News & Tax Insights

Which is better? A tax offset is not the same as a tax deduction. A deduction is subtracted from your assessable income to calculate your taxable income whilst tax offsets are deducted from the income tax payable. As your income tax will always be less then 100% of your taxable income, a tax offset is worth more than a tax deduction.   Tax offsets usually cannot be carried forward to the following year and except for franked dividends, private health insurance and a few other offsets, are generally not refundable. In a year where losses are brought forward, you may…

Question: An article in a recent newspaper reported that shares such as speculative mining shares purchased for resale at a gain are not eligible for the CGT discount. It went on to state that the discount is only available for shares delivering both income and capital gains. Is that correct? Was this intended? I am sure this would not be practised by taxpayers or tax agents.   Answer: Gains realised in the course of carrying on a business of investing in profit or trading in shares are income according to ordinary concepts and hence not eligible for the CGT discount.…

Question: Our company pays the annual leave loading to employees when they take their annual leave. They do not have an entitlement to that leave loading until the annual leave is actually taken. If employees terminate, the leave loading is not payable.   Will the leave loading form part of our deductible annual leave expense when we raise the provision for annual leave at the year end? Or, does it only become deductible at the time the employees take the leave and the loading is paid?   Answer: Annual leave and leave loadings are only deductible when actually paid either…

Question: We have an investment property that we purchased three years ago for $245,000. We wish to demolish the house and build a new home which would become our main residence. If, after five years as our main residence, we sold the property for $900,000, is CGT applicable? If so, what proportion?   Answer: There will be some CGT payable because the property would not have been your main residence for the whole of the ownership period. Your cost base is calculated by adding the original purchase price to the cost of demolishing and construction.   This, together with the…

Asking lots of good questions allows you in your discussions with your customers to understand the current situation for the customer, work out whether the customer is an appropriate client for you, establishment rapport and foster good communication, understand the decision-making process for the customer, identify differences between you and the competition, reinforce your credibility by being interested in her needs and opinions, motivate your customer’s interest and stimulate her thinking and potentially modify her attitudes to create a win-win outcome. Miller Heiman, The New Conceptual Selling

The Tax Office has announced that it will commence issuing letters warning tax payers they will receive a default assessment for tax where they have not lodged their tax return by the due date. In addition, tax payers might incur failure to lodge penalties and also administrative penalties that could be 75% of the tax liability. WTB 1724

Question from Steve: If your Will covers all your assets, does that still mean you need to make beneficiary nominations in your superannuation fund?   Answer from Brett: Your Will actually does not cover all of what you might consider your assets. Like a family trust or a company with superannuation you don’t actually own the asset. While your Will may consider the receipt of superannuation it cannot actually control that receipt.   Therefore you must make a death benefit nomination in your superannuation fund. Should your estate planning be best suited by nominating your Estate then you would nominate…

Question from Stuart: If you attempt to make a binding nomination to a non-dependant sibling, how and when would you find out that it is not valid?   Answer from Brett: Unfortunately you won’t find out until the nomination is tested on your death by the fund trustees. By then it is too late. I am yet to see a fund trustee test a nomination as it is submitted other than to ensure the physical documentation is completed appropriately. This check does not include ensuring the nominee is able to receive a benefit from superannuation.   Superannuation Legislation (SIS) does…

Question from Greg: Would a plant nursery be classified as agriculture and consequently not be subject to the reduction in fuel tax credits happening with introduction to the carbon tax?   Answer from Andrew: That is correct, a plant nursery is properly classified as agriculture for a range of tax purposes including not being subject to the reduction in fuel tax credits associated with the carbon pricing package. Agriculture is defined to include horticulture which includes the cultivation of flowers, trees, shrubs or plants.

Question from Greg: Do you have any views on how the increase in superannuation guarantee levy will be applied to "total cost" employment contracts? Where the total remuneration package is defined, will the increase in superannuation levy be borne by the employer or will it reduce the employee's cash salary?   Answer from Andrew: Great question! There are two separate superannuation issues identified with this question: First, subject to the new Superannuation Bill being passed by the Parliament, superannuation guarantee will increment from 9% to 12% over the years through to July 2019. This is a statutory rule and will…

Question from Michael: The list of companies that was outlined in your webinar presentation is mainly mining and resource related. Is this a back-door mining tax? (A short list of companies from the National Greenhouse and Energy Report 2009-10 was listed including their greenhouse gas emissions).   Answer from Andrew: The short-list of companies was selected from a large listing in the National Greenhouse and Energy Report. There are some 300 companies identified in the report which run across industries such as banking, aluminium smelting, mining, and manufacturing.   The carbon pricing mechanism applies to all sites with greenhouse gas…

Question from Steve: Does the TFN (Tax File Number) reporting of trust distributions relate to when the trustee declares the entitlement or alternatively when it is actually paid?   Answer from Andrew: This is a great question that relates to the reasonably new requirement for trustees to withhold tax where a trust beneficiary has not quoted their tax file number and other key personal data. The requirement to obtain TFN and personal details and report that information to the Tax Office is triggered by the creation of a present entitlement to income of the trust. That present entitlement usually occurs…

… previously on tax life … Sam was getting business matters under control and starting to think through the long term. A financial plan was coming together including getting insurances sorted out, estate planning, building superannuation for future retirement and long-term succession planning for the business. University The crackling was crisp, crunchy and absolutely mouth watering. Roast pork with baked veggies was one of the family favourites. A mix of gravy and apple sauce really set the meal off but Joe topped his culinary masterpiece with the steaming baked pudding and custard. It was great to have Rachel, Sam's eighteen…

… previously on tax life … Sam had got the new business off the ground and been through the ups and downs of winning orders and then weathering a quiet patch in the business cycle. It was time for some long-term personal and financial planning. Retirement? Sam's husband Joe had been on at her for quite some time about going to see a financial planner. Sam had been dubious about doing this because she was not interested in investing in shares or complicated managed funds. Joe continued to nag… Financial planners don't just put you into shares… There are a…