End of Month Practice Update

It's the end of the month and seems an appropriate time to initiate a regular 'practice update' post.

Alan and I have concentrate our planning this month on further utilising the internet and developing a web presence which will serve as a useful resource for clients.

- To improve the appearance and functionaility of our site, we have retained a professional web designer. We are looking forward to a revamped website coming soon!

- A syndicated partnership has been formed with business.gov.au. Our site will eventually operate as a 'library' of important government information, calculators, forms and business resources. We hope this will assist clients to locate everything they could ever need in the one place.

- Two blogs have been established (this one and Dollars & Sense for Small Business). Plans for advancing both blogs include working through basics and heading into lessons and valuable articles.

- In addition to other services, Alan now operates as an ASIC registered agent. This allows him to act as intermediary for clients dealing with ASIC and the ability to lodge their documents electronically.

I'm excited about the developments this month and can hardly wait until they are fully intergrated. Your feedback is always welcome - in fact, we encourage it - so if you have any comments, criticisms or suggestions, please do let us hear them. How can we serve you better?

Australian Capital Reserve in Administration

For the 7,000 investors who have $330 million placed with Australian Capital Reserve, it is an unnerving time. It was announced this week that ACR has gone into voluntary administration.

What is most disturbing to me is the advertising and promotion surrounding ACR specifically target retirees, many of whom invest their life savings.

ASIC has announced it will monitor the situation and provide an update as soon as it can. Administrator Murry Smith has stated, "It is too early to estimate the ultimate return to noteholders.''

A call centre 1800 002 009 has been established for ACR investors, and updates and information will also be available at the administrators website www.mcgrathnicol.com.

Know Your Tax Offsets: Mature Age Worker

A relatively recent rebate is the Mature Age Worker Tax Offset.

What is it?
The mature age worker tax offset was introduced in the 2004-05 financial year to "reward and encourage" mature age workers who decide to stay in the workforce.

Am I eligible?
If you are an Australian resident, have received net income from working and are aged over 55 years, you may be eligible for the Mature Age Worker Tax Offset (MAWTO).

What is net income from working?
Your net income from working is used to calculate the amount of MAWTO you are entitled to. Basically, this is your income from working less any allowable deductions.

What income counts?
Income from working includes such items as salary and wages, income from a business you carry on, personal services income and reportable fringe benefits.

Which income doesn't count?
"Net income from working" does not include any social security payments, interest and dividends, super, capital gains, rental income or eligible termination payments. The amount of income you have received from the items not included as "income from working" does not affect your eligibility for this offset.

How much is it?
The maximum MAWTO entitlement is $500. This offset can only reduce your tax liability to nil; meaning any unused portion cannot be transferred or refunded.

How much will I get?
This depends upon your net income from working. The following rates apply depending on which bracket you fall into:

Under $10,000 = calculated at 5 cents per dollar from 0 - $9,999.
$10,000 - $53,000 = $500
$53,000 - $63,000 = reduced by 5 cents per dollar over $53,000.
Over $63,000 = nil

How do I get it?
If you qualify, the Tax Office will use the informaiton provided in your tax return to assess and apply your offset.

Neglected Tax Deduction #2

Okay, so most of us know what we can claim on our tax returns (or at least what we usually claim) but there are still a lot of deductions that go neglected by people year after year. Continuing a series on Neglected Tax Deductions, today I mention another oft-forgotten area.

Do you work outdoors?

If the nature of your work causes you to work all or part of the day in the sun, you can claim a tax deduction for your sun protection expenses.

Sun protection includes sunhats, sunglasses and sunscreen lotion.

This ruling is most likely to apply to buiders, labourers, tradespeople, plant operators and others in the building or construction industry.

Understanding Benefits: Family Tax Benefit #1

The Understanding Benefits series will continue with a look at Family Tax Benefit (FTB). This can be a somewhat confusing payment, so I'll split this into several shorter posts.

