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As we approach the end of another financial year, Bongiorno Group’s Director, Michael Waycott, discusses tax-effective strategies, recent changes that may affect healthcare providers and why you should start planning now for next year’s return.
As the end of the financial year approaches, it’s important to review the changes, opportunities and possible oversights that could have an impact on your tax return.
For example, investing in superannuation is still one of the most tax-effective strategies. Michael Waycott, Director of the Bongiorno Group, recommends that you consider contributing the maximum annual amount before 30 June.
“At the moment, a cap of $25,000 per year applies to people of any age who are gainfully employed,” he says. “However, from 1 July 2013, this will increase to $35,000 per year for workers over the age of 60 and then, from 1 July 2014, for workers over the age of 50.”
If you have tax-deductible loans, investment property loans or any geared investments in shares you may also want to consider prepaying next year’s interest in order to gain a tax deduction this year.
And if you’re a self-funded retiree in receipt of a Transition to Retirement Income Stream (TRIS), you should check that you’re paying yourself an adequate pension. “If you’re under age 65, you need to pay yourself a minimum of 3 percent of your member’s balance before 30 June 2013 to ensure that your superannuation fund remains in pension phase and that there’s zero tax on the earnings within the fund,” Waycott says.
“If you’re aged over 65 and still working, the minimum is 3.75 percent. If you pay yourself less than the minimum, you risk your member’s balance converting back to accumulation where your earnings will be taxed at 15 percent instead of being tax free.”
In a recent announcement, the government has proposed that any earnings over $100,000 derived from assets that support a super pension be taxed at 15 percent. “If you’re in pension phase and you’re intending to sell any assets within your fund you might want to do that before 30 June 2014 to avoid the $100,000 cap on earnings” says Waycott. “If the legislation is passed by the senate, this is when the new law will come into effect.”
Changes announced in the recent budget may not affect this year’s tax return but are worth noting for the future.
“One example is the phasing out of the net medical expense tax offset,” says Waycott. “After 2019, only out-of-pocket expenses for disability aids, attendant care or aged care expenses will be taken into consideration.”
He also flags an impending change which will have a significant impact on doctors, dentists and allied health care professionals as well as all other tax payers – the capping of self-education costs at $2,000 per year.
According to the President of the Australian Medical Association, Dr Steve Hambleton, doctors regularly spend much more than $2,000 a year undertaking education and training essential to maintaining their qualifications and keeping abreast of the latest developments in their field of specialty.
Other industry bodies have also criticised the change and Damian Mitch, Chief Executive Officer of the Australasian Podiatry Council, is urging health professionals to take a united stand in arguing against this proposal as it currently stands.
“We have raised the issue within Allied Health Professions Australia (AHPA) and have agreed through AHPA to raise the matter with the Treasurer and the Health Minister,” he says. “While we don’t object to the concept of a cap, any cap must not restrict health professionals from developing the skills they need to provide Australians with safe and effective health care.”
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