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Know Changes to the Application of Foreign Surcharges for Trusts Holding NSW Residential Property

The State Revenue Legislation Further Amendment Act 2020, which came into effect in New South Wales on 24 June 2020, includes changes to “foreign person surcharges” for purchaser duty and land tax relevant to residential land in NSW owned by discretionary trust.

So, if you are concerned about some changes of foreign surcharges for trusts holding NSW residential property, this article can tell you more about it.

Surcharge Purchaser Duty & Surcharge Land Tax

Surcharge purchaser duty (since June 2016) and surcharge land tax (since the 2017 land tax year) have applied to ‘foreign persons’ acquiring or holding NSW residential property. Currently, surcharge purchaser duty is 8% and surcharge land tax is 2%, in addition to ordinary rates.

Where an interest in a property is acquired directly or indirectly by or held through a discretionary trust, the trustee of the trust may be liable for foreign surcharges if any one of the potential beneficiaries is a foreign person.

Each beneficiary in a discretionary trust is deemed to have the maximum percentage interest in the income or property over which the trustee may exercise a discretion to distribute.

New Measures

There are several new changes which may influence your prior discretionary trusts and the future planning.

Firstly, the new measures provide that a trustee of a discretionary trust holding NSW residential property is deemed a foreign person unless the trust deed expressly excludes foreign persons as beneficiaries and irrevocably prevents foreign persons from becoming beneficiaries.

It is important to keep in mind that a discretionary trust that does not exclude foreign persons as beneficiaries will be liable to foreign person surcharge purchaser duty and surcharge land tax even if the trust has never distributed to a foreign person and intends to never distribute to a foreign person. So, it is essential for trustees to clarify relevant terms in the discretionary trust.

Secondly, the new measures also contain transitional provisions that have retrospective effect to the time the surcharges were introduced in 2016/17.

Gradually, if a trustee incurred the surcharge purchaser duty and surcharge land tax, they could claim a refund of the surcharge. However, for this to apply, the trust deed must be varied before 31 December 2020.

From our perspective, it is necessary to check your previous discretionary trusts because Revenue NSW may reassess relevant discretionary trusts for previous transactions or years to include surcharge purchaser duty or surcharge land tax if they find that the deed for the relevant trust has not been amended by 31 December 2020. If you are planning foreign surcharges for trusts in the future, it is better to read the new measures.

Potential Beneficiary

We have known, it is now essential for trust deeds to include provisions that exclude foreign persons as beneficiaries as well as provisions that irrevocably prevent foreign persons from becoming potential beneficiaries.

A person is a ‘potential beneficiary’ of a discretionary trust if the exercise or failure to exercise a discretion under the terms of the trust can result in any property of the trust being distributed to or applied for the benefit of the person.

Thus, to avoid being a foreign trustee, the potential beneficiary must be clarified. The discretionary trust must meet both of the following requirements:

  1. no potential beneficiary of the trust is a foreign person (the “no foreign beneficiary requirement”); and
  2. the terms of the trust must not be capable of amendment in a manner that would result in a foreign person being a potential beneficiary (the “no amendment requirement”)

 

Considering the new changes, we are suggesting clients to reassess their discretionary trust deeds where the trust holds NSW residential property and, if necessary, seek advice about varying the terms to comply with the requirements as soon as possible.

If you are interested in knowing more about foreign surcharges for trusts which may impact your future planning, careful consideration should also be made because the duty and land tax surcharge provisions operate differently in different jurisdictions.

If you want more suggestions and seek for assistance about trusts, call BOA & Co. accountants on 02 9904 7886 and our Trust Specialist will be pleased to assist you.

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Using your SMSF for Property Investment

It became possible for SMSFs to borrow money to fund a direct property purchase. And, SMSFs have become an increasingly popular choice for Australians in recent years.

 If you are considering buying a property through SMSF, it is necessary to make sure you know what to do. Here is a guide to use your SMSF to buy a property.

What Is a Self-Managed Super Fund (SMSF)?

A self-managed super fund (SMSF) is a savings account for your retirement that you manage yourself, rather than one that is managed by a superannuation providers (such as Australian Super, REST Super etc). You will be able to pool your existing super balances to your SMSF and invest under your own discretions.

 So, when considering investing in property through a self-managed super fund (SMSF), it is important to learn about SMSF property rules. Investing in the property market using a self-managed fund enables you to select all kinds of property, including residential, commercial, and industrial. However, you also need to consider what is the best option for you since different types of properties have different investment rules.

Residential Property Investment

It is important to make sure that you can’t buy residential property through your SMSF if you intend to live in it, or for any other trustee or anyone related to the trustees – no matter how distant the relationship.

 You cannot invest in a residential property rented by you, or any other trustee or anyone related to the trustees, or any family members.

 Please keep in mind that the SMSF trustee, as well as their relatives and the fund’s members, cannot benefit from the property invested through SMSFs.

Also, you cannot consider an existing residential investment property you want to transfer it into SMSF.

 In short, you can invest in a residential property, but only to rent it out to the market.

Commercial Property Investment

Compared with the limitation of residential property investment through SMSFs, investing in commercial premises through an SMSF has some advantages.

