tax Archives

How to avoid scams when completing your tax return

25 June, 202425 June, 2024 Tax

CPA Australia Australians should always be wary of online scams, but we are particularly vulnerable at tax time. Cyber criminals use a mix of tried-and-tested and new methods to attempt to defraud taxpayers, which is why CPA Australia is urging Aussies to be extra vigilant and take some simple measures to help protect themselves. Speaking on CPA Australia’s With Interest podcast this week, the ATO’s Assistant Commissioner of Cyber Governance, Joda Walter, said that ATO-branded SMS and emails containing links to fake myGov web pages remain one of the most common types of scams. Mr Walter also warned Aussies to be wary of fake social media accounts using the ATO and myGov brands. Most prominent on Facebook and X, these fake accounts interact with users and try to trick people into clicking links. How to spot tax time scams Distinguishing between legitimate and scam messages from the ATO is becoming increasingly difficult, however there are signs. “Scammers take advantage of any situation, and at tax time that means targeting unsuspecting individuals through unsolicited messages claiming to be the ATO or another reputable organisation – known as ‘phishing’ scams,” says CPA Australia spokesperson Gavan Ord. “These messages trick individuals into acting quickly and letting their guard down on the promise of financial gain or by convincing them they have done something wrong and need to rectify the situation quickly to avoid penalties. These scams prey on our natural instincts, which is why we need to stop and think before we click any links or give over any personal information.” “If in doubt, always stop, think, and don’t share any personal information, including your tax file number or bank details.” Young Aussies being caught out The ATO says that young Aussies aged 25-34 have been most likely to inadvertently share personal information to ATO impersonation scammers, but everyone is a target. “It can be hard for anyone to spot tax time scams and the fact that young, tech savvy Aussies are most likely to be the victim of ATO impersonation scammers should be a wake-up call to everyone,” said Mr Ord. “It’s definitely a good idea to check in with elderly and vulnerable family and friends to make sure they are aware of common scam types, but also remain vigilant yourself. It only takes a momentary lapse in judgement to be a victim.” Source: CPA Australia The information provided in this article is general in nature only and does not constitute personal financial advice. 

Is your number up this tax time? Claims the ATO will scrutinise

5 June, 20246 June, 2024 Updated on6 June, 2024 Tax

CPA Australia No one likes being treated as just a number, but with millions of returns and tens of billions of dollars at stake, that’s the reality when it comes to how the Australian Taxation Office (ATO) assesses tax returns. The ATO uses data-driven profiles based on things like employment type and financial investments to identify where some people may be pushing the boundaries. If your claims are disproportionate to what the ATO would expect from someone in a similar job to you, or with similar financial investments, you may be asked to provide additional evidence to validate your claims. That’s why CPA Australia is urging Aussies to be thorough with their tax returns, including declaring all earnings and having evidence to back up any deductions. Anything that stands out from the crowd may attract the ATO’s attention. “It’s important that everyone pays the right amount of tax and claims what they are entitled to,” said CPA Australia spokesperson Gavan Ord. “The ATO uses highly sophisticated analytics to scrutinise all claims, including those relating to working from home and motor vehicle expenses, income from rental properties, as well as undeclared income from investments like cryptocurrency. “Your tax return is your personal responsibility, and you should be as thorough as possible when declaring your income and claiming deductions. Failure to properly declare all of your income, or over-the-top expense claims, may set off alarm bells and your claims could be rejected if you don’t have the evidence.” Work-related expenses Work-related deductions are the biggest deduction in most Australians’ tax returns, and some individuals may be tempted to overstate their expense claims in this area. Others may put in claims without sufficient evidence to support them. The ATO is focused on ensuring the correct apportioning of expenses between work and private use, including when you work from home. Keeping a diary of all your work-related activity and having the corresponding receipts is crucial. Your record should include: There are two ways to calculate working from home deductions – the fixed rate method (when you can claim a set rate of 67 cents for every hour worked from home) and the actual cost method. Having records mean you can choose which works best based on your individual circumstances. Motor vehicle expenses There are two methods of claiming a tax deduction for motor vehicle use for work purposes, but whichever is used, you must ensure the claim is accurate and properly evidenced, whether it’s for fuel, servicing or lease payments. If you use a motor vehicle for both business and private use, you must be able to correctly identify and justify the percentage you are claiming as business use. The percentage that is for private use isn’t claimable. To claim accurately, you will need to use a logbook or diary to record private versus business travel. Travelling from home to work is considered private use, unless you are a home-based business and your trip was for business purposes. Income from rental properties For rental property claims, the ATO is focusing on owners who make claims for renovations as repairs. Repairs to the property because of wear and tear or damage from tenants are tax deductible. However, if the work results in an improvement rather than just repairing damage, or results in the replacement of an asset, the expenses will be capital in nature and you can only claim a depreciation expense, not for the entire cost in the year it was spent. Claiming mortgage interest in full when there were drawdowns for private purposes, as well as declaring net income after expenses from annual rental summary of real estate as gross income, will also be under the microscope. Undeclared income (e.g. crypto profits) The ATO is also focused on undeclared income, now including money made from cryptocurrency. The most common use of crypto is as an investment, in which case the crypto asset is subject to capital gains tax (CGT). If you acquire a crypto asset as an investment, transactions such as disposal, exchange or swaps are a CGT event, and you may make a capital gain. If you hold the crypto asset as an investment, it will not be exempt from CGT as a personal use asset. You will make a capital gain if the proceeds from the disposal of your crypto asset is more than its cost base. To work out if you made a capital gain or capital loss from each CGT event, keep your records for each crypto asset and your transactions. You may be able to reduce capital gains using the CGT discount if you hold your crypto asset for at least 12 months. Source: CPA Australia The information provided in this article is general in nature only and does not constitute personal financial advice. 

