News

UPDATE: 2019/20 Budget

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The Government handed down the 2019/20 Federal Budget on Tuesday 2 April 2019.

Some of the important proposals include:

-      Increasing and expanding access to the instant asset write-off from 7:30 pm (AEDT) on 2 April 2019 (i.e., ‘Budget night’) until 30 June 2020, as follows:

       –     Increasing the instant asset write-off threshold from $25,000 to $30,000.  

       –     Making the instant asset write-off available to medium sized businesses (with aggregated annual turnover of $10 million or more, but less than $50 million).

Editor: The legislation to make the above changes to the instant asset write-off has already been passed and received Royal Assent.

-      Allowing individuals aged 65 and 66 years to:

       –     make voluntary superannuation contributions (both concessional and non-concessional) without meeting the work test from 1 July 2020; and

       –     make up to three years of non-concessional contributions under the bring-forward rule (without satisfying the work test).

-      Increasing the upper threshold of the 19% personal income tax bracket to $45,000 from 1 July 2022, and reducing the 32.5% marginal tax rate to 30% from 1 July 2024 (in addition to changes already legislated).

-      Increasing the Low and Middle Income Tax Offset (‘LAMITO’), with effect from the 2019 income year, to provide tax relief of up to $1,080 per annum, as well as an increased base amount of $255 per annum.

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ALERT: Latest ATO benchmarks released

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The ATO has released updated benchmark data drawn from over 1.5 million small businesses around the country to "help small businesses across the country . . . gauge the strength of their business and keep an eye on their competition".

Updated benchmarks for more than 100 industries are now available for the following categories:

-  Accommodation and food;

-  Building and construction trade services;

-  Education, training, recreation and support services;

-  Health care and personal services;

-  Manufacturing;

-  Automotive electrical services;

-  Machinery and equipment repair and maintenance;

-  Architectural services;

-  Veterinary services;

-  Retail trade; and

-  Transport, postal and warehousing.

The benchmarks are one of the tools the ATO uses to crack down on the black economy, along with data matching and referrals from the community.

“Businesses operating outside the benchmarks may trigger a red flag for businesses we suspect could be engaging in the black economy,” Mr Holt said.

“A frequent red flag is a business reporting minimal profit while the business owner seems to be maintaining a lifestyle far exceeding their personal income."

“If you use a registered tax professional, it’s also a good idea to have a chat with them about where your business sits in comparison with our benchmarks.  They might have some advice about steps you can take to improve your performance.”

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ALERT: Continued focus on the cash economy

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ATO Assistant Commissioner Peter Holt has announced that, in the 2019/20 financial year, the ATO will be visiting a further 10,000 small businesses across the country, including up to 500 small businesses in Tasmania.

He further said that businesses that advertise as 'cash only' and businesses that are operating outside of the ATO's performance benchmarks for their industry will be especially targeted for a visit from the ATO.

“Businesses that pay cash in hand, or fail to lodge income tax or business activity statements, get an unfair advantage and make it harder for other businesses who are doing the right thing.  By detecting and addressing this behaviour, we’re helping ensure a level playing field for honest small businesses.”

Businesses in the following industries are most likely to get a visit from the ATO:

-  Restaurants and cafes;

-  Vehicle repairers;

-  Personal care businesses including hairdressers and nail salons;

-  Pharmacies;

- Construction businesses;

-  Clothing stores;

-  Grocery stores / small supermarkets; and

-  Butchers.

Whilst on the road, ATO officers will also be available to help those businesses that are trying to do the right thing.

Mr Holt said the ATO will not hesitate to take strong enforcement action against those deliberately avoiding their tax and super obligations and the visits may uncover this deliberate non-compliance.

“If businesses know they have made mistakes we encourage them to let us know and work with us or their tax professional.”

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RULE CHANGE: Non-compliant payments to workers

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The rules for claiming deductions for payments to workers are changing.

From 1 July 2019, businesses can only claim deductions for certain payments made to workers where they've met the Pay As You Go (‘PAYG’) withholding obligation for that payment.

Specifically, a business can only claim a deduction for the following payments if it complies with the relevant PAYG withholding rules:

-    Salary, wages, commissions, bonuses or allowances to an employee.

-    Directors’ fees.

-    Payments to a religious practitioner.

-    Payments made under a labour hire arrangement.

