Posted , May 24, 2018.

The item that may receive the most analysis from the whole of this year’s federal budget will be the increase of the 32.5% tax bracket, and an expansion of the Low Income Tax Offset.

A win for small businesses in this year’s budget sees the retention of the $20,000 instant asset write-off for another 12 months until 30 June 2019. Also a limit will be imposed on the amount of cash payments made to a business. There is also a change to the R&D tax incentives, as well as deferrals to some Division 7A changes.

Following last year’s big changes to the superannuation rules, this year has seen smaller tweaks to the super system. We also note that there will be some compliance related changes to the deduction of personal contributions and the audit cycle of SMSFs.

INDIVIDUALS

BRACKET ADJUSTMENT IN PERSONAL INCOME TAXE

The upper threshold for the 32.5% marginal tax rate bracket will increase from $87,000 to $90,000. It will apply from 2018-19.
Implemented to address the issue of bracket creep, it is anticipated that the adjustment to the marginal tax bracket will stop a further 200,000 Australians from entering the 37% marginal tax rate bracket.
Moreover, from 1 July 2022, there will be further adjustments made to the brackets. The upper income threshold for the 32.5% bracket will be increased from $90,000 to $120,000. In addition, the upper income threshold for the 19% rate will increase from $37,000 to $41,000. By 2024, the 37% rate will be scrapped. The 32.5% rate will apply up to $200,000.

LOW AND MIDDLE INCOME TAX OFFSET

Introduction of a non-refundable tax offset of up to $530 per annum targeted at low to middle income earners. It will affect individuals with taxable income of up to $125,333, and will apply from 2018-19 to 2021-22.
For taxpayers with taxable income of $37,000 or less, the Low and Middle Income Tax Offset will provide a benefit of up to $200.

Between a taxable income of $37,000 and $48,000, the value of the offset will increase by 3 cents in the dollar up to the maximum offset of $530. It is noted that taxpayers with taxable incomes between $48,000 and $90,000 will be eligible to receive the $530 maximum offset.

The offset will phase out at a rate of 1.5 cents per dollar between taxable income between $90,001 and $125,333.

MEDICARE LEVY

An increase in the Medicare levy low-income thresholds for singles, families, and seniors and pensioners. This will affect low-income earners and will apply 2017-18.
The various exemption thresholds for low-income earners will increase to take into account movements in the CPI. Further, the Government has confirmed that it will not be increasing the Medicare Levy rate from 2.0% to 2.5%.

BUSINESS

$20,000 INSTANT ASSET WRITE-OFF EXTENDED

The availability of the small business $20,000 instant asset write-off has been extended for a further 12 months to 30 June 2019. This concession was previously due to expire on June 30, 2018.
Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. Further, the small business simplified depreciation pool can also be immediately deducted if the balance is less than $20,000 over this period.

BETTER TARGETING THE R&D TAX INCENTIVE

For companies with aggregated annual turnover of $20 million or more, the Government will introduce an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of R&D expenditure as a proportion of total expenditure for the year.

The maximum amount of R&D expenditure eligible for concessional R&D tax offsets will be increased from $100 million to $150 million per annum.

For companies with aggregated annual turnover below $20 million, the refundable R&D offset will be a premium of 13.5 percentage points above a claimant’s company tax rate.

Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum. R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years. The changes will apply for income years starting on or after 1 July 2018.

CASH PAYMENT LIMIT

The Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. It is proposed to apply from 1 July 2019.

Currently, large undocumented cash payments can be used to avoid tax or to launder money from criminal activity. This measure will require transactions over a threshold to be made through an electronic payment system or cheque.

REMOVING TAX DEDUCTIBILITY OF NON-COMPLIANT PAYMENTS

A tax deduction will not be allowed for the following where PAYG is not withheld:

  • Wages;
  • Payments made by businesses to contractors where the contractor does not provide an ABN.

The measure will have effect from 1 July 2019. PAYG reporting and tax withholding requirements provide integrity to the tax system. The Black Economy Taskforce recommended this action to create a further financial disincentive for businesses to engage in black economy behaviour and ensure greater compliance with tax obligations.

TARGETED AMENDMENTS TO DIVISION 7A DEFERRED

The start date of the measures to make targeted amendments to Division 7A, announced in the 2016-2017 budget and originally earmarked to take affect 1 July 2018, has been deferred to 1 July 2019. The said measures proposed to improve the operation and the administration of the Division 7A provisions applicable in the case of private companies.