What is Family Tax Benefit?

There is probably more confusion surrounding FTB than any other payment. Family Tax Benefit has two parts; Part A and Part B. You may be eligible for either one of Part A, Part B or both.

Part A is designed to help with the cost of raising kids and is paid for each dependent child you care for who is aged under 21 (or 21-25 years and still studying full-time).

Part B is designed to provide extra support to families with one main income earner, including sole parent families. Part B is a family payment and can be paid until the youngest child is 16 years (this can be extended to 18 years if the child remains in full-time study and does not receive a social security payment of their own).

Future posts will look at both Parts A and B and answer the questions of who qualifies, how to claim and how much it will be.

How Do They Work? "Tax Deductions"

A common misconception I hear people say regarding certain expenses or giving is, "it's okay, I'll get it all back at tax time." Well, that's not exactly true and, strictly speaking you do not "get it back" at all. So what does a deduction do...

How do deductions work?

A tax deduction reduces the amount of income you have to pay tax on. The Tax Office does not reimburse you for your expenses nor can you deduct these from your tax amount. Tax deductions are taken off your total income to get your 'taxable income' - the amount your tax is calculated on.

Income - Deductions = Taxable Income

Example:

Sally has income of $25,000. The tax payable on this amount is $2,850. Now suppose that Sally also has $400 in deductions. This reduces her taxable income to just $24,600. Tax payable on $24,600 is $2,790.

In this example, deductions of $400 have saved Sally $60 in tax (Sally is taxed at the 15% tax rate).

Please note this is a simplistic example given as a guide to understand how the deductions work and does not take into account other factors such as offsets previous losses, the Medicare levy, etc.

How much of a saving?

The individual tax saving as a result of deductions will vary depending upon what tax bracket a person is in. If your taxable income is less than $6,000 you would not receive any benefit from a deduction as your income is below a taxable level.

As the average Australian is in the 30% tax bracket, the best most of us can hope to recoop of our allowable deductions is just 30 cents in the dollar; better than nothing but a long way from "getting it all back at tax time."

Snail Mail Newsletter - Individual May 2007

May's snail mail client newsletter for individuals is now available online. Simply click the PDF icon to download.

I look forward to creating exciting and vibrant PDF newsletters in the future. This month is our regular newsletter converted to PDF format.

How $1,000 Becomes an 11-Year Loan

Making only 'minimum repayments' can be a dangerous thing.

Assume you have a typical credit card at 16% p.a and minimum payments required each month of 2.5%.

Now assume you charged just $1,000 on that card and made no other purchases. You now have a debt with interest.

Your first minimum payment of $25 will be around $13 towards interest and just $12 off the debt.

To pay that credit card off making only minimum payments would take over 11 years !!

If you think that is terrifying, consider this: during that time you will have paid around $860 in interest. That is a whopping 86% of the principal on top!!

Minimum repayments may be tempting but be aware they come at a high price.

Track Down That Lost Super!

Are you one of the 4.3 million Australians with lost or unclaimed superannuation?

Most of us would have no idea how much super we have lost track of, where it is or how to go about claiming it.

The Australian Taxation Office has a service they call Superseeker.

SuperSeeker is a tool that will look for your lost superannuation in real time and instantly provide you with possible matches.

To begin the Superseeker online search you will need to provide your:

• tax file number


• name, and


• date of birth

It's your money so go and claim it!

Neglected Tax Deduction #1

Okay, so most of us know what we can claim on our tax returns (or at least what we usually claim) but there are still a lot of deductions that go neglected by people year after year.

Did you know?

Most taxpayers are aware they can claim a deduction of their accountant's fee for preparing their return. We call that a "cost of managing tax affairs."

What a lot of people fail to factor in is the cost of travel to and from the accountant. Yep, you can claim that too.

Stop Bugging Me at Home! DO NOT CALL Register

The Government has finally launched the long-awaited DO NOT CALL Register. I wasted no time in adding our home number to the list.

