HECS and Student Tax

HECS and Student Tax

 Australia Wide Tax Solutions can take care of all your student tax needs without breaking the bank!  Let’s take a look at some of the tax implications for students in Australia.

 Supporting yourself while at uni?

A part time job while you are at university is taxed in the same way as a normal job.  The more money you make the more your deductions will work for you.  Gaining experience in your field of study will also help your career goals down the track.

Tax considerations for students

Books and all Uni and study expenses are tax deductible.  Any additional study while you are at university is not tax deductable.

If you go to conferences or seminars, or skills-based refresher courses in your area of study (including CPD – Continuing Professional Development) this is tax deductable.

Student loans

Students loans are given to people who are on Centrelink to meet your everyday needs, this is also paid back in the same way as HECS in that there is no interest charged other than CPI.  We can help you manange your HECS debt and student loans to make sure you’re maximising your tax benefits and other allowances.

How does HECS work?

If you don’t have the money to pay for your degree you will be eligible for a loan from the government, this is called HECS.

It increases by CPI there is no interest, you only need to pay back your HECS debt when you earn over $52,000.

If you have a job that is in the same field as your studies it is better to pay the debt rather than use HECS because it’s tax deductible.

How and AWTS help students including student discount

AWTS offers a discount for students of 50% off everything, with a valid student card.

Do you need to have your employer know you have a HECS debt?

Yes. If you earn over $52,000 you need to let your employer know that you have a HECS debt, so as your tax is covering the amount of repayments made to the debt, either way, the ATO will ensure that you pay your HECS everytime you lodge your tax return.

Does HECS affect my ability to borrow money from the bank?

HECS is like any other other loan, it will contribute to your borrowing capacity, just as credit cards and car loans do, so will HECS, so if you are planning to take out a loan ensure you pay it down, before you apply for  new loan.

Instant Asset Write-Off

The crazy world of business what should you buy, what items should you invest in your business, should you buy things just for tax deduction, or should you buy items for direct connection to making money in your business, let us shed some light on the most sort out topic of accumulating expenses just for a tax deduction, why does the Australian Tax Office provide this relief for Small businesses and not depreciate these assets over time?

What is an Instant Asset Write off?

Are items that you use in your business that are $30,000 and under and are used to produce assessable income.

Previous to these new tax laws items of more than a $1,000 were depreciated over time which meant that you only received a deduction for the portion that the item was depreciated by, which was a slow process, less spending on larger items meant that businesses in Australia could not access massive tax breaks, with this new law, you can instantly write off purchases to the amount of $30,000 previous to this it was $20,000, you will still have access to this write off until 30 June 2020.

Businesses with $10 Million or less turnover can still access this Instant asset write off. Purchases on items of up to $30,000 including GST are allowable items that can be instant write offs and do not need to be depreciated over time.

You will definitely make up your mind after this blog if you really need to purchase items for your business just for a tax deduction or so you can merely invest to produce income.

The main problem businesses face with such a decision is that main stream media and advertising channels make it sound so good and create offers that irresistible that no one can afford not to buy, what’s the catch? The catch is the media and advertising companies don’t really understand tax, however the consumer who sees it on TV or hears it on the radio says well if there saying it must be true, they’re not tax advisors, and the advice is not tailored to your needs, only believe less than half of what they promote, otherwise you may have a massive gap in your cash flow projections and or your profit and loss for year end.

We spend $30,000 the maximum amount you can write off, to have a reduction of $9,000 in your tax bill, does this make sense? It really only makes sense if you need the item you are going to buy, like a new PC, the odd tablet or Laptop, items that will produce income for your business, items that will sustain your business so you won’t go out of business.

After 10 years of being in business and 20 years of being in tax, most people believe that if you spend $30,000 you will receive a $30,000 refund, trying to explain how tax works is sometimes convoluted however it’s as simple as this, as a company you earn $1,000 then the tax rate currently is 30%, $1,000 * 30% = $300 that is your tax bill for a $1,000 earned, should you spend $500.00 of that on tax deductible items for example a tablet, then the reduction of tax is $500 * 30% company tax rate equals $150, therefore your tax bill at the end of the year with this simple illustration is $300 minus $150, the myth is that people think that they spent $500 on tax deductible items that they get the $500 in entirety back on the tax which is incorrect, the classic is when you talk to a salesperson its 100% tax deductible, what else could it be if it’s for work purposes? A 90%/10% not tax deductible, only very rarely do you see this in Australia and one example could be an Income protection policy adopting this 90 10 rule, and the reason they would adopt the 90% tax deduction and 10% not tax deductible is because you will receive your income protection payout tax free for the rest of your working life in the event of an accident.

