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Practice Update - July 2017

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P r a c t i c e  U p d a t e

July 2017

Removal of the Temporary Budget Repair Levy from the 2017/18 income year

The 2% Temporary Budget Repair Levy (or ‘TBRL’), which has applied to individuals with a taxable income exceeding $180,000 since 1 July 2014, is repealed with effect from 1 July 2017. 

Up until 30 June 2017, including the TBRL and the Medicare Levy, individuals earning more than $180,000 faced a marginal tax rate of 49%.

With the benefit of the removal of the 2% TBRL, from 1 July 2017, individuals with a taxable income exceeding $180,000 face a marginal tax rate of 47% (including the Medicare Levy). 

Editor: Don’t forget to add another 1.5% for the Medicare Levy Surcharge for certain individuals that don’t have Private Health Insurance.

 

Extension of the $20,000 SBE Immediate Deduction Threshold

In the 2017/18 Federal Budget handed down on 9 May 2017, the Federal Government announced that it intended to extend the ability of Small Business Entity (or ‘SBE’) taxpayers to claim an outright deduction for depreciating assets costing less than $20,000 until 30 June 2018.  This Budget Night announcement has now been passed into law.

Prior to the relevant legislation being passed into law, the outright deduction threshold for SBEs in relation to depreciating assets was scheduled to revert back to $1,000 as of 1 July 2017.  Now that this change has become law, the threshold is scheduled to revert back to $1,000 as of 1 July 2018.

To qualify for an immediate deduction for depreciating assets purchased by an SBE taxpayer costing less than $20,000, the asset needs to be first used or installed ready for use on or before 30 June 2018.

Editor:  The ‘aggregated turnover’ threshold to satisfy the requirements to be an SBE taxpayer has increased from $2 million to $10 million, as of 1 July 2016.  As a result, more business taxpayers than ever before will be eligible for the $20,000 immediate deduction for depreciating assets. 

Please contact our office if you need any assistance in determining if your business is an SBE, whether an asset purchase you are considering will qualify as a “depreciating asset” and/or what constitutes being “used or installed ready for use”.

  

Simpler BAS is coming soon

The ATO is reducing the amount of information needed to be included in the business activity statement (or ‘BAS’) to simplify GST reporting.

From 1 July 2017, Simpler BAS will be the default GST reporting method for small businesses with a GST turnover of less than $10 million.

In relation to GST, small businesses will only need to report:

G1 - Total sales

1A - GST on sales

1B - GST on purchases.

This will not change a business’ reporting cycle, record keeping requirements, or the way a business reports other taxes on its BAS.

Simpler BAS is intended to make it easier for businesses to lodge their BAS.  It should also reduce the time spent on form-filling and making changes that don't impact the final GST amount.

The ATO will automatically transition eligible small business' GST reporting methods to Simpler BAS from 1 July 2017.

Small businesses can choose whether to change their GST accounting software settings to reduce the number of GST tax classification codes.

Editor:  Call our office if you need help with the transition to Simpler BAS or to decide whether your business will use reduced or detailed GST tax code settings in its GST accounting software.

 

Changes to the foreign resident withholding regime for sales of Australian real estate

Since 1 July 2016, where a foreign resident has disposed of real estate located in Australia, the purchaser has had to withhold 10% of the purchase price upon settlement and remit this amount to the ATO, where the market value of the property was $2,000,000 or greater. 

As a result of another 2017/18 Budget Night announcement becoming law, in relation to acquisitions of real estate that occur on or after 1 July 2017, the withholding rate has increased to 12.5% and the market value of the real estate, below which there is no need to withhold, has been reduced to $750,000. 

Editor:  Unfortunately, even if a sale of real estate with a market value of $750,000 was to take place between two siblings on or after 1 July 2017 (both of whom have been Australian residents for 50 plus years), withholding must occur unless the vendor obtains a ‘clearance certificate’ from the ATO – despite the two siblings clearly knowing the residency status of each other!

These changes highlight the need to obtain clearance certificates where the vendor is an Australian resident and the real estate is worth $750,000 or more - not a high exemption threshold given the sky-rocketing values of Australian real estate!  If you are buying or selling real estate worth $750,000 or more (including a residential property, i.e., home) please call our office to see if a clearance certificate is needed.

