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Strategy Updates

Strategy updates
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The $11.1bn small business tax shortfall

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Last month, the ATO released statistics showing small business is responsible for 12.5% ($11.1 billion) of the total estimated ‘tax gap’.

These new figures give visibility to tax compliance issues within the small business sector and indicate where we can expect ATO resources to be focussed now and in the future.

The tax gap estimates the difference between the tax collected and the amount that would have been collected if everyone was fully compliant with the law.

Rental property expenses - what you can and can’t claim

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It’s not uncommon for landlords to be confused about what they can and can’t claim for their rental properties. What often seems to make perfect sense in the real world does not always make sense for the Australian Tax Office (ATO).

In general, deductions can only be claimed if they were incurred in the period that you rented the property or during the period the property was genuinely available for rent. This means a tenant needs to be in the property or you are actively looking for a tenant. If, for example, you keep the property vacant while you are renovating it, then you might not be able to claim the expenses during the renovation period if it was not rented or available for rent during this time (there are some exceptions to this general rule). There needs to be a relationship between the money you make and the deductions you claim. Here are a few common problem areas:

Serviceability assessment is a crucial aspect for lenders when applying for a loan.

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One of the most crucial aspects when applying for a loan is the serviceability assessment. A lender will assess your income versus expenses to determine that you can afford the proposed loan repayment. It sounds like a simple process but is quite complex.

Income is scrutinised with regards to its consistency post settlement. Each lender has slightly different policies. Generally, the more inconsistent an income the greater the scrutiny. For example, bonus income is usually averaged over 2 years and reduced by 20%. Likewise, expenses are assessed in a very conservative approach. For example, credit card repayments are calculated using the card limit at 3.8% (previously 3%). The proposed loan repayment will be calculated using an assessment rate.

Why the Government does not want your business accepting cash payments of $10,000 or more

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From 1 January 2020, the Government intends to restrict the value of cash payments a business makes or accepts to amounts under $10,000. Ignoring the limit will become a criminal offence with penalties of up to 2 years in prison and/ or $25,200*.

Payments of $10,000 or more will need to be made electronically or by cheque.

We’ll, easy enough you say, just break it up into smaller amounts! But, the law has already thought of that. The cash payment limit will apply to the total price of a single supply of goods or services, regardless of whether the price is split into a series of payments over time. If a customer is making cash payments over time, for example instalment payments on a car, the total cash component cannot equal or exceed $10,000 – payments above this amount will need to be made using alternative payment methods.

Proof of life Certificates required for overseas pensioners

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One of the stranger pieces of legislation to be introduced into Parliament last month is an attempt to ensure that overseas welfare recipients over the age of 80 are in fact, alive.

There are approximately 96,000 people permanently living overseas who currently receive an Australian social security payment. The majority of these receive the age pension. At present, the system relies on a relative to advise Services Australia that the recipient of the payment has passed away for payments to cease. Government data suggests that, “there is a disparity in the death rate of pensioners aged 80 years and above overseas, compared to pensioners in Australia.” So, either living overseas is good for your health and people are living longer than Australian norms suggest, or deaths are simply not being reported. The Government is betting on the latter.

Confusion over personal income tax changes – What are you really entitled to?

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The recent income tax cuts that passed through Parliament do not mean everyone automatically gets $1,080 back from the Government as soon as they lodge their income tax return. The Australian Taxation Office (ATO) has been inundated with calls from taxpayers wanting to know where their money is and how they can access the $1,080 they now believe is owing to them.

Are you up to date with changes made to the First home super saver (FHSS) scheme?

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It appears as though the tide could be turning in more ways than one for the Queensland property market. With more evidence mounting that the market has somewhat bottomed out in a number of residential areas, interest rates at record-lows, more first home buyers are making their way out and about to snatch up their dream property while they can.

60,000 Tax Cheat Tip-offs

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Tip-offs to the Australian Taxation Office (ATO) have reached an all-time high with close to 60,000 tip-offs received between June and May 2019 – almost double the number of the previous year. The ATO thinks the number of tip-offs will reach around 70,000 for the full financial year.

Common problem areas that people feel obliged to report include suspected tax evasion, illegal phoenix activity, and the black economy. More than half of all tip-offs received were for suspected under reporting of income or about the cash economy, for example businesses demanding cash from customers or paying their worker's cash in hand.