You can safely assume that most items used for work purposes are tax deductible hence the above example is what you will pay in tax, 100% tax deductible means that the entire purchase is minus this from the income you make thus $1,000 less the $500 of the purchase, therefore your taxable income is $500, tax on $500 is times this by 30%, so your tax bill is $150, it’s as simple as that. Should you have not purchased the $500 item then your tax bill will be with no tax deductions so $1,000 times it by the tax rate of 30% and you have a $300 tax bill, its as simple as that, spend $500 to reduce your tax to $150 or don’t spend on the tax deduction and just pay $300 in tax, the two scenarios have the following as after tax profit.

The first when your purchasing the asset is $1,000 less purchase of $500 is $500 times it by the tax rate of 30% you are left with cash in pocket $500 less tax bill of $150 is $350 in your pocket, the second scenario is no deductions so no asset purchase therefore the results are $1,000 times it by the tax rate of 30% $1,000 less $300 you are left with a profit of $700 however no purchase, with both scenarios you see that you are left with exactly half if you purchase an item and double that if you don’t purchase the item, scenario one you have $700 as profit and scenario 2 you have $350 as profit, you should speak with your tax adviser before you make any major purchases so you wont be out of pocket at the end of any financial year, our clients never make this mistake as they always consult us before any major purchases as we follow their accounts on a quarterly or monthly basis and understand where and what position the business is standing at, you can book a time with us to see how we can help here.

What you should do?

Always consult your tax agent or tax advisor, if you see that you are provided with the wrong advice three times in a row, change your accountant.

Never buy a tax-deductible item just for the sake of buying it for a tax deduction.

Always purchase tax-deductible items with the intent that you need the item to keep on creating more taxable income or assessable income for tax purposes, and that the investment will flourish your business and not create a detriment.

Avoid being one of the businesses that do not know about the instant asset write off.

Only spend if you really need too.

Consult us if you need a second opinion.

If you need any other information please let us know and we are happy to write about it.

We are happy to help you if you need sound tax advice.

How to save massive tax dollars by salary packaging.

What is it in for you as an employee?

How does it save tax dollars for you?

What is it for your employer?

What is the difference if I pay for the expenses than my employer paying for it?

Salary packaging can help a company become and continue to be an employer of choice.

Salary sacrificing cars is a key element of this strategy, both for wealthy families and for unrelated employees.  Let’s assume the employer is a full fringe benefits tax (FBT) employer. The vast majority of salary packaged cars are subject to what is called the FBT statutory formula method. This means that drivers do not have to keep log books. This effective and lucrative salary packaging means less paper work for you the employee and more work for your employer and their accountant.

Cars are often packaged using novated leases, so if an employee leaves the business, the employer is not stuck with the car. Another option is an associate lease, which can offer some of the same benefits but be even more tax efficient. There are essentially three associate lease models:

Model 1 – Lease & Sublease:

Your associate, say your spouse, might lease a car and sublease it to your employer.  You would salary sacrifice all of the costs, including the profit that your spouse expects to make on the sublease. This brings the car into the FBT net, which is often a good outcome, it might shift some of your income to your spouse (i.e. the profit that they expect to make on the annual lease) and while running costs should be deductible to your spouse, they should also reduce the FBT on the car.

Model 2 – Lease a car that you already own:

Your spouse might lease an existing car to your employer, e.g. the car that you provide your daughter to drive to university.

Again, this might bring the car into the FBT net and the running costs paid by your spouse might totally eliminate the FBT on a modestly priced car. They should also be income tax deductible for your spouse. Similar to Model 1, some of your income might effectively be shifted to your spouse under the salary sacrifice arrangement, i.e. the profit expected to be made on the lease.

Model 3 – Sell a car you already own and lease it back:

A further variation involves selling an existing car to a financier and your spouse leasing it back. Your spouse would then sub-lease it to your employer.

Again, this brings the car into the FBT net, running cost ought to be deductible to your spouse and they should also reduce the FBT. It might also effectively shift of some of your income to your spouse.

In addition, some people might use the car sale proceeds to, say, pay down a non-deductible mortgage on their family home.

Typically, associate leases provide all of the benefits of novated leases (except, sometimes, the benefits offered by an external salary packing bureau such as bulk buying discounts) and they can effectively result in a shifting of income to a spouse. On top of that, the running costs can be both income tax deductible and reduce the FBT.

