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A question that often gets asked when dealing with death benefit nominations is whether a person will qualify under the interdependency or financial dependency definitions. This is an important consideration as meeting the dependency criteria will enable potential beneficiaries to qualify as a dependent and therefore allow them to receive a death benefit. Interdependency relationship Put simply, an interdependency relationship exists between two people if all of the following conditions are met: They have a close personal relationship They live together One or both provides the other financial support One or both provides the other with domestic support and personal care. However, if two people satisfy the close personal relationship requirement but cannot satisfy the other three requirements, they can still satisfy the interdependency relationship if: Either or both of them suffer from a physical, intellectual or psychiatric disability, or They are temporarily living apart (eg, overseas or in jail). There is no easy way in determining whether an interdependent relationship exists, however superannuation law provides the following list of considerations to help superannuation fund trustees determine if an interdependency relationship exists (or existed before one of the parties died): Duration of relationship Whether or not a sexual relationship exists Ownership, use and acquisition of property Degree of mutual commitment to a shared life Care and support of children Reputation and public aspects of the relationship Degree of emotional support Extent to which the relationship is one of mere convenience Any evidence suggesting that the parties intend the relationship to be permanent A statutory declaration signed by one of the persons to the effect that the person is or was in an interdependency relationship with the other person. It is not necessary that each of these factors exists in order for an interdependency relationship to exists. Instead, each factor is to be given the appropriate weighting depending on the circumstances. Financial Dependent If a beneficiary fails to meet the interdependency relationship criteria, they may qualify as a financial dependent. Being financially dependent on the deceased generally means you relied on them for necessary financial support. This also applies to children over 18 years old as they must be financially dependent on the deceased to be considered a financial dependent. That said, the term financial dependent is not expressly defined in superannuation or tax legislation, so it takes on the ordinary meaning of that term. As such, the definition of financial dependent is reliant on case law and comes down to the facts of each case. In most cases, it is not the value of payments received from the member that establishes financial dependency but the degree of dependency on that payment. This includes the extent the person relies on the financial support provided by another person to meet basic living expenses. For example, a grandparent who chooses to pay school fees for their grandchild is unlikely to have their grandchild qualify as a financial dependent. This is mainly due to the fact that the payment is seen to be more discretionary in nature than providing for an essential element of life, such as food or shelter. In summary, superannuation case law provides more flexibility for someone to be partially or wholly dependent, whereas tax dependency takes a stricter approach as a substantial degree of dependency is required. Contact us The conditions for the existence of an interdependency and financial dependency relationship under the law can be complex. If you require further information on this topic, please contact us for a chat. Tip - If you are uncertain whether an interdependency relationship exists (i.e., where adult siblings have been living together, or where an adult child has been living with their parents), you can always request a private ruling from the Australian Taxation Office as the definition for interdependency is the same under both superannuation and tax law.