5 ways to boost your super (with contributions) before EOFY

3 June, 20246 June, 2024 Updated on6 June, 2024 Superannuation, Tax

Looking to give your super a boost before the end of the financial year? Look no further! Follow these five strategies to maximise your contributions and make the most of your superannuation savings: 1.Consider additional Concessional Contributions (Pre-Tax Contributions) Why? Because these contributions are taxed at just 15%, potentially lowering your taxable income. It’s like giving less to the taxman and more to future you! You’re allowed up to $27,500 annually, including your employer’s 11% contribution. However, there is one exception to this… 2.Catch-up on Unused Concessional Contributions If you haven’t maxed out your concessional contributions from previous years, legislation now allows you to make ‘catch-up’ contributions if your super balance is under $500,000. Look back up to five years to see if you’ve got unused caps you can access. 3.Take Advantage of Non-Concessional Contributions (After-Tax Contributions) If you’re a low- or middle-income earner, the government co-contribution scheme is a great way for you to contribute to superannuation personally AND get a little bonus top up from the government. It’s also a great way to add larger amounts to super, because you’re allowed to contribute up to $110,000 per year (or $330,000 if you are eligible to ‘bring forward’ future contributions). 4.Sharing the Super love with Spouse Contributions If your partner’s income is on the lower side, contributing to their super could earn you a tax offset of up to $540. It’s a win-win: you help increase your family’s total super savings while scoring a tax perk for yourself. 5.Or consider Contribution Splitting with your Significant Other You may be able to split up to 85% of your concessional super contributions with your spouse. This strategy can help even out your super balances, potentially reducing the tax paid on super pensions in the future. It’s a smart move, especially if one of you is taking a career break or working part-time. With the end of the financial year fast approaching, now is the perfect time to reach out to your Financial Adviser and take action to grow your retirement nest egg and boost your super. The information provided in this article is general in nature only and does not constitute personal financial advice. 

ATO flags 3 key focus areas for this tax time

16 May, 202416 May, 2024 Tax

Australian Taxation Office As ‘tax time’ approaches, the Australian Taxation Office (ATO) has announced it will be taking a close look at 3 common errors being made by taxpayers: • Incorrectly claiming work-related expenses• Inflating claims for rental properties• Failing to include all income when lodging ATO Assistant Commissioner Rob Thomson said the ATO is focused on supporting taxpayers to get their lodgment right the first time. ‘These are the areas that people are most likely to get wrong, and while these mistakes are often genuine, sometimes they are deliberate. Take the time to get your return right.’ Work related expenses In 2023 more than 8 million people claimed a work-related deduction, and around half of those claimed a deduction related to working from home. Last year, the ATO revised the fixed rate method of calculating a working from home deduction to broaden what is included, increase the rate, and adjust the records you need to keep. These changes are now in full effect this financial year, meaning you must have comprehensive records to substantiate your claims as you would for any other deduction. To use this method, you need records that show the actual number of hours you worked from home (like a calendar, diary or spreadsheet), and the additional running costs you incurred to claim a deduction (like a copy of your electricity or internet bill). ‘Deductions for working from home expenses can be calculated using the actual cost or the fixed rate method, and keeping good records gives you the flexibility to use the method that works for you, and claim the expenses you are entitled to.’ ‘Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.’ Mr Thomson said. Remember, there are 3 golden rules for claiming a deduction for any work-related expense: Rental properties Rental properties continue to remain in the ATO’s sights. Our data shows 9 out of 10 rental property owners are getting their income tax returns wrong. ‘We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this.’ ‘This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,’ Mr Thomson said. Performing general repairs and maintenance on your rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (like initial repairs on a newly purchased property and any improvements during the time you hold the property) are not deductible as repairs or maintenance. ‘You can claim an immediate deduction for general repairs like replacing damaged carpet or a broken window. But if you rip out an old kitchen and put in a new and improved one, this is a capital improvement and is only deductible over time as capital works.’ ’We encourage rental property owners to carefully review their records before lodging their return and take care to ensure they are claiming deductions correctly,’ Mr Thomson said. As reporting rental income and deductions can be complex, many individual rental owners choose to use a registered tax agent to help them prepare their income tax returns. ‘Ensuring you provide full and complete records to your registered tax agent allows them to prepare your tax return correctly, so you claim everything you’re entitled to and nothing that you’re not,’ Mr Thomson said. Get it right – Wait to lodge The ATO is also warning against rushing to lodge your tax return on 1 July. If you have received income from multiple sources, you need to wait until this is pre-filled in your tax return before lodging. ‘We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,’ said Mr Thomson. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and help you get your tax return right. ‘By lodging in early July, you are doubling your chances of having your tax return flagged as incorrect by the ATO.’ ‘We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge.’ ‘You can check if your employer has marked your income statement as ‘tax ready’ as well as if your pre-fill is available in myTax before you lodge. That way, an amendment doesn’t need to be made later, which could result in unnecessary delays,’ Mr Thomson said. Source: Australian Taxation Office The information provided in this article is general in nature only and does not constitute personal financial advice. 

