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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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setting up a new company in Australia, forming a company

7 steps to set up a company in Australia

 

Setting up a company may be the first step people think of when coming across starting up a business. Although that is not always the case, there are other structures also available for running a business like mentioned in our previous post “comparison-on-business-structures-in-Australia”. Thus a company is still the most common form that people operate their business under. 

 

Here are the 7 steps on forming a company and get ready to operate. 

 

A company is a separate legal entity that is apart from the individuals who run it. You must register a company with the Australian Securities and Investments Commission (ASIC) and operate a business across Australia without having to register in each state and territories. 

 

Assuming you have decided a company as your business structure, the steps to set up a company are set out below.

1. Choose a Company or Business Name

In choosing a company name you should consider the following:

  • You do not have to have a company name if you wish.  If you do not use a company name, you can use the company’s Australian company number (ACN) as the company name such as 123 456 789 Pty Ltd;
  • In Australia, most companies’ names end with proprietary limited or Pty Ltd companies.  
  • You can only choose a name that is available (not been occupied by another company or business name yet). Here, you can search in ASIC and reserve the name prior to registering a company;

 

2. Choose the State/Territory To Register Your Company In

A company can be registered in any state or territory of Australia. You must set up a company in one of the states or territories. You may also be required to register for GST. Once you are registered, you will receive a certificate of registration.

 

3. Choose the Principal Place of Business and Registered Office

A company must nominate a principal place of business and registered office. 

If the registered office is not at premises occupied by the company then the occupier’s consent must first be obtained.

 

4. Prepare Your Company’s Rules or Constitution 

Before you start a company you must decide what rules will apply to govern the company.  This can generally be:

  • the replaceable rules from the Corporations Act, which means that the company does not require its own written constitution; or
  • a constitution; or
  • a combination of the two.

However, if the company is a sole director or member proprietary company, you do not need a constitution.

 

5. Decide Your Shareholders and Officers

You must decide who will be the members (shareholders) and officers (directors and secretary) of the company.  A company’s directors are the people who make decisions in the company.  You must have at least one director ordinarily resident (live) in Australia and each director must be at least 18 years of age.

You must obtain written consent from each person who has agreed to act as a director of the company and who has agreed to become a shareholder of the company.

 

6. Allocate Your Company Shares

After you have chosen your shareholders you must allocate how many shares will they each own and what class of shares will they own.  Ordinary shares are the most common. There is also another class of shares, which may have different rights on voting on company affairs and receiving dividends. 

 

7. Complete the Relevant Paperwork 

After you have made all the decisions in steps 1 to 6 above and obtained the relevant consents then you can register the company with fillup relevant application forms with AISC or through BOA & Co. as registered ASIC agent so we can make the process much easier for you. 

Do you need professional assistance to set up your own company? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialists will be pleased to assist you.

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capital gains tax

What to know about Capital Gains Tax (CGT) and How to Calculate It.

The vast majority of property investors pay Capital Gains Tax (CGT) on a rental property when they sell, or dispose, of it. So it’s important to understand what is CGT and how it is calculated. In this post, we will find out:

  1. WHAT IS THE CAPITAL GAINS TAX?
  2. HOW MUCH IS IS THE CAPITAL GAINS TAX?
  3. HOW TO CALCULATE YOUR CAPITAL GAIN?

What is Capital Gains Tax?

Capital Gains Tax was introduced in Australia in 1985 and applies to any asset you’ve acquired since that time unless specifically exempted.

 

According to the Australian Tax Office, a capital gain or capital loss on an asset is the difference (the gain) between what the property was the cost to you (we call this Cost Base) and what you receive when you dispose of it (we call this sale to proceed).

 

Tax is levied on again made as a result of the sale proceed, which forms part of your income tax and is NOT considered a separate tax – though it’s referred to as CGT.

 

In most of the cases if an asset is held for 12 months or more, then any gain is first discounted by 50% for individual taxpayers and most Trusts or by 33.3%for superannuation funds.

