Tax Archives

A Self-Employed Superannuation Guide

6 December, 20236 December, 2023 Superannuation, Tax

When you’re at the helm of your own business, it’s easy to get caught up in the whirlwind of the present – chasing sales, generating leads, and growing your business. Often, self-employed people prefer reinvesting back into their businesses, hesitant to stash money away in superannuation. Yet, there’s a compelling case for setting aside a slice of your earnings. The facts don’t lie At present, self-employed Australians are not required to contribute to superannuation. According to the Australian Tax Office’s (ATO) data, while self-employed people make up about 10% of the workforce, their super contributions account for just 5% of the retirement pie in 2014-15. Dive deeper into the numbers, and fewer than 1 in 10 self-employed Australians opted to make tax-deductible super contributions that same year. What is ‘self-employed’? The ATO has clear guidelines on what a self-employed person is: For more information see the ATO website. Why contribute to superannuation? While it’s tempting to pour every hard-earned dollar back into your business, the reality is that not all businesses come with a pot of gold at the end. Some self-employed people and businesses rely solely on their own labour, with no substantial business assets to lean on. That’s where superannuation can come in, providing a great way to plan for your retirement. A nest egg for retirement By contributing to super, you are building a nest egg that will provide you with financial security and income in retirement. Putting a small amount of money into superannuation regularly can provide financial stability over time, allowing you to focus on growing your business knowing that you have another income stream building in the background. Tax benefits Here’s a big one: self-employed people may be entitled to a full tax deduction for contributions made to super. If you’re self-employed, you can make personal contributions up to the annual cap, which is $27,500 per year for the 2023-24 financial year. These contributions are taxed concessionally at 15 per cent, rather than marginal tax rates. So not only are the contributions taxed at a lower rate, self-employed people can also claim a tax deduction on those contributions. To claim a deduction for personal contributions it’s important to note that: Compounding Superannuation remains one of the most tax-effective ways to grow wealth. Over time, your contributions can benefit from compounding growth, as your investments earn returns on both your initial contributions and any earnings generated. Starting early and contributing consistently, even with small amounts, can significantly boost your retirement savings. Diversification Many self-employed people see their business as their retirement strategy. But by putting money away into the tax-effective superannuation environment, with investment strategies that can be tweaked over time, you can diversify your investment, reduce risk, AND plan for retirement. How do I contribute to super if I’m self-employed? Just because you’re self-employed doesn’t mean super has to be complicated! With various tax benefits, flexibility of contribution size and frequency, and having another source of income for your retirement, if you’re self-employed why wouldn’t you be contributing to super?! If you’d like to get started, talk to your adviser today. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Federal Budget 2023-24 Summary