-    Payments made for a supply of services (except from supplies of goods and real property) where the contractor has not provided their ABN.

Where the PAYG withholding rules require an amount to be withheld, the business must:

-    withhold the amount from the payment before they pay their worker; and

-    report that amount to the ATO.

Importantly, a deduction will not be lost if an incorrect amount is withheld (or reported) by mistake.

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UPDATE: What’s new for Australian business?

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The ATO has recently reminded small businesses of the expanded tax concessions potentially available to them, as outlined below:

-    The pending increase in the small business instant depreciating asset write-off to less than $25,000 (as discussed in further detail above).

-    Accelerated depreciation deductions for primary producers for eligible fodder storage assets, as well as for fencing and water facilities.

-    Assistance for primary producers impacted by drought at Drought Help, or by contacting the ATO on 1800 806 218.

-    A lower company tax rate of 27.5% for companies qualifying as a Base Rate Entity ('BRE').

-    Increased Small Business Income Tax Offset (‘SBITO’) for eligible sole traders and individual partners and beneficiaries.

Finally, the ATO has reminded taxpayers that more businesses are now eligible for most small business tax concessions.

Specifically, from 1 July 2016, a range of small business tax concessions became available to all businesses with an aggregated turnover of less than $10 million (i.e., the turnover threshold).

Previously the turnover threshold was less than $2 million.  The $10 million turnover threshold applies to most concessions, except for:

-    the SBITO – which has a $5 million turnover threshold from 1 July 2016; and

-    the small business CGT concessions – which continue to have a $2 million turnover threshold.

Note: The relevant turnover threshold for accessing the lower company tax rate is $50 million from  the 2019 income year (increased from $25 million in the 2018 income year).

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Alert: Christmas Gifts and Fringe Benefits Tax

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Editor:  With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled 'tax-wise'.

 Gifts that are not considered to be entertainment

These generally include, for example, a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers, a pen set, etc.  

Briefly, the general FBT and income tax consequences for these gifts are as follows:

-   gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible; and

-   gifts to clients, suppliers, etc. – no FBT, and tax deductible.

 Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

-   gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and

-   gifts to clients, suppliers, etc. – no FBT and not tax deductible.

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ALERT: Ban on electronic sales suppression tools

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From 4 October 2018, the Government has banned activities involving electronic sales suppression tools (‘ESSTs’) that relate to people or businesses that have Australian tax obligations. 

The production, supply, possession or use of an ESST (or knowingly assisting others to do so) may attract criminal and administrative penalties.

ESSTs can come in different forms and are constantly evolving, some examples include:

-   An external device connected to a point of sale (‘POS’) system.

-   Additional software installed into otherwise-compliant software.

-   A feature or modification that is a part of a POS system or software.

An ESST may allow income to be misrepresented and under-reported by:

-   deleting transactions from electronic record-keeping systems;

-   changing transactions to reduce the amount of a sale;

-   misrepresenting sales records (e.g., by allowing GST taxable sales to be re-categorised as GST non-taxable sales); or

-   falsifying POS records.

Transitional arrangements are in place for six months starting from 4 October 2018 to 3 April 2019 for possessing an ESST.

Taxpayers may avoid committing an offence for possessing an ESST if they:

-   acquired it before 7:30pm 9 May 2017; and

-   advise the ATO that they possess the tool.

Importantly, the transitional provisions do not apply to the manufacture, development, publication, supply or use of an ESST.

Depending on the offence and severity of the crime, taxpayers can face financial penalties of up to 5,000 penalty units, which currently equates to over $1 million.

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NEWS: Proposed expansion of STP to smaller employers

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Single Touch Payroll (‘STP’) commenced on 1 July 2018 for approximately 73,000 employers who have 20 or more employees.

There is currently legislation before Parliament to expand STP to all employers from 1 July 2019 and it is estimated that there will be more than 700,000 employers who will enter STP as a result.

Even though the proposed expansion is not yet law, the ATO recommends that smaller employers consider voluntarily opting-in to STP early.

The ATO acknowledges there is a large number of very small employers who have less than five employees (‘micro-employers’) who do not currently use a payroll product and has indicated that they are not looking to force them to take up a product to do STP.

Efforts are being made to work with industry to look at some alternate reporting mechanisms.

