Welcome to our End of Financial Year newsletter which sees us adopt our new business logo for the first time. We are also proud to announce the establishment of our new business website which we hope you take the time to visit. The website is still in its infancy and will evolve over time however it will become one of the main points of communication with clients in the near future. Finally please make note of our new email address for future reference. The old email address will still remain active for a short period of time.

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

• Tax Matters Update
• Individual End of Year Checklist
• Business End of Year Checklist
• Superannuation Funds End of Year Checklist
• Other Services

 

TAX MATTERS UPDATE

NEW TAX SCALES

Current Thresholds Rate%	Tax Rate %	New Thresholds From 1 July, 2007	Tax Rate%	New Thresholds From 1 July, 2008	Tax Rate%
0 – 6000	0	0 – 6000	0	0 – 6000	0
6001 – 25000	15	6001 – 30000	15	6001 – 30000	15
25001 – 75000	30	30001 – 75000	30	30001 – 80000	30
75001 – 150000	40	75001 – 150000	40	80001 – 180000	40
150001 +	45	150001 +	45	180000 +	45

 

MOTOR VEHICLE RATES FOR 2006/2007

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

 

CO CONTRIBUTION

You may be able to claim a maximum co-contribution of $1,500 where personal superannuation contributions of up to $1,000 are made. Persons must meet the following criteria:

• Make a personal contribution for which no tax deduction was claimed,
• 10% of more of total income is from eligible employment
• Total income is less than $58,000
• Be aged 75 or less at the end of the financial year
• Lodge a tax return

NEW SUPERANNUATION MEASURES

The following is a snapshot of changes to superannuation leading up to 30 June 2007 & those starting on 1 July, 2007:

• Super benefits paid from a taxed fund either as a lump sum of a pension will be tax free for people aged 60 and over,
• The reasonable benefits limits (RBLs) will be abolished,
• Concessional (Deductible) contributions will be 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,
• The legislation will allow 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,

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.

30% CHILD CARE REBATE

The 30% child care rebate will apply to fees incurred from 1 July, 2005 to 30 June, 2006 and claims for the rebate can be made in your 2006-07 income tax return.

The rebate is not a “cash in hand” refund. It is a tax offset that reduces your tax liability in the income year in which you claim it.

To claim the rebate in your 2006-2007 income tax return you will need to keep the following records:

• Your end of financial year CCB letter sent to you by the Family Assistance Office for the period 1 July, 2005 to 30 June, 2006, and
• Verification of approved child care expenses for the period 1 July, 2005 to 30 June, 2006 in the form of a summary statement of expenses incurred, receipts, cheque butts or bank statements.

Please note that there is a maximum rebate per child of $4,000 (indexed per year)

 

 

BUSINESS END OF YEAR CHECKLIST

Following is a list of items that should be provided to our office:

Cash Books & Bank Statements

For those clients with a manual cash book, a duly completed cash book outlining details of all income and expenditure for the year is required.
For those clients with computerised accounting systems, we request you provide us with a back up disk of the data file.

Bank Statements & Bank Reconciliations (if prepared) should be provided

Cash Receipts & Cash Expenditure

A summary of cash receipts not deposited and cash expenditure not made through the Cheque Account should be provided.

Business Activity Statements

Copies of monthly or quarterly Business Activity Statements, prepared and lodged with the Australian Taxation Office for the period 1st July, 2006 to 30th June, 2007.

Trade Debtors & Trade Creditors

Please provide us with a listing of all monies owing to the business as at 30th June, 2007 and a listing of all monies owing by the business at 30th June, 2007.

Wages & Employee Records

Wages records including wages books, copies of PAYG Payment Summary Statement and Individual Payment Summaries. Details of Superannuation payments made during the year for all employees should also be provided, along with details of WorkCover payments made.

Warning: It is recommended that you ensure all superannuation contributions are paid by no later than 28th June, 2007 so as a deduction may be claimed for the 2006/07 income year.

Warning: Do not forget to complete & lodge your annual WorkCover Certificate of Rateable Remuneration by the due date.

Stocktake & Work In Progress

Please provide us with stocktake figures & work in progress figures as at 30th June, 2007. 

Contracts & Agreements

Copies of any new hire purchase or lease agreements entered into during the year e.g. new motor vehicle.

