Tax Archives - Steward Wealth

Director Identification Number (director ID) – time’s running out to apply

by Anthony Picone | Sep 27, 2022 | Financial Planning, Tax, Wealth Management

You may have heard about the new rules which require directors of Australian companies to obtain a Director Identification Number (director ID). It is a unique 15-digit identifier that directors apply for once and keep forever.

The following provides some useful further information.

As a director of my SMSF’s corporate trustee do I need a director ID?

The new requirement to obtain a director ID applies to all directors of corporate trustees of an SMSF. This obligation also applies to any directors who may have resigned from all director roles after 31 October 2021 and have no intention to ever be appointed as a director of an Australian or foreign company.

How long do I have before I need to get my director ID?

Individuals that were a director of any company prior to 1 November 2021 have until 30 November 2022 to get a director ID. This transitional period also applies to newly appointed directors of corporate trustees of an SMSF, provided they were an existing director, of a company, before 1 November 2021.

Otherwise, first time directors are now required to have a director ID before they are appointed as director of any company.

What is the fastest way to apply for a director ID?

With 30 November 2022 fast approaching, we strongly encourage all directors to apply for their director ID now. The fastest way to apply for your director ID is online at abrs.gov.au/directorID.

To access the director ID application online, you will use your myGovID to log in to ABRS (Australian Business Registry Services) online.

This director ID demonstration video will show you step by step, how to apply for your director ID online.

What to do if you do not have a myGovID already?

A myGovID is different to your myGov account. Your myGov account allows you to link to and access online services provided by the ATO, Centrelink, Medicare and more, while myGovID is an app that enables you to prove who you are and to log in to a range of government online services, including myGov.

If you do not already have a myGovID you will need to set this up before you can apply for your director ID online. Refer to mygovid.gov.au/setup for more information on setting up a myGovID.

You will need to choose your identity strength, noting that ‘standard’ identity strength is the minimum strength required for a director ID.

What if I can’t set up myGovID online?

Where you are experiencing difficulties setting up your myGovID, the ATO encourages you to contact them on 13 62 50.

To speed up the phone application, please have your TFN ready as well as the information listed below, required to verify your identity.

If you cannot apply online or over the phone, the ATO will provide you with a paper form to complete. This is the least preferred option and will require you to provide certified copies of your documents to verify your identity.

Can we help you get your director ID?

You must apply for your director ID yourself, so that the ATO can verify your identity.

To verify your identity against your ATO records, once you have logged into ABRS online using myGovID, you’ll need your tax file number, your residential address held by the ATO, and information from two of the following documents:

bank account details (where your tax refunds or payments are made and received)
an ATO notice of assessment
a dividend statement
a Centrelink payment summary
a PAYG payment summary (this is different to your income statement or your PAYG instalment activity statement).

Source: SMSF Association

How can we help?

If you have any questions or would like further information about director IDs, please feel free to give me a call, or arrange a time for a meeting, so we can discuss your requirements in more detail. Although we are unable to apply for a director ID on your behalf, we would be more than happy to guide you through the process and where possible, source documents to help you verify your identity with the ATO.

Super housekeeping for 30 June

by Anthony Picone | Jun 14, 2022 | Financial Planning, Tax

Make sure you draw the minimum pension

With 30 June only 2 weeks away, it’s important to check if you have made the minimum pension payment from your account based pension in your SMSF. For those with an industry fund or a retail super fund, it’s all done for you, so you have nothing to worry about.

Remember, you only need to draw 50% of your regular minimum annual pension. This has been extended again for 2022/2023.

If you have maxed out your Transfer Balance Cap (TBC) and taken the discounted minimum annual pension, it’s often a good idea to take any additional payments from your accumulation balance.

Super contributions

You should be checking the level of concessional contributions you, or your employer, have made. If you do need a tax deduction, you may consider topping this up to $27,500 prior to 30 June.

If you are wanting to continue to build up your superannuation balance, it may also be appropriate to make a non-concessional contribution up to $110,000 for the year. Or, should you bring forward the next 2 years’ contribution this year and make it $330,000?

Remember, from 1 July 2022, changes to contribution rules may mean you can contribute up to 75 years of age without satisfying the work test.

