Concessional (or deductible) contributions caps

A ‘concessional contribution’ is basically a super contribution which is assessable in the fund. Generally speaking, contributors can claim tax deductions, including an employer contribution and a self-employed contribution.

Concessional contributions cap in 2012-13 financial year is $25,000. Exceed the $25,000 cap remain tax deductible, however are taxed at an overall effective rate of 45.5%

Non-concessional (or uneducated) contributions caps

‘Non-concessional contributions’ are not deductible contributions, made by an person from after-tax income. A person who is under 65 years of age at any time during an income year can contribute $150,000 or can bring forward their $150,000 contributions cap for the following two years, this effectively allows a person who is under 65 years to contribute up to $450,000 in one income year. This cap is at $450,000 over a 3-year period.

Non-concessional contributions in excess of the $150,000 or $450,000 limit (under the 3-year rules) are generally subject to tax at the rate of 45.5%.

Contribution made by an individual from the disposal of an active asset

Under small business CGT concession, an individual can generally choose, under capital gains tax cap amount, to exclude from the non-concessional contributions cap.

A non-concessional contribution for part or all of the capital proceeds from the disposal of a CGT asset that qualifies for the 15-year exemption or up to a life time limit of $500,000 under the retirement exemption.

The notice must be provided to their fund in approved form, indicating how much of a contribution relating to the contribution made by an individual from the disposal of an active asset before the time the contribution is made.

New changes from 2012-13 onwards:

The small business instant asset write-off threshold has increased from $1,000 to $6,500; small business can claim initial deduction for motor vehicles purchased in 2013 financial year and onwards the deduction $5,000 plus 15% of the remaining amount; the long life small business pool and the general pool have been combined into a single pool to be written off at one rate.

These changes mean small business can choose to use these rules to write off a depreciation asset that cost less than $6,500.

Example: Claiming a deduction for an asset under the new rules

During the 2012-13 financial year, A Good Food Restaurant, a small business, buys a new kitchen equipment for $5,500. As the kitchen equipment is a depreciation asset and costs less than $6,500, the business can claim an immediate $5,500 deduction for the 2012-13 financial year.

How to claim an accelerated deduction for motor vehicles?

Example: Initial deduction for a motor vehicle

ABC Construction Pty Ltd, a small business, purchase a new van for $28,000 for business purpose.

ABC Construction Pty Ltd can use the following formula to claim deduction:

($28,000-$5,000)*15%+5000=$8,450

ABC Construction Pty Ltd can claim a deduction of $8,450 for the van. If the van costs less than $6,500, it can be depreciated immediately under new rules.

From 2012-13 financial year, the long life small business pool and the general small business pool have been combined into a single pool to be written off at one rate.

Small business needs to add together the closing balance of long life and general small business pool for 2012 financial year to calculate the opening balance of your small business pool for financial year 2013.

Example: Combine of the depreciation pools for financial year 2013

ABC Construction Pty Ltd is a small business entity, At the end of the 2012 financial year, the closing balance of its long life pool was $7,000 and the closing balance of its general small business pool was $20,000.

For 2013 financial year, ABC Construction Pty Ltd’s long life pool no longer exists, however its general small business pool opening balance is now $27,000.