Accounting & Business
Taxation services
Financial Planning services

 

Tax Health

What is Tax Planning?

Tax planning is a process we use toward the end of the financial year  to structure our clients business and personal  affairs to legally reduce tax liability and make savings. This is achieved by a review of the past 11 months of trading or earnings and by using deductions, exemptions and where practicable, using structures to reduce taxable income.

According to the Australian Taxation Office we all have the right to arrange our financial affairs to keep tax to a minimum – this is often referred to as tax planning, or tax-effective investing.

"Tax planning is legitimate when you do it within the letter and the spirit of the law." ATO

 

Who Can Benefit From Tax Planning?

It's simple - All taxpayers can benefit from tax planning and the savings that are created. search shows that 95% of taxpayers are paying more tax than they are legally required to.

Approximately 50% of Australian taxpayers use legal tax planning strategies to minimise their tax with the most popular strategies being negative gearing of residential properties (2.1 million taxpayers), and salary sacrificing super contributions (4 million taxpayers).

Need some end of financial year help?  Contact us.

Plenty of lucrative deductions available for investors

New legislation,  New opportunities for investors

Changes announced as part of the 9th of May 2017 federal budget have now been legislated after being passed by the Senate on the 15th of November 2017.

For many property investors the new rules, outlined in Treasury Laws Amendment (Housing Tax Integrity) Bill 2017, have made what was already a complex topic a little more difficult to understand.

The new rules do not affect capital works deductions at all. The amended legislation only restricts property investors from claiming depreciation deductions for the decline in value of 'previously used' depreciating assets (plant and equipment) within second-hand residential investment properties.

An incorrect assumption some property investors have made after hearing about the changes is that they are no longer eligible to make a claim.

***  It's important to note that the new legislation only applies to investors who exchange contracts on a second-hand residential property after  7:30 pm on the 9th of May 2017. Even in cases where investors are affected by the change, there are still thousands of dollars to be claimed, particularly as capital works deductions typically make up between 85 to 90 % of the total claim. The new legislation provides opportunities for investors in the following scenarios as it does not impact them:

Investors who purchase a brand-new residential property

Investors who exchanged contracts on a residential property prior to 7:30pm on the 9th of May 2017

Investors who add new plant and equipment assets to their property after purchase and directly incur the expense

Investors who purchase properties which are considered to have been substantially renovated by the previous owner

Non-residential and commercial properties

Any deductions that arise in the course of carrying on a business

Any residential property held in a superannuation plan (other than Self-Managed Super Funds)

Investors who hold residential property in corporate tax entities, including company entities

  Home owners who turned their primary place of residence into a rental property prior to the 1st of July 2017 ***

 For affected investors, it's important to note that the changes only impact the existing plant and equipment depreciation deductions found within a second-hand residential property.  These are the easily removable fixtures and fittings such as carpets, hot water systems and air conditioners. Any brand-new plant and equipment assets added to the property after purchase are depreciable.

The capital works allowance, which is the component investors can deduct for the building structure, is unchanged. Examples include walls, the roof, doors, kitchen cupboards and more. These deductions can be claimed at a rate of 2.5 per cent per year for a maximum of forty years for any property in which construction commenced after the 15th of September 1987.

Often older properties have been renovated and qualifying capital works completed by a previous owner can be claimed by the new owner for any years that remain in the forty year period.

The table below provides an example of common capital works items which the owner of a second-hand residential investment property could claim.

Capital works deductions

 

Item

Capital works rate

Remaining effective life (years)

First full financial year deduction

Five year cumulative deductions

Original structure and fixed items

2.50%

25

$6,250

$31,250

Kitchen cupboards

(replaced 5 years ago)

 

2.50%

 

35

 

$289

 

$1,445

Kitchen benchtop

(replaced 5 years ago)

 

2.50%

 

35

 

$72

 

$360

Outdoor pergola

(installed 7 years ago)

 

2.50%

 

33

 

$240

 

$1,200

Plumbing (updated 5 years ago)

2.50%

35

$68

$340

Tiling (updated 5 years ago)

2.50%

35

$130

$650

Total

$7,049

$35,245

 

In this scenario the investor exchanged contracts on a fifteen year old, four bedroom, two bathroom house after 7:30pm on the 9th of May 2017.