Usually motor vehicle expenses for most Australians is not tax deductible, hence why Salary packaging or salary sacrifice is a great way to package your new car via your salary, the pre-tax dollars pay for your car via your salary which means you save tax on the amount of the payments paid to the motor vehicle including all of its expenses car registration, lease payments, insurance petrol costs of tolls, correct the expenses that could never claim as home to work travel is not deductible can be salary packaged via your employer, meaning if all the expenses cost you on a yearly basis $20,000 you minimise your tax on this $20,000 and save massive amounts of dollars, and you do not need to provide evidence in the event of a tax audit, so if you are ever afraid of ever being audited ask us about our audit insurance that will cover you for our services in the event of an audit

All in all, salary packaging cars, in one of the ways outlined above, particularly they have little or no work use, can save a good deal of tax and they can be an important tool in helping you be or remain an employer of choice.

If you are a small business and have issues in maintaining employees you may want to consider FBT Fringe benefits tax and provide your employees with such benefits so you too can be an employer of choice, this is an attractive form of salary packaging for most Small business Sydney, we at Australia Wide Tax Solutions are small business accountants in Sydney that assist you streamline this process.

How Does it work if I salary sacrifice my mortgage that is not an investment property?

The same way as your motor vehicle above is salary sacrificed so is your mortgage with a catch, the interest component is only salary sacrificed and not the principal amount, so if your primary residents mortgage is set up as interest only not recommended, then your entire amount of mortgage can be salary sacrificed within certain dollar limits according to what type of employer you work for, if you work for a not for profit entity and business you have higher limits and if you work government organisations you also have higher limits than that of a private employer i.e. working for a small business in Sydney.

If the interest component of your mortgage is $15,000 and the principal amount is $10,000 only the $15,000 which is the interest amount can be salary sacrificed. You as the employee, will save tax on $15,000 as the interest component is $15,000 the amount otherwise not deductible to you, as it is your primary residence.

We at Australia Wide tax solutions always recommend that you speak with your accountant to work out what are the non-deductible expenses that you cannot otherwise deduct in your tax return, because whatever is a deductible expense you cannot be double dipped with deductions by placing them in your tax return, if the Australian tax office audits you, there is hefty fines for you to pay and may pay interest charges on the amount owing, since your tax return would have been lodge in prior years, the Australian tax office can charge you interest on the fines and other expenses you may incur from a tax audit, please remember in this case your interest charges are deductible in the next year’s tax return under section D10 however your fines are never deductible hence why you should always use a registered tax agent

In Summary.

What is it in for you as an employee?

You save tax on the amounts you would have paid out of your pocket for the particular expense.

How does it save tax dollars for you?

The amount of the expense that you salary sacrifice is not taxable and hence taxable to your employer, which they would have otherwise paid the tax regardless of the expense or the amount that they need to pay.

What is it for your employer?

They retain you as an employee as it is a lucrative remuneration package for you, please remember there is limits to each and every employer in each state of Australia.

What is the difference if I pay for the expenses than my employer paying for it?

The difference between the two if you don’t salary package is that you will be paying for the expense after you have been taxed and not before you have been taxed, the equation is simple, have your employer go into an arrangement to salary sacrifice the expense.

Small businesses and the cash economy, what you need to know and what you need to avoid.

Regarding the cash economy many people think cash is KING and it can be ‘pocketed’ without the Australian Taxation office knowing what was made.

When consulting to clients our advice is always declare everything, there are more benefits down the line that you may not be aware of. These benefits that most people take for granted, they never understand why they need to pay tax and why it is so important to show more than less. As technology is developing, we may be going to a cashless society in a few years like some countries like China.  It is possible in the future for Australia that everything will be digital, take a look at services like Medicare and Centrelink, they have gone totally paperless in less than two years, now you need to log into your account from one portal and everything is connected. To enter your mygov account you need to first set it up which requires your past historical data from your tax return, you will need your Notice of Assessment and the last bank account details that your refund went into, if it is your accountants bank details you will need to check your tax return and grab those details before you start registering your new mygov account.

You bank deposits and your withdrawals are data matched with the Australian Tax Office, the only thing that doesn’t match is any cash you earn or spend.  If your circumstances change this can become a problem for example, if a new life event occurs you are separating or getting a divorce, a death in the family, moving houses and you want to show the least possible money ever made so your ex-spouse doesn’t take you for child support.