You can register your home and mobile numbers on the register but not business or fax lines. Telemarketers are required to check their call list against the Do Not Call register prior to making calls, or could face penalties.

Is this the end of all unsolicted calls?
No, but it's a step in the right direction. This will not stop all telemarketers as there are a few exemptions which enable certain public interest organisations to make telemarketing calls. Exempt organisations include charities, religious organisations and registered political parties. You can also still receive calls from market researchers.

How soon until I notice the changes?
According to the Do Not Call website, it may take up to 30 days after registering your number for calls to reduce.

How do I register?
You can register online at www.donotcall.gov.au or over the phone on 1300 792 958.

Parenting, Housework, Employment and Not Enough Hours in the Day

If you're a mother who feels like she is constantly picking up after everyone else, you probably are!

According to a recent facts sheet released by the Australian Institute of Family Studies to support National Families Week 2007, mothers with a child under 5 spend an average of 23 hours a week doing housework. And it doesn't end when the kids go to school. The figures indicate that mums with a youngest child 5-14 years old are still putting in 20 hours a week on household chores.

Dads aren't getting off the hook either with most contributing an additional 6 hours each week to the housework.

You'd think we all lived in spotless homes! Still, I can attest to the fact that one can clean all day and still have it look the same as it did when you first started just 10 short minutes after the kids walk in the door.

Considering that,
38% of mothers with an infant are employed
54% of mothers with a 4-5 year old are employed, and
the employment rates of fathers with an infant and those with a 4-5 year old are both over 90%.

it is no surprise we are also feeling rushed and pressured for time; a significant source of stress for families.

Child Care Budget Changes #2

The second 2007-08 Budget initiative relating to child care comes in the form of changes to the way parents currently claim the child care tax rebate.

2. The Government will bring forward payment of the Child Care Tax Rebate (CCTR) and pay it through the Family Assistance Office (FAO) at the end of each financial year. This means eligible families will receive the rebate soon after the end of the financial year - a lot easier than the current way of having to wait and claim it the following year.

Who will benefit?

The change will benefit all working families who receive CCB for approved child care. These families will now be able to receive a payment equivalent to 30% of their out-of-pocket expenses up to $4,000 indexed per child per year for approved child care at an earlier time. The payments will begin from September 2007 for child care expenses incurred in the 2006-07 year.

Good News!

Families who incurred child care expenses in both the 2005-06 and 2006-07 years will receive two rebates in 2007-08, potentially totalling up to $8,000 (indexed) per child! The first rebate will be received as part of their tax assessment, while the second will be received as a direct payment from the FAO.

How do I get it?

For child care costs incurred in 2005-06 you still need to keep your paperwork and claim the Child Care Tax Rebate (CCTR) in your 2006-07 tax return. For child care costs incurred after 1 July 2006 the FAO will pay the CCTR directy into your bank account after you have lodged your tax return.

Child Care Budget Changes #1

According to the Family Assistance Office, a number of the 2007-08 budget initiatives will impact Centrelink and FAO customers.

Two significant changes have been announced in regard to child care. They are both good news for parents.

1. The rate of Child Care Benefit (CCB) will be increased by 10 per cent, on top of the normal CPI increase. As a result of these changes on 1 July 2007 families will receive a total CCB increase of more than 13%. What does that mean in your world? It means up to an extra $20.50 per child per week, for one child in full time care (5 days per week) for low income families.

Who will benefit?

All families who are currently receiving CCB and those who are eligible for CCB in the future will benefit from the additional financial support provided through the CCB changes.

How do I get it?

You don't need to do anything to receive the CCB increase. The Family Assistance Offcie will automatically adjust your entitlement. If you have chosen to receive your payment as a lump sum, it will be paid after you have complete your tax return at the end of the financial year.

Understanding Benefits: Maternity Payment

This will be the first in a series of posts outlining the various Centrelink and Family Assistance payments.

