Tax isn't the sexiest thing on earth, but the friendly blokes at PKF Business Advisers in Adelaide sure make it a lot easier to understand. With tax time here again, Wayne Manna and Tony Simmons have put together a sensational checklist for mining families. (Just a note of caution: although rather comprehensive and super handy, the list is not exhaustive and your individual circumstances must be considered. Please consult your adviser or PKF before acting on any info below. The items discussed focus upon individual taxation and are not necessarily applicable to those carrying on business.) Here goes ...

Superannuation Concessional Contribution Threshold

From 1 July 2009, the annual concessional contributions cap has been reduced to $25,000. The annual transitional cap for people aged over 50 has been reduced to $50,000. Where you are making concessional contributions to a super fund, be aware of the new contribution thresholds. 

Deductible Personal Superannuation Contributions

To deduct personal contributions to super funds, individuals cannot derive more than 10% of their income from employment. Recently, an individual who retired and received a payout of leave entitlements in excess of the 10% threshold was denied a deduction as the entitlements constituted employment income. While employees may be denied a deduction for personal superannuation contributions, it may be possible to achieve a similar tax outcome by sacrificing salary and having your employer increase its employer contributions. The same age-based concessional contributions caps apply to contributions made by an employer.

Co-Contribution Reduction

Non-concessional contributions of up to $1,000 are currently matched by the Government with a co-contribution of the same amount made for people earning less than $31,920, phasing out when the individual reaches an income level of $61,920.

Employee Share Schemes

New employee share rules took effect on 1 July 2009.  Under these rules, employees are taxed immediately on the discount upon receiving shares or rights from their employer.  There are provisions which defer the assessment of the discount where the share meets certain qualifying criteria, including that they do not immediately vest in the employee and that the employee is at genuine risk of forfeiting the shares before they vest.

Payment Summaries – Salary Sacrifice Information

Employers are required to disclose on an employee’s PAYG payment summary all reportable superannuation contributions. These represent contributions in excess of the amount required under the SGC (or under an award or industrial law where the amount exceeds the SGC amount), and the employee has influenced the additional contribution (eg salary sacrifice).  Excess contributions out of post-tax salary are not included.

Salary packaged benefits for employees with taxable income less than $180,000 may be less attractive from 1 July 2010 due to the change in the tax rates and thresholds.  It may be possible to preserve the benefit of packaging where an employee is on a lower salary level by the use of "after-tax contributions", but taxpayers need to seek advice on the correct structuring of their remuneration package to ensure that they are better off packaging non-cash benefits.

Low-income Thresholds

If you have investment income derived through a trust, consider allocating income to low income individuals - those (other than minors) with income below $14,000 do not pay tax (it will rise to $16,000 for the 2011 tax year).  For children and minors, the tax-free threshold is $3,000.  If you do not have a trust, consider restructuring investment so they are held in the name of the lower income earner.

Work-related Expenses

It is common in the mining sector for employers to provide most items that employees need. Rather than listing items that might be deductible for tax, we remind you that deductible items include those items that you purchase to assist you carry out your work (sunglasses for example if you work outdoors) and those items that you are required to provide as a condition of employment (if for example you are required to supply and wear a watch while underground).  In general, there is no limit to the amount you can claim for applicable items.  However, where you wish to claim more than $300 of work expenses, taxation laws require you to retain documentary evidence of the amounts you have spent and to keep those records for at least four years after the year you make the expense claim.

Senior Australians

A single senior Australian can receive $29,867, while each member of a couple can receive $25,680 without paying tax.

Medical Expenses Rebate

From 1 July 2010, the medical expenses rebate threshold will increase from $1,500 to $2,000. 

Foreign Employment Income

The Government has removed the exemption for foreign sourced employment income from 1 July 2009 (except where the employee is engaged on a foreign aid project or is involved in service with a military force). Employment income which used to be exempt may be taxable from 1 July 2009 and the change to the section 23AG exemption can have other implications for employees and employers. Fringe benefits provided to those employees may also now be subject to Australian FBT.