The average price of a home not apartment in Sydney is say a million dollars, you dodge the system and beat child support, you saved $8,000 for the year and you saved another $13,000 in tax for not lodging that you made $65,000 profit net income from your small business, then it is time for you to buy the Australian Dream the home that you need to house your loved ones, you apply for loan to one of the major banks with tax returns that say no tax was paid or that your taxable income was as the least possible to avoid tax and child support and all of sudden you receive a loan declined and you are not sure why because in your head you think you make a lot of money, say $140,000 with a net income profit of $65,000.

That is why many people always amend their tax returns in the future, to show the true value of what they really earned, so they always pay the accountant twice than what they really are worth, which is crazy because now you will pay for everything you should have paid in the start plus double the services from your accountant.

What else can you miss out on, most banks these days need you to cover and protect your mortgage in the event of death, total permanent disablement and or critical illness, so you can keep up with the loan repayments in the event of unforeseen circumstance, and it always has me puzzled that most people will insure their cars that are worth $30,000 to $50,000 for $2,000 per year but when it comes to insuring there life for a $1,000,000 or more or at least for what the house is worth there not willing to pay $4,000 for the life insurance policy, we can assist you making all these payments tax deductible so please see us, before buying any policies.

Hypothetically you lodge a tax return that you earned $25,000 net profit and although the bank won’t provide a loan for you to buy a house or even to receive a car loan, and you saved $13,000 in tax, and or didn’t pay child support of $8,000, if you were ever to make a claim on your income protection policy, your last tax return is what the insurance company will usually go by to pay your monthly payments of income protection now they only pay 75% of your yearly income so that means you will only be paid $18,750 you know Centrelink pays as close to that in the event of an accident per year on some certain allowances, so we always tell clients to think twice of what their future goals are and do the right thing from the start.

The ATO reminds business owners to ensure they declare all cash and online sales in their tax return, including money they have earned from participating in the cash economy.

‘If for example, you are renting out a room, a car parking space, doing odd jobs such as delivery or cleaning for a fee, or driving passengers for a fare, remember to include this income in your tax return,’ lodge it all because the Australian tax office will understand that if you are using more petrol than ordinary however not declaring the income they will know by the basic statistics they have that you are making money that has never been declared, platforms like Uber and Airbnb where by you earn income and never declare, will need to report in a few years to the Australian tax office all income made, so they can data match and catch you out hence why in Australia the Australian tax system is self-voluntary, you lodge what you believe is your income.

The ATO also reminded self-employed people to declare personal services income also for any personal efforts, skills or expertise; you may be earning personal services income as for example if you are contractor cleaner and only have one person paying this means it personal services income, the deductions are fewer for people with this sort of income.

The new personal services income tool will help you work out if your income is personal services income and if special tax rules apply.

If the special tax rules apply to your personal services income they can affect the deductions you can claim and how you report your income.

The ATO also said it there are simplified depreciation rules for small business that have an aggregated turnover of less $2 million.

One of the simplified depreciation rules is the instant write-off. The instant asset write-off means you can immediately deduct assets bought for your small business, which cost less than $30,000 in the year that you buy and use them, or install them ready for use. The ATO also noted the increased instant asset write-off threshold of $30,000 applies from 30 June 2018.

Besides the instant asset write-off, another important rule to remember is that if the balance of your pool for depreciating assets is less than $20,000, before applying any other depreciation deduction, you will need to immediately deduct the full amount in your tax return, is it complicated yes, hence why you should always use a reputable tax agent that know what they are doing.

The best example are restaurants, cash always passing by their hands and the restaurateurs avoid lodging the correct figures, the Australian tax office have statistics that show that if you use so much flour and so much of any other product to produce your meals, they will know how many meals you produce, and the one thing that most owners always leave out is meals for own use, always thinking they are entitled to meal from there business, “well it is my business and I work for it” so I should get a free meal and not declare it, this is not the case it must all be lodge, imagine your yearly expenses to live are home loan private health insurance motor vehicle costs and school fees and everyday shopping to put a meal on the table that may come to $30,000 a year and you declare in your tax return $24,000 we have a massive issue, and a slight possibility of a tax audit, as previously mentioned technology is getting better and data matching will be a thing of today and into the future, there will be no escape unless you go and leave on an island in the Caribbean or the Mediterranean, and eat off coconuts, big brother is always going to catch you out, so do the right thing from the start as it does get expensive down the track when you want to amend tax returns to suffice the correct figures to certain government departments and large institution’s.

If you are running a small business and need help in getting it right the first time give us a call for a free fifteen minute consult to see if  we are the right fit for your small  business anywhere in Australia, our base is in Sydney though we travel all around Australia and the world, to see our clients.

3 simple things you need to know when purchasing your second property in 2019

If you have already purchased your first home, congratulations! The next step in building wealth for your future could be to plan for the purchase of a second property as an investment.

