Dollars & Sense for Individuals

Announcement: This blog has relocated

2008-05-18T11:16:00.002+10:00

We have a new look and location. Now you can read the Dollars & Sense blogs at Dollars & Sense.

Beware of Tax Refund Email Scam

2008-05-10T12:05:00.002+10:00

An email fraudulently claiming to be from the Tax Office is currently circulating.

The email claims to offer a tax refund and asks people for personal and credit card details.

It is similar to previous scams and uses the Tax Office logo and the words ‘Notification — Please read’ or ‘Australian Taxation Office – Please Read This’ in the subject line. There may also be more variations to these subject headings.

The email asks people to click on a link which redirects them to a bogus website that looks similar to the Tax Office website and asks for credit card and personal details.

The Tax Office will never send people an email asking them to provide personal information including credit card details.

Acting Second Commissioner Bill Gibson said anyone who receives the email should delete it immediately.

“People should be wary of unsolicited emails claiming to be from the Tax Office.
“As an extra precaution we recommend you type internet addresses directly into your internet browser rather than clicking on hyperlinks embedded in emails,” Mr Gibson said.

If people have entered their credit card information on the website, they should report it to their credit card provider as soon as possible.

ATO Media release 2008/24

Be Careful with your Tax File Number

2008-04-14T09:41:00.004+10:00

The ATO is reminding taxpayers to keep their Tax File Number secure.

People are increasingly being asked to provide their TFN when it isn't needed. Watch out for bogus job advertisements that ask for your personal details including your TFN. It does not have to be provided to potential employers.

Only certain people can ask for your TFN, the most common being:

• the Tax Office when discussing your tax records
• your employer once you have started work
• your bank or other financial institution
• your tax agent
• Centrelink, and
• your superannuation fund.

To read the full ATO media release along with tips for keeping your TFN safe, see here.

Office Closed 6th - 13th April

2008-04-04T15:16:00.001+11:00

Please note that our office will be closed from Sunday 6 April until Sunday 13 April. Clients who wish to speak with Alan are welcome to try reaching him on his mobile phone.

If you don't get through (we are staying in an area with little reception) please leave a message on the mobile and Alan will call you back as soon as he can.

Alternatively, voice messages left on the office answering machine will be followed up on the 13th when we return. Thank you for your understanding.

Q&A: How Long Do I Keep Records?

2008-02-12T15:15:00.000+11:00

Question: How long should I keep my tax records and receipts?

Response: From 2004/05 the majority of individual taxpayers are required to keep their records for a period of five years from the time of lodgement.

Some exclusions may apply, such as in the case of a tax dispute with the Commissioner or capital gains tax (in these cases, the five year requirement may be extended).

However, five years from the time you lodged your return is the record-keeping requirement applicable to most Australian taxpayers.

Retrenched or leaving your job?

2008-01-22T00:21:00.001+11:00

Leaving your current job can be a frightening experience, especially if you are not sure what's going to happen next.

If you resign, are retrenched or considering a redundancy package, you might be entitled to income support payments when you leave work.

Centrelink's Financial Information Service have put together a "Retrenched or Leaving Your Job Fact Sheet". The fact sheet provides information on entitlement, claiming, restrictions and waiting periods that may apply. You can download the publication in either PDF or rich text format online HERE.

Certain stapled security arrangements under review

2008-01-14T22:58:00.000+11:00

ATO Media Release 2008/2

Acting Tax Commissioner Bruce Quigley today warned people to be cautious about claiming deductions for losses incurred under certain stapled security arrangements.

In these arrangements the company issuing the securities suggests that the investor may claim deductions for losses in certain circumstances.
These circumstances include the assignment, transfer or surrender of the note, or conversion or disposal of the stapled security.

Mr Quigley said the Tax Office is concerned that these losses may not be allowable and will be releasing a public ruling on the arrangement shortly.
"We are acting now to warn people who may be involved of our concerns as soon as possible.

"People should seek independent tax advice before claiming deductions for any losses that they incur under these arrangements,” Mr Quigley said.

A taxpayer alert TA 2008/1 was issued today and is available from the Tax Office website www.ato.gov.au

What every employee needs to know about super

2008-01-12T17:28:00.000+11:00

The ATO has recently released their publication, "Super - what you need to know."

If you’re new to the workforce, changing jobs or you need to know how to make the most of your super savings, this publication will:

- help you understand how super works
- provide the steps needed to make the most of your super at different life stages, and
- show you where to go for more information.

You can download a free copy of the publication as a PDF directly from the tax office website HERE.

Another ATO Tax Refund Email Scam

2007-12-08T23:40:00.000+11:00

The Tax Office is again warning people about a fraudulent email being circulated that claims to offer a refund from the Tax Office.

The email is similar to previous scams from March, June and October which fraudulently uses the Tax Office logo and the words ‘Australian Taxation Office – Notification’ or ‘Australian Taxation Office – Please Read This’ in the subject line.

There may also be more variations to these subject headings.

The email asks people to click on a link which redirects them to a bogus website that looks similar to the Tax Office website and asks for credit card and personal details.

The email and website are not affiliated with the Tax Office in any way.

Acting Second Commissioner Bill Gibson said anyone who receives the email should delete it immediately.

“People should be wary of unsolicited emails claiming to be from the Tax Office.

“The Tax Office will never send emails to people asking them to provide personal information including credit card details.

“As an extra precaution we recommend you type internet addresses directly into your internet browser rather than clicking on hyperlinks embedded in emails,” Mr Gibson said.

If people have entered their credit card information on the website, they should contact their credit card provider as soon as possible and report a possible compromise.

Tax Deadline Approaching

2007-10-28T23:07:00.000+11:00

REMINDER:

If you are doing your own tax return this year, you have just days left to lodge it with the ATO before the October 31 deadline.

Online Guide for Young Employees

2007-10-12T12:56:00.000+10:00

Today sees the launch of the Workplace Authority's "What's the deal with workplace agreements?" interactive tutorial.

The head of Workplace Authority, Barbara Bennett, says "'What's the deal with workplace agreements?' is a versatile product that advises and supports young employees, be they at school and working on the weekend or working full time as an apprentice. It cuts out the jargon and gives young employees the facts through realistic situations so that they know where they stand when they enter a workplace agreement."

The guide provides factual information about agreement making, rights of young employees, as well as the responsibilities of their employers. It is best suited for 14-22 year olds and their parents.

You can access or download the interactive guide at http://www.workplace.gov.au/

740 New Places to Boost Uni Entry in NSW

2007-09-12T10:53:00.000+10:00

University students in New South Wales will benefit from 740 new Commonwealth supported places announced today by the Minister for Education, Science and Training.

“Places have been allocated for areas of skills need and student demand. New South Wales will receive 2,006 additional places by 2011,” Minister Bishop said.

“The new student places will provide for the training of 225 engineers, 200 nurses, 120 science professionals, 120 teachers, 50 health professionals including Indigenous health professionals, 10 business and IT professionals and 15 places for Indigenous education pathways.”

“Nationally the Australian Government has allocated more than 2,300 new Commonwealth supported places to help meet student demand for higher education,” Minister Bishop said.

More to Receive Higher Pensions

2007-09-11T10:16:00.000+10:00

More than two million age pensioners will receive increases in their pension payments from 20 September 2007 and an estimated 300,000 older Australians will be able to access the pension for the first time or get a higher rate of pension.

Minister for Families, Community Services and Indigenous Affairs, Mal Brough, yesterday announced that pensions would once again rise above inflation.

The Minister said the adjustments from 20 September also applied to people receiving the full range of Centrelink payments, such as Disability Support pension and Newstart payments.

You can access a full summary of changes online here.

Elements of a Super Payout

2007-09-07T11:40:00.000+10:00

From 1 July this year, Super payouts are made up of two components - a tax-free and a taxable component.

A tax-free component does not count towards your taxable income.

A taxable component is the part of the payment which is taxable. This will usually be broken up again into "taxed" and "untaxed" elements.

The taxed element had already had tax paid on it in the fund. It may or may not need to have additional tax paid on it once it is paid out. How much tax you may still need to pay on the taxed portion depends on the type of payout and your age when taking it. If you are 60 or over, you pay no tax on the taxed element of your payout.

The untaxed element is the part of your payout that hasn’t had any tax paid on it in the fund. It is still taxable so needs to included in your tax return as income. How much tax you will need to pay on the untaxed element depends on the type of payout and your age.

When you receive your payout, your super fund will send you a payment summary which will show the components (including any untaxed and taxed elements) and the tax withheld.

If the taxable component includes both taxed and untaxed elements, each is taxed separately according to different rules. For more detiled information, visit the ATO page How Your Super Is Taxed.

Thousands of Apprentices Gain New Benefits

2007-09-05T09:45:00.000+10:00

According to a government media release this morning, thousands more Australians have today become eligible for a wide range of incentives to encourage the take up of apprenticeships in areas of skills shortages.