APPLICATION OF DIVISION 7A TO UNPAID PRESENT ENTITLEMENTS

The Government is proposing to tighten the rules regarding the application of the provisions of Division 7A to an unpaid present entitlement of a private company. This will commence from 1 July 2019

The measure will ensure the unpaid present entitlement is either required to be repaid to the private company over time as a complying loan or subject to tax as a dividend.

SUPERANNUATION

MAXIMUM NUMBER OF SUPER MEMBERS

The maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) and small APRA funds is proposed to be increased from four to six. This measure will commence from 1 July 2019

This will provide greater flexibility for joint management of retirement savings, in particular for large families.

DEDUCTIONS FOR PERSONAL CONTRIBUTIONS

The integrity of the “notice of intent” processes for claiming personal superannuation contribution tax deductions is proposed to be improved. This measure will commence from 1 July 2018.

Currently, some individuals receive deductions on their personal superannuation contributions but do not submit a notice of intent, despite being required to do so. This results in their superannuation funds not applying the appropriate 15% tax to their contribution. As the contribution has been deducted from the individual’s income, no tax is paid on it at all.

VOLUNTARY CONTRIBUTIONS TO SUPER FUNDS

An exemption is proposed to be introduced from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements. The start date of the said measures is July 1, 2019.

Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum of 40 hours in any 30 day period in the financial year.

THREE-YEARLY AUDIT CYCLE FOR SMSFS

The annual audit requirement is proposed to be changed to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance, to commence from 1 July 2019.

This measure will reduce red tape for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.

RECOVERY OF TAX AND SUPERANNUATION DEBTS

The Government will provide $133.7 million to the ATO to continue to deliver on a range of strategies that sustain both an increase in debt collections and an improvement in the timeliness of debt collections

This will extend, and roll into ongoing funding, the measure announced in the August 2013 economic statement addressing the level of unpaid tax and superannuation in the community that would otherwise terminate on 30 June 2018.

The measure will ensure the ATO is able to continue to target those taxpayers gaining an unfair financial advantage over those who pay their fair share of tax and superannuation.

HEALTH / AGED CARE

MEDICAL SERVICES IN RURAL AND REMOTE AREAS

Financial assistance is proposed to be increased for the Royal Flying Doctor Service to improve the delivery and availability of dental, mental health and emergency aeromedical services in rural and remote areas.

This is part of measures to achieve stronger rural, regional and remote health outcomes by aligning the distribution of the health workforce to areas of greatest need and building the capability of Australia’s medical practitioner workforce.

NATIONAL IMMUNISATION PROGRAM

Certain vaccines are proposed to be listed on the National Immunisation Program from 1 July 2018. Vaccinations introduced on the list include those to prevent whooping cough in pregnant women, influenza in people aged over 65, and the prevention of meningococcal in children.

Access to aged care at home

The Government proposes to increase the number of high level home care packages by 14,000 over four years. It will be introduced over four years from 2018-19. The intention is to support the choice of older Australians who wish to stay at home and avoid going into residential care.

NEW LISTINGS ON THE PHARMACEUTICAL BENEFITS SCHEME (PBS)

The Government has introduced new and amended listings on the PBS, including Spinraza for the treatment of spinal muscular atrophy. Changes will apply over various dates from 1 January to 1 July 2018.

The medicines are intended to treat or prevent spinal muscular atrophy, breast cancer, refractory multiple myeloma, relapsing-remitting multiple sclerosis or HIV.

INFRASTRUCTURE

GREAT BARRIER REEF

The Government will provide $535.8 million over five years from 1 July 2018 to accelerate the delivery of Reef 2050 Plan activities. It has allocated half a billion dollars to help protect the Great Barrier Reef from climate change and pollution.

SPACE PROGRAM

The Government will provide $41.0 million over four years from 2018-19 to grow the Australian space industry, including by establishing a National Space Agency. This will coordinate domestic space activities for Australia and the International Space Investment project, which will provide grants to strategic space projects that generate employment and business opportunities for Australians

TRANPORTATION

The Government will provide $24 billion for various transport projects throughout Australia, starting from 1 July 2018. It plans to fund key transport projects all around Australia – with commitments to road and rail in Western Australia ($3 billion), an airport rail link for the Melbourne airport in Victoria ($5.1 billion) and the Sydney freight rail ($400 million), amongst other projects.