24 May, 202318 May, 2023 Updated on18 May, 2023 Centrelink, Economy, Superannuation, Tax

Lady Luck has once again looked down fondly upon Australia, creating the first Federal Budget surplus in 15 years, through a higher tax take on record export earnings and increasing income tax receipts from higher job numbers. But how long will the good times last? Domestic economic growth is expected to buckle under the weight of higher interest rates. As a result, annual gross domestic product is expected to fall to just 1.5 per cent in 2023 -2024, recovering slightly to just 2.25 per cent the following year. This low growth forecast, down from 3.25 per cent currently, comes despite an expected surge in immigration numbers to 300,000, while inflation is forecast to stay stubbornly close to the 6 per cent mark for 2022-2023. The Budget papers suggest inflation will eventually fall within the Reserve Bank‘s guidelines, but not for some time, raising the possibility of stagflation engulfing economic growth. At the same time, unemployment is expected to rise from its record low level of 3.5 per cent to 4.5 per cent the following year and remain at this level for the foreseeable future. Nonetheless, this is a true Labor Budget. The Federal Government will boost Job Seeker payments by $40 a fortnight, provide greater rent assistance and energy subsidies to low-income households, as well as lower medicine costs and provide cheaper doctor visits for all Australians. Increased wage payments for those working in the aged care sector and increased childcare subsidies should also help to reduce the pressure on working families struggling to deal with the recent uptick in cost-of-living pressures. An estimated 60,000 single parents will also be able to claim the Single Parent welfare payment benefit from September 1, with the Government lifting the eligibility age for the youngest child in a family from 8 to 14 years. The Government insists these measured spending increases are targeted and restrained and will work to reduce the rate of inflation. However, only time will tell if the Reserve Bank agrees that a lift in overall government spending via the Budget will work to bring down prices. The Government hopes to reduce housing pressures by encouraging investment in rental housing by lowering the annual profit on build-to-rent projects from 30 to 15 per cent. But beyond this, this Budget has very little to help struggling businesses. It does, though, include some $4 billion to encourage new green energy programs, including $2 billion to support large-scale hydrogen production and $1.3 billion to help households upgrade their existing homes through the Household Energy Upgrades Fund. At the same time, big-ticket items within the Budget just get bigger. There is a brave estimate that spending within the NDIS will be restrained, yet there is no actual strategy for achieving this other than to reduce waste. The cost of providing health services has never been higher, while defence spending is expected to surge to $20 billion over the next four years, including some $9 billion to be spent on the new AUKUS nuclear-powered submarines. Little has been done to boost Government revenue beyond more fairly taxing windfall profits in the gas industry and increasing the tax bill for super accounts with more than $3 million in assets. Beyond this, nothing has been done to address the structural challenges within the Budget. Meanwhile, there is already unrest that the Job Seeker allowance is not being increased sufficiently to pull recipients out of poverty, with cost of living pressures at record highs for Australia’s most vulnerable people. All at a time when the Budget is in surplus. The information provided in this article is general in nature only and does not constitute personal financial advice.

Thriving in the ‘Gig Economy’

1 March, 202323 March, 2023 Updated on23 March, 2023 Budgeting, Education, Tax

If you’re a freelancer or contractor or maybe even a consultant then you’re part of the “gig economy”. Gone is the job for life, or even a job in the normal, employed meaning of the word. For you, work consists of short-term contracts or a series of one-off jobs. “Gigs” as the band down at the pub might put it. For some, gig work is a liberating choice that allows them to work their own hours, holiday when they like and work wherever they wish. For others it’s a necessity in a weak job market where under-employment and age discrimination is rife, and more companies choose to outsource specific tasks. Key to the gig economy is technology, be it an Uber app, Skype, crowdsourcing sites or just email and the Web. A study found that 4.1 million Australians had freelanced in 2014/15, and it’s a trend more likely to grow than diminish. So if you’re a “gig worker” what can you do to make the most of your situation? It’s business If you’re happy picking up the odd jobs that fall into your lap for a little extra money, that’s fine. But if you are looking to earn a full-time income then you’re in business and need to operate accordingly. To begin with, you need to know: Who your potential clients are; How to reach out to them; How to gain referrals; The processes you have to put into place to track your work, issue invoices, and make sure you get paid on time; How to meet your tax obligations. Protect yourself Depending on the work you do and the requirements of your clients you may need a range of insurances: Professional indemnity insurance – if there’s any chance a client could sue you in relation to the work you are engaged to complete. Public liability insurance – in case your work activities cause injury to a member of the public. Income protection insurance – you may be eligible for workers’ compensation insurance, but the rules vary from state to state, depend on your business structure, and only cover work-related injuries. Income protection insurance will also cover you against illness and non-work-related injuries. Life insurance – if you have dependents but little in the way of net assets. Think long term Can you build your business into something you can sell? If not, how will you fund your retirement? As a gig worker you’re unlikely to receive compulsory superannuation contributions, but you can (and should) make your own contributions. Personal contributions are tax deductible up to the annual concessional cap of $27,500. Get advice All state and territory governments have departments of business that offer a wealth of information and support for small businesses. Check out the help available in your state. And talk to your financial adviser. Aside from being able to look at your insurance, savings and super needs, your adviser may be an experienced small business operator, a potential mentor, and a valuable member of your network. Contact us today! The information provided in this article is general in nature only and does not constitute personal financial advice.