Single touch payroll exemption for directors and family members

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The ATO has provided a concession from single touch payroll for payments by small employers to closely held payees.

Single touch payroll (STP) was extended to cover all employers on 1 July 2019. For directors of their own company or for family businesses employing family members, there are some practical problems with STP - sometimes they don't know exactly what their salary or wages are for the year until just after the end of the financial year. STP however demands that payments are reported to the ATO in real time.

Super, insurance and exit fees: The 1 July Changes

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From 1 July 2019, new laws prevent superannuation providers from eroding member balances with unwanted or unnecessary insurance and exit fees. Plus, inactive accounts with low balances will be moved to the ATO to try and unite the unclaimed super with its owner.

These changes do not apply to self-managed superannuation funds or small APRA funds.

5 last minute tax return tips for the end of financial year

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If you haven’t looked at the calendar for a while, you might be a little bit surprised to see we’re now in the final stretch of the 2018/19 financial year. The EOFY sales are in full swing, and the ringing of accountant’s phones across the country is starting to pick up at a rapid pace.... It’s tax time! If you’re one of the handful of people who are confidently across their finances and tax obligations, well done, the end of financial year will seem like just another month. For everyone else though, now is the time to really kick your EOFY planning into full gear, gather up all those receipts covered in 2018’s dust and study the tax legislation for every deduction possible before the 1 July deadline.

ATO increases rental deduction audits

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In the 2017-18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions and the Australian Taxation Office (ATO) thinks that is too much - one in ten is estimated to contain errors.

4,500 audits of rental property deductions will be undertaken this year with the focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing. Deliberate cases of over-claiming are treated harshly with penalties of up to 75% of the claim. In one case exposed by the ATO, a taxpayer had to pay back $12,000 in claims for deductions against a holiday home that was not genuinely available for rent and was blocked out during the holiday season. In another, a taxpayer paid back $5,500 because they had not apportioned their rental interest deduction to account for redraws on their investment loan to pay for living expenses.

Tax and Superannuation with a Labor Government

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A Labor Government on Tax & Super

Tax on investment property

In general, taxpayers are able to deduct from their assessible income any expenses they incur generating or producing that income. An investment is negatively geared when the cost of owning the asset is more than the return. Negative gearing is not limited to property but can apply to other assets such as shares. In 2016-17, Australians claimed $47.5 billion in rental deductions against gross rental income of around $44.1 billion.

2019-20 Federal Budget policies on tax, superannuation and business

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What you can expect after the election

Headlines only explain so much. In this special update, we examine where the 2019-20 Federal Budget left us, and the pivotal policies from the ALP on tax, superannuation and business.

There are no guarantees, however, that any policies or announcements not already legislated will come to fruition – that will depend on the Senate composition. At the next election, 40 of the 76 Senate seats will be contested - 6 in each State and 2 in the Territories. The final Senate composition will determine what policies become a reality, the more controversial the policy the less likely it is to pass the Senate. Let’s take a look!

How much rent should I charge for my investment property?

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Whether you are new to property investment or an experienced investor, setting the rent on your investment property can be a difficult and research intensive process. Charging the right amount of rent has a critical impact on the performance and overall viability of your investment property and financial strategy. Rent setting is a delicate process; the goal of investing is to maximise the income earned, increasing the return on your investment while at the same time avoiding pricing the property out of range of potential tenants. So how does a property investor find the sweet spot where they can rent the investment property for the most beneficial price?

International Women's Day: Has anything changed?

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Women and girls make up just over half (50.7%) of the Australian population. While women comprise roughly 47% of all employees in Australia, they take home on average $251.20 less than men each week (full-time adult ordinary earnings). The national gender “pay gap” is 15.3% and it has remained stuck between 15% and 19% for the past two decades.

In 2017, Australia was ranked 35th on a global index measuring gender equality, slipping from a high point of 15th in 2006. While Australia scores very highly in the area of educational attainment, there is still a lot of progress to be made in the areas of economic participation and opportunity and political empowerment.

Legislation in limbo

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A budget, an election and the legislation that hasn't made it through.