Holding commercial properties in an SMSF can be open to all SMSF trustees. To buy a commercial property in an SMSF, a fund may apply for a specific SMSF loan. Nevertheless, the requirements are stricter than traditional lending with tighter loan to value ratios.

Many small business owners use their SMSF to buy business premises and then pay rent direct to the SMSF. Holding business premises within an SMSF can provide asset protection against any future claims or liabilities that could result from operating their business, which means if the business goes belly up, their properties are still safe. It is important to note, the rent paid must be at the market rate (no discounts) and must be paid promptly and in full at each due date.

Further, since the property is held in your SMSF, you can secure your business’s tenancy for the longer term. It will have benefits of asset protection.

What Benefits Can You Acquire?

Apart from some advantages of commercial property investment, there are also other benefits when you consider purchasing a property through SMSFs.

1. Tax Benefits

There are significant advantages to owning property through an SMSF. First, your super fund will be taxed at 15 per cent on rental income or 10% on capital gain (subject to CGT discount rules), which is considerably lower than most people’s personal tax rates.

Second, your capital gain tax will also be discounted if the properties are held for longer than 12 months.

If the property is purchased through a loan, the interest payments are tax deductible to the fund. If expenses exceed income there is a taxable loss that is carried forward each year and can be offset on future taxable income, but please keep in mind that any tax losses cannot be offset against your personal taxable income outside the fund.

2. SMSF Funds Can be Investing 100% into Commercial Premises

When investing in commercial properties, SMSF funds have the option of investing 100% into commercial premises if a member of the fund runs a business. This is an attractive advantage for small businesses who want to own the premises from which they run. Investors or businesses which already own a commercial property can contribute the property to the SMSF. But please note that transferring property may have capital gains, stamp duty and tax implications, so always get advice before making plans.

When you are thinking of leasing the property to a related party, it must be done on the same terms as it would with an independent third party. If you were leasing to an independent third party, a lease arrangement needs to be in place, clearly outlining the terms and conditions of standard commercial agreements. Market rate rent will need to be paid regularly into the SMSF bank, and the property will need to be periodically independently valued.

3. SMSF Funds Can Borrow Money to Invest

SMSF can be leveraged via loans to acquire assets. There are many loan products from different banks and private lenders, max LVR of 70% can be achieved. Borrowing to buy property through an SMSF is achieved through a limited recourse borrowing arrangement (LRBA).

 When implementing leveraged strategies within SMSFs, it is important to document the assets correctly, especially if the asset being purchased is an interest in another asset-such as a tenants-in-common interest in a property.

Tips before Option

There are some tips you need to keep in mind before you decide to select this type of investment, for example:

Borrowing requirements for an SMSF is generally stricter than a normal property loan that you may take out as an individual. Also, there can be substantial fees and charges associated with the purchase, ownership, and subsequent sale of a property in an SMSF. Remember that loan repayments must be paid from your SMSF. So, you need to ensure the income in the super fund will cover these costs and allow for growth.

And you are responsible for Compliance. The ability to buy property in your SMSF with borrowings would be with some very strict rules and obligations that you may not be familiar with since they are not criteria that exist outside an SMSF.

 

Using SMSF to property investment is becoming more popular in Australia because it can be another investment choice to diversify your investment assets.

 If you want more suggestions and seek assistance about SMSF, call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF Specialist will be pleased to assist you.

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Advantages and Disadvantages of a Discretionary Trust

If you are considering starting your business through a discretionary trust, it is important to understand how the discretionary trust will impact your business running and understand this structure is appropriate for meeting your purposes. In this article, we’ll explain the advantages and disadvantages of a discretionary trust.

What Is a Discretionary Trust?

Discretionary trusts are often called “family trusts” because they are usually connected with tax planning and asset protection of family members. In a discretionary trust (or family trust) the beneficiaries do not have a fixed entitlement or interest in the trust funds. The appeal of a discretionary trust is that the trustee has better control and flexibility on the disposition of assets and income because the nature of a beneficiary’s interest is that they only have a right to be considered by the trustee in the exercise of his or her discretion. This offers a great deal of flexibility, but might seem too nebulous for some stakeholders.

So, this business structure may work well for one business, but may not be the best option for another business. That’s why it is essential to balance the advantages and disadvantages of a discretionary trust.

Advantages of Discretionary Trusts

There are several benefits of discretionary trusts when you determine to operate your business through a discretionary trust. It may be more suitable to achieve some business objectives.

1. Flexible and Easy Distribution of Trust Income and Capital

Discretionary trusts provide ways for the trustee who has better control and flexibility on the disposition of assets and income. The trustee could use their discretion to change the allocation of funds to beneficiaries without having to make any major changes.

2. Asset Protection

A Trustee of a discretionary trust holds the property beneficially for the beneficiaries. Property held by a person as trustee cannot be taken by a creditor in bankruptcy, unless the debt relating to the creditor was a trust debt. Similarly, property held by a company, as trustee for a trust, cannot be taken by creditors in a liquidation of that company unless the debt is a debt of the trust.  Any properties held in trust can only be attacked by creditors of that trust.

3. Tax Efficiency

Discretionary trusts allow for the accumulation of assets for beneficiaries.