 

Capital loss from one asset can be offset against capital gains from other assets,  and net capital losses in a tax year may be carried forward indefinitely.

 

However, if there is a capital loss, then it will be either used to offset other capital gains in the financial year or carried to later financial years forever until it is offset up.

 

According to the ATO, most personal assets are exempt from CGT, including your home (main resident property), car, and most personal use assets such as furniture. CGT also doesn’t apply to depreciate assets used solely for taxable purposes, such as business equipment or fittings in a rental property.  

 

Foreign residents only pay capital gain tax if a gain is made on an asset that is ‘taxable Australian property’.

 

If you’re an Australian resident for tax purposes, CGT applies to your assets no matter which country it is located.

 

When you sell off an asset it’s called a CGT event, which is the moment when you make a capital gain or capital loss. Therefore the timing of a CGT event is important because it tells you in which income year to report your capital gain or capital loss, and may affect how you calculate your tax liability.

 

In the case of real estate, for example, the CGT event generally occurs when you enter into the contract (contract signed and exchange) – that is, the date on the contract, not when you settle.

 

How much is Capital Gains Tax?

CGT can be a little tricky to calculate, that’s why it’s so important to have a good accountant on your side – BOA & Co. is CGT specialist to safeguard your investment return.

 

Remember CGT is only payable in the financial year in which you sell or dispose of your rental property.

 

For most CGT events, your capital gain is the difference between your capital proceeds and the cost base of your CGT asset – that is, where you receive more for an asset than it cost you.

 

According to the ATO, the cost base of a CGT asset is largely what you paid for it, together with some other costs associated with acquiring, holding and disposing of it.

 

If the rental property or asset was acquired before 1985, then no CGT is payable, however,  major improvements to a property since that time may be subject to CGT.

 

There are two main measures to calculate your CGT

The two different calculations are:

  • CGT discount method

 

For assets held for 12 months or more before the relevant CGT event. Allows you to reduce your capital gain by:

  • 50 per cent for individuals (including partners in partnerships) and trusts
  • 33.33 per cent for a complying Self-managed Super Fund.

 

This is generally not available to companies.

  • Indexation method

 

For assets acquired before 11.45 am (by legal time in the ACT) on 21 September 1999 (and held for 12 months or more before the relevant CGT event).

  • Allows you to increase the cost base by applying an indexation factor based on the consumer price index (CPI) up to September 1999.

 

An example of using the CGT discount method is:

Justin purchased a rental property on 1 June 2016 for $300,000 and sold it for $350,000 on 15 July 2018.

 

As she owned the asset for more than 12 months she is entitled to the 50 per cent CGT discount.

 

She would need to also subtract the cost base from the capital proceeds, deduct any capital losses, then reduce by the relevant discount percentage.

 

There is a Capital Gains Tax calculators available on our website so you can work out how much CGT you might have to pay if you sell a rental property.

 

It’s important, of course, to speak to our taxation accountant when it comes time to decide on selling off or before lodging your income tax return to ensure you did it right. 

Do you need professional assistance for your CGT concerns? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialists will be pleased to assist you.

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home office tax claims

What’s New for 2020FY Home Office Tax Claims due to COVID-19

With an increased number of employees working from home due to the Covid-19 pandemic, home office expense claims have become more common deduction items for the 2020 tax year. Anyone who has worked from home, they may be able to claim a tax deduction for expenses they necessarily incur related to performing their work duties.

 

Traditionally expenses that can be claimed as a tax deduction by employees required to work from home includes two categories:

  1. Home office running expenses, and 
  2. Occupancy expenses.

 

Home office running expenses

In most cases, claiming home office tax deductions for these items will require some substantive evidence which should be understood to demonstrate how the deduction has been calculated. 

The ATO allows the following methods for calculating running expenses:

 

Fixed-rate

A fixed-rate of 52 cents per hour can be claimed for each hour worked from home and represents running expenses. This method is simple and more commonly used as it does not require full substantiation of actual expenses. Employees will need to keep a record of actual hours worked at home or a diary showing the usual pattern of working from home over a four week period (applied across the remainder of the year).