What is the Maternity Payment?

Maternity Payment is a one-off amount paid to families following the birth (including stillborn) or adoption of a baby. The payment replaces the former Maternity Allowance and the ATO's Baby Bonus. The Maternity Payment is not income tested and is given to help out with those initial expenses after the addition of a new child.

How much is it?

Maternity Payment is a one-off payment of $4,133 for each child and is usually paid as a lump sum. If the recipient is under 17 years, the payment will probably be staggered over a period of 13 weeks. The amount is payable for each child in a multiple birth (that's $8,266 for twins). Changes in care during the 13 weeks eligibility period could result in the payment being apportioned between two carers.

Does it affect tax or benefits?

The good news is that Maternity Payment is not taxable income and it is not considered income for Family Assistance or Social Security purposes either.

How do I get it?

More than likely, the hospital will send you home with a claim form aswell as your new bundle of joy. If that is not the case, you can claim online using online services or call 13 6150 to have a claim form sent out to you.

You must apply for Maternity Payment within 26 weeks of the birth of your own child. Application requirements for adoptions can differ slightly so it is best to check this first with the Family Assistance Office.

Know Your Tax Offsets: Net Medical Expenses Over Threshold

Alan and I have three beautiful children ages 4, 6 and 8. Let's face it; children are expensive! Keeping track of some of these expenses can pay off when tax time comes around.

The Tax Office has found that many people are still not taking advantage of a large number of rebates.

20% Tax Offset on net medical expenses over the threshold

One of the most common areas people fail to take advantage is the medical expenses offset. This applies to out-of-pocket expenses (so deduct refunds from Medicare or your health insurer) over the $1,500 threshold. It sounds a lot but it is shockingly simple to reach that amount, especially with a young family or elderly dependents.

Who's included?

The offset applies to you and your dependants. If your household spent over the threshold on unreimbursed medical, you may be able to claim this offset.

What medical expenses count?

Medical expenses can include things like visits to your doctor, hospital, optical, dental, referred physio, prescription medication and even some counselling services.

How much will it be?

The offset amounts to 20% of the amount over the threshold. For instance, if our family had $4,000 of net medical expenses for the year, our offset would be $500 (4,000-1,500 =2,500 x 20% = $500).

It all adds up

It is not difficult for a family to go over the threshold (I single-handedly managed to get us up there just with a little dental work)! It is simple enough to access your medicare statement but you do should be aware of tracking the little things such as prescription medications - they just might be the tipping point to put you over the threshold.

No Time for the Centrelink Queue: Register for Family Assistance Online

If you haven't yet discovered Online Services at the Family Assistance site, it is well worth the effort to register. Save yourself the time and frustration of queuing up at Centrelink for simple matters.

After a secure login, you are able to view and update your information aswell as access payment history, apply for certain benefits and view the important correspondence your dog ate.

Registering is relatively simple and you only have to do it the one time. Goodness knows, it has to be less painful than standing in a line trailing out the door for 2 hours just to notify a stressed-out public servant that your child has changed preschools!

Check out the Family Assistance site to get the ball rolling. I promise you'll be glad you did.

More Personal Tax Cuts

According to Budget 2007-08, all taxpayers will benefit from from a further $31.5 billion in tax cuts over the next four years.

Highlights include:

1. From 1 July 2007, the low income tax offset will increase to $750 per year and the 30 per cent threshold will rise from $25,000 to $30,000.




2. From 1 July 2008, the 40 per cent threshold will increase to $80,000 and the 45 per cent threshold will increase to $180,000.

That's great news for next year but what about this tax season? Well, thanks to the May 2006 budget, it's still good news for low income earners.

More taxpayers are likely to qualify for the Low Income Tax Offset (LITO) this year as a result of the offset increasing from $235 to $600 and not starting to phase out until $25,000. So what does that mean for you? It means a reduced offset may be possible up to a taxable income of $40,000.