Change to deductions for personal super contributions

Up until 30 June 2017, an individual (mainly those who are self-employed) could claim a deduction for personal super contributions where they meet certain conditions. One of these conditions is that less than 10% of their income is from salary and wages.  This was known as the “10% test”.

From 1 July 2017, the 10% test has been removed.  This means most people under 75 years old will be able to claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test).

Editor: Call our office if you need assistance in relation to the application of the work test for a client that is aged 65 to 74.

Eligibility rules

An individual can claim a deduction for personal super contributions made on or after 1 July 2017 if:

r         A contribution is made to a complying super fund or a retirement savings account that is not a Commonwealth public sector superannuation scheme in which an individual has a defined benefit interest or a Constitutionally Protected Fund;

r         The age restrictions are met;

r         The fund member notifies their fund in writing of the amount they intend to claim as a deduction; and

r         The fund acknowledges the notice of intent to claim a deduction in writing.

Concessional contributions cap

Broadly speaking, contributions to super that are deductible to an employer or an individual, count towards an individual’s 'concessional contributions cap'. 

The contributions claimed by an individual as a deduction will count towards their concessional contributions cap, which for the year commencing 1 July 2017 is $25,000, regardless of age.  If an individual’s cap is exceeded, they will have to pay extra tax.

Editor:  Call our office to discuss the eligibility criteria and tax consequences of claiming a tax deduction for a personal contribution to super for the year commencing 1 July 2017.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Where there’s a Will, there’s an Estate Plan

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Let’s face it: no-one likes to think of death, especially their own. It’s not exactly a great conversation starter, is it? This might explain why so many people end up “dying Intestate” which means they die without a will and, as a consequence, have their assets distributed according to State law.

Sadly, the way State law distributes a deceased person’s assets among family members can often be a lot different to the way a deceased person wanted their assets distributed

It can create a lot of unnecessary stress and conflict within a family.

So unless you’re living as a hermit with no contact or relationships with others, and you also don’t have a single possession to your name, you need to not only think about preparing a will, but do something about it.

And you need more than just a will. You need an estate plan.

Why having a will is not enough

If you have a will in place, you may not think you even need an estate plan. After all, your will spells out your “Who gets what” instructions regarding your estate, right?

Unfortunately, the estate you’ve specified in your will may not include all of your assets. By law, your will doesn’t include assets such as:

  • jointly-held property
  • superannuation
  • proceeds of life insurance policies
  • assets held in trust
  • company assets.

To control what happens to these assets, you need an estate plan.

6 more reasons to have an estate plan

A well-written estate plan can do more than just distribute all of your assets the way you want. It can also help:

  1. Your beneficiaries (i.e. your loved ones) to reduce (if not eliminate) tax on the income generated when they receive their inheritance, and every year thereafter
  2. Protect your beneficiaries’ inheritance from unfortunate events such as divorce and bankruptcy
  3. Minimise or even avoid the death benefits tax when distributing your superannuation benefits
  4. Guard against a beneficiary wasting their inheritance because of their spending habits, mental health, drug addictions, gambling or other vulnerabilities
  5. Make capital gains tax savings on the assets distributed through your estate
  6. Ensure your assets are passed to your preferred beneficiaries rather than, say, an in-law or former spouse.

Who should help you create your estate plan?

While an estate plan is a legal document, its creation shouldn’t be left solely to your solicitor. You need someone who knows about you, your family and your financial situation.

And the person who generally knows the most about that is your accountant or financial planner.

However, while they may know all about your finances, they may not have the legal qualifications needed to create a watertight estate plan. So you actually need your accountant or financial planner and a solicitor.

According to One Super Fund partner Gerard Wall:

“The financial planner’s job is to try and identify if the estate plan is funded properly, and if it is funded that the insurance is owned by the right person; the accountant’s job is to make sure that the client’s affairs are structured appropriately from a tax point of view; and the solicitor’s job is to make sure the documentation is all drawn up.”

Avoid leaving a trail of chaos behind you

Whether or not you have an active will in place, without an estate plan there’s no telling who your assets may end up with. Avoid creating stress and conflict for your loved ones, and give yourself the peace of mind in the here-and-now that your affairs are well in order. Get in touch and we can start the ball rolling to get a solid estate plan in place for you and your family.

 

Why Business Budgeting is More About Being Accountable, than it is About Accounting

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For many, the word ‘budget’ is about as appealing as the word ‘diet’.

It seems to imply what you will go without, rather than what you will achieve.

To a successful business owner, however, the word ‘budget’ has a very different meaning.

It’s more like a map than a diet. It’s an outline of where you want to take the business, and what you need to achieve to get there.

Running a business without a budget is like a ship’s captain setting off on a voyage without a map. Sounds ridiculous, doesn’t it. Who would do that?

Yet this is, figuratively speaking, what many business owners do.

Successful business owners, on the other hand, not only set clear targets and budgets each year, they monitor them closely each month, even each week, and adjust them as they go throughout the year.

Here are 3 compelling reasons your business needs a budget, now:

One: If you don’t know where you’re going, how do you know you’re not already there?

If you’re not satisfied with how your business is performing, unless you set clear goals for where you want to take it, it’s probably as good as it is ever going to get. At best, it will just meander along, subject to the whims and vagaries of the economy and general market conditions.

The good news is that your business doesn’t need to meander along.

The first step in charting a clear course for growing and developing your business is objectively measuring ‘where it’s at’ right now.

And the numbers do tell a story.

For some, they act as a wake up call. For others, they just confirm the journey’s starting point.

It’s paradoxical that a large part of the value in a business budget is not in the numbers themselves. It’s in the realisation and acceptance of where you are and where you want to be.

The numbers are just the signposts for the journey.

A factual look at the numbers that describe where your business is right now takes away all the subjectivity, opinions and ‘reasons’ (often excuses, disguised as reasons).

This is the naked truth.

In fact, it is like standing on the scales, naked, looking at yourself in a full length mirror. That may or may not be a pretty sight!

For your business, these factual numbers are the sales, the variable costs, the margins, the overheads, and, lastly, the profit. After all your work, this is the reward you’re left with.

Then comes the first of a series of ‘hard questions’…

  • Are you happy with that profit?
  • Is it worth it? Or are you dissatisfied? Then …
  • What do you want those figures to look like?

Answer those questions, and you’ve just described where you want to be. Congratulations! You have charted your course, which is the first step to maximising your success.

Two: What’s more important to treat? Symptoms or causes?

As you well know, sales just don’t happen. Costs don’t just drop because you want them to. Sales and costs are a result of other underlying factors. Put another way, they are symptoms of causes.

The business budgeting process quantifies the symptoms, and by asking a series of ‘What leads to this number?’ questions, it also identifies the underlying causes.

For example, underlying factors contributing to a sales (revenue) figure could include:

  • the number of calls made,
*
  • the number of customers walking through the door,
*
  • the percentage of conversions of enquiries or walk-ins to sales, the dollar value of the average transaction, or simply
*
  • where your marketing is targeted.

These are all called drivers.
The sales figures are simply a result of these drivers. Costs are no different.

For example, the rent paid may be a result of the storage you need for your stock levels. Wages costs may be blowing out as a result of overtime paid but underlying that may be inefficient staff. Or a lack of clear processes. Or both.

So in reality what came first was not the sale or the cost, but their underlying drivers. The budgeting process forces you to name and to quantify these underlying drivers.

That’s one of the most valuable aspects of preparing your budget. Not the budget itself, per se, but identifying your business’ drivers.

Why?

Because then you can focus on improving them.

That’s what will produce the improved results in your business. No focusing on last quarter’s figures. That’s history.

It’s more fun to create history. And that is, in essence, what you are doing when you are in your own business. You are captain of your own destiny, and you can steer it in any direction you want.

Note that word … direction. A key point is to have one.

You will enjoy how effectively the budgeting and planning process will get you crystal clear on your direction.

Three: Budgeting is not about accounting. It’s about being accountable.

Once you are clear on the handful of drivers that creates your business’ results, the next question is…

What are you going to do about it?

Your budget won’t just give you a monthly sales target, for example, it will help you quantify the drivers that will produce the result.

