Q: Hello there. My friend and I would like to setup a design service business and need to know the difference between a partnership and a company? If it’s a partnership can we use a domain with .com.au or is that solely for a company? What is cost difference between setting up a partnership and company.
A: Hi Martina,
Without answering the domain question, the differences between partnership and company are very important to understand, or at least appreciate.
Number one point to consider is the asset protection issue.
To get the right advice you need to sit with a business accountant (CPA or CA best bet) and run through the options available to you and get it right early.
Best of luck with the venture.
Q: I play soccer for a local club and get paid some money if my name is on the Team Sheet for season games. I have provided the club with a Statemtent by a Supplier and ticked private recreational pursuit and hobby as my selection. The club has sought permission from me for them to create a RCTI so that they can claim GST credits. Is this okay?
A: Hi Carmel,
Your statement by supplier form identifies that you do not have, or need and ABN. As such, you do not have GST registration.
While the club can prepare a RCTI, it will need to show no ABN, and note that there is no GST on the invoice. They cannot claim a (legitimate) tax credit.
Q: Hi, my husbands runs a small business as a contractor to a number of builders and developers and I do the books, He has had to bring on subcontractors to complete the work on time and we want to check about how we pay them, do they need a ABN, do we pay GST on their invoices, what about super, our accountant is away so any help would be great?
A: Brendan Curran has covered it all! Only add is the ATO website - contractor vs employee decision tool. Can be a little simplistic, or text book scenario, but still worth reviewing.
Q: I been contracting for the past 10 years and have 3 and at times 4 regular clients. I never had income protection insurance but recently was started developing anxiety issues and currently on prescribed medication.
A few friends have suggested I should look into income protection. As I’m on medication do you think there would be an issue, thanks?
A: Hi Ben,
You will need to disclose the details of your condition in your application for the insurance. This may impact on the premiums charged.
If you don’t disclose, the insurer may use it against you in the event of a claim.
Q: Hi, we need some advice.
One of our staff is never happy and continuously brings down the mood within the business and with a small team of 10, it’s very frustrating. The business is going well but it could be so much better and we are really worried about losing other staff because of the negativity. What is our best course of action, we don’t want to wait until it is too late?
A: Hi Christine,
I'd suggest the first port is to discuss with the employee the issues that you have with their attitude at work. Let them know your expectations in the workplace and how the performance improvements will benefit both them and the business.
If you don't get any improvement you will need to explore your options for termination, unless there is scope for a side-way shift.
Never easy (and one i struggle with as well) but you need to put the business first.
Q: Will my declared income on a bank home loan application be data matched with the ATO?
So does the ATO receive information from banks about income declarations in loan applications?
A: The banks do not, to the best of my knowledge, do data matching or reporting to the ATO (all personal information that cannot be confirmed by the ATO).
You may find that the bank requires confirmation of your incomes though - notice of assessment generally, though they may be prepared to accept an accountant prepared set of numbers (accountant would then be confirming the accuracy of those numbers, so will need to be accurate).
Sorry, but if you are hoping to dodgy up the application, you are likely to be caught out. Further, you may ruin your name with that bank (and maybe broker). Compliance requirements may put the broker in trouble.
Q: Hi there,
I have been working for the same company for 9 years and have been offered a redundancy package. I’m trying to calculate my entitlements and I’d like to ask if I should do the calculations from the time they made the offer or to my last day which would be in 6 weeks. Do I include a percentage long service leave as an entitlement even though I’m 6 months away from 10 years’ service?
A: Hi Shaun,
Agree with above, you should be entitled to a pro-rata portion of the Long Service Leave, and based on the departure date.
Being a redundancy, any Genuine Redundancy is based on the completed years of service - if you have just ticked over nine years, you've done well, but if you're short by a few weeks the tax free amount drops back.
Good luck with your next opportunity.
Q: I am a self-funded retiree with a share portfolio of $300,000 with a high proportion of bank shares. I feel as though they will continue to be strong but would like to ask if others think the same?
A: Hi Leo,
My feeling is the bank shares will be strong, and return to higher values once the Royal Commission is finalised and the recommendations implemented. Good dividend returns will remain.
Gut feel, don’t have the qualifications or research to back it up.
Q: Hi, I’m a shareholder in a small business (own 40%) but don’t work in the business, not a director but there is a shareholders agreement in place. Is there any business insurance I should have in place to protect my investment?
A: Hi Charles,
The business should have the insurances to protect itself - Public Liability, Professional Indemnity (where appropriate), workers compensation etc..
As a shareholder you do not take any responsibility, nor any financial responsibility to the business. Unfortunately your investment in the business will always be at risk. Insurance people here may have a rabbit in the hat to protect the share value that I'm not aware of, but generally that level of risk would see massive premiums (as percent of cover).
Grab your shareholder agreement, see your accountant and business lawyer to make sure you fully understand your rights, responsibilities as well as buy/sell agreements etc..
I have purchased a computer and other equipment of substantial value for use in a business that I'm about to start. However I have not registered a LLC or other yet. Is it possible to still claim these purchases if the tax invoices have been made out in my name?
A: Hi Marcus,
You need to catch up with your accountant ASAP! You don't have to be a company etc. to be able to claim the deductions, but well worth spending some time and money to get the right advice for you and your business. Costly mistakes can otherwise be made.
Q: Hi, I would like to ask a question about buying a franchise/licence. The parent company is not calling it a franchise (just a licence) but the agreement looks and feels like a franchise and we have to commit to KPI’s and a 3 year term. If it is just a licence agreement does that mean the parent company is required to pay tax on our behalf or is that our responsibility – thank you?
A: Hi Tim,
Regarding the agreement, I’d suggest you get it in front of a lawyer that covers contracts and understands fully the franchise rules.
Regarding the tax, that is certainly your responsibility as a business owner. Get in front of an accountant with business focus, get the right structure for your business and circumstances. A bit of cost now can save thousands each year in tax!
Good luck with the business.
Q: We do our BAS each quarter but we invested significant funds into the business in Oct and Nov and want to know if we can do our BAS for the 2 months now, then do Dec at the end of the month and then go back to quarterly?
A: Short answer - no. If you change to monthly you will be stuck with that for a minimum period of time. Check the ATO website for further details.
Might pay to check your numbers, might not be that much benefit for the longer term frustration of monthly BAS.
We have a family business and the accountant has it set up that my income is $40k more than my wife’s. We are looking to buy an investment property and also been advised to buy the property in my wife’s name. Does this sound like good advice and can we get a loan if the loan by using my wife’s name and will they look at both our income and the business profits?
A: Hi Marcus,
You should be able to get the loan using the combined incomes/business income to qualify your serviceability. Part for the Broker.
Depending on the incomes being identified and business structure, your accountant will undoubtedly be looking to provide asset protection for the property from the business. A wise strategy!
I agree with Scott above - have your accountant and finance broker/bank manager work together to make this happen (always easier when your professionals are able to work together for you).
Q: I have just set up my own business and want to ask about super. I’m a sole trader and just starting out so do I have to make super contributions based on the income I earn or can I wait until the business is making more money
A: Hi Dale,
As a Sole Trader, no super is required on your profits.
While this is handy as a start up, there are tax advantages along with retirement planning advantages to picking up on the contributions before to long.
Regarding you business structure, please discuss with a CPA/ CA accountant that deals with business.
Good luck with the new business! Exciting and challenging times ahead, and extremely rewarding.
I have a SMSF and finding it difficult to maintain it time wise. Is it possible to unwind and what do I need to do?
A: Hi Jonah,
The fund can be wound up and funds re-entered into a retails fund - but PLEASE liaise with your accountant and financial planner before you take the leap. It will cost $'s to get this sorted out, plus fees to go back into the retail sector.
It might be easier to work out/simplify the SMSF maintenance issues you are having. These do not need to be difficult, unless you were trying to regularly trade in shares or other commodities.
Get the right advice before making a costly decision (and possibly a costly mistake).
Q: Hi, we are putting our business on the market and want to ask if a buyer gets any benefits from the carried forward loses from our first 2 years setting up the business. Thanks?
A: Hi Mark,
The business structure determines what is possible, and then the format of buying/selling the business.
While you might see a positive in selling a company (only structure that allows this type of loss carry-over) with retained losses, the buyer may not be so keen. Key issue in buying the company rather than just the business is the scope for litigation following the company. As a legal entity, the company get sued, but if the business is bought out of the company, the new entity (buyer) does not take on any litigation issues from previous owner.
Speak with your accountant, as should any buyer, so that all parties are aware of their options and the best decisions can be made.
Q: We have been trying to find out if there is a limit to how much we can gift our eldest son and remain tax free. We have been getting mixed messages as it is a significant amount, is there a limit… thanks in advance
A: Hi Daniela,
There is no tax on gifting to any level in Australia.
