Credit ratings are used by banks and other businesses to determine how credit worthy a customer will be. Credit rating agencies use information from lenders, such as repayment history, as well as information from the government, such as bankruptcy and court visits, to calculate your score.
In order to keep a healthy credit rating, be careful not to over commit when you borrow money, and always keep a good cash buffer so you are able to pay all your debts on time. It is good practice to check your credit report once a year to ensure the information is accurate. This will give you peace of mind when you apply for your next loan or credit card.
Please contact our office If you would like help checking your credit rating.
Are you planning to spend over $20,000 on research & development this financial year? If so, you may be eligible for a refundable tax offset of 43.5%. This means if you spend $20,000 on a new product, the government will pay you $8,700 at the end of the year.
In order to access this generous incentive, you must meet the following criteria:
The following types of expenditure can be claimed under the Research & Development Tax Offset, assuming they relate to the registered activity:
For example, Monika is in the fitness industry and has an idea for a new type of heart rate monitor that gives more accurate readings than traditional monitors. Her company MonMons Pty Ltd spends the following amounts in the 2018 financial year:
If you are interested in finding out more about your options regarding research & development expenditure, please contact our office.
Have you ever had a brilliant idea for a product or app or business but lacked the financial resources to follow it through? Crowdfunding could be the answer!
It is normally difficult to fund a new idea using traditional lenders due to the risky nature of start-up ventures. Many great ideas therefore have historically remained just an idea, but now with the invention of the internet, crowdfunding websites let you broadcast your idea to millions of people all over the globe. This style of funding is unique as instead of having one or two major investors or lenders, you can have thousands of funders putting in a few dollars each.
How It Works
In a typical crowdfunding campaign, a person or company with an idea can ask for donations toward a certain goal within a set period. Once you have reached your goal, you can go out and turn your brilliant idea into a brilliant product, app, or business.
People are usually happy to part with $5 or $10 to see a mutually desired product or service be developed as it is not a large sum of money to them. But if you are receiving that $5 or $10 from 10,000 people, it becomes a significant pool of start-up capital.
Tax & Legal Issues
The ATO has identified four different types of crowdfunding arrangements. Below is a list of these arrangements along with the tax issues arising from each.
If you would like to discuss whether crowdfunding could take your brilliant idea to the next level, contact our office.
A transition to retirement income stream (TTRIS) is a pension income stream you can withdraw from your superannuation fund once you reach your preservation age. Your preservation age depends on when you were born. Anyone born after 1 July 1964 must wait until they are over 60 before they can access their superannuation.
If you have reached your preservation age you can commence a TTRIS pension, which means you can access up to 10% of your superannuation balance each year. The amount you can access for the year is calculated on your balance at 1 July.
For example, Ben has a self-managed superannuation fund (SMSF) called BigBen Superannuation Fund. At 1 July 2017, he had a balance of $650,000. As Ben was born on 20 March 1961, he can commence a TTRIS pension when he reaches age 56 (which he did on 20 March 2017).
Ben decides to commence a TTRIS pension on 1 July 2017. He can therefore take up to $65,000 per year from the fund (adjusted each year depending on the fund balance). He can take this as one payment of $65,000 or regular instalments; such as $2,500 per fortnight.
The $65,000 income stream Ben takes needs to be included in his 2018 income tax return, however this income is concessional tax. Only the taxable component of the $65,000 is taxed, therefore if he has made non-concessional contributions part of his income stream will be tax free. The taxable component is taxed at Ben’s marginal tax rate, however he receives a 15% tax offset to reduce the total amount of tax that he needs to pay.
A TTRIS pension can be a good way to cut back on the number of hours you need to work while keeping your income levels the same. See our office if you would like more information on how TTRIS pensions work.
Personal Services Income (PSI) is income you earn predominantly through the use of your skills and efforts as an individual. The PSI rules have been enacted to stop people who earn PSI from paying wages to their spouses or family members to reduce their overall tax bill. For example - John earns $130,000 running an IT service business through a company. As the money is derived mainly from John’s individual skills, the income is classified as PSI. This means John cannot pay his wife a salary for bookkeeping and other duties and the income is declared on John’s personal tax return. The PSI rules can be avoided however if one of the following tests are passed.
The main test is called the Results Test and if you pass this test, the PSI rules do not apply. To pass this test you must meet the following criteria:
If you do not pass the results test, you may still be able to exclude your income from the PSI rules if you do not receive more than 80% of your income from the one client and you pass one of the following three tests.