For example, if next month’s sales target is $120,000, that end-result figure is not your focus. Not on a day-to-day basis. Knowing the underlying drivers, your focus will instead become, for example:

  • 25 calls per day (Driver No.1)
  • At 80% conversion rate (Driver No.2), with
  • Each customer buying an average of $300 worth of products (Driver No. 3).

Now you and your staff have a clear focus and are 100% accountable.

That’s good for them, and good for you and your business.

People in a business want a clear scoreboard and a ‘game to play’ so they know whether or not they are winning. Research has found that a lack of measurement in a job is demotivating to a staff member. Patrick Lencioni’s book ‘3 Signs of a Miserable Job’ gives some great examples of this.

Knowing these drivers, and quantifying a target for each you can then ask questions like:

  • Have the 25 calls been made today?
  • If not, why not? Is the target realistic?
  • Does the team need training?
  • Do they need better telephone equipment or dialing software?
  • Or just more focus?
  • Or guidance on what their task priorities should be?
  • Or a combination of these?
  • Are we being effective and converting 80% of the calls?
  • Again, if not, why not?

You can then decide to improve skills, or systems, or attitude, or all three!

As you can see, the power of the budget is in the process of preparing it, and then the budget itself is a tool to hold you accountable to the measurable indicators you’ve chosen.

An added layer of accountability is… us.

We work with a number of clients where, on either a monthly or quarterly basis, we act as a sounding board and independent party to ask you the hard questions about the drivers and the results. This focuses your mind, allows you to form a clear Action Plan to improve results, and then increases your chances of success because you know you need to report in to us next time.

It’s a powerful process that you’ll enjoy due to the focus it creates and, in turn, the results that focus achieves in your business.

To take more control of your business and its performance, get in touch to make a time to come in and see us. Depending on the size of your business, we might work out that a quarterly process might work best (and be the most feasible, cost-wise), or your business might be at a point where monthly or even weekly guidance would be ideal.

Either way, we’ll outline your options and your costs so you know precisely what’s involved.

We look forward to helping you chart your course, helping to get a clear direction, and then keeping you and your business on course.

After all, you won’t end up at the ideal destination by drifting.

Your 9 Point Checklist for Paying Less Tax This Year (And Why This Checklist Will Be Useless to You in a Few Weeks’ Time)

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Time is running out.

If you want to take a few simple preventative measures to minimise or defer how much tax you will pay for this Financial Year, you need to do two things: 1. Read the following 9 point checklist, then 2. Call or email us as soon as possible so we can make a time to sit down with you to assess which of these preventative measures can be done for you in your circumstances. Depending on your situation, this tax planning process could save you many thousands of dollars. That’s cash in your bank account, rather than the Tax Office’s.

After all, why pay one more dollar in tax than you have to?

I’m sure you have better uses for your money, such as investing in your future or just investing in the here and now and rewarding yourself with a little ‘lifestyle indulgence’. Now … to the checklist. Tick each item you think is relevant to you:

Review debtors Your income tax is payable on any invoices you’ve issued, even if you haven’t been paid. Don’t pay tax on any invoice you know won’t ever get paid. Review the list of those who owe you money and write off those ‘bad debts’ now.

Review your stock levels The value of your closing stock directly affects your business profit, the higher your stock value the higher your profit and tax. Review and identify any obsolete or old stock and scrap it or re-value it to its correct value. Individual items of stock can be valued at cost, market value, or replacement value.

Review your business assets Write off any obsolete asset and claim its remaining book value now. There are also new ways assets can be depreciated, called pooling, that will increase the depreciation expense. This isn’t suitable for all business, but it is worthwhile reviewing.

Defer income — A simple tip that can defer a lot of tax for you If your cashflow allows, you may consider deferring some of your invoices until July. If the income was not invoiced this financial year, it can’t be taxed this financial year. Before taking this option we recommend having a budget to manage these months income and expenses. We can help you with that.

Review your invoices issued If you have invoiced someone in advance for services you will provide in the next financial year, then you may not have earned that income in this tax year. That income may belong in the year you provide the service. Again, this is something we can work out with you when we meet for tax planning.

Pay the June quarter superannuation Superannuation if paid on time is deductible when paid. Since you have to pay the 9.5% superannuation by 28 July, bring it forward a month and pay it now and claim the deduction now. Why wait a whole year to reduce your tax?

