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NEWS ARTICLES

Plan your Succession - August 08
The Important Role Of Accountants in Business - July 08
It's Now the Law, You Can Gear your Super! - June 2008
Budget Summary 2008 - July 08
Choosing a Financial Planner - April 08
Tax Policies - The Labour Party - March 08
Christmas Parties and FBT - Nov 07
TAX Changes to Legislation for Small Business Owners - Oct 07
Small Business Amendments - July 07
Deemed Dividends - Companies with asset loan accounts - July 07
Financially Fit - from the Institute of Chartered Accountants, Australia - July 07
Some Super News - July 07
Claim the COST of Managing Your TAX Affairs

Plan your Succesion - an interview with Phil Browne

Succession Planning can be a difficult topic to discuss, however, it is an important part of life both personally and in business to protect your assets and your family. Phil Browne speaks about some important issues below.

What is succession planning?
Succession Planing is structuring affairs during a lifetime to; limit legal claims, protects assets, plan tax affairs and minimise tax, make precautions for incapacity and put strategies in place to pass wealth on death securely and tax effectively to intended benficiaries.

Why is succession planning so important?
I work with my clients regularly on succession planning because it is vital to the success of their business. If they are not prepared, there could be large issues, tax and other losses going forward.

What are some ways to effectively manage succession planning?
One of the ways to achieve positive results through succession planning it to establish a will with a testamentary trust. This means. An example of managing your succession planning is, a property transferred via a will to a testamentary trust is not subject to stamp duty.

We need to be mindful of ensuring we have planned our succession and are ready for scenarios that can come during the life of your business. For example, superannuation assets and family trust assets cannot be left in a will. We are planning to work with you in the coming months on succesion planning. If you have any questions or queries please contact me directly so that we can assist with your plan.

The Important Role of Accountants in Business

A paper, recently released by the International Federation of Accountants (IFAC), was written concerning the important need that mid-sized enterprises have, for experienced and knowledgeable accountants who can look after the unique challenges in virtually all aspects of business, including: strategic management; organisational and financial structure; corporate governance; risk management and internal control; management accounting; and business reporting.

”The paper canvasses the important roles professional accountants in mid-sized enterprises play. As integral members of the management team of an organisation, these accountants fulfil a variety of responsibilities beyond the obvious finance and accounting disciplines. The paper also details how accountants are looking for opportunities to improve their skills outside the traditional boundaries of the finance and accounting department.” Source ICAA Website

It has been a common belief for many years, that accountants are simply concerned with compliance, assisting you and your business to pay tax and obey the rules of the government. The benefits of accounting services are often seen to not outweigh the costs.

However, the information and advice provided by accountants, is the foundation of tax and accounting services. Studying a wide range of businesses, from the healthy to the insolvent, develops a wealth of knowledge and experience regarding the ways to best operate a business to ensure compliant and beneficial tax positions.

In addition to this, which is sometimes overlooked, is the strategic and structural actions that lead to the successful achievement of business goals. If this is not advantageous enough, with this comes implementation, management and business advice to help make those very important decisions that businesses of today face. Put simply, the position of your accountant, is not only concerned with compliance. It is concerned with assisting you to protect your assets, financially control your business, manage your money and ensure your business is in the most efficient and advantageous position it can be in for success. Theses benefits, are being recognised by clients, and making the importance of the accountants role within a firm, or as a partner like Browne&Co and FWA Eagar&Co more apparent.
The paper can be viewed here.   

IT'S NOW THE LAW, YOU CAN GEAR YOUR SUPER!
Editorial by Nicola Le Couteur, Accountant at Browne&Co

Have you been reading headlines like this over that past couple of months?  Well, it’s true: the new borrowing regime introduced in September 2007 is said to be the most significant change to super since the introduction of the Self-Managed Super Fund regime itself.  Technically, the borrowing takes place by means of an instalment warrant, which is simply an agreement that enables the fund to purchase an asset over time.  Instalment warrants are commercially available; however, it is now possible to customise an instalment warrant, enabling the fund to borrow for any asset that a super fund is currently permitted to acquire.

So imagine your Super Fund wanted to buy a commercial property for $1 million, but you only have $500,000 available cash resources.  How does a customised instalment warrant work?