TAX ADMINISTRATION

BLACK ECONOMY: COMBATTING ILLICIT TOBACCO
Importers of tobacco will be required to pay all duty and tax liabilities upon importation, applying from 2019-20. For tobacco products that are held in licensed warehouses at the commencement of the measure on 1 July 2019, transitional arrangements will apply. Current weekly settlement arrangements will no longer apply to imported tobacco.

Other measures to target the black economy include the formation from 1 July 2018 of an Illicit Tobacco Task Force to target illicit tobacco smuggling, and further funding will be provided to the ATO to bolster its capabilities to detect and destroy domestically grown illicit tobacco crops.

From 1 July 2019, permits will be required for all tobacco imports (except for tobacco imported by travellers within duty free limits).

The ATO will upgrade and modernise its excise and excise equivalent goods payment systems beginning 2020-21 to replace the outdated paper lodgment system.

BLACK ECONOMY: TAXABLE PAYMENTS REPORTING

The Government will expand the taxable payments reporting system (TPRS) from 2019-20 to three additional industries — security providers and investigation services, road freight transport, and computer system design and related services

Under the TPRS, businesses are required to report payments to contractors to the ATO. Businesses will need to ensure that they collect information from 1 July 2019, with the first annual report required in August 2020. A new online form is expected to make the reporting process easier.

TAX INTEGRITY

High profile individuals, for example sportspeople and actors, will from 2019-20 no longer be able to licence their fame or image to another entity such as a related company or trust. The Government notes that the licencing structure has created opportunities to take advantage of different tax treatments and that it facilitates misreporting and incorrect tax outcomes.

TAX COMPLIANCE FUNDING

The Government has set aside $130.8 million for the ATO to increase its compliance activities conducted towards taxpayers and their tax agents.

The funding, from 2018-19, is intended to provide the ATO with the resources needed to undertake new compliance activities, including additional audits and prosecutions, improving education and guidance materials, pre-filling of income tax returns and improving real time messaging to tax agents and individual taxpayers to deter over-claiming of entitlements.

It is expected that the increased compliance activities will generate revenue of $1.1 billion in fiscal balance terms over the forward estimates period.

DENIAL OF DEDUCTIONS FOR VACANT LAND

The Government will deny deductions for expenses associated with holding vacant land from 2019-20. Denied deductions will not be able to be carried forward for use in later income years.

This is an integrity measure to address concerns that deductions are being improperly claimed for expenses, such as interest costs, related to holding vacant land, where the land is not genuinely held for the purpose of earning assessable income.

COMBATTING ILLEGAL PHOENIX ACTIVITY

The Government will introduce a package to deter and disrupt illegal phoenix activity. This measure follows on from the Black Economy taskforces. The package introduces new phoenix offences to target those who conduct or facilitate illegal phoenixing. It will prevent directors improperly backdating resignations to avoid liability or prosecution, limit the ability of directors to resign when this would leave the company with no directors, and restrict the ability of related creditors to vote on the appointment, removal or replacement of an external administrator.

Posted , October 3, 2016.

Do you own a business that you want to make more profitable? To do so, you need to understand your cash flow projections better. How do you do this without your own numbers guy on board? This is evidently one of the specialist services that you best outsource. To make your business more financially sound, consider engaging CFO services.

WHAT ARE CFO SERVICES?

CFO, as you probably already know, stands for Chief Financial Officer, the services of whom may now be outsourced. What are the different tasks that fall under the role performed by a CFO?

  • Budget Planning and Implementation
  • Performance Analysis and KPI setting
  • Expense Management Reporting
  • Variance Analysis
  • Cash Flow Management Reporting & Support

WHY SHOULD YOU USE CFO SERVICES?

If your business needs help managing its accounting and other finance functions in a professional and proactive manner, it’s best to engage the services offered by experts. Outsourcing CFO services will allow you and your staff to concentrate on the core operation of your business while enjoying the assurance that the service you engaged is achieving the best results for your business with maximum efficiency.

WHAT ARE THE BENEFITS OF USING CFO SERVICES?

CFOs are considered important assets in the organisation they work for. They provide the following benefits as do outsourced CFO services:

  • Improved profit.
  • Better cash flow control.
  • Accelerated business growth.
  • Strategic succession and exit plans.
  • Systemised business.
  • More efficient receivables management.

WHO WILL BENEFIT FROM CFO SERVICES?