Using all of your superannuation cap If maximising your superannuation is part of your retirement plan, then don’t forget to contribute as much as you can into your super fund. We can guide you as to how much you can contribute. It’s a missed opportunity not to do this each year.

Employee bonuses Bonuses to employees are deductible when the business has committed to paying them and it is not subject to any discretion. So finalise and sign off on the bonuses to be paid and reduce this year’s tax.

Capital Gains Tax (CGT) Minimising your capital gains tax is often about timing. Ensure the asset has been owned for at least 12 months. If you already have a capital gain, are there any investments making a loss you can sell? Do you qualify for any capital gain rollover relief concessions? (Again, we can guide you here.) CGT is a whole topic on its own, and the potential savings are so great, it is definitely an area in which you should seek our guidance.

If you ticked any of the above items, then we need to talk. And soon.

Call us now on 1300 574 108 or email us on info@middlewise.com.au to make a time to meet and discuss your tax planning options.

Middlewise Accounting Investment Update

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As the end of the financial year races towards us, we just wanted to give you a quick review of how the market has performed over the last quarter. We look at which sector had gains and which sectors weren’t so great.

Looking back over the first quarter of 2014, the All Ordinaries gained nearly 1% which is fairly positive. This would suggest that returns are looking to get back to a more normal range of 8-9% compared to the last year’s lift of around 20%.

Best and worst performing sectors of 2014 so far

If you’re looking to invest in different sectors to diversify your portfolio strong sectors include IT (up 6.5%), Utilities (up 4.4%) and Financials (up 3.8%). Sectors that went the other way include Materials (Resources) (down 0.4%) and Consumer Staples (down 0.9%).

Property Performing

Property has performed extremely well, with home prices increasing steadily for the last 10 months. March has been the strongest with a 2.3% gain which is the biggest monthly gain in over 18 years. Property values in ALL capital cities have recorded gains emphasising the underlying strength of property markets.

Once again property investment has become attractive due to the low vacancy rates and strong rental yields. Low interest rates have also contributed to the drive in activity. Recently the Reserve Bank appears to be monitoring house prices closely as policy makers would be wary of home buyers becoming over leveraged due to the current low rates which will inevitably rise.

Building Boom Looming

It is important to note that there has been an increase in the sale of land and building approvals. This should lead to a building boom increasing the housing supply which should dampen any gains as the 2014 year progresses. As the building boom gains momentum it will have a multiplying effect through builders, developers, landscape gardeners, home fittings, appliance and DIY retailers. So we could see a significant increase in the retail sector.

If you’d like to talk through your investment strategies, or to discuss how Middlewise Accounting can build a ‘Freedom Plan’ for you contact us now on 1300 574 108!

Together we can help you have a beautiful financial future.

Get a life… and a mortgage

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Client Alert! May 2014

Get a life… and a mortgage


Do you enjoy a good bottle of wine? How about that unmistakeable new car smell, holidays or eating out?  

Of course you do! We do too. In this article we’ll go through what you have to do to buy a home and still ENJOY all that life has to offer.  

Understand all the costs

It may seem like common sense but the principal cost of the property is not all that you need to consider before buying. There are legal costs, inspections, reports… and that’s before you’ve even thought about moving in! Then you have removalists, repairs, maintenance, the list goes on. Take some time and work out how much this could cost you. Most of these costs can be added to your mortgage, you just need to know what you’re in for. Bear in mind that interest rates may rise so you don’t want to push yourself to the brink and hope for interest rates to ease or remain stable.

For once, Inflation is a good thing

For the vast majority of us, a mortgage is a marathon, not a sprint. When you’re in it for the long term, inflation is going to help you out, here’s how. A decade ago the average home loan was in the vicinity of $190,000, at the same time the Australian Bureau of Statistics shows the average income was just over $39,000. Last year the average wage was more than $74,000 so play that out over 10-20 years and your mortgage starts to look a lot more manageable.

Understand your end goal

Before jumping in, make a personal financial plan for yourself and the property. List all of the improvements you would like to make and the estimated costs, as well as other personal life expenses you would like or can foresee i.e. holidays, cars, your kid’s education etc. Then prioritise them according to your goals. Remember it’s just a plan, it doesn’t need to be perfect and it definitely shouldn’t be rigid. With a well laid plan, you should be able to roll with the punches.

