The ATO will target sales representatives, sales and marketing managers, truck drivers and electricians this year. If you fit into these categories, what can you do to help your situation if they come along for an audit (apart form locking your door and putting the hose on them).

Don’t put your records through a shredder just yet! Many people bin their records in July each year, but the ATO may still need those documents for quite a while. The best bet is to keep them for at least 5 years for individuals, and 7 for a company structure.

Things like depreciation records and dividend reinvestment information may need to be kept until a number of years after the asset is sold, so CGT can be calculated properly. These are the things that should be kept for an audit are:

* Payments received, including salary, pensions, share dividends or bank interest.
* Expenses related to income received, such as work-related expenses or repairs made to a rental property.
* Buying or selling assets such as shares or a rental property paperwork.
* Tax-deductible gifts or donation receipts.
* Medical expense receipts.

Car expenses are one of the most common tax deductions, and the ATO says record keeping is vital. If you travel at all for work, make sure you keep a log book. Even if you don’t completely fill it in ALL the time, it doesn’t really matter. As long as you’ve got one. Especially if you have recently bought a new car.

Do you have any other things that the ATO has given you a hard time on this year? I would love to hear about it.

PD

Happy New Year! Now that there are new laws and tax rates to apply from this week onwards, I thought I might give you the upper hand on wat the main parts have changed which will more than likely affect you.

The new tax rates means that the 30 per cent income threshold is increased from $34,000 to $35,000 and the 40 per cent tax rate is reduced to 38 per cent.

An individual on $40,000 a year will get an extra $2.88 a week, while someone on $100,000 a year will get an extra $10.58 a week.Don’t go and spend it all at once!

The Family Tax Benefit A has also risen by $5.60 a fortnight for each child 12 and under and by $7.28 a fortnight for teens aged 13-15.

The baby bonus will increase by $185 to $5185, while childcare benefits for one child using full-time care will increase by $6.50 a week to $180, and the maximum childcare rebate will rise by $278 to $7778 per child per annum.

If you were planning on putting larger sums of money in your transition to retirement in the coming years, I wouldn’t hold your breath with a decrease in the super contribution cap being halved - from $50,000 to $25,000 for those under 50 and from $100,000 to $50,000 for those older than 50. After the past few years, and maybe those to come, you will need to top up that super balance before retirement.

A huge bonus for NSW residents is the NSW Government will cut duty by 50 per cent for people buying newly built properties with a value not exceeding $600,000 from July 1. If you tie that into your $2.88 week saving, you may be going places! Unfortunately, the savings you make up on the stamp duty, will be taken back in parking levies for those living in Sydney with levies doubling as of 1 July from about $950 to about $2,000 near the city, and marginally less in the inner West.

VICTORIA

First homebuyers in Victoria are eligible for up to $36,500 in grants. The Victorian Government will provide up to $22,500 for those buying new houses in regional areas and $18,000 for those buying in metropolitan areas. This is in addition to the $14,000 Federal grant.

QUEENSLAND

not much to write home about in Queensland with rates are also set to soar in south-east Queensland. They will jump 8.7 per cent in Redland, 5.4 per cent in Moreton Bay, 6.45 per cent in Brisbane, 7.5 per cent in the Sunshine Coast and 6.9 per cent in Logan. I suppose that will give the NSW counterparts something to finally smile about once the football season is over.

South Australia

In South Australia stamp duty will be eliminated for mortgages and rentals in a move set to cost its State Government $183 million over four years. So, some very positive news there. Interstate Pollies watching the SA government at all???

So, in the end, there are some very positive cuts in tax and increases in general bonuses, which hopefully will give business the kick along it’s been waiting for.

Is there anything the governments can implement that would dramatically benefit yout local area or demographic?

Have a great New Year.

PD

After the headache of getting all of your payments in on time for end of financial year, now comes the headache of getting all of your deductions together to find out what exactly can you claim.

One such area is investment properties. This form of investment has proved very popular over the past 5-10 years with property prices on the up, so the majority of readers will have some form of property investment. One thing that many of us miss out on, is legitimate claims on items such as depreciation (but this is generally due to a lack of a depreciation schedule prepared by a professional) and smaller items.

Defence Housing of NSW has put together a great article which outlines the important aspects of generating the most from your deductions, with the help of the ATO, so it ‘must’ be true (until they change the rules again). So if you have an investment property, take note as this will be valuable information straight from the horses big mouth.

The Australian Taxation Office’s (ATO’s) Assistant Commissioner, Megan Yong, provides an overview for rental property owners of the “do’s and dont’s” of claiming deductions.

‘Last year more than 1.4 million people claimed over $25 billion in rental deductions in their tax return. Over 200,000 of these people were claiming deductions for the first time,’ Ms Yong said.

