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The thing that every property investor should know about is that if you are holding an investment property eventually you will likely have to pay Capital Gains Tax (CGT)

 

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?

The vast majority of people pay Capital Gains Tax on a rental property when they sell, or dispose, of it, so it’s important to understand how CGT is calculated.

 

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 so ensure you did it right. 

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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 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 understanding the above, please contact us on  02 9904 7886 so we can help address your personal circumstances.

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Dividends and graph

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

 

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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
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When can I access my super?

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).

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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 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. 

 

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.

Dou you pay insanely high amounts of tax each year? Or you don’t pay completely.

Share your experience in the comment section below and let’s keep the conversation moving.

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

 

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 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.

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How to make tax-deductible super contributions

What are tax-deductible super contributions?

Tax-deductible super contributions are made from your after-tax income. This income may be from a variety of sources such as your take-home pay, savings, an inheritance or from the sale of assets.

Whatever the source, you can make a payment to your super fund from your bank account either as a one-off payment or a periodic direct debit.

 

Who can make tax-deductible contributions?

There was a time when the only people who could claim a tax deduction for super contributions were self-employed (defined in super legislation as earning less than 10% of their income from salary or wages).

But thanks to changes in super legislation on 1 July 2017, more Australians are now able to make voluntarily tax-deductible, concessional super contributions.

If you are self-employed you can still do this, but now you’re also eligible if you:

  • Earn salary or wages as an employee
  • Earn investment income
  • Receive a government pension or allowance
  • Receive a partnership or trust distribution
  • Earn income from foreign sources
  • Earn superannuation income.

To be eligible to claim a tax deduction for your super contributions you must also:

  • Be aged under 75
  • Meet the work test if you’re aged between 65 and 74
  • Not use the contribution to help fund an existing super income stream or pension
  • Not be splitting the contribution with your spouse (married or de facto)
  • Not make the contribution to an untaxed super fund or a Commonwealth public sector defined benefit fund.

 

What do I need to do to claim a tax deduction on a super contribution?

If you’d like to benefit from a tax deduction on your personal after-tax super contributions, you’ll need to:

Make an after-tax contribution to your super

The amount you choose to contribute is up to you, but remember you cannot contribute more than $25,000 per year under the concessional contributions cap – or penalties will apply. If you’re an AMP super customer, you can set up notifications in My AMP to let you know when you’re nearing your limit.

Lodge a form with your super fund

You’ll need to lodge a notice of intent form with your super fund, which your super fund will acknowledge in writing.

Also note, you shouldn’t make any withdrawals or start drawing a pension from your super before your notice of intent form has been lodged with your super fund.

Are there other things that I should keep in mind?

 

How much can I claim tax-deductible Super Contribution?

If you’re claiming a tax deduction for an after-tax super contribution, the contribution will count towards your concessional contributions cap ($25,000 per year). If you exceed this, penalties will apply. 

From 1 July 2019, your concessional contribution cap may be higher than $25,000 if you’re eligible to use unused concessional contribution cap amounts that you have carried forward from previous years.

Unused concessional cap carry forward

 

Description 2017–18 2018–19 2019–20 2020–21 2021–22
General contributions cap $25,000 $25,000 $25,000 $25,000 $25,000
Total unused available cap accrued Not applicable $0 $22,000 $44,000 $69,000
Maximum cap available $25,000 $25,000 $47,000 $25,000 $94,000
Superannuation balance 30 June prior year Not applicable $480,000 $490,000 $505,000 $490,000
Concessional contributions nil $3,000 $3,000 nil nil
Unused concessional cap amount accrued in the relevant financial year $0 $22,000 $22,000 $25,000 $25,000

It’s also important to note that personal tax-deductible contributions are not the only contributions that count toward this cap. Other contributions include:

  1. Compulsory contributions paid by your employer under the Superannuation Guarantee
  2. Contributions from any other jobs you may have held in the same financial year
  3. Salary sacrifice contributions
  4. Notional taxed contributions if you’re a member of a defined benefit fund.
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Minimise your land tax in Five easy ways

 

Land tax is a tax payable based on the combined unimproved value of the land a person or entity owns. The land tax is calculated based on how much the land in question would be worth were it vacant. In other words, the land tax is payable on owned property and not the principal place of residence. The tax is imposed by all the state and territory governments; however, the rules and thresholds of the land tax impost differ with different states and, therefore, do exists.


In recent years we have experienced booming property values, and land tax has become a greater burden to many Australian property investors. To every property investor, the land tax represents a high cost to owning property investment. Often investors raise the question of how can such land tax liabilities be minimized.


Encouraging, there exist ways as well as individualized tax planning strategies from a tax expert, all of which are legal that could help lower the land tax burden.