 

For instance, if an employee spent 10 hours per week for the whole year (48 weeks estimated after excluding public holidays and annual leave), the claim under this method will be 10 hours per week x $0.52 per hour x 48 weeks = $249.60.

 

This method covers heating, cooling, lighting, cleaning and the decline in value of the furniture.

 

If using this method, the following can be claimed in addition as per usage:

  • Phone and internet expenses
  • computer consumables and stationery, and
  • a decline in value on the computer or other equipment

Employees claiming are required to separately work out their eligible claim for these items (as explained below).

 

Actual running expenses

To calculate the claim for running costs, as an alternative to the fixed rate method employees can use the actual running expenses method. This method is more complex requiring more detailed records but may result in a larger claim.

 

To use this method, they will need to work out how much of their household running expenses ‘reasonably’ relate to performing work in the dedicated office. As an example, a reasonable method of apportionment could include working out what floor area relates to the dedicated home office as a percentage of the total floor area of the home. This percentage is applied to actual running costs incurred during the period including electricity etc. Employees will need receipts of expenses and records to prove the claim.

 

Some common examples of working from home expenses an employee can claim a tax deduction for include:

  • lighting, heating and cooling;
  • costs of cleaning the home working area;
  • the decline in value (or, depreciation) of equipment, furniture and fittings in the area used for work. Small capital items costing $300 or less may be claimed in full by individuals i.e. does not need to be depreciated;
  • the cost of repairs to this equipment, furniture and furnishings; and
  • other running expenses, including computer consumables (such as a printer, paper, ink etc.) and stationery.

 

Phone and internet expenses

If employees use the phone or internet for work, they can claim a deduction for the work-related percentage of these expenses if they paid for these costs and have records to support their claims. As above, they will need to formulate a reasonable method of apportioning their work percentage of claims, ordinarily done in the form of a logbook demonstrating a usual pattern of work use.

 

As an alternative, a tax deduction of up to $50 with limited documents can be claimed based on a set rate for work-related use of:

  • 25 cents for calls made from a landline
  • 75 cents for calls made from a mobile
  • 10 cents for text messages sent from a mobile.

 

The shortcut method 

Since the beginning of 2020 Covid-19 made people working from home more intensively, the ATO has amplified the claim using the working from home shortcut method,

 

The shortcut method to claim tax deductions at a flat rate of 80c per hour.

 

This method is only available for hours worked from home from 1 March 2020 and unless extended, will apply to 30 June 2020. Claims before 1 March 2020 will need to be calculated using the above-mentioned methods.

 

This method covers all running costs (including depreciation, phone and internet costs), and there is no requirement to operate in a dedicated work area to claim a tax deduction under this method during the eligible time period.

 

 All that is required is a record of the hours worked from home. Further, multiple people in the same household working from home can each make a claim under this method.

 

 If a person worked from home prior to 1 March 2020, then they will need to use one of the other methods to calculate the claim for this period.

 

Home office occupancy expenses

Generally, an employee cannot claim a deduction for occupancy expenses, such as rent, mortgage interest, property insurance, land taxes and rates, unless their home office is a regular place of business. In the event that a home is a place of work, these expenses could be claimed, however, beware that claiming such expenses may have adverse tax consequences such as impacting the main residence CGT exemption.

 

Occupancy expenses can include:

  • Rent
  • Mortgage interest
  • Rates
  • House insurance

 

‘In order to claim occupancy expenses, you must be able to pass what the ATO refers to as the ‘interest deductibility test’

 

Frankly speaking, if you intend to claim a deduction on the interest you pay on your mortgage or rent paid to your landlord, the area you declare as your home office/place of business must have the ‘character’ of a place of business. It should meet the criteria, outlined by the ATO:

  • clearly identifiable as a place of business, for example, you have a sign identifying your business at the front of your house
  • not readily suitable or adaptable for private or domestic purposes
  • used exclusively or almost exclusively for carrying on your business
  • used regularly for visits by your clients.