Backdated to 1 July 2007, Aircraft Maintenance Engineers, Binders and Finishers, Butchers, Flat Glass Trades, Furniture Finishers, Locksmiths, Optical Mechanics, Painters and Decorators, Picture Framers, Printing Machinists, Screen Printers, Shearers, Signwriters, Tree Surgeons, Vehicle Trimmers and Wood Machinists, will now join 38 trades previously eligible to access a range of Australian Government apprenticeship incentives including:

* $2,000 Apprenticeship Wage Top-Up;
* $1,000 Apprenticeship Training (FEE) Vouchers;
* $800 Tool Kit;
* $13,000 Wage Subsidy for Apprentices over 30 yrs;
* $1,000 Commonwealth Trade Learning Scholarship; and
* $1,000 Rural and Regional Skills Shortage Employer Incentives.

For more information contact the Australian Apprenticeships referral line on 13 38 73 or check out the website at http://www.australianapprenticeships.gov.au/.

Q&A: Allowances and Deductions

2007-09-03T22:53:00.000+10:00

Question: I received a laundry allowance from my employer. Does this mean I have been reimbursed and can't claim a tax deduction for laundry?

Answer: Receiving an allowance from your employer (as shown on your payment summary) is not the same as being reimbursed. The allowance is taxable income and included on your tax return along with your regular wages. You can and should still claim a tax deduction for your actual laundry expenses in order to reduce your income (which now includes the allowance you received).

Payment of 2006/07 Child Care Rebate

2007-08-13T00:28:00.000+10:00

The Family Asistance Office have reported that payments of the 2007 30% Child Care Rebate will be made from September.

Remember, this is the only year where you could receive two lots of the rebate; the 2005/06 child care rebate on your tax return and also 2006/07 rebate from the FAO. From next year, the rebate will only be paid through the Family Assistance Office.

We're overweight, marrying less and buying more

2007-08-12T00:58:00.000+10:00

According to an Australian Bureau of Statistics (ABS) publication released last week, we're more likely to be overweight, less likely to marry, and consuming more goods and services. A few titbits include:

The latest figures show that around 7.4 million Australian adults (54%) were overweight or obese. This was an increase of more than 2 million adults from 1995.

The probability of marrying has declined. If current rates were to continue, 31% of men and 26% of women would never marry.

The Australian labour force participation rate for women of child-bearing age (15–44 years) rose from 59% to 71% between 1980 and 2005.

While many goods and services have become more affordable others, such as education and hospital and medical services, have become less affordable because price rises for these services have outpaced increases in income and wealth.

As our household income has increased so has household spending. The largest increases have been on communication services and goods for recreation and culture.

ASIC warns Aboriginal communities of get rich quick schemes

2007-08-08T00:49:00.000+10:00

Source: ASIC Media Release - CA07-13

ASIC has urged consumers from Aboriginal communities to look out for potential scams following concern over an investment scheme that appeared to target communities on the south coast of New South Wales.

ASIC’s warning follows the unearthing of a scheme that proposed investors join a revolving wealth creation scheme that would see them divided up into groups to invest funds every week for three months, then each take turns to dip into the accumulated money pool. Promises made by the scheme included turning ten dollars into $1000 or more.

ASIC viewed this proposed scheme as being illegal under the Corporations Act as each ‘membership’ would have amounted to a unit in an unregistered managed investment scheme. ASIC’s enquiries found that the scheme never got off the ground but we are concerned that Aboriginal communities may be especially vulnerable to promoters of illegal schemes who promise large returns from affordable weekly contributions’, ASIC Executive Director of Consumer Protection, Mr Greg Tanzer said.

'ASIC is committed to ensuring that any investment schemes or scams targeting particular community groups are stopped before any investors join up.’ ASIC encourages all potential investors to carry out safety checks before investing their money. If the investment does not pass the test then these schemes should be reported to ASIC.The safety checks are:

- Search ASIC’s database to see if the company managing the investment holds an Australian financial services licence and is registered.

- Check ASIC’s list of illegal investments available at http://www.fido.gov.au/.

- Ask the seller for their product disclosure statement. This document must clearly and concisely set out information about the product.

Further, ASIC has established a toll free number (1300 365 957) to assist Indigenous consumers with any queries.

Additional information for Indigenous consumers and investors as well more information regarding scams and illegal investments schemes can be found at ASIC’s consumer website, http://www.fido.gov.au/.

Understanding Benefits: Multiple Birth Allowance

2007-08-01T23:08:00.000+10:00

Multiple Birth Allowance is an extra payment to help you if you have a multiple birth.

Who Qualifies?
You can get Multiple Birth Allowance if you have three or more children who are born during the same birth for whom you receive Family Tax Benefit.

How much is it?
The Allowance can be added to your Family Tax Benefit. The Australian Government has announced that from 1 January 2008, families will remain eligible until the children turn 16 years of age, or for fulltime students, until the end of the calendar year in which they turn 18.

Parents of triplets will receive an additional $3,179.15 extra per year ($121.94 fortnightly).

Parents of quads or more are entitled to an additional $4237.65 each year ($162.54 p.f).

How to apply?
You do not need to make a separate claim for Multiple Birth Allowance, as it will be paid as part of your FTB.

Family Tax Benefit Adjustments in your Tax

2007-07-29T16:52:00.000+10:00

This year, FTB reconcilations (top-ups or overpayments) are included in the Notice of Assessment from the ATO and refunds adjusted accordingly.

If you have over-estimated your taxable income, your Family Assistance top-up will arrive in the same payment as your tax refund.

Receiving a nice lump sum can feel like quite a windfall!

However, persons who have been overpaid family assistance throughout the year may be disappointed. FTB overpayments will be deducted from any tax refund due.

While the new way saves waiting for the Family Assistance Office to get around to paying top-ups, unfortunately it doesn't give recipients a clear break-up of the FTB payments included in the reconcilation.

Can you claim Work Skills Vouchers?

2007-07-23T23:50:00.000+10:00

Did you know...?

If you are 25 years and over and do not have Year 12 or equivalent or certificate level II or higher qualification, you are probably eligible for Work Skills vouchers to help improve your qualifications.

The vouchers can be used in public, private or community colleges and are worth up to $3,000.

Unskilled workers and those returning to the workforce (such as parents, carers, etc) will get priority according to the latest information.

You can check your eligibility for a voucher through the Australian Skills Vouchers Program website.

Instant Rebate with Medicare Easyclaim

2007-07-18T20:06:00.000+10:00

I have to admit, I like the idea of getting a rebate immediately and without a trip to a Medicare office.

If you normally pay to see your doctor, Medicare Easyclaim lets you claim your Medicare rebate on the spot, using the EFTPOS terminal in the doctor’s surgery. Your rebate is paid directly into your cheque or savings account almost immediately.

For more information on the new Medicare Easyclaim visit the Patient Information Page.

$15 Million paid to assist local storm victims

2007-07-11T19:58:00.000+10:00

The Australian Government has distributed more than $15 million in emergency assistance to people affected by the Hunter and Central Coast floods, Minister for Human Services, Senator Chris Ellison said today.

Senator Ellison said Centrelink has paid nearly 13,000 claims for the Australian Government Disaster Recovery Payment – totalling $15.67 million - since the assistance package was announced on 10 June.

“The damage and impact of the floods has been widespread across the Hunter and Central Coast region and Centrelink staff have been working tirelessly to get help to those in need,” he said.

“Along with staff from the Red Cross, Samaritans and the NSW Government, Centrelink workers door-knocked houses in affected areas to check on residents’ wellbeing and ensure they’re aware of help available. In addition, staff at the Wallsend processing centre are still working well into the night to process claims as quickly as possible.”

Senator Ellison said he had heard some remarkable stories from the floods. “One story I heard was of a staff member whose roof collapsed while she was in bed, flooding her entire house and destroying most of her clothes and possessions,” he said.

“She showed up for work on Tuesday following the floods at Newcastle Centrelink wanting to help people who were worse off than her.

“30 Centrelink staff flew in from around Australia to help with the recovery effort, many of whom were involved in helping Innisfail rebuild after Cyclone Larry last year. I commend Centrelink staff and their colleagues from the NSW Government and community organisations for getting help to people when they needed it.”

Senator Ellison said the disaster recovery payments offered $1000 per adult and $400 per child for the destruction of their principal place of residence, where homes had been rendered uninhabitable for 48 hours or more as a result of storm or flood damage, or in cases of serious hospitalisation.

“Anyone still seeking assistance should contact the Australian Government Storms Assistance Hotline on 180 2211 which is still available 24 hours a day, or visit their local Centrelink office,” he said.

More than 15,500 enquiries have been answered by the hotline and staff are still receiving hundreds of calls a day. The Commonwealth and New South Wales governments have also contributed $500,000 each to community recovery funds and recovery grants of up to $15,000 for eligible small businesses and primary producers. Further information is available by calling 1800 678 593.

Source: Media Release, Department of Human Services.

Boosting Minimum Wages for Aussies

2007-07-09T12:08:00.000+10:00

A decision by the Australian Fair Pay Commission confirms Australia’s status as the nation with the second highest minimum wage in the developed world.