Control Freak

If you want to understand what your repayments will be then think about locking in a fixed rate loan. At the time of writing, interest rates are pretty low so this could be an excellent option but just remember, in the next round of rate cuts or rises you’ll either be fist pumping or lamenting your decision… be prepared either way.

Doing Deals

Applying for a new loan or refinancing an old one can be a great time to review ALL of your providers. Pull out your bills from the last quarter and start making some phone calls. There’s always a better deal out there for Credit cards, phone bills, insurance… it could be WELL worth your while to spend an afternoon firing off emails and making calls. Remember, to consider your credit rating as the guidelines changed in March 2014 – http://middlewiseaccounting.practicepl.us/blog/protect-your-reputation-manage-your-credit-rating-march-2014.

Do the math & know what you can claim

Understand all of the features and perks of your loan, there could be good deals with credit cards or offset accounts which could save you money on interest. Make sure you do the math all the way through though, as loans with offsets usually have higher interest rates, so just make sure the benefits outweigh the costs. Also, check with your local government before you dive in, there are often grants or other subsidies available. Once you’re all set up make sure you are leveraging the perks of your loans and your credit card loyalty programs to save money, and still enjoy all of life’s luxuries.

Contact us TODAY for a FREE home loan review and comparison report with the latest rates available for you. 

Middlewise Accounting

Ph: 1300 574 108

Email: info@middlewsie.com.au



Federal Budget 2014 - What you Need To Know

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Client Alert! May Special 2014             



Yesterday, the Treasurer Joe Hockey delivered his first Federal budget.

The budget was in many ways what was expected, below is a summary of the key features and how they could affect you – Please get in contact with us if you would like further details on how these decisions will affect your own personal situation.

More ‘Tax’ for Higher Earners

A Temporary ‘Budget repair Levy’ was introduced to tackle the rising national debt. This debt levy will affect higher income earners (over $180,000) – a rundown of the levies is as follows:

Taxable Income

Debt Levy

$200,000

$400

$250,000

$1,400

$300,000

$2,400

Also a number of other tax rates that are currently based on calculations that include the top marginal tax rate will also be increased in line with the Temporary Budget Repair Levy from 1 July 2014. An exception applies for fringe benefits tax (FBT), which will be increased from 47 per cent to 49 per cent from 1 April 2015 until 31 March 2017 to align with the FBT income year.

Short Term Clarity on Super

Last night’s budget confirmed the rise of the superannuation guarantee to 9.5% as of 1 July 2014 this is in-line with 2012 legislation. However the proposed schedule has changed to hold the rate 9.5% for 4 years followed by 0.5% yearly rises up to 12% by 2022/23.

Changes to the excess non-concessional contributions tax means that contributions made since 1 July 2013 can be withdrawn. This is good news for anyone who has accidentally exceeded their non-concessional contributions as they can withdraw it rather than paying the top marginal rate.

Tighter Welfare Rules

The government has proposed several clamp downs on welfare including:

  • Reduced deeming thresholds from 2017 making it harder to pass the ‘income test’ for social security benefits
  • Commonwealth Seniors Health Card changes
  • Progressively increase the Age Pension age to 70 from 2025

We want to make sure ALL our clients are ready for anything this is why we would love to talk to you about a ‘Freedom Plan’. This puts the power back into your hands by clearly identifying what you need to do to retire on your own terms. Call us today to find out how.

Family Assistance

Changes to the Family Tax Benefits (FTB) scheme include a change to Part B where the primary income limit will be reduced from $150,000 to $100,000 from 1 July 2015. Also Payment of FTB Part B will be limited to families whose youngest child is under age six from 1 July 2015. Transitional arrangements will ensure families whose youngest child is age six and over on 30 June 2015 will remain eligible for FTB Part B for two years.

The paid parental leave scheme has been proposed on a smaller scale to what was expected. It will provide six months of paid leave, including superannuation, from 1 July 2015. However, the payment threshold is proposed to be reduced from $150,000 per annum to $100,000 per annum.

Business & Investors

The company tax rate has been reduced by 1.5% bringing it down to 28.5%. This reduction, however, will be off-set by businesses that earn more than $5,000,000 in taxable income by a 1.5% levy to fund the paid parental leave scheme.