 

The previous owner of the property had completed renovations which included updating the kitchen through installing new cupboards and benchtops five years ago and adding an outdoor pergola seven years ago.

 

As the example shows, the investor would be eligible to claim $7,049 in capital works deductions in the first full financial year, or $35,245 in cumulative deductions over five years.

 

The investor would also be eligible to claim depreciation for any brand-new plant and equipment assets they chose to purchase and add to the property themselves.

 

Any plant and equipment assets that were installed by the previous owner can be excluded from the depreciation schedule and included in a capital loss schedule. This schedule can be used by the owner to offset any Capital Gains Tax liabilities should they choose to dispose of any assets or sell the property in future.

 

There are still substantial deductions available for any investors affected by the new legislation. It's always worthwhile consulting with a Quantity Surveyor to discuss what deductions can be claimed.

 

If you are venturing into the investment property mine-field, be sure to consult our practice for further advice.

 

 

 

Smart saving for your household

 Imagine always having spare income to add to your investment so that your money is constantly working harder for you? According to Simple Savings' Jackie Gower, it's not a pipe dream with these common sense tips for cutting expenses.

Curtailing your spending is no easy feat, especially if you have a family. But there are some simple ways to cut back that may mean a bigger investment portfolio.

Food

Usually the biggest bill in any household, but luckily, it's one of the easiest to diminish. As the TV chefs always say, cooking at home is the key. "We know of families who've reduced their weekly food bill by as much as 50% as a result of menu planning," Jackie reveals. Also, look beyond the supermarket. "Taking the time to shop around your local butcher and greengrocer can result in valuable savings.

Utilities

The answer to saving here, Jackie says, is to review and compare. Do your research and check out deals from different providers. This is not the most exciting task, but Jackie estimates one to two hours on the phone or online could save you several hundred dollars a year.

Petrol

Potentially another large household expense. "The best way to cut-back on petrol is not to use it. Walk, ride or use public transport whenever possible. Car-pooling is also a great cost-saver. Make a list of your errands over a fortnight and try to get them done in the same area at once.

Entertainment

Everyone automatically reaches for their wallet here, but fun can be reasonably priced, or even free. Check out exhibitions, markets, walks and local fairs. Host a movie or games night, or pack a picnic and head to the beach or a national park. And, instead of buying new toys, join the local library or toy bank if available. The kids can play with exciting 'new' toys as often as they like - for free," she adds.

More thrifty hints...

If you're terrible with money, downloading an app to track spending could be your salvation. "One tried-and-true app is Track My Spend" our expert says.

Finally, if you really struggle with self-control, many banks offer accounts with online-only access, or require you to go in to make a withdrawal. This can prevent you going on mad sprees with your EFTPOS or credit card.

The important thing is to take the first step, as Jackie affirms, "Aim as big or small as you like. Any saving is a good saving."

Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

As dentists compete strongly and with continuing uncertainty in the sector, it is more important than ever to hang on to your existing patients.

 

Here are 7 powerful tips to make your patient recall communications more effective.

 

1. Your message needs more…

'Our records show you are due for your next appointment, please call us' is uninspiring and not likely to compel your patients to call you.

If you want to improve your patient recall rate, you need to show your patients you've missed them, tell them what they will miss if they don't attend, and guide them effectively to call you.  Read on for more details…

 

2. Make it personalised

OK, so it's unlikely you have time to write an individual message to each patient, but you can make it appear more personalised when you incorporate some simple techniques:

 

•           Address them by name – don't use a generic 'Dear patient'. A simple, yet important, point which you can incorporate easily via 'mail merge' techniques.

•            Address them and only them – talking about 'our patients' as a whole is a little impersonal and can even seem 'distant'. So address the reader directly.

•            Write the letter from the individual dentist/hygienist – this gives the patient the impression they have been missed specifically, rather than receiving a general communication from you

 

3. Place the focus on them

This one should be applied to all your patient communications…

 

To clearly and effective put the emphasis on your patient and their needs, make sure you use more 'you' and 'yours' rather than 'we' and 'our'.

 

Start each sentence with 'you' or 'your' whenever you can. Simply switching 'our records show' to 'you are now due' is a good start.