Depending on what the money has been doing in the past, you could have tax on selling assets to provide the cash.
I would suggest you spend some time with your accountant, financial planner and maybe a finance broker (if to help your son with financing) to make sure your plans are appropriate for YOUR situation.
Our mum wants to gift some money to the kids and grandchildren. We need a second opinion and whether she or we have to help her (she’s in her late 70’s) set up a trust account and is there anything else we need to know?
A: Hi Jane,
Gifting money is OK if done the right way. The main issue will be down the track - making sure the family knows/understands what was done at this time.
There may be an impact to your mother if receiving an age pension, as there are limits to the gifting of funds/assets that are included in her assets tests. If this is not of concern - great!
Assuming your mother is of sound mind, it may be prudent to have your sit with her solicitor to review and maybe update her will. This may be more prudent than setting up a trust (however if a trust is worthwhile, they can suggest and sort this out). For this purpose, it may also be prudent to liaise with your accountant and get a referral to a solicitor that deals with these scenarios (tax, pension and family issues).
Sorry, rarely a straight forward answer to these types of questions.
Q: I’m in my last year at Uni and have a job starting in February next year in I.T.
For the last 6 months I have been doing freelance work and have earned around $30k. I want to keep doing this work when I start the job but as my starting salary is $85k will that mean I will need to set up a company and register for GST for the freelance work?
A: Per BC above, setting up a business structure is optional, but a decision that should be made after running through the pro's and con's with your accountant.
Make sure you prepare for the expected tax implications, regardless of structure.
Q: Hi i had been working for an employer for 12 months and they did not oay super my question is if they were to pay what was owed do i have the right to ask for it in cash so i can oay it into my fund personally or do they just have to pay into a nominated fund i am not confident they will pay unless i ask fir cash but im unsure if i can ask legally for it in cash thankyou
A: Hi Nathan,
They are required to pay direct to your nominated super fund. They are not permitted to pay the cash direct to you.
They are required to pay this by the 28th day after the end of each quarter. If this is not done, they are in default, and very quickly the directors become liable if the company fails.
Follow up with them regarding your outstanding super. Let hem know that you'll follow up with the ATO if not sorted ASAP. If they still do nothing, call the ATO and let them know. The ATO likes doing audits for unpaid super, can look back five years and where appropriate, will enforce the liability onto the directors.
Q: Hi - I have been contracting for 4 years and just been using a business name and ABN. My income is now consistently $12-13,000 a month and wondering whether it’s time to set it up under a company – what would be the benefits to do so?
A: Hi Mel,
Business structures can have great benefits, depending on your business and personal circumstances.
You need to speak to your accountant to review the best option for YOU. If you don't have an accountant that deals with business structures, please find one. They will need to know about your business, family dynamics and assets/liabilities at a personal and business level.
2 years ago we started a new business and spent about $300,000 so far. It’s not working out as well as we hoped and now thinking about closing it down and getting a job – the question we have is about the losses we have in business… can they be offset against the future income when we find employment?
A: Hi Sam,
Without knowing your business structure we cannot give a definite answer.
Depending on the business, if there is scope to sell it to recoup some of the investment, will make a difference.
First two to three years are always the hardest, especially in the current market.
Before you make a final decision please sit with your accountant and get advice, consider options fully. Even liaising with a business coach/advisor may help, see if there is potential to turn it around.
Q: I’m 46 and been in sales and business development for 20 years. I have had an idea in my mind for many years and would love the freedom of running my own business but the fear factor and financial commitments have always held me back. I’d like to ask other people’s opinion on how they took the first step, how hard they found it – the good and bad, thanks?
A: Hi Peter,
To use the cliche, start with a business plan. While most of it will be in your head, you need to get it on 'paper'.
Cash flow is a key issue to consider, and expect to become time-poor. It is a major step, but once you get through the initial two-three years, extremely rewarding.
Speak with your accountant (or get one) with business experience (CPA/CA recommended). Use their experience and knowledge, get a good bookkeeping software (Xero, MYOB etc.) and take some time with them to understand some basic report formats.
Finally, speak with a finance broker (one that can liaise with your accountant always helps). Make sure the financial pressure is under control so you can devote time early to grow the business (fall-back finances essential).
Q: Our business uses Xero accounting and about to set up another business with an investor. As the financial reports will be different is there a way around having to set up another Xero account, could we just use the one?
A: Hi Nicholas,
Short answer (from my point of view) is no.
Each file has its own ABN, specific to the entity running the business.
Running reports for two businesses from one file is a nightmare, you will struggle to get relevant information on a timely basis (the key purpose of such systems). While you can (with manipulation) get the report format set up OK, you will still have a jumble of numbers and a lack of clarity.
Assuming your investor wants to know what is happening with the new business, do you want them having access to your existing business details?
Some starting reasons to consider.
Q: Currently looking at a couple of commercial properties as an investment and want to know if the contracts have to say if the sale price is inclusive or exclusive of GST ..... do we also have to register for GST?
A: Hi Ben,
Generally speaking, the property will be GST free under 'Going Concern' provision, if it is sold with an existing tenant. Look for Going Concern on the front page, and be familiar with the GST clauses later in the document. Check to ensure the lease is current as well.
Confirm the details of the contracts with your accountant and/or commercial/tax lawyer before finalising. Might also pay to discuss with finance broker/bank manager for fall-back.
The GST is a round/robin of money - you pay to the seller, who passes it on to the ATO, where you claim it back from. So yes - you'd need to be registered for GST.
I work in the media and have a number of different contracts. I’m trying the get more funds into my super but in my line of work I need to be careful. If I make more super contributions is there any considerations to being able to access funds if needed?
A: Hi Elizabeth,
Generally speaking, you cannot access your Superannuation until Preservation age/retirement. Only exception is through significant financial hardship (read up on this on the ATO website - quite serious hardship required).
While Super is a great tax benefit, and could be very worthwhile maximising to draw on in the future, depending on your age, it may be more financially sound to build up your cash reserves/reduce personal debts to a point that you can manage for a period of time without work.
speak to your accountant and financial planner to get some clarity based on your personal circumstances.
I work full time as digital marketer and do some freelance work after hours. My work salary is $78,000 so do I need an ABN and register for GST for my own work?
A: You will need an ABN for a business operated in Australia.
GST registration requirement is generally $75k turnover of the business - wages are not part of the business. Registering for this is at discretion if likely to be below this level.
Speak to your accountant - if you don’t have one, find one. There are a few things you need to be aware of/consider with having a business, regardless of size.
Q: hi ..I work as a shop assistant in a clothing store and we are told we have to wear the clothes from the shop. We do get the clothes at a discount …can I claim the cost as a tax deduction
A: Hi Peta,
Generally no deduction available. If they are the general clothing of the company, it would be expected that they can be worn elsewhere as casual clothing etc.
This is a fairly common scenario in retain stores - big and small. The business may stipulate a certain colour scheme or style, or require their own products be worn, but they are not claimable.
Requirements are - Uniform (registered/logo), Protective(e.g. high vis, sun protection) or Occupation Specific (e.g. chef's outfit).
With the ATO's current plans for audit, would be worthwhile speaking to your accountant/tax agent to make sure you are getting this right.
Q: We operate a transport business and have been using ABM accounting software for many years. Finding it very manually reliant and our accountant had said their moving all their clients across to Xero but we would like to get some opinions on how they find Xero , MYOB, Quickbooks or others – thank you
A: Hi Penny,
After years of using/promoting MYOB to clients we got onto Xero about 4 years ago. Haven't looked back!
MYOB and Quickbooks, like most, are still good systems. MYOB probably with the greatest market share. however I have found they haven't updated/improved their software with the advancing of the Cloud. While MYOB gives you the capacity to store your data file in the cloud (so no need to back-up anymore) you still need the software on your computer - three versions per year.
With clients using MYOB, struggle to see any using the bank feeds well/at all.
Xero is purely cloud based, works through a decent app for invoicing, bank transactions, entering receipts (including photos). As long as you have internet access, you can access your file from any device.
If your accountant is using Xero internally, can find it actually reduced the fees, as they are completing financials from your data file, and can make adjustments in there directly.
Q: AFL Grand Final, who will win
West Coast Eagles or Collingwood Magpies?
A: Eagles by 8
Q: First time in business and my friend and I want to start a casual dining wine bar on Sydney northern beaches. Going through financial projections and wondering what benchmark we should be using for profit margins. We have the funds to fit it out so no borrowings and another $50k to start. Any advice would be helpful?
A: Hi Ronny,
Work out your overheads (fixed costs), look at your costings for produce etc. and expected number of customers per week. You can then sort out your pricing, which will give you the profit margin. Plenty of P&L and Cash Flow reports available to work with.
You can get hold of reported benchmark figures, which may give a reasonable idea of the margins applicable (range rather than specifics).