Ways to contribute

Your contributions may be simply a cash contribution, or you may transfer investments like shares into your fund. Remember, any transfer is regarded as a sale, so it will give rise to a capital gain or capital loss. This could also be advantageous.

Super co-contributions

If you meet the eligibility criteria, you could guarantee yourself a guaranteed return of up to 50% by making a personal (after-tax) contribution (also known as a non-concessional contribution) of up to $1,000.

The co-contribution from the government is to support low or middle-income earners.

The amount of government co-contribution you receive depends on your income and how much you contribute.

You don’t need to apply for the super co-contribution. When you lodge your tax return, they will work out if you’re eligible. If the super fund has your tax file number (TFN) they will pay it to your super account automatically.

Plan your super/pension strategy for 2022-2023

Planning early for the next financial year is important. Your plan should include:

Level of contributions to be made for 2022-2023.
The best time to make these contributions.
Should you commence an account based pension?
Updating your SMSF Investment Strategy up to date.
For those exceeding their TBC and running an account based pension within their SMSF, have members sign a notice to take the minimum pension with any surplus to be taken from the accumulation account.

Superannuation can be very complex, and while it presents excellent opportunities for retirement, each person’s situation is very different. So, before acting, you should seek personal advice from your adviser.

Want to learn more? Speak to a specialist about your SMSF today.

Guide to superannuation threshold changes

by Anthony Picone | May 31, 2021 | Financial Planning, Tax, Wealth Management

Changes to superannuation thresholds from 1 July 2021 to 30 June 2022

Transfer Balance Cap

The transfer balance cap rules commenced on 1 July 2017. It is a limit on the amount of superannuation a member may use to commence a tax free pension in retirement phase. It is also the level at which you may not make any further non-concessional superannuation contributions. From 1 July 2021, this transfer balance cap will increase from $1.6 million to $1.7 million.

Non-Concessional Contribution Cap

The non-concessional superannuation contribution cap will also be indexed up from $100,000pa to $110,000pa and so the 3 year bring forward rules will enable you to make a $330,000 non-concessional contribution.

Concessional Contribution Cap

The concessional superannuation contribution cap will also be index up from $25,000pa to $27,500pa. Concessional contributions include employer SG (super guarantee), salary sacrifice or deductible super contributions.

Superannuation Guarantee (SG)

The contributions you will receive from your employer will rise to 10%pa from 1 July 2021. Employers will need to pay this on salaries of up to $58,920 per quarter.

The increase in contribution limits is always a noteworthy event, given it tends to only occur every 4-5 years. For those considering utilising the 3 year bring forward provisions, it may be worth considering deferring these payments for 6 weeks. This also applies to those who were considering using their superannuation to purchase a retirement income stream prior to 1 July 2021. If you would like to discuss these changes and how to best take advantage of them, please feel free to contact us. We will be more than happy to assist.

2021 tax tips – How to avoid overpaying

by Anthony Picone | Apr 26, 2021 | Financial Planning, Tax

I’m sure we can all agree that tax is something we would prefer to not pay; or at least not pay any more than we need to.

The ATO provides us with the ability to claim a tax deduction for personal expenses we incur in the quest to generate assessable income. It also incentivises through tax concessions, to reward certain practices such as funding for our retirement through superannuation.

So, rather than leaving it late, we have listed a few general tax tips for individuals which you may consider to either reduce your potential tax liabilities for the 2020/2021 financial year, or even to maximise your tax refund. But remember, you should always receive professional advice to determine which of these tips are appropriate for you.

Tax Tips 2021

Superannuation contributions

A ‘concessional’ contribution of $25,000pa may be made and a full tax deduction claimed for the 2020/2021 financial year. It’s important you don’t exceed this amount and remember your employer contributions are included in this limit. So, check-in again in June at what level your contributions sit at for the year, and if it makes sense it may be worthwhile adding while under the $25,000 limit.

And if you qualify under the ‘catch-up’ super provisions (detailed in our previous blog) your concessional contribution could be significantly higher.

General working deductions

Generally you can claim a deduction for work-related expenses (including educational costs). In order for the expense to qualify, you must not have been reimbursed by your employer and the expense must relate directly to your occupation and the earning of income. You must always keep your receipts.