There are many types of nominations offered by different funds. Knowing which one suits your circumstances is key to ensure your superannuation ends up in the right hands. Types of nominations Individuals can direct or influence their superannuation fund trustee as to how they want their death benefits distributed by completing a death benefit nomination form. Superannuation funds offer a range of death benefit nominations, including: Non-binding death benefit nominations Binding death benefit nominations Non-lapsing binding nominations Reversionary pension nominations, and In the case of an SMSF, executing a trust deed amendment or using one of the above types of nominations. However not all funds will provide all options to their members, and completion of these forms is best done by the member in conjunction with their adviser and an estate planning lawyer in the first instance. Non-binding death benefit nomination The is the most common type of death benefit nomination and is offered by most superannuation funds. A non-binding nomination is an expression of wishes which is not binding on trustees. The trustee of your superannuation fund will look at the nomination you make, but will exercise discretion to determine which of your beneficiaries receives your superannuation and in what proportions. Binding death benefit nomination A binding death benefit nomination is a written direction from a member to their superannuation trustee setting out how they wish some or all of their superannuation death benefits to be distributed. The nomination is generally valid for a maximum of three years and lapses if it is not renewed. If this nomination is valid at the time of your death, the trustee is bound by law to follow it. Non-lapsing binding death benefit nomination This is a written direction by a member to their superannuation trustee establishing how they wish some or all of their superannuation death benefits to be distributed. These nominations generally remain in place forever unless you cancel or replace it with a new nomination. If this nomination is valid at the time of your death, the trustee is bound by law to follow it. Reversionary pension nomination If you are in receipt of an income stream, you can nominate a beneficiary (usually your spouse) to whom the payments automatically revert upon your death. With this type of death benefit nomination, the fund trustee is required to continue paying the superannuation pension to your beneficiary if your benefit nomination is valid. SMSFs and death benefit nominations If you are an SMSF member and want to make a death benefit nomination, it is important to review your fund's trust deed requirements to determine the rules regarding death benefit nominations. Although the High Court recently ruled in the case of Hill v Zuda Pty Ltd [2022] that traditional three-year lapsing death benefit nominations do not apply to SMSFs, many trust deeds expressly include the traditional requirements. If this is the case, they must be complied with, and the nomination will lapse. What if there is no nomination or an invalid nomination? If you have not made a nomination, your superannuation fund will have rules for determining the death benefit recipient(s). In many cases, funds will either exercise discretion and follow the same process as if a member had a non-binding nomination, or pay your benefit to your legal personal representative (LPR). The risk with this option is if you don't have a Will, your benefit may be distributed under the relevant state laws for dealing with intestacy! Similarly, if your nominated beneficiary does not meet the definition of a superannuation law dependent at the time of your death, the nomination will be deemed invalid. Again, it will come down to your fund's rules which may determine that your benefit must be paid to your LPR or alternatively that the trustee exercise their discretion. Check your nomination Remember to regularly review your superannuation death benefit nominations when your circumstances change to ensure it remains up to date and ends up in the hands of the right person(s).

Your superannuation death benefits must be paid to someone when you die. That somebody will usually be your estate or your nominated beneficiary (also known as your dependents). Paying death benefits to your estate Unlike other assets such as shares and property, your superannuation and any insurance benefits you have in superannuation do not form part of your estate. That's because your superannuation is not held by you personally, rather it is held in trust for you by the trustee of your superannuation fund. However, you can direct your superannuation death benefit to your estate by nominating your 'legal personal representative' (LPR), who will usually be the executor of your estate. If you nominate your estate or LPR, you must also specify in your Will who you want to distribute your superannuation money to. This can include eligible beneficiaries as well as anyone else you wish to leave your death benefits to. As such, it's important that the directions stated in your Will are up to date as your LPR pays our your death benefits (as well as your other estate assets) as per your wishes. Paying death benefits to a beneficiary/dependent If you want your superannuation death benefits to be paid to a person, that person must be a 'dependent' for super purposes. The meaning of dependent is important as it determines who can receive a death benefit, whether the death benefit will be taxed and in what form your death benefit can be paid out (i.e. lump sum, income stream, etc.). In particular, superannuation law determines who can receive your super directly from your super fund without having to go through your estate. These people are your superannuation dependents. Tax law on the other hand determines who pays tax on your superannuation death benefit. These people are considered tax dependents. The table below summarises the difference between: a superannuation dependent and tax law dependent, and the types of death benefit that can be paid to each category of dependents. As can be seen, the key differences between the superannuation and tax dependent definitions are: a tax dependent does not include an adult child (whereas a super dependent does), and a tax dependent includes a former spouse (whereas a super dependent does not). Although your financially-independent adult children are your superannuation dependents and can receive a death benefit directly from your superannuation fund, they are not tax dependents. This means they will not receive more favourable tax treatment than a tax dependent would receive unless they qualify under an 'interdependency relationship' or are financially dependent on you. A tax dependent will generally not pay any tax on superannuation death benefits. In contrast, a non-tax dependent is taxed on any taxable components of a superannuation death benefit. This could be up to 15% tax plus Medicare levy on any taxable component and potentially up to 30% plus Medicare levy for any taxable untaxed elements within your fund. Need help? Please contact us if your would like further information about who you can nominate to receive your superannuation death benefits.