 

How can BOA & Co. help?

If you need any assistance filing your tax return, contact BOA & Co. accountants in Chatswood on 02 9904 7886 so we can help address your personal circumstances.

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Dividends for company shareholders

3 Types of Dividends for Company Shareholders

 

Do you know there are 3 Types of Dividends for company shareholders? 

If you have read our previous post “Comparison on Business Structuresyou will find that company is the only structure that can distribute after taxed retain profits to its shareholders. This is so-called Dividends.

What are the dividends?

When companies make a profit they often reward shareholders by distributing some of this profit by way of dividends. Like individuals who earn an income or profit, companies are also required to pay tax on their earnings at the company tax rate of 27.5%. As such, the dividends received by shareholders may be partially, fully franked, or unfranked (that is, have had the tax partially, fully, or unpaid on that income).

dividend-franking-credit-cash-flow_

Here are 3 types of dividends: 

  1. Fully franked – 100% of company tax paid is attached to the dividend as franking credit to be distributed to shareholders,
  2. Partly franked – less than 100% of company tax paid is attached to the dividend as franking credit to be distributed to shareholders,
  3. Unfranked – No company tax paid is attached to the dividend.

This is called the Dividend Imputation system

Franked-Dividend

 

What Is a Dividend Imputation?

According to the Australian Tax Office (ATO), A dividend imputation is an arrangement in Australia and several other countries that eliminates the double taxation of cash payouts from a corporation to its shareholders. Australia has allowed dividend imputation since 1987.1 Through the use of tax credits called “franking credits” or “imputed tax credits,” the tax authorities are notified that a company has already paid the required income tax on the income it distributes as dividends. The shareholder does not then have to pay tax on the dividend income

 

Fully franked dividends

When companies pay fully franked dividends, they have paid the full amount of tax on their profits. Consider the following example: After making a profit and reinvesting some of those funds back into the business, Company ABC Pty Ltd distributes its remaining profit of $1,000 to investors (shareholders) via fully franked dividends. Investor A owns 10,000 shares in the company, and as such, receives a fully franked dividend of $1,000 (10 cents per share). As the dividend is fully franked, this provides Investor A with $275.00 in franking credits which they can use to offset their personal tax liability.

Depending on Investor A’s marginal tax rate, the impact of the imputation credits is demonstrated in the table below:

 

Personal Effective Tax Rate 0.00% 15.00% 30.00% 37.00% 45.00%
Franked dividend paid by a company $1,000 $1,000 $1,000 $1,000 $1,000
plus Franking Credits $275 $275 $275 $275 $275
Company tax rate 27.50% 27.50% 27.50% 27.50% 27.50%
Assessable Income  $1,275 $1,275 $1,275 $1,275 $1,275
Tax on assessable income $0 $191 $383 $472 $574
less Franking Credits $275 $275 $275 $275 $275
Tax Payable/(Refund or Excess credits for tax offset)  -$275 -$84 $108 $197 $299

 

Claiming a refund of franking credits

 In the example provided, it has been assumed that franking credits have been claimed when an investor lodges their personal tax return. However, this isn’t the only way that shareholders can claim their franking credits. For those people who don’t lodge a tax return, imputation credits can be claimed by completing an ‘Application for Refund of Franking Credits’ form which is available from the Australian Tax Office: ato.gov.au.

 

Unfranked dividends 

Companies are also able to pay unfranked dividends in some instances, in which no franking credits are passed on to shareholders. Using the example below, Investor A would receive a dividend of $1,000 on their shares, but no franking credits, meaning that the income will be taxed at their marginal tax rate:

 

Personal Effective Tax Rate 0.00% 15.00% 30.00% 37.00% 45.00%
Franked dividend paid by a company $1,000 $1,000 $1,000 $1,000 $1,000
plus Franking Credits $0 $0 $0 $0 $0
Company tax rate 27.50% 27.50% 27.50% 27.50% 27.50%
Assessable Income  $1,000 $1,000 $1,000 $1,000 $1,000
Tax on assessable income $0 $150 $300 $370 $450
less Franking Credits $0 $0 $0 $0 $0
Tax Payable/(Refund or Excess credits for tax offset)  $0 $150 $300 $370 $450