The ATO has a list of occupation specific expenses which is helpful here.

Home office deductions

Many of us are continuing to spend more time working from home. If you are, you may be able to claim a deduction for expenses you incur relating to work.

For 2020/2021, the ATO will allow you to continue to use the ‘Short-cut’ method in determining your home office expenses. This basically involves maintaining a diary for 4 weeks noting the hours you work from home. An amount of $0.80 per hour may then be claimable.

The second method is the ‘Actual’ method, whereby you retain receipts and claim work related expenses (including depreciation on equipment), for which your employer has not reimbursed you. If you have a dedicated office, you may also claim utility expenses.

It’s actually worth considering both methods and to compare which is more appropriate for you.

Pre-payment of expenses and interest

Bringing forward deductible expenses is a great way to help manage your tax position.

If you have borrowings on an investment, such as property or shares, you may pre-pay the next 12 months worth of interest in June.

Capital gains tax deferral & the 12 month rule

If you are contemplating the sale of an asset, and expect to generate a capital gain, you may want to consider selling after 30th June to defer your tax liability.

Also, if you can hold on to an asset for 12 months before selling it, you will qualify for a capital gains discount of up to 50% (except for an asset held in the name of a company).

Offsetting capital gains with capital losses

If you have a capital gain for the year, one way to reduce it is to sell down any asset which may be trading at a loss. Just remember that any capital losses will reduce the gross capital gain (ie. The gain before any discount is applied).

It’s also worth noting that any capital loss which is not used may be offset against future capital gains.

Income protection insurance

Income Protection insurance protects up to 75% of your salary, if you can’t work due to injury or illness.

Not only is income protection imperative for many people, the premium is also tax deductible.

If you haven’t had you insurance needs reviewed, this may well be a trigger to get it done and possibly benefit from a tax deduction.

With the end of the financial year approaching, careful planning now may help to minimise any tax liability you may incur. So, don’t wait until it’s too late.

Review your personal situation now, and if you need clarification on what you can do to improve your situation, please get in touch.

Call Steward Wealth today on (03) 9975 7070.

An offset account, do I really need one?

by Cameron Purdy | Nov 9, 2020 | Property Loans, Tax

When searching for a property loan the first thing people tend to look for is a low interest rate but getting the right features with your loan can be just as important. Most people have heard of an offset account, but do you really need one and, if so, are you getting the most out of it?

How does an offset account work?

An offset account is an everyday transaction account that you can deposit all your spare money into and is linked to your mortgage. When interest on your loan is calculated, the balance of this account is combined with your loan to ‘offset’ the amount charged. For instance, if your mortgage was $500,000 and you had a balance of $100,000 in your offset account, interest would be calculated based on a balance of $400,000. Over the life of your home loan, placing any additional savings into your offset account can significantly reduce the time taken to pay off your loan.

There are generally two types of offset account, partial and 100%, which, as the names imply, offset different proportions of the mortgage balance. Also, the majority of offset accounts are linked to variable home loans with only a small number of lenders offering this feature with a fixed rate.

Offset account vs redraw facility?

While each lender tends to label them differently, most lenders offer you the choice of loans. A ‘basic loan with a redraw facility’ allows you to make extra repayments towards your loan which you are then able to withdraw at any time. It is important to read the fine print as some redraw facilities limit the amount or frequency you are able to access these funds and some even charge a fee for the privilege.

‘Packaged loans’ generally include an offset account together with other features such as a credit card and provide more flexibility around making changes to your loan without additional cost, for example fixing your rate at a future date. This usually attracts a flat annual fee of between $200-$400 and some lenders even offer a reduced interest rate compared to their basic product.

If both an offset account and unlimited redraw facility allow you to make extra repayments, whilst maintaining access to the funds, then which one do you need?

Home loan offset accounts

If you are purchasing the property to live in, or a holiday house that you do not intend to rent out, then applying for a ‘basic’ loan with a redraw facility may be appropriate for you. It will save you any ongoing fees associated with a packaged loan and in some cases you may even receive a better rate.