For a wine bar with casual dining, stock levels will be paramount to your success, and re-ordering etc.. Make sure you have looked into those requirements - nothing worse for a customer than for their favourite/preferred wine to be sold out. Your early reputation is soo important. Don't over-stock either (kills cash flow).
Catch-up with AJ above, or Brendan Curran (another NSW Accountant on here) for advice. I assume you have drawn up a business plan (to some level). If not, put everything else aside and get into that process. Fail to plan - plan to fail!
Q: Hi All,
I hope you're all winning!
I have a tax question for the accountants here.
If someone has held a company for over 12 months and is now selling the business, will they be up for full CGT? Or do they get a similar concession to a real estate asset?
The business has been held by 2 directors and shareholders and will each have an equal share of the proceeds from the sale.
A: Hi Frank, if selling the company, then yes, should qualify for the 50% discount if owned for more than 12 months.
Have your client liaise with their Accountant to make sure selling the shares in the company is the preferred option.
I have just moved from being an employee to a contractor – same role with greater flexibility. My question is what percentage of my income should I put aside for tax and is there anything else I need to consider, thanks?
A: Brendan Curran is on the money here - check this is the right format for you, and you are being compensated properly.
Regarding the tax, speak to your accountant to get a good handle on it. It depends heavily on the level of tax deductions you would be claiming against your income. They really aren’t much/any different to claiming as an employee.
Q: I contract full time to a company and have sub-contractors working for me. Hard to find the information I need to make sure I pay them properly. Do I pay their tax for them? Some sub guys want cash. I had a local accountant but it didn’t work out – do they need to be local?
A: Genuine subbies don’t need tax withheld, but you need to check for Super and Workers comp.
Don’t need local, but need someone you are comfortable and confident speaking to. Look for CPA or CA for top qualifications.
Q: I have a small business that has been going for a year and I need to access some capital to take advantage of two new contracts. No luck with the banks so I am wondering if it is possible to use some of my superannuation to invest into the business. We only need about $50,000, are there any limitations and do I need to set up a SMSF to do it?
A: Hi Antony,
Would be happy to have a chat about your situation and see if a finance broker can assist, depending on your set-up and numbers. From experience, the banks can say no if there isn't enough information to assist them to see the potential in the business.
Q: Hi I’m thinking of selling my home which I used to secure a loan for a investment property the bank told me I need to repay 80% of market value of investment property My loan is fixed interest only do i have to pay extra fees and charges ? Thanks
A: Hi Silvana,
Assuming your capacity to pay the loan is not in question, I would expect that you would just need to reduce the loan to equity position on the investment property to 80%.
You might have to pay some penalty interest, depending how much you need to reduce the loan balance, and how long you have left on the fixed rate term.
Good luck, and don't be afraid to liaise with a broker to ensure the bank is looking at your plans properly - there may be options available that the bank hasn't considered (generally to hard too think out of the box).
Q: Hi, I have recently become the Executor of my dad’s estate. Through his current accountant, I have been recommended to see a Financial Planner as the whole estate is in ASX listed shares. I am worried about getting bad advice. What are some of the questions I should be asking the adviser to know if they are any good?
A: Hi Sam,
Ask the accountant, your accountant and/or any other people you trust for a referral. Hopefully they will only refer someone they trust.
Financial planning can be very subjective. Depending on the planners own experience and stage of life, the advice can vary substantially. I'd suggest trying to find someone at a similar stage in life to you, so they will hopefully be with you for the longer term.
From your secondary comments above, it will certainly be worthwhile looking a diversifying your portfolio, but you need to get the advice for your circumstances.
As planners generally charge fee for service, rather than receive commission, you are in a stronger position to get initial comments and get an idea of their views before going too far with someone you don't connect with. A good planner will be someone with your interests in mind, that you feel comfortable liaising with going forward, and who can tweak the plan as your situation changes (spouse/family/work).
If they have a on-size-fits-all attitude, politely thanks the for their time and run 😊.
Once you have their advice, be prepared to ask them questions, and maybe even run it by your accountant (assuming you have one you are comfortable liaising with). While they may not be able to provide advice, they can certainly give feedback for further discussion.
Q: My husband should be treated as an employee , he is employed as a subcontractor , he is carpenter . His boss has not paid into super or PAYG. So he not paid tax this year. He works full time and on an hourly rate , uses his own car and tools for the job- he invoices his boss weekly and provides an ABN . What should he do.
A: Hi Kate,
Best option is to identify to the boss what his obligations are - even under subcontractor arrangements, can often still be required to cover Super and Workers Comp Insurance. ATO has a great decision tool on their website. I'd recommend you have a look at this, maybe print/email the results to the boss so he knows where you are coming from.
As for PAYG(W) - nothing illegal under the current arrangement. You can ask for a voluntary withholding amount, generally 20% of income, to be dealt with by the business, otherwise liaise with your accountant to work out a reasonable amount/percentage to put away (when done well, you can benefit from having the governments money working for you).
If you want to rock the boat, you can mention to the ATO about the super - they are happy to audit the business and charge the superannuation accordingly. Same can be done with WorkSafe for workers comp insurance.
Note it is a small world out there, only use as a last resort.
This is a big area for the ATO at present. The building industry has been the case in point for subcontractors being incorrectly dealt with over the years, with the government keen to reduce the mistakes and penalise those that skirt the issue. Unfortunately many small businesses have gone bust as a result of this issue.
Q: Politics in Australia, you have the floor
What’s the one message you’d like to convey to the leaders within the Australian Parliament in relation to the way they are governing, leading, operating and managing the best interests of Australia and it’s people in both the short and long-term?
A: On current and recent history - No Confidence in either side.
Elected by the people, For the people. Time to get back to governing and stop ‘playing’ politics.
Q: Hi team
My wife is a teacher that has just finished up mat leave but yet to return to any full time employment.
Whilst on mat leave, she undertook a makeup course. The course has assignments that require you to purchase makeup supplies but they advise to buy significant more to build up the kit once she starts working as a makeup artist. Currently, she hasn't got an ABN though will do as soon as the course is complete.
In her tax return, can she claim these significant expenses as either educational or work expenses? Reallistically they are both but not sure if recognised by ATO. How can we best structure this?
Thanks in advance.
A: Hi Dan,
As the study and purchases are for an activity that is not yet earning an income, the expenses cannot be claimed as a deduction. ATO view is that there needs to be a direct connection between the incomes being earned and the expenses.
As far a stocking up early on product to use once stated - from a tax perspective, I'd suggest the opposite. Once work is confirmed, stocking up on the necessary products at the time will provide scope to claim the expenses. If there is too much of a time lag, the claims are lost.
Q: Regarding Wills.
Wishing to make out a will and living in Queensland. Do I have to include my children in the will. I would prefer not to mention them but was told that legally I cannot exclude them from my will.
A: Your children are one of the few who can easily contest your will.
From comment I have read over the years, it may be a better idea to mention them, even if you are specifically not leaving them anything, or give them a token amount. That way you have considered them and made a specific decision regarding your estate. Same goes for any other parts of the family.
Please get decent legal advice, as the laws may differ from state to state, and my experience is directed at WA situations.
Q: Taxation query
I am asking for a friend. She was advised by the Commonwealth Bank to purchase their shares. She has now lost $36k due to their advice. Is there any way that she can claim this on her tax.
A: There will be a capital loss, which can only be used against capital gains. If your friend has capital gains, then yes, can be used to reduce her tax. Otherwise any loss(once shares have been sold) will carry forward until there are sufficient gains in the future.
If not yet sold, and not needing the cash, might be worth holding onto for the dividends, and wait/hope the value returns over the next few years.
Q: I am intending to purchase a commercial property - what advice can you offer to not pay GST and reduce stamp duty?
A: Hi Lina,
Generally no scope to avoid stamp duty, or even minimise. It will be the transfer fee of the property that will attract the duty.
GST can be avoided where the property is currently leased. Will then be sold as a 'Going Concern'. The GST is just a timing issue, as you will be able to get the GST back on the first BAS you lodge after payment. Where this is happening, financiers can take this into account and allow a few months to pay back the GST portion without hiking their rates. speak to your broker.
Make sure you speak to your accountant (or get one to speak to) before you go too far with these plans. There are other issues you need to get across before you sign on the dotted line!
Q: Hi, I am 30 and earn 87k pa. My boyfriend is 27 and doesn’t have an income (but will in the next few years). We have combined savings of around 150k.
My question is: what is our best move? Continue to save and put down a chunky deposit on a place in Perth (where we plan to live in a few years) and then use equity to buy an investment property or the reverse? Buy an investment property in the interim that I can service with my income. Orrrr start a share portfolio?
I’m feeling the opportunity cost of not doing anything right now.