 

Do you need professional assistance for your tax concerns? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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smsf property investment

5 Mistakes on Self-Manged Super (SMSF) Property Investment

Deciding on getting into property investment through the self-managed super fund or SMSF is something worth considering. If you take into consideration the volatility of the stock market, low-interest rates, and tax concessions, it makes a lot of sense. So what do you need to know?

 Here are 5 Common Mistakes when considering property investment through SMSF

  1. High leverage on SMSF property investments
    • Heavily rely on bank loans when investing property within SMSF might be problematic. High loan-to-value ratio (LVR) could be feasible when investing elsewhere but SMSF loan is more strict and less options in loan market. Most lenders require positive cash flow (i.e. no Negative Gearing allowed) considering acquisition of property in SMSF.
    • Having a combined balance of $200,000 for husband and wife investors could be a starting point of thinking property strategy in SMSF. 
    • The loan-to-value ratio is lower for an SMSF loan than for residential property from most of the lenders. You would need a 25-30% or more deposit when borrowing to buy a property.
    • Lenders view SMSF loans as riskier, and hence a high-interest rate because they consider it a commercial loan even if it purchases residential properties. 

     

  2.  Buying an inappropriate property
    • Not getting a good return on investment, invest in areas that overly supplied or show inconsistent capital growth.
    • Balancing with right rental yields and capital growth is critical. Thinking high capital growth without required rental income leads to insufficient cash. 
    • Investing in bad or volatile areas could make you lose your money quickly.
    • Consider supply vs. demand. You will get good rental returns if you get a good location with low supply

     

  3. Carefully buying off-plan in SMSF
    • Buying off-plan can be a risky move if you do not do your numbers correctly.
    • Undertake a cash flow analysis into your fund with a buffer because you might guess wrong after a few years when settlement, it might not be as what you thought initially. For example considering higher interest rates and lower rental income when doing the analysis.
    • Improper valuation and conservative quotes by banks can lead to problems in future. 
    • If you must buy off-plan, purchase somewhere with strong demand and solid rental return. You avoid the oversupply of apartments that are prevalent in some areas.
  4. Too late to start SMSF property investment
    • Aim to invest for long term (a minimum of 10 years), before the retirement age of 65.  Never too early to start SMSF just to do the maths right. 
    • If possible, start as early as 45 to realise the true potential of investing
    • Investing in property is typically for 10 to 20 years; banks are wary of short-term loans
    • If you are pooling funds from other members, you must also consider their ages, how close they are to retiring, risk tolerance and your ability to manage the funds to the advantage of all members

     

  5. All in property is risky
    • Property is good investment asset to be held in super, but still needs to diversify.
    • Right level of cash reserve mixed with other liquidiable investment is healthy strategy just because real estate is not liquidable asset with a higher transactional cost when selling.
    • Diversify your SMSF to have a well-rounded portfolio
    • Have a good buffer of assets and only invest in property when you have sufficient resources

Do you need professional assistance for your next investment? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialists will be pleased to assist you.

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access super, retirement fund

When Can I Access My Super Fund?

Generally, you can start withdrawing from your superannuation fund after you’ve reached your preservation age and you’re retired, but there are instances when you may be able to access super early.

 

Your super is designed to help fund your retirement, so generally, it’s only possible to withdraw your super once you’ve reached a ‘preservation age’ and you’re permanently retired. However, there are some special cases where you may be able to withdraw your super savings early. Since your super fund is critical for your retirement life, everyone should think and plan ahead for your future retirement. 

 

Your ‘preservation age’ is the earliest age where it’s possible to tap into your super, and it’s calculated based on your date of birth. If you’re not sure about your preservation age, here is a table that can help:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

 

Here’s some helpful information about when and how super may be accessible to you.