Cash Bonus for Senior Australians

On Tuesday, 8 May 2007 the Commonwealth Government announced details of the Budget for 2007-08.

One-off $500 Payment

• A non taxable one-off payment of $500 will be paid by 30 June 2007 to each person of age pension age eligible for Utilities Allowance as at 8 May 2007.
  


• A payment of $500 will also be paid to each self-funded retiree eligible for the Seniors Concession Allowance as at 8 May 2007.
  
  
• In addition, a one-off payment of $500 will be made to each person eligible for Mature Age Allowance, Partner Allowance and Widow Allowance as at 8 May 2007.

Medicare Online

Because I am a huge fan of anything that saves me time and hassle, I'm happy to note that Medicare Australia now offers a range of online services.

You do need to register and wait for a password to be mailed to you but once you are set up you can:

• View your medicare tax statement


• Update your personal and banking details


• Request replacement or additional cards


• View your children's immunisation history statements


• Check your Medicare Safety Net balance


• Check your organ donor registration (if applicable)

To register for these online services, simply go to www.medicare.gov.au and follow the links.

Click, Print and SAVE MONEY

Shop-A-Dockets have been in Australia since 1986, and savvy shoppers have been using them since then.

The great news is that you no longer need to spend a single cent at the supermarket to take advantage of the savings. Did you know you can download the vouchers and print them off at home?

Hotdockets.com.au is the Shop-A-Docket online voucher site. Simply enter your postcode to search for savings in your area.

We tend to do this for pizza occassionally and the price difference is well worth the minimal effort to print out a voucher before heading off to Domino's.

Compare Private Health the Easy Way

The Australian Government has introduced a comprehensive, independent website that shows an overview of every available private health insurance product from every fund.

It's controlled and run by the Private Health Insurance Ombudsman and it includes a simple search facility that makes it easy to find and compare all the products that fit your needs.

You can now easily compare private health insurance products at http://www.privatehealth.gov.au/.

What are the Dollars & Sense Blogs all about?

Well, I am glad that you asked.

After designing, printing and posting client newsletters the other day, I was struck by the "light bulb" idea to begin blogging. It's a quick and effective way to communicate and offers so much more possibility than quarterly snail mail.

Alan and I see our role as more than a one-off tax season service for our individual clients. We are your accountants every day of the year. Unfortunately, it is often difficult to build upon that relationship and extend service throughout the year because most of our individual clients only phone in around July... even later if they aren't expecting a refund.

So, I asked around to discover what it is people really want to know and services they wished their accountant provided. As it turns out, there is a whole LOT... more than enough to justify regular blog updates.

Many of you face issues on a daily basis dealing with various government departments, understanding and claiming ever-changing entitlements, sorting out a household budget, knowing what records to keep, making sense of tax jargon, getting out of debt, contemplating home-businesses or getting back into the workforce once the kids are at school. Phew! It's no wonder we are all stressed these days.

As a family with three young children ourselves, we understand the frustration.

The aim of the Dollars & Sense blog for Individuals is to provide you with relevant information and tips so that you can stay informed and on top of nitty-gritty household management.

While I am beginning the blog with local families and clients in mind, most of the information and resources will be relevant to any Australian household.

You can expect articles, news, reviews, hints, tips, lessons and links covering everything outlined above from claiming tax rebates to cutting the grocery bill.

I'll be maintaining the "Individuals" blog and adding postings on a regular basis. Content will be guided by your feedback so don't be shy about making suggestions or offerring your comments.

We are also establishing the Dollars and Sense for Small Business blog with similar aims as an additional service to our business clients and anyone else who is interested.

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Christie Lewis is a business partner with Alan Lewis Accounting & Taxation Services. Located on the NSW Central Coast. More than just a tax time necessity... we remain at your service for the entire year. Visit us online today at www.lewistaxation.com.au

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