A: Hi AK,
From James above, I'd suggest (though not financial advice) looking at the Perth market for where you would like to live, and rent it out until you are ready to move in. a real buyers' market over here, though not sure when the market will turn.
You will get short term negative gearing while also being in the market. Being your only property, and planning to move in, not a bad idea to then smash off the loan as much as possible (outside of opportunity cost of other investments). That equity could then be used to assist with your next investment.
Use your team of Accountant, Financial Planner and Finance Broker to help set everything up right, and look at all the options.
You've taken the first step - asked the questions!
Q: Consider for a moment or two.
In 2008 (GFC) the Australian Government gave a guarantee on bank deposits to Australian Financial Institutions to the tune of $600B. It was in the eyes of the Government a necessary initiative to shore up local confidence and protect the nation’s international competitiveness and funded by taxpayers.
Fast forward 10 years and Australia is drought-stricken.
The big four banks in Australia now have a combined market value of approximately $384B. When you consider, 82% (20,500,000) of Australian’s are over the age of 15, the $384B represents a value of $18,731 per person.
As a Friday 3 August 2018 the big 4 banks have donated $3,300,000 to The Big Drought Appeal to help the Australian Farmers.
• Commonwealth Bank - $2M
• ANZ - $1M
• Westpac $200,000
• NAB - $100,000
Using the same parameters as above their donations represents $0.16c per and 0.0008% of the value each person over the age of 15 delivers to the banks.
We’d love to get your thoughts. Are the bank's donations fair and reasonable or should they be donating more?
A: The banks can do more - and should, but so can and should we the consumer.
Would love to see the banks doing more to assist with the direct financial burden during long droughts (freeze repayments and interest, extend finance where viable) along with the donations. Without looking into specifics, are Westpac or NAB doing more as direct assistance rather than donations to a cause that may not get to the farmers efficiently enough?
As a country, we need to look at our spending habits and look to keep profits in Australia - farm produce and manufacturing etc. before we fall into a position where we have no capacity to do so.
Q: Hi, my husband is 62 years old and is being made redundant from his role. He has reached preservation age for his super. My question is, can he take a lump sum payment of his super and then return to work at a later date, even though he won’t he 65?
A: Hi Julie,
Brendan is spot-on regarding the withdrawal of funds once over preservation age. Being 'retired' doesn't work for everyone, so there is no restriction stopping a return to work if desired (ATO doesn't like a scheme of this sort though).
Please liaise with your accountant & financial planner to make sure you are considering all the options with the super. While your plan may not be wrong, I'd hate for you to find it is not the best plan for you longer term.
Q: I know salary sacrifice cap to Super is $25k per year (incld employer contribut) and up to $100k after tax. I received inheritance - paid off mortgage, and have balance in term deposit atm. Once that money comes off term deposit, is that classed as after tax and can I contribute $10k straight into my super as a one off?
A: Hi Jacqui,
Per James above, you can now put your own funds into super and claim the deduction - the $25k cap has this included so be careful.
Your best bet, being what most would consider a good financial position, is to speak to a good financial planner and sort out yourt plans going forward. Between super and personal investments, thereis a world of opportunity for you to consider.
Please speak to your accountant and other contacts if you don't already have a trusted financial planner, and make sure you are comfortable with the planners advice before you sign anything. Have other trusted advisors look over if in any doubt.
All the best,
Q: if i rent my house out and there is a short fall of 1000 buck a month can i claim it all back at tax time?
A: The negative gearing is the key issue for tax.
If you are paying principle and interest repayments you can only claim the interest part. If interest only, then you would be looking at the difference.
You should also get a depreciation report done, which might see a significant increase in the negative gearing amount, and hence tax refund.
If you’d like to make an appointment I can go through the details of this more thoroughly.
Q: Should financial literacy such as savings plans, credit scoring, personal finance, credit cards, interest rates, home loans, interest calculations, buying and selling and the value of money all form an important component of the high school curriculum?
A: Fully agree!
Basic financial literacy would be very worthwhile. While many aspects are there at a basic level (simple and compound interest in maths) they are not put together for practical use.
An understanding of basic life skills and knowledge of how income, tax and debts tie in, budgeting could see the next generation avoid some of the mistakes many are making at the moment.
Sadly, the view of 'that's how my parents did it' leads to the same mistakes being made, generation after generation.
Q: Hi all, if a shareholder of an unlisted public company is wanting to sell their shares what information is the company obliged to provide in relation to the financials and performance of the business to allow the shareholder a reasonable chance of selling their shares?
A: Hi Paul,
The shareholders in a private company will generally have the right to a copy of the financial statements from year to year, once completed by the accountant. They won't necessarily get a copy without asking (normally a director as well, in which case they should always receive a copy, along with access to general accounts information/management reports).
You may find the shares can only be sold to an acceptable new shareholder - so the continuing shareholders have a level of control on who can come into the business.
Depending on the scenario, it may be worth getting an independent valuer involved, as the intangible asset of Goodwill may be a big issue. Everyone will have their own view of its value based on their position in the valuation.
Party selling out may find value and peace of mind in talking to a corporate lawyer, just make sure they have all appropriate information at hand. If there is a shareholder’s agreement, that will often take precedent, though some areas of the Corporations Act cannot be over-written.
Q: My father passed recently. He had a SMSF where he and my sister were directors of the fund. My sister is also the executor of his will. My sister and I are both nominated 50/50 beneficiaries of the fund. Is my sister able to sell all the shares in the fund and distribute without going to probate? And if so, would this be tax free? Thanks
A: Hi Bruce,
Sorry for your loss.
Your sister should be fine to start selling off the assets in the SMSF to clear your late fathers share of the assets. She is bound, as trustee, to ensure the funds are allocated per the binding nominations. The fund is independent of the will, so probate shouldn't be needed.
As you and your sister are adults and from the sound, financially independent of your father, there is likely to be tax implications on the account being closed.
For legal advice, I'd suggest Trainor Legal in Subiaco - 9380 4800. We can assist with the tax matters, though the fund will undoubtedly have an accountant from years past that your sister has dealt with. A sound financial planner may also be of value as this time.
Q: My brother, mother, and I want to purchase an investment property, but we were thinking to only take out the loan in mine and my brothers’ name. The plan was to occupy the property for 6 months so that we will be eligible for the first homebuyers grant (Mum would not be eligible as she has purchased property before). Can all three of our names still be on the deed for the property, if only 2 of our names are on the mortgage?
A: Hi Jared,
You have bigger questions to ask around the format of the purchase - to ensure everyones interests are covered both short and long term.
What happens when you or brother wants to sell out and buy own home with spouse? What happens in t he event of death etc.? What happens if... - so many if's!
You need to speak to your accountant(s) and maybe get legal advice to structure up right, have wills updated and an agreement signed off (like a parnership agreement for businesses) to protect each other.
But the short answer would be along the lines of - you probablt can't have mum on the title as this could kill the grant - so she won't be a legal owner in that case. Loans can potentially have mum included, though there are potential isses and the banks don't like it. Negative gearing might only be in the legal owners names, unless...(speak to your accountant) and Capital Gains Tax implications would be to the same parties.
Happy to have a chat about this, but bigger issues around the idea than just first home owners grant.
Q: It is reported 75% of Australians over the age of 65 receive the full or part pension from the Government.
Compulsory superannuation was introduced into Australia in 1992 (26 years ago) for employees to have a percentage (now 9.5%) of their income invested into a superannuation fund to help fund their retirement years. The desired outcome was for people to be self-funded retirees as opposed to being reliant on government pensions.
The superannuation industry is a $2.6 trillion dollar industry with something like $26B of fees paid annually.
If after 26 years, 75% of Aussies over 65% are still reliant on the government it begs the following questions
1. Is the current superannuation policy working?
2. Who is really benefiting from the compulsory superannuation regulations?
3. Should superannuation be compulsory or voluntary?
We’d love to get your thoughts and opinions.
A: Seeing my parents retire a few years ago, and using their superannuation to reduce debt to a nominal level, and move onto the pension had me question the policy - though they only received super for part of their working lives, at lower levels etc..
I would expect a large portion of the over 65's on age pension are those that have used up their super to clear debt, have the overseas holidays etc. while they are still capable, and fall back to the reduced income after that.
With older Australians living longer, and most super only expected to last a maximum of 15 years, a reliance on the age pension will always exist.
Compulsory super should stay, and more flexibility for those in later stage of working life to put more in to allow for the longest timeframe possible to draw it down. Improve the industry for retail and industry funds to protect the members balances and push for advisors to have a compulsory file review and client meeting every two year after say age 50, to make sure the products invested in are still relevant.
Agree with Ken above - need to push for self-employed to contribute as well. Have to be careful there though, as many small businesses have enough cash flow issues, especially early on.