• A fixed trust is created
• The trust holds legal ownership of the asset; the Super Fund has a 100% beneficial interest
• The Super Fund borrows money from any lender that will offer a non-recourse loan (that is, the lender’s rights in the event of default are limited to the particular asset, not to other assets within the Super Fund)
• The Super Fund buys the asset. (Yes, it has to be a new asset)
• The Super Fund collects the entire rental, pays all the interest and pays off the borrowings as the trustee see fit. 
• In the fullness of time, the Super Fund can pay out the debt from earnings and future contributions, and take full ownership. Or the asset can be sold.

Is this too good to be true?  Well there’s no getting away from the inherent risks with geared products: it is a great way to amplify the gains, but the losses can be all the more painful. This profile needs to sit well with the fund members and the fund’s investment strategy.  There are significant establishment costs involved, and the interest rate may be higher given the non-recourse nature of the loan.  The old adage is as relevant as ever: Buyer Beware.
 
This is an exciting opportunity if you are thinking about growing your super through a Self-Managed Super Fund.  It is crucial to get good quality advice and to avoid the pitfalls.  Call Nicola on 9954 3409 for more information.

 

Budget Summary 2008

For more details see Chartered Accountants Federal Budget 2008 - 2009

Tax highlights

The Federal Budget handed down at 7.30pm on 13 May 2008 contained a package of tax relief measures designed to help families with education, child care and other living expenses, while means testing a range of benefits. As anticipated, the government's first Budget also initiated a broad review of the tax system.

This special CCH Budget Night Report outlines the tax and superannuation changes announced in the Budget. Here are the highlights.

 

CHOOSING A FINANCIAL PLANNER..

Editorial by Phil Browne, CEO Browne&Co and FWA Eagar&Co March 2007

For 20 years I have outsourced financial planning services for my clients. I have continued outsourcing, in spite of increased demand and publicity. The industry is growing and has improved regulations and systemisation, now offering a broadening range of services. This has unfortunately gone hand in hand with reduced professionalism and competency. Arguably, some increased systemisation has left clients without the personal attention they deserve – the objective of course, being fee reduction.

An important issue…
The diversification of services by financial planners has included tax advice, insurance, and mortgage broking. I would like to discuss the issues surrounding tax advice. Tax advice can be provided by tax agents and solicitors only. It is illegal to provide tax advice where you are not authorised to do so. A Financial Planning firm that is also registered as a tax agent, is authorised to, and should, provide tax advice. Those who are not tax agents must not advise clients on tax issues. The issue here is that many do.

So what is tax advice?
Tax is an expense or deduction from gross income and capital returns. Management of this is called tax planning and must occur at the beginning, during, and at the end of a process (eg. a new investment plan). Common mistakes occur when tax planning occurs at the end of the process (or not at all) and it is too late to correct costly errors.

An example of the wrong advice…
We have experienced many examples of financial planners not planning for their clients. One of these, was a 90 year old female client who had held some public blue chip company shares since the late 50’s and pre capital gains tax (CGT). The client also held post CGT shares. We had always advised our client (as her Tax Agent) when doing her annual tax return to keep the pre CGT shares. When we referred our client to a financial planner about 7 years ago, we advised of the asset allocation at the time & continued to do so.
After suffering an illness, the client’s financial planner advised her to sell all her shares and invest in managed funds.
She told us that the paperwork from the public companies was getting on top of her. This was a fair comment considering her age and the amount of paperwork involved. 
About 6 months later when doing the client’s tax return we found the sales of the shares. There was a substantial tax bill arising from the sale of the post CGT shares and sufficient cash had not been allocated for this causing stress to our client. She realised in hindsight the poor financial planning advice involved. We were and are still very upset by the action that was taken because we believe all the options were not considered by the adviser.

