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Australian Property Market Update - Winter 2017

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Our commitment to our clients continues to evolve as we further develop our Direct Property Service in our suite of services available to you.

Please find attached our latest seasonal newsletter. If suitable to you, we look forward to explaining this service at our next meeting.

In the meantime, if you are considering investing in an investment property we encourage you to contact us on 1300 574 108.

2017 Winter Update - Australian Property Market


Practice Update - June 2017

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P r a c t i c e  U p d a t e

June 2017

Budget Update

The Government handed down the 2017/18 Federal Budget on Tuesday 9th May 2017.

The Budget proposes (amongst several other changes) to increase the Medicare Levy by 0.5% to 2.5% from 1 July 2019 (and tax and withholding rates that are linked to the highest marginal income tax (e.g., FBT) will also increase from 1 July 2019).

One of the other more significant Budget announcements is that, from 9 May 2017, the Government proposes to limit plant and equipment depreciation deductions (e.g., for dishwashers and ceiling fans) to outlays actually incurred by investors in residential properties

More specifically:

q      Plant and equipment forming part of residential investment properties as of 9 May 2017 (including contracts already entered into by 9 May 2017) will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.

q      Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset.  However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property (acquisitions of existing plant and equipment items will instead be reflected in the cost base for CGT purposes).

More taxpayers can access the benefits of being an 'SBE'

Editor: Recent changes to the law have expanded the eligibility criteria for a taxpayer to be considered a ‘Small Business Entity’ (or ‘SBE’), meaning more businesses will be able to utilise the tax concessions that are only available to SBEs.

Broadly speaking, for the year ending 30 June 2017, a business taxpayer will be an SBE if its ‘aggregated turnover’ is less than $10,000,000

That is, where the business' ‘aggregated turnover’ (taking into account the turnover of the entity carrying on the business and the turnover of its related parties) is less than $10,000,000, it will be able to access most of the concessions available to SBE taxpayers, including:

n       Access to:

       –     the lower corporate tax rate of 27.5%;

       –     the SBE simplified depreciation rules, including the ability to claim an immediate deduction for assets costing less than $20,000;  

       –     the simplified trading stock rules;

       –     the small business restructure rollover relief;

       –     deductions for certain prepaid business expenditure made in the 2017 income year;

       –     the simplified method for paying PAYG instalments calculated by the ATO; and

       –     the FBT car parking exemption;

n       Expanded access to the FBT exemption for portable electronic devices;

n       Ability to claim an immediate deduction for start-up expenses; and

n       The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.

Editor: Note that the reduction in the SBE company tax rate to 27.5% for the 2017 income year was accompanied by a limitation on the maximum rate that such companies can frank their dividends also to 27.5%.  Consequently, if an SBE company fully franked a distribution before the law changed on 19 May 2017, the amount of the franking credit on the distribution statement provided to shareholders may be incorrect (if the franked distribution was based on the 30% company tax rate).

The ATO has set out a practical compliance approach for such companies to recognise the change and to notify their shareholders.  Please contact this office if you would like more information about this.

Who is assessed on interest on bank accounts?

As a general proposition, for income tax purposes, interest income on a bank account is assessable to the account holders in proportion to their beneficial ownership of the money in the account.

The ATO will assume, unless there is evidence to the contrary, that joint account holders beneficially own the money in equal shares. 

However, this is a rebuttable presumption, if there is evidence to show that joint account holders hold money in the account on trust for other persons.

Example – Joint signatory (but no beneficial ownership of account)

Adrian's elderly aunt has a bank account in her name, and Adrian is a joint signatory to that account.  Adrian will only operate the account if his aunt is unable to do so due to ill health, but all the funds in the account are hers, and Adrian is not entitled to personally receive any money from the account.

Adrian does not have any beneficial ownership of the money in the account and is therefore not assessable on the interest income.

Children’s bank accounts

In relation to bank accounts operated by a parent on behalf of a child, where the child beneficially owns the money in the account, the parent can show the interest in a tax return lodged for the child, and the lodgment of a trust return will not be necessary.

Example – Child savings account – parent operates as trustee

Raymond, aged 14, has accumulated $7,000 over the years from birthdays and other special occasions.  Raymond's mother has placed the money into a bank account in his name, which she operates on his behalf, but she does not use the money in the account for herself or others. 

Raymond earns $490 in interest during an income year and, since he has beneficial ownership of the money in the account, he is therefore assessable on all of the interest income.

However, as Raymond is under 18 years of age, he will be subject to the higher rates of tax that can apply to children.  If Raymond shows the interest in his tax return for that income year, his mother will not need to lodge a trust tax return.


Using social media? Be aware of tax scams!

The ATO has advised that, in the lead up to tax time, it's important to be aware of what taxpayers share on social media.

Note that scammers may also try to impersonate a tax agent (or their practice) and try to trick recipients into providing personal information or to release funds.

The ATO recommends that all taxpayers:

u      ensure their computer security systems are up to date and they are protected against cyber attacks;

u      keep personal information secure (including user IDs, passwords, AUSkeys, TFNs); and

u      do not click on downloads, hyperlinks or open attachments in unsolicited or unfamiliar e-mails, SMS or social media.

Editor: Call our office if you think you've received a suspicious e-mail claiming to be from us or the ATO.

FBT: Car parking threshold

The car parking threshold for the FBT year commencing 1 April 2017 is $8.66.  This replaces the amount of $8.48 that applied in the previous year commencing 1 April 2016.

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.

Property Update - April 2016

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We have various strategies to assist you in your search for property.

