covering Budgets is that lots of Australians miss out on important stories that come out of the Budget.

Working overseas

For example, I was talking to a colleague of mine who had worked overseas and boy was he surprised that Aussies working overseas are now to be slugged with our home-grown tax scales. Tom Seymour, the hot shot tax guy at PriceWaterhouseCoopers used a simple example of how the changes will hit that army of Aussies who go to places like London, New York, and Hong Kong to work for a year or two.

Tom says imagine someone working in Singapore who would pay 20% tax. Well following the Budget this person now would have to pay tax on the income earned and would have the amount of tax paid in Singapore rebated!

But wait there’s more, as my old mate Tim Shaw once said. There are some exceptions to this tax slug, which include volunteers, defence personnel and government workers.

Research it

Here is some useful advice when it comes to surprise tax, personal investment and even business information — always check the actual ruling or law change by using the official websites and then talk to an expert if you think you are going to be materially affected.

If I were about to go to work overseas, I would talk to a good accountant to see how I would be affected by these changes. Starting a job before a certain date might give you some grace or there might be other tips experts can give that could soften this Budget blow.

More Budget details
Let’s look at some other challenging Budget changes.

The decision to make those in Employee Share Schemes (ESS) pay tax upfront and using $60,000 as the threshold for this imposition has not only annoyed the top-end-of-town business executives, but has also riled the union movement! It is thought around 85% of people in ESS schemes will be affected.

Until now employees offered options or shares didn’t have to pay tax until they turned the ‘gifts’ into money. They were often sold so they could pay the tax. This decision is stupid and I reckon will be looked at again by someone with a few more brains.

Clear it up

The crackdown on those owning hobby farms, B&Bs and horse studs have a few holiday home owners worried because of some second-rate journalism. Sydney-based accountant Joe Caleb from www.AustralianBiz.com.au says the change does not hit holiday homes but these are being looked at under another division of the Tax Act. The Budget change targets taxpayers with a taxable income of $250,000 and where there is a commercial operation, not a passive income situation like a rental property, and where losses are being incurred and used to reduce their tax bills. These losses will be ring-fenced and can be used when the commercial operation starts to make profit. This is a real high-flyer slug.

Super changes

On super, salary sacrifice has become harder with under-50s now only allowed to put $25,000 extra into their super. If this has hurt you, you do have until June 30 to get one $50,000 in before the new rules apply.

For those who are 50 years old and over, the so-called concessional cap which salary sacrifices operates under will be reduced from $100,000 to $50,000, so you too have until June 30 to throw in big for one last time. By the way, this $50,000 cap goes to $25,000 for you guys from 2012!

Now that was concessional contributions, where the employer can claim a tax deduction and it includes our compulsory 9% super. What about the non-concessional contributions which come from our post-tax income? Many people think there were no changes, but there were a few subtle ones.

Lots of people would know these as the $150,000 maximum contributions many pre-retirees want to make before retiring. You can actually dump three-years worth in one go.

While they did not tamper with the amounts, they ruled out an indexation option that would have taken this $150,000 cap to $165,000 a year. This is an annoying development for savers but this Budget is not for savers, it’s for spenders to help the economy out of the economic downturn.

Co-contribution cuts

For those into superannuation co-contribution, there have been some scrooge-like changes here too. Right now for someone on around $30,000, if say your partner or parent tossed a $1000 into your super, the Government co-contributes $1,500 but this will be cut back to $1,000 after June 30. The experts say that even up to around $60,000 there is still a contribution made by the Government, but the amount reduces for every $1,000 extra income earned.

Act fast

Good luck with all of your Budget figurings and given that in some cases the rules change after June 30, the more work you do and fast, the better!

 

Published on: Thursday, May 21, 2009

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300