Quarterly Economic Update: January-March 2024

9 April, 20244 April, 2024 Updated on4 April, 2024 Economy, Finance, Investing

The first quarter of 2024 saw the Government roll out considerable changes to the Stage 3 Tax Cuts, inflation continuing to slow but remaining stubbornly high across some areas, surging stock market highs and continuing pressures in the property sector. Government Overhauls Stage 3 Tax Cuts In January, the Labor government unveiled changes to the proposed stage 3 tax cuts, aimed at providing bigger tax cuts to middle Australia. The new changes, which passed the Senate to become law in February, retain the tax bracket that would have been scrapped under the original proposal, and adjust tax rates to benefit both lower and higher-income earners. The changes will take effect from July 1 and are summarised as follows: Taxable Income Bracket Tax rate New Tax Plan from July 1, 2024 Below $18,200 0% $18,200 to $45,000 16% $45,000 to $135,000 30% $135,000 to $190,000 37% Above $190,000 45% Original Stage 3 tax cuts Below $18,200 0% $18,200 to $45,000 19% $45,000 to $200,000 30% Above $200,000 45% Inflation continues to ease Inflation continues on a downward trend, with the RBA expecting it to return to the target range of 2-3 percent in 2025, and reach the midpoint in 2026. Service price inflation remains high despite goods price inflation decreasing, supported by continued excess demand and strong domestic cost pressures. The RBA expects the consumer price index (CPI) to come in at 3.3% by June, compared with 3.9% forecast three months ago. As a result, the board decided to leave the cash rate unchanged at 4.35 per cent at the first official meeting for the year.  Share Market Highs Global share markets have been breaking records this quarter, with the ASX200, S&P500, Eurozone and Japanese markets reaching record highs, helped by US inflation data coming in as expected, leaving the Fed on track to cut rates from mid-year. Whilst economic growth both locally and globally is forecast to slow, there is optimism in the market as inflation has started easing and is likely to continue falling, and central banks across the US, Canada and Europe are expected to start cutting rates in the coming months. Recession still looms as a risk, but it appears the economy may be moving toward a soft landing. Housing market continues to tighten The national vacancy rate fell to a new low of 0.7 per cent in February, highlighting the ongoing supply and demands challenges in rental properties across Australia, as a result of a construction sector under strain, rapid population growth from migration, and rising property prices. Whilst the government has put stricter measures on international students to try to ease demand pressures, supply continues to be an issue, with building approvals falling by 1 per cent in January, though multi-unit dwelling approvals increased by 19.5 per cent in the same period. Property prices continued to rise despite higher interest rates, inflation and cost of living concerns. The Home Value Index was up 0.6 per cent nationally in February, and showed an increase in all capital cities except Hobart. Labour market cooling Labour market conditions cooled over the December quarter 2023, with an ongoing shift away from full-time employment and growth in part-time jobs, and a decrease in recruitment activity. These trends are consistent with Treasury forecasts that growth will continue to ease and the unemployment rate will increase from 3.9 per cent in January to 4.2 per cent by June, and 4.3 per cent by the end of the year. Despite clear softening, labour market conditions remain tight, and many employers are experiencing challenges finding suitable workers to fill positions, while some shortage pressures remain evident. The information provided in this article is general in nature only and does not constitute personal financial advice. 

A Self-Employed Superannuation Guide

6 December, 20236 December, 2023 Superannuation, Tax

When you’re at the helm of your own business, it’s easy to get caught up in the whirlwind of the present – chasing sales, generating leads, and growing your business. Often, self-employed people prefer reinvesting back into their businesses, hesitant to stash money away in superannuation. Yet, there’s a compelling case for setting aside a slice of your earnings. The facts don’t lie At present, self-employed Australians are not required to contribute to superannuation. According to the Australian Tax Office’s (ATO) data, while self-employed people make up about 10% of the workforce, their super contributions account for just 5% of the retirement pie in 2014-15. Dive deeper into the numbers, and fewer than 1 in 10 self-employed Australians opted to make tax-deductible super contributions that same year. What is ‘self-employed’? The ATO has clear guidelines on what a self-employed person is: For more information see the ATO website. Why contribute to superannuation? While it’s tempting to pour every hard-earned dollar back into your business, the reality is that not all businesses come with a pot of gold at the end. Some self-employed people and businesses rely solely on their own labour, with no substantial business assets to lean on. That’s where superannuation can come in, providing a great way to plan for your retirement. A nest egg for retirement By contributing to super, you are building a nest egg that will provide you with financial security and income in retirement. Putting a small amount of money into superannuation regularly can provide financial stability over time, allowing you to focus on growing your business knowing that you have another income stream building in the background. Tax benefits Here’s a big one: self-employed people may be entitled to a full tax deduction for contributions made to super. If you’re self-employed, you can make personal contributions up to the annual cap, which is $27,500 per year for the 2023-24 financial year. These contributions are taxed concessionally at 15 per cent, rather than marginal tax rates. So not only are the contributions taxed at a lower rate, self-employed people can also claim a tax deduction on those contributions. To claim a deduction for personal contributions it’s important to note that: Compounding Superannuation remains one of the most tax-effective ways to grow wealth. Over time, your contributions can benefit from compounding growth, as your investments earn returns on both your initial contributions and any earnings generated. Starting early and contributing consistently, even with small amounts, can significantly boost your retirement savings. Diversification Many self-employed people see their business as their retirement strategy. But by putting money away into the tax-effective superannuation environment, with investment strategies that can be tweaked over time, you can diversify your investment, reduce risk, AND plan for retirement. How do I contribute to super if I’m self-employed? Just because you’re self-employed doesn’t mean super has to be complicated! With various tax benefits, flexibility of contribution size and frequency, and having another source of income for your retirement, if you’re self-employed why wouldn’t you be contributing to super?! If you’d like to get started, talk to your adviser today. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Federal Budget 2023-24 Summary