Then, the trustee can distribute income which is regard to tax-specific individual circumstances. Such ‘income splitting’ can minimise overall family tax obligations if the trustee chooses to distribute the trust income to the beneficiaries that have an unused tax-free threshold or a lower marginal tax rate. For example, trust income may be paid to a wife who is on a lower tax rate or to a private company associated with the spouse. The way a trustee distributes income can be changed from year to year to reflect marginal rates for that year.

4. Discount on Capital Gains

If you select your company as a discretionary trust, the trust entitled to a discount on capital gains made on the disposal of assets held by the trust for longer than 12 months. Other tax benefits include availability of the 50% CGT concession where capital gains are distributed to natural person beneficiaries; potential for application of the CGT small business concessions; and capacity for loans to be made to beneficiaries tax-effectively and with flexibility.

Disadvantages of Discretionary Trusts

Unfortunately, there are also some disadvantages when you choose the discretionary trust.

1. Family Trust Distribution Tax

This Family trust distribution tax applies when a distribution is made outside of the “family group.”And a family trust does pay tax is if the income isn’t distributed to its beneficiaries. In this case, the trust gets taxed at the highest marginal tax rate. So, it’s highly important for trustees to make the election and choose the appropriate “test individual” for the family group, and the “family group” is designated by making the election.

2. Losses cannot be distributed

The trust structure cannot distribute capital or revenue losses to its beneficiaries. Hence, when a trust incurs a loss, beneficiaries are not able to offset that loss against any other assessable income such as salary, interest, dividends etc.

3. Beneficiaries Lack Legal Interest in Trust Property

Since the trustee or trustees can use their discretion to change allocations, beneficiaries don’t have certain legal interests in the trust property. Beneficiaries can’t rely on receiving their “share” of the assets because allocations could be changed on a whim.

Although there are some disadvantages of discretionary trusts, this type of trust is still a common business structure in Australia because it maintains a high degree of flexibility and protection for beneficiaries.

 

Although there are some disadvantages of discretionary trusts, this type of trust is still a common business structure in Australia because it maintains a high degree of flexibility and protection for beneficiaries.

If you want more suggestions and seek for assistance about discretionary trusts, call BOA & Co. accountants in Chatswoodon 02 9904 7886 and our Trust Specialist will be pleased to assist you.

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Make Trusts Part of Your Future Planning

Clients often ask, “Why do I need a trust?” This question comes up when people want to make lifetime gifts to their children in the future, and even more frequently when it comes to the potential tax consequences which can arise where they are misused.

A trust can provide some protection from creditors and can accommodate a relationship between employers and employees. In family matters, the flexibility, control, and limited liability aspects relevant with potential tax savings, make trusts very popular.

What Is a Trust?

A trust is a legal concept that can look complex, but when explained, are easier to understand. A trust is a legal obligation or a relationship that is recognized by the courts which exists where one party gives a second party (the trustee) the ability to hold asset or property for a third party (the beneficiary). The trustee can be an individual, group of individuals or a company.

There can be more than one trustee and there can be more than one beneficiary. Where there is only one beneficiary the trustee and beneficiary must be different if the trust is to be valid.

Common Types of Trusts

Although the basic structure of different trust types is pretty much the same, there are several different types of trusts with different aims and characteristics. Generally, there are six common types of trusts:

1. Unit Trusts

Unit trusts are usually fixed trusts where the beneficiaries and their respective interests are identified by their holding “units” much in the same way as shares are issued to shareholders of a company. The beneficiaries are usually called unit holders.

For example, it is common for property that the trustee owns the property of the trust and distributes each year, income of the trust, to various unit holders with a common purpose. This common purpose includes minimizing the total income tax, capital gain tax and asset protection. Also, investment trusts (e.g., managed funds) and joint ventures can be structured as unit trusts.

Furthermore, a fixed trust is eligible for the land tax threshold. Revenue NSW’s definition of a Fixed Trust states that it is a trust where the beneficiaries (or Unit Holders) are considered to be owners of the land at the taxing date of midnight on 31 December prior to the tax year. This type of Trust applies only to NSW.

2. Discretionary Trusts

These are often called “family trusts” because they are usually connected with tax planning and asset protection of family members. In a discretionary trust (or family trust) the beneficiaries do not have a fixed entitlement or interest in the trust funds. The appeal of a discretionary trust is that the trustee has better control and flexibility on the disposition of assets and income because the nature of a beneficiary’s interest is that they only have a right to be considered by the trustee in the exercise of his or her discretion.

Also, a Family Trust Election (FTE) is a choice by the trustee of the trust to specify a particular individual around whom the family group is formed. Why should some clients consider making FTE? A trust is a family trust at any time when a family trust election (FTE) for the trust is in force. Generally, an FTE is in force from the beginning of the income year specified in the FTE (the election commencement time). The FTE must also specify an individual who forms the point of reference for defining the family group that is considered in relation to the election.

There are some circumstances a trustee should consider making FTE: the trust receives franked dividends, the trust has losses, the trust owns shares in a company with losses, to bring the trust within the family group of another trust, or where the trust is involved in a restructure under the new small business restructure roll over relief.