For investors, this means that little will change for those invested in businesses who earn less than $5,000,000 as the increased dividends will be offset by a decrease in franking credits. However, for those invested in companies who earn more than $5,000,000 will be worse off as they will have less franking credits as well as a decreased dividend.

That being said, with the marginal tax rate for businesses at 28.5% and the maximum individual marginal tax rate at 49% there may be some opportunities. Call us to discuss how this may impact you.

Middlewise Accounting is here to help you make better financial decisions now for a beautiful financial future. Talk to us to find out how we can make the best of a tight federal budget for you.



Middlewise Accounting

P: 1300 574 108

Email: info@middlewsie.com.au


Tax Planning Starts Now - April 2014

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There’s five key things that all business owners MUST consider RIGHT NOW. Three of them are brilliant wealth creation ideas. Please read on!

30 June is only 13 weeks after the beginning of April. It's not a long time at all. This year let’s try and use all of them.

Too often, we end up suffering because we have procrastinated and not made a positive decision to do something. If we all leave your tax planning until the end of May and early June, quite frankly there may not be enough time to do anything significant to legally reduce your tax.

So for 2014, our invitation to you is to START NOW with your tax planning.

5 Key Tax Planning Strategies

Over the next 5 weeks, we will send you one e-mail per week covering one of our 5 key tax planning strategies. These are:

  1. Establish a Self Managed Super Fund (SMSF) - How to make it your family's wealth VAULT and legally pay NIL tax at retirement.
  2. Big tax refunds for prepaid interest for a capital protected share portfolio (with NO cash required by 30 June).
  3. Debt Optimisation – Pay off your home loan sooner, minimise non-deductible interest and maximise your tax deductions for investments.
  4. Trust Distribution Resolutions needed BEFORE 30 June 2014 - or pay up to 46.5% tax on trust profits.
  5. General tax planning strategies - Key items that mean $ in your pocket.

So keep an eye out for our emails over the next 5 weeks, and we'll outline in detail for you how to save $ and at the same time grow your family's wealth in a low-risk manner.

How our Tax Planning Process works

First of all, we request from you details of your expected income and business profits for the 2014 tax year (1 July 2013 to 30 June 2014). This includes all wages / employment income, interest and dividends and rental income received, business profits / losses, and any capital gains / losses you expect to make.

Based on this information, we estimate your taxable income and your tax payable BEFORE any tax planning strategies. For example, we may calculate (based on your information) that you may have a taxable income of $200,000 for 2014. This would result in $66,547 tax and Medicare levy payable.

Secondly, we discuss all of your tax planning options. Some of these may be things to do in your business, and some of these may be investment / wealth creation options.

Third, we provide you with a report that explains in plain English the tax planning strategies we recommend and exactly how much tax you will save.

And finally, we provide you with an easy-to-follow Action Plan to ensure that both you and we can do everything that needs to be actioned before 30 June.


 

Contact us TODAY to get started!

Don't wait until June. Contact our office TODAY to start your tax planning for 2014.

And look out for our special e-mails over the next 5 weeks where we'll explain in detail how you can benefit from the above 5 key tax planning strategies.


Middlewise Accounting

Ph: 1300 574 108

Email: info@middlewise.com.au


Start NOW to beat the Taxman%21 - February 2014

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Not only are these legal ways to cut your tax bill, they’ll give you more money to build your wealth.

While the taxman is targeting investors hiding assets overseas, there are much less complicated ways to cut your tax bill. Here are 6 legal tax-minimising strategies that you can easily use – and they can make a significant difference to your overall wealth creation.

1. Mortgage Offset Account

Have you accumulated some cash and you’re not sure about what to do with it? If you have a home loan, putting the extra cash into an offset account can not only reduce the amount of interest payable on the loan, but it will also stop you paying tax on the interest you would otherwise have earned.

2. After-Tax Super Contributions

Using some of your after-tax earnings to contribute into super may make sense for you. The thing to focus on is the environment that your money is invested within. Compared with investing after-tax money in an investment in your own name, investing via super is taxed at a maximum of 15% on earnings and 10% on capital gains, and for those eligible for transition to retirement their money grows in a zero tax environment.