 

4. Highlight the features and benefits

The MOST IMPORTANT tip for you to take on board…

Show them WHY they should attend.

Many patients are surprised about quite how many checks a dentist or hygienist makes. So tell them what you do during the appointment. Make it jargon-free and be concise.

Then follow these appointment 'features' with the BENEFITs to them.

 

For instance:

"Your dental examination is the most effective way for you to find out about any issues you may have with your teeth and gums. It pays know about any issues early, as they can be dealt with more easily and at a lower cost.

 

During this visit you will receive:

•           An evaluation of your teeth and any existing restorative dental work

•           An evaluation of your gums and supporting structure of the teeth (your cheeks, tongue, floor of your mouth and jaw)

•           Full screening for a range of mouth diseases

As you can see, it is a thorough review and we therefore recommend you call us at your earliest convenience"

 

5. Inform overdue patients

The last point is paramount in all your recall communications, but for overdue patients you can go further…

Tell them a little about what may be happening in their mouths over the last year/ 18 months / 2 years since you have seen them. Do it clearly and concisely, without being overly dramatic.  Then follow this info with…

 

6. Reassure overdue patients

If you are looking to recall patients who are overdue (and you should be on a periodic basis to keep your patient database as up-to-date as possible), make sure you tell them you don't see the time passed as a barrier.

A patient may know they should return to see a dentist, but may hold back from coming back to you for fear of embarrassment. Tell them they needn't worry. Reassure them you'll be happy to see them regardless of the time they have been absent.

Patient recalls is a numbers game and this just may break down any psychological 'barrier' some may have built up about coming back to you as time has passed.

 

You can refer to your online booking system if you have one, so they don't even have to call in to book.

 

7. End with a strong, compelling 'call to action'

What you want your message to do is motivate the patient to contact you, isn't it? So make sure you encourage them to do it!

In marketing terms, this is called a 'call to action'. Something which clearly tells the patient what you want them to do.

 

Here's a useful mnemonic I refer to when writing a call to action. Make the action you want them to take a 'SURE' thing…

 

S– Make it specific – tell your reader exactly what you want them to do. For example, instead of saying "contact our practice" say "call us now on [your tel no.] and speak to our friendly reception team"


U– Give it urgency – add a sense of urgency to your call to action. Using terms like call today


R– Reinforce the reasons why the reader simply must contact you. State the benefits again in abbreviated form. For example: "Call us today on 0x7 5475 4300 and make sure you continue to care for your oral health."


E– Entice them – Offer something extra to entice the reader to take action. This is optional and the above three points are more applicable here.

 

Include your phone number in the call to action too, to make it as easy as possible for people to call and increase the amount who take action straightaway on reading your message.

As first appeared in ASPD 17th February 2014

Burnout: Gain Financial Independence & Retire Early

Prioritize and eliminate debt.

The most important aspect to achieving financial independence is to gain control of spending. While it may seem like an intuitive concept, lifestyle creep is a prevalent behaviour among physicians as they receive pay bumps after residency and again after entering private practice. As a consequence, student loans and other debt may be ignored in favour of a nicer car, a larger house and exotic vacations. By putting extra money towards savings or paying off debt rather than big ticket items that increase your fixed expenses, you'll be closer to achieving financial independence and reach retirement sooner.

Maximize your savings.

Contributing the maximum to your contribution cap into superannuation will maximize your post-retirement savings.  In addition, where structured into your agreement an employer can top this off in the form of matching and profit sharing for a maximum combined contribution.   

By funding a superannuation fund account that won't be touched until retirement you are saving in a way that includes a wise tax-planning strategy for your future .

Invest in yourself.

Physicians in private practice are often presented with the opportunity to buy an interest in the practice, the real estate of the practice, and the surgical centre utilized by the group.  If the ownership is structured appropriately and the investment is financially sound, who better to invest in than yourself and your colleagues? The consolidation that has occurred in medicine, as well as third-party interest, can make ownership in one's practice a particularly fruitful investment and further diversify your overall investment portfolio.

Insurance

Personal insurance is a smart way to protect your quality of life and provide support for loved ones if you get sick or injured.  We suggest you consult a financial planner about the type and structure of your insurance so that the dollars you pay for premiums work harder for you.   Contact us for further information.

