Happy new financial year! Welcome to our quarterly newsletter. In this issue, we have provided articles on the following topics:
- Staff and Office Updates
- The ATO’s Focus this Tax Time
- Are COVID-19 tests deductible?
- Commonwealth Seniors Health Card Eligibility Changes
- How does Trustee Incapacitation affect my SMSF?
Staff and Office Updates
With the onset of the colder months which usually see people suffer from the seasonal illnesses we hope everyone is staying safe and healthy, unfortunately most of us here have suffered in some form or another.
Allison has returned from maternity leave and we are all very pleased to see her back, so we can finally say we are now fully staffed again. She will be working the same hours as she was before – Tuesday to Thursday from 8am until 4pm.
Snow was lucky be able to take a holiday to England and Scotland, and although she was unwell for part of it did manage to enjoy herself. We would also like to congratulate her on her recent engagement.
Tracey celebrated her anniversary and enjoyed a lovely surprise from her thoughtful hubby with a dinner and a night away.
The ATO’s Focus this Tax Time
The ATO assistant commissioner, Tim Loh has said the ATO will be carefully looking at car related deductions when the 2022 returns are being processed.
Due to the changes in the last two years from the pandemic, the ATO expect car and travel expenses to be significantly less than in previous years. This is due to the number of people working from home.
They are also preparing to crack down on Australians who are over-claiming on other work related expenses to help increase their refunds. To claim a deduction for a work related expense, you must have spent the money and not been reimbursed, and it must be used for a work related purpose. If it is partly personal, then you can only claim the percentage that is used for work.
The ATO will also be watching cryptocurrency investors to ensure that any sell, swap or exchange of crypto is reported as a taxable transaction. They have received data matching information from the cryptocurrency exchanges so will be able to identify if a taxpayer has made reportable transactions.
If you are unsure whether any of the above is relevant to your situation, please contact one of our tax accountants.
Can I claim a tax deduction for a COVID-19 test?
Yes, taxpayers can claim a deduction for any COVID-19 test purchased from 1 July 2021, as long as they satisfy the following 4 conditions:
- It must have been purchased for a work related purchase;
- You paid for a qualifying COVID-19 test (eg a PCR or a RAT);
- You did not get reimbursed for it by your employer; and
- You kept a record such as your receipt, or some documentation that shows the cost and the purpose
Commonwealth Seniors Health Card Eligibility Changes
The Commonwealth Seniors Health Card (CSHC) gives substantial concessions for pharmaceutical benefits and public dental work. Anyone drawing an age pension isn’t eligible for the CSHC as they get a pensioner concession card instead.
Eligibility for the CSHC is not asset tested, but there is an income test that takes into account your adjusted taxable income, plus the deemed income from any superannuation pension you receive.
Currently, the cut-off is $57,761 per year for singles, and $92,416 for couples. From 1 July 2022, this increases to $90,000 for singles and $144,000 for couples which covers a much larger number of self-funded retirees.
How Does Trustee Incapacitation Affect my SMSF?
To be a member of an SMSF, you must be a Trustee of the Fund, either individually or as Director of the Trustee Company. To be a Trustee, you need to be over 18, not under any legal disability (eg mental incapacity) or be a disqualified person.
If a member becomes incapacitated (eg accident, dementia), they can still remain a member of the SMSF with some careful planning. The SIS Act allows for a Legal Personal Representative (LPR) to take over the Trustee responsibilities if the member is a minor, is under a legal disability or is deceased until the death benefit becomes payable.
An LPR is appointed by making an Enduring Power of Attorney (EPoA) or is the executor of a deceased person’s Will. The EPoA is a legal document that lets you appoint someone to make certain decisions for you, if and when you are unable to make those decisions yourself. An EPoA can cover financial decisions (paying bills, buying or selling assets), personal decisions (where you should live) and health care decisions.
Where an EPoA exists, then the attorney can become the LPR of the member which means the fund continues to be a complying fund and can continue to operate.
What happens if there is no LPR and the member is mentally incapacitated?
The member has to leave the SMSF as they can no longer act as Trustee. Their member balance may need to be rolled over into a complying superannuation fund or paid to the member which might mean assets will need to be sold. However, without an LPR, there is no one to make decisions on which assets to sell or which fund to roll into, so someone may need to apply for guardianship over the member.