Our advice to you when choosing a financial planner…
It is for this reason that I have very strong expectations of the financial planners who I choose to work with. Browne&Co and FWA Eagar&Co have decided after many years to take on a financial planner within the company, to assist you, our clients with your financial needs. It is of great importance to me that the financial planner I recommend to you, works with me and my staff directly to ensure that you receive the most beneficial and authorised financial and tax advice possible. The experience I’ve had with financial planners has taught me that choosing the right person to take on the work of our clients is of utmost importance. So watch this space…

 

 

TAX POLICIES -The Labor Party

LABOR Tax Policies

• Tax plan - tax cuts of equal value to those proposed by the Government for those individuals earning up to $180,000 p.a, but deferral of the Government's proposed tax cuts for individuals earning over $180,000 p.a. (see proposed longer term tax brackets and rates at www.eagar.com.au/newsevents)
• Increase in the Low Income Tax Offset;
• GST - Labor opposed any increase in the GST Rate or expansion of the GST base;
• Introduce a BAS Easy option for Small & Medium Enterprises;
• A 50% Education Tax Refund on education expenses for families eligible for Family Tax Benefits, refunds up to $375 per child per year for primary school children, and $750 per child per year for secondary school children;
• Increasing child care tax rebate to 50%;
• Rental tax incentive offering institutional investors annual tax incentives and financial support for building homes and renting them out at 20% below market rents;
• HECS Changes - halving the fees for Maths and Science students and graduates.

Christmas Parties and FBT

Although not a separate ruling on Christmas Parties in particular, there may be a minor benefit and exemption from FBT if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300. For the FBT year beginning 1 April 2006 and prior years, the minor benefits threshold was less than $100 rather than less than $300. For more information. click here

TAX Changes to Legislation for Small Business Owners

According to the new tax declaration form, from 1 July 2007, small business owners must provide all employee tax file numbers to the superannuation fund accepting contributions from them. The tax declaration form states that the payer must provide employee tax file numbers (TFN) for superannuation purposes, to the superannuation fund accepting contributions from the employer. The Tax Office will be checking for compliance when performing their field visits.

CLUBS News

CLUBSNSW SPONSORS WORLD MASTERS GAMES
ClubsNSW will today hand over a cheque for $500,000 to the Sydney 2009 World Masters Games as part of its continuing support of NSW sport. The World Masters Games will see 30,000 athletes descend upon Sydney for nine days in a festival of sport that will inject more than $100 million into the NSW economy. Individual clubs will in addition provide many of the competition venues, as well as actual athletes and volunteers, and the accommodation and hospitality for visitors and athletes.
Source: www.clubsnsw.com.au

PREMIER RULES OUT SECOND CASINO
ClubsNSW welcomes today's announcement by Premier Morris Iemma that NSW will continue to remain a one casino state. ClubsNSW has always opposed a second casino in NSW on the grounds that such an expansion in gambling facilities could only cause an adverse effect on registered clubs and their ability to serve the community.

Source: www.clubsnsw.com.au

Small Business Amendments

The Tax Laws Amendment (Small Business) Bill 2007, which was introduced into Parliament on 10 May 2007 and was passed unamended on 13 June 2007 provides for the standard eligibility criterion that is to apply across the small business concessions. This bill will increase the GST cash Accounting turnover threshold from $1 million to $2 million.
From Taxation in Australia, Volume 42/1 July 2007

Deemed Dividends - Companies with asset loan accounts

Recent changes made to Div 7A has simplified Deemed Dividend situations. While Div 7A has not gone and Company tax payers will still need to consider it every year, it will apply in less situations (for example, marriage breakdown is now excluded), it is clearer (for example, where the shareholder is also an employee), it has been made less onerous (refinancing), it allows for more situations to be rectified (interposed entities) and, most importantly where it does apply the penalties will either be less onerous (no franking debit or only the shortfall amount being a deemed dividend) or the penalties have been done away with altogether (the Commissioner's discretion).
From Taxation in Australia, Volume 42/1 July 2007

Financially Fit - from the Institute of Chartered Accountants, Australia

With the arrival of the end of the 2006/ 2007 financial year, the Institute of Chartered Accountants in Australia is launching its 'Financially Fit' series, advising Australians to take this time to review and assess their finances. The Institute's Manager for Financial Planning and Superannuation, Hugh Elvy said "Just as regular exercise is essential to staying healthy, maintaining a realistic financial plan as part of a weekly or daily budget is the only way to becoming financially fit long term." Institute 'Financially Fit' checklist:

