101 Ways to Save Money on Your Tax - Legally! 2021 - 2022. Adrian Raftery
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The 2021–22 federal budget proposed a no negative equity guarantee on the loan and access to a capped upfront lump sum payment of 0.5 times.
The principal from the Pension Loans Scheme is accruing interest at a rate (currently 4.5 per cent) which is significantly higher than what banks lend at. Whilst we all know of the benefits of compound interest when saving, with no minimum repayment back to the government, there can be sizable detriment as interest is charged on interest over time.
Under the gifting rules, the maximum amount that you can gift to a friend or relative is $10 000 in each financial year and $30 000 in total over the previous five-year period. Any excess amounts are added back as part of your assets under the assets test.
Seniors card
Each state and territory has a free Seniors Card scheme which provides transport concessions and participating business discounts on a range of goods and services. To be eligible you must be a resident of the state, 60 years of age or older, and not working more than a set numbers of hours per week in paid employment (for example less than 20 hours in NSW and 35 hours in Victoria and Queensland).
Other benefits
The following additional benefits may also be available to families:
energy supplement
single income family supplement
telephone allowance
stillborn baby payment
education entry payment
carer adjustment payment
assistance for isolated children scheme
rent assistance.
10 FAMILY BREAKDOWN
While we all want to have the perfect marriage and live happily ever after, the sad reality is that approximately one-third of marriages end in divorce in Australia.
The tax system has provisions in place to assist with easing the financial burden of separating families. These provisions apply to capital gains tax (CGT), superannuation and income from child- and partner-support payments.
Transfer of assets
Normally, when you sell an asset that was acquired after 19 September 1985, you are liable for CGT. However, when you transfer assets to your spouse as a result of the breakdown of your relationship, it is classified as an ‘automatic rollover’ of those assets and you will not have to pay CGT at that time. Any subsequent disposal of the asset will trigger the CGT provisions, except for the family home, which is exempt.
There is no CGT if you transfer a property to your former spouse under a court order following the breakdown of your marriage.
This rollover ensures the spouse who gives the assets disregards a capital gain or capital loss that would otherwise arise, and the one who receives the asset (the transferee spouse) will make the capital gain or capital loss when they subsequently dispose of the asset.
If you and your spouse divide your property under a private or informal agreement (not because of a court order, a binding financial agreement, an arbitral award or another agreement or award), marriage or relationship breakdown rollover does not apply.
Transfer of superannuation
The splitting of superannuation between divorcing partners is similarly treated as a rollover. As the funds are not being released as a payment, this rollover split does not need to wait until retirement.
Child support and spouse support payments
You do not need to include any child support or spouse support payments that you may receive in your taxable income, but they are part of your adjusted taxable income calculation for tax offset purposes. Similarly, there is no tax deduction available for child support or spouse support payments.
The ATO cooperates with the Child Support Agency to:
supply information to the Child Support Agency for the purpose of calculating child support payments
encourage lodgement of outstanding tax returns
recoup child-support debt from tax returns.
Some may say that binding financial agreements defeat the purpose of marrying based on the values of love and trust, but seeking legal advice on setting up a binding financial agreement could be a good preventative measure against a bag egg. Love hurts, but divorce can be expensive. Make sure you consult a lawyer before drafting up any such agreement.
While it is tempting not to lodge income tax returns for a number of years to avoid any increase of child support payments, you could be missing out on a number of other benefits (including substantial tax refunds and government concessions) or simply accruing extra late lodgement penalties with the ATO.
11 DEATH
Three things in life are certain — taxes, death … and taxes on death! Unlike other countries, there is no gift or inheritance tax in Australia. But don't be fooled because certain transactions that occur as a consequence of a person's death are taxed.
Date of death return
Executors of deceased estates are required to finalise the tax affairs of the deceased person, including any outstanding tax returns.
The final personal tax return of the deceased person with their personal TFN is known as the ‘date of death return’ and covers the period from the previous 1 July to the date of death. It should include all assessable income derived by the deceased person and all the tax-deductible expenses incurred up to the date of death.
The general individual tax rates, with the full tax-free threshold, apply to the final tax return as well as the Medicare levy and Medicare levy surcharge. Any compulsory Higher Education Loan Program (HELP) or Student Financial Supplement Scheme (SFSS) repayments are also included, but the remaining accumulated HELP debt is cancelled.
Ordinary losses as well as capital losses will lapse at the time of death and cannot be carried forward into the deceased estate. If possible, try to use these capital losses prior to death by selling any assets that have appreciated in value.
Deceased estate returns
Income derived after the date of death, and any deductible expenses incurred after the date of death, are included in the deceased estate's trust return. Tax returns will need to be lodged in future years until the estate is fully administered and