The decision means low paid workers receive an extra $10.26 a week taking the minimum wage from October 1 2007 to $522.12 a week.

With the cost of living being what it is, even with the increase to minumum wages, it still appears pretty rough. As frugal as our household is, I couldn't imagine feeding and housing a family on minimum wage. Still, let's not forget the additional social support available to Aussie families.

The recent report released by the Australian Bureau of Statistics confirms that after families receive government benefits, principally family tax benefit, only 40 per cent of households pay any net tax — that is, they get more back in family tax benefits than they actually pay in tax.

In my opinion, we really do live in the lucky country. Without a doubt, we have one of the most generous social support systems in the world. Unfortunately, generosity is open to abuse and can lead to a sense of entitlement or a cycle of dependency.

What do you think? Should we have minimum wage laws? Is it better to leave the labour market sort itself? Does the welfare system need to toughen up on some recipients? Who and how?

The Paperwork that Protects You

2007-07-06T00:20:00.000+10:00

Statements are sent to you by investment funds, by companies you hold shares in, by your superannuation fund for your protection. Always get the originals sent to you personally. If you cannot look after your own affairs, get them sent to a person you trust (but not your adviser), so there is always a pair of independent eyes looking after you. Love your paperwork!

The importance of this is illustrated by the case of a financial planner and tax agent based in Newcastle. Stuart Forsythe is his name and ASIC's investigation gathered the evidence that had him sent to gaol for six years.

The people who went to see Mr Forsythe were elderly people with superannuation money and savings, and they wanted him to help them choose appropriate investments to see them through their retirement. The first part of the process went well enough when Forsythe put their money into solid funds with a reasonable track record.

Then he made these people what sounded like a really sensible and attractive offer. He arranged for the funds to send all clients statements direct to him at his office. He told them that when he does their tax, he would have all the paperwork handy and that it would easier than them searching around at home to find them. Needless to say, some his clients agreed to this, because it seemed such a good idea.

But here's the trick. Because Forsthye received the clients' statements, he was now in a position to make withdrawals from their investment accounts without their knowledge. He then forged the clients' signatures on withdrawal requests from their various investment accounts and helped himself to their money. They had no idea what he was up to.

Forsythe eventually came unstuck but his victims are still trying to sort out the mess.

As you can see this was a really simple fraud that could easily have been prevented.

All the clients had to do was say no. They should have received the original statements themselves to check what was happening with their money. If they wanted Forsythe to do their tax, they could have sent him the copies whenever they got a statement.

© Australian Securities & Investments Commission. Reproduced with permission.

The Income of Minors and Taxation - Part 3

2007-07-05T10:00:00.000+10:00

What rate of tax applies to the income of minors?

The tax rates given below apply in 2006–07 for minors who:

are residents of Australia
are not excepted persons, and
have no excepted income.

Rates

$0 - $416 other income = Nil tax

$417 - $1307 other income = Nil + 66% of the excess over $416

Over $1307 other income = 45% of the total amount of income that is not excepted income.

If the minor’s taxable income is less than $40,000, they will get the low income tax offset. The maximum tax offset of $600 applies if their taxable income is $25,000 or less. This amount is reduced by four cents for each dollar over $25,000.

Example:

Kris is 15 years old. She has no excepted income and $900 in other income. The tax payable on her income is:

Excess over $416 = $900 – 416 = $484
66% of the excess = $484 x 66% = $319.44

As Kris’s taxable income is less than $25,000, she gets the maximum tax offset of $600. The net amount payable by Kris is $0 ($319.44 - $600).

What if the application of the special rules results in serious financial hardship?

If a minor faces serious financial hardship as a result of the application of the special rules, they may get a tax offset of some or all of the extra tax payable if we consider there is serious hardship due to higher tax rates applying rather than ordinary tax rates.

If you are in this situation, you will need to provide information stating the reasons for your hardship when you lodge your income tax return.

Source: Australian Taxation Office

The Income of Minors and Taxation - Part 2

2007-07-05T09:47:00.000+10:00

Are all types of income received by minors covered by the special rules?

No. Even though a minor may not be an excepted person, ordinary rates of tax still apply to certain types of income. Such income is called excepted income.

Excepted income includes:

employment income
taxable pensions or payments from Centrelink or the Department of Veterans’ Affairs
compensation, superannuation or pension fund benefits
income from a deceased person's estate
income from property transferred to the minor as a result of the death of another person or family breakdown, or income in the form of damages for an injury they suffer
income from their own business
income from a partnership in which they were an active partner
net capital gains from the disposal of any property or investments listed above, and
income from the investment of any of the amounts listed above.

Excepted net income – that is, excepted income minus deductions relating to that income – is taxed at ordinary rates. All other income of a minor who is not an excepted person will be taxed at higher rates.

Source: Australian Taxation Office

The Income of Minors and Taxation - Part 1

2007-07-05T09:42:00.000+10:00

Income of minors
A minor is a person who is under 18 years of age. Special rules apply to the income of minors.

Under these rules, certain types of income received by minors may be taxed at higher rates.

However, minors who are residents of Australia do not have to lodge a tax return if they earn less than $1,334 in 2006-07. This is because the low income tax offset of $600 offsets the tax payable on income less than $1,334.

Why do special rules apply to income of minors?

The special rules were introduced to discourage adults from splitting their income and diverting it to their children.

Are all minors covered by the special rules?

No. Several categories of minors are excluded from the special rules. These minors are called excepted persons.

A minor is an excepted person if on 30 June 2007:

they were working full-time, or had worked full-time for three months or more in 2006-07 (ignoring full-time work that was followed by full-time study)
intending to work full-time for most or all of 2007-08, and
not intending to study full-time in 2007-08.
they were entitled to a disability support pension or rehabilitation allowance, or someone was entitled to a carer allowance to care for them
they were permanently blind
they were disabled and were likely to suffer from that disability permanently or for an extended period
they were entitled to a double orphan pension and received little or no financial support from relatives, or
they were unable to work full-time because of a permanent mental or physical disability and received little or no financial support from relatives.

Ordinary rates of tax apply to all the income of an excepted person.

Continued in Part 2

Source: Australian Tax Office

Understanding Benefits: Rent Assistance

2007-07-04T11:13:00.000+10:00

What is it?

Rent Assistance gives extra help to you if you receive more than the base rate of Family Tax Benefit Part A, and pay rent to private landlords.

Who is eligible?

You may also be able to get help if you pay:

lodging, or board and lodging;
site fees (eg. caravan, mobile home);
mooring fees for a boat or vessel that you live in.

Rent Assistance is generally not paid to people who pay rent to a government housing authority (such as a Housing Commission), own or are buying the home in which they live (except for mobile and relocatable homes), are getting Incentive Allowance, or pay less than the threshold amount of rent.

How much is it?

Rent Assistance is paid at the rate of 75 cents for each dollar of rent paid above the rent threshold, up to specified maximum rates. The rate of Rent Assistance depends on how many children you have, and whether you are partnered or single.

Maximum fortnightly payments range from $122.22 for a single person with one child up to $138.18 for a couple with 3 or more children. These rates are a guide only. For an estimate on how much you may be able to claim, use the online Family Assistance Estimator.

How do I get it?

Rent Assistance is paid along with your Family Tax Benefit. You can choose to get your Rent Assistance as fortnightly payments even if you choose to defer all of your Family Tax Benefit until after the end of the income (financial) year.

Rent Assistance cannot be paid through the tax system.

In order to claim rent assistance, you'll need to supply the Family Assistance Office with a copy of your current lease or tenancy agreement.

Source: Family Assistance Office

Starting a New Job? Claiming the tax-free threshold

2007-07-04T06:42:00.000+10:00

When you start a job, your payer (employer) will give you a Tax file number declaration form to complete. Centrelink is also a payer and they will give you this form if you apply for payments.

You tell your payer you want to claim the tax-free threshold by printing X in the Yes box at ‘question 9 - Do you wish to claim the tax-free threshold from this payer?’

You have 28 days to give your payer a completed Tax file number declaration form with your tax file number (TFN) on it or to claim an exemption from quoting a TFN. An exemption may be claimed if you do not earn enough income to pay tax and you are under 18 years of age.

After that time, they must start taking tax out of your pay at a rate of 46.5%.

If you don’t have or have forgotten your TFN, you can indicate on the Tax file number declaration form that you are making an application or enquiry to get your TFN. This will mean your payer will tax you at the normal rates for 28 days.

However, if you have not provided your TFN at the end of the 28 days, they must start taking tax out of your pay at a rate of 46.5%.

What if you have more than one payer?

You cannot claim the tax-free threshold from more than one payer at a time. If you do, it will result in you not paying enough tax for the income year. This may result in a large tax bill when you lodge your tax return.

If you have more than one payer, you need to choose which one to claim the tax-free threshold from. Generally, it is best to claim the threshold from the payer who pays you the most.

You have more than one payer if:

you have a part-time job and also receive Centrelink payments, or
you have two (or more) jobs.

Once you have selected the payer you want to claim the tax-free threshold from, print X in the No box at question 9 with your other payers.