Maintaining a sound financial plan will eliminate burnout, allow you to focus on caring for your patients and increase the time you will have in the future to dedicate towards your other passions.

Should you use a trust to buy a property

Many people have only a vague understanding of how trusts work .  Janet Schier's story shows one way that an investor established herself in the property market through a tax minimisation strategy.

"When Janet Schier purchased a block of land earlier this year, she didn't name herself as the title holder.

Rather, she bought the property via a trust, subsequently building two sets of duplexes via additional trust structures.

For Ms Schier, the use of multiple trusts was the right choice because of tax minimisation and asset protection;  but in reality, it's a complex process.

And while most people are aware of trusts and the general reasons for their use, many have only a vague understanding of how they work, and under which circumstances they become beneficial.

A trust is an arrangement where a person or company (the trustee) holds assets (property) in trust for the benefit of others (the beneficiaries).

"So before you purchase a property via a trust, you need to establish a trust deed," says chartered accountant Brett Hetherington."The deed sets out the rules for establishing and running of the trust. Once the trust has been established then the trustee can go about including or stating the trust will be the owner of the property."

According to Mr Hetherington, there are a number of reasons for utilising a trust to purchase property, such as asset protection, holding assets for the benefit of children or other family members and avoiding capital gains tax and stamp duty within families.

There are various forms of trusts including unit trusts, discretionary or family trusts as well as hybrid trusts.

A unit trust is where beneficiaries – or unit holders – purchase a fixed interest in a trust by purchasing units.

"A unit trust is useful where parties desire fixed ownership, and the ability to claim interest on a loan to purchase units as a tax deduction," says Mr Hetherington.

In a family or discretionary trust the trust has the discretion to distribute income and capital to beneficiaries. Beneficiaries do not have a fixed interest but a right to trust assets depending on the trustees desire to distribute income or capital or both.

"A discretionary or family trust is a great investment structure for families as an intergenerational tool, assets can be handed down to children or grandchildren without incurring capital gains tax or stamp duty.

"The trustee has the discretion as to what family members can receive income and/or capital distributions.

"The fact you are a beneficiary of a trust does not mean you have any ownership in trust assets."

A hybrid trust has the workings of both.

While trust structures do offer benefits, Mr Hetherington says there are some common mistakes to be aware of, such as thinking that you can distribute losses and not structuring the investment to take advantage of tax benefits.

It's also important to be aware that tax or legal changes might require an amendment of the trust deed.

"Interestingly, professionals agree a trust structure could be an appropriate vehicle to save for retirement other than superannuation," says Mr Hetherington.

Commentary

There may be hidden traps for family trusts owning personal use assets and holiday homes under recent ATO rulings.  It is imperative you seek advice before entering into any trust arrangement. "

Clarke McEwan has been providing investment advice for over 20 years, guiding investors in the use of tax structures and how they can impact your tax position.  

 Call us for an obligation-free meeting.

Down to the Crunch

With the end of the financial year fast approaching we're getting down to the crunch for tax planning.   McCullough Robertson Lawyers offer some practical strategies that SME's should implement by 30 June!!  

Uncertain of how to apply these suggestions? Contact us for advice now.

SMALL BUSINESSES

There are additional tax planning strategies if your business is considered to be a small business under the Tax Act.

From 1 July 2017, in order to be a small business, the turnover of the business, including connected entities and affiliates, has to be less than $10 million GST exclusive per annum.  The turnover for either the current financial year or the previous financial year can be used.

The small business turnover for accessing the 27.5% tax rate has increased to $25 million for the 2017/2018 year.

The following 3 strategies apply only to small businesses. 

1.  Instant asset write-off of $20,000

A small business with a turnover of less than $10 million (GST exclusive) can claim an immediate tax deduction for "individual" assets (including motor vehicles) costing less than $20,000 (GST exclusive), including individual assets that form part of a set.

This immediate write-off applies equally to the purchase of new and second hand assets which are used in the business.

Note that to be entitled to the deduction this financial year the asset needs to be acquired at or after 7:30pm on 12 May 2015, and ordered, used, or installed ready for use by 30 June 2018.  The Government have also proposed that, as part of this year's budget, this will be extended to 30 June 2019.  For assets acquired before 12 May 2015 or from 1 July 2019, the immediate deduction can only be claimed if the asset's value is below $1,000.

