Protecting the forgetful

Money can disappear quickly, when it is unclaimed.

For example, Treasury estimates that under the current rules, a 20 year old with $1,000 in super can unknowingly have his super savings eroded to just $418 after five years.

A range of fees and deductions will see to that.

Similar estimates show that  a 30 year old with $2,000 can have his super savings eroded to just $1,250 after five years.

But the government is about to change the rules, to provide forgetful Australians with better protection.

The Parliamentary Secretary to the Treasurer, Bernie Ripoll, said reforms he would introduce into parliament would achieve that.

Mr Ripoll said that meant lost super and bank accounts would:-

*   stop being eroded by fees and inflation

*.. paid interest and

*..reunited with their owners sooner.

“The reforms will ensure this lost money is properly protected so people can get what is rightfully theirs,” he said.

The changes will help preserve those savings.

“As a result of the Government reforms, the same 20 year old will be able to claim $1,131 from the Australian Tax Office after five years, a boost to their superannuation savings of over $700 compared with current arrangements,” Mr Ripoll said.

“And the same 30 year old will be able to claim $2,263 after five years, a boost of over $1,000 to their superannuation savings.”

Small business still struggling

Small business is still struggling.

A new survey shows that trading conditions continued to get worse in the September quarter.

The Australian Chamber of Commerce and Industry said that left its indexes deep in contractionary territory.

There may be worse to come.

“Small business expects trading conditions to worsen further over the coming months amid rising input costs, subdued consumer demand and looming global economic uncertainties,” the chamber warned.

The Survey also found that:

*   the small business sector has become increasingly pessimistic about the strength of the Australian economy over the coming year, with the index of Expected Economic Performance edging lower from 40.6 to 38.8 during the September quarter, to be 2.3 points lower through the year

*   Profit Growth slid deeper into contractionary territory, while Selling Prices declined to its new historical low of 44.7, 1.3 points below the low reading of 46.0 previously recorded in June 2009.

*   Small businesses expect profits and selling prices to continue to fall in the December quarter

 and

*   Wage Growth and Non-Wage Labour Costs rose further in September, defying the declining trend reported in a broad range of indicators elsewhere in the Survey

However Business Taxes and Government Charges continued to constitute the top barrier to investment for small businesses for the seventh successive quarter in the quarter.

ACCI’s  Chief Economist, Greg Evans, said:“Small businesses have become increasingly concerned that labour costs have continued to rise and remain elevated, despite all other trading indicators trending lower in recent months.

Lack of pricing power as manifested by the historical low Selling Prices has dented small business profits and its ability to employ and investment.

“Against the current difficult trading condition facing Australian small businesses, further rate cuts are required to provide much needed support to the struggling sector, especially against the backdrop of international uncertainty and the high dollar and their implications for the domestic economy,” Mr Evans said.

Hockey “campaigning” for higher GST:Government

The Assistant Treasurer, David Bradbury, says the Coalition is campaigning for a higher GST.

He cites the following extract,  from an interview the Shadow Treasurer, Joe Hockey, gave on the Sunday edition of the Sky news program, Agenda, today.

The host asks Mr Hockey if the states should be campaigning for a hike in GST.

The transcript says:-

HOST: You want them to campaign for it?

HOCKEY:  Well they’ve got to campaign for it and they’ve got to win the Australian people over. I tell you why…

So what’s this “fiscal cliff?”

Share traders have been rattled today by fears that the United States economy is about to go over a fiscal cliff.

These fears followed the re-election of Barack Obama to the US presidency, while he is facing a still hostile Congress.

But what is this so-called fiscal cliff, anyway?

The Federal Treasurer, Wayne Swan, should know.

And he attempted an explanation, in a radio interview earlier today.

“……the fiscal cliff is a combination of tax increases and spending cuts,” he said.

Mr Swan was talking, primarily, about the US economy there.

But global woes got a mention, too.

“ As you know there’s great uncertainty in the global economy,” Mr Swan added.

These two worries added to each other.

“ We’ve got weak global growth at the moment and of course that’s beginning to weigh on growth in our region,” Mr Swan said.

So what’s ahead?

A rough ride, possibly,

Mr Swan certainly thinks so.

“So if you put together the recession in Europe and the challenges in the United States, the global economy does face challenges in the weeks and months ahead,” he says.

“ It’s really important therefore that these matters are dealt with in a sustainable way in the United States,” he adds.

The New York Times also has an explicit explanation, of the fiscal cliff.

“…this simultaneous combination of sweeping reductions in government spending and tax increases could push the economy into recession in 2013, economists fear,” the paper says.

Those tax increases, in large part, would be due to the expiry of Bush era tax breaks.

New tax cap a problem? Talk to Wayne

High income and big medical bills?

Then you may be interested in a notice that has just been placed on the Federal Treasury’s website.

As you might recall, the Federal government announced in its Budget, back in May,  that it would introduce a new means test, for people like you.

That’s now open for public comment, in case some people would be hurt, unreasonably,  by the new arrangements.