Q: Hi, starting a new job as a contract courier and have to set up an ABN. I don’t have an accountant (anyone know a good one in the Shire) – my question is do I have to keep a log book for just one month or so I have to all the time for claiming expenses back?
A: Damien P asked a similar question about a month ago - have a look at the thread there.
Generally speaking, as a courier you will have a van, which will qualify as a commercial vehicle. This has historically been accepted as 100% business/work use.
The ATO is trying to push for a log book to be done on these going forward with the same requirements as other vehicles. Just to prove you aren’t taking the van out for your surfing weekends, camping trips and standard run to the shops etc. (I can only assume they have never driven one, or parked them in a public area.)
Certainly find an accountant you can liaise with - don’t have to be too local these days with the technologies available.
Q: I'm getting divorced, I moved out of the family home about 12 months ago and my ex has kept living there. It's taken us this long to work through all the negotiations for the financial consent orders and agree on a settlement. Soon he'll buy me out of the house we lived in together and he'll also transfer some of his superannuation into my super fund. Will I need to pay capital gains tax on either of those?
A: Hi Ali,
There should be no Capital Gains Tax on either aspect! As your marital home, never earning rental income, it should be CGT free (I assume you haven’t purchased another house in the last year).
Where these are done on settlement endorsed by the court, generally no tax implications at all.
Good luck with the next phase of life.
My husband and I are recently married and in our mid-50s. We have been discussing setting up an SMSF and joining our super to invest in property and would like to know what steps we need to take, is there a certain percentage of our individual super we can only contribute or can it be all of it?
A: Hi Fiona,
If you are unaware/unsure about the complexities surrounding a SMSF, the best advice you can get is to sit down with an Accountant and Financial Planner and get the RIGHT advice. I know everyone is still uncertain about Financial Planners (there are still some questionable ones, few and far between now) but a good planner will run through your situation, advise on the cash flow requirements and make sure your plan will work for you. Charging fee for service these days means they can happily discuss property as well as shares etc..
Speak with your accountant (if you have one) and get a referral from them. Either in-house or external, they can review and discuss the plan (possibly not give advice though). Your accountant can then discuss your obligations and requirements as trustee for your fund.
These are not simple little products to have, can be costly if borrowing (both set-up and annual costs) and extremely costly if you get it wrong.
Best of luck.
Q: With the Federal Parliament, today securing personal income tax cuts is it now time for Parliament to do the same for company and business tax cuts. Let's rally Business Australia and share your thoughts?
A: Changing Corporate Tax Rates helps (short term) available cash flow for SME's using company structure. There has been no mention about assisting the SME market operating under Sole Trader, Partnership and Trust structures - where the individuals pay tax at marginal rates every year (Don't like S.T. or Partnerships in general anyway).
I would rather see the inefficient taxes like payroll tax cleared away, and some genuine incentives provided for the SME market.
BC - I have made a few comments over the years about taxing families as such, to assist in the costs of raising a family. Perfect example is the FIFO family, where Dad (typically) is working a 4/1 roster and Mum has to do al the running around with little support - and can't really manage a lot of time for a job. The tax on a $150k salary is huge, with nice savings if slit to effeectively 2x $75 incomes. They don't get any other Centrelink/government support.
There is always plenty for the Gov't to consider!
What are the tax implications if assets are used to repay a debt instead of an actual cash payment?
An example below:
A loan is provided by party A of $10,000 with 20% interest to party B.
Party B cannot repay and so they hand over a car valued at $12,000 to party A and the agreement is extinguished. No cash has changed hands.
Does party A have to put their hand in their pocket and pay tax after receiving the car?
A: Simple answer is yes - receipt of goods to cover payment is still taxable. Same as barter systems.
$2,000 interest income, the other $10k is just repayment of loan.
I am currently paid $243,000 per annum and I am expecting an offer of redundancy in the coming weeks. I am unsure of what my tax position will be if I accept the offer. I have worked for 12 years in my current employment.
My employer provides a calculator to work out what the redundancy payment will be. However, they have told me that any offer of redundancy is not finalised until the day the offer is made. The calculator tells me that I should expect the following:
Notice Period Entitlement: $29,600
Severance Payment: $158,500
Annual Leave Entitlement: $15,000
LSL Entitlement: $41,500
Estimated Gross Payment: $244,600
Will I be paying full tax on this payment? Someone mentioned to me that I will pay concessional tax – what does that mean?
A: Sounds about right there Glenn.
A nice chunk tax free and reduced tax implications on majority of other components. Certainly not full tax!
My partner and I recently started out in a turf laying business. We are contracted work by a turf supplying company, he then pays the boys a gross income as they are running under an ABN like us.
We are not particularly well off and we don’t make a profit, just a living.
I’m just wondering if there is anyone that is willing to offer a bit of beginners advice on how and where things need to be lodged in regards to BAS, Tax Returns, etc ? I’m not needing someone to do it for me, just rather guide me.
Any help would be sincerely appreciated and I understand it is only an opinion, not professional advice.
A: Hi Louise,
Sorry, but the best advice to keep your costs down is to speak to your accountant and get the right advice early. If you don’t have one, get one.
A little cost now may save you a large amount down the track.
Q: Does someone (not working) need to lodge a tax return?
Circumstances: Over 65 and retired. Approx. $10,000 of investment income (including franking credits) plus an additional $10,000 of assessable capital gains (after 50% discount).
So, with SAPTO and LITO, they won't have to pay any tax. But, their total income is over the $18,200 tax free threshold.
On the ATO website on the 'do you need to do a tax return' tool, one of the things says "Does dividends and distributions exceed $18,200"? and if you pick yes, then it says you do need to do a tax return. Dividends/distributions haven't exceeded $18,200 but they've had a capital gain that has resulted in taxable income being over $18,200.
So, do they need to lodge a return or can they just submit a franking credit refund form for their franking credits?
A: Hi Glenn,
If lodging themselves, the deadline is 31 October each year. If through an agent, generally 15 May the following year (we have just finished lodging 2017 returns).
With the expectation that they will have a refund, the ATO generally has a soft approach, as they don't mind holding onto your money.
From the sounds of it, should be a fairly simple return to process through - unless the $10k capital gains is from quite a number of share sales. Local agent should be able to run the details through with your client without a drama (we can do from Perth as well - small world these days!). Will need a full return at the end of the day.
Q: Hi, I am 26 and have been with the same company for 5 years and my super is about $25,000. Is that enough to have a financial planner now or should I wait and just use the superfund through work?
A: Hi Abby,
Never too soon to have a financial planner and make sure your super is working for you. Because they do so much more than just super!
But be wary - depending on the advice you are seeking, there are fees involved that can be quite high. Make contact and ask what they will be charging based on what you want to get out of the advice, so you don't get a rude shock.
Q: Hi, I set up my own contracting business in April this year and have quite a bit of money owing with invoices due to be paid. When I left my old job in March I had quite a bit of holiday pay owing and paid more tax than normal so if the money owed to the business comes in after 30 June will it need to be included in this year’s tax returns as the invoices were dated pre 30 June?
A: Hi Toni,
You can elect to have the business taxes on a cash basis under the small business format. This will be the same for accounts you owe as well, and will generally be a long term decision.
Check with your accountant, who can generally run some projection and tax planning numbers to help you decide.
Q: Hi there, I was made redundant 4 months ago and had a novated lease with my previous employer. I have now been offered a 'vehicle hand back option' regarding the car from the Lease Protection insurance company. They will cover up to 25k (less car payments and petrol costs already paid) if I hand back the car to the financier. The current payout figure is 39k on a 2016 Jeep Grand Cherokee. Is there anything I need to consider before I decide?
A: From what I read of your query:
You are being offered to sell back the vehicle to the lease company/car yard at a value to be determined.
The Lease Finance Insurance will cover up to $25k of the value difference.
Payout figure quoted is $39k.
2016 Jeep G.C. - what is the private sale/trade in value? If you can get more on a trade-in/private sale and the $39k is set, may be a better option. If the vlaue is say $20k, then handing back would make sense.
Unfortunately the Novated Lease options are generally set up to look after the finance and car company - you pay top dollar for the car, finance at a higher rate - and the novated lease/salary sacrafice company gets the kick-back. The tax saving and personal contribution are offset by the the higher payment values.
Good luck with this - hopefully there is a positive outcome.
Q: I have just started working for a new employer as a full time Sales Representative and the employer is paying fortnightly a car allowance reimbursement. Car allowance of $20k annually which also includes fuel and running costs. I am not sure if I should purchase a new or used car or lease a car and which is the best option tax wise, given the car will be used for business purposes 80- 90% time? Thank you Gen.
A: Only thing I'll add to BC above - whatever car you are buying, understand that if you buy above $57k you may be limited to the amount of depreciation you can claim. New or second hand does not matter.
And remember - LOG BOOK!!!