Owning two properties is a great financial ambition and with Australian house prices on the rise, doing so has great potential to improve your financial situation in the long term. But please don’t be fooled – just because you have done it once before doesn’t mean it will be easy! Buying a second property also requires hard work, discipline and effort. Here are some financial pointers to help with the process of buying your second property.

    1. Property purchase purpose

The first thing you need to understand is why you want to buy a second property, for example:

Are you planning to rent out your original property and buy something else to move into?

Are you buying a ‘renovators dream’ to knock down and develop?

Are you buying because you want a beach house and you will spend half your time in each location?

Do you need a second passive income?

Do you want to build a granny flat at the back of your house in which case is it easier for to just buy a second house?

Do I need to pay land tax?

Are all my properties in the one state?

Understanding why you want a second property before you set out will help to inform all your other decisions in the property purchasing process. For example, if you are buying as an investment property, decisions around location, capital gain potential and rental yield will influence you in a different way than when you are buying something for yourself to live in.

Interest rates, deductible expenses, depreciation and other factors will and should influence your decisions before you purchase that second house.

  1. Your cash flow and budget

There are no two ways about it – having a second mortgage is going to have a significant impact on your monthly cash flow!

Ask yourself: can you easily service both mortgages?

Do you have a stable income?

Will your income significantly change in the next year?

Always keep a budget so you know what you can reasonably handle you don’t need over-extend yourself at these crucial moments and at these life changing events. The key here, and this is what a lender will look for, is your ability to earn enough to service both your first and second mortgage effectively, on top of the cost of living and factoring in a second income from rental income if you choose to rent our your second place or both. 

It is important to fully assess and understand your borrowing capacity. Australia wide tax solutions can assist you with this please call us. As with any other home loan application, your second mortgage will be assessed on your income versus expenses. Lenders will look at your overall position of asset and liabilities, which means if you have any existing debts such another mortgage (which you do have), personal loans, credit cards or car loans, your borrowing capacity is going to be less, compared to if you were debt-free.

When considering your cash flow and budget, it is also well worth including a ‘safety buffer’ contingency plan. This could be three to six months’ worth of repayments and living expenses, or similar, depending on your savings ability. It is important to have a safety buffer if you are hoping to use your owner-occupied property as security to fund the deposit for the second home.

Our partners at Australia Wide Tax Solutions can set you up with real time bank feeds driving straight to your phone where you can see your budget needs to the hour, all incoming and outgoing cash can be monitored right at your fingertips please ask us about this app

  1. Will you be renting out one of your two properties?

If the answer is yes, and for most of you we imagine that you are buying a second property for investment purposes, it’s essential to get a rental estimate for your second property before you make your purchase. If you are just in the research stage, having a rough estimate of rental income will help with setting your budget and understanding your cash flow (see point 2 above), but if you have chosen ‘the’ property to buy, most lenders will require a rental estimate letter from a real estate agent currently handling the property at the application stage.

Lenders will factor in any possible rental income (if applicable) when determining your borrowing capacity, ensuring it is set at a safe limit – reducing your risk and theirs! When choosing a property for rental income, it’s important that the property is well located and will be easily tenanted so that it continues to generate income and support itself.

  1. Loan type & loan structure

Interest rates have been very low for some time, which makes it a great time to consider buying a second property. Right now there are literally thousands of home loan options out there for you to consider. However, there are many variables to take into account when financing your second property purchase it’s a good idea to give us a call for sound advice. Finding the right home loan product for your financing needs depends entirely on your current financial position and your short and long term goals. This is why the right advice is imperative when taking on a higher amount of debt across two different properties. It is best to speak to us about these options and the best way to structure your finances, before you even choose a property to buy, so you don’t get stung later on in the process. A few scenarios we could discuss include:

Using your existing equity

If you’ve lived in your first home for some time, there’s a good chance the equity in your house has increased. Equity is the difference between what your home is worth and how much you owe on it. For example, if your home is worth $550,000 and you owe $200,000 then you have $350,000 in equity.

Tapping into this equity could give you a larger deposit for your second property purchase, which could be beneficial for your borrowing capacity and your overall budget. If you’re looking to do this, you will need to have your home revalued. In order to determine how much equity you have in your home, a lender will perform a valuation using an independent valuer before determining how much you can borrow and approving your loan.

Refinancing or staying with your current mortgage lender?

