GOT A BURNING QUESTION?
TAX PLANNING
For most people, it is a worthwhile exercise to review the tax implications of their financial activities and to look for opportunities to ensure they are not paying more tax than their liability. Unfortunately very few actually make the effort!
It is a fact of business life that most transactions entered into have a tax effect. In Australia, all businesses and most individuals have to pay income tax. In many cases they are liable to pay Goods and Services Tax; to complete Business Activity Statements and sometimes pay stamp duty and payroll tax, along with taxes on many other simple transactions.
With this in mind, through your relationship with your taxation adviser you should be taking a proactive, strategic approach and considering all available options - now. Generally speaking, each year there are changes to the tax laws that create both opportunities for the alert, and pitfalls for the unwary or poorly informed.
Tax Affair's professional team of advisors are there to help you. Call or e-mail us for a quick response.
There are many ways you can increase your retirement savings by implementing tax-effective super strategies such as taking advantage of the government co-contribution scheme, or benefiting from spouse contributions and salary sacrificing.
Such planning opportunities are different for everyone, because they depend on your life stage and personal circumstances.
A financial adviser is usually the best person to work out which strategy best suits your personal circumstances. They will also make sure you and your family don’t miss out on any opportunities at the end of the financial year.
PAY LESS TAX VIA SALARY SACRIFICE
Salary sacrifice means putting part of your pre-tax income into your super and paying less tax because it is taxed at 15% (within certain limits). This is compared to putting your after-tax money into super which is taxed at a marginal tax rate of up to 46.5%.
Whether salary sacrifice is right for you will depend on your personal circumstances and level of income.
CLAIM A TAX DEDUCTION ON YOUR SUPER CONTRIBUTIONS
By making personal contributions to super, you may be able to claim a tax deduction to reduce your taxable income. The contribution claimed as a tax deduction may be taxed at 15% instead of your marginal tax rate as well.
To take advantage of this strategy, you must generally earn less than 10% of your assessable income (plus reportable fringe benefits and reportable employer super contributions) from an employer.
This strategy is ideal for people running a business as a sole proprietor or in partnership, as well as some retired or unemployed people.
PROTECT YOUR FAMILY
“Under insurance” is a major issue in Australia at this time.
You can get adequate life insurance cover and pay less for premiums by purchasing insurance through your super. This involves holding life insurance in your super account and using your contributions or balance to pay for the premiums, rather than paying for the premiums from your after-tax money.
The tax savings are one of the biggest advantages of this strategy, plus your premium is likely to be cheaper because the super fund is buying the insurance ‘in bulk’.
TAKE ADVANTAGE OF GOVERNMENT CONCESSIONS
Many people can take advantage of the government concessions available to increase their super savings, such as the Federal Government co-contribution scheme.
If you are a low to middle income earner and eligible for the co-contribution scheme, the Government currently contributes up to $1 for each $1 of personal after-tax contributions you make to your super. This could mean up to an extra $1,000 in your super account – a significant amount.
BOOST YOUR SPOUSE’S SUPER SAVINGS
If you have a low income earning spouse, you can help to top up their retirement savings by contributing to their super whilst reducing your income tax at the same time. You receive a tax offset of up to $540 if you contribute to their super. As a one-off amount, this may not sound like much, but if you put the tax saving back into super, over time, it can grow into a substantial saving.
You could also split your employer super contributions or personal deductible contributions with your spouse. This strategy may reduce your tax liability, and if you contribute more into the older spouse’s super, it may mean accessing tax-free benefits sooner when one of you turns 60 and retires.
ACT NOW SO YOU DON’T MISS OUT
As indicated briefly here, there are many super strategies you can put into place to boost your retirement savings and achieve tax benefits both before 30 June and thereafter. Although there is usually a special focus on utilising these opportunities before 30 June, these strategies can actually be used all year round to grow your retirement savings.”
For more information on these super strategies and end of financial year planning, speak to your financial adviser or contact Consolidated Investment Planners on (03) 9824 0911.
This material is current as at March 2010, but may be subject to change. It has been prepared without taking into account your objectives, financial situation or needs. Before making a decision based on this material, you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs.
Before making any financial decision, Consolidated Investment Planners recommend you obtain professional financial advice specific to your circumstances.
P.A.Y.G. & SELF EMPLOYED RETURNS 2010
This information is provided to assist you in getting together all that is required to enable your tax return to be completed quickly and make sure that you receive the maximum refund due to you.
YOUR CHECKLIST
Should include:
Last year's tax return and all PAYG certificates
Centrelink allowances and pension statements
Termination and rollover statements
and details of
Unit trust distributions and deductions
Franked and un-franked dividends
Work-related expenses
Investment income and interest received
Superannuation payments
Donations
Capital gains and losses
Self-education and home office expenses
and any other relevant information.
Personal Taxation
All income must be declared and only genuine deductions may be claimed.
Receipts and records
Claims for work-related expenses over $300 must be substantiated by receipts or other records. Minor claims (less than $10 each up to a total of $200) can be supported by diary entry or similar documentary evidence.