3. Holding Trusts (Bare Trusts)

Where there is only one trustee, one legally competent beneficiary and no specified obligations, the beneficiary has complete control of the trustee (or “nominee”). Put simply, as for property, a bare trust arises where the trustee simply holds property of and on behalf of the beneficiary. The trustee has no discretion and no active duties other than to transfer the property to the beneficiary when required.

When considering the use of a Bare Trust by a SMSF to borrow money and purchase assets, please keep in mind an SMSF can only borrow money to purchase an asset using a limited recourse borrowing arrangement and in such borrowing arrangements the SMSF Trustee receives the beneficial interest in the purchased asset but the legal ownership of the asset is held on trust by another holding trust or what is sometimes called a Bare Trust.

4. Hybrid Trusts

A hybrid trust, as the name suggests, is generally a hybrid of a discretionary and a unit trust. This type of structure is attractive because it contains the advantages of both and is an extremely useful structure. You can split the trust up into units while also having beneficiaries to distribute to at your discretion. The trustee of a hybrid trust has the power to allocate income and capital among the beneficiaries in a standard discretionary trust.

There are several advantages when considering hybrid trust, for example, asset protection, fixed interest, flexibility of distributions, capital gains tax, tax-free distributions, entry of new parties, employment benefits and low-cost. Make it with more details, as for capital gains tax, Hybrid Trust can help in redeeming units without triggering CGT, and for CGT to only be assessable in the hands of beneficiaries (although this depends on how the trust deed is drafted and detailed advice should be sought). Also, it is generally easier for tax-free (or low tax) distributions to be made through a Hybrid Trust as compared to a unit trust or a company.

5. Testamentary Trusts

A testamentary trust, often called a will trust, is an agreement made for the benefit of a beneficiary and only effective once the trustor has died. The assets included in a testamentary trust are overseen by the nominated trustee, whose job is to distribute the trust’s assets to beneficiaries complied with the trustor’s wishes.

6. Self-managed Superannuation (SMSF)

All superannuation funds in Australia operate as trusts. The deed sets up the basis of calculating each member’s entitlement, while the trustee will normally keep discretion regarding to such matters as the fund’s investments and the selection of a death benefit beneficiary.

 

There are also other different types of trusts which can satisfy additional specific needs. For example, instalment warrant trusts (superannuation), charitable trusts.

If you want more suggestions and seek for assistance about trusts, call BOA & Co. accountants in Chatswood  on 02 9904 7886 and our Trust Specialist will be pleased to assist you.

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Tips for Transitioning From a Full-Time Job to a Career As a Freelance

 

Independent composing is a suitable vocation that any individual who can peruse and order can begin. It has a minimal effort of the section. As a rule, the individuals who need to start functioning as an independent essayist don’t need to purchase anything since all you require is a PC and a telephone to begin. Most as of now have this.

Outsourcing has gotten incredibly mainstream as of late, the same number of individuals look for different approaches to enhance their salary, and work in a more adaptable setting.

For some, however, Freelancing and telecommuting is a vocation and their primary pay source. It is unquestionably feasible for outsourcing to get a lot of pay. In the beginning, phases are that as it may, particularly now, during this financial emergency, pay from outsourcing can be temperamental and is in every case exclusively subject to your capacity to search out and complete tasks for paying customers. For individuals transitioning into outsourcing from regular work, the change from a consistent compensation to outsourcing pay can be a battle. The problematic idea of outsourcing salary makes it especially significant for a specialist to realize how to financial plan their cash, so that, in times when work is hailing, the person in question won’t be stone cold broke. In case you’re a specialist or considering transitioning into full-time outsourcing, you’ll have to relearn how to both make and utilize your cash.

Why Freelance Writing Is a Viable Option for Laid Off or Out-of-Work Professionals

The American labour force is evolving. Numerous positions are vanishing in areas that won’t return, e.g., assembling and papers, to name two. Talented workers who’ve lost jobs in these areas are profoundly far-fetched to discover relative positions somewhere else. What’s more, regardless of whether they do, it won’t be at the compensation they’re likely familiar with.

While it might be challenging to accept, it’s realities like the over that are making many reexamine what work steadiness is setting.

On the off chance that telecommuting as an independent author interest you as a “downturn confirmation” profession decision, and you end up hoping to make the transition, following is some direct exhortation on the best way to do precisely that.

Tip No. 1 for Transitioning to a Freelance Writing Career: Rethink What Job Stability Means

If you wind up laid off from employment that you thought was secure, and you haven’t had the option to get another work, perhaps it’s an ideal opportunity to rethink what precisely what work soundness implies. To do this, it would be best if you initially acknowledged the way that the days when you get with an organization and work with them directly through to retirement is a relic of times gone by. This is the labour force of a worldwide economy, and professional stability isn’t essential for the condition generally.

An organization can be sound monetarily one day, as we’ve seen throughout the most recent decade or somewhere in the vicinity, can be bankrupt in a matter of seconds by any stretch of the imagination. A good example: General Motors. Who would have thud that this could transpire? Furthermore, while they appear to be bobbing back (gratitude to government advances), they are doing it with a smoothed out labour force. Also, who comprehends what will occur in 5, 10 or 15 years.