Accessing your super during a transition to retirement (TTR)

 

If you’ve reached your preservation age but you’re not quite ready to permanently retire, you might wish to access a portion of your super through a transition to retirement pension (TTR).

A TTR involves drawing down on your super as a non-commutable retirement income stream (or account-based pension). As part of your retirement plan, a TTR can give you more financial flexibility and free up precious time or can help you maintain your work hours while saving on tax.

Keep in mind that with a TTR it’s only possible to withdraw between 4% and 10% of your super savings every financial year.

 

Accessing your super at age 60, if you’ve stopped working (but aren’t retiring)

If you’re aged 60 to 64 and stop working (for any amount of time), you’re considered retired for the purposes of accessing your super. This is the case even if you have no intention of retiring completely.

This means you can cash out the super you’ve accumulated up until that time, even if you begin working again under a different employment arrangement or switch to a different company.

 

Accessing your super when you reach age 65

When you turn 65, you typically have full access to your super, regardless of whether you’re working or retiring. There aren’t any special conditions you’ll need to meet to get full access to your super, and you can also choose not to withdraw it and continue your contributions (but there could be certain tax benefits for withdrawing your super).

 

Are there cases where I can withdraw super early?

Generally speaking, superannuation rules state you can’t take your super until retirement (as outlined earlier), apart from the First Home Super Saver Scheme, which was introduced on 1 July 2017 to help eligible Australians save a deposit for their first home.

However, there are other cases where legally accessing super early is possible, such as if you have a severe financial hardship, or have certain medical conditions. In each instance, you’d need to meet the eligibility criteria.

 

Accessing super under compassionate grounds

Life can be unpredictable. Because of this, there are some instances where you may be allowed to withdraw a certain amount of money from your super on compassionate grounds if you don’t have the capacity to meet certain expenses.

These can include:

  • medical-related expenses
  • funeral costs
  • mortgage repayments that will prevent you from losing your home.

 

Accessing super early because of severe financial hardship

If you’re under your preservation age, have been receiving financial support payments from the government for 26 consecutive weeks and can’t meet reasonable and immediate family living expenses, you can apply to withdraw between $1,000 and $10,000 from your super. This can only be done once in a 12-month period.

There are no cashing restrictions under severe financial hardship if you have reached your preservation age plus 39 weeks, received government income support payments for a cumulative period of 39 weeks and you were not gainfully employed on a full-time or part-time basis at the time of application.

 

Accessing super early due to incapacity

If you’re permanently or temporarily unable to work due to a physical or mental medical condition, you may be able to access super as a lump sum or via regular payments over a period of time.

 

Accessing super early due to a terminal medical condition

If you’ve been appropriately diagnosed with a terminal illness that’s likely to result in your death within a two-year period, you could apply for early access to your super. In this case, there are no set limits on the amount you can withdraw.

 

Withdrawing super from funds with benefits less than $200

If you switch employers and the balance of your super account is less than $200, you can apply to withdraw this amount. Likewise, if you have less than $200 of lost super or less than $200 of super that’s being held by the Australian Taxation Office (ATO), you may be able to withdraw this money.

 

How to withdraw super if you’re leaving Australia

If you’re a temporary resident in Australia and have worked and earned super on an eligible temporary visa, you can submit an application to withdraw your super once you leave the country, as long as your visa has expired. These applications are done as part of a Departing Australia Superannuation Payment (DASP), but the government requires you to meet specific criteria and provide documentation to withdraw super in this case.

 

How will accessing superannuation affect you?

While accessing superannuation is useful for retirement planning and in cases of financial or medical difficulty, it’s also worth considering how withdrawing super can affect your tax, and any Centrelink payments (such as the age pension).

 

Do you think you are eligible to access your super early? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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land tax rate remit

Australia Land Tax – An Introduction

Can You Avoid Remitting Your Land Tax?

It is possible to stop paying your monthly land tax. However, that would mean you also stop purchasing more properties. 

How would that sound?