24 May, 202318 May, 2023 Updated on18 May, 2023 Centrelink, Economy, Superannuation, Tax

Lady Luck has once again looked down fondly upon Australia, creating the first Federal Budget surplus in 15 years, through a higher tax take on record export earnings and increasing income tax receipts from higher job numbers. But how long will the good times last? Domestic economic growth is expected to buckle under the weight of higher interest rates. As a result, annual gross domestic product is expected to fall to just 1.5 per cent in 2023 -2024, recovering slightly to just 2.25 per cent the following year. This low growth forecast, down from 3.25 per cent currently, comes despite an expected surge in immigration numbers to 300,000, while inflation is forecast to stay stubbornly close to the 6 per cent mark for 2022-2023. The Budget papers suggest inflation will eventually fall within the Reserve Bank‘s guidelines, but not for some time, raising the possibility of stagflation engulfing economic growth. At the same time, unemployment is expected to rise from its record low level of 3.5 per cent to 4.5 per cent the following year and remain at this level for the foreseeable future. Nonetheless, this is a true Labor Budget. The Federal Government will boost Job Seeker payments by $40 a fortnight, provide greater rent assistance and energy subsidies to low-income households, as well as lower medicine costs and provide cheaper doctor visits for all Australians. Increased wage payments for those working in the aged care sector and increased childcare subsidies should also help to reduce the pressure on working families struggling to deal with the recent uptick in cost-of-living pressures. An estimated 60,000 single parents will also be able to claim the Single Parent welfare payment benefit from September 1, with the Government lifting the eligibility age for the youngest child in a family from 8 to 14 years. The Government insists these measured spending increases are targeted and restrained and will work to reduce the rate of inflation. However, only time will tell if the Reserve Bank agrees that a lift in overall government spending via the Budget will work to bring down prices. The Government hopes to reduce housing pressures by encouraging investment in rental housing by lowering the annual profit on build-to-rent projects from 30 to 15 per cent. But beyond this, this Budget has very little to help struggling businesses. It does, though, include some $4 billion to encourage new green energy programs, including $2 billion to support large-scale hydrogen production and $1.3 billion to help households upgrade their existing homes through the Household Energy Upgrades Fund. At the same time, big-ticket items within the Budget just get bigger. There is a brave estimate that spending within the NDIS will be restrained, yet there is no actual strategy for achieving this other than to reduce waste. The cost of providing health services has never been higher, while defence spending is expected to surge to $20 billion over the next four years, including some $9 billion to be spent on the new AUKUS nuclear-powered submarines. Little has been done to boost Government revenue beyond more fairly taxing windfall profits in the gas industry and increasing the tax bill for super accounts with more than $3 million in assets. Beyond this, nothing has been done to address the structural challenges within the Budget. Meanwhile, there is already unrest that the Job Seeker allowance is not being increased sufficiently to pull recipients out of poverty, with cost of living pressures at record highs for Australia’s most vulnerable people. All at a time when the Budget is in surplus. The information provided in this article is general in nature only and does not constitute personal financial advice.

How to help your adult child buy their first home

23 March, 20235 April, 2023 Updated on5 April, 2023 Budgeting, Finance, Superannuation

By Robert Goudie This savings strategy is about building a healthy deposit and allowing kids to learn about consistent, regular saving. The strategy will require patience to build a substantial deposit over several years. I also acknowledge that not all parents are able to help their children buy their first home. In my professional life as a personal financial adviser, I have seen many parents assist their children in purchasing their first home. This has often been done with a lump sum. But, unfortunately, this doesn’t have the bonus of any tax efficiency or teaching children a regular savings habit to give them a sense of achievement. Purchasing a home can be difficult, especially as property prices have increased significantly in recent years. For many people, the high cost of housing (and living) has made it difficult to save a deposit for their first home, and even if they can do so, they may not be able to afford the monthly mortgage payments on a home that is within their budget. Building a larger deposit can reduce the debt levels needed to buy their first home or even help them to buy in their preferred area. For parents with the financial capacity and want to help their children save for their first home without handing over a large lump sum, this strategy, combined with some patience, provides an effective way to build the deposit faster. (Please note: I would only recommend parents to do so that have met their own retirement financial goals and have the extra capacity to help out) By subsiding your children’s income regularly, it can allow your child to start salary-sacrificing pre-tax dollars into superannuation – something that they normally couldn’t do without your help. Superannuation salary sacrifice Salary sacrificing is a way for employees in Australia to contribute part of their pre-tax salary into their superannuation account. This can be a tax-effective way to save for retirement because the contributions are taxed at a lower rate than your marginal tax rate. In Australia, the tax rate on contributions made through salary sacrifice is 15%. Contributions are made from your pre-tax salary, which means they are not taxed at the same rate as your income tax. This can be a significant saving if you are on a high marginal tax rate. For example, suppose you are on a marginal tax rate of 45% and were to salary sacrifice $10,000 into your superannuation account. In that case, you will pay $1,500 tax on those contributions (15% of $10,000). However, if you received that $10,000 as salary instead and then contributed it to your superannuation account after tax, you would pay $4,500 in tax (45% of $10,000). In this example, salary sacrificing would save you $3,000 in tax ($4,500 – $1,500). This can be a significant saving, especially over the long term. However, it is important to note that there are limits on the amount you can salary sacrifice into your superannuation account each year. FHSSS In recent years, the Australian Government has implemented the First Home Superannuation Saver Scheme (FHSSS), allowing individuals to save for their first home inside their superannuation account. The policy was designed to help first-time home buyers save for a deposit more quickly by allowing them to make voluntary contributions to their superannuation account, which can then be withdrawn for a home deposit once certain conditions have been met. Under the FHSSS, individuals can apply to withdraw voluntary contributions of up to $15,000 from any one financial year from 2017 onwards, up to a total of $50,000 across all years. If you are in a couple, this is a combined $100,000. Again, these contributions are taxed at a rate of 15%, which is generally lower than an individual’s marginal tax rate. The money saved through the FHSSS can be withdrawn (less the 15% tax) for a home deposit once the individual has held their superannuation account for at least 12 months and met other specific eligibility requirements. Note that superannuation contributions, including contributions made under the FHSSS, must still be within the standard annual caps for concessional super contributions. The FHSSS is one of several government initiatives aimed at helping Australians save for their first home and addresses housing affordability issues in the country. It is available to Australian citizens and permanent residents aged 18 and older who have not previously owned property in Australia and meet additional eligibility requirements. Let’s crunch the numbers Let’s assume a couple make a $14,705 contribution each into superannuation, earning $80,000 each per year, and continue this strategy for a full four years. We will first look at the amount saved in superannuation that can be used for a first home deposit and compare this saving with after-tax dollars outside the superannuation system. After four years of salary sacrificing into superannuation and assuming no investment returns, you would have accumulated a combined $99,994. Compare this to saving after-tax dollars; you would have accumulated $77,054 in comparison. If a couple is lucky enough to have the ability to achieve the above, they would have saved $102,000, which is an extra $23,400 when compared to saving in after-tax dollars. Now let’s look at the amount of income that would need to be provided by those generous parents or grandparents to ensure that the household cash flow remains the same: $15,000 less the marginal tax rate of 34.5% is $9,825 per person or $19,650 for a couple. Other thoughts Of course, many individuals and couples may already be actively saving for their first home deposit. Therefore, they may not need their generous relatives’ full support to achieve the above. Grandparents and parents can also choose to add a lump sum to help them at the time of purchase. It is worth noting that I have seen many clients take significant pleasure in helping their children and seeing the benefit of this assistance whilst they are still alive. However, as mentioned above, any gifting needs to ensure that generous relatives do not compromise…