The February 2019 Parliamentary sitting days were the last opportunity before the Federal Budget for the Government to introduce or push through new legislation. Next month, on 2 April, Parliament reconvenes for the Federal Budget and it’s likely that an election will be called very soon after that (18 May 2019 is the last possible date for the election of the House of Representatives). Any legislation that has not passed when the election is called basically goes back to the drawing board and may never be enacted.

Single touch payroll extended to all employers

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From 1 July 2019, single touch payroll – the direct reporting of salary and wages, PAYG withholding and superannuation contribution information to the ATO – will apply to all employers. What employers need to report will also be extended to include certain salary sacrificed amounts.

Employers with 20 or more employees have been required to use single touch payroll since 1 July 2018. The new rules push all businesses with employees into the single touch payroll system. This includes the situation where payments are made to the owners of the business in the form of salary, wages or directors fees.

5 steps to staying up to date with your superannuation position

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Depending on how close you are to retirement, actually accessing your superannuation might feel like another lifetime away. It’s all too common for Australians to treat their superannuation as a set and forget part of their lives, failing to keep up to date with important legislative changes along with rule changes that may have positive or negative effects on your super balance. Financial solutions providers know all too well just how long some people leave their superannuation for, but it’s still surprising to see people failing to keep on top of such an important aspect of post retirement financial health.

The top 7 things tenants look for in a rental property

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As a first time landlord or property investor, it can be hard to pinpoint the things that are going to help you to ensure your property is rented out at the best price, and sooner rather than later. Luckily there have been a number of surveys and long term studies conducted by research groups and property managers in Brisbane around what potential tenants look for when deciding whether or not to rent a property. By following these 7 tips you will go a long way to ensuring your property stays occupied for the best possible price, avoiding periods of time without anyone renting your investment property.

How to choose the right financial planner for your circumstances

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Choosing a qualified and reputable financial adviser for your personal circumstances is instrumental in ensuring your financial goals are achieved. The recently released Royal Commission on Financial Services has now concluded and has shown just how important it is to ensure your financial adviser, financial planner or mortgage broker is adequately qualified in their field and in a position to act wholly in your best interests. The value of good personalised financial advice is still priceless, and more than ever is going to be necessary to navigate the complex and rapidly shifting economic climate.

5 myths Financial Advisers hear all the time about Wills and Estates

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Did you know that approximately 50% of Australian adults don’t have any form of will? That means half of Australians are without the final legal document that outlines their final wishes and the distribution and administration of any assets making up their estate. That is a scary statistic considering that dying is one of the most disruptive things that can happen to not just your family, but also your finances and possessions.

Protect your money from scams

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You’ve been scammed, hacked or breached!

Another year, another scam. While data driven crime is more sophisticated and difficult to address than ever, human error and judgement remains one of the major problems.

The latest data breach report from the Office of the Australian Information Commissioner (OAIC) is surprising for the simplicity of the problems - 37% of data beaches resulted from human error not malicious attack. In over 20% of reported cases, personal information was simply sent to the wrong recipient. Another 6% of complaints were attributed to system faults.

Tax warning on overseas income

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Do you earn income overseas? A recent case highlights why you might pay more tax than you thought on foreign income.

If you are an Australian resident and earn income from overseas, such as income from investments, sale of assets such as property, distributions from foreign trusts, etc., you will generally need to declare that income in your Australian tax return. If you have paid tax in a foreign country on that income, you might be able to claim a foreign tax offset to reduce your Australian tax liability.

Estate planning to protect your assets

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What would happen if...

Life does not always go to plan. While we logically know that, most of us don’t plan for the worst - it's all a bit morbid and time consuming.

The downside of not planning is the potential for hard earned assets to be squandered, family fall-outs, and money handed to the Government that could have been distributed in accord with your wishes. If you are a business owner, then the stakes are even higher.

Reduce risk with a well diversified investment portfolio

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Volatility is the word on many economists’ lips in 2019 as Australian and Global outlooks on stocks, property and banking take a more unclear path. Financial advisers are being asked more than ever by clients and investors as to the timing of when possible downturns will occur and how best to protect themselves against possible downturns in a number of different asset classes. While the forecasts are notoriously unreliable and the timing of downturn events nearly impossible to pick, one risk management technique has the ability to increase returns over different cycles and help offer a buffer against any possible losses.