If your circumstances change, you can fill out new Tax file number declaration to ensure you continue to claim the tax-free threshold from the payer who pays you the most. However you must always make certain that you are not claiming the tax-free threshold from more than one payer at a time otherwise you may end up with a tax debt at the end of the income year.

© Commonwealth of Australia. Source: Australian Taxation Office

Choosing an Income Protection Insurance Policy - Part 3

2007-07-03T12:22:00.000+10:00

How much will you receive?

Income protection policies have a formula for calculating how much you will be paid. It may depend on your income at the time you took out the policy or your income over a number of years. The schedule attached to your policy will tell you how much you will receive every month.

The insurer may not check that you have correctly stated your income at the time you take out the policy. They may only check it when you make a claim. If, for example, you are self-employed, make sure you can produce tax returns, invoices or other documents establishing your income. Otherwise, the insurer could pay you less.

For further information on income protection insurance, visit ASIC's page on Insuring Your Income.

See Part 1
See Part 2

© Australian Securities & Investments Commission. Reproduced with permission.

Choosing an Income Protection Insurance Policy - Part 2

2007-07-03T12:13:00.000+10:00

What kind of cover do you want?

Once you've decided you want to take out cover, you need to consider how comprehensive you want the cover to be. The more comprehensive the cover, the more expensive it will be.

1. Do you want to receive a benefit if your disability is: - partial (eg you can return to work part time) or total

- permanent or temporary

2. Do you want to be covered if you are "disabled" in a broad or narrow sense? Different policies will consider that you are disabled if you are unable to do:
- your usual occupation
- any occupation to which you are suited by education and training or
- any occupation at all.

3. Do you want to receive a benefit for a disability that is the result of:
- an accidental injury
- sickness or illness or
- both?

4. If the policy covers sickness or illness, does it cover "pre-existing" illnesses?

A pre-existing illness is one that you:
- may have had before you took out the policy (even if you have recovered) or
- one that you had symptoms or treatment for (even if it was not severe enough to prevent you working).

This is particularly important if you are taking out a new policy each year (instead of paying an annual premium to continue an existing policy). The insurer may have the right to refuse a claim if you contracted an illness under one policy, but were not disabled until after you had taken out the new policy. The illness becomes "pre-existing" and is therefore not covered under the new policy.

5. How long do you want to receive benefits?

For example, benefits for temporary disability will usually be limited to a period of one or two years only.

6. Do you want to receive an insurance payment even if you are receiving other money?

Some policies will not make payments (or will reduce the amount they pay) if you are getting money from another source as a result of the accident or illness. For example, if you are getting workers' compensation or disability payments through Centrelink, the insurer could pay you less or not pay you anything.

7. Does your policy cover you if you aren't working when the disability occurs? For example, you may be between jobs or a seasonal worker moving from job to job.

See Part 1

See Part 3

© Australian Securities & Investments Commission. Reproduced with permission.

Choosing an Income Protection Insurance Policy - Part 1

2007-07-03T12:00:00.000+10:00

Most people only read their policy from cover to cover when they need to make a claim. Unfortunately, by this time it's often too late.

In 60% of cases involving disputes over unpaid claims during 1999, consumers did not have the insurance they thought they did. Make sure you know up front what to expect from your policy. Courtesy of ASIC'S comsumer site FIDO, here's what to look out for so you get the cover you need:

Is Insurance Part of Your Superannuation Package?

Before deciding whether to insure yourself against loss of income, check if you already have disability insurance through any superannuation fund you contribute to. If you do, check what sort of insurance it is and when it will pay.

Superannuation funds commonly offer insurance that pays benefits if you become permanently disabled and cannot return to work (to replace at least some of the income you would have earned if you were still employed). It is usually (though not always) cheaper than a policy you take out yourself. Your super fund's product disclosure statement (PDS) tells you about your insurance coverage. Ask you super fund for a copy of your PDS.

See Part 2

See Part 3

© Australian Securities & Investments Commission. Reproduced with permission.

Know Your Tax Offsets: Baby Bonus

2007-07-02T14:11:00.000+10:00

I am still talking to women who were/are eligible for the Baby Bonus and had no idea! Don't miss out... know your tax entitlements or talk to someone who does.

What is it?

The baby bonus is a payment from the Tax Office you may be entitled to if you had a baby or gained legal responsibility for a child aged under five, between 1 July 2001 and 30 June 2004.

The baby bonus is a refundable tax offset – even if you do not pay tax, do not have any income or do not have to lodge a tax return you can still claim it. The baby bonus is paid whether or not you currently get any other family benefits.

Who qualifies?

If you had a baby or you gained legal responsibility of a child aged under five (for example, through adoption), after 30 June 2001 and before 1 July 2004 – whether or not you already have other children – you could receive the baby bonus. Usually, it is paid to the mother of the child. If you had a baby or you gained legal responsibility of a child aged under five (for example, through adoption), after 30 June 2004, you are not eligible for the baby bonus. You may be eligible for the new Maternity Payment which is administered by Centrelink.

How much is it?

How much baby bonus you get depends on your own taxable income each year. If your taxable income is $25,000 or less you will be entitled to an annual amount of $500. The ATO have an online calculator to help you work out your baby bonus.

Do I need to Lodge a Tax Return?

2007-07-02T09:26:00.000+10:00

Typically you will need to lodge a tax return if:

you have paid income tax during the financial year
your taxable income is above the tax-free threshold of $6,000 and you did not receive Centrelink payment,
you received a Centrelink payment, had other income, and your taxable income was above the threshold amount listed in TaxPack.

Other reasons you need to lodge a tax return include such things as:

you are the liable prent under a child support assesment,
You have a reportable fringe benefits amount,
you are entitled to the private health insurance offset,
you carried on a business,
you made aloss or claim claim a loss you made in a previous year

... along with a host of other reasons.

If you are unsure, it is worth getting in touch with your accountant or tax agent to clarify your obligation. Did you know the ATO now have an online tax tool to help you determine if you need to lodge?

If you are not required to lodge a return this year, you should submit a non-lodgement advice to the ATO (this is included in TaxPack 2007). If you are registered under a tax agent, they will inform the Tax Office for you.

Tax Office warns of illegal early access to superannuation

2007-07-02T00:07:00.000+10:00

In like vein to yesterday's post on early withdrawal of super, the ATO has recently released a media alert warning people to beware of shonky schemes:

The Tax Office has warned people from non-English speaking backgrounds to beware of schemes offering access to superannuation benefits before retirement.

Deputy Tax Commissioner Raelene Vivian said schemes offering early access to superannuation for a fee are illegal and anyone involved faces the loss of their super benefits, legal penalties and a hefty tax bill.

“We have detected promoters offering early access schemes to people from non-English speaking backgrounds in western Sydney.

“Anyone who is offered a scheme which, for a fee, arranges access to their superannuation before they retire, should contact the Tax Office on 13 10 20 without delay.”

Ms Vivian said promoters are misusing self managed superannuation funds they have established or that they establish for their clients, to access superannuation benefits.

She said they are charging fees of up to 20% or more of the fund’s assets for their services.

“They then claim the client can withdraw the money to pay off debts or to fund the purchase of a home, to buy a car, a boat, pay for a holiday or other purposes.

“Involvement in early access to superannuation schemes as either a client or a promoter is illegal and attracts significant legal and financial penalties.”

Ms Vivian said early access to superannuation is only granted in cases of severe financial hardship or on compassionate grounds with approval from the Australian Prudential Regulation Authority.

“In these situations people do not need the services of a promoter and no fee is required.”

Q & A: Early Release of Superannuation

2007-07-01T16:18:00.000+10:00

This weeks question is another common query; can you withdraw the money in your superannuation early?

This seems to be one of the first 'solutions' to pop into the mind of a lot of people when really it should be considered only as a last resort.

By law, you generally get your super only when you:
- permanently retire from the workforce, and also
- reach the minimum age set by law, called your 'preservation age' (this is typically between 55 and 60 depending when you were born).

You can get your super earlier only if you:
- suffer permanent incapacity for work, or
- possibly in cases of severe financial hardship, or
- on 'compassionate grounds'.

Severe financial hardship

Contact your fund. If the rules allow early release of benefits, you must satisfy the trustee that you have been receiving a Commonwealth income support payment for a continuous period of 26 weeks and you cannot meet your reasonable and immediate family living expenses.

Compassionate grounds

Contact your fund. If the rules allow early release of benefits, the 'compassionate grounds' are set out in the law. The Australian Prudential Regulation Authority (APRA) must consider your application first, before your fund trustee can make a final decision.

Compassionate grounds involve medical treatment for serious conditions that is not readily available through the public health system, transport for medical treatment, changes to a home or vehicle because of a severe disability, palliative care, funeral and burial expenses, or to prevent the forced sale of your home by your mortgagee.

Illegal early access

Avoid illegal schemes that try to get your super money out early, and save yourself from getting cheated and from heavy tax and legal penalties. These schemes are sometimes promoted by word of mouth or shady advertising.