• Review budget - detail how much you earn and spend.
• Question expenses - have they changed due to external sources and are they needed?
• Review goals - what do you want to achieve - pay the bills on time, kids education, retire etc?
• Risk management - assess what can impact the achievement of your goals and review insurance
• Review savings - save first, spend later, assess savings plan and ensure it will help reach your goals
• Review estate planning - ensure your family's financial needs are catered for in all circumstances

"With recent external factors impacting on the finances for many Australians including recent interest rate rises and increasing petrol prices, the end of financial year along with recent superannuation reforms make this the ideal opportunity for many to take control of their finances. A licensed financial adviser can provide the tailored and comprehensive advice to ensure that Australians are 'Financially Fit' now and in the future, " Mr Elvy concluded.

From Media Releases July 2007. www.charteredaccountants.com.au

Some Super News

Superannuation Fund Tax File Numbers

Since 1 July 2007 TFNs should b provided to your Superannuation Fund. Without a TFN, contributions will be taxed at the highest marginal tax rate of 46.5% rather than 15%. Employers should note this as superannuation funds are seeking advice of TFNs for all employees. A further restriction is a superannuation fund cannot accept Voluntary member contributions from a member without a TFN.

Pension Changes
The Better Super changes as they are marketed by the Government, also impact Age Pensions from 20 September. The personal asset threshold is increasing and this means more in pensions for some and also that currently ineligible pensions due to asset levels may become eligible or re-eligible.

Tax Free Super Payouts from 60

Anyone aged 60+ who has paid tax in their super (most workers) can now take a lump sum or pension payout without any tax. The amount taken isn't even declared on tax returns. From now on the rules for taking superannuation are much more flexible. The rules regarding continuation of part-time work are also relaxed.

Superannuation Contributions

Just a reminder that super contributions must be paid quarterly. Contributions due for the June 2007 quarter must have been paid by 28 July 2007.

Lost Super

The Government is introducing a new easier system for tracking lost super called SuperSeeker.

Self Employed Super Contributions

From 1 July 2007 there is no longer partial reduction in super contributions for the self employed. Yay!!

 

Claim the COST of Managing Your TAX Affairs

Did you know that you can claim the expenses you incur when you manage your own tax affairs? When preparing your tax return and other tax documents you can claim expenses relating to:

• Preparing and lodging your tax return and activity statements
• Travel associated with obtaining tax advice
• Appeals to the Administrative Appeals Tribunal or courts; and
• Obtaining a valuation needed for a deductible gift or donation of property or for a deduction for entering into a conservation covenant.

The expenses relating to preparing and lodging your tax return and activity statements include costs associated with:

• Buying tax reference material
• Lodging your tax return through a registered tax agent or the TAXPACKEXPRESS service.
• Obtaining tax advice from a recognised tax adviser, and
• Dealing with the Tax Office about your tax affairs

You can also claim fees paid to a recognised tax adviser (e.g. Browne&Co) for preparing your return, however they can only be claimed in the year after you have paid them i.e. you can only claim expenses from your 05-06 tax return in your 06-07 return.

Source: ATO website www.ato.gov.au

Low Income Offset

From 1 July 2007, the low income tax offset will increase from $600 to $750 per year. In addition, the income threshold at which the offset begins to reduce will increase from $25,000 to $30,000. As a result, some offset can be claimed up to an income of $48,750 compared to $40,000 currently. Those eligible for the full income tax offset will not pay tax until their annual income exceeds $11,000 (up from $10,000 currently).

Source: ATO website www.ato.gov.au

Tax Thresholds - 2008 and 2009

2006/2007 Income Range $	Rate %	Current 2007/2008 Income Range $	Rate %	Proposed 1 July 2008 Income Range $	Rate %
0 - 6,000	0	0 - 6,000	0	0 - 6,000	0
6,001 - 25,000	15	6,001 - 30,000	15	6,001 - 30,000	15
25,001 - 75,000	30	30,001 - 75,000	30	30,001 - 80,000	30
75,001 - 150,000	40	75,001 - 150,000	40	80,001 - 180,000	40
150,001+	45	150,001+	45	180,001+	45

Source: Tax Vine, 9 May 07, www.taxinstitute.com.au

Increase in the GST Registration Turnover Threshold

The annual turnover thresholds for registration for the GST will be raised to $75,000 for businesses and to $150,000 for non profit bodies, with effect from 1 July 2007. As a result of this measure, businesses and non profit bodies with a turnover between the present threshold ($50,000 or $100,000) and the proposed threshold ($75,000 or $150,000) will no longer be required to register for GST. Those that voluntarily register for GST will have the option of remitting GST annually, rather than quarterly or monthly.