The increase in the turnover threshold to $10 million, which applies from 1 July 2016, provides an additional tax planning opportunity for many businesses that did not previously meet the definition of small business.  Significantly, the immediate deduction available for depreciating assets valued under $20,000 acquired between 12 May 2015 and 1 July 2018 (and potentially up to 30 June 2019) can be accessed by these new small businesses (rather than having the item depreciated over a number of years).

2. Deduction for pre-paid expenses

A small business can claim an immediate deduction for certain prepaid business expenses where the payment covers a period of 12 months or less and that period ends before the end of the next income year.  The most common expenses that you should consider prepaying by 30 June 2018 include lease payments, interest, rent, business travel, insurances and business subscriptions.

Note that your business must be able to make the prepayment under the relevant contractual agreement to get the immediate tax deduction this financial year - you cannot simply choose to prepay the expense.

3. Other tax concessions

A small business is also entitled to the following additional tax concessions:

  • Simplified trading stock rules, giving small businesses the option to avoid an end of year stocktake if the value of their stock has changed by less than $5,000 from the previous year; and
  • The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.

Make super contributions by 30 June 2018

From 1 July 2017, the maximum concessional superannuation contribution limits is $25,000 for all individuals regardless of their age.

Note that employer super guarantee contributions and salary sacrifice contributions are included in the cap. Where a concessional contribution is made which exceeds these amounts, the excess is taxed at your marginal rate, less a 15% tax offset for the tax already paid by the super fund on the excess contribution.

If you are self-employed and making a personal superannuation contribution, ensure you obtain the correct documentation from your superannuation fund to substantiate claiming the deduction before lodging your tax return.

In order to obtain a deduction in the 2018 financial year, the contribution must to be received by your superannuation fund by 30 June 2018 (see below).

Super contributions made by cheque or electronic funds transfer (EFT)

Care needs to be taken where last minute contributions are made by cheque or electronic fund transfer to ensure that the deduction can be claimed in the current financial year.

Where the super contribution is made by cheque and the fund receives it by 30 June 2018, the deduction is allowed in the current financial year so long as the trustee banks the cheque within 3 business days and the cheque is not subsequently dishonoured.

Where the contribution is by EFT, it is taken to be made when the amount is "credited" to the bank account of the fund and not when the transfer is made.

Unless the contribution is made between linked accounts of the contributor and the fund (held at the same bank), the deduction may be deferred to the next financial year where the funds are not credited to the super fund account by 30 June 2018.

Defer income & capital gains tax

  • Businesses that return income on a cash basis are assessed on income as it is received.  A simple end of year tax planning strategy is to delay "receipt" of the income until after 30 June 2018.
  • Businesses that return income on a non-cash basis are generally assessed on income as it is derived or invoiced. Income may be deferred in some circumstances by delaying the "issuing of invoices" until after 30 June 2018.
  • Realising a capital gain after 30 June 2018 will defer tax on the gain by 12 months and can also be an effective strategy to access the 50% general discount which requires the asset to be held for at least 12 months. The date of the contract is the realisation date for capital gains tax purposes. In some cases, the capital gain can be further reduced to Nil under the small business capital gains tax concessions. 

Family trust distributions

For the 2017/18 year, minors (i.e. children under the age of 18 at 30 June) can receive investment income (including trust distributions) of up to $416 without paying tax.  Any income earned above this amount is taxed at penalty rates.

Income received by a family trust should be allocated amongst the various beneficiaries by 30 June each year and documented by way of resolution. It is preferable that the resolution is made by 30 June 2018 to avoid any later dispute with the ATO as to whether the income was properly allocated by this date.

The exact requirements for allocating trust income are set out in the trust deed, and as each trust deed is different, it is vital that trustees are aware of the terms applying to that particular trust.

Failure to follow the terms of the trust deed and to allocate the relevant income by 30 June may result in the trustee paying tax on income of the trust at the top marginal tax rate of 49% (including 2% medicare levy).

Note also that special rules apply to the "streaming" of capital gains and franked dividends received by family trusts to particular beneficiaries, and if you wish to stream it is critical that there are sufficient "streaming" provisions in the family trust deed which allow the trustee to do so.   