So tip number one for transitioning to an independent composing vocation is to acknowledge the way that the main occupation security that exists is simply the thoughts you give.

Tip No. 2 for Transitioning to a Freelance Writing Career: Develop a Routine

Numerous new to independent composition – or any work from homework – state that they would think that its difficult to do because there are such a large number of interruptions when telecommuting.

Be that as it may, in case you will prevail as an independent author, you should be focused. The most effortless approach to develop this propensity is to have a daily practice for your independent composing vocation – from the beginning – simply as you did when you needed to get dressed and report to work.

Get up simultaneously and report to the workplace consistently, make a rundown of errands to achieve each day, and close up simultaneously always. Turning into an independent essayist isn’t hard. However, it takes the centre. By following a daily schedule, you remain centred – and begin to encounter achievement that significantly earlier.

FYI, a portion of the assignments you ought to do at first is making a site, making composing tests and assembling a showcasing plan so you can begin getting independent composing occupations.

These are the most significant things you have to do to make a fast, simple transition to outsourcing as an author. Following great propensities, you can construct a flourishing independent composing business in the blink of an eye by any stretch of the imagination – and never need to stress over working for another person again.

Advantages of Being An Online Freelancer

Many individuals are transitioning from corporate work to being an online specialist. I won’t accuse them, as I have experienced that equivalent course myself. Being in the corporate world for over ten years demonstrated extremely valuable regarding money related advantages. Be that as it may, as an online consultant for more than five decades, the benefits are unmistakably more than money-related.

In this article, I will give a portion of the advantages that I have delighted in from far off work. Some could conceivably concur with what had a place with this rundown, yet please don’t hesitate to remark on what you figure I should include or eliminate.

Advantage #1: No Travel Needed!

Instead of driving each day from home to office and bearing the difficulties of everyday traffic, being an online consultant allows you to work from the solaces of home. It would be best if you had your apparatus (for me, that is a PC, a steady and quick web association, and cups of espresso!) You can set up in a lovely spot, enjoy a reprieve in your particular solace room, cook your own feast. Essentially, you can simply remain at home and still be beneficial.

Advantage #2: No make-up required

This is exceptionally gainful to telecommute mothers, or for any lady who is conscious about their looks. You can wear anything you like since you’re not expected to meet individuals face to face consistently. What’s more, indeed, no make-up vital, and more opportunity for work or something different. I have seen some computerized wanderers continuing to work even before getting a shower or brushing their teeth.

Advantage #3: Flexible Time

You can pick when to work. This is as yet dependent upon the timetable of your customer and your agreement with them. If you make some full memories work working on the web, you can pick which move you are manageable to work with. This is not normal for a corporate setting, where you need to report for work from 9-5 at a physical office. The drive is additionally tedious.

Furthermore, because you make some adaptable memories, you likewise have the opportunity to seek after different things, maybe something you have been energetic about, however, have been putting off. You would have sufficient opportunity to go through with your family, with your companions, or merely being without anyone else. You can deal with your time when the time for work is a lot of adaptable.

Advantage #4: Work Anywhere

Regardless of whether you’re not needed to answer to the office for work, you can pick where to work! The prospects are unending! You can telecommute, work from a restaurant, work before the seashore, or maybe in a delightful miracle of the world.

Advantage #5: Earning Potential

There is a boundless procuring potential when you telecommute. Joining the wide range of various advantages referenced, being an online consultant permits one to seek after more than each profession in turn. As you can deal with your time, you can be gainful for more than the standard eight hours every day. On the off chance that you are a viable multitasker, you can deal with more than one assignment for more than each customer in turn.

So there you have it. Those are a portion of the advantages that I have encountered dependent on my virtual vocation. If there are a few things that you are contrary to, it would be ideal if you don’t hesitate to prompt me. I would cherish for us to examine it.

 

Do you think you may qualify for these deductions? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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Tips for Freelance Tax Preparation

 

Individuals who have been utilized in conventional work settings are thinking that it’s essential to enhance or supplant their revenue sources. While some intentionally exit their positions, others might be the result of cutting back and cutbacks. In any case, numerous who hold energy for their calling discover options, for example, redistributing, to get back in the work power. It is imperative to remain side by the side of tax laws that sway independently employed people. Here are three significant tax contemplations.

Tip #1 Reduce Taxable Income

When documenting salary taxes, numerous independently employed entrepreneurs are astounded to find that they might have brought down their taxable pay and paid less in taxes during the year. It is imperative to have an arrangement set up that incorporates tax decrease systems. For instance, one frequently missed strategy is retirement investment funds. Adding to a Self Employed Pension Plan is an excellent method to gather non-taxable investment funds and keep a more significant amount of the cash you acquire. Talk with a tax bookkeeper to guarantee that you are boosting benefits around there.

Tip #2: Remit Estimated Tax Payments

Pay tax retentions are not removed from instalments that you get as a consultant. Yet, because no tax is retained doesn’t imply that the administration isn’t searching for you to send them in. The top worry for most freelancers is the amount to cover in assessed taxes and when to send them in. To decide the measure of taxes due you should figure your gross pay. A salary tax adding machine and tax schedule are assets that assist you with assessing sums and make convenient instalments. Furthermore, if state and nearby taxes apply, you should transmit instalments to them also.