The difference between a savings account and a term deposit

15 February, 20239 February, 2023 Updated on9 February, 2023 Education, Investing

Depositing cash in a savings account or a term deposit are the most common ways to invest your money. But, how do you know which is right for you? First, let us explain their main differences and impact on your money. What is a savings account? A savings account is a deposit account held at a bank or other financial institution that earns interest. Benefits Easy access to your money at any time, while the remaining balance earns interest. You can save more by depositing more at any time. Savings accounts are eligible for the Australian Government’s Financial Claims Scheme, which protects against the failure of an authorised deposit-taking institution (ADI) (such as banks or credit unions). The government guarantees deposits of up to $250,000 per account-holder per ADI. Downsides You may need to link your high-interest saving account with a transaction account to meet certain conditions, such as depositing a minimum amount every month or limiting your withdrawal frequency. As interest rates can vary, your earnings will also fluctuate. You may be tempted to spend more given the easy accessibility of funds. Fees Most banks do not charge a savings account fee; however, some may charge an account keeping fee. Possible Tax outcome Interest earned is treated as investment income and taxed at your marginal tax rate. What is a term deposit? A term deposit is also a type of deposit account held at a bank or financial institution, with money kept for a set period of time at a fixed interest rate. Benefits The interest rate is guaranteed and does not fluctuate. You can invest in multiple term deposits of different terms and interest rates. For example, you can invest $15,000 in a 6-month term deposit earning 1% p.a. and $5,000 in a 12-month term deposit earning 1.50% p.a. They too are eligible for the Australian Government’s Financial Claims Scheme. Downsides If you want to access your money before the term finishes, you may be required to notify your bank at least 31 days prior, except under special circumstances. If interest rates increase, you cannot benefit as your money is already locked away at a fixed rate. Banks usually have a minimum balance requirement for a term deposit of approximately $1,000 to $5,000. It may be a considerable risk if you do not want to lock away that much of your savings or have just commenced your savings journey. Fees Banks usually do not charge any fee on a term deposit. However, if you want early access to your money, there may be an early withdrawal fee and loss of interest for the remaining term. Possible Tax outcome Interest earned is treated as investment income and taxed at your marginal tax rate. Which is better for your needs? Interest rates, accessibility of funds, and fees are key factors to consider. If you want a guaranteed income, term deposits are the way to go. However, if you want easy access to your money, use a savings account. Alternatively, you may keep some funds in a savings account for daily expenses or an emergency and invest the rest in a term deposit. Ultimately, the right decision for you will depend on your budget and financial requirements. The information provided in this article is general in nature only and does not constitute personal financial advice.

4 simple techniques to reduce your tax

22 June, 202216 June, 2022 Updated on16 June, 2022 Tax

Here is a list of tips to help you minimise the amount of tax you pay this end of financial year: 1. Keep records Even if you use an accountant to prepare your tax return, you are responsible for the information you provide and for keeping your tax records for a minimum of five years. So, to ensure that you don’t have to pay any more tax than you are obliged to: Keep receipts of all your tax-deductible expenditure. If you are audited by the tax office, you will need to be able to prove the expenses were incurred. Keep track of all your medical expenses. If net medical expenses relating to disability aids, attendant care or aged care exceed the threshold for the year, you may be eligible for a tax offset that takes the form of a credit against tax payable. Keep detailed records of income and capital gains. Required details include date the investment was purchased, how much was paid, when it was sold and how much was received. 2. Claim all available tax deductions You may be able to claim a tax deduction for many of your expenses. These include: donations to registered charities or non-profit organisations; self-education expenses; premiums on income protection insurance; work-related expenses. You should bear in mind that the range of permissible work-related expenses varies widely from occupation to occupation. Refer to the Australian Tax Office (ATO) website www.ato.gov.au for full details. 3. Contribute to superannuation Contributions to superannuation can reduce the level of tax you would otherwise have to pay on your investments because super is taxed at a maximum of 15%. In addition, some people are eligible to claim a tax deduction for contributions made to super. The rules surrounding superannuation tax deductibility provisions and contribution limits are complex, so it pays to seek advice from your financial planner. 4. Manage capital gains When you sell an investment for a profit, you are considered to have made a capital gain. For non-professional investors, capital gains will be included on your annual income tax return. Assets acquired before 20 September 1985 are exempt from Capital Gains Tax (CGT) considerations. When you sell an asset for less than you initially paid for it, you make a capital loss. When your total capital losses for the year outweigh your total capital gains, you will finish up with a net capital loss for the year. If you have a potential CGT liability, there are some strategies that you could consider to reduce the amount you need to pay: a. Keep an investment for at least 12 months Investors are entitled to claim a 50% discount on capital gains made on assets held for longer than a year. So, by holding on to the investment for more than 12 months you will halve the CGT payable. b. Use carry-forward tax losses to reduce CGT Capital losses incurred in previous tax years that have not already been offset against capital gains may be carried forward in future tax years and can mitigate the effect of any CGT liability. Check your past income tax returns or ask your accountant to determine whether this is an option for you. Remember that this information is not personal tax advice. Always consult a professional adviser to help you determine the best strategies for your personal circumstances. The information provided in this article is general in nature only and does not constitute personal financial advice.

