Net Medical Expenses Tax Offset Phase-out
The net medical expenses tax offset is being phased out from 1 July 2013.
To be eligible for the offset this year, your clients must have received the offset in their 2012–13 income tax assessment. Similarly, those who receive the tax offset in their 2013–14 income tax assessment will continue to be eligible for the offset in 2014–15. That is the final year the offset can be claimed.
This does not apply to clients with out-of-pocket medical expenses relating to disability aids, attendant care and aged care. Those expenses can be claimed until 30 June 2019.
Instant asset write-off and simplified depreciation
As part of its 2013 election commitments, the government announced it would repeal the provision allowing small businesses an accelerated initial deduction for motor vehicles.
Small businesses can currently claim up to $5,000 as an immediate deduction for motor vehicles costing $6,500 or more that were acquired from the 2012-13 income year onwards. The remaining value is depreciated in the general small business pool at a rate of 15% in the first year and then at 30% a year thereafter.
(If the vehicle costs less than $6,500, the whole amount can be claimed as an immediate deduction under the instant asset write-off provisions)
If the proposed changes are enacted, motor vehicles will only be immediately deductible if they cost less than $1,000. Motor vehicles costing $1,000 or more, acquired and available for use after 31 December 2013 will need to be depreciated in the general small business pool.
Motor vehicles acquired and available for use between 1 July 2013 and 31 December 2013 will still be eligible for an immediate deduction of up to $5,000.
Be prepared for new penalty powers
On 14 December 2013 the government announced that it will proceed with law changes that give the ATO greater powers in dealing with SMSF trustees who breach super law.
It is proposed that these new powers will apply to contraventions occurring from 1 July 2014 and cover:
• administrative penalties
• education directions
• rectification directions.
They will also apply to contraventions that were made prior to 1 July 2014 and continue after that date.
For example, if your fund has lent money to a member or relative and the loan still exists on or after 1 July 2014 you will be liable for a penalty. The loan should immediately be repaid to the fund with appropriate commercial interest.
Under the proposed measures, penalties will vary according to the type of breach. In the example above, each individual trustee will be personally liable for a penalty of $10,200.
For an SMSF with a corporate trustee each director will be jointly and severally liable for a penalty of $10,200.
The penalty cannot be paid using the resources of the SMSF and doing so would be considered a serious breach likely subject to more significant penalties from the ATO.
Under the proposed administrative penalties the ATO must impose the penalty when we become aware of a relevant breach from 1 July 2014. To avoid these penalties make sure your SMSF is fully compliant with the super laws so that you don’t become liable for a penalty or other sanctions.
If trustees are making progress in resolving contravention(s) by 1 July 2014 the ATO would consider these circumstances in any request to remit any imposed administrative penalties.