4 simple techniques to reduce your tax

22 June, 202216 June, 2022 Updated on16 June, 2022 Tax

Here is a list of tips to help you minimise the amount of tax you pay this end of financial year: 1. Keep records Even if you use an accountant to prepare your tax return, you are responsible for the information you provide and for keeping your tax records for a minimum of five years. So, to ensure that you don’t have to pay any more tax than you are obliged to: Keep receipts of all your tax-deductible expenditure. If you are audited by the tax office, you will need to be able to prove the expenses were incurred. Keep track of all your medical expenses. If net medical expenses relating to disability aids, attendant care or aged care exceed the threshold for the year, you may be eligible for a tax offset that takes the form of a credit against tax payable. Keep detailed records of income and capital gains. Required details include date the investment was purchased, how much was paid, when it was sold and how much was received. 2. Claim all available tax deductions You may be able to claim a tax deduction for many of your expenses. These include: donations to registered charities or non-profit organisations; self-education expenses; premiums on income protection insurance; work-related expenses. You should bear in mind that the range of permissible work-related expenses varies widely from occupation to occupation. Refer to the Australian Tax Office (ATO) website www.ato.gov.au for full details. 3. Contribute to superannuation Contributions to superannuation can reduce the level of tax you would otherwise have to pay on your investments because super is taxed at a maximum of 15%. In addition, some people are eligible to claim a tax deduction for contributions made to super. The rules surrounding superannuation tax deductibility provisions and contribution limits are complex, so it pays to seek advice from your financial planner. 4. Manage capital gains When you sell an investment for a profit, you are considered to have made a capital gain. For non-professional investors, capital gains will be included on your annual income tax return. Assets acquired before 20 September 1985 are exempt from Capital Gains Tax (CGT) considerations. When you sell an asset for less than you initially paid for it, you make a capital loss. When your total capital losses for the year outweigh your total capital gains, you will finish up with a net capital loss for the year. If you have a potential CGT liability, there are some strategies that you could consider to reduce the amount you need to pay: a. Keep an investment for at least 12 months Investors are entitled to claim a 50% discount on capital gains made on assets held for longer than a year. So, by holding on to the investment for more than 12 months you will halve the CGT payable. b. Use carry-forward tax losses to reduce CGT Capital losses incurred in previous tax years that have not already been offset against capital gains may be carried forward in future tax years and can mitigate the effect of any CGT liability. Check your past income tax returns or ask your accountant to determine whether this is an option for you. Remember that this information is not personal tax advice. Always consult a professional adviser to help you determine the best strategies for your personal circumstances. The information provided in this article is general in nature only and does not constitute personal financial advice.

A different “End of Financial Year Sale”