It is being reported that software developers, and even some of the larger banks, have shown an interest in developing some kind of product that would enable micro-employers to provide the necessary data to comply with STP at a low cost.

Employers who are in an area that has internet issues or challenges are reminded that there are potential exemptions available under STP.

The ATO is currently consulting with focus groups to look at flexible options to transition micro-employers to STP over the next couple of years.

Assuming the relevant legislation passes, the ATO does not realistically expect that everyone will start STP from 1 July 2019 and has indicated that it will be flexible with the commencement date, including the provision of deferrals to help stagger the uptake.

Editor: This is a very positive message from the ATO, particularly for micro-employers.  Hopefully, together with the relevant software developers, they are able to come up with a low-cost and simple alternative for those who do not currently use payroll software to comply with their STP obligations.

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ALERT: Increased scrutiny of home office claims

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Last year, 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’, which includes home office expenses.

Reportedly, due to a high number of mistakes, errors and questionable claims for home office expenses, the ATO has recently advised that it will be increasing attention, scrutiny and education on these claims this tax time.

In particular, the ATO has flagged their concerns relating to taxpayers who are claiming:

-   expenses they never paid for;

-   expenses that their employer has reimbursed them for;

-   private expenses; and

-   expenses with no supporting records.

Whilst additional costs incurred as a direct result of working from home can be claimed, care must be taken not to claim private expenses as well.

The ATO has indicated that one of the biggest issues they face is people claiming the entire amount of expenses (e.g., their internet or mobile phone), rather than just the extra portion relating to work.

Provided the taxpayer is able to demonstrate that they have incurred additional costs of running expenses (e.g., electricity for heating, cooling and lighting), then these are generally deductible.

In contrast, employees are generally not able to claim any portion of occupancy-related expenses (e.g., rent, mortgage repayments, property insurance, land taxes and rates).

Taxpayers are warned that the ATO may contact their employers to verify expenses claimed for working from home.

In addition, the ATO expects to disallow a lot of claims where the taxpayer has not kept adequate records to prove that they have legitimately incurred the relevant expense and that the expense was related to their work.

As with the claiming of deductions in general, supporting records must be kept when claiming work-from-home expenses, which may include receipts, diary entries and itemised phone bills. 

Importantly, only the additional work-related portion of the relevant expense is deductible.

Advancement in technology has allowed the ATO to deploy sophisticated systems and analytics to spot claims that do not ‘add up’ and claims that are out of the ordinary compared to others in similar occupations, earning similar income.

Finally, the ATO has reminded taxpayers of the ‘three golden rules’ to follow when claiming work-from-home deductions, being:

-   the taxpayer must have spent the money themselves and have not been reimbursed;

-   it must be directly related to earning the taxpayer’s income, not a personal expense; and

-   the taxpayer must have a record to prove the expense.

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(08) 9364 4204

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NEWS: Black economy recommendations will impact day-to-day business

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Editor: Recently issued draft legislation has focused on introducing new measures to manage the growing cash economy (i.e., the ‘black economy’) in light of the Black Economy Taskforce recommendations and recent Federal Budget announcements. 

Two of these key recommendations are outlined below.

Removing tax deductions for PAYG failure

The Government is currently considering removing tax deductions where businesses fail to comply with their PAYG withholding obligations for payments to employees and contractors from 1 July 2019.

Specifically, deductions are proposed to be denied for these types of payments where the payer has failed to either:

-   comply with their obligations in relation to withholding from these payments; or

-   notify the ATO of the withholding amount (i.e., via their BAS).

Interestingly, deductions will only be denied if no withholding took place or no notification has been made. 

That is, incorrect amounts withheld or reported to the ATO will not impact a taxpayer’s entitlement to deductions.

Further expansion of the taxable payments reporting system (‘TPRS’)

The TPRS was introduced for the first time in the 2013 income year with respect to businesses in the building and construction industry, requiring the reporting of total payments made to contractors for building and construction services each year.

The taxable payments annual report is due by 28 August each year.

Legislation is currently being considered by Parliament to extend the TPRS to the cleaning and courier industries from the 2019 income year.

Furthermore, draft legislation has now been released to further expand the TPRS to the following industries from the 2020 income year:

-   security providers and investigation services;

-   road freight transport; and

-   computer system design and related services.