Businesses in the SME sector are normally not yet equal to the expense of hiring a full-time CFO. This is where CFO services come in. They provide the skill sets of an experienced CFO, allowing your business to benefit from such expertise without incurring the expense of a salaried executive with benefits.

WHAT ARE THE RESULTS ACHIEVED BY USING CFO

SERVICES?
With the improved profit, cash flow, and business efficiency they achieve for your business, it can then enjoy the competitive financial advantage it needs.

HOW WILL ASV PARTNERS WORK TOGETHER WITH YOU?

Working as a team with you, ASV Partners will follow this process:

  • Discussion and assessment of your current financial situation and your reporting requirements.
  • Audit analysis of your operations to evaluate what works and what doesn’t.
  • Recommendations for improvement of your processes and outcomes.
  • Implementation and tracking of new systems and/or procedures.
  • Continuation of work with you until you’re comfortable to go at it alone.

Are you interested in the above benefits and outcomes? Contact us at (03) 9587 9747 to discuss CFO services for your business today.

Posted , .

Financial freedom in retirement should be one of your goals, no matter how young you still may be. It’s simply prudent to save for the future as this is without a doubt an important factor in ensuring your welfare as a retiree.

It really behoves you to explore your options as early as you can so you can get started on a program for funding your retirement while you have plenty of time and means to do so. Your choice will probably depend on the level of responsibility you’re willing to take on. If you want more control over your retirement investments, consider setting up a self-managed superannuation fund.

WHAT IS A SELF-MANAGED SUPER FUND (SMSF)?

An SMSF is an investment portfolio that allows you to take the do-it-yourself approach in saving for your retirement. This means that the members of an SMSF are also the trustees and they have the freedom to run it in the manner they deem to be most beneficial to them.

If an SMSF appeals to you, you can set one up for yourself, making sure you adhere to the strict regulations of the Australian Taxation Office. You may do it on your own or with one to three more members besides yourself.

WHAT BENEFITS WILL YOU GAIN FROM AN SMSF?

As mentioned, you have greater control and enjoy better flexibility over your investments. You and your fellow trustees get to decide what to invest in and how to operate the fund. The same applies when it comes to picking the right insurance policy to suit your situation.

Cost could be another benefit, depending on the size of the fund. Account-keeping fees are fixed instead of percentage-based. An SMSF also has the advantage of being tax efficient with the option to make longer-term investments that allow you to negotiate for lower rates.

You have the option to leverage your SMSF to invest in property. This allows you to diversify your investments. You can also employ strategies that allow you to hold commercial premises in super if you own a business.

This fund is effectively a trust that can serve as a family wealth mechanism which you can pass on through the succeeding generations in your family.

HOW CAN YOU GET AN SMSF DONE RIGHT?

Running your own fund can be a complex process. The best way to ensure that you’re doing it correctly is to engage the services of a super fund accountant. Assistance from such a specialist involves ensuring that you meet all pertinent legal obligations and determining that your fund keeps within its purpose of providing you with financial security when you retire. You get guidance and analysis without you ever relinquishing control.

HOW CAN YOU MANAGE YOUR SMSF ON AN ONGOING BASIS?

To make sure that your SMSF is consistently managed, hire a super fund accountant to regularly monitor it so that you can be certain that you are not breaking the rules, that you’re keeping up with costs and fees, and that your fund is essentially doing what it is supposed to do.

IS AN SMSF RIGHT FOR YOU?

An SMSF isn’t for everybody, so it’s best to consult an expert before deciding to go for it. Will the benefits apply to you? Do you have the time and skills necessary to make it work for you? Is it the most cost-effective option for you? These are just some of the points to consider.

WHAT ARE THE COSTS, BOTH UPFRONT AND ONGOING?

For individual trustees, the upfront cost should be around $800 to $1,000. For corporate trustees, it’s no more than $2,000. Ongoing fees include account keeping fee, audit fee, and ASIC fee (if you’re a corporate trustee). Simple funds shouldn’t run higher than $2,000 per year. More complex funds cost around $2,500 to $3,000 a year. These cover the base cost. There may be additional costs as well.

HOW CAN YOU BUILD WEALTH WITH AN SMSF?

An SMSF can be an integral part of your overall wealth plan and be used for estate planning, for making additional investment, for ASIC protection, etc. It should be combined into your overall wealth-building strategy.