Q: Question on behalf of my mum, she is 78 and still very active. She is looking at buying a house and land package near Goulburn for $450,000 as an investment. Mum owns her own home valued at $1.2M and an investment property valued at $1.6M and she lives off her super. Apart from the super she has around $200k in savings and would use $150,000 to purchase the property. With a strong net asset position would she be able to get a loan of $300K and what lenders would look at a loan like this?
A: Without wanting to sound rude, the question I would put up as an accountant is along the lines of estate planning.
What will happen to this property in the event of your mother passing? Would you/your sibling(s) be looking to keep the property or sell it off?
Regardless of Capital Gains Tax (a nice problem) the buying and selling costs can be significant. If the property was to be sold to clear the debt, then weighing up those costs against the return on investment, compared to other investments, would be worth considering.
If your mother lives on for 10-20 years or longer, then this isn't such an issue.
Sorry, but we like to play devils advocate to make sure all issues have been considered.
Q: My husband is set on buying a handy man franchise costing us $40,000 to join. He is very good around house and I think he can do it himself but he thinks he needs support and the brand. For us it is a lot of money and how do we know they will support him with new customers?
A: Hi Angie,
The idea behind the franchise model is generall to provide the how to formats for the business, marketing support and an almost ready made client base. But obviously you pay for it.
Per BC above, try to speak to other franchisees - ideally not too close to your area so not in conflict. They may be more open and upfront. Speak to your accountant with numbers in hand, and consider having the franchise agreement checked by a franchise lawyer.
Biggest negative I have seen with some franchises is the selling out clauses (along with the cost of getting in). If they control the sale, and take a considerable percentage, you can build a strong business and find that selling at a higher value provides no end profit, as it is chewed up in fees.
Do you and your husband have much business background? You may be able to set-up and build a great brand in your local area for much lower costs. It is harder, with regular money going out for marketing etc.. Get your accountant/business advisor involved and work out your business plan. Measure what works and what doesn't, so you don't push the same marketing for no results.
All these issues are what the franchise will provide (through their experience).
It can be very rewarding to build it up yourselves, but is certainly harder and more stressful.
Q: Hi, ....been offered a job as a contracted courier not employee. I have to get an ABN but not sure about things like super, holidays and the taxes. I’d like to get some advice on all the questions I should be asking the business?
A: Agree with the above.
The main aim for businesses not having the employees, along with the red tape, is the flexibility (similar to casual employees) of not paying you unless you work. They may also want you to supply your own vehicle (takes the risk of owning the asset away from them). Oddly enough, these are weighted in the businesses favour.
For you - your rate should cover for a general wage paid in about 44 to 46 weeks of work (allows for the loss of public holidays, annual leave, sick leave and the longer term LSL). They will not withhold tax unless asked (they still might not) so it is your obligation. You should also receive the extra 9.5% super, which you are not obliged to put away, although highly recommended.
If you have to supply your own vehicle, check the numbers to make sure this is in your favour. You may need your accountants assistance, but from experience I'd suggest pushing to receive enough in vehicle rate to cover the cost of buying the vehicle(including finance costs) within three years, plus a rate for the ongoing costs. It isn't hard to get lost in the numbers and find that the running costs and financing costs only leave you a relatively small income at the end of the day, to which you need to take out income tax as well.
Don't forget to identify GST as well, and keep on top of this. Too easy to see that money come in and not have it put aside for BAS time.
Plenty to consider before jumping in head-first.
I want to buy an investment property to help set up my two kids, 17 and 15.
I know they can’t borrow money and the loan will be in my name but what’s the best way to set this up.
Can they be on the title or will it have to be a private agreement and what are the CGT and stamp duty implications should they end up owning the property over the next 10 – 15 years?
A: Hi Gary,
Outside of the stamp duty implications, two great options are via trusts (set up one for each kid) or through your estate planning. These generally have no extra problems with stamp duty.
What sort of property would you be looking at? You might be able to get negative gearing, which could be very beneficial in the short term (in your own name).
If you plan on the kids living in these houses in X number of years time and deciding what they want to do with the properties down the track, trust might be better - while not renting from the trust, they can accrue expenses to minimise the capital gains implications.
If the plan is to give them access to a starting house, but keep available for your own longer term investments, use as part of your estate planning (update your will) where the CGT implications will pass to them, when they eventually sell.
Speak to your accountant for specifics on your circumstances. Hopefully some starting points to consider.
Q: I run a small business with 3 staff and the business is going ok apart from staff issues. Their work is great but after 5 years I feel I would be making more money for my family if I chose to operate on my own. With super, taxes, paperwork and their personal issues.. it is wearing me down and I’d like to get some advice from other business owners who may have or have been through a similar experience. I do feel obligated to support them but at what cost, thanks in advance?
A: In a similar position Sally.
I recall a simple manage technique - they are not staff/employees, but your team (it is a perspective thing). When you have the team with you, they can/should give you the freedom to have a life as well.
Sit down with your accountant, or consider an external business advisor by all means - but # 1. please revisit your business plan. Most importantly our short/medium term goals.
What growth strategies can be implemented to take the next step? What opportunities are there for your business? Take some time out from the business to work ON it, rather than just IN it. By looking at this and driving the next step in your business evolution, you just might find that lost spark, and find the $'s look after themselves.
Running a business isn't easy, and the stresses get extreme. It can be lonely when dealing with these sorts of issues. It is imperative, to my mind, to have a network of other business people you can talk to, to vent the issues every now and then.
And use your professional network to assist with those opportunities. A good Advisor (not just accountant) will help steer you in the right direction and help develop future plans.
Q: I am looking at opening an SMSF but I am not experienced in this area. What should I be careful of when approaching a Financial Planner (ie. questions I should ask), amid the media coverage of the Royal Commission?
I am not interested in taking on products that the Financial Planner might offer. I want financial investment advice and I also want the Financial Planner to manage the SMSF as I have compliance concerns if I were to do it, myself. Thank you in advance.
A: Hi Julie,
If you have a good and trusted accountant, they may be able to steer you to the right planner for your interests.
A SMSF can be great in the right circumstances, and the compliance isn't that hard - there are just key issues to understand.
Work with your accountant and planner to make sure it is right for you and consider your investment strategy - how you want to invest. While you can leave some level of control with the planner, you still need to be involved and understand the risks involved in each investment option.
2 friends and I are starting a property renovation business where we help people with the designs and renovations with their own properties. We hope to one day to buy, renovate and sell properties as well and would like to get some advice on the things we need to consider in setting up the partnership?
A: Can't agree more with Brendan above! Find a decent business accountant local to you, and all three of you attend the meeting. You can each have individual advice if needed, but a good accountant should be able to look after everyones interests.
Do your business plan and make sure you all have similar business expectations/directions. Plan for the longer term as well as next couple of years, exit strategies etc.. Better to deal with these issues now than down the track, when friendships can be easily fractured. Will be worth speaking to solicitors that set up structures to assist with these types of agreements.
Best of luck with the venture!
My business has been operating for 10 months and we have just secured a couple of new contracts which means I need 2 new staff. As the business has just started to grow I am finding it difficult to get the finance needed to take advantage of the new contracts. Is it possible for me to invest some of my super into the business? I have $220,000 in super and only need about $40,000
A: Hi Matt,
BC is right - there are very clear rules with Super that say No to usiong those funds for the member or their affiliates (including related business).
PLEASE speak to your business finance broker and accountant, get interim accounts prepared, budget for the upcoming year with the growth and additional costs associated (to make sure this is financially worthwhile) and update/prepare a business plan. Getting finance for the business, when so young, can be difficult. Hopefully these details with a good broker will see some success (may need to use equity in your home if available).
Self-employed and about to buy a new car – is it better to get a lease and finance the car or use the redraw on our home loan?
A: Hi Tim,
Depending on the finance costs of each, might be more advantageous to finance through the business and claim the interest as a deduction. Redraw on the home loan, while potentially still deductible, means that a proportion of the home loan may be deductible.
Often find that the repayments are lower, therefore that is all you pay, and don't pay off the vehicle finance for an extended time, therefore costing more in interest long term.
If you can get a split loan for the car against your home loan and pay it off over five years, this can be a great way to go.
Please speak to both your finance broker and accountant to get the right advice for your circumstances.
Note the $20k write-off has been extended, so if looking at a cheaper second hand car, might be able to claim 100% this year - this might not be that great an option, but again speak to your accountant.
Q: Can someone explain the difference between an offset account and redraw. Is an offset account really that important for the loan we have on the property we live in?
A: Hi Kay,
Outside of the finance brokers answers, what are your plans for the house longer term? If you have any inclination of turning this into an investment property down the track, using the offset format can be much more beneficial from a tax perspective.
Both will save you interest, the bigger question comes "at what cost"? Is the redraw loan at a higher or lower interest rate to the offset format? Generally speaking, you cannot lock in the interest rate with these features.
Speak with your finance broker or one of the guys above, and maybe look at splitting up the borrowing to take advantage of fixed rate loan and redraw/offset options.
If considering the option of renting out the property down the track, speak with your accountant as well, and have them work with the finance broker to set up with both short and long term plans considered.
Q: Wife and I in our mid 50’ss with not much super. Looking to downsize from a family home worth about $1.6M into an apartment block, Purchase price $950K including costs. We are both still enjoying working so should we look to place the funds into a managed fund where we can get access or our super? thanks
A: Hi Marcus,
You should get some time with a financial planner and your accountant. With +/- $600k to play with, there will be a few options to consider, depending on your overall circumstances. Do you:
i) Invest in personal names;
ii) put as much as possible into super;
iii) part of each (and where on the sliding scale)?
It all depends on debt position, retirement timeframes, retirement plans (i.e. what do you want to do when you retire), lifestyle plans in the meantime.
What risk profile do you sit in? I would guess towards conservative, but it is a very individual question.
While it can be tough finding someone you are comfortable with, you do need the right advice. Having an accountant and financial planner that can work together in your best interests is key. If they are independent of each other, can be beneficial. Be prepared to pay for the advice, to make sure they are keen to look after you properly.
Too much money to take pub advice.
All the best.
Q: Hello, I earn $120k a year and looking to buy an investment property to get into the property market.
My parents have offered to help but I have some questions as I don’t want to expose them.
If they give me 10% deposit can I borrow 90% or do they have to be on the loan?
Do they have to be on title and do they have to mortgage one of their properties?
A: Hi Sally,
Have your parents gifted you the money, or is it a family loan? Do they expect it back in the future?
They may not need to be on the title, but this could be important information for both the bank/broker and any siblings you have. These types of gifts have been known to create conflict within family group when dealing with estates. If there is doubt, I'd recommend you speak to a lawyer to make sure everyone's interests are considered and fully documented.
From a tax perspective, it may be worth having a loan agreement in place, where you can claim interest paid to your parents (they will need to declare the interest income) to maximise the gearing benefits. Worth speaking to your accountant for this part.
Have you considered first home owners options as well? Check what the obligations are to qualify - might only have to live in the property for six months to qualify and help with reduced fees and/or get a grant. Check your options here.
Q: Hi, we took some bad advice a number of years ago which affected our super. We have a business that is going well and we pay ourselves quite well ($125,000 each) and we own our own home. Given the hit to our super should we look to reduce our salaries and put the difference into our super. We are in our mid 50’s and would like to know the tax implications of this strategy?
A: Hi Bec,
Depending on your business structure, the tax benefits may change. However, the simple view is that Super is only taxed at 15% going in as opposed to 27.5% in company, or up to 47% for individuals (through trusts, sole trader or partnership). Biggest downside is loss of access to those funds until retirement age. Against your wages above, 39% effective tax rate down to 15%, saved tax put into retirement investments.
If you have been bitten in the past by a planner, find another one. Speak to other professionals (accountants, lawyers, finance brokers) for referrals, and make sure there is no finders fee/referral fee in their relationship (breaks the confidence of the referral). A good advisor will run through where you are now, where you want to be in the future and structure the advice accordingly.
If not happy with the advice, start again - they do not own you as a client! For a full plan, you may cop a fee for service, so wait until you are confident in the party before going too far.
You can also run the details through your accountant as a second opinion. While they will generally be restricted on advice, they might be able to point out areas of concern/interest or clarify what the planner has suggested.
Q: Fun Friday,
Can you name a movie quote that gives away the film without saying the title?
A: Luke, I am your father!
My business partner and I have had a printing business for 9 years…. We both now want different things and I have agreed to buy him out within the next 6 months. Are there finance options to help me buy his shares?
A: Hi Raj,
Per BC above, get the legal advice - not only for the prospect of the vendor finance option, but also the contract itself! Make sure your old partner isn't going to open up next door and take half your clients with him!
From experience, you may be able to finance some of the value against the business if it ticks the appropriate boxes. You'll need an experienced business finance broker rather than just a home loan specialist to see what options might be available.
Q: My sister, brother and I would like to buy a property together and we have been asked if we want to buy the property as joint tenants or tenants in common. What do people recommend?
A: Hi Jade,
All the responses above are spot on - you do need to get advice and each party understand the ramifications before finalising the purchase.
There are some great articles online regarding this type of purchase and legal agreements that can be put in place at the start to protect each other for varying scenarios - check lawcentral.com.au and legalconsolidated.com.au for a start.
I'd lean towards Tenants in Common, so each party has their share in their estate. Protections can be set up to automatically sell through the estate to surviving parties in agreed format (best to do that now, before a problem comes up) on death, with same policy if a party needs to sell out for other reasons.
Please take the time and spend the necessary $'s to get the right advice. Happy to have a chat as needed.
What are the fine points that are to be looked into while taking over a new business to analyse its financial fitness, and know my actual ROI?
A: Hi Jym,
Nice mine-field here. Depending on the business and value purchasing for, it could be beneficial having a Due Diligence review done by a qualified accountant. They then have access to the current business records for review and reconciliation, like an audit. They can then prepare a report of findings from their review, to identify if the reported figures and record keeping figures match, and reconcile to bank accounts, supplier statements etc..
Be prepared to pay 1-2% of the purchase price of the business. It can be a worthwhile cost to make sure you are getting what you are paying for.
Note - generally you need to have provision in the purchase contract to undertake this process.
Speak to your accountant before going too far. We generally have access to industry information for business buying and selling, and can pull information from the selling report to advise.
Good luck with the purchase. Will be a stressful time, but can be very rewarding in the long term.
Q: As an industry expert and small business owner, what are the 2 biggest issues challenging you as you strive to build a profitable and successful business?
A: Cashflow is always an issue.
Finding and developing the right team members.
Marketing in an ever changing world, and keeping up with trends.
Q: I work 20 hours a week in my office job and have my own florist business where I operate from home
I’d like to know what I claim for my own business and working from the home office, thank you?
A: Agree with both comments above - get advice on what deductions are appropriate for your situation, both short and long term. The adverse effects of a bad call now could be significant.
Q: I have been running my own business for 3 years and have just secured a full-time job.
As my bookkeeper was using MYOB and cloud computing, what happens if I cancel my subscription. Can I still access information and if not what do I need to do before I cancel the subscription, thank you?
A: Hi Andrew,
If using MYOB Essentials, once the subscription is cancelled you'll be locked out of the information. For the cost of maintaining, I'd suggest keeping it going until after the last business tax return is lodged. Make mention to your accountant/tax agent so they can make sure they have appropriate records on file to cover in the event of an audit. If you are loading a majority of your receipts into the cloud, you might need to keep the subscription for up to five years.
If using MYOB with the software on your computer and just using the cloud as the storage location, you should be able to take a backup of the file to your PC which will cover off your obligations.
Good luck back on wages - much less stress!
Q: I have tax losses from a previous business and about to set up a company with a new partner. Can I transfer the tax losses across to the new company?
A: Speak to your accountant before setting up the structure (maybe get advice from them on the structure as well).
Agree with BC above.
Q: Just bought a pub freehold and we will be owner-operators. We are going through the insurance process and been told we need to insure the pub for 60% more than the purchase price. Does that sound right or would we be paying a higher premium unnecessarily?
A: Did you get a steal with the purchase? What is the value of the stock, replacement cost (new) for the fit-out? A few factors to take into consideration. As noted above, you do not want to be under-insured.
Did you go straight to the insurance company, or using a reputable insurance broker? I would suggest the insurance broker, where they can look at what the pub does and doesn't do, to make sure the policy is right for the business you have. Good chance your accountant could recommend one for you.
Q: My wife and I are in our early 70’s and concerned about the money coming in and how it is impacting the things we want to do. We own our family home and would like to ask about the implications of our 2 kids buying into our home? Are there tax issues for us or them?
A: Hi Bill,
You and your wife need to sit down with both your accountant and financial planner!
There can be tax implications for your kids buying into your property. They might be able to negatively gear for 'rent' received, and there will be capital gains implications when the house is sold.
If not enough money coming in, maybe look at the downsize option the government has thrown in, where you can put funds into super that may not impact on pension numbers (financial planner can give you more here).
With the plans you might be looking at, it might also be a good time to review your wills, to make sure it is up-to-date considering changing circumstances now.
Q: I have stable employment and earn $220,000 a year. Unfortunately, I made a poor decision to get involved in one of those investment schemes where you get tax deductions up front.
The tax department has since closed down this scheme and I now have to pay $180,000 to the ATO. I have 2 properties but there isn’t enough equity to refinance and pay the ATO.
I don’t want to declare myself bankrupt and would like to know what other options are available?
