Q: I retired in 2012 and rely on the Age Pension and dividends from a small share portfolio to meet my living expenses. I have previously lodged an Income Tax return via a tax agent to access my refund on the franking credits from my share portfolio. Do I have to lodge a tax return as I don’t receive enough income to pay tax?

A: Retirees who are eligible for the Seniors and Age Pensioners Tax offset (SAPTO) and have income of less than $32,279 as a single (or $28,974 each if a member of a couple) are not obliged to lodge an annual tax return provided they meet these criteria and are not subject to the following circumstances.

However, there are circumstances where you are obliged to continue to submit annual tax returns regardless of being under the income limits.  You are obliged to lodge a return if you receive income as a Pay-as-You-go employee where tax was withheld. You receive reportable Fringed Benefits. You are self-employed. You received a distribution from a trust. You received income from foreign employment, investments or pensions. You wish to claim your Private Health Insurance Rebate. You wish to claim tax deductions for donations or eligible expenses. You realised a capital gain in the tax year.  You own foreign assets worth more than $50,000 in Australian Dollars. You made a personal contribution to Superannuation and you are entitled to claim a Tax Deduction or receive the Government Co-contribution. You have received an Australian Superannuation lump sum where there was an untaxed component or you received a lump sum death benefit paid to you as a non-dependent.

Dividends paid to shareholders by Australian resident companies are taxed under a system known as imputation. This is where the tax the company pays is imputed to the shareholders. The tax paid by the company is allocated to shareholders as franking credits attached to the dividends they receive, typically the tax credit is 30%. If you are not required to lodge a tax return, you can claim a refund of the franking credits by lodging an “Application for a refund of franking credits for individuals” with the ATO.

You can lodge the form online, via www.my.gov.au, complete a paper form and submit the records over the phone or via post direct to the ATO in your capital city. Applications forms for the 2019 tax year are already available on the ATO website. Processing of the refund typically takes 2 weeks for online or telephone claims. Paper-based applications will take up to 50 days to process. To order an application for refund of Franking Credits contact the ATO on 1300 720 092 or download the form www.ato.gov.au. For further information contact the ATO on 132 861 or visit their website.

Q: I am 66 years of age and I recently retired from full employment on the 28th June this year.  Am I able to make a contribution to Superannuation in this new Financial year?

A: A new rule came into effect from 1 July 2019 that allows individuals who are age 65 or over up to age 75, to make voluntary contributions to Superannuation without having to first meet the work test, provided the contribution is made in the financial year immediately following the year in which they last met the work test. 

However, this opportunity is only available to individuals whose total superannuation balance at the 30 June immediately preceding the year that they wish to make the contribution is less than $300,000.

The work test otherwise applies to individuals aged 65 or older who wish to make a contribution to superannuation. It requires the individual to have completed a minimum of 40 hours of gainful employment within a period of 30 consecutive days within the financial year, and must be met before the contribution is made. Once this requirement had been met, the individual could contribute to superannuation throughout the rest of the financial year within contribution limits. 

Under the new rules, permitted voluntary contributions include both concessional (tax deductible) and non-concessional (after tax) superannuation contributions.

This new rule replaces the previous obligation for an individual to satisfy a work test in a financial year before they are eligible to make voluntary contributions.  This contribution opportunity can only be used once. 

If the individual subsequently meets the work test again in a future year, they may be able to make further contributions – although existing contribution rules would apply. 

A word of warning, if you had already fully retired from the workforce prior to the previous financial year i.e.2017-8, then you would not be eligible under these new regulations to make voluntary contributions in the 2019-20 tax year. In order to make a contribution to superannuation under this scenario, you would need to satisfy the work test prior to making the contribution.