27 October 2015

“Pensioners need to heed new pension laws” by Steve Marsten

We have had a few clients reading about changes to the Age Pension rules in the near future. So lets talk ‘Aged Pensioners’ and ‘Assessable Assets’ by way of property.
From 1st January, 2017 the government is changing the amount that an aged pensioner can have via the Assessable Asset test, to determine how much pension the government will provide. The good news is the initial threshold is increasing from $286,500 to $375,000 for couples and $202,000 to $250,000 for singles. This is for Home owners.
The family home in which a pensioner lives, is not classed as an Assessable Asset .
The “upper limit” threshold amount in which the test allows a pensioner to receive a part pension and to have assets - currently is $779,000. This will reduce to 547,000 for single pensioners and $1,163,000 to $823,000 for a couple. Once this amount is met, Centrelink is no longer providing pension assistance. These decreases will impact many aged pensioners  and possibly many may not be fully aware that the deadline is near.
This has some advisers recommending to the pensioners to update the family home which is seen as exempt from the Assessable Asset test.  While this sounds logical, there are many things to be considered before committing to upgrading, renovating or selling and buying a new home.
To sell and buy a home, there are fees such as Legal fees and agent’s commission that would need to be accounted for as well as every-day bills that may increase due to having a larger home, using more electricity to cool your larger home, possible larger rates bill, not to mention other possible fees such as body corporate.
When these extra costs are taken into account, it could leave a pensioner with even less available funds.
Therefore making changes could potentially find the pensioner in a worse position down the track, so although there could be a slight decrease to an individual’s pension, decreasing one’s assets should be made with clarity rather than changing because of the asset test.

At Sothertons our financial planners review these options carefully to ensure that all scenarios are considered before making rash decisions. Time is running out however, hence you should consider calling us 07 4972 1300 for an appointment.

20 October 2015

“How BIG is your Tax Refund?” by Tina Zawila

At this time of the year, there’s still lots of talk about tax refunds, and often it’s a competition about “who’s is bigger”!  However, it often surprises us how many people have no idea how their refund is calculated or what they should expect from their tax refund.  And recently we’ve seen first hand the potential problems that arise when you simply apply “the biggest is best” principle!

So let me explain some basic tax facts:
  • You can only get a refund if you have paid tax during the year – some obvious examples of paying tax during the year include: where your employer has deducted tax from your wages, or the bank has withheld tax from your interest income, or you receive franked dividends (which gives you a tax credit for the tax paid by the company who paid you the dividend).  If you have not had any tax deducted from your income, then you cannot receive a tax refund.

  • You can’t get back more tax than you have paid – same principle as I mentioned above, but with a slight variation.  If you have only paid $1,000 of tax throughout the year (let’s say it’s been deducted from your wages), then the maximum tax refund you can receive is $1,000.  No additional deductions can increase your refund to exceed the tax you have paid.

  •  You don’t get $1 tax back if you spend $1 on a tax deductible expense – A $1 tax deduction, will reduce your taxable income by $1.  Which depending on which tax bracket you find yourself in, could save you anything between zero and 49 cents in tax.  So at most, you will get 49 cents back on your $1 tax deduction, and you may not receive any tax back at all if your income is below the taxable threshold.
Most importantly, sometimes it’s not the size of the refund that matters, it’s what you do with it that counts.  How do you use your tax refund each year – do you invest it to create more wealth, or does it just seems to go towards those never-ending bills? 

At Sothertons Gladstone, our goal is to minimise your tax and maximise your wealth.  Everyone’s situation is different, call our team today on 4972 1300 to discuss your individual tax position.

13 October 2015

"It's hard to avoid the preferential payment trap!" by Steve Marsten

It’s hard enough in business to build a customer base; deal with staff issues; secure decent suppliers who are ethical and professional; look for well positioned premises and deal with the multitude of red tape and licences to get up and running and then you need your customers to pay you! So it completely blows me away when a good local business who operates with a proper purchase ordering system and a good debt collection team, gets stung by the fact that they are paid by a business that collapses!
OK so you are asking how is that a problem if they get paid? The problem is – in Australia, if you happen to be paid by a customer that goes into liquidation or administration within six months of you receiving your payments, you may be considered a “preferred creditor” or a “preferred payment”.
A preferential payment is a payment or transfer of assets to creditors that gives that creditor a supposed advantage over other creditors. These payments or transfers may be recoverable by trustees in bankruptcy under the provisions of the Bankruptcy Act.
The transfer of funds must take place during a specific period before the bankruptcy.  As I mentioned above, this period is usually 6 months before the filing of the creditors petition.
The creditor has three arms of defence. These include:        
1.       The transfer was in the ordinary course of business
2.       The recipient of the funds acted in good faith;
3.       The recipient gave market value consideration or service.
However the Administrators or the liquidators will often go to court spending down the assets of what’s left in the defunct Company to secure the (so called preferentially) paid funds. These are funds often paid in the normal course of business and more often then not - in good faith. So the customer who has acted in good faith now has to incur legal fees to attempt to keep the funds that they have genuinely earnt. These are funds that have been used to pay the wages of his employees and costs of operations.
If the Trustee can prove that the company that paid the funds was insolvent at the time of payment, regardless of the good faith of the creditor, they can often force the repayment of the funds. This area of the Bankruptcy Act is not fair by any means.

At Sothertons we can assist businesses to prepare a case with their legal advisers to minimise the chances of losing hard earnt income. Contact us on 07 4972 1300.

07 October 2015

What to expect from your Accountant or Tax Agent by Tina Zawila

So the ATO letters are starting to flow through to Bechtel workers and therefore we are fielding enquiries from taxpayers keen to 'do the right thing' and avoid the possibility of penalties.  Remember, the ATO is offering an exemption from penalties if you voluntarily request an amendment of your return/s prior to 31st October 2015, so time is running out!

What we are discovering is that many of these people do not have a copy of the original return lodged, or if they have been able to get a copy of the return, there is a lack of detail around their deductions.  There are simply amounts shown at the deduction labels in the return.  Upon enquiry it seems that most taxpayers are unaware of how those deductions were calculated or what they consist of. 

As I have said in previous articles, it is imperative that you understand your tax return and that you are fully aware of the content.  Ultimately, it is your responsibility.

However, it has led me to consider what clients should expect as a minimum, from their accountant and tax agent:

  • A complete copy of your return with all associated schedules detailing items/labels in the tax return.
  • An explanation of the content of your completed return and what has been claimed.
  • Advice on the basis of your deductions and your substantiation requirements for deductions claimed - e.g. receipts, log books for vehicles, diary evidence for other deductions.
  • An invoice or receipt for the cost of preparation of your tax return.

If you are not receiving this minimum level of service, then I strongly encourage you to request this from your accountant/tax agent. 

If you are concerned about your tax return, or just want a second opinion, please contact our professional team at Sothertons Gladstone on 49721300, we would be happy to help. Article Content”