DIVORCE Hidden costs on super

The hidden impact divorce can have on your super savings
According to research by a large retail superannuation firm, going through a divorce can lump 10 more years on to the average Australian's working life, as they endeavour to re-establish the level of retirement savings they may have accumulated through their married lives.

Suncorp Superannuation's Untying the Knot report purports to have uncovered the until-now unappreciated real cost of divorce for Australia's divorcees (estimated to be close to 100,000 people annually).

Suncorp said the most common considerations during divorce were property, child custody, the family car and the partner's income. However thousands or even hundreds of thousands of dollars were often excluded from a divorce settlement because superannuation may not have been taken into account in every case. The study found that up to 83% of divorcees did not consider superannuation in their divorce settlement.

The report found that most happily married Australians expect to retire in their mid to late 60s, while divorcees expect to work well past age 75, preventing them from getting the most out of their golden age.  Read more…

HOME OFFICE Which expenses can you claim?

If you operate your business in full or in part from home, you may be able to claim a deduction for your costs.
Deductions may be claimed if you are required to use your own computer, phone or other electronic devices for work purposes.

There are however rules you need to adhere to and records you need to keep. The deductions you may be able to claim are for:
  • occupancy expenses such as rent, mortgage interest, rates, land taxes and house insurance premiums
  • running expenses which can include:
  1. home office equipment such as computers, printers and telephones, the cost (for items costing up to $300) or decline in value (for items costing $300 or more)
  2. work-related phone calls (including mobiles) and phone rental (a portion reflecting the share of work-related use of the line) if you can show you are on call, or have to phone your employer or clients regularly while you are away from your workplace
  3. heating, cooling and lighting
  4. the costs of repairs to your home office furniture and fittings, and
  5. cleaning expenses.

Being able to claim these expenses hinges on whether your home is your place of business and if you have an area set aside exclusively for business activities.  Read more…

ASSET CLASS What does it mean and why is it helpful?

What the term 'asset class' means, and why this can be helpful
The term "asset class" describes a set of investment options that are grouped into a similar area or type.

The main asset classes are cash, fixed interest, property and shares.  There is also a group of investment products that have tended to be labelled "alternative" as they don't readily fit into the parameters of the other asset classes.

The reason why it can be helpful to have an understanding of the different asset classes is that each has different levels of risk and return. Knowing what to expect can help you decide the type of investments that will suit your circumstances. You will also be able to judge your investments based on whether you prefer growth or income assets. The other thing people tend to overlook is how the different classes will be taxed, which is surprising because the after tax cash flow is perhaps a better measure for the return an investor can expect to earn.

Every investment carries an element of risk, and the main reason that people need to be confronted with risk is that it generally becomes inextricably linked to the level of return on any investment.

The trade-off between risk and return is well established – generally, the higher the risk an investor is able or willing to take, the higher the potential rewards (or return). Put another way, if a particular investment offers huge returns, this can be an indication that it will come with equally huge risks.  Read more…

ATO continues to audit, review and investigate individuals, businesses and self-managed super funds (SMSFs) against their industry benchmarks
Sophisticated data matching technology enables detailed cross-referencing of information from an assortment of government departments, which increases the frequency and scope of ATO's audits, reviews and investigations.

Should you face an audit, review or investigation instigated by the ATO or any other government agency (e.g. Work Cover, State Revenue Office) the professional costs incurred are often significant. As such, GJB can respond to queries to provide information to explain your position if you find yourself or your business under the ATO's scrutiny.

With audits now so commonplace, GJB continues to have in place a tax audit insurance arrangement, underwritten by AAI Limited trading as Vero Insurance[1] to cover our professional fees incurred, up to a prescribed limit, for the preparation of material and management of any response process. This provides cover for your latest lodged return and all previous years' returns.

GJB's audit insurance cover is not automatic. Read more…

DEBT TAX What flow-on for business?

The "debt tax" has flow-on effects for businesses
Announcement of three year Temporary Budget Repair Levy on high income individuals will result in top marginal tax rate increasing 47% to 49%.

However there are a number of other taxes that are based on calculations that include the top personal tax rate, and so it is expected that these will also be increased for the same period that the debt levy is in place - from July 1, 2014 until June 30, 2017 (a different two year period applies for the increase in the FBT rate; see below).

Businesses which may be affected will need to plan accordingly in order to not be caught on the back foot - for example, the increase in the Medicare levy from the 2013-14 Federal Budget (from 1.5% to 2%) caught many off guard in that there were consequential effects to other tax rates that, then as now, relied on the top marginal tax rate as a basis for calculation.

There are some income tax rates that are automatically linked to the top marginal rate. For example, trust income to which no beneficiary is made "presently entitled" would be taxed at 49% for the relevant income years to which the debt levy applies.

Based on the explanatory memorandum to the relevant Budget bills, the taxes that follow the top marginal rate are summarised in the table that appears below.  Read more…
Planning to enter aged-care accommodation?
Do so sooner rather than later.