Source: Tax Vine, 9 May 07, www.taxinstitute.com.au

Increase in the Threshold for Requiring an Approved Tax Invoice for GST

Businesses will be allowed to claim input tax credits for purchases with a GST exclusive value of $75 or less without the need for an approved tax invoice, with effect from 1 July 2007. To claim an input tax credit, businesses currently have to obtain an approved tax invoice for all purchases with a GST exclusive value greater than $50. For purchases with a GST exclusive value of $50 or less, the documentation required for income tax purposes is sufficient to claim an input tax credit. This measure will also carry over to the "no ABN withholding" arrangements, increasing the threshold for "no ABN withholding" from $50 to $75.

Source: Tax Vine, 9 May 07, www.taxinstitute.com.au

INSTITUTE SUPPORTS PLAN to cut small business red tape - 17 April 2007

The Institute of Chartered Accountants Australia supports Labor's plans to slash small business red tape, in particular the implementation of BAS Simplification to ease the burden of GST compliance on small business and the harmonisation of payroll tax, announced during the Leader of the Opposition's National Press Club address earlier today.

The Institute has actively lobbied for a reduction in the onerous red tape for small to medium enterprises (SMEs) and over the past year has worked closely with the current Government, providing feedback on its report examining regulatory burdens on business - Rethinking Regulation. The Institute's SME Chairwoman, Sue Prestney, said: "The Opposition's plans to reduce small business regulation, in an effort to promote innovation, demonstrates a willingness to treat business red tape as a serious issue".

The Institute believes the plan to reduce the GST compliance on SMEs and harmonise payroll tax is encouraging for small business owners nation-wide and would continue the current Government's efforts to reduce the regulatory burden on small business.

Source: ICAA Website www.charteredaccountants.com.au 17 April 2007, Media Centre.

EXEMPT TAXPAYERS - Licensed Club in Sydney Loses Exempt Status

This news item discusses a taxpayer who owned and ran a licensed club in Sydney. The club had a large membership and conducted a diverse range of activities for business including gaming, entertainment, harbour cruises, investments and loans. The taxpayer was under the control of the club and provided it with substantial financial assistance.

The taxpayer sought exemption from tax due to the club being established for the encouragement of a sport (Div 50 item 9.1 (c) in s 50 - 45 of the ITAA 1997). The exemption was disallowed based on the support and encouragement of the sport not being the main object or even an object of the Club. The fact that the taxpayer had received an exemption from tax in an earlier year was not determinative of its status for the other years.

Exemption under Div 50 is not "once and for all" and the Commissioner clearly reserves the right to assess each case on its merits - and on a year on year basis. For other sporting social and other clubs eligible for exemption the critical consideration will be whether they too are at risk of losing their exempt status. Source: Tax Update, Taxation Institute of Australia 2006. South Sydney Rugby League Club Ltd v FC of T 2006 ATC 2150; [2006] AATA 265.

CHARTER BOATS AND HIRE - Tax Implications

Under normal circumstances business expenses are deductible for income tax purposes. There are however certain expenses that are specifically not income tax deductible.
One section of the taxation law that deals with defining specific items as non income tax deductible relates to expenses for "Boats".
There are fortunately some exclusions where a taxpayer can claim a tax deduction. The main criteria allowing boat hire activities to be deductible, is if it is operated as a business. "The letting of the boat to boat hirers, either directly by the boat owner or through a boat hire operator must amount to more than a passive receipt of income from property".
Further issues arise on this subject and revolve around potential private use of the boat and associated fringe benefit tax considerations.
The matter of boats and non deductibility of expenses is a Hot Topic for the Australian Tax Office and we strongly suggest that advice is sought before actions are taken in this area. The law will change shortly in relation to boat business operations which trade at a loss.