An offset account becomes attractive if you prefer instant transaction access to the funds, including BPAY and EFT, rather than being limited to the terms of the redraw. This works well for people who receive higher levels of income who can pay their salary, and any commissions or bonuses, directly to the account offsetting interest whilst expenses are then periodically paid from the facility.

Remember that you generally receive a credit card with the packaged loan so cancelling your current one, and the annual fee often associated with it, could net the extra cost. A common strategy is to select a credit card that provides an interest free period on your purchases and use this to pay your everyday expenses. The credit card is then paid down in one monthly payment thus maximizing the balance of the offset account whilst not accumulating any interest on your expenses. This approach requires discipline to ensure credit card repayments are made on time and may not be for everyone.

Several lenders also offer the ability to have more than one, often up to 8-10, offset accounts linked to the same home loan. The cumulative balance of all offset accounts then acts to reduce the interest accrued. This can be a useful budgeting tool where you separate your income into different categories or ‘buckets’, helping you to save while still reducing interest and paying off your loan more quickly.

Investment loan offset accounts

Offset accounts attached to Investment loans are where the real benefits become apparent. Investment loans are lending for properties, or other investments, from which you draw an income usually in the form of rent. Due to the transaction capabilities of an offset account, it provides a great way to keep all your investment property-related income and expenses together in the same account.

The interest on the loan, and other related expenses, are generally tax deductible, which is one of the significant benefits of owning an investment property. If you access the extra repayments from a redraw facility, the redrawn amount is treated as a separate loan to you and would prevent you from claiming this as a tax deduction, unless you can demonstrate that you are using those funds for investment purposes. Issues can arise, for example, when you withdraw money to take the family on a holiday or buy a new car. If your extra repayments are accessed directly through an offset account, the ‘fund purpose’ test would not apply, and all interest accrued on the loan would continue to be deductible.

This benefit can be significant when you purchase a second property to move into and convert your current one to an investment. In most cases you would benefit from reducing the loan on the new owner-occupied property and maximise the investment loan for tax purposes. If you transferred extra repayments to the new loan from a redraw facility, those repayments would fail the ‘fund purpose’ test and would not be deductible. By accessing the funds from an offset account, you can therefore maximise your deductions. Its important to note that these examples can significantly vary depending on your personal circumstances and you should always consult an accountant for personal tax advice.

Finding the best rate combined with the most appropriate loan features can be a complex, time consuming task that Steward Wealth can help you with. Feel free to get in touch.

Massive international tax scam

by James Weir | Sep 21, 2020 | Markets and Economy, Tax

The ACCC recently told Google and Facebook they have to negotiate with Australian media sources to effectively pay them for their news. This has sparked a furious response from both companies because they are conscious governments all over the world are watching very carefully, and if they give in to Australia it could well open the proverbial floodgates – much like the fight over plain paper packaging for cigarettes.

As well as sucking a huge amount of advertising revenue out of domestic media franchises, these transnational companies are renowned for utilising every legal loophole they can to avoid paying tax, especially the tactic of attributing revenue to low tax, offshore locations like Ireland, the Netherlands or Cayman Islands.

According to Neil Chenoweth of the AFR, Google’s CY2019 Australian ‘customer receipts’ were reported as $5.2 billion, but ‘revenue’ was $1.2 billion, so $4 billion of sales made in this country were somehow attributed to offshore offices.

Google reported pre-tax earnings of $134 million and ended up paying tax of $49 million. Chenoweth writes that if its Australian division is as profitable as the rest of the company’s non-US businesses, pre-tax earnings would have been $2.2 billion, which means Australian tax should have been more like $660 million, or 13 times more than what it paid.

Facebook reported CY2019 Australian revenue of $167 million and paid tax of $14 million. Chenoweth calculates revenue was probably more like $2.2 billion. Again, using average non-US earnings rates, pre-tax profit should have been $1.1 billion, which should have resulted in tax of $330 million, or 24 times more than what it paid.

Michael West compiles an annual list of the worst tax dodging companies, and interestingly neither Google nor Facebook make the top 40.

These are but two example of what is a farcical international tax regime. A classic example of just because it’s legal doesn’t mean it’s right.

P.S. For anyone curious about the ramifications of social media, The Social Dilemma on Netflix is an interesting take on it.

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