With so many people claiming deductions the ATO is continuing its focus in this area to ensure property investors get their claim right.

‘This year the ATO will write to around 110,000 people who have purchased rental properties in the past 12 months with advice on claiming rental property deductions,’ she said.

Here are a few things Defence Housing Australia (DHA) investors should think about when claiming deductions in their 2008-09 tax return.

What you can claim as an immediate deduction

‘There are a number of rental property expenses that can be claimed as an immediate deduction,’ Ms Yong said.

These include:

• interest on a loan to:
  - purchase a rental property or purchase land to build a rental property
  - purchase a depreciating asset for the property like an air conditioner
  - finance renovations like a deck
  - make maintenance repairs or repair damage to the property.

What needs to be claimed over a number of years

‘Expenses that are deductible over a number of years include most borrowing costs and the cost of depreciating assets and structural improvements,’ Ms Yong said.

Borrowing costs can include:

• stamp duty charged on the mortgage
• loan establishment fees, fees for a valuation required for loan approval and lender’s mortgage insurance
• title search fees charged by your lender, costs of preparing and filing mortgage documents and mortgage broker fees.

If these amounts are less than $100 in total they can be deducted immediately, otherwise they are generally deductible over five years or over the term of the loan, whichever is less.

‘Major renovation costs and costs to repair damage, defects or deterioration upon purchasing a property can’t be claimed as an immediate deduction.

‘These costs generally must be claimed as either a deduction for decline in value over the asset’s effective life, or as a capital works deduction over 25 or 40 years,’ Ms Yong said.

What you can’t claim: avoiding common mistakes

According to the ATO website, there have been a number of common mistakes identified in the income tax returns of rental property owners. Below is a list the ATO has compiled of common mistakes to avoid.

Construction costs

Certain types of construction – including extensions, alterations and structural improvements – can be claimed as capital works deductions. However, the land on which a rental property is constructed cannot be claimed. Instead, the land forms part of the cost for capital gains tax purposes.

Deductions can be claimed for the decline in value of some types of depreciating assets in residential rental properties (for example, curtains, blinds, dishwashers, refrigerators, stoves, television sets and hot water systems). However, construction costs are not depreciating assets.

For more information on deprecation, click here to read this month’s Industry insight from quantity surveying firm, Turner & Townsend.

Common depreciation claim mistakes include:

• claiming the cost of the land component as part of the cost of constructing the rental property,
• claiming construction costs as a decline in value of depreciating assets deduction instead of a capital works deduction.

Refer to Rental properties for a comprehensive list of residential property items and whether they are depreciating assets or capital works.

Interest

Taxpayers sometimes use their loan facility for both investing and private purposes—for example, to purchase or renovate a rental property and to buy a motor boat.

The interest expense on the private portion of the loan (the motor boat) is not deductible.

A common mistake is to claim a deduction for interest on the private portion of the loan.

Travel expensesWhere travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses. You may be able to claim local expenses that are directly related to the property inspection and a proportion of accommodation expenses.

A common mistake is to claim a deduction for the cost of travel when the main purpose of the trip is to have a holiday and the inspection of the property is incidental to that.

Deductible borrowing expenses

The correct way to claim borrowing expenses of more than $100 is to spread the deduction over five years or over the term of the loan, whichever is less. If your borrowing expenses are $100 or less, you can claim the full amount in the income year they are incurred.

A common mistake is to claim all deductible borrowing expenses in the first year they are incurred.

Ownership interests

If you purchase a rental property as a co-owner and are not carrying on a rental property business, you must divide the income and expenses for the rental property in line with your legal interest in the property. This is despite any written or oral agreement between co-owners stating otherwise.

A common mistake occurs when a property is purchased by a husband and wife (as co-owners) and the income and expenses are not split in line with their legal interest in the property.

Refer to Rental properties for more information on how rental income and expenses should be split between co-owners.

What records do you need to keep?

You need to keep proper records in order to make a claim, regardless of whether you use a tax agent to prepare your tax return or you do it yourself. You must keep records of:

• the rental income you receive and the deductible expenses you pay - keep these records for five years from 31 October or, if you lodge later, for five years from the date your tax return is lodged.
• your ownership of the property and all the costs of purchasing/acquiring it and selling/disposing of it - keep these records for five years from the date you sell/dispose of your rental property.

More information

The ATO website has detailed fact sheets outlining what expenses you can and can’t claim for your rental property,’ Ms Yong said.

These include:

Rental properties – avoiding common mistakes
Rental properties – claiming borrowing expenses
Rental properties – claiming interest expenses
Rental properties – claiming repairs and maintenance expenses
Rental properties – claiming capital works deductions

If you would like to talk to someone at the ATO about tax deductions for rental properties call 13 28 61.