A different “End of Financial Year Sale”

25 May, 202225 May, 2022 Superannuation, Tax

As the end of financial year fast approaches, there is still time to consider the strategies available to you this June 30 to build your wealth, some of which are discussed below. Making a non-concessional contribution to super (Government Co-contribution Scheme) There is a federal government scheme in which people who earn less than $42,016 pa and make a non-concessional contribution to superannuation (a contribution for which no tax deduction will be claimed), may be eligible to receive a government contribution to their superannuation. Under the scheme, the government will contribute up to $0.50 for each $1.00 you contribute to your super fund up to $500. This entitlement reduces for every dollar earned up to the cut-off annual income of $57,016. For those eligible, this strategy can provide a return on every dollar contributed to super. Making a concessional contribution to super Concessional contributions to superannuation are those contributions made to super for which a tax deduction is being claimed. Using this strategy, most people can claim a tax deduction for contributions they make, up to the maximum limit, which is currently $27,500 p.a. However, this figure includes any Superannuation Guarantee Contributions an employer may make. If you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may be entitled to make additional concessional contributions for any unused amounts. The federal government allows a 15% Low Income Superannuation Tax Offset of up to $500 on concessional contributions made by individuals with a taxable income of less than $37,000 per year. This strategy can assist you to bolster your retirement savings whilst managing your tax liability prior to retirement. Paying income protection premiums in advance Income protection insurance can pay a monthly benefit of up to 75% of your salary if you are unable to work due to illness or injury, with the premiums being tax deductible. Paying premiums in advance enables you to bring forward the following financial year’s premiums to claim a tax deduction this financial year. This strategy enables you to protect your existing and potential wealth by taking out insurance to cover you against those events which can disrupt even the best laid plans. There are many end of financial year strategies that have tangible benefits to assist your wealth accumulation and protection objectives, so speak to your financial adviser now to discuss and implement. The information provided in this article is general in nature only and does not constitute personal financial advice.

Federal Budget Highlights 2022-23

13 April, 20226 April, 2022 Updated on6 April, 2022 Economy

The Federal Government has delivered a big-spending 2022 budget, taking immediate steps to reduce cost of living pressures for working Australians while implementing a range of massive infrastructure and defence spending measures. The Government will slash the fuel excise by half, effective immediately, as well as provide a one-off cash hand out of $250 to a range of social security recipients, and a $450 additional tax offset for low- and middle-income earners. Productivity will be boosted across the nation by enhanced training incentives, dramatic tax measures to drive greater digital adoption and improve computer-based efficiencies as well as steps to boost the nation’s overall level of self-sufficiency. Concerns about the growing budget deficit, which has now reached $78 billion, have been largely put on the back burner with confidence placed in the fact that as the economy grows, this will naturally reduce. A bounding economy The Australian economy has posted astonishing growth. It has come roaring out of two years of pandemic induced lockdowns, to post strong growth across the nation, spurred on by higher prices for coal, iron ore and wheat. Gross domestic product is expected to expand by a massive 4.2% this year while wages are expected to grow by 2.75% and surge by 3.25 % in the following year. Unemployment is currently 4%, but this is expected to drop to 3.75 % over the next six months – its lowest level since 1974. An extra 100,000 Australians have found work compared to employment numbers recorded when the pandemic first hit in March 2020. This is expected to help slash welfare payments by $11 billion across the next four years. A focus on increased productivity Training and improved productivity remains a key focus, with the Government implementing a $365 million extension to the existing apprentice wage subsidy scheme, in an attempt to further boost apprenticeship training. The Federal Government is continuing its focus on boosting business productivity allowing a $120 tax deduction for every $100 spent on digital adoption technology, such as portable payment systems, cyber security measures and subscriptions to cloud based services. A similar tax measure will be introduced for businesses providing external training courses to staff whether online or in-person, to increase productivity throughout the economy. This will be supported by a raft of Government driven efficiencies such as digitalising trust income reporting, improved PAYG systems and automatic reporting of taxable payments. And a more efficient economy The 2022-23 budget also includes a raft of infrastructure projects that will drive greater efficiencies and economic growth across Australia in the decade ahead. In addition, the Government has announced steps to develop a circular waste economy, support low emission technologies including hydrogen, extended gas pipeline infrastructure and more efficient environment approval strategies. Source: budget.gov.au The information provided in this article is general in nature only and does not constitute personal financial advice.

Frequently asked questions about super

16 March, 20229 March, 2022 Updated on9 March, 2022 Superannuation

If the ins and outs of superannuation leave you confused, the answers to these frequently asked questions will help you understand the basics. How much do I need to retire? According to the Association of Superannuation Funds of Australia (ASFA), a couple requires savings of $640,000 if they wish to enjoy a ‘comfortable’ lifestyle in retirement. For a single, the figure is $545,000. How is my super taxed? Broadly, contributions are categorised as either concessional or non-concessional. Concessional contributions are contributions on which an employer or an individual has claimed a tax deduction. Non-concessional contributions are made from after-tax income. They include many personal contributions and government co-contributions. Concessional contributions are taxed at 15% within the super fund, with a tax offset available to low income earners. Non-concessional contributions are not taxed within the fund. How can I contribute to super? If you are over 18, employed, and earn more than $450 per month your employer will contribute 10% of your ordinary time earnings to super. You can further boost your super by: Asking your employer to make concessional salary sacrifice contributions from your pre-tax income. Making personal contributions from your after-tax income. Subject to set limits you may be able to claim a tax deduction for these contributions in which case they will become concessional. If no tax deduction is claimed they will be non-concessional. Low to middle income earners who make a personal non-concessional contribution may receive up to $500 as a government co-contribution. Age limits and work tests may apply to some types of contribution. When can I access my super? When you turn 65, even if still working. When you reach preservation age (between 55 and 60 depending on date of birth) and have retired. If you start a transition to retirement (TTR) income stream. If you face severe financial hardship, specific medical conditions or under the first home super saver scheme. Who can I leave my super to? If your super fund allows binding death benefit nominations, you can elect to have your superannuation paid to your legal personal representative. The money will then be distributed as instructed by your Will. Alternatively, you can instruct your fund trustees to pay your death benefit to one or more of your ‘dependents’. Under superannuation law these are: Your spouse (includes same-sex and de facto partners) Children A financial dependent People you had an interdependency relationship with Without a binding nomination, your super fund’s trustees decide which dependents will receive the death benefit. They will be guided, but are not bound by, any non-binding nomination. How do I make the most of my super? Superannuation remains, for most people, the best vehicle within which to save for their retirement. However, it can be complicated and there are numerous rules to navigate. That creates challenges, but it also generates opportunities, many of which can add thousands of dollars per year to your retirement income. The information provided in this article is general in nature only and does not constitute personal financial advice.