A self-managed super fund is an effective financial vehicle for funding your retirement. If you would like to set up your own SMSF, contact our super fund accountant at (03) 9587 9747 to find out more.

Posted , August 16, 2016.

Saving funds for retirement is a necessity, regardless of your age, lifestyle and personal goals. There is no better demonstration of responsibility to oneself than to ensure that you have the means to look after yourself and your own interests in the future, and that you will not need to rely on someone else for financial assistance.

As such, as early as you can during your professional life, it pays to begin exploring your options and to set a portion of your hard-earned money aside for the advanced years in which you will no longer have a paycheck to look forward to.

Consider an SMSF

One of the financial vehicles you would want to consider for this purpose is the Self-Managed Super Fund or SMSF. This is an investment portfolio that allows you to save the funds you require for retirement; however, unlike a typical superannuation scheme, the SMSF takes the do-it-yourself approach.

With an SMSF, you can exercise greater control over your retirement savings and investments because the members (also known as trustees) get to decide what to invest in and how the fund will operate. Trustees are responsible for everything — the investment strategies as well as the statutory and legal requirements.

SMSFs are beneficial because they can be run in a tax-efficient manner, they offer longer-term investments, and the trustees can directly negotiate for reduced rates for the services they need as well as make good, well-informed decisions geared toward their own investments.

What’s more, a person has the option to use their SMSF to invest in property.

Property investment basics

You can purchase both residential and commercial properties through your SMSF, provided that you can justify that your investment meets the following criteria:

    • It has to pass the “sole purpose test.” This means that the property investment must be made solely

to provide retirement benefits to the fund members.

  • The property should not be purchased from a related party of any of the fund members.
  • No related parties of any of the fund trustees should be renting or living in the property. You cannot, for example, use the SMSF property as a place for your family to holiday in, or to rent it out to relatives — these would be considered pre-retirement benefits that would be a breach of the investment conditions.

Basically, the property in question must have a reliable income stream as well as realistic expectations of potential capital growth.

Take note, however, that your SMSF cannot be used to purchase your own home.

Costs

Investing in property means that you will need to spend money from your SMSF balance. The money will cover a range of fees: bank, legal, upfront, advice and ongoing property management fees, as well as stamp duty.

There is also the option of borrowing or gearing your super into property. This, however, comes with significant risks and should only be explored if the strict borrowing conditions can be met.

Your SMSF property investment is an excellent resource that will ensure your financial security during retirement. But as with any financial endeavour, there are important decisions to be made and risks to be factored in.

Contact our super fund accountant at ASV Partners at (03) 9587 9747 to get the best advice and assistance for your specific needs.

Posted , .

Xero is considered the leading accounting software today, and for many valid reasons. It allows you to monitor your business data and transactions in real time. It offers you the on-the-go convenience of pre-programmed formulas, instant reports and easy payroll management. Many of the most time-consuming bookkeeping tasks can now be done with just a few clicks of a button. Moreover, its data entry and reconciliation features give you laser-focus accuracy and minimise costly errors and miscalculations.

As with any software, however, Xero is, at the end of the day, only a tool – no matter how clever or helpful it is, its performance still depends on its users. Xero shines when it is utilised by a highly skilled accountant who knows how to use it, and most importantly, truly understands how to make the best of the software’s capabilities to cater to the interest of your business.

When you work with a Xero accountant in Melbourne from our team, you don’t just benefit from the software. You also gain from solutions customised to the needs of your business, delivered by a trusted expert.

Get value beyond the software.

By working with an accountant who is armed and skilled in the use of the right tools and solutions such as Xero, you can look forward to a more streamlined accounting and reporting process for your business. With your accounting matters properly managed, you can then gain back the time, energy and headspace you need to access more opportunities that can drive the growth of your enterprise.

Be up-to-date with the latest regulations.

Tax legislation is not only complex. It also gets revised or updated on a frequent basis, so ensuring your business is fully compliant with prevailing laws can be tricky. A highly skilled accountant is in the know with the latest changes in legislation, so he or she will be able to prepare your files, organise your books and file the necessary paperwork following the right format and process. This will save you time as well as keep you away from legal problems due to misinformation.

Develop the right tax strategy for your business.

Obtaining tax deductions is one of the common benefits of getting an accountant to work with you. But future-looking accountants do not focus simply on one-time bonuses. Instead, they will lay out and help you develop a strategic approach that allows you to not just minimise the impact of tax in your cash flow, but also make tax management a key component of business growth and wealth creation.