Option 1 - Do it yourself;
Option 2 - We find property for you

Please see below link for available properties:

Property Availability List


If you require our assistance to increase your wealth please contact us on 
1300 574 108 or email us at info@middlewise.com.au to meet and discuss your property options.

Why Every Business Needs a CFO (and How Small Businesses Can ‘Rent a Slice’ of one)

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Larger businesses have a Chief Financial Officer (CFO) on staff. But what can small and medium sized businesses do in this regard?

Clearly, larger businesses can afford an in-house CFO. But it goes beyond an affordability issue: Large, successful businesses also understand how crucial the CFO role is to their business performance.

The CFO in a business:

  • Keeps a close eye on the numbers and trends,
  • Alerts management when preventative actions are required,
  • Helps management create sound forecasts and plans,
  • Ensures the cash inflows and outflows are managed well so the business never runs out of cash or needs to borrow in haste,
  • Reports on revenues achieved compared with targets,
  • Gives solid information on a range of Key Performance Indicators (KPIs) to the business decision makers, and also
  • Helps management with decision making.
  • This is management input that all businesses require regardless of their size. But how can small and medium sized business access CFO-level input and guidance?

    The answer: You out-source it. You get a part-time, out-sourced CFO until you can afford one full-time.

    That’s where we play a role for many of our business clients.

    Our ‘Your CFO’ service has been developed with input from our clients to make sure it’s the ideal mix of support services and affordability.

    As your CFO we roll our sleeves up and work with you in management meetings throughout the year on:

    • Cash flow – Efficient management of cash flow to provide cash for saving or investing in growth
    • Profitability – Identifying key drivers of profit and focusing on these
    • Business value – Growing a valuable and saleable business asset
    • Structure management – Staying on top of risk and taxation issues 
    As business owners we all need to measure and monitor Key Performance Indicators (KPIs). That is, the handful of numbers that really matter in running our business. 
     
    It is also important that you have a ‘KPI dashboard’ to display your KPI targets compared with your current KPI performance. This helps tremendously in monitoring and managing your business’ performance and, ultimately, hitting your targets.

    As your outsourced CFO, we will bring to each meeting that we conduct with you clear financial reports, easy-to-understand KPI information, as well as our commercial experience to interpret the information, make suggestions and help guide your decision making.

    Items we’ll discuss each meeting include:

  • Profit (historical and future)
  • Cash flow (historical and future)
  • KPIs: A mixture of focusing on Lead Indicators which drive performance and Lag Indicators that measure the outcomes
  • Marketing activity and effectiveness
  • Operational efficiencies such as work-in-progress or workflow
  • Financial indicators such as debtors, inventory, stock turn (depending on your industry and type of business)
  • Team efficiencies, knowledge management, morale and safety.

  • By helping with your forward planning for achieving the next period’s targets, and by being a sounding board for you as you strive to meet your targets, our ‘Your CFO’ service and support gives you a crystal clear focus for what needs to be done to achieve the goals of your business.

    Your next step … Call us on 1300 574 108 or email us on info@middlewise.com.au for a no cost and no obligation meeting to discuss how we can work with you as your outsourced CFO. We’ll outline for you what’s included and what costs are involved so you can see how the service can be comfortably included in your budget.

    10 Rules for Successful Property Investment

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    Many of our clients are asking us about property investments, and the best way to structure these in order to reduce tax.

    In an upcoming newsletter we’ll outline an awesome way that you can own a property and have your boss effectively pay it off for you.

    Buying the right property is the key. Recently we read an awesome list put together by property consultant Michael Matusik, and his 10 rules for successful property investment really make sense to us.

    Here’s what Matusik said:

    “My rules apply to “passive” investors – the “set and forget” types (which is the vast majority of the market – more than 90% of investors, according to recent survey results) and not to the “renovator junkies”, as I like to call them.

    1. New, or at least recently renovated, to maximise depreciation/tax return and gross rental returns.
    2. In a small or multi-staged development. Preferably under 50 dwellings. Large properties should not be ruled out. They must, however, have substantial points of difference, i.e. well-proportioned and well-appointed apartments; quality facilities and finishes; and good access.
    3. In a strong location – “infill” highly favoured, with high existing amenity; a great “walk-score”; and more importantly, potential for above average mid- to long-term capital growth.
    4. In an area with five or more pillars of economic support, including cumulative demographic/rental demand and high employment/wages growth.
    5. Within five minutes of “hard-core” infrastructure i.e. major work nodes; secondary schools; entertainment precincts and public transport, especially rail.
    6. Delivered by a proven development team.
    7. High quality in terms of design, materials and construction. It must require minimum maintenance.
    8. End prices under $600,000; better still, less than $500,000; and they must yield more than a 5% gross rental return.
    9. Limited new dwelling supply when compared with underlying demand.
    10. Sold with independent API registered valuation support and within an acceptable range of sales/marketing commission.

    So, stick to the 10 and you’ll make millions? Well, short answer – there are no shortcuts and no guarantees. But by following my 10 rules I believe you can, with a little effort and knowhow, convert a modest deposit into a sizeable nest egg. But (yes, there is always one) don’t do it blind-folded – seek independent investment advice, have at least a 10% deposit, and have a truly spare $100 per week available to afford to buy that investment property.”

    Action Plan

    Talk to the Middlewise Accounting team today if you are interested in property investing. We can provide you with independent advice about the best name to put on the contract, the best loan available for your circumstances, how to maximise tax advantages, and the cashflow outcome for you of buying an investment property.

    Middlewise Accounting

    Ph: 1300 574 108

    Email: info@middlewsie.com.au

    This article is provided as general information only and does not consider your individual specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of an individuals specific circumstances. © 2013 Middlewise Pty Ltd


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