A new way for tax office to target cash economy

The tax office has obtained or will obtain data identifying all motor vehicles sold, transferred or newly registered in the 2011/12 and 2012/13 income years where the transfer and/or market value is $10,000 or greater from the various state and territory motor vehicle registering bodies.

The data obtained will be matched against tax payer records to identify those participating in the cash economy, and/or those who may not be declaring all their income or deliberately avoiding their tax obligations. 

The tax office is already matching interest, wages, and dividend data declared by the taxpayers against data provided by employers, banks and share registries.

This measure is aiming at identifying those skimming some or all of their cash takings, running part of their business "of-the-books", or in other ways not reporting all their income. 

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

Changes to depreciation rules that every business should know about

A couple of changes have been introduced by the government effective 1 July 2012 and would affect the income years 2012/13 onwards. These changes only apply to you if you are a small business that has an aggregated turnover of less than $2 million. If you retail fuel, your non-fuel sales should be less than $2 million per year.

1. Increase in instant asset write off. You can now claim an immediate deduction (write-off) for most depreciating assets purchased that cost less than $6,500. Previously you could write-off an asset costing less than $1,000.
2. Accelerated deduction for motor vehicles. If you buy a motor vehicle for use in your business, you can now claim an immediate $5,000 deduction. The remainder of the cost goes to a depreciation pool to be depreciated at 15% for the first year and 30% for later years.

Some businesses have interpreted this to be an additional deduction to the already existing depreciating rules, that is surely NOT the case. You still get the same deductions over time, the newer rules are simply making more deductions to be claimed sooner.

 
BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

How the superannuation system works

Most of us whether employed or self employed would become members of a superannuation fund in our working lives. What amazes me however is how so many of us still don't know how the superannuation system works . So here is a quick snap shot of how it works.

The superannuation system was designed to help people save money for their retirement. Money is contributed during your working life in order to provide you with a source of income once you retire. 

Most people are entitled to compulsory superannuation contributions from their employers that should be made to a superannuation fund of their choice at least once every three months. The amount of contribution is calculated as a percentage of your income, which is currently set as a minimum 9%. You or your employer can also choose to contribute additional funds to your superannuation account at any time. If you are self employed, you would be able to contribute for yourself and the contributions may be tax deductible when you lodge your tax return.

The superannuation fund invests the money you have in your account on your behalf to maximise the return for the associated risk profile that you specify. The superannuation fund will charge you fees to manage and grow your super balance.

Except under exceptional circumstances you do not have access to your super money until you retire or turn 65. When you retire, you can obtain the money from your superannuation fund in a lump sum or as an income stream.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (NSW) & TAX FIRST (SA) - accounting and business advisory firms located in Sydney and Adelaide.

 

 www.taxfirst.com.au

 

 

How owning a rental property affects your tax position.

One of the recurring questions I get asked is "If I buy a rental property, how does that affect my tax position?" Here is how.

• Rent and other associated payments (e.g. Bond) that you receive would be declared on your tax return as rental income
• You can claim a deduction for certain expenses you incur relating to the rental property. The most common of these expenses are interest on the loan, council rates, water charges, insurance, property agent fee/commission and depreciation on capital items.
• If the rental income is more than the deductible rental expenses then the net rental income would be added to your other income (e.g. Salary and Wage, Business Income, etc) to determine your taxable income.
• If the rental income is less than the deductible rental expenses, then the net rental loss would be taken away from your other income (e.g. Salary and Wage, Business Income, etc) to determine your taxable income.
  

Example:

Salary income of $50,000, rental income of $25,000 and rental expenses of $15,000. The amount of income you would have to pay tax on is $60,000 (i.e. $50,000 + $25,000 - $15,000).

If the rental expenses in the above case were $30,000 then the amount of income you would have to pay tax on would be $45,000 (i.e. $50,000 + $25,000 - $30,000).

BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Adelaide, South Australia.

