Superannuation & Your Tax File Number

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

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?

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

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

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

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

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.