Indeed, the concept of the accountant as a “mere” number cruncher has long been dead (to us at ASV Parnters, at least). In its place is a new breed of accounting professionals who deliver tailor-fit services that will offer tremendous value to your business and drive it to its full potential.

Contact our Xero accountant to find out more. Call us at (03) 9587 9747 now.

Posted , .

Tax reform under Malcolm Turnbull and Scott Morrison”… the only way we can ensure that we remain a high wage, generous social welfare net, first world society is if… we have strong business confidence.” Malcolm Turnbull, September 14, 2015

Leadership instability in the federal government has been unsettling for business and society as a whole. However, the latest change in leadership puts two men with business experience squarely at the helm with expectations that there will be greater understanding and appreciation of the pressures facing the agriculture sector, manufacturers, importers, exporters and the services sector.

Joe Hockey instigated a major review of tax reform which had over 800 submissions. It’s now possible that the terms of the review will be tweaked to emphasise business. The new leadership could foreseeably use this as an opportunity to engender confidence by delivering an immediate benefit to business. We’ll be watching closely and will keep you updated.

Whilst the media continue to impress the inevitability of recession, it’s not a fait accompli. There are factors that may provide a buffer, such as a lower dollar, that would benefit local manufacturers and exporters.

Under the new leadership, there’s likely to be a greater focus on investing in skills, which could benefit businesses looking to expand their production and access to markets. There may be an increased value placed on perpetual natural resources and technology, which could lead to concessions and more grants that increase Australia’s ability to nurture and maintain our most creative and innovative minds.

”Our values of free enterprise, of individual initiative, of freedom; this is what you need to be a successful agile economy in 2015.” Malcolm Turnbull, September 14, 2015

We are keeping a close eye on changes to taxation and benefits and are always able to advise you of the latest reforms and legislation that can grow your business and help you succeed.

Call us on (03) 9587 9747 to discuss how you can take advantage of the changes.

Posted , August 31, 2015.

David HindleASV Partners are pleased to announce that David Hindle has decided to remain at ASV Partners indefinitely.

You may recall that David’s firm, David Hindle & Associates, merged with ASV Partners last year. Whilst David’s initial plan was to retire, we are delighted that he has agreed to remain on in an advisory capacity.

David’s extensive knowledge and experience of the accounting industry, taxation legislation and practice, means that ASV Partners can continue to draw on his talents and expertise, particularly where complex matters demand his attention.

We trust that you share our enthusiasm for what we hope continues to be a longstanding relationship with one of the industry’s most experienced practitioners. Should you have any questions about David’s new appointment, please call one of our associates for more details.

Posted , August 14, 2015.

ATO Targets for 2015If you already follow your own superannuation fund closely, you may find the additional control that you get running a SMSF to be more satisfying, but it will take time and there are ongoing costs. There’s an investment in time required at the outset to understand the legal and regulatory requirements, as well as an analysis of your finances to see if a SMSF is right for you. And an interest in investment is also helpful. Whilst direct property is one of the most popular SMSF categories, direct shares and cash can round out a personal superannuation portfolio.

Running a SMSF can be time-consuming. Firstly, you need an investment strategy with a plan that’s reviewed periodically to make sure it’s achieving the value you plan to take into retirement. Then you need to make sure you have enough capital and lastly, the time to run your SMSF, whether you administer the fund or place it in the hands of experts.

Lifestyle and You

Developing a strategy can help you determine how – and with whom – you invest in and share your SMSF. Year on year, three asset classes out-perform all others: direct property, cash and direct shares. There are a number of ways to consider and select your investments and there’s really no limit to your options.

You may want to consider your interests before establishing a fund. If you have a medical practice, investing in devices or pharmaceutical shares could be a natural fit for your SMSF. If you’re also interested in renewables or health, looking at shares in these categories will make it easier to stay on top of your investments from day to day.

Time, skills and costs

Running a SMSF requires more time than an industry super fund. You can run a SMSF with up to three others which can give you a broader interest and skills base to draw on as well as a wider interest in investment types. Keeping a close eye on the performance of your industry super fund is a fairly good indication of an ongoing interest in a SMSF.