Write-off slow moving or obsolete stock

All businesses have the option of valuing trading stock on 30 June 2018 at the lower of actual cost, replacement cost, or market selling value. A different valuation method may be applied for each item of trading stock.

For example, where the market selling price of stock items at year-end is below the actual cost price, your business can generate a tax deduction by simply valuing the stock at market selling value for tax purposes.

Also, in situations where stock has become obsolete at year-end (e.g. fashion clothing), your business may elect to adopt a lower value than actual cost, replacement cost, or market selling value, provided the value adopted is reasonable.

Maximise depreciation claims for non-small businesses (i.e. turnover >$10M) 

  • An immediate deduction can be claimed for assets costing less than $100 GST inclusive (e.g. minor tools).
  • A tax deduction can be claimed for depreciable assets that are scrapped or sold for less than their written down value.
  • Assets costing less than $1,000 GST exclusive can be allocated to a "low value pool" and depreciation claimed of 18.75% for 2018 (37.5% thereafter) regardless of when the assets were acquired during the income year.

Claim deductions for expenses not paid at year end 

All businesses are entitled to an immediate deduction for certain expenses that have been "incurred" but not paid by 30 June 2018 including:

Salary and Wages: A tax deduction can be claimed for the number of days that employees have worked up to 30 June 2018, but have not been paid until the new financial year.

Directors Fees: A company can claim a tax deduction for directors fees it is "definitely committed" to at 30 June 2018 and has passed an appropriate resolution to approve the payment. The director is not required to include the fees in their taxation return until the 2018/19 year when the amount is actually received.

Staff Bonuses and Commissions: A business can claim a tax deduction for staff bonuses and commissions that are owed and unpaid at 30 June 2018 where it is "definitely committed" to the expense.

Repairs and Maintenance: A deduction can be claimed for repairs undertaken and billed by 30 June 2018 but not paid until the next income year.

Write-off bad debts

If your business accounts for income on a non-cash basis and has previously included the amount in assessable income, a deduction for a bad debt can be claimed in 2017/18 so long as the debt is declared bad by 30 June 2018.

Your business will need to show that it has made a genuine attempt to recover the debt by 30 June to prove that the debt is bad.  It's preferable that this decision is made in writing (e.g. a company directors minute).

Your business can also claim back the GST paid on debts that have been written off as bad, or where not written off as bad, the debt has been outstanding for 12 months or more.

Personal services income rules

If you conduct a business through a trust or company structure that relies on your personal effort and skill to generate the income, there are different rules that apply to the diversion of some or all of that personal services income.

For example, if your company earns personal services income, the ATO can treat the income as having been earned by the individual rather than the entity that earns the income, unless certain tests can be satisfied.  The personal service income regime also denies particular types of deductions which would otherwise be available to a business.

#2018taxplanning #smallbusinesstips #endoffinancialyearplanning

Our thanks to McCullough Robertson Lawyers for this insightful content .

BUDGET 2018

In the 2017-18 Federal Budget the Government announced a number of significant changes that potentially impact on property investors and owners. Some of the key changes likely to have the widest impact are discussed below.

Travel deductions

Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 contains amendments aimed at preventing rental property owners from claiming a deduction for travel expenses.  These changes are now law and apply to travel expenses incurred from 1 July 2017.

The rules prevent a deduction from being claimed for a loss or outgoing if it relates to travel and the expense is incurred in gaining or producing assessable income from the use of residential premises as residential accommodation.  The term "residential premises" takes its meaning from the GST system.

The purpose of the travel is not really relevant under these rules.  They simply prevent a deduction from being claimed if the travel is undertaken in connection with a residential rental property, which could include travel to inspect the property, undertake repairs, collect rent or meet with real estate agents.

The restriction would apply to transport costs (regardless of the mode of transport used), meals and accommodation expenses incurred in relation to a residential rental property.  

There are some exceptions to these changes.

Firstly, the rules will not prevent a deduction from being claimed if the expense is necessarily incurred in carrying on a business.  This means that if a client carries on a business of renting properties they can still claim a deduction for travel expenses that relate to their rental activities.  Also, the rules do not apply to certain entities including:

·         Companies

·         Superannuation funds, except SMSFs

·         Managed investment trusts

·         Public unit trusts

·         Unit trusts or partnerships, but only if all unit holders or partners fall within one of the categories above.