5 tips to increase your chances of getting approved for a home loan this year

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It appears that 2019 is poised to be another important year for home owners, investors and those looking to enter into the housing market. Home loan advisers are being asked more than ever – “what will happen to the property market this year?” While there is no magic answer, perhaps a more apt question could be asked in its place – “what will happen to home loan lending in 2019?” Many economists point to the correlation between house prices and home loan approval rates. Recent data released by the Australian Bureau of Statistics (ABS) show that November home loan approvals fell by 0.9% and the total value of home loan finance dropped 2.5%. This data supports many economists’ beliefs that banks are their tightening their lending criteria and being more selective of how their loans are dispersed.

5 things you probably didn't know about Australian economic history

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Australia has a long and rich history of innovation, borne out of necessity and brilliance. Due to our removal from other developed nations, we have often had to fend for ourselves on the world stage of history, creating some interesting solutions to problems and creating historically significant economic landmarks. Below are 5 things you may not have known about history and economics in Australia.

Comprehensive Credit Reporting - Lenders new requirements, so what does this mean for you?

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Comprehensive credit reporting, a crucial step when assessing a loan application is assessing past repayment history. A credit search is one way lenders do this. A credit search will show if an applicant has been bankrupt, defaulted on both financial and non-financial accounts (i.e. mobile phone, power, personal loans or home loans) and prior enquiries for credit. This is called negative credit reporting - only adverse information listed. However, from 1st July 2018 the major banks have been required to list positive history.

Why you need to speak to a loan adviser in 2019

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Home loans, interest rates, big banks, Royal Commissions; four major talking points for economists, journalists and everyday Australians over the last few years. The Reserve Bank of Australia has now left interest rates unchanged at their record low of 1.5% for almost 2 years, with many economists predicting more of the same for 2019. But this stability in interest rates hasn’t been coupled with stability in Australian politics, economic outlook and house prices. As home loan figures from the end of 2018 start to filter through, it appears as though banks have responded to these instability factors by tightening lending restrictions, resulting in fewer home loans being approved. Investors and first home buyers alike have been affected by these restrictions, with uncertainty around eligibility and lending criteria causing plenty of stress in Australian households.

5 steps to getting your property rented in 2019

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Are you ready to start making money from your investment property? Not knowing where to start when it comes to getting your property rented out is a common theme amongst first time landlords. It can be a daunting process preparing your home, satisfying regulations and legislation, finding the right property manager, picking a price point and finding the right tenants but it doesn’t have to be. Investing in property is already complicated enough, by following these steps you will be able to ensure a smooth transition into becoming a landlord and making 2019 a profitable year for your investment portfolio and financial health.

Tax on shares: ATO extends data matching program

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The Australian Tax Office (ATO) is utilising data provided by the Australian Investments and Security Commission (ASIC) to data match share trades.

The ATO is accessing more than 500 million records detailing price, quantity and time of individual trades dating back to 2014. The information complements information that the ATO already holds from brokers, share registries and exchanges.

How to Goal Set for Success!

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First things first, Happy New Year! Bring on 2019! It’s hard to fathom that we’re just under twelve months away from the year 2020. There’s something about the thought of 2020 that sounds so futuristic, surely we are supposed to be getting around in flying cars by now?

We can’t rewind the clock, but we can welcome the New Year and everything that goes along with it, including the trusty New Year’s resolutions. Setting resolutions and goals for success are a great way to get you motived for the new year ahead and set your sights on things you really desire.

4 SMART financial resolutions you'll be able to keep in 2019

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The festive season is a time filled to the brim with food, fun, presents, family, and for many Australians a hangover or two. For many though, the worst hangover is a financial one. Australians will spend around $10 billion this Christmas and New Year period, and with 40% of people failing to keep track of their budgets during this time, overspending is likely to make up $600 million of this total. A Salvation Army study estimates that 6 million Australians feel obligated to spend more than they can afford, with 1.8 million left with worrying debt after the holiday season and 2.4 million worried about how they will pay for this spending. Don't let financial stress put a dampener on your start to 2019. It's never too late to plan and set yourself some financial resolutions for 2019 that you'll be able to keep and help plan for the year ahead.