I guess you wouldn’t want to give up on your investment property business.

So, what should you do instead?

Let’s find out!

 

No Land Tax Remittance on your first purchase

Your first land purchase will not attract any penalties unless it’s a high-value block of land.

You see, so many potential small investors shy off from buying these properties because of the land rates involved.

And I don’t think that should be the case.

 

Rules on Land Rates differ from one state to the other

Every state has its specific rules on how and when you can remit land rates. But generally, the rates will only come into effect after you’ve reached a particular land value threshold.

For instance, in Queensland, rates become effective on properties purchased under a trust. There isn’t any threshold for purchasing land under trust in NSW though. 

So you can see there are land tax loopholes. You only need to take advantage of each of them and avoid paying the rates sometimes.

 

Cast your portfolio net, far and wide

It is actually a brilliant idea to diversify your investments across different states. Nonetheless, it would be foolhardy to do so just because you want to avoid paying land rates.

The idea is to put down a solid strategy first.

And as Nathan narrates, he purchased many investment properties in various states because he’d seen the great potential. Further, he was able to strike super deals that have opened more doors for him.

For him, it wasn’t about saving money on tax.

 

Would you rather Apartments or Houses?

Many people don’t realize that you can buy several apartments and still operate below the land tax threshold. 

But how, you, may ask?

Most of these apartments contain just a smaller portion of land under the title.

Let’s say you bought a few apartments in Sydney 10 years ago. By now, you would be paying land rates. 

The same isn’t true if you had bought several apartments in Sydney. 

 

Land tax is part of the Business cost you must be ready to meet

Any type of business will require you to part with some costs. There isn’t a two way about it.

Honestly, why would you decline to buy an apartment that could fetch you more than $200,000 in three years because you fear to part with some few dollars in terms of land tax?

Nathan admits that he pays hundreds of thousands each year towards land tax. But then, that is how the system operates. 

However, he reveals that he’s bought more properties that he’s able to make more in profit and passive income.

 

Work with a good accountant

A knowledgeable and experienced accountant will help you minimize your overall taxation costs by applying for the different rules and exemptions on tax.

 

We pay tax on almost everything

Doing business and paying taxes are like siamese twins. The best thing to do is to pay your tax religiously but invest in properties that will fetch you massive profits.

Do you pay insanely high amounts of land tax each year? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialists will be pleased to assist you.

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property investment, retire income saving

Do You Want to Retire in Comfort? Investing in Property then

Why invest in property for retirement income?

After you retire, you need a plan to generate income. As per the Australian Bureau of Statistics, only about 10% of Aussies who retired from the labor force will earn $1,500 or more every week. It is essential to plan how you will supplement your retirement income via other investments. Investing in property is one of the ways you can get passive income with ease.

According to research, most Aussies rely on the accumulation of based savings. This is not wise and advisable because most financial goals will be met via retirement. The better alternative is to earn money from assets, i.e. high-interest savings accounts, term deposits, direct shares, property investments and contributions. With real estate property, you can have peace of mind expecting money every month or relying on the appreciation of your property with time. However, if you are not patient, you can end up selling your property at a loss or before it appreciates. Finally, it is vital to consult professionals before investing in any property. Professionals offer not only advice but also opinions on whether to buy a particular property or not. Wealth planning is crucial if you want to have asset protection in the future. 

 

Currently, the retirement age is 66, but it is set to increase to 67 by mid-2023. By 2035, the retirement age is set to be 70 years, and this shows that there will be more time for investments to grow. However, there will be less time to enjoy investments. Ergo, being smart and planning earlier in advance is vital.

 

What do you need to be comfortable?

In Australia, singles need $43,601 annually while couples aged around 65 need $61,522 yearly according to the Association of Superannuation Fund. To earn about $80,000 annually, you need to be mortgage-free and have at least $2,000,000 in investments. However, if you cannot get such kind of money, it is wise to start small and develop with time.

Are you on the right track for a comfortable retirement? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialist will be pleased to assist you.

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