Report to ASIC or the Australian Tax Office (ATO) anyone who tries to talk you into getting your preserved benefits early through a self-managed super fund or for a fee. AVOID THESE SCAMS and do not risk your money.

Source: Information for this response has been sourced from the Australian Securities and Investments Commission.

Lodge on Time and Don't Risk a Fine

2007-07-01T11:45:00.000+10:00

A few people have asked when their returns must be done by so I thought it worth mentioning here.

You have until the 31 October 2007 to lodge your 2006-07 tax return.

Late fines range from $110 to $550 if you lodge within four months after the due date, and up to $2,750 after that period. Interest is also incurred on outstanding tax.

Individuals lodging their own return must do so by October 31, whereas those registered under a tax agent have longer.

One reason many people avoid lodging on time is the fear they will have to pay a tax debt. If this applies to you, be aware that:

you have plenty of time before now and the first payment,

the ATO can work with you to come up with a manageable payment plan, and

the longer you leave it, the more fines and interest charges you will eventually have to pay.

The lesson here is lodge on time and don't risk the fines.

Understanding Benefits: Large Family Supplement

2007-06-30T22:59:00.000+10:00

What is it?

Large Family Supplement is an extra payment to assist families with three or more children.

Who is eligible?

To be eligible for the Large Family Supplement you must have three or more children for whom you receive Family Tax Benefit.

How much is it?

You can receive a Large Family Supplement of $9.80 a fortnight (that's $255.50 per year) for each child after the second. This is paid on top of your Family Tax Benefit. Therefore four children equals an additional $19.60, five children $29.40, etc.

How do I apply?

You do not need to make a separate claim for Large Family Supplement, as it will be paid as part of your Family Tax Benefit. If you are eligible and are not already receiving Large Family Supplement as part of your Family Tax Benefit, you should contact the Family Assistance Office.

Source: Family Assistance Office

End of Month Practice Update

2007-06-30T19:59:00.000+10:00

Well, it's the end of another month and the end of yet another financial year.

New-look Website
Visitors to our Home Page will notice an updated look and feel to the site. This is stage one of our long-term vision of developing an ultimate informational resource for clients and the public alike.

Plans over the next month include adding additional content and downloadable resources.

Business Planning
It would seem a lot of queries lately involve the nitty-gritty questions and confusion surrounding the start-up of a new business venture. I cannot stress enough the importance of proper planning and structure at this stage. Alan is always happy to meet with you and go over your business ideas to help you start out well informed and on the right foot.

This month, Alan is focused on adding content relevant to business planning and I'll be continuing to include MYOB tips and tutorials.

Client Promotion
We are always seeking ways to further support our clients. We hope to extend this service by offering 'client profiles' in the blog posts and bi-monthly newsletters. Additionally, I would love to help some of our business clients without a web presence to get their name online. I'm working on a plan to see this happen shortly.

Appointment Times
Alan is available after hours this tax season for face-to-face interviews. Appointments can be made to see Alan:

Monday to Friday from 7:00 pm

Saturday and Sunday from 9:30 am till late.

To make an appointment you can contact our office at any time on 02 43 904156. Evenings are already filling up so be sure to secure a preferred time as soon as you're ready.

Some people prefer to just drop off their stuff, have us collect it or mail it in. This is fine too although Alan will still need to contact you by phone to discuss your return before completion.

As always, your feedback and suggestions are more than welcome. Tell us, how can we serve you better?

Child Support Scheme Reforms

2007-06-29T21:21:00.000+10:00

Significant changes are being made to the Child Support Scheme from 1 July 2008 and all child support payments will need to be reassessed.

The Child Support Agency (CSA) is currently running a campaign between now and the end of July 2007 to make sure they have the most up-to-date contact details for all parents.

The CSA needs all of their customers to update their contact details so they can let them know about the changes, and so CSA can make sure they get the new assessments right.

Child support and Family Assistance are linked - the amount of child support you pay or receive can affect how much Family Assistance you receive. If CSA can't contact you, your new child support assessment may be incorrect, which could also mean you do not receive the family assistance that you are entitled to.

For more information or to update your details go to www.australia.gov.au/csa or to update your contact details with the CSA, call 131 272.

You can register your email address to receive important updates about the changes to the Child Support Scheme directly to your inbox. You may also choose to take part in future email surveys, which will help CSA improve their service to you. To subscribe go to www.australia.gov.au/csa.

Source: Family Assistance Office

Some quirky Census facts

2007-06-28T21:31:00.000+10:00

The ABS has recently released it's "quirky census facts" from the 2006 Census. Having worked as a census collector, I can assure you that "quirky" doesn't begin to cover some of what I encountered. Still, for fact junkies like myself, these might provide some interesting conversation fodder:

Locations with the highest proportion of high-income people

Canberra's suburb of Forrest is the statistical local area with the highest concentration of adults (aged 15 years and over) with gross personal incomes of $2000 or more per week (24%), closely followed by the Shire of Peppermint Grove in Perth (also 24%).

Uncommon ancestries

Among the smallest ancestry groups recorded in the Census were Hmong (2189 people), Manx (1853), Tatar (299), Mayan (127), and Masai (32). In some cases a person might have claimed one of these in combination with another ancestry.

Nil hours of housework

Just over 39% of males and almost 29% of females aged 15–19 years did no housework in the week prior to the Census. Of the people aged 15–19 who did nil hours of housework, 86% were dependent students or non-dependent children living with their parents.

Internet connection

The suburb of Pullenvale in Brisbane had the highest Internet connection rate of 92% for its occupied private dwellings, slightly ahead of the Canberra suburb of Fadden (91%) and the Brisbane suburb of Chapel Hill (91%).

Convents and monasteries

There were 581 convents, monasteries, and similar religious institutions counted in the 2006 Census. This was less than three quarters of the number counted in 1996 and less than half the number counted in 1986.

Recent arrivals: place of settlement

Of the 756,000 people who had arrived since 2001 to stay in Australia for one year or more, 31% settled in the statistical division (SD) of Sydney, 24% in Melbourne SD, 11% in both Perth SD and Brisbane SD, 5% in Adelaide SD and 3% in the Gold Coast SD.

Women dominate higher education

Of people attending TAFE institutions and university, 52% and 57% respectively were women.

Private and public schooling

In 2006, 35% of students in primary and secondary school attended private schools. In 1996 the proportion was 30%. One per cent of the increase can be attributed to attendance at Catholic schools and the remaining 4% to other non-government schools.

Source: ABS 2006 Census.

Census paints a picture of the average Australian family

2007-06-28T21:18:00.000+10:00

The 2006 Census showed that the most common family type in Australia was a couple with children. Just over 45% of all families, or 2.4 million families, fell into this group. The Australian Capital Territory and Victoria had the highest proportions of families in this group.

Of all couple families with children, most were young families with children under 15 years (69%, or 1.6 million couple families). These families might also have included dependent students (aged 15–24 years) and non-dependent children still living with their parents.

Couples families with children under 15 were the most common family type in every state and territory. The Northern Territory had the highest proportion, with 80% of all couple families with children falling into this group.

The average number of children living in couple families with children under 15 was 2.16 children. Of the almost 4 million children living in Australia at the time of the 2006 Census, three-quarters (almost 3 million) were living in a couple family and almost all of these (2.7 million) were with both their natural or adoptive parents.

Nine out of 10 couple families with young children lived in a separate house with an average of 4 bedrooms. Most of these families were paying off a mortgage – almost two-thirds across Australia. The exception was in the Northern Territory where 43% of young families were renting their home.

The median monthly mortgage repayment for young families in a separate house was $1400. The lowest monthly repayments for young families were in Tasmania ($975 per month) and the highest in New South Wales ($1665 per month). The highest level of outright home ownership by young families in separate houses was in Victoria (18%).

The 2006 Census also showed that couple families with young children have 2 cars on average.

Exactly 83% of couple families with young children have some type of Internet connection at home. The lowest rates of connection were in the Northern Territory (66%) and the highest in the Australian Capital Territory (90%). In all states, broadband is the most common connection type. The highest use of broadband was in the Australian Capital Territory (69% of young families).

SOURCE: ABS Media Release, 27 June 2007

Job Search in Your Jammies

2007-06-24T23:40:00.000+10:00

Gone are the days of travelling to the nearest CES and scouring the job boards for potential matches. Today's employers are posting vacancies online as are government agencies.

Australian Jobsearch is a Government initiative (almost like an online version of the old CES). The database is updated with thousands of new jobs each day. Additional information is readily accessed on career information and job search tips. If you register, you can create a job match profile and upload your resume online. Searching by location and/or occupation is quick and simple. If you are a job seeker, this is one site you will want to be visiting regularly.

Other popular general job search sites include Career One and Seek.

Don't feel limited to job bulletin sites in your search. Many businesses advertise positions vacant on their own websites. If you have a particular company in mind, be sure to check the 'careers' section of their site. Similarly, local councils and other government departments will advertise positions on their own little patch of cyberspace. I've personally picked up casual contract jobs by going directly to the Bureau of Statistics and the Electoral Commission sites and applying directly.