 

1. Use the name of a person who may not have exhausted their respective threshold in a given state to buy a property

Since every person has a specific limit which, when exceeded, the cost of land tax in Australia goes up. Therefore, by using the name of the spouse whose threshold in a given state is not used up to buy a property, the new threshold is absorbed hence tax lowered.

 

2. Purchase a property such an apartment whose land values are below a certain threshold for the home state.

Houses usually have high land components compared to apartments, and one can own several apartments all within an individual’s threshold in some states of Australia. Nevertheless, it is essential to scrutinize land components of the investments of interest to determine the validity of a certain threshold.

 

3. Diversification in property investment in different states.

Investing in varying states of Australia, the land tax threshold ceiling would remain untouched, unlike single state investment. The spreading properties` investment in various states, the land tax paid reduces due to spread land values at different thresholds. Therefore, carry your eggs all, not in one basket.

 

4. Land tax liability can be reduced by the use of distinct firms or companies that offer an individual a separate threshold for a different property.

In various states of Australia, some entities exampled by the fixed trust can provide investors with a separate threshold within their rights, which enables them to enjoy several thresholds, thus lowering land tax liabilities.

 

5. The land purchase and sales time coupled with land tax assessment date per state.

Consideration of land tax assessment dates is an essential factor when selling property since the property seller is obliged to payment of land tax should it not be settled by the assessment anniversary. This would help reduce the incurrence of such tax even after the property sale.

Importantly, such ways shouldn’t be construed to mean failure to pay land tax for your properties. However, while evaluating the cost of holding an investment property, consideration of land tax, among other expenses, should be factored in to determine the capital gain in long-term investments realistically.

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How much does it cost to register a company?

What is an ABN

Your ABN is an 11-digit number that represents your business to the gov, other businesses and the public in Australia. Legally you are required to have an ABN if you want to start an enterprise in Australia, or if you want to register for GST (Goods and Services Tax). 

You are required to register for GST if your business has a GST turnover of $75,000 or more ($150,000 for not-for-profit businesses). 

If you don’t have to register for GST, you are still expected to have an ABN.

How to get an ABN

There are three ways to apply for an ABN in Australia. The following are the methods. 

    • Registered through the ABR, for free (Australian Business Register)
    • Through your Tax agent
    • Download the form, complete it, mail it

You have to be a business entity to apply for an ABN. There are 4 types of entities. 

    • Individual/ sole trader 
    • Partnership
    • Company
    • Trust 

11 Things to note when applying an ABN

These questions are some that you should ask yourself before you apply for your ABN. Your answer will relate to your ABN application as these are the details that you have to give to the government.

  • Do you have a previously registered ABN?

In the case that you have applied for an ABN at a previous date, you must provide the details of your previous application. Use this link to see if you have an ABN already.

  • Are you using the services of a tax agent? 

Tax agents are representatives that can resolve any issues with the ATO on your behalf. If you are currently being represented by a tax agent, you can provide their registration number, which is usually found on an income tax return.

  • Do you have an ACN or Australian Registered Body Number?

All companies and registrable Australian businesses must register with ASIC before applying for an ABN. Once registered, ASIC will give you an ACN or an ARBN (Australian Registered Body Number). 

  • The name of your business 

If you are a business organisation, you must give the legal name of your business entity, which will be shown on all official business documents and legal papers. If you’re an individual, use your own name will suffice.

  • What is your TFN 

You TFN can allow quick application for an ABN online. During the application, you can give your own TFN and/or the TFN of any of your business associates. Without a TFN, your ABN application may be stalled.

  • Where is your business location 

Details such as the following

    • Street address
    • Business activity details 
    • Phone and email contacts 
  • What are your contact details 

You have to nominate a contact during your application to deal with all issues related to the business’s ABN, make changes and updates when required. This could be yourself, or a person who you nominate who will bear this responsibility. 

You have to give these following details for this person.

    • Name 
    • Position held
    • Mobile, phone and fax numbers (if applicable)
    • Email address 
  • The details of your business associates 

Based on your entity (Sole Trader, Partnership, Company and Trust), your business associates may be Individuals or Organisations

    • If your associates are Individuals, then you must provide their 
      • Date of birth 
      • Gender 
      • Position held 
      • TFN 
      • Residential address
    • If they are an Organisation, then you must provide their
      • ACN or ARBN (if applicable)
      • ABN 
      • TFN or address 
      • Date of formation 
  • Describe the main activity of your business 

You will be required to give out what your main income-generating activity is for your business. 

If you work in multiple locations, you may be required to give out the main business activity for each locale.

  • When do you need your ABN 

You have to specify the date when you need your ABN. Typically, it should be on the date that you want to start your business. 

  • Are you providing the correct information 

At the end of your application, you must declare that all the information you have provided is true and accurate. This is to ensure you can be held accountable for dishonesty. 

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