In addition to the rules that will prevent a deduction from being claimed, the changes will also ensure that these travel expenses cannot be included in the cost base or reduced cost base of a property.

Depreciation deductions

The changes apply to depreciation deductions that would otherwise arise in the 2018 income year onwards.  However, the new rule should only apply if:

·         The asset was acquired at or after 7.30pm on 9 May 2017; or

·         The asset was acquired before this time, the asset was first used or installed ready for use in the 2017 income year or an earlier year and the asset was not used at all for a taxable purpose in the 2017 income year.

In broad terms the rules prevent depreciation deductions from being claimed in relation to these assets if any of the following apply:

·         The asset has been used by another taxpayer (other than as trading stock) before the taxpayer started the hold the asset;

·         The asset was used in the current year or a prior year in residential premises that were a residence of the taxpayer at that time (doesn't need to have been their main residence); or

·         The asset was used for a non-taxable purpose in the current year or a prior year, unless that use was occasional.

Presumably in response to concerns raised by stakeholders as part of the consultation process around these new rules the Government has introduced an exception which is intended to apply to off the plan purchases.  That is, someone who acquires a newly developed property may still be able to claim depreciation deductions for the assets that were sold to them with the property if certain conditions can be met.

 

Main residence exemption

 

In the 2017-18 Federal Budget the Government announced that the main residence would no longer be available to foreign residents or temporary residents.  While exposure draft legislation and explanatory materials were released in July 2017, we have not yet seen any legislation entered into Parliament in relation to this proposed change.

 

The way the rules are set out in the exposure draft legislation is that a taxpayer will not generally be able to claim any exemption under the main residence rules if they are a non-resident at the time of the CGT event, even if they were a resident for some (or even most) of the ownership period.  On the other hand, if the taxpayer is a resident of Australia at the time of the CGT event then the normal main residence exemption rules apply, even if they have been a non-resident for some or most of the ownership period.

 

Interestingly, while the original Budget announcement indicated that the exemption would no longer be available to temporary residents, there was no mention of temporary residents in the exposure draft legislation. It is not clear whether this means that the Government has changed its approach or whether this was merely an oversight.

 

Special amendments are also being introduced to deal with deceased estate scenarios and special disability trusts.

 

As announced in the Budget, it is expected that someone holding property at 9 May 2017 can apply the current rules if the CGT event occurs on or before 30 June 2019.  This gives non-residents some time to sell their main residence (or former main residence) and obtain some tax relief under the main residence rules.

 

Further details will be released in relation to these changes. 

 

Time Management - Is it a Myth?

Do you feel the need to be more organized ?   more productive?  Is your day spent in a frenzy of activity and afterwards you wonder why you haven't accomplished much?

 

Time management is learned and by instilling some basic tips you can increase your productivity while staying Calm, Cool and Collected. Here's how:

 

Real time has only 24 hours

This is the first thing you have to understand about time management is that no matter how organized you are, there are always only 24 hours in a day.   Time doesn't change.  All you can actually manage is yourself and what you do with the time that  you have. Appreciate this. Internalize it. And move on as soon as possible to the next tip.

  

  The Time Wasters

Many of us are prey to time-wasters that steal time we could be using much more productively. What are your time bandits? Do you spend too much time 'net surfing, reading email, Facebook posting, texting, or making personal calls?

In a survey by salary.com , 89 percent of respondents admitted to wasting time every day at work:

31 percent waste roughly 30 minutes daily

31 percent waste roughly one hour daily

- 16 percent waste roughly two hours daily

-   6 percent waste roughly three hours daily 

 2 percent waste roughly four hours daily

So if you suspect you may have fallen into a time-waster pattern, try tracking your daily activities so you can form an accurate picture of how much time you spend on various activities, the first step to effective time management.

  

A Change to Behaviour

Remember, the focus of time management is actually changing your behaviours, not changing time. A good place to start is by eliminating your personal time-wasters. For one week, for example, set a goal that you're not going to take personal phone calls or respond to non-work related text messages while you're working. 