25 May, 202225 May, 2022 Superannuation, Tax

As the end of financial year fast approaches, there is still time to consider the strategies available to you this June 30 to build your wealth, some of which are discussed below. Making a non-concessional contribution to super (Government Co-contribution Scheme) There is a federal government scheme in which people who earn less than $42,016 pa and make a non-concessional contribution to superannuation (a contribution for which no tax deduction will be claimed), may be eligible to receive a government contribution to their superannuation. Under the scheme, the government will contribute up to $0.50 for each $1.00 you contribute to your super fund up to $500. This entitlement reduces for every dollar earned up to the cut-off annual income of $57,016. For those eligible, this strategy can provide a return on every dollar contributed to super. Making a concessional contribution to super Concessional contributions to superannuation are those contributions made to super for which a tax deduction is being claimed. Using this strategy, most people can claim a tax deduction for contributions they make, up to the maximum limit, which is currently $27,500 p.a. However, this figure includes any Superannuation Guarantee Contributions an employer may make. If you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may be entitled to make additional concessional contributions for any unused amounts. The federal government allows a 15% Low Income Superannuation Tax Offset of up to $500 on concessional contributions made by individuals with a taxable income of less than $37,000 per year. This strategy can assist you to bolster your retirement savings whilst managing your tax liability prior to retirement. Paying income protection premiums in advance Income protection insurance can pay a monthly benefit of up to 75% of your salary if you are unable to work due to illness or injury, with the premiums being tax deductible. Paying premiums in advance enables you to bring forward the following financial year’s premiums to claim a tax deduction this financial year. This strategy enables you to protect your existing and potential wealth by taking out insurance to cover you against those events which can disrupt even the best laid plans. There are many end of financial year strategies that have tangible benefits to assist your wealth accumulation and protection objectives, so speak to your financial adviser now to discuss and implement. The information provided in this article is general in nature only and does not constitute personal financial advice.

EOFY is coming – Have you thought about …

23 June, 202116 June, 2021 Updated on16 June, 2021 Superannuation, Tax

The end of another financial year is looming, and with that may come thoughts about your tax return and how your wealth has tracked throughout the year. Whether you’re nearing retirement, a high-income earner looking to reduce your taxable income, or you’re on a lower income and looking for ways to maximise your super contributions; there are a few things you can consider at tax time. Nearing retirement? Maximise your super contributions If you’re nearing retirement, putting as much money into your superannuation account now is a good way to make sure you build up a healthy nest egg to live off in your golden years. To maximise your super contributions, consider salary sacrificing to put more money into your super account. Salary sacrificed super payments take money out of your pre-tax income. These are called concessional contributions and are taxed at 15%. This rate is lower than most taxpayers’ marginal tax rates, so it can be an excellent way to reduce your taxable income while increasing your superannuation savings. The maximum employer and salary sacrificed contributions that can be made each financial year is $25,000. And remember, if you’re self-employed, your concessional contributions are a tax deduction. Non-concessional contributions of up to $100,000 can also be made each financial year. These contributions come from your after-tax income. Consider a one-off contribution to lower your income tax Let’s say you’re on an income of $170,000. If you haven’t opted to salary sacrifice, your employer contributions to super will be $14,748.86 in the financial year. Therefore, your taxable income will be $155,251.14. To lower your taxable income, you could make a one-off concessional contribution of $10,000. This will reduce your taxable income and still come in under the concessional contribution cap of $25,000. Are you eligible for the Government co-contributions to super? If you earn less than $54,837 per year (20/21 financial year) before tax, you could be eligible for the Government’s co-contribution on after-tax super contributions. Those who earn under the threshold can make an after-tax contribution, and the Government will calculate your co-contribution amount when you submit your tax return. The co-contribution will be deposited directly to your superannuation account. Review your records now Now is the time to check you’ve been keeping good records. Have you got a record of relevant receipts and policy statements for items such as income protection policies you have outside superannuation? Understanding the paperwork you require now to maximise your deductions will save you time when it comes to completing your tax return. If you haven’t got all of your records organised, review your spending throughout the year, identify transactions that may be a tax deduction, and put aside those receipts for tax time. Looking for more help? If you’re looking to maximise your tax return and get ready for a successful financial year ahead, talk to a financial adviser about your options. It doesn’t matter your circumstances; there are options available to help you boost your super savings and get the best tax return possible. The information provided in this article is general in nature only and does not constitute personal financial advice.