Buying a second property offers the perfect opportunity to give your existing mortgage as a health check. Use the opportunity to consider your home loan needs in relation to your future goals and ask yourself how well your current loan is performing for you. If you’re satisfied with the service your lender is providing and you have determined that the interest rate and fees you’re paying are competitive, there may be no need to refinance to another lender. However, there are some record low rates on offer at the moment and if you have had your mortgage for some time, it would be worth talking to us about what other home loan products are suitable for you and your goals.

Buying your second property is by no means a small task. We are here to help you with your financial goals, so please chat to us about how we can structure your loan so your second property purchase can really set you up for the future.

Can Salary Sacrifice assist you in paying off the home sooner or more tax effectively? Please read are blog here.

Choosing to build a granny flat could be another option if you don’t have massive equity in your current property, choosing to rent this out even to students from language schools can significantly increase your income capacity and at a less expense, the only issue you have is council approval and the time it takes to build your granny flat, we have builders that can do it under 12 weeks from the time DA approval is granted, hence you can organise yourself in regards to a drawdown to your mortgage.

When you have more than a primary resident in any one state your land tax bill can be significant please ensure that you factor in your cash flow budget amounts to this tax as most investors forget to include this in there cash flow analysis, notwithstanding they forget to inform the office of state revenue of their second property, and years later they receive a massive land tax bill only to find they need to mortgage this amount to pay for it, or to go on payment plan with the office of state revenue. Remember to register your second property with the office state revenue here.

There are many investors that may choose to buy in different states and in different entities to minimise all the above costs, when building a property portfolio you should consider tax planning in advance before you buy any of the investment properties having a clear tax plan will ensure that you do end up with a passive income in the end.

Whatever your choice maybe, you should always consider to maximise your tax benefits at all costs, creating more income in the most tax effective way can create a great passive income now and into the future or can assist you to decrease your home loans in the most effective time.

How you can supplement your taxable income in just a few simple steps.

Centrelink’s Pension Loan Scheme allows a retired person on a part age pension to borrow against the security of their home (or other property) at 5.4% pa interest to subsidise their living costs.

The amount of the loan is limited to the difference between the full and the part pension, so in a way it’s a top up facility. It’s paid fortnightly as part of the usual age process.

Not everyone is eligible. Persons who receive a full age pension are not eligible. And persons who fail both the assets test and the income test, i.e. who do not receive any pension, are not eligible. So it’s available to persons getting a part pension.

PLS loans are not that common, and it’s hard to see why. They make a lot of sense, and the relatively low cap, i.e. the difference between the actual and the full pension, means its unlikely age-pensioners will be evicted from their homes by Centrelink.

The interest rate is 5.25% charged fortnightly, which equates to an effective interest rate of 5.4%. You can negotiate a better deal through a mortgage broker and or bank.

If a married couple’s client’s part pension was hypothetically $5,000 and their full pension $23,160 the amount of the loan would be capped at $18,160 a year or about $700 a fortnight. If their home is worth say $700,000, and is otherwise unencumbered, it is unlikely that the home loan will every catch up with the home value, or even come close to it.

The extra $700 a fortnight will make all the difference to your everyday living expenses and your day-to-day quality of life, and may even allow them to avoid selling their home or other quality assets.

This system is a great idea and awareness of it can help reduce the anxiety of ageing, if you are over 65 and are on a part pension, please speak to us, please remember all our senior citizens with a pension card receive our massive 50% off all our services excluding filling out pension forms. Check out the special here.

How to be an Australian Tax resident for tax purposes when you are new to Australia.

Why is your status as an Australian tax Resident make the difference when you are lodging your tax return?

Why do non tax residents get taxed on Australian Sourced income?

What are the tax rates for non-residents of Australia?

What is an Australian resident for tax purposes?

The good part of the Australian Tax Law is that you don’t need a Working holiday VISA or any other type permanent residency to be classes as an Australian for tax purposes.

You can have a VISA to enter Australia and still be considered as an Australian for tax purposes.

You do not have to be an Australian resident or an Australian Citizen to be considered to be Australian for tax purposes.

The residency Test.

The resides test means you can still be an Australian for tax purposes if you are physically present in Australia, you have family in Australia, you have either business or employment ties, you maintain Australian Assets, your living arrangements can also play an important role in being Australian for tax purposes.

If you do not pass any of the above you need to follow the domicile test, the domicile test states that if your permanent place of abode is outside of Australia, as in your permanent home by law is outside of Australia, if you are transitioning between places of abode you may need to suffice the 183 day test.