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Certificate awarded from Australian Taxation Office for Lodgement Program 2017-18

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We are pleased to announce that Mawer Consulting met the ‘85% or more’ on-time lodgment performance requirement for Lodgment program 2017–18.

As a tax practitioner, the role we play is vital in supporting and influencing our clients to recognise and value the tax and superannuation system that underpins Australia’s economic and social wellbeing.

Achieving the 85% on-time lodgment performance requirement indicates we are assisting your clients in meeting their tax reporting obligations in a timely manner.

Thank you to all our clients for making this possible.

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(08) 9364 4204

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NEW SEMINAR : Hatching your new business idea

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Mawer Consulting and Small Business Development Corporation have teamed up to help small business owners of Perth to achieve what they desire. Best of all, all of the sessions are complimentary for small business owners.

Our latest seminar is titled 'Hatching your new business idea'

This workshop will cover a range of relevant topics for potential start-ups and new business owners including the following:

Converting your business idea into a well-defined business concept.

Defining your target market and explaining market differentiation concepts.

Pricing methods and budgeting techniques

Breakeven analysis and business viability concepts

Business cash flow concepts and planning strategies

Business analysis techniques to assist in evaluating your business or business idea

Bookkeeping basics and how quality record keeping will help you make informed decisions

Business growth strategies to help grow your business

Find a list of all available seminar dates on our Eventbrite page below:

https://www.eventbrite.com.au/o/mawer-consulting-17425341484

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEW SEMINAR DATES: Small Business Cash Flow Essentials

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Mawer Consulting and Small Business Development Corporation have teamed up to help small business owners of Perth to achieve what they desire. Best of all, all of the sessions are complimentary for small business owners.

We now have three dates and locations available for our Small Business Cash Flow Essentials seminar.

They say cash is king, and if you run a business you will understand this saying.

This interactive session discusses why cash flow is vital to proactively manage, how cash flow planning works in a practical sense, different methods/softwares available to manage cash flow, discuss three way models and a range of other vital issues.

This session includes a complimentary one hour follow up meeting or telephone call to assist in the implementation of the learnings in the session.

Find a list of all available seminar dates on our Eventbrite page below:

https://www.eventbrite.com.au/o/mawer-consulting-17425341484

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

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admin@mawcons.com.au

(08) 9364 4204

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NEWS: ATO scrutinising car claims this tax time

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The ATO has announced that it will be closely examining claims for work-related car expenses this tax time as part of a broader focus on work related expenses.

Assistant Commissioner Kath Anderson said: 

“We are particularly concerned about taxpayers claiming for things they are not entitled to, like private trips, trips they didn’t make, and car expenses that their employer paid for or reimbursed.”

This is no doubt because over 3.75 million people made a work-related car expense claim in 2016/17 (totalling around $8.8 billion), and, each year, around 870,000 people claim the maximum amount under the cents-per-kilometre method.

Ms Anderson said that the ATO’s ability to identify claims that are unusual has improved due to enhancements in technology and data analytics: “Our models are especially useful in identifying people claiming things like home to work travel or trips not required as part of your job . . . simply travelling from home to work is not enough to qualify, no matter how far you live from your workplace.”

Ms Anderson said there are three golden rules for taxpayers to remember to get it right.

“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”

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NEWS: Superannuation guarantee amnesty introduced

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The Government has introduced legislation to complement the superannuation guarantee ('SG') integrity package already before Parliament by introducing a one‑off, twelve month amnesty for historical underpayment of SG.

The Bill incentivises employers to come forward and "do the right thing by their employees" by paying any unpaid superannuation in full, as well as the high rate of nominal interest (but without the penalties for late payment that are normally paid to the Government by such employers).

Employers that do not take advantage of the amnesty will face higher penalties when they are subsequently caught – in general, a minimum 50% on top of the SG Charge they owe. 

In addition, throughout the amnesty period the ATO will still continue its usual enforcement activity against employers for those historical obligations they don't own up to voluntarily.

The amnesty will run for twelve months from 24 May 2018.

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ALERT: Continued ATO focus on holiday home rentals

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The ATO has recently advised that they are “setting their sights on the large number of mistakes, errors and false claims made by rental property owners who use their own property for personal holidays”

While it confirms that the private use of holiday homes by friends and family is entirely legitimate, the ATO states that such use reduces a taxpayer’s ability to earn income from the property, and therefore impacts on (i.e., reduces) the amount of claimable deductions.

