As reported in The Age today, the ATO is on the war path over rental properties, particularly those in holiday locations. Their activity will be focused on properties generating low rent but comparatively high outgoings, repairs & improvements, travel claims and apportionment of private use.

If you are unsure what you can and can’t claim, you can refer to the ATO’s guidebook which can be found at:-

http://tinyurl.com/npm6hjy

Or, if you can’t be bothered reading it or can’t understand those 44 pages, ask us.

And if you are thinking of buying an investment property, we have a calculator which models out what your future income / net tax loss will be as well as growth in equity in the property over 10 years. We also have a guidebook that steps you through all the things you need to know and do.

At MRS, we will spend today planning for your success tomorrow.

The following is a listing of assorted tax saving opportunities.

• Buying items such as stationery, printer cartridges, stamps, etc by Tuesday 30^th June.  Those of you who entered the Simplified Tax System (STS) by 30^th June 2005 (and are therefore automatically assessed on a cash basis) may wish to pay any bills not due until July like your phone bill, rent, insurance etc.   Paying your accounting fees is also recommended!
• Superannuation is of course a major deduction provided it is paid by 30^th June.  Contributions into super are taxed at only 15% whereas your marginal tax rate may be much higher at 19%, 32.5%, 37% or 47% – as well as Medicare Levy at 2%.  As we have highlighted in previous correspondence, be careful with the 30^th falling on a Tuesday.  A June contribution that doesn’t clear until July will be not be deductible in 2014/15 and will count against next year’s contribution limit.  It is now too late to make payment by B-Pay.  And beware of making EFT payments after your bank’s night time cut off.
• Whilst there are minimum levels of super to be paid by employers on behalf of employees under SGC provisions, your own business conducted through a company or trust can claim a deduction up to $30,000 ($35,000 if you were 49 on 1^st July 2014 – i.e. those who now 50 or older).
• For those who are self employed, the same limits apply.
• STS taxpayers are now known as Small Business Taxpayers (SBTs).  SBTs also include taxpayers with an annual turnover under $2,000,000.  As we have previously highlighted, SBTs can claim a full deduction for any assets acquired costing less than $1,000 (meaning $1,100 including GST).  That limit is $20,000 (excluding GST) for assets bought after 12^th May.
• Furthermore, SBT taxpayers can claim half a year’s depreciation on acquired assets that cost more the above limits – even if the asset is purchased on the last day of the year.
• SBT taxpayers can also claim a full deduction for payments such as insurances, rent and the like which cost more than $1,000 even though the service period runs past 30^th June and into the next financial year.
• For those of you who receive this e-mail that are employees or rental property owners, you can claim a complete write off for assets costing less than $300.
• If a property is jointly owned, then you can claim the full cost of assets costing less than $600 (meaning you claim less than the $300 limit each).
• Investors can claim prepayments in full.  An investor with a property or share loan can claim a deduction for 12 months prepaid interest.  Please note that the ATO requires that for the prepayment to be claimed, one must benefit through a lower interest rate (for which you need to keep proof).
• For those who have already generated a large capital gain, consideration should be given to selling other investments that have an unrealised capital loss.  Those with no or minimal employer SGC support should consider making a deductible contribution into superannuation to offset the tax on the capital gain (but speak to us first).
• From 1^st July 2004, persons under 65 no longer need to be working or have ceased employment within the last two years in order to make a deductible super contribution.  Consequently, those with large incomes can greatly reduce their tax burden by putting monies into superannuation.  With super pensions paid to those older than 60 now being tax free, the tax savings are greater than ever before.
• Please note that those over 65 but under 75 can only contribute into super only after they have satisfied a work test.
• If you are about to sell an asset which will generate a capital gain, consideration should be given to selling it after 30^th June.  This will defer the payment of any capital gains tax liability until after 30^th June 2016.

We have considered these matters when undertaking your pre year end business reviews with our clients.  However, do not hesitate to contact us should you wish to clarify any matter.

We take this opportunity to remind all employers to attend our HR Myths and Secrets seminar.  There is much that most employers don’t know – sometimes at great cost when an employee or contractor makes a claim for unpaid entitlements (arguments which employers never win).  I strongly encourage all employers to attend so that they can ensure that they are compliant and not an accident waiting to happen.

The tax bill tax which included the provisions for small businesses to be able to claim a full tax deduction for assets costing less than $20,000 was passed by the Senate on Monday 15^th June.

So if your business does need a small asset, now is the perfect time to buy it.

But before doing so, please note 5 critical factors and considerations:-

1. Only buy an asset you need. So if a company buys and asset for $11,000, it will get back $1,000 of GST and will have a tax deduction of $10,000. It will pay $3,000 less company income tax. It will still be $7,000 out of pocket.
2. You need to elect or have previously elected to use the small business general pooling depreciation method. If not, the $20,000 provisions do not apply.
3. Your small business must own the asset. It either needs to pay for it or finance it by a loan, hire purchase or by way of a chattel mortgage contract. Leased assets do not qualify for the write-off as one does not own the asset until the final payment is made or the lease contract is paid out early.
4. If you trade-in an asset, it is the cost of the new asset that qualifies. So if your business buys a car for $30,000 and trades in an old car for $12,000, there is no entitlement as the cost of the new asset exceeds $20,000.
5. The $20,000 refers to the GST exclusive price. If however, a business is not registered for GST, it is the cost of the asset including GST.

Please contact us if you have any questions.

At MRS, we will spend today planning for your success tomorrow.

Do you have any overseas trips planned?

If so, please take note of the following tips to make sure your trip doesn’t cost you more than it need to.

Some clients decide to cancel their private health insurance for the period they are overseas.  This might save some premium but it can cost much more with the imposition of the Medicare Levy Surcharge (which is charged proportionally on the number of days for which private health insurance is not held at rates from 1% to 1.5% depending one’s level of income).  This is subject to an income threshold of $90,000 for singles and $180,000 for couples (add $1,500 for every child after the first child).

Senior Health Concession Card holders also need to be aware that they will have their card cancelled when they are overseas for more than six weeks.  This happens automatically as the Passport Control pass on their data to Centrelink.

Or perhaps your kids are going off to explore the world for a year.  The trip could cost them less of they go at the right time.  If they left in July and returned in June, then they would have a year with no income and waste the tax free threshold of $18,200.  If they leave in January and return in December, they will be able to use two tax free thresholds and not leave the first tax bracket in either year.  If your child is earning $50,000, leaving in January rather July will save them almost $7,000.