Tip #3 File the Right Tax Forms

Freelancers can decide to work as one of a few business elements including Sole Proprietor, Partnership, Limited Liability Company, “S” Corporation, or “C” Corporation. Every one of these choices utilizes an alternate tax structure for revealing purposes so ensure that you know which one to apply.

Filling in as a free-lancer has numerous advantages, including adaptability and boundless salary potential. By the day’s end, it isn’t the amount you make that is important. It is the amount you can reinvest and multiply to make the way of life that you want.

 

Incredible Tips for Freelance Tax Preparation

Setting your work routine and working where you favour may seem like a definitive method to get by with opportunity and portability. Each openwork door may have difficulties, and this is genuine regardless of whether you work in an independent organization. The means to a fruitful separate encounter might be more straightforward than you envision, and planning taxes might be the ideal method to help other people and bring in cash on your terms.

  1. See how taxes collected

Paying taxes is extraordinary on the off chance that you work for yourself rather than being a representative and getting a W-2 structure from an organization. You may get a 1099-MISC design as a record of your profit, and this is the thing that you should submit when you document your taxes. Else you have to follow your pay.

  1. Track your costs and pay

You should think about your independent work as a business, and this implies that you should keep a detailed record of your pay and working costs. You should keep receipts, solicitations, and other relevant data composed consistently. Keep these records in a protected document in your office for when you begin to set up your taxes.

  1. Make standard, assessed tax instalments

Representatives can have taxes retained from their checks. However, it would be best if you approached the lead in setting tax instalments if you work independently. Falling behind can prompt risky budgetary conditions, and you might be confronted with punishments if your tax instalments fall behind also. Fortunately, you can make online instalments, and this can dispose of the weight of concocting a massive whole of money when your return is expected.

  1. Comprehend your derivations

Costs of doing business come in numerous structures, yet real deductible costs are described as being vital and typical for the sort of business being referred to. The operational expense may incorporate protection, lease, promoting, utilities, and individual vehicle use.

  1. Post a gaining benefit

Posting a misfortune every year might be cause for the IRS to see your business tries as an interest rather than an approach to gain salary and make a benefit. This may prompt expensive reviews, so you should practice care as you direct your independent work. However long you produce a decent measure of income and have separate accounts, you ought to be protected. Check with your tax proficient.

Taxes are a yearly event, yet having an arrangement can keep this classic piece of procuring a living from wrecking your fantasy about working freely. Work with experts and buy the apparatuses essential to keep excellent records, like Quicken, and plan great tax reports, perhaps H&R Block Business Edition.

Do you think you may qualify for these deductions? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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five small business tax deductions when claim tax

Five Small Business Tax Deductions When Claim Tax

 

Running a business is not easy since the more you earn an income, the more expenses you incur most, especially when paying taxes. However, some universal rules help the business to claim a tax deduction on various costs that the company incurs in the long run. Some may be easy to detect while others are somewhat hidden. Well, that is why we are here for you! This article will discuss the top five tax deductions to keep in mind, which is not easy to identify.

 

  1. Interest

Although it is well known that one has the right to deduct money off the interests paid on a borrowed loan, there are some hidden interests that you can also deduct. These interests are not well known by some people. For example, any claims that your business incurs and is not paid by the next time you file for tax (30th June) are deductible.

In the case where you loan your business money from a credit card or use a personal loan, you can claim a deduction in the income tax. This is because the interest cost will not be part of the business but from your income.

 

  1. Depreciation

Assets are not always guaranteed to appreciate over some time. Thus, if your assets depreciate, save some bucks by claiming for a tax deduction. There is a tax rule governing small business owners who own assets in Australia. If the asset has a value of around 6500 dollars, you can claim a tax deduction or write off.

 

  1. Motor vehicle

Again this is another area where the small business owners can benefit from. You can depreciate the vehicles in your company ranging from vans, trucks, and other personal vehicles. The deduction is made as follows;

100 per cent of 5,000 dollars of the actual costs and 15 per cent of the remaining cost amount in the year of purchase. Also, note that if the vehicle’s price falls under the 6500 dollars, then the whole amount will be written off.

An example

If you bought a business van at 14000 dollars, the first deduction you will receive is 4,200, calculating it with 100 per cent.

 

  1. Trading stocks

How often do you take stock in your business? Did you know that you can get some tax deduction from the stock available in your company? The stocks include any products manufactured, sold, and even items for resell in the company. If there any that are lost, damaged, or not in use before the next tax day, you can write it off from all the stock in the company.

How is a deduction made?

If the stock value in the company depreciates or appreciates with around 5000 dollars, you need to figure out the amount the stock changes with before the following tax date. If the stock’s value has appreciated, then the extra money is calculated as an income, and you will be taxed. However, if the stock depreciates, then you can file for a tax deduction.

How do you calculate the stock’s value at the end of the year or the tax date?

The value you bought the stocks at, the current selling, value the stocks are at, and any value of maintenance incurred.

 

  1. Bad debts

This happens when customers fail to settle their debt. If you have sold out services or products to a customer(s) and fail to pay the payment, then you can file for a tax deduction. A debt is calculated as a bad debt if it stays for about 12 or more months before being settled, and there is no sign of settlement.