A: Hi Marcus,
A little less colourful than BC, but he is certainly on the money. Unfortunately these tax minimisation schemes see the 'advisor' get a great commission up front, with little/no responsibility when the s*%t hits the fan.
While the ATO is like a dog with a bone, they are also reasonable when you communicate with them in a reasonable manner. It's not their fault that your in this predicament, so work with them to manage your way through. If there is interest and penalty amounts in that account balance, they might even review and reduce these.
A good accountant (CPA, CA) will assist you in liaising with the ATO and setting information for them to look at long term payment plan. It can be like doing a finance application, but you are effectively going for a short term loan.
And certainly check what options you have with the advisor that got you into the scheme.
Q: My boss has asked if want to have a car allowance incorporated into my salary. As I understand it means less take home pay but are their real benefits for me. Is it better to get paid my full salary and just claim the car business vehicle expenses. Who benefits most, me or my employer?
A: Hi Sam,
You need to speak to your accountant and get some further details from payroll/boss.
Are they looking to add to your exsisting wage, or incorporate different components into one wage figure? Or the reverse?
From a tax deduction perspective, there is no difference. Assuming you are doing a lot of driving for your work, make sure you have a log book completed within the last 5 years and keep note of odo reading every 30 June.
Your take-home pay might change a bit - a motor vehicle allowance does not need to be fully taxed, if the employer expects you to claim a deduction to or exceeding the allowance level. Note - this reduces the tax refund at year end, as you receive the tax benefits in your pay.
Super and work cover should still apply, generally, to this allowance, especially if part of your salary package.
I look after the paperwork for my husband’s business…. He is a sole trader but the business is getting bigger and people have suggested we should structure the business as a company. I would like to ask about the benefits of changing and what accounting and tax issues do we have to consider, thank you?
A: Speak to your accountant - if you don't already have one, that is the first thing you need to change.
If your husbands business employs staff, his personal assets are at risk of the errors/stupidity of employees.
You should also ask about a trust as part of the business structure. These can provide great flexibility with profits, as part of tax minimisation, as well as having the asset protection with the company.
Getting the right advice will cost money, but may save more than just money in the long term.
Q: Is it possible to transfer the equity I have in an investment property to our home…. our home is worth around $600,000 and we owe $265,000. We have an investment property worth $450,000 and the loan is $250,000.
If we look to refinance can borrow up to 80% on the investment property to repay the home loan?
A: Hi Timo,
You will not be able to increase your tax deductions, as the change in borrowing would still be a private purpose.
If you main plan was to take the finance off your home as fast as possible, I'm sure the brokers could assist you with this. At $110k from your numbers above, this would not be enough to clear your home as security.
Sorry to be the conveyor of bad news.
Q: My husband and I are looking to purchase a property with my parents in a discretionary trust we had set up 12 months ago. Are we able to add my parents to an established trust and is it easy to be able to obtain finance under this structure?
A: Hi Martina,
You really need to sit down with your accountant and possibly corporate lawyer regarding this. Key aspects to consider:
1. What is the intention of the property purchase? Is it residential or commercial? Is it to be positively or negatively geared? New or existing? Level of debt involved?
2. What are the terms of the deed (e.g. parents may already be included in general beneficiary class)? The deed needs to be reviewed.
3. What time frame do you plan on owning the property?
There are short term and long term aspects to this type of purchase that need to be considered, not least ownership breakup for both tax and succession purposes (do you have siblings? how would they get their share of the property upon parents passing?). Too many key concerns to cover in a forum like this.
Q: I am employed full time and paid a salary.
On the weekend, I have been paid for photography services that I have provided. I have received $4000 so far.
How do I need to report this to the ATO? At the end of the financial year add this money to my annual income?
If so, is the tax rate 35%? Can I claim all expenses as tax deductible such as, travel, equipment etc.
A: Hi Andrew,
The details above are spot on. First question though, how often are you doing this work? Is it a regular activity, or just something you have done on the cheap for friends/family over the course of the year? There is a possibility you fall under the hobby umbrella, and don't have to do anything.
Speak to your accountant, or get on to one sooner rather than later.
Q: Hi want to invest in something paying more than nabs term deposits were do I start?
A: Speak to a financial planner - there are a number of options, but a lot depends on your situation and the term for the investments.
Get referrals from friends or other professionals (e.g. your accountant, finance broker) to make sure they are reputable and will look after your needs.
Q: Hi. I have already bought an investment property from the available funds of offset bank account for a mortgage home where I live now.
To keep new house on investment officially I contacted NAB bank. NAB bank is ready to swap over the property title-papers but advices that I will not be able to take advantage of tax benefits by doing so because govt tax officers check what was the purpose of the home loan originally? Please advice me now how do I take advantage of tax benefits?
A: Sanjiv, you need to seek advice from an accountant/tax agent that understands property investment before going into such transactions.
A good firm will work with your bank/finance broker to ensure that the best deductions can be obtained, with both short and long term intentions considered.
I'd be happy to have a chat, but from your quick query, I fear you have a problem.
Q: I am shortly going to be doing freelance writing in addition to my normal full time job. I have my own ABN. Do I need to include GST in my invoicing or does this apply only after reaching a certain level of income? If so, is that income purely from my business, or including the income from my normal day to day job?
A: Hi April,
From above, if you are registered for GST, while creating extra paperwork, you can claim GST on your expenses that relate to the freelance work. Depending on the amount of expenses, this could be quite worthwhile.
If less than $75k turnover from freelance work, then you can account for the GST annually, so hold onto the governments money for a while.
Best option - speak to your accountant to make sure your set-up is right for your circumstances.
Q: Hi all,
First time user.
My income is three times that of my wife. We also have kids. We are looking at an investment property and were wondering does it matter who we put our investment property under and who collects the income?
We were also looking at possibly putting the investment property and our principle place of residence in a trust. What would be the benefits of a trust?
I appreciate your help with the above.
A: Hi M R,
Depends on the property and level of gearing involved. If a new build with high finance, there is a strong chance your name is best on the title. If existing property and/or low finance, the property may be best with your wife.
You can purchase as tenants in common and break up the percentage according to best advantage.
The names/percentages on the title will generally dictate the income and expense percentages.
You need to liaise with your accountant and I would recommend also financial planner.
Q: I am looking to start a small business and do my own accounting. If I receive an APPROVAL for an overdraft, but don't need it yet, does that APPROVAL need t be recorded in the books or only when it is activated?
A: Best advice - see an accountant!
Nothing to be recorded in the books, but hold onto confirmation of overdraft facility.
Q: Hi, I am employed by a trading platform in USA, money will be getting transferred to my account to purchase iTunes cards and traded for bitcoin. I will be getting a monthly wage. My question is, will I only need to pay tax on my wage of $3500 per month ? OR will I get slammed paying tax on the massive amount of money this company are putting into my account to purchase the iTunes cards for them?
A: Hi Kellie,
You need to get the full details of money in and out recorded in a ledger. Otherwise i'd back Brendan and his advice.
From your quick note above, it may be prudent to have a separate bank account for the funds coming in, where you can identify the purchases of iTunes cards against it.
While the ATO's advice may not be wrong specifically, they are not bound by the phone advice. If you have notes of the phone call, it may help save you from major penalties in the event of an audit.
Have written contract/instructions from your employer to qualify the activities you are undertaking.
The ATO and other government organisations monitor funds coming into the country, and often question these sort of activities where there isn't a sufficient level of detail in your tax return.
Get Audit Insurance and a good accountant.
Q: I am running the business my father founded and wanted to ask about protecting the family should his health deteriorates. Dad is 74 and reluctant to formally hand over control but we want to put things in place to ensure everyone is happy. What is the best way we can achieve this?
A: Hi Nick,
You need to sit down with Dad and the business accountant to discuss the options. Depending on how the business is set up, there may be smooth transfer options that covers Dad's wishes as well as looking after your long term plans.
Succession planning is often a difficult subject to run with the founder, but really important as they age.
You may also need to see a law firm that specialises in business structures and succession planning, where they can make sure all the legalities are covered for the worse case scenario.
Q: I am moving to South Africa, but i have an investment property here im renting out, is there anything i can do to retain as much of my superannuation so that it doesnt dwindle down to nothing while i wait to be retirement age?? will i have to make contributions to a super there as well?
A: Hi Monique,
There should be such an amount in fees as to reduce from $24k to $2k in four years. Per Glenn's comments, poor returns (possibly high risk portfolio) and insurance premiums should be the main issues.
Depending on when your UK trip was, market has changed and fees have generally reduced with the industry funds etc. but you will certainly need to speak to a financial planner.
Rental property will still be taxable, and depending on the expenses (depreciation, interest) may not have too much concern (negative to neutral gearing). If positive, tax will apply at 32.5% until $87k.