Disclaimer: This information has been sourced from the Australian Taxation Office via the Defence Housing of NSW website, which contains some great information at www.dha.gov.au  DHA property investment is subject to the terms of the lease. DHA investors retain some responsibilities and risks. Investors should seek professional and independent advice.

Almost a Happy New Year, but thee is still the last minute things you need to strike off your list, such as pay all of your outstanding work related bills before tomorrow to enable you to claim it as a tax deduction. To maximise your dedutions, I’ve comprised a short list with links of what you should look at to make this tax time a little easier.

Of course, consult a qualified accountant if you are self employed, or are still unsure of what you can and can’t claim. Hopefully some of it will be a bit easier to learn yourself by going through these points.

Your tax time checklist

To help you get the best tax return possible, here’s a few things to tick off your “to do” list today:

1. Are you eligible for the Superannuation Co-contribution? If so, it’s up to $1,500 of free money.

2. If you use your car for work, don’t forget to estimate your motor vehicle expenses.

3. A 20% tax offset is available for out of pocket medical expenses over $1500.

4. Sponsor a child through a donation which is tax deductible.

5. The cost of having your tax return prepared is also an allowable deduction.

6. Income Protection insurance premiums can also be a tax deduction.

7. Small business owners who are selling business assets can take advantage of extremely generous “small business CGT concessions.”

8. You can claim up to $300 of work related expenses without the need to have written receipts. However once your claim exceeds $300 you must have receipts for the full amount.

9. Don’t forget all those miscellaneous work expenses such as union fees, seminars, trade journals, software and home office expenses. Even an appointment diary can be deductible.

10. Check the deductions fact sheet for your specific occupation to ensure that you are claiming everything that you are entitled to.

I hope this helps make your tax time a bit easier to keep track of.

PD

If you didn’t realise, there was a Federal Budget handed down recently. There are always many things that are packed into a budget, but how does all of it affect us? There are several areas that will apply to most of us, and I have tried to simplify it as much as possible in this post. Please let me know if you would like to know more about how you can benefit, or whether it affects you in any way, and I’ll be happy to help.

At the bottom of each subject is a link to my free information site ASKABOUTMONEY.COM.AU, which explains everyday financial subjects in easy to understand terms. Please tell me what you would like to hear about, and I’ll find the right professional to talk about it.

So what happened that would affect you ? Here’s a run down of some of the 5 main points outlined in the budget in plain English.

1. Maximum Government Co-contribution reduced
You may or may not know about the government’s scheme to help superannuants in their pursuit of a self-funded retirement. Basically, if you earned under $65,000 year and paid into super ‘after tax’ payments, the government would pay 150% of whatever you paid up to $1500 year.

This helped many people boost their super by a little extra over the past few years. So much so, that they have decided to cut back for a couple of years to match whatever you pay into super $1 for $1 up to $1,000 year. This will be like this until 2014 when our economy is supposed to be kicking along. So, possibly don’t hold your breath for that to happen.

2. Small and insoluble lost accounts to be transferred to the ATO
You know all those super funds that you have accumulated over the years when looking for the ideal job? All the casuals know what I’m talking about. Well, from 1 July 2010, superannuation providers will be required to transfer accounts of lost members with balances of less than $200 (small accounts), and those which have been inactive for a period of five years and have insufficient records to identify the owner of the account “insoluble accounts” to unclaimed monies.

This means, when you finally get around to consolidating all these funds together, you only have to visit the ATO, and they will have all of your money. You can visit www.protectmywealth.com.au/combine-my-super.html to submit an enquiry about bringing all your supers together. It’s very easy, and cost effective. We’ll look at why in another post.

3. Private Health Insurance Rebate
From 1 July 2010 the Government will introduce a 3 tiered approach to determine the amount of private health insurance rebate payable to individuals. Once income is above $120,000 for singles and $240,000 for couples, no private health insurance rebate will be payable.

Their reasoning for this is that people on those income brackets ‘should’ be able to pay for a Dr. But as every normal thinking human would know, this will only send many of them packing straight to the struggling public health system, which can’t cope as it is! Maybe they should’ve consulted their trusty State government’s first to sort out the mess they’ve left it in.

4. Medicare Levy Surcharge increase

To ensure that middle and high income earners do not abandon their private health insurance the Government has introduce variable rates of Medicare Levy surcharge, if appropriate private health insurance cover is not held and certain income thresholds are exceeded.

It’s a step in the right direction, however, there should be more concentration on getting the States to pull their finger out than mess around with private health insurance.

5. First Home Owner’s Grant Boost - extension

The Government have announced that the First Home Owners Boost (FHOB) will be extended for a further 6 months.