 

Conclusion

These are the top five areas where you can file for a tax deduction if you have a small business. As you can see, these are some of the expenses that are quite difficult to figure out, especially if you are not keen. For example, you don’t have to pay for tax on stocks that have depreciated or damaged.

 

New Standard

The Australian Tax Office has released its standards to make things easier for a small business deduction. There is information on the website, including how to take advantage of these new offerings.

Do you think you may qualify for these deductions? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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Can Business Loans Be Written Off?

 

Acquiring a loan to finance or rather boost business is quite common among different business owners. However, one needs to be cautious when taking the loan and the kind of loan you take since the financial flow in a company is also affected by taxation. This brings us to the question whether all the business loans are tax-deductible or not. For example, when you take out a loan to finance your business.

This kind of loan is preferred by the majority of big companies considering they are long term loans that are also charged at lower interest rates compared to the short term loans.

However, different states have different tax deduction rules that revolve around the kind of loan you take. We are going to discuss how a loan for a business is taxed or tax deducted in Australia.

ATO also referred to as Australia Taxation office agency is the statutory agency and the only principal departments involved in revenue collection in Australia. We will review some of the frequently asked questions regarding loan and business, and how ATO views the kind of loans.

 

Q&A

Q1: Can a business loan be written off?

All the money or expenses you incur in the business to keep it running and growing are deductible. This is because this is not an income for the company but rather an expenditure (“loss”).

A:

When it comes to loan cases, not the entire money you borrow from the lender will be tax deducted. Meaning, only the loan that involves activities that earn the business an income are deductible. Or if the money is used to cater for expenses and the income can be traced.

If the loan is used to fund activities that do not earn the business a payment, then only part of the loan will be deducted, and in most cases, it’s the interest.

Let’s break it down

If your loan involves paying back an interest accrued as a result of expenses for running a business, then the interests are written off when paying the tax.

But, if the money or the interest accrued was as a result of personal fulfilment, perhaps a trip to Dubai, then none will be written off. This is because this is not a business liability but personal.

 

Q2: Is the loan a taxable income?

A:

This is determined by the lender and the kind of loan you take. Usually, take out loans, also referred to as long terms loans are the kind of loans you take without necessarily involving collateral. Such loans are not included in tax income books. This is the money you agree with the lender to pay after a specific period.

But, if part of the loan is written off or forgiven, then the forgiven amount of taxable. For example, if you had borrowed 30,000 dollars and the lender forgives you 5,000, then the 5,000 dollars is included as taxable.

However, if the loan is short term and involves collateral such as from a bank or online lender, then the type of loan will be taxable.

 

Q3: Is a loan repayment a business expense?

A:

No! This is because you are borrowing the money to run or finance your business. It does not matter the kind of expense you pay with the loan as long it is related to your business or any other business. So, paying back the loan to the lender is classified as business expenses that you will incur. However, if the loan has incurred interest, then the interest amount is categorized as an expense.

 

Q4: Which expenses are written off?

A:

Other expenses that are tax-deductible in business are;

  • The credit card interests
  • Incentives
  • Tax preparation expenditure
  • Education fee
  • Health care tax
  • Professional fees and insurance payments

 

Conclusion

Before you take a loan for your business or personal use, these are crucial details that you need to know about. The information will guide you to determine the right loan that will work for your business. For example, take out unsecured loans are some of the best loans to take for boosting the company since they are tax-deductible.

New Standard

The Australian Tax Office has released its standards to make things easier for Business Loans Written Off. There is information on the website, including how to take advantage of these new offerings.

Do you think you may qualify for these WRITTEN OFF? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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understanding the ess changes five things you need to know

Understanding the ESS changes. Five things you need to know.

 

There have been some recent changes to the tax rules when it comes to employee share schemes. There has been an attempt to make them more appealing for employer and employee participation.

 

The changes to the ESS were significant as of 1 July 2015. They allow for a more extended tax deferment. There are some new rules for startup companies.

 

There are five significant changes to take note of.

  1. Changes to the tax treatment of these employees go into effect as of 1 July 2015.

It will be applied to interest in shares, stapled securities, option to acquire shares, and rights when it comes to dealing with the stapled securities.

 

  1. There are additional concessions that can be used by startups.

Under the new rules, employees are allowed to have a 15 per cent discount when they are working with a startup company, and this amount is tax-exempt. When employees sell them for making a profit, they may be subject to being taxed.

To be considered a startup the company has to be in business for less than ten years, have no equity interest listed on the stock exchange, and cannot have a turnover of fewer than 50 million dollars.

For a concession to apply to a company, the ESS must meet the following:

    • When working with interested that is issued under the ESS, and the shares cannot have a discount that is greater than 15 per cent of the market values.
    • The rights under the ESS must have a strike price that is SS that is great then or more than the market value from the company.
    • The employee mist holds this stock and any interest that they make for at least three years.

 

  1. When going for a tax-deferred scheme, the taxing point can be deferred from the date of the exercise.

This change can delay the first taxing point. The taxing point will be deferred if

Employees can exercise their right to have no risk forfeiting if there are no restrictions on getting rid of the share.