Did you know you can reduce your income tax bill by making a large personal tax-deductible contribution from your take-home pay to your super? This strategy may be particularly useful if you will be earning more income this financial year or if you have sold an asset this year and made a large capital gain. What is a personal deductible contribution? A personal deductible contribution is a type of concessional contribution that you make with your own money and claim as a personal tax deduction in your tax return, subject to meeting certain eligibility criteria, Other types of concessional contributions include superannuation guarantee (SG) contributions from your employer and amounts you salary sacrifice to superannuation. The cap on concessional contributions is currently $27,500 per year in 2023/24. However certain individuals may be eligible to use the "catch-up" concessional contribution rules to make a larger contribution. What are catch-up concessional contributions? You can carry forward any unused concessional contribution cap amounts that have accrued since 2018/19 for up to five financial years and use them to make concessional contributions in excess of the annual concessional contribution cap. You can make concessional contribution using the unused carry forward amounts provided your total superannuation balance at the end of the previous financial year (ie. 30 June 2023) is below $500,000. Once you start to use some of your unused cap amounts, the rules operate on a first-in first-out basis. That is, any unused cap amounts are applied to increase your concessional contribution cap in order from the earliest year to the most recent year. So, when you use some of your unused cap from prior years (by making additional superannuation contributions), the unused cap form the earliest of the five-year period is used first. And remember, if you don't use your accrued carry forward amounts after five years, your unused cap amounts will expire. So it's best to use it before you lost it! Carry forward contributions may provide strategic opportunities to make larger personal deductible contributions in financial years where you may have a higher level taxable income, for example, due to assessable capital gains. See the example: Joe earns $90,000 and only receives SG contributions from his employer (ie. 9.5% for 2018/19 - 2020/21, 10% in 2021/22, 10.5% in 2022/23 and 11% in 2023/24). He sold some shares in 2023/24 realising a net (discounted) capital gain of $30,000. After factoring in his SG contributions, Joe's cumulative unused concessional contribution (CC) cap amount in 2023/24 is $103,500. Having an unused concessional contribution cap amount of $103,500 will allow Joe to make a personal deductible contribution of $30,000 to fully offset the amount of the capital gain and still remain well within his concessional contribution cap. As a result, by contributions $30,000 as a personal deductible contribution, Joe will have boosted his superannuation while also saving $5,850 in tax being the difference between the tax payable on the capital gain of $10,350 (ie. $30,000 x 34.5% marginal tax rate) and 15% contributions tax of $4,500 ($30,000 x 15%). It's important to seek advice before you make any superannuation contribution. Getting it wrong could mean a loss of all or part of your deduction and may also cause you to exceed the contribution caps which can lead to paying excess contributions tax.

