Welcome again to our End of Financial Year newsletter. We remind clients who have received this newsletter by mail that all future client correspondence will be via our business website www.jascpa.com.au. The website has had a reconstruction recently making it easier for clients to locate items of interest.

The annual End of Year Tax Checklists are now only available from our website under the heading Resources/Checklist and I suggest you take the time to visit and print off the useful checklists.

The newsletter is made up of the following categories to make it easier to go to points of reference:

1. Year Tax Planning/Strategies
2. Tax Matters
3. Other Services

YEAR END TAX PLANNING/STRATEGIES

Deferring Income

Consider deferring income from sales, services, interest, dividends and rent until after 30 June, 2008.

Defer the disposal of a Capital Asset, where a profit is expected, to a subsequent year, and ensure the asset has been held for greater than 12 months to take advantage of the 50% capital gains discount.

 

Accelerating Deductions

Ensure the payment of deductible expenses and bills are brought forward and paid by 30 June, 2008.

Eg. Interest – consider organising to prepay interest in advance

Rent & Lease – consider paying rental & lease payments in advance for business premises, cars & office equipment.

Travelling Costs – organise to pay for travel & accommodation for business trips to be undertaken after 30 June, 2008.

Seminars – organise to pay for seminars & conferences to be undertaken after 30 June, 2008.

Repairs – any planned repairs to office premises, equipment, cars and other business items should be made prior to year end.

 

Superannuation Contributions (It is important you seek all superannuation contribution advice from a qualified financial adviser)

For Sole Traders and Business Clients a tax deduction can be claimed for superannuation contributions made to a complying fund up to certain limits as advised below;

Concessional (Deductible) contributions are limited to $50,000 per annum. As a transitional measure, for those aged 50 or more, contributions of up to $100,000 can be made from 2007/08 to 2011/12,

Employers will generally be able to claim a full deduction for all super contributions on behalf of employees up to age 75,

People under 65 can make post tax (“undeducted”) contributions of up to $150,000 in one year,

Legislation allows taxpayers to bring forward up to 3 years of undeducted contributions in one year ie $450,000, so long as there are no contributions in the following 2 years,

Make undeducted contributions to get Government 150% co-contribution – use salary sacrifice superannuation contributions to get under income thresholds.

Please note that superannuation contributions must be paid before 30 June, 2008 to ensure it is deductible.

 

TAX MATTERS

TAX SCALES

Current Thresholds	Tax Rate %	New Thresholds From 1 July, 2008	Tax Rate%	New Thresholds From 1 July, 2009	Tax Rate%
0 – 6000	0	0 – 6000	0	0 – 6000	0
6001 – 30000	15	6001 – 34000	15	6001 – 35000	15
30001 – 75000	30	34001 – 80000	30	35001 – 80000	30
75001 – 150000	40	80001 – 180000	40	80001 – 180000	38
150001 +	45	180001 +	45	180000 +	45

 

MOTOR VEHICLE RATES FOR 2007/2008

Car Type	Non Rotary Engine	Rotary Engine	Rate per km
Small	Up to 1600cc	Up to 800cc	58c
Medium	> 1600cc – 2600cc	> 800cc - < 1300cc	69c
Large	> 2600cc	>1300cc	70c

RESIDENTIAL PROPERTIES

As a result of the many calls I have received recently regarding tax implications of owning investment properties I have decided to include the following information as appeared in the December, 2006 Newsletter.

If you are planning on buying, or currently hold rental property, you need to be aware of some important tax features of this type of investment.

Here’s a checklist of some common tax issues to consider before you commit to buying a rental property.

• Acquisition and disposal costs generally aren’t immediately deductible (e.g., cost of purchasing property, stamp duty on the transfer, conveyancing costs). Some of these costs may be relevant for capital gains purposes
• When you rent out a property, the rent you collect and other rent related income is assessable for tax purposes. Against this income, you can claim a deduction for certain rental expenses you incur whilst this property is rented out (or available for rent)
• Where the total rental income exceeds the total allowable deductions, you’ll have a net assessable amount, which is added to your other taxable income. Where the total allowable deductions exceed the total rental income (this is a negatively geared property), you’ll generate a loss that may be off-set against your other taxable income. This will reduce your total taxable income
• When you sell a rental property, you may need to pay capital gains tax on the net sale proceeds (e.g., where you purchased the property on or after 20 September 1985). You may also need to pay tax on depreciated items that are sold with the property (for example, if the property’s fixtures and fittings have been depreciated but are sold at a price above their final adjustable value at the time the property is sold)
• You must keep records of all income and expenses relating to your rental property for five years from the date you lodge your tax return
• If you buy or inherit the property, receive property as part of a divorce settlement or as a gift, or make improvements to property, you need to keep records for capital gains tax purposes. Records relating to your ownership and all buying and selling costs must be kept for five years after you sell.

 

Some things to watch out for:

Non-commercial rental – if you let a property at less than market rates, this may limit the amount of deductions you can claim.

Borrowing expenses – deductions for borrowing expenses (e.g., loan establishment fees, valuation costs, lender’s mortgage insurance) are generally spread over five years or the term of the loan, whichever is less.

Depreciation – generally you will not get an immediate deduction for the cost of capital items - this cost will have to be depreciated over the effective life of the asset. Some parts of a rental property are not treated as separate assets in their own right and are considered to be part of the capital cost of the property.

Items you can depreciate:
• blinds, carpets and floor coverings, curtains, furniture and fittings, hot water installations, stoves/ovens and microwaves, refrigerators, washing machines.

These items can’t be depreciated:
• floor and wall tiles, built in kitchen cupboards, doors and windows, sinks, tubs, baths, washbasins, toilet bowls, in-ground pools and spas.

 

OTHER SERVICES

In addition to preparing your Annual Financial Accounts and Income Tax Return(s), we also provide the following services to assist you:

1. Business & Taxation Planning
2. Advice on Negative Gearing & Capital Gains
3. Bookkeeping Services
4. Computer Business Software Consultation and Advice
5. Cash Flow Projections & Budgeting
6. Business Plans, Advice on Business Sales & Acquisitions
7. Company Secretarial Services
8. Audits of Non Profit Organisations

 

Clients also have access via referral to our Financial Services Network which makes available the following additional services:

1. Financial Planning – including personal and risk insurance advice and advice on all Centrelink matters,
2. Superannuation – including advice on public and industry superannuation funds and lost super,
3. Mortgage Broking – includes review of existing home/investment loans and assistance with future home/investment loans ensuring the lowest interest rate obtained,
4. Banking &  Legal – assistance and advice on banking and legal matters
5. Motor Vehicle / Equipment Finance – assistance on funding for motor vehicles & machinery

 

I advise that all referrals to the above Services Providers include a free, and no obligation, initial consultation.

 

Remember:

Please advise our office of your email address or change in contact details so that we can communicate to you more effectively and do not forget to visit our website.