Giving the gift of investing

2 September, 202126 August, 2021 Updated on26 August, 2021 Education, Investing

Did you have a savings account when you were young? It wasn’t uncommon and those old Passbook accounts funded many a first car. Now you’re a parent, are you thinking of opening an account for your kids? Record low interest rates have taken some of the fun out of watching bank accounts grow, but there are alternatives. For example, have you considered a share portfolio? Direct shares follow market movements, whether that be up or down, but over time, quality shares have greater growth potential than many other investment types. For a child’s investment fund, you’re probably looking at a savings term around 15 to 20 years – ideal for riding market ups-and-downs. How do shares and savings accounts compare? Consider the following example: Initial investment: $500Monthly contribution: $50Investment term: 20 years Assumptions: Savings account return calculated on 1% per annum interest. Share portfolio return 4% per annum based on a comparison of mixed Balanced Asset funds over the past three years to December 2020. This example demonstrates how shares, year-on-year, can potentially outpace a savings account. By year 20, your child’s projected Savings Account balance could be $13,899 and the projected Share Portfolio balance could be $19,450. Straight-forward? Not so fast, as there are a few other points to think about. Tax and TFNs Your child can have a tax file number (TFN) – there’s no minimum age. All funds will request a TFN, but whether you quote the child’s TFN or your own depends on a number of factors like who is contributing to the investment, whether the money is being used, etc. Tax is tricky too. Your child’s age and whether they’re earning their own money will determine whether they have an income tax liability and need to lodge a tax return. Additionally, there’s Capital Gains Tax (CGT). Share portfolios are assessed for CGT if the assets are sold for more than their purchase price. The amount of CGT payable will depend on a number of elements, but your tax agent will be able to assist. There will always be tax, but how much, what type and how it is calculated will depend on your, and your child’s, circumstances. Do your sums to work out the most suitable tax outcome for you and your child. Remember that mistakes can be costly so it’s wise to consult a tax accountant for personalised advice. Everyone’s situation is different and investment types and structures are not one-size-suits-all. Before making any decisions, seek the advice of qualified professionals, and regardless of whether you choose a share portfolio or an alternative investment, you’ll be across your options and confident that your particular needs are being met. The information provided in this article is general in nature only and does not constitute personal financial advice.

EOFY is coming – Have you thought about …

23 June, 202116 June, 2021 Updated on16 June, 2021 Superannuation, Tax

The end of another financial year is looming, and with that may come thoughts about your tax return and how your wealth has tracked throughout the year. Whether you’re nearing retirement, a high-income earner looking to reduce your taxable income, or you’re on a lower income and looking for ways to maximise your super contributions; there are a few things you can consider at tax time. Nearing retirement? Maximise your super contributions If you’re nearing retirement, putting as much money into your superannuation account now is a good way to make sure you build up a healthy nest egg to live off in your golden years. To maximise your super contributions, consider salary sacrificing to put more money into your super account. Salary sacrificed super payments take money out of your pre-tax income. These are called concessional contributions and are taxed at 15%. This rate is lower than most taxpayers’ marginal tax rates, so it can be an excellent way to reduce your taxable income while increasing your superannuation savings. The maximum employer and salary sacrificed contributions that can be made each financial year is $25,000. And remember, if you’re self-employed, your concessional contributions are a tax deduction. Non-concessional contributions of up to $100,000 can also be made each financial year. These contributions come from your after-tax income. Consider a one-off contribution to lower your income tax Let’s say you’re on an income of $170,000. If you haven’t opted to salary sacrifice, your employer contributions to super will be $14,748.86 in the financial year. Therefore, your taxable income will be $155,251.14. To lower your taxable income, you could make a one-off concessional contribution of $10,000. This will reduce your taxable income and still come in under the concessional contribution cap of $25,000. Are you eligible for the Government co-contributions to super? If you earn less than $54,837 per year (20/21 financial year) before tax, you could be eligible for the Government’s co-contribution on after-tax super contributions. Those who earn under the threshold can make an after-tax contribution, and the Government will calculate your co-contribution amount when you submit your tax return. The co-contribution will be deposited directly to your superannuation account. Review your records now Now is the time to check you’ve been keeping good records. Have you got a record of relevant receipts and policy statements for items such as income protection policies you have outside superannuation? Understanding the paperwork you require now to maximise your deductions will save you time when it comes to completing your tax return. If you haven’t got all of your records organised, review your spending throughout the year, identify transactions that may be a tax deduction, and put aside those receipts for tax time. Looking for more help? If you’re looking to maximise your tax return and get ready for a successful financial year ahead, talk to a financial adviser about your options. It doesn’t matter your circumstances; there are options available to help you boost your super savings and get the best tax return possible. The information provided in this article is general in nature only and does not constitute personal financial advice.

What does a good financial adviser do?