TIP: Today's employers often ask you to email your resume along with your application. Keep in mind that different software versions could change the look of your resume significantly. Keep any fancy formatting for paper versions and stick with a safe copy for emailing.

Happy job hunting in your jammies!

Your Student HELP Debt 2006-07

2007-06-23T23:42:00.000+10:00

What is a HELP debt?
From 1 January 2005, the Higher Education Loan Programme (HELP) was introduced, replacing the Higher Education Contribution Scheme (HECS). You will be required to start repaying your HELP debt when your repayment income is above the minimum threshold for compulsory repayment. HELP includes:

HECS-HELP
FEE-HELP
OS-HELP

When do you start repaying your debt?
You must start repaying your debt when your repayment income is above the minimum threshold for compulsory repayment. The repayment thresholds are adjusted each year to reflect any changes in average weekly earnings. For the 2005–06 income year the minimum threshold was $36,184 and for the 2006–07 income year it is $38,148.

Compulsory repayments are made through your income tax assessments.

You don’t have to provide HELP information in your tax return. If you have a debt, and your repayment income is above the minimum repayment threshold, the Tax Office will work out and include your compulsory repayment in your notice of assessment.

NOTE:

If your repayment income is above the minimum repayment threshold you must start repaying your debt, even if you are still studying.

Frugal Family: Make Lunches in Bulk. Save time. Save money.

2007-06-16T20:49:00.000+10:00

It is astounding to me how many mothers complain about having to make lunches each morning while running late or forking out for lunch orders because they had nothing in the cupboards.

Anyone who knows me knows that I prefer the "a little organisation now saves a lot of stress later" approach to life. School lunches is no exception.

Sandwiches freeze well and stay fresh on a hot day to be nicely thawed by lunch. This was one area we were able to significantly cut back on food costs by planning ahead and making a single trip to collect everything on the one shopping day.

Why keep dashing out the store for bread at 7am at around $3.50 a loaf? Now I buy 6 loaves at Aldi for 99c each, a tub of Aldi margaring at 98c and go to the deli counter at Coles for the cold meat (devon, ham, chicken loaf, etc). You know, I used to buy little premium packs of ham and chicken loaf in the dairy section in cute 100 or 200g packs until I did the math - it works out almost triple the price of getting the same thing directly from the deli!

In a couple of hours, you can make up an entire fortnight's worth of school lunches. No more morning stress... no more overpriced canteen orders... no more complaints from the kids because you only have a choice that morning of vegemite or more vegemite. Simply good time and financial management.

Once you get into the habit, you'll wonder how you ever managed beforehand.... and you'll be surprised just how much of a cost-saver this can be.

Tax Office Warning on Educational or Scholarship Trust Schemes

2007-06-15T12:39:00.000+10:00

ATO Media Release

The Tax Office today warned taxpayers to be cautious of arrangements that seek to reduce tax through 'education or scholarship trusts’ for a student who may be a family member of the person contributing to the trust.

Tax Commissioner Michael D’Ascenzo said he is concerned about whether taxpayers who enter into these arrangements are entitled to claim scholarship and bursary payments as tax free.

Under the arrangements taxpayers apply to the marketer of the scheme for the student to be accepted into an ‘education funding program’. Once the student is accepted into the program, the taxpayer who is usually a relative contributes money indirectly to an ‘individual scholarship trust’ and these funds are distributed to the student tax free.

“Under the law these types of payments are only tax free if they are received by a student who has won an award or been selected through an open process," Mr D'Ascenzo said.

“The Tax Office is looking at arrangements that do not appear to meet these requirements and whether tax should be paid on any distributions,” Mr D’Ascenzo said.

Further information about these arrangements can be found in Taxpayer Alert 2007/6 which is available from the Tax Office website.

Work Related Expenses Under the Microscope

2007-06-13T23:25:00.000+10:00

Last year over 7 million people claimed deductions for work related expenses totalling a whopping $12 billion.

The Tax Office has said it will be looking at claims for work-related expenses very closely.

For the 2007 tax return, the A.T.O. will be paying particular attention to claims for motor vehicles, self-education, home-office and travel.

The following guidelines should help when working out your claim:

you must have incurred the expense in the year you are claiming,

the expense must be work-related and not private,

if your employer has reimbursed you the expense cannot be claimed again,

if deducting more than $300 in total, you'll need written evidence to support your claim.

Q & A: Claiming Everyday Bank Fees

2007-06-13T21:14:00.000+10:00

Question: If my pay is made directly by my employer into an everday bank account, can I claim the bank fees and charges associated with that account?

Answer: In most cases, the answer will be no. Banks rarely charge for deposits into everday accounts and this would be the only portion you may have a claim for in regards to work.

Low income households gain most from government benefits and taxes

2007-06-13T19:26:00.000+10:00

I'm a bit of a statistics geek and today's release from the ABS made for some interesting reading. For fact collectors like myself, here's the latest from the Bureau:

Australia's low income households received more cash benefits from the government than higher income households, while indirect benefits (provided in kind) were more evenly distributed, according to an Australian Bureau of Statistics (ABS) study released today.

During 2003-04, more than a quarter (27%) of government benefits went to people in the 20% of households in the low income group. These people received over a third (36%) of government benefits in cash, and 22% of benefits in kind through government services.

In comparison, the 20% of households in the highest income group only received 4% of cash benefits and 16% of the benefits in kind.

People in the low income group paid 5% of all personal income taxes, and 17% of taxes on production such as the GST. People in the high income group paid 54% of personal income taxes and 26% of taxes on production.

The study also found that, on average:

Households comprising couples under 35 without children paid $534 per week in taxes and received $109 per week in benefits.
Couple households with dependent children paid $519 per week in taxes, and received $501 per week in benefits.
Couples with one person aged 65 or over paid $148 per week in taxes and received $586 per week in benefits.
Households in the ACT received the lowest benefits ($318 per week) and paid the highest taxes ($478).
Households in Tasmania received the highest benefits ($398) and paid the lowest taxes ($278).

Source: Australian Bureau of Stataistics. Media Release 12/06/07

Tax Help for NSW Flood Victims

2007-06-13T08:49:00.000+10:00

ATO Media Release:

The Tax Office has assured people affected by the floods in New South Wales that they do not need to worry about their tax at this time.

Tax Commissioner Michael D’Ascenzo said this is a very difficult time for residents of the central coast and Hunter region, especially those who have suffered damage to their home or business.

“We understand that people have other priorities to sort out now and it may be some time before they are able to focus on tax matters.

“People who are having problems meeting their tax obligations because of the flood can call us on 13 11 42 to make arrangements that suit their individual circumstances,” Mr D’Ascenzo said.

Your tax agent can also talk to the Tax Office on your behalf.

The Tax Office can help by:

fast tracking refunds for people impacted by the flood
giving extra time to pay debts - without interest charges
giving more time to meet BAS and other lodgement obligations – without penalties
helping reconstruct tax records where documents have been destroyed, and
offering personal visits from field officers to help reconcile lost records.

Superannuation Transitional Rules: Myths, Facts & Tips #1

2007-06-12T20:37:00.000+10:00

In preparation for 'simpler super' the commissioner has released a series of factsheets to help people understand what is fact or fiction when it comes to superannuation.

Transitional rules:

Myth
Until 30 June this year an individual can borrow $1 million to put into their super and claim the interest as a deduction.

Fact
Interest is not deductible for individuals.
However, employers can continue to claim a deduction for interest on money they borrow to pay into super funds for their employees under the special business expense deduction rules.

Tip
If you are considering borrowing money to put into your own super we suggest you seek financial advice.

Superannuation Age Rules: Myths, Facts & Tips #2

2007-06-12T20:33:00.000+10:00

Myth
I am over 60 and on a pension so I don’t have to lodge a tax return.

Fact
People getting a pension from taxed funds – which is most funds – and who have no other source of income will not need to lodge a tax return.

However, people with pensions from an untaxed fund, or who have income from other sources will still need to lodge a tax return.

Superannuation Age Rules: Myths, Facts & Tips #1

2007-06-12T20:29:00.000+10:00

In preparation for 'simpler super' the commissioner has released a series of factsheets to help people understand what is fact or fiction when it comes to superannuation.

Age rules:

Myth
Everybody over 60 can take their money out of their super fund tax free and keep working.

Fact
This is only true for money taken out of taxed funds. It also depends on the type of fund and how you take the money out.

Tip
If you are over 60 and considering taking money out of your super but continuing to work seek financial advice or talk to your super fund.

Superannuation Co-Contributions: Myths, Facts & Tips #5

2007-06-12T20:23:00.000+10:00

Myth
If you are over 70 and go back to work your employer has to pay Superannuation Guarantee (SG) for you.

Fact
If you are aged 70 or more you are not entitled to SG. However, your employer may continue to make contributions for you until just after you turn 75, but it is not compulsory for super guarantee purposes.

Superannuation Co-Contributions: Myths, Facts & Tips #4

2007-06-12T20:20:00.000+10:00

Myth
You have to apply to receive the Super Co-Contribution.

