Indexing... - Dalle Cort Financial Services

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Super Contribution Splitting the balance of superannuation was split evenly. (Spouse A: Account balance: $400,000 and Spouse B: Account Balance: $400,000. All the benefits are part of the taxable component) ii.Again, both Spouse A and B are able to withdraw $140,000 (each) of taxable component tax-free and re-contribute this amount back into superannuation as a non-concessional contribution. Therefore for each account, 35% of their respective superannuation benefits are of the tax-free component. This leaves 65% of each account as a taxable component. If both Spouses A and B were to draw $35,000 pa each ($70,000 pa combined), $12,250 pa would be tax-free whilst the remaining $22,750 pa would form part of the taxable component. The tax offset of 15% on the taxable component would exceed the amount of tax payable. This is results in no tax payable on the income amounts drawn. Therefore Spouses A and B could draw $70,000 pa (combined) completely taxfree. Therefore with contributions splitting, this particular couple does not have to wait until 60, to draw tax-free income in retirement. 3. A boost for superannuation savings for the spouse nearing retirement Where one spouse is planning to retire earlier than the other, the younger spouse could arrange to split contributions to the older spouse’s superannuation account. This is because the older spouse would satisfy a condition of release sooner (and gain access to superannuation monies sooner). It is important to note that there are some general rules for contributions splitting: • Non-concessional contributions cannot be split • Members must make the request to split contributions within 12 months to the end of the financial year. • The amount of contribution splitting is unable to exceed 85% of concessional contributions (as the source fund pays the contributions tax) • The receiving spouse must not be retired. They must be either under preservation age or between preservation age and age 65 and not retired. Contributions splitting, as demonstrated above, can have a number of benefits for a wide degree of individuals. Again, it is best to consult your Financial Planner to determine whether such a strategy is suitable and/or can assist you to meet your financial goals and objectives. 4
When is Interest Deductible? When Is Interest Deductible? The main test used by the ATO to determine the deductibility of interest is the use of the borrowed money. Therefore interest on borrowed funds may be deductible when the funds were used to: • acquire an investment product to gain an investment income stream; • acquire an investment property to gain rental income; or • finance business operations Interest paid on funds borrowed to buy shares or a managed fund would normally always be tax deductible. Complications can arise in determining the amount of interest to be deducted when some of the funds are used for private purposes or a split loan arrangement exists. If part of the initial borrowings are used for private purposes then the interest claimable on the loan needs to be apportioned on a use basis and accordingly any principal payments on the loan need to be apportioned on the same basis between private and deductible. When for example a line of credit is in use and a private amount is withdrawn during the course of the loan then the apportionment applies from the date of the withdrawal. Split loans generally involve at least two loans or sub accounts being maintained in respect of that loan. The main advantage that was seen by this arrangement was to maximise the interest deduction by making all repayments off the private part of the loan and capitalising the unpaid interest on the income producing part of the loan. Whilst in principle this seemed acceptable under the Income Tax Act the Courts have determined that it triggers the antiavoidance provisions. Accordingly any claim for interest deductions need to be reworked on an apportionment basis. Therefore, it is essential that before any private amounts are withdrawn from an investment loan that you consult with your accountant to determine the tax consequences to you. 261 Ross River Road Aitkenvale, QLD 4814 Ph: (07) 4725 2384 Fax: (07) 4779 3146 Email: chris@austaxtsv.com.au Web: www.austaxtsv.com.au Update on New Education Tax Refund From 1st July 2008 families receiving FTB Part ‘A’ with children undertaking primary or secondary studies will be eligible to claim a refundable tax offset in respect of eligible education expenses incurred from this date (eg laptops, education software, school text books & stationery). Eligible parents will receive a 50% refund every year for eligible education expenses up to: • $375 per primary school child, per year • $750 per secondary school child, per year To claim the refund you will need receipts so be sure to keep supporting documentation for things you spend over the coming months. Austax Townsville is a separate business from Dalle Cort Financial Services. MLC Financial Planning does not have any association with Austax Townsville and therefore is not responsible for any advice that they may provide. 5
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Indexing... - Dalle Cort Financial Services

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