You can address written submissions to General Manager
Personal and Retirement Income Division
The Treasury
Langton Crescent
PARKES ACT 2600

Or email your contribution to  personaltaxconsultation@treasury.gov.au

But what’s it all about, again?

The Treasury explains:-

“The Government announced in the 2012-13 Budget that it will introduce a means test for the net medical expenses tax offset (NMETO) from 1 July 2012.

“Under the new means test, people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012?13), the amount above which a taxpayer may claim the NMETO will be increased to $5,000 (indexed annually thereafter).

“The rate of offset will be reduced to 10 per cent of eligible out?of pocket expenses incurred above the $5,000 claim amount.

“ People with income below the income thresholds will be unaffected by this change.”

Got that?

Polishing the superannuation system

Super is gradually getting back a little of the lustre it lost when the stock market crashed  in 2008.

Although the value of the shares held by Australia’s superannuation funds have risen robustly from post crash lows, they have not yet returned to pre-crash levels.

But further gains can be expected on that front.

Meanwhile, the Federal government is giving Australia’ superannuation system a fresh polish, in several departments.

It has placed three separate bills, affecting super on the notice paper for the Spring Sittings of the House of Representatives this week.

They are:-

• The Superannuation Laws (Capital Gains tax relief and other Efficiency Measures) bill
• A Further My Super and Transparency Measures bill and
• A bill covering arrangements with New Zealand.

These – and other – measures will add up to a small overhaul of the system.

There will be big changes, for example, to the way “lost super” is treated.

Amounts of up to $2,000 in lost, inactive accounts, whose owners can’t be contacted, will be transferred to the Australian Tax Office.

The Federal Superannuation Minister, Bill Shorten, says this will prevent the value of money in these accounts being eroded by fees and charges.

Interest will also be paid on these accounts, to protect them from inflation.

Mr Shorten explains, too, that Australia’s superannuation funds struck a difficulty with capital gains tax, when they came to distributing money to the beneficiaries  of fund members who have died.

Investment earnings that superannuation funds get, on assets that support pensions, are exempt from tax.

However a draft ruling, issued by the Tax Office last year, led to some uncertainty on this point.

“To address these concerns, the Government will amend the law to allow the pension earnings tax exemption to continue following the death of a pension recipient until the deceased member’s benefits have been paid out of the fund,” Mr Shorten said.

The government is also planning to curb superannuation fund fees by pushing the superannuation industry even further along the path to full digital processing.

Processing superannuation transactions manually costs between $5 and $10 each.

Digital transactions, though, cost between 5 and 15 cents each.

Naturally, it is you, the individual fund member who eventually picks up the cost of these transactions, either way.

The really big movement in Australia’s superannuation system, though, will start on July 1 next year,.

That’s when the superannuation guarantee levy will gradually begin moving from its present level of 9 per cent, to 12 per cent of pay.

Business tax:what’s needed now

Business is looking for a “broader and more fundamental” review of Australia’s company tax system.

The Australian Industry group made that declaration today, after a government working party failed to agree on limited reforms it had been asked to study.

The group’s chief executive, Innes Willox, said: “The Ai Group is relieved that the Business Tax Working Group has recommended that the Research and Development Tax Incentive should not be scaled back to pay for a small reduction in the company tax rate.

“ As we argued in our submission to the Review, this measure would have detracted from longer-term economic activity by much more than activity would have been boosted by the small rate cut its removal could have financed,” Mr Willox said.

 ”We are however disappointed that the decision to cut short the Business Tax Working Group’s deliberations means that the modeling foreshadowed by the Working Group was not completed,” he added.

“ This modeling was a valuable opportunity to progress the tax debate by assessing the extent to which a revenue neutral change to business taxation could be expected to lift overall economic performance and productivity.”

“”That said, Ai Group is not surprised that the Draft Report finds that there is little support in the business community to finance a company tax cut from within the business tax system.  Our members were never convinced that raising tax on business was a sensible way to finance a cut in tax on business and they expected that national benefits would be marginal at best.

“We need to look more broadly and more fundamentally at our tax system to find ways to finance cuts in our company tax rate which is now alarmingly higher than the majority of OECD countries.

“Reducing the company tax rate should be our top tax reform priority.

” Finding a sensible way to finance it will require looking beyond the business tax system,” Mr Willox said.

Find that “lost” super

Don’t let the Tax Office get its hands on your “lost” super.

At present, money in such  accounts can be transferred to the tax office if they hold less than $200; there have been no contributions for five years; and the people who own them can’t be contacted.

However changes just announced mean that, from January,  “lost” super accounts will be transferred to the ATO if their owners can’t be contacted; there is less than $2000 in the fund; and there have been no contributions for one year or more.

At present, there is an estimated $17 billion in “lost” super accounts

If you suspect that some of your money might be there, you should chase it.

That shouldn’t be too hard.

The Association of Superannuation Funds of Australia has some advice.

It says: “The most important action that members of funds must do is find their lost super.”

It suggests that they superguru on the net to find out how.

Then they can consolidate their accounts and ensure that their super fund has their latest contact details.