Assets Disposed during Year

Please provide use with a list of any assets sold, traded in or otherwise disposed of during the year together with details of consideration or cash received on the sale or disposal and the date of sale.

 

 

INDIVIDUAL END OF YEAR CHECKLIST

To help you to get ready to do your tax return for the 2007 tax year you need to ensure that you get all your records together so that you declare all your assessable income, maximise your deductions and ensure you make the most of available tax offsets
Following is a list of items that should be provided to our office:

Income

• Individual PAYG Payment Summaries for Salary and Wages inc. ETP payments;
• Certificates from Centrelink including Government Pensions & Allowances;
• Investment records for Interest, Dividends & Trust Income received
• Rental Property records detailing Rental Income Received & Property Expenses, including details of loan interest and any significant repairs;
• Contract details for purchase or disposal of property, shares & other assets to ascertain Capital Gains/Losses
• Foreign Income/Pension Records;
• Personal Services Income (ie. Payments received as a Contractor)
• Details of any other income;

Warning: We advise that the Tax Office maintains data matching facilities with banks, public companies and government departments whereby it tracks payments of interest, dividends and disposals of property, shares etc.

Expenses
Common Work Related Deductions claims include:

• Special work clothing – e.g., the cost of buying and maintaining protective clothing and occupation specific clothing is usually deductible.
• Subscriptions and union dues – including things like membership fees for a relevant professional association.
• Self education expenses – e.g., tuition and course fees for something relevant to your current employment, as well as the cost of textbooks, stationery and possibly some travel expenses.
• Work related travel expenses – you can claim some types of travel expenses directly connected with your job (but not the cost of travelling to and from work). You may need to maintain a log book.
• Home office expenses – if your employer lets you work from home, you may be entitled to claim deductions for a proportion of running expenses like electricity and heating, but not for expenses like your mortgage interest or rent (to claim these your home would also have to be a place of business).

Please ensure you hold valid receipts, invoices of other documentary evidence for your expense claim.

Other deductible claims include:

• Receipts for Donations to approved charities and school building funds;
• Superannuation contributions made by yourself and/or by you on behalf of your spouse;
• Medical expense records, where net medical expenses exceed $1,500;

 

The checklist is not exhaustive of all the information which we may require to complete your return, and should you have other records relating to your taxation affairs, these should also be provided to us.
Warning: Allowances for meals, travel, or for a car can be a trap – some people think you can automatically fully expense the allowance without substantiating your claim. If you receive one of these allowances, don’t assume you can automatically claim deductions against it. You must still keep written evidence of any allowable deductions to prove any claim you make, regardless of the amount involved.

 

SUPERANNUATION FUND (SMSF) END OF YEAR CHECKLIST

For those clients with SMSF’s, the following information is required in order that the Superannuation Fund Financial Accounts, Member Report/s, ATO Annual Return, Income Tax Return and Audit Report can be prepared and lodged with the Australian Taxation Office:

• Superannuation Fund Cheque Account Cash Book and/or Cheque Butts, Deposit Books and Bank Statements.
• Copies of any Investment and/or Share Certificates;
• Full details of all investments made by the Fund during the year.
• Full details of all Investment Income received.
• Copy of any Superannuation Life Assurance Policies (if applicable);
• Full details of any assets sold or disposed of during the year,
• Documentation on expense payments made by the Fund, and
• Any other books and records in respect of the Superannuation Fund activities.

 

OTHER SERVICES

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

• Business & Taxation Planning
• Advice on Negative Gearing & Capital Gains
• Bookkeeping Services
• Computer Business Software Consultation and Advice
• Cash Flow Projections & Budgeting
• Business Plans, Advice on Business Sales & Acquisitions
• Company Secretarial Services
• Audits of Self Managed Super Funds & Non Profit Organisations

 

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

• Financial Planning – including personal and risk insurance advice and advice on all Centrelink matters,
• Superannuation – including advice on public and industry superannuation funds and lost super,
• Mortgage Broking – includes review of existing home/investment loans and assistance with future home/investment loans ensuring the lowest interest rate obtained,
• Banking &  Legal – assistance and advice on banking and legal matters
• 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.

 

Wise man Leo says:
 “you do not need to be rich to invest, you need to invest to be rich”

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