Fact
There is no application process for Super Co-Contribution – it is paid automatically to eligible people who make a personal contribution to their super.

Tip
To make sure you receive any co-contribution you are eligible for, make sure your fund has your tax file number and your contribution is with your fund before 30 June. The Super Co-contribution will be pain into your super fund after you lodge your income tax return.

Superannuation Co-Contributions: Myths, Facts & Tips #3

2007-06-12T20:15:00.000+10:00

Myth
Everyone can get a Super Co-Contribution of $1.50 for every $1 they contribute to super, regardless of how much they contribute and earn.

Fact
The maximum Super Co-Contribution people can receive is $1,500 per year. People earning $28,000 or less per year receive $1.50 for every $1 they contribute up to a maximum co-contribution of $1,500 per year.

The amount of co-contribution paid for each dollar of personal contribution made by people earning more than $28,000 but less than $58,000 a year reduces on a sliding scale.

Tip
Use the ATO calculator to work out how much co-contribution you could receive.

Superannuation Co-Contributions: Myths, Facts & Tips #2

2007-06-12T20:10:00.000+10:00

Myth
I never have $1,000 to contribute at any one time so I miss out on the Super Co-contribution.

Fact
You can contribute small amounts of personal contributions over the whole year.

Tip
If you are eligible, Super Co-contributions are paid into your super fund automatically once you do your tax return

Superannuation Co-Contributions: Myths, Facts & Tips #1

2007-06-12T20:00:00.000+10:00

In preparation for 'simpler super' the commissioner has released a series of factsheets to help people understand what is fact or fiction when it comes to superannuation.

Super Co-contributions

Myth
Contributions that come out of my salary or wages before tax has been taken out count towards getting the Super Co-contribution.

Fact
One of the rules for the Super Co-contribution is that you have to make personal contributions and do not claim an income tax deduction for the contribution. Most employees will not be able to claim a deduction for personal contributions they make. From 1 July 2007 the Super Co-contribution is being extended to the self employed.

Tip
You don’t need to wait until the end of the financial year to make one big contribution. You can also make small regular contributions to take advantage of the Super Co-contribution.

Data Matching and Capital Gains

2007-06-12T14:11:00.000+10:00

The Tax Office will continue to focus on capital gains tax (CGT) this year and people who do not report capital gains for the sale or disposal of shares, property and other assets.

A recent A.T.O media release states the Tax Office will be matching data yet again to identify sales that involve capital gains.

Information will be gathered from state and territory revenue offices, managed funds, the stock exchange (ASX) and share registries to match against tax return information.

If you have disposed of assets during the year, be sure to let your accountant know.

Your Tax Return and Share Buy-Backs

2007-06-12T11:02:00.000+10:00

During the 2006-07 financial year, listed companies in Australia bought back over 350 million shares according to the A.T.O. This amount to over $5 billion.

Shareholders who have participated in these buy-backs will need to work out any capital gain or loss and include this in their 2007 tax return.

Remember, dividends paid as part of any share buy-back must also be declared in your tax return.

Home Affordability Deteriorates Further

2007-06-12T02:00:00.000+10:00

The Age lifestyle blogger, Alex May, recently wrote:

The great Australian dream of home ownership now takes years of saving, two good incomes and the ability to not break out in a rash when staring at the six-figure mortgage required to buy your own patch of paradise.

According to the latest Housing Industry Association affordability report, the average monthly mortgage repayment has hit $2,986 a month in Sydney.

"It's even worse than when interest rates were up at 17 per cent," according to HIA chief economist Simon Tennent.

"The days of paying a mortgage on a single income are well and truly over," Tennent says. "House prices have stretched beyond any increases we've had in incomes."

Even property investing experts like John Edwards are asking if it is worth the sacrifices for first-home buyers to get into the market. "When a large percentage of young people allow themselves to borrow to the poverty line just to own a house, you've got to wonder what it's all about," he says. "Life is short. Does it really matter if you rent?"

To most Australians, it does matter... but at what cost?

Superannuation & Your Tax File Number

2007-06-11T23:17:00.001+10:00

From 1 July 2007 super funds or retirement savings accounts without their member's tax file number (TFN's) will be unable to accept personal contributions.

Some people will have received reminders about this from the A.T.O or their fund. If you haven't received a letter yet and are unsure, check your latest member contribution statement to see if your fund has your TFN.

Dividends: Franked v Unfranked

2007-06-11T21:59:00.000+10:00

One common area of confusion seems to be the difference between franked dividends and unfranked dividends.

What is a dividend?

A dividend is the part of a company's profit which is distributed to shareholders. If you own shares in a public company, you probably have dividend income to declare.

What does it mean by 'franked'?

The franked portion of your dividend has already been taxed; the company has already paid tax on this profit at the 30% company tax rate. The good news for you is that you can claim an imputation credit of 30% of the franked amount (that way, the ATO is not double-dipping).

What about 'unfranked'?

The unfranked portion of dividends has not yet been taxed. This is treated the same as any other revenue, ie. it becomes a part of your taxable income.

Thinking of Starting a Business?

2007-06-11T21:33:00.000+10:00

Alan posted a short article at Dollars & Sense for Small Business yesterday titled, "So you want to start a business?"

This will be the first in a series of contributions on starting a small business - something most of us consider at some time.

I mention the article here is it links to several handy free resources for those of you contemplating a small business venture.

You might also be interested in the interactive New To Business Checklist available as a PDF download from our site.

Investment property tips - depreciation

2007-06-11T00:54:00.000+10:00

Wanting to capitalise on the rental property that you own? A lot of people hold rental properties for a two-fold reason: to negative-gear (reduce their current taxable income) and to obtain capital growth from the property in future years.

To maximise negative gearing it is advisable to obtain a quantity surveyor's report to utilise the maximum depreciation possible. The surveyor will look at all fixtures and fittings on the property and assign a value to each from which depreciation can be calculated.

If the building was constructed after 17 July 1985 (for residential properties) the quantity surveyor can estimate the cost of building the premises and a capital works deduction of 2.5% can be claimed on that.

This may not seem like much but you may be surprised at how much it can increase your deductions. If you consider a building that cost $110,000 to build at a rate of 2.5%, that will be $2,750 in deductions claimable. Now add to that items such as carpets, curtains, blinds, hot water systems, ovens, stoves, dishwashers, light fittings, security systems, air conditioners/heaters etc, the claimable depreciation amount could rise to around $6,000.

When you consider that kind of deduction with an income of $80,000 it will give you a tax saving of $2490... each year! Even on a lower income between $30,000 to $75,000 you would still receive a tax benefit of $1,890 per year.

A quality surveyor will provide a report on the property giving a breakdown of the fixtures and fittings as well as the capital works amount in depreciation schedules tailoring to prime cost, diminishing value and low-value pools. Armed with this, you can give it to your tax agent when you do your next tax return.

You can find quality surveyors in the phone book and their prices usually range from $600 to $800 which can be written off over a period of five years. All-in-all it's not a bad investment.

Frugal Family: Prepackaged Play Lunches

2007-06-10T20:03:00.000+10:00

Roll-ups, muesli bars, multi-pak chips, le snacks, fruit jelly cups and overpriced cheese sticks. No, no, no! As appealing as they may be to your kids and as convenient for you, these prepackaged snacks are going to quickly run up the grocery bill.

In a perfect world a fresh supply of fruit would always be on hand and your children would love nothing more than a healthy crisp apple for recess. The reality is we are busy and the kids want to eat rubbish and use the fruit you pack as a cricket ball.

Buy Bulk, Package Yourself
A significant cost-saver I have found is buying or making the foods the kids want and packing them myself.

An example of this was sultanas. All three of our kids loved those little boxes of sultanas and would consume at least 2 x 6 packs a week.

Before: Buying Coles Farmland brand I could purchase a 6 x 40g sultana packs for $2.03.

Now: Buying a 1kg bag of sultanas at Aldi for around $3.70, I can make 25 x 40g packs. To get 25 prepacked boxes would come at a cost of $8.46!

Result: We saved almost $5 just on sultana boxes by buying bulk and putting them ourselves into small re-usable plastic containers. It takes barely any effort.

I like to package my own recess snacks on Sunday night for the week so they are just as convenient to grab and pack in the mornings.

This also works well for items such as:

dried fruits
tiny teddies (again, go for the box and make your own 'packs' using cheap zip-lock bags)
BBQ shapes and like products
Popcorn (make it yourself for next to nothing)
Pretzels (big bag for around $2.50 makes around 15 small zip-bags)
Jelly cups (as opposed to $1.00 each, you can make these for under 10c in your own container)
Cheese sticks (buy bulk and cut them yourself)

... and the list goes on and on.

When you need the convenience without the cost, consider packaging your own play lunch foods.

New Series: The Frugal Family

2007-06-10T17:12:00.000+10:00

Financial straight-talker Dave Ramsey tells people to "live like nobody else (now) so that you can live like nobody else (later)."

The truth is that life is filled with wealthy individuals on meagre income aswell as those households struggling despite bringing in impressive amounts of cash. In most cases, it really isn't a matter of what you have so much as what you do with it.

