I salary sacrifice the contributions I make to superannuation every fortnight which means I pay it before tax and only get taxed on my pay after this contribution is taken out. Therefore I pay less tax. It’s also meant that this money didn’t show up on my assessable taxable income for my tax return. From next financial year it will.
I take it to mean this – and by gosh I hope I’m wrong but I don’t think I am – if I estimate my income at what I would earn if I didn’t salary sacrifice then it’s an enforced saving because I pay too much tax and don’t get as much child care benefit and so on because I’ve told the tax office I’m earning more than I do.
As of next financial year, my superannuation contributions will now be included so the I won’t effectively be over-estimating my income any more.
To put some numbers on it.
Say I tell the tax office I earn $30,000 per year. Out of that $30,000 I pay $5,000 in superannuation therefore making my assessble income $25,000 as far as my tax return is concerned. That means I get a nice tax cheque back.
With the new rules the the whole $30,000 is now assessable income because they’re counting the $5,000 superannuation contribution so I don’t get any, or much, of a nice tax return at all!
I knew in the back of my mind that the nice handouts we’ve been getting as part of this Stimulus package would have to be paid back and I guess this is how it will be happening – but twofold.
Jen
I don’t know about rules and regs in Australia but the situation you describe does not fit with British tax collection so I’d be inclined to find a tax adviser – even if it costs a bit for the advice it’ll be worth it for the peace of mind (I hope).
I’m not familiar with Australian tax regulations, either, but from what you described, it definitely doesn’t sound good. I would do a little research, see if you can find a better explanation of what their new plan is, and then maybe consider what you are putting towards salary sacrifice. Even if there’s nothing you can do to change it, at least you’ll be better prepared.
Losing the majority of our tax refund would suck. It’s the one time of year we get to splurge just a bit. When you’re counting on that money being there, having that taken away, or even reduced, would be a hard blow.
Scum sucking mongrels in Parliament, the notion of blood from a stone springs to mind!
Hmmm, I may have to look further into this as well, as I do a reasonable SS too. Thanks for the heads up!
I was also wondering about this.