9 June, 20212 June, 2021 Updated on2 June, 2021 Aged Care, Budgeting, Economy, Finance, Insurance, Investing, Retirement, Superannuation

Some people may think that a financial adviser’s role is to forecast the direction of the share market from month to month and invest clients’ money accordingly. This is not the reality, of course. Investments are only one small part of what your financial adviser can provide for you. Consider for a moment the number of websites, newsprint and broadcast time dedicated to financial topics these days. Australians seem to have an insatiable appetite for understanding finance. Whether it’s the latest share market activity, economic news or the constantly changing tax and superannuation rules, a licenced financial adviser can help answer your burning questions and save you the hassle of finding it yourself. Usually, the benefit you receive from a financial adviser can be spelt out in dollar terms. It might be the income tax you have saved by re-structuring your salary, or a new concession from the Australian Tax Office (ATO) or Centrelink that you didn’t know you could get. The finance section of your newspaper or online magazine probably includes a regular “advice” or “Q & A” column. By law, these columns must warn readers that the advice does not consider your personal situation or needs, and you should consider its appropriateness before acting. In setting your financial strategy, a good financial adviser will take the time to get to know you and your circumstances. This means that everything recommended to you—the investment portfolio, super contribution strategies, savings plans and insurance advice—is tailored to your personal needs, goals, and tolerance to risk. As the years go by, your financial strategies will need adjusting due to changes in the broader environment or something closer to home. Whatever the case, your adviser is there to help you make the most of the good times and the bad. And a regular financial review doesn’t always mean major changes, but at least you’ll know that you’re on the right track – and not having to do it alone. Quality, knowledgeable advice is critical, and wherever you are on your financial path, now is always the best time to talk to us. The information provided in this article is general in nature only and does not constitute personal financial advice.

Working from home? How to boost your next tax return

13 May, 20216 May, 2021 Updated on6 May, 2021 Tax

With the range of technology and software available today, it’s become easier than ever to work from home. Employees can efficiently complete calls using teleconferencing software, many collaboration tools are now cloud-based, and work devices, including laptops and tablets, are light and portable. If you’ve been working from home, you’ve likely also set up a dedicated work area, and you’re using your own electricity and resources to power your workday. But which of these items can you claim in your next tax return to ensure you maximise your return? How many Australians work from home? Working remotely has become more common as companies began providing the technology to enable employees to work from anywhere. Research from Roy Morgan found that in early-2020, at the height of the COVID-19 pandemic shut down, 32 per cent of Australian workers were working from home. This equates to over 4.3 million people. It’s easier for employees in certain industries to work from home, such as finance and insurance, public administration and defence, and communications. In contrast, more “hands-on” industries such as retail, manufacturing, transport and storage and agriculture still require staff to be present in-store. Tax deductions available if you work from home Home office expenses you may be able to claim include: – electricity; – cleaning costs for your dedicated work area; – phone and internet expenses; – computer consumables – such as printer paper and ink cartridges; – stationery; and – home office equipment – including computers, printers, phones, furniture, and furnishings. The Australian Taxation Office (ATO) provides a complete list of the available deductions and how to calculate each on its website. How to calculate your home office expenses There are three methods employees can use to calculate their home office expenses: – Shortcut method: 80 cents per work hour – only available from 1 March 2020 to 30 June 2021 – Fixed-rate method: 52 cents per work hour – Actual cost method Be careful with home office expenses If you include home office expenses in your next tax return, ensure you calculate and apply your deductions correctly. For example, you can claim the full cost of home office equipment up to $300, but you need to claim the decline in value (depreciation) for any items that cost over $300. Regardless of the method you use to calculate your expenses, you will need to have records. You’ll need to keep receipts for any purchases you’ve made and a record of relevant utilities and bills. You’ll also need to keep a timesheet, roster or diary that shows the hours you’ve worked from home. If you can, keep your relevant records and receipts aside and updated throughout the year to save yourself a significant administrative workload at tax time. Have a professional prepare your tax return to maximise your refund With the range of deductions that may be available to you, plus the different calculation methods for home office expenses, having a registered tax professional prepare your tax return can be worth the investment. Quite often, your maximised refund will more than cover the cost of having a professional prepare your return. If you’re unsure about the home office deductions you’re entitled to, contact an accountant or qualified financial professional for advice. The information provided in this article is general in nature only and does not constitute personal financial advice.

What will you do with your tax refund?

29 July, 202017 September, 2021 Updated on17 September, 2021 Tax

Thousands of Australians receive tax refunds every year. Some refunds won’t even cover the cost of a pizza to celebrate, however many are quite substantial. If you’re one of the lucky ones, what will you do with your tax windfall? If you go out and spend it, all you’re doing is giving part of it back to the government in the form of GST. Sure, it’s nice to splurge once in a while but there are other places you can stash your cash and reap a longer term benefit. Consider these options: a) Superannuation contributions Your superannuation fund will surpass any other investment vehicle simply due to the law of compounding… and your contributions are taxed at only 15%. Whilst superannuation funds remain the most tax-effective haven and thus the best way to grow your investments, the downside is that once your money is contributed it’s usually not accessible until you retire. b) Regular investment plan Consider investing the lump sum and setting up a regular savings investment plan to build it up. This will help you meet future objectives such as a new home, education or new car. While a certain amount of money in the bank is helpful for emergencies, now could be the time to consider a longer term plan with assets such as property or shares. You can invest in a managed fund with an initial deposit of $1,000 and make monthly contributions. While such investments are subject to fluctuations in value, you will see them grow over time. c) Reduce your mortgage By paying it straight into your mortgage, you immediately acquire more equity in your home and reduce the interest. Having more equity in your home also means that you can re-borrow that money again for investment, gearing, or to purchase other assets. So that’s an option that could keep on working for you. The moral of this story is to have a plan and then apply it. Work out where your tax refund will work best for you then talk your decisions through with your licensed financial planner. The information provided in this article is general in nature only and does not constitute personal financial advice.

End of content