MGAA AboutTax Blog

Have you sold an investment property or a parcel of shares this financial year? Are you losing sleep, worried about a big Capital Gains Tax (CGT) bill this tax time? There could still be some solutions , as long as you act well in time! Taking an example: if you sold an investment property for $900k in FY18, which you bought for say $500k a few years ago, your gross capital gain is $400k. Assuming you are eligible for 50% Long Term CGT discount, your taxable capital gain is $200k. Split this between husband and wife owners, each of you are liable to pay your marginal tax rate on your share of $100k of this gain. This could be as high as $47k each, if you are in the top tax bracket.

So what can you do about it?

1. Contribute to super.

Untill 30.06.2017 tax deductible contribution to super could only be possible through salary sacrifice (unless you were running your own business, this added to the complexity and hence the limitation). From 01.07.2017 any one can contribute to their super, and claim it in tax. Hence you can possibly contribute a part of your capital gains into super, and thus reduce the taxable gain. It is important to note; Read more…

Welcome to Tax time 2016. To better prepare you for this tax time, please click here to download our tax time checklists. 

Meanwhile, below are 2 messages from ATO on the areas of audit that they will focus on this tax time. 

ATO Focus on Work Related Deductions

The ATO has announced that it will focus on work-related deductions claims that are higher than expected, in particular, car expense claims for transporting bulky tools, an deductions for travel, internet and mobile phone, and self-education.  The ATO said that this year, for the first time ever, it will check taxpayers' deductions in real-time as they complete their online return. IT will take a closer look at any unusual deductions and contact employers to validate these claims.  The ATO has also reminded that there has been a change in the rules for calculating car expenses this year and taxpayers need to use a logbook or the cents per kilometer method to support their claims. It is encouraging taxpayers to use the myDeduction tool in the ATO mobile app which allows taxpayers to record work-related deductions on the go, and uploads directly into their next tax return just like the pre-filled information.

ATO Focus on Rental Property Deductions

The ATO has announced that it will focus on excessive interest expense claims and incorrect apportionment of rental income and expenses between rental property owners. It will also look at holiday homes that are not genuinely available for rent and incorrect claims for newly purchased rental properties.  The ATO has reminded taxpayers when claiming deductions for their rental property to include all the rental income and make sure that their property was genuinely available for rent when the expenses was incurred. The payers must also make sure the apportion any deductions to take any private use into account, and must have records for the claims they make.

Contact us to book an appointment to do your taxes.

 

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This article aims to give you a quick update on Budget 2015 changes and some tax tips for tax time 2015.

NEWSPOINT

Tax Rates   Taxable Income Tax Rates 2014-15 Tax Rates 2015-16  0 - $18,2000 Nil  Nil   $18, 201 - $37, 000           19%  # 19%  #  $37, 001 - $80, 000 32.5%  # 32.5%  #  $80, 001 - $180, 000 37%   37%    $180,001 and over  47% * 47% *    * Includes 2% temporary budget levy applicable for 3 years from 1st July 2014.   # Low Income Tax Offset ("LITO") of $445 applies for taxable income up till $37,000, reducing by 1.5 cents in the dollar, for every dollar of taxable income over $37,000 such that it cuts out at $66,667. The effect is that no tax is payable up to an income of $20,892.

Medicare levy low income thresholds 2014-15 Basic Medicare levy of 2% applies to taxpayers earning above threshold as per below. Type  Income Threshold for 2014-15 Individuals             $20, 896 Families  $35, 261

BUDGET UPDATE 2015 - FOR INDIVIDUAL TAXPAYERS

Work related car expenses From 1 July 2015, taxpayers will only have two methods available to calculate and claim their work-related car expenses – the (max 5000kms) cents per kilometre method and log book method.

Read more…

Largely misunderstood by most taxpayers and some tax professionals, this part of Income Tax Assessment Act 1936 covers just one section, broken down into innumerable subsections and continues to gives us sleepless nights. This provision aims to catch the mischief of an individual taxpayer accessing underlying cash from after tax profits of a private company without having to pay their top up marginal tax rate.

So what's the fuss about?

To explain with an example, say a private company makes $500k and pays a flat 30% tax on it.  If the after tax profit of $350k is distributed to it's mum and dad shareholder, they would most certainly have to pay a top up tax, which could be as high as 22% of the cash dividends. How easy would it be if the shareholders instead just took this cash out of the company as loans, or made the company pay for their personal expenses? This is the mischief that Div7A of ITAA'36 purports to catch!

 What would the cash be used for? This could be broadly split into two categories;

  A.      Personal use and lifestyle 

• Cars, bikes, boats
• Holidays, shopping, personal use goods
• LIfestyle assets, home improvements, etc

B.      Personal investment assets  Read more…

Financial Planning: It's too much money! Honey!

With PUP joining hands alongside Liberals to water down FOFA laws, a few questions arise; What is the real issue with Financial Planning laws? Why is it that we have seen so many cases of fraud and inappropriate advice?

Years ago, when I was earnestly studying to become a tax advisor, I had an opportunity to sit in a presentation by one of the best known Australian minds in Superannuation and Financial Planning Industry.  After the presentation I approached him to seek guidance on my career path. He said, 'Manu, how much do you think the best paid partners in large tax firms make a year? About $500,000. This kind of money is made by a corner shop financial planner in Parramatta!'.  Now I must add that this great mind continues to be one of the most ethical advisors I have met in my lifetime.  He, however pinpointed to the problem in Financial Planning industry, so succinctly : It's Too Much of Money! Honey!                                       

In financial planning industry you could earn as much as a Cardiologist without years of education and training or thousands in HECS debt. Even a hairdresser has to study way more for her license than a financial planner does. I guess it is this attraction of easy money which creates 'conflict of interest' and, at times, inappropriate advice, which results in people loosing their lifetime of savings.

So what does this new look FOFA mean to us?

• Financial Advisors would be able to tick a few boxes to confirm that 'they acted in best interest of their client' without any rigorous compliance.
• Bank tellers will be able to lead you into buying their insurance and superannuation products without personalised advise for commissions.
• Ongoing clients will continue to pay commissions to their financial planners without even knowing how much! This is even when the financial planner has never contacted them over the years. Read more…