Aged care is likely to get a lot more expensive from July 1, 2014 when means testing for the government accommodation supplement will be based on income and assets of the recipient as opposed to just income-testing alone.

The current income-tested care fee – which is based on assessable income – will be replaced by a means-tested care fee that will be based on both assessable income and assets (which may include your home).  The government will either pay the maximum accommodation supplement or a part accommodation supplement, depending on the recipient's assessed financial circumstances. For many, this will mean ongoing care fees will be higher if entering into an aged care facility on or after July 1, 2014.

Further, the manner to which payment for the accommodation should be made, the amount of accommodation fees payable and any on-going care fees will also be affected. Critically, the family home may also impact the accommodation fees payable.

The table on the following page summarises the current situation and the post July 1 changes.

The changes will not affect people who are already living in aged care facilities or those who are already receiving care at home - unless they leave care and re-enter after a period of 28 days, or if they change facilities and decide to re-enter under the new rules. However, anyone now receiving care at home who enters aged-care accommodation on or after July 1 would have to enter into a new agreement with the new provisions.

What should you do?  Read more…

NEW MYOB ESSENTIALS addresses 8 necessities of online accounting

MYOB Essentials, formerly known as MYOB LiveAccounts, now released
Focuses on three pillars: easy to use, on-the-go and better value for users.

Thanks to extensive testing of the user interface and responding to feedback during the test phase, MYOB Essentials not only covers all the essentials a small business needs, but does it at an extremely affordable price with no hidden costs and no locked-in contract. It is also web-based, which means you can access it from any device with an Internet connection and browser.

The MYOB Essentials range caters to a wide range of user types, from sole traders to business owners with employees, and covers the following eight necessities of online accounting:  Read more…

SMSF REGIME More changes from 1 July 2014

New rules being introduced after 1 July this year will affect SMSF trustees
  • the SMSF registration and rollover process will be amended to reduce the instances of funds being illegally released from SMSFs
  • proof of identity checks will be required for all people joining an SMSF, whether they are establishing a new fund or joining an existing fund â€" although note that identification measures will not apply retrospectively except for existing SMSFs wishing to organise rollovers from an APRA-regulated fund
  • new penalties will be introduced to prevent illegal early release
  • criminal and civil sanctions will be introduced for illegal early release scheme promoters, and
  • amounts illegally released early will be taxed at the superannuation non-complying tax rate, with an additional penalty that takes into account the individual circumstances.
Contact GJB on 02 9686 3130 or read more about how we help get your SMSF arrangements in proper order at #yourSUPER.

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Guidance on how to deal with instant asset write-off uncertainty - at last
As most small businesses know, the previous government introduced a number of small business tax relief measures as part of its Mineral Resources Rent Tax (MRRT, or mining tax) legislation.

These included:
  • the ability to instantly write off asset purchases up to $6,500 in value (up from the existing $1,000 relief)
  • instant write-off of the first $5,000 spent on a motor vehicle plus 15% of the rest of the purchase price
  • ability for small companies that incur tax losses to carry those losses back against profits of a previous year, with a resulting refund of tax paid in that previous year.

As part of the repeal of the mining tax, the current government proposed to also abolish these measures, with effect from January 1, 2014. However the mining tax repeal has not passed the Senate, which means that these measures have been in limbo - meaning that small businesses have also been left in limbo as far a knowing what to do about them from a practical tax treatment point of view. Currently these concessions are in the law, but should the Senate pass the legislation after July 1, they would retrospectively disappear, effective from January 1.

The continuing uncertainty for small businesses has not been helpful, and while the Federal Budget would have been an ideal opportunity to provide clarity, no such guidance was forthcoming.

The government's failure to address these concerns for small businesses has led to the Tax Office having to step up to the plate and, sure enough, in the week after the Budget it provided guidance on how businesses should deal with these measures pending either the passing of the mining tax repeal law or a revision of the proposals. 

The Tax Office advises that should the mining tax (and so the concessions) be repealed, taxpayers will have to amend any tax returns already lodged that have claimed the higher rate of instant asset write off, accelerated vehicle depreciation and loss carry-backs, but - crucially - has advised that businesses that have made such claims based on existing law will not have imposed on them tax shortfall penalties or shortfall interest upon amendment.

This means that small businesses which have bought qualifying assets or will make a tax loss in the current year can now take advantage of the existing measures confident that the worst that can happen is they will have to recalculate their tax based on the new law but that they won't be hit with interest and penalties. 

Speak with GJB on 02 9686 3130 to find out more.

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EOFY PLANNING 8 tactical business deductions

Tactical business deductions for your end-of-year tax planning
Various legitimate ways minimise #yourbusiness tax liability, with various straightforward tax deductions that most can utilise.

The general rule is that you can claim deductions for expenses your business incurs in its task of generating income. Many of these deductions are obvious - rent, materials, supplies and so on.

But for all the obvious possible deductions, there are also some very often overlooked and not so obvious tax deduction tactics that you may be able to take advantage of in the run-up to the end of this financial year. These may not suit every business, so check with us to ensure they are applicable to your situation.  Read more…