As a result, the ATO has reminded holiday home owners that: 

-    They can only claim deductions for a holiday home with respect to periods it is genuinely available for rent.

-    They cannot place unreasonable conditions on prospective tenants/renters, set rental rates above market value, or fail to advertise a holiday home in a manner that targets people who would be interested in it and still claim that the property was genuinely available for rent. 

-    Where a property is rented to friends or relatives at ‘mates rates’, they can only claim deductions for expenses up to the amount of the income received. 

       -   Property owners whose claims are disproportionate to the income received can expect greater scrutiny from the ATO.

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UPDATE: Super guarantee payable on ‘public holidays’ and ‘additional hours’

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The Federal Court has held that superannuation guarantee contributions were payable with respect to the ‘additional hours’ and ‘public holidays’ component of annualised salaries paid by BlueScope Steel, on the basis that these particular components formed part of ordinary time earnings (‘OTE’). 

Under an enterprise agreement, primarily due to the specific working environment, the employees in question were required to be available (at short notice) 365 days per year and 24 hours per day, including a requirement to work additional hours and public holidays. 

As such, the employees were paid an annualised salary, which was made up of a base rate, as well as a component which absorbed all additional payments, such as penalty rates, allowances, public holiday loadings and pay-outs, and payment for additional hours worked outside the normal rostered hours.

However, when paying superannuation, adjustments were made to the annualised salary, so that the additional hours and public holiday components were not included by BlueScope Steel as OTE for superannuation guarantee purposes.

Decision

The Federal Court did not agree with the employer’s adjustments, instead finding that, under the circumstances, the ‘additional hours’ and ‘public holidays’ formed part of an employee’s ‘ordinary hours of work’ and, therefore, were considered OTE for superannuation guarantee purposes.

This remained the case whether or not the employee actually worked the additional hours or the public holidays.

That is, the ordinary conditions of the employee’s work required them to be available outside their rostered shifts and on public holidays (on short notice) and, as this was factored into their annual salary, they were considered ordinary hours for these particular employees.

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ALERT: ATO's focus on work-related expenses

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This year, the ATO is paying close attention to what people are claiming as 'other' work-related expense deductions, so it's important when taxpayers claim these expenses that they have records to show:

-    they spent the money themselves and were not reimbursed;

-    the expense was directly related to earning their income; and

-    they have a record to prove it.

If the expense is for work and private use, the taxpayer can only claim a deduction for the work-related portion.

Importantly, taxpayers are not automatically entitled to claim standard deductions, but need to be able to show how they worked out their claims.

Editor: ‘Other’ work related expenses are expenses incurred by employees in relation to their work that are not for travel, clothing or self-education, such as home office expenses.

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admin@mawcons.com.au

(08) 9364 4204

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NEWS: Review of rules for early release of superannuation

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The Government has announced that Treasury will review the current rules governing early release of superannuation on grounds of severe financial hardship and compassionate grounds.

It will also review whether, and the circumstances in which, a perpetrator’s superannuation should be available to pay compensation or restitution to victims of crime.

The review will not examine other general conditions of release for superannuation.

The Government also announced that it will transfer the regulatory role of administering the early release of superannuation benefits on compassionate grounds from the Department of Human Services to the ATO in 2018, to enable the ATO to provide a more streamlined service to members.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

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NEWS: Further 'affordable housing' measures passed

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Parliament has passed the legislation allowing first home buyers to save for a deposit inside superannuation through the First Home Super Saver Scheme (FHSSS), and also allowing older Australians to 'downsize' and then contribute the proceeds of the sale of their family home into superannuation.

From 1 July 2018, a first home buyer will be able to withdraw voluntary superannuation contributions they have made since 1 July 2017 (up to $30,000 each, with individuals being able to contribute up to $15,000 a year within existing caps), along with a deemed rate of earnings, to help buy their home.

Also, from 1 July 2018, when Australians aged 65 and over sell a home they have owned for at least 10 years, they may contribute up to $300,000 from the proceeds into their superannuation accounts, over and above existing contribution restrictions.   Both members of a couple may take advantage of this measure, together contributing up to $600,000 from the proceeds of the sale into superannuation.

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Click here to sign up to our Newsletter to receive the latest in strategic advice, taxation and business

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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