The capital gains tax (CGT) discount can reduce by 50% a capital gain that you make when you dispose of (sell) a CGT asset that you have owned for 12 months or more. However, the discount is only available to: individuals (but not foreign or temporary residents) complying superannuation funds (33% discount applies, not 50%) trusts; and life insurance companies in respect of a discount capital gain from a CGT event in respect of a CGT asset that is a complying superannuation asset. The most notable omission from this list is companies. They are not eligible for the general discount. They are not eligible for the general discount. This should be factored in when assessing which entity is chosen to acquire a CGT asset. 12-Month Requirement The tax legislation requires that to qualify for the general discount, the asset must have been acquired at least 12-months before the time of the CGT event (sale). The 12-month period requires that 365 days (or 366 in a leap year) must pass between the day the CGT asset was acquired and the day on which the CGT event happens...effectively 12-months and two days! If a taxpayer is nearing the 12-month mark, they should consider delaying the sale where possible until this timeframe is satisfied and therefore becomes eligible for the discount. For the purposes of satisfying the 12-month holding period, beneficiaries can treat an inherited asset as though they have owned it since: the deceased acquired the asset, if they acquired it on or after 20 September 1985 the deceased died, if they acquired the asset before 20 September 1985. Note more generally that for CGT assets acquired before 20 September 1985, no CGT is payable anyway. Foreign Residents The CGT discount no longer applies to discount capital gains of foreign or temporary residents or Australian residents who have a period of foreign residency after the below date. However, the CGT discount will still apply to the portion of the discount capital gain of a foreign resident individual that accrued up until 8 May 2012 (the date of announcement). This measures applies where: an individual has a discount capital gain, including a discount capital gain as a result of being a beneficiary of a trust, from a CGT event that occurred after 8 May 2012, and the individual was a foreign resident or a temporary resident at any time on or after 8 May 2012.  The effect of the measure is to: retain the full CGT discount for discount capital gains of foreign resident individuals to the extent the increase in value of the CGT asset occurred prior to 9 May 2012 remove the CGT discount for discount capital gains of foreign and temporary residence individuals accrued after 8 May 2012, and apportion the CGT discount capital gains where an individual has been an Australian resident, and a foreign or temporary resident, during the period after 8 May 2012. The discount percentage is apportioned to ensure the full 50% discount percentage is applied to periods where the individual was an Australian resident. If you have any questions about the 50% discount, please contact us.

If the subject of self-education leads to, or is likely to lead to, an increase in the taxpayer's income from current (but not new) income-earning activities, a deduction for self-education expenses incurred will be allowable. There is no specific provision in the income tax legislation that allows a deduction for self-education expenses. Rather the expenditure falls for consideration under the general deductibility provision of the Tax Act. In broad terms this allows for, but also limits, deductible expenses to those incurred in the course of earning assessable income. This requires a close nexus between the outgoing and assessable income: the outgoing must be incidental and relevant to the gaining of the assessable income. Principle 1 - the self-education maintains or improves current skills or knowledge Where a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge, a deduction for self-education expenses incurred will be allowable where the subject of self-education enables the tax payer to maintain or improve that skill or knowledge. The High Court decision of FC of T v Finn [1961] HCA 61; 106 CLR 60 is a leading authority for this principle. In this case, Finn, a senior government architect, was allowed deductions for expenses incurred on an overseas tour focused on the study of architecture. This principle requires an assessment of a taxpayer's current skills and knowledge compared against the subject of self-education, and a consideration of how close the subject is to those current (not future) income-earning activities. (The ATO advises the relevant employment activities are the duties and tasks expected of an employee to perform their job and are usually set out in an employee's duty statement / contract of employment.) Principle 2 - the self-education leads to, or is likely to lead to, an increase in income from current income-earning activities If the subject of self-education leads to, or is likely to lead to, an increase in the taxpayer's income from current (but not new) income-earning activities, a deduction for self-education expenses incurred will be allowable. It is not necessary for the expected increase in income or promotion to be realised for self-education expenses to be deductible, for example, if the taxpayer's employment was terminated before gaining the promotion or increase. However, the expenses should be incurred whilst the taxpayer was employed (even if on leave without pay), and generally with a real prospect or likelihood of leading to such an increase or promotion. The important thing for taxpayers is to retain their receipts in relation to their self-education. If you have any questions around what expenses are claimable, contact us.