Working from home? How to boost your next tax return

13 May, 20216 May, 2021 Updated on6 May, 2021 Tax

With the range of technology and software available today, it’s become easier than ever to work from home. Employees can efficiently complete calls using teleconferencing software, many collaboration tools are now cloud-based, and work devices, including laptops and tablets, are light and portable. If you’ve been working from home, you’ve likely also set up a dedicated work area, and you’re using your own electricity and resources to power your workday. But which of these items can you claim in your next tax return to ensure you maximise your return? How many Australians work from home? Working remotely has become more common as companies began providing the technology to enable employees to work from anywhere. Research from Roy Morgan found that in early-2020, at the height of the COVID-19 pandemic shut down, 32 per cent of Australian workers were working from home. This equates to over 4.3 million people. It’s easier for employees in certain industries to work from home, such as finance and insurance, public administration and defence, and communications. In contrast, more “hands-on” industries such as retail, manufacturing, transport and storage and agriculture still require staff to be present in-store. Tax deductions available if you work from home Home office expenses you may be able to claim include: – electricity; – cleaning costs for your dedicated work area; – phone and internet expenses; – computer consumables – such as printer paper and ink cartridges; – stationery; and – home office equipment – including computers, printers, phones, furniture, and furnishings. The Australian Taxation Office (ATO) provides a complete list of the available deductions and how to calculate each on its website. How to calculate your home office expenses There are three methods employees can use to calculate their home office expenses: – Shortcut method: 80 cents per work hour – only available from 1 March 2020 to 30 June 2021 – Fixed-rate method: 52 cents per work hour – Actual cost method Be careful with home office expenses If you include home office expenses in your next tax return, ensure you calculate and apply your deductions correctly. For example, you can claim the full cost of home office equipment up to $300, but you need to claim the decline in value (depreciation) for any items that cost over $300. Regardless of the method you use to calculate your expenses, you will need to have records. You’ll need to keep receipts for any purchases you’ve made and a record of relevant utilities and bills. You’ll also need to keep a timesheet, roster or diary that shows the hours you’ve worked from home. If you can, keep your relevant records and receipts aside and updated throughout the year to save yourself a significant administrative workload at tax time. Have a professional prepare your tax return to maximise your refund With the range of deductions that may be available to you, plus the different calculation methods for home office expenses, having a registered tax professional prepare your tax return can be worth the investment. Quite often, your maximised refund will more than cover the cost of having a professional prepare your return. If you’re unsure about the home office deductions you’re entitled to, contact an accountant or qualified financial professional for advice. The information provided in this article is general in nature only and does not constitute personal financial advice.

What will you do with your tax refund?

29 July, 202017 September, 2021 Updated on17 September, 2021 Tax

Thousands of Australians receive tax refunds every year. Some refunds won’t even cover the cost of a pizza to celebrate, however many are quite substantial. If you’re one of the lucky ones, what will you do with your tax windfall? If you go out and spend it, all you’re doing is giving part of it back to the government in the form of GST. Sure, it’s nice to splurge once in a while but there are other places you can stash your cash and reap a longer term benefit. Consider these options: a) Superannuation contributions Your superannuation fund will surpass any other investment vehicle simply due to the law of compounding… and your contributions are taxed at only 15%. Whilst superannuation funds remain the most tax-effective haven and thus the best way to grow your investments, the downside is that once your money is contributed it’s usually not accessible until you retire. b) Regular investment plan Consider investing the lump sum and setting up a regular savings investment plan to build it up. This will help you meet future objectives such as a new home, education or new car. While a certain amount of money in the bank is helpful for emergencies, now could be the time to consider a longer term plan with assets such as property or shares. You can invest in a managed fund with an initial deposit of $1,000 and make monthly contributions. While such investments are subject to fluctuations in value, you will see them grow over time. c) Reduce your mortgage By paying it straight into your mortgage, you immediately acquire more equity in your home and reduce the interest. Having more equity in your home also means that you can re-borrow that money again for investment, gearing, or to purchase other assets. So that’s an option that could keep on working for you. The moral of this story is to have a plan and then apply it. Work out where your tax refund will work best for you then talk your decisions through with your licensed financial planner. The information provided in this article is general in nature only and does not constitute personal financial advice.

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