Firstly, you’ll need capital to start a SMSF, which you can provide yourself, or with up to three other investors. An initial investment under $100,000 isn’t going to be very cost-effective, with set up and operating expense fees consuming up to 10% annually, However, if you have more than $100,000 and are prepared to undertake some of the administrative and investment functions, a SMSF is the most competitive superannuation solution.

You’ll then need an investment strategy, as well as legal and financial advice to ensure you comply with laws pertaining to establishing and operating a SMSF. The administration and investment functions can be performed by the SMSF investors themselves, which include the preparation of an annual tax return for your fund, amongst other functions. Depending on your initial investment, you can spend anywhere from 1-10% of your initial capital to set up your fund.

There are also fees associated with your annual return, insurance for the members of the fund and administrative costs. The annual operating expense ratio (OER) of a SMSF is generally under 1%, but can be as low as 0.25%.

After all is said and done, you may find the set up fees and ongoing costs outstrip the benefits, but without a thorough account of your current situation and a SMSF, it’s difficult to determine what’s right for you.

Personalised advice for your needs

If you’re in the early stages of your career and have a small amount of equity saved, it may be worth considering setting up a SMSF to build wealth more quickly with a partner or up to three others, whilst at a more mature stage in your career, you may be looking for the security a source of revenue can provide in your retirement.

Tailoring a solution to your needs requires an understanding not only of your life stage, but the life path you’re following. If you intend to change careers at some stage, travel for an extended period or leave the workforce to start a family, you need to talk to a professional for advice to help help you to consider all the events in your life that can determine the Superannuation investment strategy that best suits you.

Wealth creation starts with small steps and great advice

We have practitioners who are experienced in running their own SMSFs who can provide first-hand insights into the peaks and pitfalls as well as the expertise to administer a fund for you.  If you have any questions about SMSFs, please don’t hesitate to call one of our SMSF experts to address your concerns.

Posted , August 13, 2015.

shutterstock_88823146 medIn recent years, the ATO has provided a target area of scrutiny, usually an occupation such as doctors, tradies or salespeople. Last year, they broke with tradition and focused on tax deductions related to computers and mobile phones. In keeping with the change, this year they have issued a warning to owners of investment properties across all sectors as well as work-related expenses and the cash economy.

Investment property

There are 1.8 million Australians – or 8% of the population – with investment properties. The scrutiny is likely to impact squarely on many SMEs who use property as both an investment and place of business.

The ATO estimates that property owners claim an average of $25,717 in deductions including interest, repairs and maintenance.  In most cases, this amount is a net loss which can then be offset against other income. As the popularity of property as an investment continues to grow, we can expect ongoing attention in this area.

You’ll also need to stagger the deductions of any large scale capital works or repairs over several years.

Holiday rental properties are particularly vulnerable, as the ATO now has access to third party data that can determine the value of a property as well as whether or not it was rented out for the period claimed in tax returns. If you own the property with a spouse who claims less tax than yourself, you’ll need to be aware that the deductions or capital expenses need to be shared equally if the property is owned equally.

Work-related expenses

Excessive work-related expenses such as mobile phones, or double-dipping on travel expenses, will also fall under the spotlights as the ATO continues to target tax payers who unfairly claim a disproportionate ratio of expenses used for business purposes.

Cars fall into this category, which means you need to be aware of which accounting method is applicable to you and your business. This is an easy trap that many SMEs fall into but one that is easily avoided.

The cash economy

It’s becoming increasingly easier to track the movement of cash through share registries, banks, titles offices, auction houses and even employees and employers. If you operate in a business that only accepts cash, it’s never been easier – or in your interests – to comply.

In 2014, the ATO uncovered $950 million in liabilities through cross-checking individual returns alone. Further liabilities were uncovered using web-scraping, whereby popular restaurant and café review portals as well as online auction websites easily detected those operating cash-only businesses.

The SuperStream deadline is approaching

By September, 2015, the ATO expects that the 800,000+ employers who are now required to make super guarantee contributions on behalf of their employees to be compliant. With so many different super funds, this can be a complex undertaking. You can simplify the process by either upgrading your existing payroll software or outsourcing the payroll functions.

The changes are designed to provide a single channel when dealing with employee super funds, less time spent dealing with employee issues, a reduction in costs associated with processing contributions and payments as well as a more timely flow of information and contributions.

Whichever way you choose to comply, you’ll need some advice as well as preparing some basic information to support contributions made electronically using SuperStream. Call us on (03) 9587 9747 to discuss your options if you haven’t already decided how to proceed.