 

Find a system that works for you

Whether it's a Day-Timer, a software program or a phone app, the first step to physically managing your time is to know where it's going now and planning how you're going to spend your time in the future. A software program such as Outlook, for instance, lets you schedule events easily and can be set to remind you of events in advance, making your time management easier

 

Prioritize ruthlessly and stick to it 

    You should start each day with a session prioritizing the tasks for that day; set your performance benchmark. If you have 20 tasks for a given day, how many of them do you truly need to accomplish?

    Learn to Delegate or Outsource    

   Delegation is one of the hardest things to learn how to do for many business owners. No matter how small your business is there's no need for you to be a one-person show. You need to let other people carry some of the load.

   Establish Routines & Get in the Habit of Setting Time Limits for Tasks

   For most people, creating and following a routine lets them get right down to the tasks of the day rather than frittering away time getting started. If a crisis does arise, you'll be much more productive if you follow routines most of the time.

 Finally, set a limit of one hour a day for certain tasks and stick to it.  For instance, reading and answering email can consume your whole day if you let it.

 

The Half Way Mark

 

We find ourselves nearly mid-way through the calendar and it is only a month until another financial year will draw to a close. 

At Clarke McEwan we are about to embark on our annual round of tax planning, which is also a good time for our clients to do a reality check on how well their businesses are dealing with changed perceptions in the marketplace.

Customers today expect a great experience at all touch points, including awareness on social media, the transaction itself, and afterward. Successful businesses understand that it's more time consuming and costly to attract new clients, than it is to maintain existing ones. Unfortunately, some businesses are simply too large to remember all of their clients by name, and it can be difficult to maintain contact with their client base. However there are many digital platforms to make your own, for the purpose of maintaining awareness with your clients, and the options grow frequently.

While making plans for expenditure in the next financial year, it may be the time to budget for implementation of some of the new methods of providing client service by using some of the technology platforms that have emerged in 2018.

With a plethora of both good and poor quality products out there, it is important to set aside some time to do your research as you would when adopting any new system or technology for your business.  Here are a few ideas of where to begin:

1. Speech self service

We have seen a lot of ads about the latest Google device that responds to your voice commands. Google Home is really making inroads into our domestic situations. It still feels odd to ask the device out loud to turn on the lights and music, but children are already using it for their homework assignments. Clearly they are not shy and in time, neither will we be, as the technology continues to get smarter.

2. Digital Privacy and Safety

Just because many of us share some of our life on social media  doesn't mean we should not be concerned about safety measures online. In fact, quite the opposite is true. The digital rights and governance group at the University of Sydney conducted a survey of 1,600 people and found that even tech-savy people in their 20s and 30s were concerned. Online platforms (like FortKnoxster, a cyber-security company, specialized in developing secure and encrypted communication solutions) are taking advantage of blockchain technology, decentralized storage, and advanced encryption, and creating potential solutions to help protect user safety as it becomes more important.

3. Futuristic Technologies

Some of the very abilities we have only seen up until now on television or in the movies are finally making their appearance. Passwords will become a thing of the past as we start to see voice print as identification and with biometrics embedded into hand held devices, like iris scanning and face recognition. One such company, Prellis Biologics can now print organs on demand with a 3D printer. What was once the realm of sci-fi is now very real.

4. Blockchain

A major mainstream credit card company is already using blockchain, a more secure and transparent method to pay, as it is said to be a more efficient method of paying. It also removes the need to swipe a credit card. MasterCard's blockchain operates independently of a cryptocurrency, and instead accepts payments in local currency.

5. Artificial Intelligence

Artificial Intelligence is becoming more mainstream and businesses are starting to utilise it. A basic chat bot utilising an AI platform can be built in just a week and a half. The great thing is that no longer are large enterprises leading the way – anyone can be involved. Companies are now making their AI tools accessible and easy to use, so we will see more experimentation and innovation from smaller businesses. 

Paradoxically, new technologies can be both a major source of expenses for your business, as well as a method of eradicating your biggest costs.  Focus on the areas where you will see the biggest bang for your technology buck if a new technology succeeds -- but be ready to abandon the cutting edge if it cannot deliver on these promises.

If in doubt about the deductibility or tax treatment of acquiring new software or software enhancements before the end of the financial year, contact us.

 


Contact Clarke McEwan