Posted on July 2, 2019 by Tom Francis
It’s July once again and at GeersSullivan that means one thing above all else, individual tax returns are coming! Over the past few years we have seen an increase in the number of warning letters issued by the ATO where taxpayers have a higher level of deductions than their peers.
One of the chief drivers of high deduction claims is self-education expenditure; at this item taxpayers are allowed to claim for courses and seminars attended, as well as travel costs and related study expenses such as stationery, internet access and even depreciation. The key to claiming these items is that the study “must have a sufficient connection to your current work activities as an employee” and:
- maintain or improve the specific skills or knowledge you require in your current work activities, or
- result in, or is likely to result in, an increase in your income from your current work activities.
The two most common errors when determining if education expenses meet the above tests are:
- the study is only generally related to the taxpayer’s employment and lacks the relevant connection;
- the study enables them to gain new employment.
For a course of study – such as a certificate or similar formal qualification – to be deductible, the skills and knowledge you are acquiring need to have a strong connection with your current employment. In the case of a certification or formal schooling this means:
- You will directly apply the skills being taught in your current employment, or
- The skills being taught will enable you to take on a more senior role in your current profession, or
- You are obtaining additional knowledge about your area of expertise and this will assist you in performing your role or in obtaining a more senior role in the same profession
An example of this is a nurse who undertakes studies to become a nurse practitioner with the ability to prescribe some medications. He or she is likely able to apply for more senior roles but the study maintains the specific connection to the profession of nursing.
In contrast a taxpayer employed in an internship role would not be able to claim their course fees against their income earned as an intern. This is because the study is not being undertaken for the purpose of gaining employment as an intern and is therefore in relation to gaining new employment.
In the case of a seminar, conference or similar event having a strong connection to your employment means:
- The topic being presented on is directly related to your area of expertise, or
- The issues being discussed or the planned outcomes have a direct relationship to your area of expertise or how your industry operates.
Revisiting our example of the nurse, if he or she attends a two-day seminar on best practice methods for caring for patients suffering a particular ailment this would have the necessary connection to their employment. Similarly, a conference on the impact of changing legislation on nurses’ professional conduct will also have the necessary connection.
On the other hand, a seminar that presents the results of a new medical device or the impact of a particular disease on the population is likely to be too general to be considered in relation to the nurse’s employment. Put plainly the topic does not directly impact the taxpayer’s work as a nurse.
We encourage anyone who is considering further study and believes the course to be tax deductible to consider the points of this article carefully. If in doubt, please feel free to call us to discuss on (08) 9316 7000.
Posted on by Piera-Lee Ramm
With Labor having planned some major superannuation policy changes, there had previously been concerns about their impact on Self Managed Superannuation Funds (SMSF). Now, with the surprise Coalition victory, the Morrison Government has the opportunity to move forward on their proposed changes to superannuation.
Whilst the Coalition hasn’t proposed any major policy changes to superannuation, it has announced a few minor changes, many of these policies were provided in the 2019 Federal Budget. This article summarises the Coalition’s main proposals relating to superannuation.
The Coalition announced three measures that will allow older individuals to make superannuation contributions from 1 July 2020 onwards.
Work test exemption for ages 65 and 66
Relaxation of the work test rules relating to contributions so that individuals aged 65 and 66 can make voluntary superannuation contributions (both concessional and non-concessional) even if they do not meet the work test.
This is in addition to the previously announced ‘Work Test Exemption’ where from 1 July 2019, individuals aged 65 to 74 with a total superannuation balance below $300,000 will be able to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test.
Currently, individuals aged 65 to 74 can only make voluntary superannuation contributions if they meet the work test of working a minimum of 40 hours over a 30-day period in the relevant financial year they seek to make contributions.
Individuals with a total superannuation balance of $1.6m or over are not eligible to make non concessional contributions, regardless of age.
Bring-forward extension for ages 65 and 66
Individuals aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule, provided their total superannuation balance is less than $1.4m.
Reduced non-concessional bring forward caps apply if an individual’s total superannuation balance is equal to or greater than $1.4m.
Currently the bring-forward rules allow individuals aged up to 65 years to make up to three years’ worth of non-concessional contributions to their super fund in a single financial year, subject to their total superannuation balance. The current non concessional contributions cap is $100,000 a financial year.
This means under the current non-concessional contribution caps, members aged under 67 will be allowed to make a $300,000 non-concessional contribution in a single year; assuming they haven’t already triggered the 3 year bring-forward period and their super balance was less than $1.4m at 30 June prior.
Spouse contributions allowed up to 74
The age limit for spouse contributions will be increased from 69 to 74 years.
Currently individuals aged 70 years and over cannot receive contributions made by a spouse on their behalf.
Individuals aged between 69 and 74 need to satisfy the work test in order to be eligible to receive the contribution made by their spouse.
You may be able to claim a tax offset of up to $540 if you make contributions to a complying super fund for your spouse. Your spouse’s income must be $37,000 or less for you to qualify for the full tax offset and less than $40,000 for you to receive a partial tax offset.
To be eligible for the maximum tax offset of $540 you need to contribute $3,000 and your partner’s annual income needs to be $37,000 or less.
There are limits on what can be contributed, please contact our office for more information.
Simplifying Exempt Current Pension Income (ECPI) calculations
The Coalition has also proposed changes to the calculation of exempt current pension income, including the removal of a redundant requirement for superannuation funds to obtain an actuarial certificate where all members of the fund are fully in the retirement phase for the whole financial year.
From 1 July 2020 members with interests in both the accumulation and retirement phases during a financial year will be allowed to choose their preferred method of calculating ECPI. This is a welcome change and should mean that SMSFs will be able to choose the method which provides the most tax-effective outcome.
Allowing SMSFs to have 6 members
It is proposed to increase the maximum number of members for a SMSF from four to six.
Currently SMSFs can have up to four members at any time.
Expansion and delay of SuperStream Rollover Standard
The ATO will receive $19m to facilitate the inclusion of superannuation release authorities by electronic request. This will involve expanding the electronic SuperStream Rollover Standard used for the transfer of information and money between employers, superannuation funds and the ATO.
To coincide with this the start date for SMSF rollovers in SuperStream will be delayed until 31st March 2021.
Please contact our Superannuation Manager Helen Cooper on 08 9316 7000 should you wish to discuss your specific circumstances in more detail.
Any information provided in this article is general in nature and does not take into account your personal objectives, situation or needs. The information is objectively ascertainable and was not intended to imply any recommendation or opinion about a financial product. This does not constitute financial produce advice under the Corporations Act 2001.