The ATO has just announced that the cents per kilometre rate has increased to 85 cents per kilometre for 2023/24. The recap, there are two methods to claim work-related car expenses: 1. Cents per kilometre method This method is easier for record keeping, involves a more simple calculation, and is generally suited to those with less vehicle use. You simply keep a record of the number of kilometres you're traveling for work or for business over the duration of the year and you claim these using the set rate. The drawback of this method is that you are limited to a maximum of 5,000 work-related or business kilometres per year. That gives you a total maximum claim of $4,250. Thus, if you're using your car a lot for work, you may find this method quite limiting. 2. Logbook method This method can allow for greater claims depending on how much you're using your car for work or business. However, there are more recordkeeping requirements - the main one being that you must keep a 12-week logbook that records all of your trips, both business and private, for those 12 weeks. At the end of the 12 weeks, you calculate your work-related or business percentage use, and you can claim that percentage for all deductions for your car. you also need to keep all receipts for fuel, insurance, registration, interest, and servicing throughout the year. As mentioned, despite the additional effort, it can often lead to a greater claim if you are using your car a lot for work and business. Comparison Cents per km method Pros: Simple calculation and record keeping No need to keep all receipts for running expenses Cons: Total claim limited to 5,000kms or $4,250 (2023/24) No separate depreciation claim available Logbook method Pros: Potentially allows for larger deductions Ability to claim a percentage of actual expenses as well as depreciation of the vehicle Cons: More onerous recordkeeping requirements Must keep records for all car expenses Summary As you can see, both methods have their downsides and can have their benefits too depending on your situation. consider which is best for you, taking into account: If you have the time or the ability to save all of your car-related records The level of your business-related vehicle use

Although not related to tax, there are a number of changes on the Fair Work front that employers should be aware of. Minimum Wage Increase The National Minimum Wage applies to employees who aren't covered by an award or registered agreement. From 1 July 2023, the new National Minimum Wage will be $882.80 per week or $23.23 per hour. The new National Minimum Wage will apply from the first full pay period starting on or after 1 July 2023. This means if your weekly pay period starts on Monday, the new rates will apply from Monday, 3 July 2023. Note that if a worker is covered by a registered agreement, the minimum wage increase may apply to them. This is because the base pay rate in a registered agreement can't be less than the base pay rate in the relevant award. Check your agreement by searching for it on the Commission's website: https://www.fwc.gov.au/agreements-awards/enterprise-agreements/find-enterprise-agreement Award Minimum Wage Increase The Fair Work Commission has also announced that minimum award wages will increase by 5.75%. Most employees are covered by an award. Awards are legal documents that outline minimum pay rates and conditions of employment in your industry or occupation. If you're not sure which award applies to a worker, use: https://services.fairwork.gov.au/find-my-award This increase will apply from the first full pay period starting on or after 1 July 2023. This means if your weekly pay period starts on Monday, the new rates will apply from Monday, 3 July 2023. Secure Jobs, Better Pay: 6 June Changes to Workplace Laws From 6 June 2023, changes also came on stream related to: requesting flexible working arrangements extending unpaid parental leave agreement-making bargaining. For more information, visit: https://www.fairwork.gov.au/newsroom/news/secure-jobs-better-pay-changes-to-australian-workplace-laws Aged Care Sector Direct care and some senior food services employees in the aged care sector will receive a 15% wage increase from 1 July 2023. For more information, visit: https://www.fairwork.gov.au/newsroom/news/15-per-cent-wage-increase-aged-care-sector Paid Parental Leave Scheme From 1 July 2023, the Paid Parental Leave Scheme is changing. From this date the current entitlement to 18 weeks' paid parental leave pay will be combined with the current Dad and Partner Pay entitlement to two weeks' pay. This mean partnered couples will be able to claim up to 20 weeks' paid parental leave between them. Parents who are single at the time of their claim can access the full 20 weeks'. These changes affect employees whose baby is born or placed in their care on or after 1 July 2023. Other changes include: allowing partnered employees to claim a maximum of 20 weeks' pay between them, with each partner taking at least two weeks (except in some circumstances) introducing a $350,000 family income limit (indexed annually from 1 July 2024) for claiming paid parental leave pay expanding the eligibility rules for fathers or partners to claim paid parental leave pay making the whole payment flexible so that eligible employees can claim it in multiple blocks until the child turns two removing the requirement to return to work to be eligible for the entitlement.