3. Discretionary Family Trust

An effective way to hold investments, a trust is a separate investment structure where assets are controlled by one or more persons (the trustees) on behalf of a group of other persons (the beneficiaries). A discretionary trust allows the trustee to decide who gets the income and capital the trust owns. These can suit someone on the highest tax bracket with family members who are on lower tax rates.

4. Transition to Retirement

If you are over 55, the combination of salary sacrificing pre-tax income into super, and drawing an income from super benefits can be very tax effective. Not only does it get more into your super fund but your cash flow remains the same. The income tax reduction comes about thanks to receiving less salary income (and therefore paying less tax) and more concessionally taxed pension income from your super fund.

5. Investment Bonds

Earnings from an investment bond are excluded from personal income tax because the bond provider pays the tax at 30% internally, leaving you nothing to declare on your tax return. To get the full benefits, you have to leave your money in the bond for 10 years. After this, there is NO tax to pay! It is possible to get access to the money before 10 years, but then there will be some tax payable.

6. An Investment Company

Setting up a company through which investments are bought is one way of ensuring the tax paid is never more than 30%. Income type assets are best held in a company, and growth style assets are best held by a super fund where the tax on capital gains is just 10%.

To start saving tax immediately, contact the team at Middlewise Accounting 

TODAY!

Tax saved NOW will lead to increased wealth.


Middlewise Accounting

Ph: 1300 574 108

Email: info@middlewise.com.au




Protect Your Reputation Manage your Credit Rating - March 2014

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New credit rating regulations find out who’s been naughty and who’s been good...

Next month, missing a credit card repayment will mean more than a ‘slap on the wrist’ letter in the mail and a possible fine. You’ll also leave yourself open to a nasty black mark on your personal credit rating.

The New Regulations

As of 12 March 2014, loan and credit repayment details are one of five additional pieces of information that lenders can pass on to credit bureaus as part of a new more comprehensive credit reporting regime.  Similar to the country rating system, individuals will soon be slapped with a credit rating which financial institutions can use as a quick reference loan check along with other more comprehensive checks.

Know your limits

Be aware of ALL your cards and their limits. Even those ‘emergency cards’ that we keep in the deep dark corners of our purses and wallets. It doesn’t matter whether you have borrowed the full amount or not, it is automatically assumed that you already have. So keep an eye your card limits.

But it’s not all doom and gloom

As opposed to the current system where only negative aspects of a person’s credit history have been taken into account. Under the new regulations you can be rewarded for your years of good behaviour. A few minor defaults which in the past could prevent someone from obtaining a credit card can be outweighed by years of diligence in paying bills on time.

This is the first time Australian have a real incentive to manage their credit

Now is a really great time to assess your credit file and implement a routine to stay on top of your personal finances. You can obtain one free copy of your credit file per year and an additional copy if your loan application is rejected.

Your Report Card Do’s & Don’ts

Report Card

How to GET a top rating

How to LOSE a top rating

  • Set up automated direct debits to pay off all credit cards and loans. This will safeguard you against unforeseen circumstances such as holidays or hospitalisation.
    • Paying debts late. Any payments more than five days late will be recorded as a late payment.
  • Cancel all credit cards and credit lines that you’re NOT using or need.
    • Paying your debts REALLY late. Debts larger than $150 and remain outstanding after 60 days will be recorded as a default.
  • Make sure you pay something. Pay a smaller amount rather than default if making repayments become difficult.
    • Applying for credit cards and loans that you DON’T need.
  • Check that your credit file is accurate. Credit bureaus make mistakes – make sure you’re not one of them.
    • Failing to organise easier payment plans with lenders when repayments become too difficult, will end in default.

An Eye on the future

Although these changes are a massive step for credit bureaus, they are still wanting more information. They are still lobbying to obtain further information on individuals. Credit balances, electricity and even phone bills are on your cards. With post-paid phone bills being among the first young people receive, now is a good time to teach your kids about the importance of managing their finances and their reputation.

For more information on the new regulations, what it will mean for you and other ways you can take control of your credit history, visit www.creditsmart.org.au

Middlewise Accounting

Ph: 1300 574 108

Email: info@middlewise.com.au

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