All ESS investments with no risk of forfeiting the internet and restrictions on the sales are removed.

There are times when the employee can resign for the job.

Interest may be deferred up to 15 years after the ESS were obtained.

 

  1. Requirements for Significant Ownership and Voting Right Limits have stopped.

The limits on voting power went up from 5 per cent to 10 per cent. The only ownership had to have a significant investment in the company, but now all shares are looked at.

This will allow the employees to gain a larger share of the company, but it will also look at the shares that they already have.

 

  1. An Income Tax Refund in possible even if an employee does not exercise their rights.

If an employee decides not to exercise their right with ESS but had to pay the taxes up front, they will be given a refund for the money that they have paid on income tax. The refund will be granted if the ESS was able to protect the employee from risk in the market.

These changes have been long-awaited by the tax professionals, including accountants. The changes are welcome by employees.

 

New Standard

The Australian Tax Office has released its standards to make things easier for startup companies. There is information on the website, including how to take advantage of these new offerings.

Do you think you may qualify for these stamp duty concessions? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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Do you know about Stamp Duty Concession on certain asset transfers in Self-Managed Super Fund?

Are you a property investor?

Are you a trustee of SMSF?

 

Then you should read this article carefully. 

Aside from the lower tax rates which apply within a self-managed superannuation fund, the trustees of SMSF can also take advantage of the valuable stamp duty concession provided by Revenue NSW.

 

Buying commercial real property under a self-managed superannuation fund (SMSF) is seen as a common strategy. But how about if you have already owned commercial properties? 

 

Not everyone knows that you can also take advantage of the valuable stamp duty concession provided by State Revenue, which could save thousands of dollars in duties and taxes along the way. 

 

This concession can be very significant.  If the SMSF purchases NSW land/property from a member with a market value of $900,000, the duty which would apply (but for the concession) is $35,835.0.  With the concession, the saving in duty is $35,335.0.

 

Here is the current breakdown on stamp duty for property investors or small business owners looking to move property they own personally in to their SMSF.

 

Stamp duty imposed by State and Territory governments should always be considered before transferring land to an SMSF. Concessions or exemptions from duty may be available depending on the State or Territory.

 

Reminder:  the land/property must be business real property owned in the personal name of the member of SMSF rather than a company. Certain trust is also eligible as a landowner but please check with our SMSF specialist at BOA & Co.  

 

The following tables set out the details of the stamp duty offices and relevant provisions of the relevant legislation in each State and Territory. This is up to date as at 27 February 2017.

 

NSW

Transfer to an SMSF
Duty payable $500 subject to conditions being met. Previously $50 but increased 01/07/2014. Depending on the documentation in place for the transaction you may be able to apply for a retrospective re-assessment and obtain a refund. An SMSF specialist lawyer would be able to advise you on this.
Relevant provisions 62A NSW Duties Act 1997
General description of legislation Nominal duty is charged on a transfer of dutiable property from a person to a trustee of an SMSF where the: transferor is the only member of the super fund or the property is to be held by the trustee solely for the benefit of the transferor (ie property or proceeds of the sale of the property cannot be pooled with property held for another member and no other member can obtain an interest in the property or proceeds of sale), and the property is to be used solely for the purpose of providing a retirement benefit to the transferor.
Documentation Evidence that it is a complying SMSF as at the date of the agreement/transfer, copy of minutes of meetings of the SMSF stating the intention to have the property transferred to it and confirm that the property was owned beneficially by the transferor member, copy of the SMSF trust deed or a variation to it, showing a non-revocable clause that the property is segregated for the transferor member’s benefit only (follows wording in section62A(2))
Legislation Duties Act 1997 (NSW)
Legislation website http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/
Office Office of State Revenue
Website http://www.osr.nsw.gov.au

 

VIC

Transfer to a super fund

Duty payable No duty subject to conditions being met
Relevant provisions Section 41 Vic Duties Act 2000
General description of legislation No duty is charged in respect of the transfer of dutiable property made without monetary consideration to a trustee of a super fund, where there is no change in beneficial ownership (again, the property must be held in the personal name of the member and not a company name). A transfer of property to a trustee of a super fund by a beneficiary of the fund does not, for the purposes of this section, effect a change in the beneficial ownership of the property.
Documentation Documents are required – refer to ‘Evidentiary Requirements for Dutiable and Exempt Transactions’ on SRO website
Legislation Duties Act 2000 (VIC)
Legislation website http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/
Office State Revenue Office (SRO)
Website http://www.sro.vic.gov.au/land-transfer-duty

 

QLD

Transfer to a super fund

Duty payable Ad valorem duty applies
Relevant

provisions

No provision for exemption or concession from duty
General description

of legislation

A transfer of dutiable property is a dutiable transaction.
Documentation Duties office form and documents are required.
Legislation Duties Act 2001 (QLD)
Legislation

website

http://www.austlii.edu.au/au/legis/qld/consol_act/da200193/
Office Office of State Revenue
Website http://www.osr.qld.gov.au/duties/index.shtm

 

There are also other conditions which have to be satisfied. For example Revenue NSW requires evidentiary documentation before these concessions can be granted. 

Do you think you may qualify for these stamp duty concessions? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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