183 day Test

If you have an intention of making Australia your home and have lived for 183 days on or off in a financial year you are said to be an Australian for tax resident purposes, this effectively means that you have access to the tax free thresholds that other working Australians have and that is why most, if it is determined or established that your usual place of abode is outside Australia you will not be an Australian for tax purposes.

Foreign residents who have worked in Australia or you have rental income, or have an Australian pension or you have a capital gain via any assets must declare and lodge a tax return, foreign residents do not have access to the tax free thresholds that other Australians have, as a non-resident you not have access to Medicare so you do not have to pay for the Medicare Levy, as a non-resident if you have an Australian property that you sell, you will need to include your capital gain in your tax return at the time you sign the contract, not the time you receive the money.

As an Australian tax resident for tax purposes you will need to declare all your income world wide

What tax does a Working Holiday VISA pay?

If you enter Australia on VISA 417 or 462 you will have fixed rates of tax, please tell your tax agent if you are on these VISAS.

DUAL Residency, what is it?

If you an Australian resident for tax purposes however have assets overseas or have worked overseas, if that country you have these items in has a double tax treaty with Australia, you will receive a credit in your Australian income if you have paid tax in that country, remember there is caps hence why we always recommend to receive tax planning advise book an appointment here.

Will my tax back affect my tax rebate or tax refund if I change my residency status?

Yes your refund will be determined by the above factors.

How to Avoid Overdue Tax Returns and Fines in 3 Easy Steps

Most taxpayers in Australia dread the day they need to lodge their personal tax returns, common reason is that most Australians find it difficult to comprehend the tax law that Australia has for something that we do as Australians on an everyday basis, that is go to and from work to earn income to pay for a roof over our head, crazy to know that up to 52% of our income will be taxed by the Australian Government and the Australian Tax Office.

The maximum fine for an overdue tax return is $850 and convoluted as it is, the Australian tax law system can impose major fines if you get your tax return submission incorrect the first time. Although you can amend your personal and company tax returns within a two year period if you feel that you have done something wrong this often creates extra work and expense for you and your accountant and could alarm a tax audit.

Let’s look at three methods for avoiding these issues and fines: 

To find out more about the work we do and the savings you could make, don’t take our work for it,  see the reviews from our clients:


3 Simple Ways To Boost Your Superannuation in 2019

Superannuation remains a very tax effective investment vehicle, with a maximum tax rate within the fund of 15% when the relevant rules are complied with.

It may be hard to believe, particularly with all the discussions since the 2016 Budget announcements regarding changes to the system, however we know that in Australia it’s the most simplistic system anyone has in the world when it comes to retirement.

Is it a Scam?

Can invest in my own Superannuation fund?

Why Is Superannuation compliance so expensive?

Are Retails Funds better than Self Managed Superannuation Funds?

How much tax is paid by my Superannuation Fund?

So what’s all the noise about the changes then? There are some changes and it is important to be across them, but the above fundamentals still remain. The changes themselves can largely be categorised into two main themes – changes around contributions, and changes in retirement.

Contribution changes

The changes to contributions don’t take effect until 1 July 2017. From that time, there will be a reduction in the amount that can be contributed annually, and if you have (or are approaching) a total super balance of $1.6 million, an additional restriction on your non-concessional (or after tax) contributions apply. I’m finding it hard to believe that the government thinks that you can actually live off $150,000 for the next 20 years, because most tax payers will not retire on more than this, now they have caps for higher income earners and balances.

Changes from July 1, 2017.

From 1 July 2017, the annual limit for concessional contributions falls to $25,000. This limit applies for everyone eligible to make or receive these pre-tax contributions, which generally comprise Super Guarantee (SG) amounts from employers, amounts salary sacrificed to super and, if you are eligible, personal deductible contributions. If all you receive is the minimum SG required from your employer, then the reduction in annual limits (from $30,000 or $35,000 this year depending on your age) won’t have an impact on you. But if you also salary sacrifice, you may need to review your arrangements by 1 July 2017 to ensure you don’t inadvertently exceed the cap. Of course, the flip side is that if you aren’t maximising these contributions this year whilst the cap is higher, is there more you can do?

Non Concessional Contributions.

For non-concessional, or after tax contributions, from 1 July 2017 the annual cap will be reduced from its current $180,000 to a lower limit of $100,000. The three-year bring forward provision still applies, meaning you can do up to three years’ worth of contributions in one year (provided you were under 65 at the start of the year).

Limits that are reducing.

With that limit reducing from 1 July 2017, the question again arises as to what you can do this year? If you were under 65 on 1 July 2016, and you haven’t used the bring forward provision in the last 2 years, you actually have the ability to contribute up to $540,000 of after tax contributions this financial year and give your super a great kick before the limits reduce. Of course we know not everyone has the ability to contribute this much, but again it’s worth thinking about how much you can actually afford to do.