Protect yourself and your family with Income Protection Insurance

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When it comes to thinking of their assets most people will list the usual things: car, home, contents, shares and maybe some collectibles. Of course it's prudent to insure those assets and most people do. But not many people think of their income as an asset, let alone insure it. In fact, only 2% of Australians have income protection insurance. Think back to your last pay, where did it go? Mortgage repayments, bills, credit card repayments, rent, or maybe you're putting some money away for a trip to Europe. Would you have spent it the same way if you knew it was your last pay for 12 months? How long would your family be comfortable without your salary?

4 benefits of a Self Managed Super Fund

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Everybody has heard the term, Self Managed Super Fund (SMSF), but most people are unaware of the ins and outs of one. A SMSF is exactly what it sounds like - it is a superannuation fund where you are the Trustee. Being a trustee of your own Self Managed Super Fund is like having remote control over your retirement. You have the power to make the investment decisions, but with great power comes great responsibility. Tax responsibilities, fee responsibilities, risk responsibilities and the same trust responsibilities as a CEO. Becoming the Trustee of your own superannuation fund is a big decision, and seeking the expert advice of an independent financial planner is crucial.

The 3 easiest steps toward an early retirement

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Retiring early, plenty of people joke about it and most would jump at the opportunity in a heartbeat. But how do you know you're ready to retire early? What does retiring early mean? Retiring early doesn't mean retiring from life, it means retiring from work as you know it, and integrating into doing more of the things you want. According to the Australian Seniors Insurance Agency though, 69% of Australians experience anxiousness when they think about their retirement years. A 2017 report by Super provider MLC found that more than half of Australians don't think they'll have enough money to retire on. Retiring early doesn't have to be a pipe dream. With thorough planning, expert guidance and dedication, you can start planning your early retirement today.

Are you paying too much for property management?

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Expanding your investment portfolio and becoming a landlord has required dedication, thorough planning and a number of unavoidable fees and charges. You've paid stamp duty, transfer fees, conveyancing costs and you're prepared to cover any property damage in a reasonable timeframe. But how much should a Property Manager cost? If you are like a majority of investors, you are focussed on getting the highest dollar value of rent per week possible. Sometimes this tunnel vision can cause landlords to overlook their property management expenses, causing them to pay more than they should. Who likes paying extra fees?

The Systematic Guide to Achieving a Comfortable Retirement

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If you're like most of us, we all dream about the comforts, rewards and relaxation of retirement. Years of hard work finally paying off, cashing in the super, travelling the world or just having the time and money to do what you please.

This might be a reality for some, but for others, it remains just a dream - particularly if you're going to rely on the age pension to materialise those dreams.

Unless you win the Lotto, like most of us, you will need to plan ahead.

Financial Planning Advice for People in their 30's

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Are you financially ready to take on your 30's? This phase is one of the most crucial times in your life, financially speaking. Your responsibilities may be changing, whether you are buying a new house, starting a family, or embarking on a new career path. Whatever your 30's hold for you, the way you handle this change in life can very well determine what your finances will look like for the rest of your life.

Expert strategies for protecting your hard earned money.

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The future has never been as unpredictable as it is now. Can you afford to risk your future financial security by failing to adequately take control of your finances today? Most people think about their finances regularly; whether they should spend money, save it for the future or a little bit of the best of both worlds. When it comes to planning for retirement everybody knows that the more you save in your earlier stages of life, the more likely you are to be financially independent.

Property Investments Australia

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Investing in property is one of the most common forms of investment for many Australians. In addition to a constant rental revenue stream, many suburbs are still offering possibilities of capital gains through house price increases. However, being a landlord is a multi-faceted and sometimes difficult job, certainly more than simply collecting the rental payment each week.

Whether you are thinking of taking the plunge into property investing or have recently added property to your investment portfolio, there are many factors you must consider to ensure a smooth ride as a landlord. From expensive repairs to messy tenants who do not pay on time, there are a number of things to consider.

6 occasions when you need to hire a financial adviser

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Spending money on a financial adviser might feel like an extra burden on your bank balance. In reality it's really a luxury you cannot afford to be without in certain situations. You never know what life is going to throw at you, and not having a plan when life gets bumpy is only going to make a difficult situation worse.