 

 www.taxfirst.com.au

 

 

Mistakes people make when starting and running a business

In my role as a business adviser, here are some of the common mistakes I see people making when they start or are running a business:

1. Going in partnership with a friend or family. Most people who don't have the capital required to start a business normally approach friends and/or family and ask them to start a business jointly. Most people who have gone down this road soon realize what a big mistake this was. Barely a few months go by and they start having disagreements about the direction of the business, work load and profit sharing. If you want to be in business, go solo!
2. Having family as employees. At the start of business when you want to keep costs low, it may sound like a good idea to ask a friend or family member to be an employee of the business but in the long run it doesn't work out. Even if you have to pay them more, hire unrelated people in your business for their skills not their relationship with you.
3. Setting up the wrong business structure. Setting up a wrong business structure at the start can cost you hundreds of thousand of dollar in extra taxes over the life of the business. There are various business structures available out there from sole traders to partnerships, from trusts to companies and depending on your circumstances any one or combinations of a few would suit you. Don't ask your business friends what structure they have got and replicate it, go to an expert and let them analyse your situation and recommend whats best for you.
4. Trying to do everything by yourself. Don't waste your time in doing things like designing your own website or trying to design your business cards. If you do, you will soon realize that you would be wasting a lot of your time on these activities rather than using time on developing and growing your business.There are professionals out there who specialize in these and other services that you may require to start up and run a business, use them.
5. Wasting your time on monitoring competitors.  Many businesses waste a lot of time trying to monitor what their competitors are doing and try to beat them. If you really want to succeed then you must differentiate yourself from the competitors.The best way to do this is by ignoring what they are doing and running your own business in your own way and not be influenced by the competitors.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Adelaide, South Australia.

 

 www.taxfirst.com.au

 

 

Individual Tax Return Myths

Below are some of the myths I am encountering when preparing my clients' 2012 tax returns:

1. The first year a person does the tax return, they get all tax paid back. Not true. Your tax refund depends on your income and tax paid not whether it's your first year tax return or not.
2. I use my car to travel to work so I can claim for that. False. You can claim only if you use it for work and not travel to work. So if you use your car to see your customer or travel from one office to another, etc then you can claim for the use of your car.
3. I can claim all my university fees in my tax return. Half true. You can claim for courses you do but they have to be related to your current job.
4. I can claim for my children's education in my tax return. Nopes you can't. Schoolkids Bonus (formerly known as Education Tax Refund) is not part of your tax return any more, its managed by Centrelink.
5. I am on call and need my phone to get shifts so I can claim the phone in my tax return.  Totally untrue. You can only claim for phone if you use it for actual work, say to call your clients, etc.
6. I work in an office environment and need to wear a suit so I can claim it in my tax return. Sorry but you can't. Unless it is part of uniform with a logo, you cannot claim it.
7. I flew interstate for a job interview and I want to claim it in my tax return. Unfortunately you can't claim that. Any expenses incurred in getting a job are not claimable in your tax return.
8. I was fined for not lodging a tax return on time last year and I want to claim it in this year's tax return. You can't claim fines and penalties in your tax return.

There may be other myths going around but the above are what I have encountered so far this year. Also note that the dependent spouse tax offset has been further restricted this year.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Wayville, South Australia.

 

 www.taxfirst.com.au

 

 

Stop blaming the banks and start taking some responsibility.

Let me start by clarifying a couple of things right at the start:

1. I have not been paid by any of the banks to write this article and have no investments in any of the banks.
2. I do have a substantial mortgage to pay so I do know how it feels when that monthly repayment goes out of the savings account.

Barely a week goes by without me reading, listening or watching someone who goes on and on about how horrible the banks are. How they should reduce their interest rates when the reserve bank does. How they charge unreasonable bank fees. How they make millions of dollars and should reduce their charges or interest rates to help the customers.

I call this "bank bashing". Is this justified? ABSOLUTELY NOT. And I will tell you why.

Buying a house (and having a mortgage) might be our dream but it is not a necessity of life (we can rent a house for the rest of our lives) and when we bought a house of say $500,000 we knew that we would have to pay the mortgage for a certain number of years and that interest rates keep changing. We knew there are a number of lenders out there and we decided to sign a mortgage contract with a particular lender. So now if we cant earn enough to repay the mortgage, whose fault is it? The banks? Obviously not! Its our fault that we bought something we couldn't afford. The banks never told us to buy a house of a certain value, they just helped us and its about time we all took full responsibility for our actions.