In a future series, I'll be dealing with creating and managing a household budget - that balance between how much you earn and how much you actually need. For now, I've decided to start with the simple and practical things you can do today to cut back living expenses.

Baby steps can make a difference. A little effort and planning has helped our family cut almost $100 each week off the grocery bill alone. That's a whopping $5,200 saving each year just at the supermarket! I'll be using the frugal Family series to share the everyday hints, tips, recipes and ideas we used to accomplish that goal and others.

Not Long Now - Time to Get Organised

2007-06-09T23:12:00.000+10:00

Do not be one of the thousands of taxpayers who is missing out on deductions they are entitled to this year. It's time to do some tax housekeeping and dig out those receipts.

I read a frightening statistic earlier today. Apparently new research shows that 80% of Australians are paying too much tax because they are simply unorganised or unaware of their entitlements.

"Many people could be missing out," says Tony Greco, CEO of Taxpayers Australia. "Understanding tax can be pretty daunting. Not everyone would be motivated to do all the research and they could be missing out on eligible deductions."

This is where a tax agent can be of enormous benefit. Their job is to know and apply the tax rulings to get you the maximum possible return. The thing is, they can only work with the information and records you provide them. A little organising now can make a big difference when it's time to lodge that return.

Understanding Benefits: Pensioner Education Supplement

2007-06-08T22:06:00.000+10:00

The Pensioner Education Supplement is a fortnightly payment designed to assist people to improve their chances of finding a job through study.

Who can get it?

You may qualify for the Pensioner Education Supplement if you are studying and receiving a certain Centrelink payments such as parenting payment (single), carer payment, disability support pension, widow pension, or sole parent on special benefit.

How much study do I need to do?

To receive Pensioner Education Supplement, you must be enrolled in and undertaking an approved course of secondary or tertiary study.

To qualify for the part rate of payment (that is the payment you would receive if you were considered to be a part-time student) you must be undertaking at least 25 per cent of the normal full-time study load for your course.

To receive the full rate of payment (that is the payment you would receive if you were considered a full-time student) you must be studying full-timeâ€”that is, at least 75 per cent of the full-time study load or qualify for the 66 per cent study load concession.

How much is it?

Pensioner Education Supplement is paid at two rates. How much you receive depends on your study load and the payment you are on from Centrelink or Veterans Affairs. The maximum payment rate is $62.40 per fortnight or $31.20 at the part-time rate.

You may also be able to receive an Education Entry Payment. This is a one-off payment of $208 to help you with the up-front costs of taking up study.

Pensioner Education Supplement is NOT taxed and is paid over holidays so long as you continue with your studies.

How do I get it?

When you claim Pensioner Education Supplement, you will need to show Centrelink proof from the institution where you are going to study that you are enrolled as a student such as your student number, the name and details of your course, etc. Usually you will get paid when your studies start. Your claim must be lodged:

- before 31 March (for semester one) for full-year study, or
- before 31 July (for semester two) for full-year study, or
- within four weeks of either commencing study or otherwise becoming qualified for Pensioner Education Supplement.

To find out more or to apply for the Pensioner Education Supplement you should contact yor local Centrelink office. After you first contact Centrelink, you usually have 14 days to put in your claim.

7 Tips to Help Your Kids Manage Money

2007-06-07T21:15:00.000+10:00

Teaching your kids how to manage their money is an important skill that will help them through life.

Children need to understand that money is a limited resource and does not simply "grow on trees" or materialise from holes in the wall.

FIDO has compiled a list of 7 tips for parents to help their kids manage money and start their financial lives with good habits.

1. Encourage them to think about what they want, what they need, and to identify their savings goals.

2. Help them decide what they really want, and to focus on their most important goals.

3. Remind them to regularly set aside a specific amount of their pocket money towards the items they are saving for.

4. Help them to control impulse buying by reminding them of their savings goals when they get tempted to buy things that aren’t on the list.

5. Encourage them to put loose change into a savings jar at the end of each day and to use this little pot of ready cash to cover small personal expenses.

6. Tell them about lay-by and encourage them to use this an alternative to credit.

7. Use pre-paid cards for your children’s mobile phones and make your kids top up the card themselves if they spend them too fast.

So, what exactly is a "tax offset"?

2007-06-06T20:33:00.000+10:00

A tax offset is different to a tax deduction. You'll remember from a previous post I explained how a tax deduction is taken off your income before tax is calculated.

With tax offsets (previously known as rebates), the offset is taken off the amount of tax you have to pay.

The ATO has identified three types of tax offsets – those that:

provide tax relief for personal circumstances – for example, offsets for senior Australians and people living in remote areas.

give you a credit for an amount of tax that has effectively already been paid – such as credits for franked dividends and foreign tax, and

provide an incentive – for example, the tax offset for mature age workers and the private health insurance rebate.

In most cases an offset can only reduce the amount you have to pay to zero. If your offsets total more than your tax payable, you typically don't get a refund for the difference. Offsets which do provide a refund are the private health insurance rebate, franking tax offset and the baby bonus.

Alan provides a more detailed explanation and list of tax offsets available in his post at Dollars & Sense for Small Business.

Q & A: Can I claim my TAFE fees?

2007-06-05T22:31:00.000+10:00

I was asked earlier today a question I often hear: Can I claim my TAFE fees as a tax deduction? The answer really depends on your individual situation.

You can claim self-education expenses only if they are directly related to your CURRENT employment (such as a secretary taking a Business Administration certificate).

Typically, the person asking is attending TAFE in order to change careers or get back into the workforce. Unfortunately both of these circumstances would not allow them to claim a deduction for their TAFE fees.

Beware: Common errors in rental property claims

2007-06-04T22:14:00.000+10:00

The ATO has stated it will continue to closely scrutinise rental property expense claims for the 2007 income year.

Some of the areas of concern identified by the ATO in recent compliance activities include:

- Claiming deductions during a period where the property is not genuinely available for rent;

- Claiming full deductions when the property was available for rent only part of the year.

- Claiming initial repair and or renovation costs as repair and maintenance costs (these should be attributed to the base cost of the property under the CGT rules);

- Incorrectly allocating deductions related to private borrowings or travel; and

- Incorrectly claiming deductions for legal expenses for things such as costs associated with buying and selling a property or defending title.

I'll be detailing some of these issues in more detail in future posts.

SOURCE: National Tax and Accountants' Association Tax Schools Seminar 2007

Forgotten Tax Deduction: Income Protection

2007-06-03T21:59:00.000+10:00

While life insurance is not tax deductible, income protection insurance is.

Payments are typically made monthly on these policies but can usually be paid up to a year in advance.

June is a great time to maximise your tax deductions. If you pay your annual premium now as a lump sum, you can then claim a tax deduction for the full amount in this years tax return.

Family Tax Benefit A Supplement

2007-06-02T21:11:00.000+10:00

I've received a few queries recently about the Family Tax Benefit Supplement. It is coming to that time of year again when families begin to anticipate this payment and are wondering just how much it will be and when it will be paid.

What is it?
The Family Tax Benefit Part A Supplement is an increase in the annual rate of Family Tax Benefit Part A to be paid as a lump sum after the end of the financial year.

How much?
For the 2006-07 financial year, the payment will amount to $646.05 per child. If you have a child for part of the year or share care, the amount will be proportional to the period or percentage of care.

Who is eligible?
The Supplement is available to all Family Tax Benefit Part A eligible families. Please note that if an overpayment has occurred during the year, the Supplement will be used first to offset outstanding overpayments.

When will it be paid?
Families will be paid the Supplement after family tax returns have been lodged and FTB payments have been balanced for the for the financial year. If you or your partner are not required to lodge a tax return, be sure to notify the Family Assistance Office of this so as not to delay payment.

End of Month Practice Update

2007-05-31T23:49:00.000+10:00

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

2007-05-30T22:54:00.000+10:00

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

2007-05-29T19:33:00.000+10:00

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

2007-05-28T23:22:00.000+10:00

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

2007-05-27T20:30:00.000+10:00

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"

2007-05-26T16:41:00.000+10:00

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

2007-05-25T21:57:00.000+10:00

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

2007-05-24T16:26:00.000+10:00

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!

2007-05-23T16:22:00.000+10:00

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

2007-05-22T16:24:00.000+10:00

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

2007-05-21T16:17:00.000+10:00

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

2007-05-20T16:13:00.000+10:00

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

2007-05-19T16:11:00.000+10:00

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

2007-05-19T16:09:00.000+10:00

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

2007-05-18T16:06:00.000+10:00

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

2007-05-17T16:03:00.000+10:00

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

2007-05-16T15:59:00.000+10:00

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

2007-05-15T16:18:00.000+10:00

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:

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.

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

2007-05-14T15:56:00.000+10:00

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

2007-05-13T15:47:00.000+10:00

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

2007-05-12T15:53:00.000+10:00

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

2007-05-11T15:43:00.000+10:00

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?

2007-05-10T15:33:00.000+10:00

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.

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