Work related expenses
Records must be kept to prove claims for tax deductions. Work expenses cover all the different kinds of things money is spent on to earn income as an employee. These include tools of trade, protective clothing, trade journals, subscriptions to trade, professional and business associations and income protection. Special rules apply to car and travel expenses and complete details of expenses should be kept, including car log books and travel diaries.
Self Education Expenses (SEE)
Deductions may be available for SEE where there is a reasonable
likelihood that learning capacity with a like occupation, will be increased.
Home Office Expenses
Deductions may be available for home office expenses where a separate room is set aside for an office.
Rebates
You may be entitled to a rebate under the following:
Zone allowance, if you are a resident of a remote area
Medical, if you are "out of pocket' more than $1,500 on medical bills
Pensioner, if your income was below a certain level
Beneficiary, if your income was below a certain level
Dependent, subject to a means test.
Eligible Termination Payments
ETP's are lump sums paid on leaving a job and are taxed differently from ordinary income.
HELP/HECS (Higher Education Loan Programme - formerly Higher Education Contribution Scheme)
Students who pay their HELP/HECS through the tax system are not required to make any contribution until their personal taxable income reaches a minimum level. Compulsory repayments are made through your income tax assessments. It is not necessary to provide HELP/HECS information in your tax return. If you have a HELP/HECS debt, and your repayment income is above the minimum repayment threshold, the ATO will calculate your compulsory repayment and include it in your income tax notice of assessment.
MEDICARE Levy
All taxpayers except those on low income pay the levy. Some exemptions can be claimed. The 2009 Budget included changes to the levy that affect certain income groups.
Capital gains Tax (CGT)
Income from the sale of most assets is taxable. CGT exemptions apply to the family home and most personal items sold for below $5000. Tax applies to the disposal of most assets acquired after 1985.
Objecting to an assessment
Anyone unhappy with an assessment can object within 60 days of issue of their assessment. Tax Affair staff will professionally prepare appeals and assist you with an application.
Tax File Number (TFN)
The Tax Office takes up to four weeks to issue a TFN and tax returns cannot be processed until you have a number. Tax Affair will assist you with an application.
Business and self-employed persons' taxation
Tax is based on taxpayers income. The taxable income is calculated by deducting all allowable deductions from the total assessable income.
Business Expenses
Most expenses are deductions. Depreciation on items of a capital nature is a deduction. Entertainment is usually not, but home office expenses usually are.
Fringe Benefits Tax (FBT)
FBT exists to ensure tax is paid on a range of benefits forming part of salary packages paid to employees. FBT is not a tax deduction and must be declared on your tax return.
Submitting your return
At Tax Affair, tax returns are transmitted electronically to the Tax Office to speed up your refund. Tax Affair fast tracks refunds; gives the best service to pensioners and correctly treats ETP's.
ARCHIVED ARTICLES:
WHAT'S NEW FROM THE ATO?
There have been a number of tax changes announced by the ATO in recently which will affect many taxpayers.
To assist you in determining if any of these affect you, in general terms, set out below are the main areas that have changed for individuals:
Education tax refund - this refund allows eligible parents to claim on some primary or secondary education expenses incurred after 1 July 2008. Independent students aged under 25 years who are studying secondary or primary school subjects may also be eligible to claim a refund on certain education-related expenses. Your accountant can advise you regarding your eligibility.
Family tax benefit - This benefit can no longer be claimed through your tax return, but may now be claimed via the Family Assistance Office and paid as either a lump sum or a fortnightly payment.
First home saver accounts - if you operate such an account, you may be eligible for an annual contribution from the federal Government. You will need to complete and lodge a notification of eligibility form to claim the contribution. Your accountant can assist in preparing this for you.
HECS-HELP benefit - is a benefit available to certain graduates and some teachers. You will need to fill out an application form which is available from the ATO. Your accountant can assist in preparing this for you.
Medicare levy surcharge thresholds - have increased for both singles and families.
Same sex couples - death benefits dependant - the definitions of spouse and child have been changed to include same-sex partners and their children for the purposes of defining who is a death benefits dependant in respect of employment termination and super lump sum payments. Your accountant will be able to advise if you qualify.
Upper income limits for certain tax offsets - a number of these offsets are now restricted to people having a taxable income under $150,000. You should check with your accountant to see how this affects you.
Donations to Charities - you should keep all receipts or statements showing such payments. You can check to see if an organisation has tax deductible status by visiting the ATO web-site, or ask your accountant to verify your claim.
There may be other changes that affect you and if in doubt, you should always seek professional assistance.
Business tax changes, rental property deductions, work related expenses and capital gains tax - there have been changes in all of the above areas and if you feel you may be affected you should consult a tax professional, your accountant or visit the Tax Office web-site without delay.
A full description of these and other changes, and the implications for taxpayers is available on the Tax Office web-site at www.ato.gov.au
$900 TAX BONUS - FOR WORKING AUSTRALIANS
On February 18, 2009 the tax bonus legislation became law. The Australian Government has published information regarding the above. Some of the key points are:
- The bonus is available to Australian resident taxpayers who paid net tax (after considering their tax payable; Medicare levy and Medicare levy surcharge; and less any offsets or imputation credits they received this year) in the 2007-2008 financial year.