Now to the question of the banks charging all these "unfair" bank fees and making millions of dollars. The banks are a business at the end of the day and they are there to make money. Again having a bank account with a particular bank was your decision, you knew or now know what fees they charge, etc. So if you don't like the fees being charged then move to another bank that has lower fees or if you cant find a bank that offers what you want then keep the money under your mattress, but do take responsibility of the decision you make.

Do not take this article out of context and interpret my meaning of the message that all the people who are struggling out there to repay their loans deserve it and should not be helped. I am NOT saying that, all I am saying is that we all need to take responsibility for our financial situation and stop blaming others for it!

BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Wayville, South Australia.

 

 www.taxfirst.com.au

 

 

Tax File Number (TFN) and identity theft

CLIENT QUESTION: 

If someone steals my Tax File Number (TFN) what can they do with it?

OUR ANSWER:

Stealing a TFN is an act of identity theft. Your TFN is used in your dealings with the tax office, a stolen TFN may be used to:

• Avoid paying tax, child support or higher education loan repayment
• Apply for a government benefit
• Steal your superannuation

Only certain people are entitled to ask for your TFN including the Tax Office, Centrelink, your superannuation fund, bank or financial institution, and your employer (but only after you have started working for them). Your TFN should never be used to establish or confirm your identity with other organisations.

ANSWERED BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Wayville, South Australia.

www.taxfirst.com.au

How much do we charge for a meeting?

CLIENT QUESTION:How much do you charge for a meeting?

OUR ANSWER:

I do not charge anyone anything for a meeting or for talking to me. 

You would only have to pay for your investment in our services if we are able to help you in some way or form. So your investment in our services is always based on the value we are able to deliver and not on the amount of time we spend doing the work or meeting you. And we would always let you know before hand what your investment in our services is going to be before we start any work.

ANSWERED BY SURESH RAJANI

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Wayville, South Australia.

 

 www.taxfirst.com.au

 

 

 

How the 2012 federal budget affects individuals and families?

Here is a quick snap shot of how yesterday's federal budget would affect individuals and families.

FOR FINANCIAL YEAR ENDING 30 JUNE 2013

Tax Rates for 2012/2013 financial year
Taxable income $	Tax payable $
0 - 18,200 18,201 - 37,000 37,001 - 80,000 80,001 - 180,000 180,001+	Nil Nil + 19% of excess over 18,200 3,572 + 32.5% of excess over 37,000 17,547 + 37% of excess over 80,000 54,547 + 45% of excess over $180,000

Together with the Low Income Tax Offset low-income earners will have an effective tax-free threshold of $20,542.

 

Replacing the Education Tax Refund with a Schoolkids Bonus

From January 2013, every family with a child at school will be paid $410 per annum for each primary school student and $820 per annum for each secondary school student. All eligible families will receive the full rate of payment and will no longer need to keep receipts as proof of expense, or wait until lodging their income tax return to obtain the benefit.

Means testing medical expenses offset

The medical expenses tax offset will be means tested from 1 July 2012.

For people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13), the threshold above which a taxpayer may claim the medical expenses offset will be increased to $5,000 (indexed annually thereafter). In addition, the rate of reimbursement will be reduced to 10% for eligible out-of-pocket expenses incurred. People with income below the surcharge thresholds will be unaffected.

Reduction of superannuation tax concessions for high income taxpayers

From 1 July 2012 the contributions tax paid on concessional contributions for individuals with income greater than a threshold figure of $300,000 will increase from the current 15% rate to the higher rate of 30%.

The definition of ‘income' under this measure is expected to include taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax-free government pensions and benefits, less child support.

 

FOR FINANCIAL YEAR ENDING 30 JUNE 2014

Family Tax Benefit Part A

The maximum payment rate will increase by $300 per annum for families with one child and $600 per annum for two or more children from 1 July 2013.

SUMMARISED BY SURESH RAJANI

If you want to discuss the above further or want to know about how the budget affects you in person give Suresh Rajani a call at 08 8372 7837. 

Suresh Rajani is the Business Leader at Tax First - an accounting and business advisory firm located in Wayville, South Australia.