For eligible first home buyers who enter into contracts between 1 July 2009 and 30 September 2009, the FHOG will continue to provide $7,000 for the purchase of established homes and $14,000 for the purchase of new homes. Combined with the first home owners grant eligible persons who purchase an existing dwelling will receive $14,000 of assistance and where eligible persons purchase a new dwelling they will receive $21,000 of assistance.

For eligible first home buyers who enter into contracts between 1 October and 31 December the FHOB will be halved. Where an existing dwelling is purchased, an eligible first home buyer will receive $3,500 of assistance where as if an new dwelling is purchased they would receive $7,000 of assistance. Coupled with the first home owners grant, eligible first home buyers will receive $10,500 assistance for an existing dwelling and $14,000 of assistance for a new dwelling. $21,000 of assistance.

6. Small business tax relief For eligible assets acquired between 13 December 2008 and 31 December 2009

As part of previous stimulus packages, the Government had announced that small business (those with a turnover of less than $2million) would be able to claim a bonus tax deduction for the acquisition of eligible assets, in addition to the usual capital allowance deduction. Initially set as a 10% bonus deduction, then 30%, the bonus has again been lifted to 50%.

To be an eligible asset for this bonus, the asset must:
– cost more than $1,000
– be purchased between 13 December 2008 and 31 December 2009
– be used or installed ready for use by 31 December 2010.

As an example of the benefit this provides, for every $1,000 of eligible asset acquired, the total tax deduction will be $1,500. A $1,500 tax deduction provides a tax saving of $450. Therefore the overall after tax cost of $1,000 acquisition would be $550. So, if you were to buy a car, or machine for more than $1,000 before 31 December 2009, you will be entitled to an extra 50% tax deduction. This is great news if you are wanting to buy a car, especially with the new and used car industry in such dramas at the moment.

It’s definately prompted me to look into a car before the end of the year.
I’ll explain some of the changes in future posts, so if you are wondering what some of this is all about, it will be coming.
PD

Do you earn under $60,342? If so, you may be eligible for FREE MONEY from the government. No, Kevin hasn’t lost his mind again. You may have heard of the government’s co-contribution scheme to bolster super accounts so that we all don’t look forward to living off welfare till our average age reaches 123.

Basically, if you are earning less than $60,342 and contribute after tax monies to a superannuation fund, the government will give you $1.50 for every dollar you contribute. This is based on a sliding scale, phasing out to $0 after $60,342. To see how much you would receive into your super, HERE is the ATO Calculator.

Some people have said, ‘why would I want to put more money into super when it’s going backwards?’. It’s a fair comment, but remember, based on the calculator, you WILL receive 150% return for all after-tax money you put in to your super. Plus whatever your current super fund is (or isn’t) earning in interest. That’s a pretty good investment.

I posted another part to this story at ‘Have the government pay your insurance for you’ where you can link your life insurance and income protection/sickness & accident insurance to your super and the co-contribution covers the additional cost of your insurance.

You have just under two months to arrange something as it looks like KRudd is about to hand down a killer budget which will possibly scrap the co-contribution scheme. I suppose it’s only natural to kill off something that encourages ’saving’.

PD

Something that many people may not realise is that you can claim an additional 30% deduction on new (or near new) cars that are purchased before 30 June 2009.

The law was introduced in March this year during the government’s bonus bonanza and probably came just in time to help the diminishing car industry from it’s increasing threat of total meltdown. Over the next could of months, or until the end of June 09, you can not only grab yourself an absolute bargain at the dealerships and car yards, you can also take advantage of the government’s deduction.

To help with the finer details, we have been helped by Vincent Uno from Platinum One Accounting in Sydney. If you find these details useful, please show your support by visiting their website and contacting them for further advice.

Details of the Small Business & General Business Tax Break Bill 2009, eligible businesses are entitled to a ‘one off’ bonus tax deduction equal to 30% of the cost of the new car, as long as they meet the applicable investment thresholds and are:

• Used in carrying on the business
• Acquiring between Dec 13, 08 & June 30, 09 and
• Operational by June 2010

If you cant make your mind up by  June 30, you can still receive a deduction equal to 10% of the cost from July 1 to Dec 31, 2009.

Sometimes this sort of thing is hard to digest, so here’s an example of what you would expect based on buying a $50,000 car:

Bought before 13/12/09 = $12,500 depreciation

Bought btween 13/12/08 - 30/06/09 = $27,500 depreciation

Or bought between 01/07/09 - 31/12/09 = $17,500 depreciation.

That should give you an idea to work with for your ‘paper write offs’ for this year if you are looking at buying a car. I will be looking at it while the industry is down and the deductions are up. Make sure you do the maths before buying a new car, so if it pays off in the long term then seriously consider it.

I hope this helped, and please make sure you look out for Platinum One Financial Services and contact them for any information on these types of issues.

PD