- You will not have to pay tax on your payment and you will not have to report the receipt of your tax bonus on your income tax return. The tax bonus will also not be included in your separate net income for tax purposes.
- Taxpayers do not need to apply for the payment. The Australian Taxation Office will make the payment to taxpayers after determining eligibility for the 2007-8 financial year.
- To be eligible, Taxpayers must lodge their returns for the 2007-2008 year by 30 June 2009.
- The ATO began making payments in April. If you lodged your 2007-08 income tax return during March or later, it is expected that your payment will be issued from this month (May).
- If you have a deferred due date to lodge your 2007-08 income tax return after 30 June 2009 and this arrangement was in place before 18 February 2009, you will still be eligible to receive the payment provided you lodge your 2007-2008 income tax return by the agreed date, and you meet all the other eligibility criteria. If you did not have a deferred due date in place before 18 February 2009, you must lodge by 30 June 2009 and meet all the other eligibility criteria to receive payment.
- Special arrangements have been put in place for people affected by bushfires or floods. For information call the Australian Taxation Office automated phone service on 1300 686 636.
How much is the bonus?
- A $900 bonus will be paid to taxpayers with taxable income up to and including $80,000.
- A $600 bonus will be paid to taxpayers with taxable income exceeding $80,000 to $90,000.
- A $250 bonus will be paid to taxpayers with income exceeding $90,000 to and including $100,000.
From 1 July 2009 any entitlement to the bonus payment will be lost.
Some conditions apply for minors.
If you have any queries regarding this extraordinary offer please call us on 1300 887 166 or email us.
Are you a proprietor of one of the increasing number of small businesses coming “onto the market”? Or perhaps you “took a package” and are thinking of purchasing a business or starting out on your own? If so, at Tax Affair we understand the issues that are facing you.
According to a recent survey, 68 per cent of business owners in this country have (or had) plans to retire by 2013. Retiring family business owners should account for wealth transfer in excess of $1.6 trillion, while a only a third of business owners’ preference is for the business to remain in family control.
In the present market, as business owners retire, across the board they are struggling to realise their sale expectations. Furthermore, the recent economic downturn and its’ resultant reduction in the availability of credit, have made it difficult for the next generation of business owners to access significant capital for such a purchase.
Consequently, many of these soon-to-be sellers will have to accept a lower payout for their business with buyers slowing down and becoming more selective, as they try to second guess the direction of the economy in coming months and years.
The sector hardest hit appears to be businesses realising an annual profit of less than $100,000.
The stark reality is that there are now, and are likely to be for some foreseeable time, more businesses for sale than buyers, in this market segment and many of these businesses are in reality “unsaleable.”
So if you are thinking of selling, you need to have your business in the best possible “shape” for presentation to a prospective owner. Here’s where we can come in – call our office to make an appointment with a specialist accountant who can help you get things in the very best order for sale.
On the other hand, many baby-boomers whose plans for retirement have been upset by the disasters which have hit super funds, will find themselves remaining in the workforce long after reaching 65 years of age. Some of these are currently business-owners and others will try to buy businesses and hence an income.
This highlights the issue of “transfer of wealth.” With a shortage of or difficulty in obtaining capital, how will generations X and Y access capital in substantial amounts in order to buy or operate businesses?
The question remains unanswered as the Government of the day struggles to cope with the immediate financial problems of the economy and the looming prospect of significant unemployment, which will bring further pressure to bear as more people seek to buy themselves a job to secure their future.
In the end, well run, profitable businesses with easy to understand and credible accounts and reporting systems will be the ones that sell for the best return.
There are many long-standing, good businesses whose owners will still want to retire in the next five or ten years.
If you are considering buying a business, you should talk to one of Tax Affair’s qualified accounting specialists who can advise you about the viability of the enterprise and walk you through the minefield of issues that often are discovered too late by an unsuspecting new owner.
2008 THE YEAR THAT WAS...
What a year! Take a breath. After 50 years as a qualified CPA I thought nothing in business would surprise me, but I was way off the mark with what happened last year.
However, the real challenge in today’s volatile business and financial marketplace is to read the signs without being swept away by the rhetoric and media hype.
Yes, by all means things are bad in many sectors and they will probably get worse, but there are also opportunities and checks and balances which can be put into place if you act prudently and promptly.
At Tax Affair, we have accountants and advisors who specialise in helping businesses and individuals minimise damage and maximise advantage.
Whether you are an existing client or someone who just wants to talk about their particular circumstances, we can help you. The important thing is not to put an issue out of sight, but rather to seek advice and deal with it head on.
You may not always like what we have to say, but by knowing your options and talking with an informed professional who has your best interests at heart, you will go a long way towards solving your problem or making the best of the situation.
Please don’t wait – give us a call.
We wish all our clients and visitors to this site prosperity and well being in the coming year.
Lindsay Hosking
Founder,
Tax Affair Group of Companies
For advice on any tax or related financial matter, feel free to call one of our experts on 1300 887 166 or email us at info@taxaffair.com.au