Unrelated Client Test
You pass this test if you work for two or more unrelated clients, and you offer your services to the public.
You pass this test if your business employs other people as subcontractors or employees.
Business Premises Test
You pass this test if your business premises is not your home or your client’s premises and is used exclusively for your business.
If you do not pass the above tests as you have unusual circumstances, you can apply for a Personal Services Business determination.
Please contact our office if you are concerned you may be receiving PSI and would like use to review your circumstances.
The 2017 Budget, delivered on 9 May 2017, has seen two major changes that will impact current and future rental property operators.
The first change, which will impact existing owners of rental properties, is the removal of the tax deductibility of travel expenses effective from 1 July 2017. This means if you travel to inspect or maintain your property you can no longer claim this on your tax return. The 2017 tax return will be the last time you will be able to claim these expenses.
The second and more substantial change, which will only impact new rental properties purchased from 9 May 2017, is the removal of the ability to depreciate plant and equipment (such as dishwashers, ovens, air conditioners, etc) that come with the property. Prior to the budget, when you purchased a property you could obtain a tax depreciation report to increase the depreciation you could claim on the property. However, from 9 May 2017, you can only claim this depreciation on plant and equipment you purchase once you own the property.
Although the wording of the Budget papers is vague, it would appear if you build a new house or purchase a unit off the plan, you will still be able to claim the full amount of depreciation. This point will be clarified once Parliament releases the draft legislation.
If you would like to know how this will affect your individual circumstances, please contact our office.
The ATO has released a new app, available for both Android and iOS, which has a few tools that may help you with your record keeping. Perhaps the best feature in the new app is the ability to take photos of your receipts and store them until tax time. When you are ready to complete your tax return you can use the receipts or email them straight to us from the app. Other helpful features of the app include a PAYG withholding calculator, an ABN lookup tool, small business benchmarks and a list of key tax deadlines. To find the app, just search for ATO in the Google Play or Apple App Store.
Xero have recently launched a new feature which makes their software more powerful. It’s called Live Contacts and as the name suggests this feature allows your contact information to be linked to an online database. This can be a big time saver as the software can prefill details such as addresses, ABNs, and phone numbers. This information is made available by Equifax (formally Veda), who are one of the largest credit rating agencies in the United States. The other major benefit is Equifax provides a credit rating for the contacts you add – meaning you can now check the credit worthiness of your current and prospective customers. This may save you from doing work or selling to businesses who may not pay you. Watch the following short video for more info.
A question we are regularly asked is what is the best legal structure to use for holding a property portfolio. Although the best structure for you will depend on your individual circumstances, a great structure to consider would be a unit trust with a corporate trustee.
As the rental properties in the unit trust will most likely be geared, it is probable that in the first few years the expenses will be higher than the income, thus creating a tax loss. Any losses the unit trust makes are carried forward and offset against future profits or capital gains the trust makes.
Usually the downside of holding property in trusts is that the trustee must pay land tax on the unimproved land value of each property the trust holds at a rate of 1.6%. However, our trust deed provider is able to set up a trust deed with special provisions that allow yourself as an individual unit holder to be assessed for land tax personally instead of the trust. This means you have the benefit of the land tax threshold so you will not pay land tax until the unimproved value of your land total land holdings is above $482,000.
Finally there is asset protection; if someone has an accident on your property and sues you, your other assets may be at risk. You should always obtain an appropriate insurance policy to cover yourself for this type of risk. If you hold the property in a unit trust with a corporate trustee and get sued, there is another layer of protection as it would be the corporate trustee that will be sued, not yourself personally.
If you would like to know whether a unit trust would be a suitable structure for your property portfolio, please contact us.
The Office of State Revenue (OSR) currently has a grant available to small businesses who hire new employees, this is called the Small Business Grant. The value of the grant is $2,000 per new full time employee. The grant is also available to part time or casual employees; however the value of the grant is pro-rated based on the number of hours they work.
To be eligible for the grant, you must be a small business that is not currently liable to payroll tax. The employee must be employed in a new position; you cannot replace an existing employee and receive the grant.
The grant is available to new employees who commence work during the period 1 July 2015 to 1 July 2019 and is paid to the employer on the twelve months after their commencement date.
You can apply for the grant online through the OSR website by clicking the following link or by contacting our office for help: