Devil in the details for tax returns
WHEN it comes to tax returns, timing your payments can mean the difference between a tax refund and a bill.
THIS week Noel Whittaker offers advice to readers with questions about super contributions, bank accounts and tax on foreign pensions.
Q: I am 55 and retired, with superannuation income of $85,000 per year. I own three investment properties in my own name and intend to sell all three when I turn 60, expecting to have a significant capital gain. Can someone who is not working and receiving no income other than super and investment property income (properties will hit positive gearing in a few years) make a tax-deductible contribution of $25,000 to super in the year I sell the properties?
A: If you are under 65, and not receiving employer super, you can certainly make a tax-deductible contribution to super of up to $25,000. As capital gains tax is assessed by adding the gain after adjustment to your taxable income, a deductible contribution can reduce that taxable income and may have the effect of keeping you in a lower tax bracket. Take advice from your accountant, but a better strategy may be to sell one property every financial year - this will reduce the total capital gain in any one year and enable you to use the $25,000 strategy for each property.
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Q: With regards to the government's downsizing plan for older citizens, to hold funds in a bank account which is to be frozen for 10 years - well may "the devil be in the detail", but will the same "devil" then remove our funds from these accounts when they become inactive after three years?
A: Please keep in mind that these accounts are only a possibility at this time - but in any event, they are exempt from the unclaimed money rules.
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Q: Having worked in the UK for some 10 years in the National Health Service in the past, I am currently receiving a monthly pension that is transferred into my Australian bank account. I am an Australian citizen. My accountant tells me that this UK pension is taxable in Australia when it has already been taxed in the UK. I have been receiving this pension, varying on the Australian dollar (around $700 a month), for the past three years. Should my pension be doubly taxed?
A: My accountant assures me that Australia will give you credit for the tax you have paid in the UK and they will allow you an 8 per cent undeducted purchase price if you don't have the actual figure yourself.
* Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making financial decisions. Email: noelwhit@gmail.com