Doubling-up the $25,000 Concessional Contributions

Doubling-up the $25,000 Concessional Contributions

Good Morning All,

Just as a reminder for tax planning in 2019-20 that we can use the 'double-up' concessional contribution strategy for clients with a SMSF.

As you are aware a client can make a concessional contribution up to $25,000 in a financial year. However, there are circumstances where a double contribution would be very beneficial to the client.

So, anyone who is eligible to make a concessional contribution (either under age 65 or 65-74 meeting the work test) can make a 'second' $25,000 contribution at the end of the financial year. Super legislation requires member contributions to be applied to a member’s account within 28 days after the end of the month in which the contribution is made, so as long as that 'second' $25,000 arrives at the fund in late June it can be held in reserve and then allocated to the member account 28 days later (ie. in the next financial year).

However the contribution is recorded on the date that the contribution is made – this allows the member to claim both contributions in the one financial year, and then have that second contribution allocated before July 28.

Both contributions can be claimed as tax deductions in the year in which they are made. As far as the second contribution that is carried over to the next financial year, it is counted against the concessional cap in that year.

ATO Documentation

Appropriate Australian Taxation Office forms need to be completed to acknowledge the carryover of the contribution. The relevant form in this instance is a Request to adjust concessional contributions (NAT 74851-07.2015).

That an SMSF can claim both contributions in the year they are made is confirmed in an ATO interpretive decision (ATO ID 2012/16) and a subsequent tax determination (TD 2013/22).

A Live Example

Married couple are both members of a SMSF. They sell a property outside their SMSF that they have held for more than 12 months and make a taxable capital gain of $100,000. They owned the property jointly so each incurs a $50,000 taxable capital gain.

Assuming they have personal exertion income of $100,000 each and we add 50% of the taxable capital gain to that income we have an annual income of $125,000.

The tax payable is $36,277

If they use the 'bring forward' concessional tax rules and contribute $50,000 to super then the tax is reduced to $17,452 a tax saving of $18,825.

Insurance for Kids - Think about it!

Insurance for Kids - Think about it!

Insurance for Kids - Think about it!!!

Most of my clients have had their insurance risks assessed and we have adequate insurance cover either with an insurance company or via a superannuation fund. 

But there is a new type of cover on the market - and it is insurance for kids. I know it sounds odd - but just think about it. 

Have you known a family that has had a child with a life-threatening illness? I know that we all hope it does not happen to us - but what happens if it does?

What happens is that the family is thrown into chaos.

You want to be with your child - you need to be with your child - so it usually means that one parent has to take extended leave (usually without pay).

The other children suffer as one or both parents need to be with the sick child.

Sometimes families have to sell their home or borrow from facility members.

This is a Risk for a family - and like all other risks we want to make sure that there is a back-up plan in place.

It is possible for a very small additional premium to add Children's Trauma Insurance to your own insurance policy.

The cover is available for all children over the age of two. 

If the child suffers an illness or has an accident that is life threatening the policy pays out to the parents. If that cover was for say $200,000 then that money is paid out and used to offset the lost income and the medical expenses.

It is something that we hope never happens - but I am sure that all those parents with kids in Ronald McDonald House at the moment hoped it would not happen to them.

When you think about insurance risk - think about it as a family issue - because the whole family gets impacted by this kind of thing - we don't want it to happen but for a small extra premium it is nice to know it is there. 

 

What is it with House Prices?

What is it with House Prices?

What Is It About House Prices?

If I have to read another newspaper article about falling house prices I might go stark raving mad!!! House prices are falling – ok – we get it!!! Go find some news that MATTERS!

For most Australians their house is their most expensive asset. It is money that they have already spent to live in a house and area of their choosing.

IT IS NOT AN INVESTMENT

You see, you have to live somewhere – as human beings we require shelter and your home is basically a part of staying alive, it provides shelter against weather – that’s it. The fact that the value of that house rises or falls is immaterial to your personal well-being, because the house is still providing shelter.

Since 2008 all I have heard is “house prices can’t fall” or, “you can’t go wrong with property” or “safe as houses “. It is amazing how quickly people forget we have had property downturns before and we will have them again. So why are property prices falling now?

Three really simple reasons:

  1. Credit
  2. Immigration
  3. Interest Rates

 

  1. Credit

Banks are not lending as much as they were – slowing down lending means less people are able to secure bank finance to buy property.

  1. Immigration

 

Overseas migration to and from Australia in 2018, resulted in a net increase to Australia's population of 237,200 people:

    • There were 526,300 migrant arrivals which was an annual decrease for the first time since 2014
    • There were 289,000 migrant departures which is the highest number on record

There are less people coming to Australia and more people leaving.

 

  1. Interest Rates Don’t Matter

As the Reserve Bank reduces interest rates (they are already at historical lows) it does not make any difference. The reason is that the major banks don’t pass on these rate cuts to home buyers – they are not compelled to reduce the mortgage rate at all.

House prices will remain flat or continue to fall while these three factors remain in play.

For most of us – it does not matter – we still have our shelter.

Downsizer

Downsizer

The monkey-rope is found in all whalers; but it was only in the Pequod that the monkey and his holder were ever tied together. This improvement upon the original usage was introduced by no less a man than Stubb, in order to afford the imperilled harpooneer the strongest possible guarantee for the faithfulness and vigilance of his monkey-rope holder.In the tumultuous business.

Do I Need TPD Or Trauma Insurance

Do I Need TPD Or Trauma Insurance

The monkey-rope is found in all whalers; but it was only in the Pequod that the monkey and his holder were ever tied together. This improvement upon the original usage was introduced by no less a man than Stubb, in order to afford the imperilled harpooneer the strongest possible guarantee for the faithfulness and vigilance of his monkey-rope holder.In the tumultuous business.

What’s A Really Good Investment

What’s A Really Good Investment

The monkey-rope is found in all whalers; but it was only in the Pequod that the monkey and his holder were ever tied together. This improvement upon the original usage was introduced by no less a man than Stubb, in order to afford the imperilled harpooneer the strongest possible guarantee for the faithfulness and vigilance of his monkey-rope holder.In the tumultuous business.

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Contact Info

P: 03 9974 8333
A: 108 Watton Street, Werribee Vic 3030
E: financialservices@cscapitalgroup.com.au
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Member firm & corporate authorised representative of Advocate Advisory Pty Ltd,
ABN 14 150 153 503, AFSL No. 405576 Suite 3, 675 Boronia Road, WANTIRNA VIC 3152

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