Income definitions on verge of change
Clients using strategies such as salary sacrifice may lose or have their access to some government benefits or concessions reduced following changes in income definitions for a range of benefits and concessions from July 1, 2009.
Certain income definitions will include reportable superannuation benefits and net investment losses, which may result in the reduction or loss of some government benefits or concessions.
Advisers with clients who are affected by the changes should review the impact on their cash flow if benefits have been reduced and retirement plans if superannuation benefits have been affected, according to Strategy Steps director Jennifer Brookhouse.
Tax benefits are still provided but will no longer reduce assessable income when determining co-contribution eligibility, level of child income support payable or an eligibility to claim a personal tax deduction for superannuation contributions, Brookhouse said.
Brookhouse also advised clients to review their levels of salary sacrifice to ensure they don’t exceed the concessional contribution caps, which have now halved to $25,000 (and to $50,000 for those aged 50 or over).
The tax office’s new definition of ordinary time earnings (OTE), which categorise different payments as OTE and salary or wages, will also take effect from July 1.
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