Changes in retirement.

Despite all the talk of the changes to super in retirement, there have been no changes to the rules around when you can actually access your super or, if it comes from an accumulation style fund, the way the payments are taxed to you. The existing rules continue to apply.

In essence, only two things have changed. First, if you have commenced drawing on your super through a ‘transition to retirement” (TTR) income stream, or look to commence one from 1 July 2017, from that date, earnings on the assets in your super fund that support that ‘transition to retirement”  will no longer be tax free. Rather, those earnings in the fund will be taxed at the standard 15% tax rate in super, rather than being tax free in the fund. Remember, there is no change to your personal tax on the amounts you receive from a ‘transition to retirement”.

Second, for pension paid in the “retirement phase”, which essentially refers to pensions payable to you after retirement or age 65 may increase to 67, there is a limit on how much you can actually start these pensions with. From 1 July 2017, that limit will be $1.6 million. Amounts above that need to stay in accumulation phase, with the earnings on those accumulation amounts continuing to be taxed within the fund at the rate of 15%.

If you don’t have, and don’t expect to ever be in receipt of superannuation accounts in excess of $1.6 million, these changes won’t impact you, other than if you run a ‘transition to retirement”.

Super is still a great option as tax deductible expense.

One of the major things that these recent super changes have shown is that it’s really important to understand what the changes mean for you. Superannuation, as a concept, remains unchanged. The Government estimates that no more than 4% of the population will be impacted by these changes.

Whether you are in that 4% or not, it’s always worth contacting AWTS just to see how you are placed in terms of your current plans, or if they should change.

Let our Superannuation Specialist help you retire on a healthy super balance later on life, avoid risking being a tax payer that retires on less than $150,000 for life, and speak to us today.

Please note that deductible contributions as an employee can only be classed as Salary sacrifice so you can deduct superannuation after tax superannuation contributions goes to a different pool of funds within your superannuation, which may not be taxed when you retire, all other contributions will be taxed unless you reach preservation age.

There is never a better time to plan your tax affairs than right now.

How to completely change your thoughts, 5 Myths about insurance.

As we move through life, find a partner, raise a family, and maybe start a business, slowing down, moving or even sudden death can impact us in many different ways. These life events are always changing for all of us, are we being protected from the inevitable?

Insurance is all about providing a financial safety net that helps you to take care of yourself and those you love when you need it most.

  1. Protection for you and your family - Wealth

Your family depend on your financial support to enjoy a decent standard of living, which is why insurance is especially important once you start a family. It means the people who matter most in your life may be protected from financial hardship if the unexpected happens.

Life Insurance, Total Permanent Disability are the major Insurances inside Superannuation.

These are best taken up considering your super takes care of its payments.

  1. Reduce stress during difficult times - Lifestyle

None of us know what lies around the corner. Unforeseen tragedies such as illness, injury or permanent disability, even death – can leave you and your family facing tremendous emotional stress, and even grief.

With insurance in place, you or your family’s financial stress will be reduced, and you can focus on recovery and rebuilding your lives.

Income Protection and Critical Illness and Trauma insurance and insurances within Superannuation can assist in these types of cases.

Ensure either you or your superannuation is paying for your Income Protection, there is different laws about the payments to income protection so always consult a financial planner.

  1. To enjoy financial security - Risk

No matter what your financial position is today, an unexpected event can see it all unravel very quickly. Insurance offers a payout so that if there is an unforeseen event you and your family can hopefully continue to move forward. With Insurance payments paid out in 30 to 60 days, most people will be able to take sick leave if you needed to look after a loved one in the hospital or at home. We can organise to assist you to find a suitable financial planner.

  1. Peace of mind - Ease

No amount of money can replace your health and wellbeing – or the role you play in your family’s life. Though you can at least have peace of mind knowing that if anything happened to you, your family’s financial security is assisted by insurance. The peace of mind that you know if you cannot earn an income is satisfying knowing you are covered by the best policies in Australia. We use and Recommend MLC Superannuation.

  1. A legacy to leave behind – your loved ones.

A lump sum death benefit can secure the financial future for your children and protect their standard of living. Life Insurance although may not be needed for those who are single and have no dependants to leave behind, however because you will need total permanent disability insurance as part of your package when bought via super, we recommend you speak with a financial advisor that can assist in packaging these items for you.

To ensure you’ve got the right cover for you and your family, please contact us today.