Five Expensive but Avoidable Financial Mistakes

Years ago everyone looked forward to their “retirement” at age 55. But these days, do you really want to retire?

We’ve all heard many stories about people who retire, and they’re dead less than a year later. Why?

Because they have nothing keeping them mentally active, nothing keeping them going with real purpose.

Instead of aiming for retirement, we believe everyone should be aiming for financial freedom. Freedom to do what you want, when you want.

The road to financial freedom has many potholes. Here are some of the most common mistakes, with help on how to avoid them.

Too little too late
The Government has deliberately set up our superannuation system to favour those who start early and stay on track. Those who leave it to the last minute often do so at their own peril. Start as soon as possible and map out your road to financial freedom.

Pay unnecessary taxes
There are many simple, legal ways to make sure you are not paying more tax than you need to. Ask us at Select Accounting if you are making the most of the tax incentives offered by the Government.

Fall for investment fads

This probably poses the greatest single danger to your prosperity. Tech stocks in the late 1990’s and speculative miners in the late 2000’s were very tempting when they were rising fast. Your best weapon against this temptation is to develop a disciplined investment plan and stick with it.

It won’t happen to me
Wealth management is just as much about protecting your assets as it is about building wealth. Make sure you have a “Plan B” to pay off your house and look after your family if you were to die or be permanently unable to work. Your ability to earn money is actually your most valuable asset, so it’s vital to protect that asset with income protection insurance. If you don’t have income protection insurance – please contact us IMMEDIATELY for a free quote.

Fail to plan
As the old adage goes, “if you fail to plan, you plan to fail”. If you can articulate your goals and visualise what achieving these goals looks like, you are well on your way to achieving them. Write down your three most important goals and keep then in a safe place to review at least once a year.

Keeping your Business Alive

What’s your strategy to keep cash flowing through your business?

High sales and consistent profits are great aspects to have in your business, but without cash rolling in regularly you won’t be able to pay your suppliers, staff, even yourself! Give yourself some security by preparing a Cash Flow Forecast for your business.

What is a Cash Flow Forecast?

A cash flow forecast is a projection of all of your income and expenses for your business over the next 12 months, with an emphasis on when the cash from the income and expenses will be received and sent. This includes when your income locked up in Debtors will be received and when your Creditors will need to be paid.

Once you prepare your 12 month cash flow forecast you will be able to spot weaknesses in the year and plan for it. By taking a proactive approach and planning ahead means you can start making changes now to help you through those tight periods, such as introduce tighter credit policies with your customers or acquire a line of credit to help you through the period in the future.

What’s even better is banks love them! Are you looking to lease some new equipment? If you are looking for finance it’s going to be easier for the banks to approve you if they can see you have capacity to make loan repayments.

Would you like security in your business this year? Are you interested in preparing your own forecasts for the year?

If you would like Select Accounting to prepare a 12 month cash flow forecast for your business give us a call on 02 4337 5155

What can I claim against my tax?

What can I claim against my tax?

It’s tax time again. What can you claim to reduce your tax?

Please take just 2 minutes to read this blog article. We’ll explain:

• Deductions you can claim

• The importance of a fantastic tax accountant

• The “tax trap” you need to avoid

• Links to more information about specific deductions

Deductions you can claim

According to the Australian Taxation Office (ATO) website, there are 3 things you need to claim a work-related deduction:

1. You must have spent the money yourself and weren’t reimbursed;

2. It must be directly related to earning your income; and

3. You must have a record to prove it.

The ATO allows you to claim up to $300 for work related expenses without having kept any receipts – but you must have spent the money and it must be related to your employment.

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion.

If the cost of any item is over $300, it will have to be depreciated (a portion of the cost claimed each year over its effective life).

The importance of a fantastic tax accountant

Many accountants seem to be working for the ATO. Instead of trying to maximise what you claim, they’re often too scared of upsetting the ATO rather than fighting to get you the largest legal tax deductions.

Rather than using an accountant who “works for the ATO” – use an accountant who works in your best interest.

At Select Accounting – we’ll help you to claim every last dollar you can, and make sure you stay out of jail by not claiming anything you shouldn’t. Our team are aware of everything you can and can’t claim and what you should do this year to give you a bigger tax refund next year.

Our extraordinary accountants are all highly trained specialists at legally reducing your tax – so talk with us today!

The “tax trap” you need to avoid

Everyone wants to increase their tax refund (or reduce their tax payable). We’re here to help you to do this!

Tax saving strategies generally involve you spending money on “something” which creates for you a tax deduction. The “something” you spend your money on could be an expense, an asset, or an investment related payment (like superannuation or prepaid interest on an investment loan).

However – please don’t fall into a common trap of spending money just to get a tax deduction. You only save tax based on the marginal tax rate proportion on the amount you spend, NOT the full amount you spend.

For example, if you earn say $85,000 a year, your marginal tax rate (including Medicare levy) is 34.5%. This means any extra dollar you earn will be taxed at 34.5%, and any extra dollar you claim as a deduction will save you 34.5%.

So, if you spend $100 on something that you can claim a deduction for, you will get back $34.50 from the ATO. But it will still cost you $65.50. So only spend money on what you NEED, not just to create extra tax deductions for yourself.

We are here to help!

To make an appointment with us to discuss and prepare your 2017 Tax Return please do not hesitate to contact us
02 4337 5155 or via email

General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

We’re a lucky country, but will you have enough for retirement?

If you were to watch the news recently (by recently I mean in the last 2 decades) you would think that Australia maybe about to lose its ‘Lucky Country’ tag. However research released by Credit Suisse Research Institute has Australia fairing very well in the wealth rankings.

The richest nations in the world are classed as those with a wealth per adult figure of over USD 100,000. Below is a table ranking these nations in order of wealth per adult.

Rank        Nation          Avg. wealth per     Change since mid-2013

                                    adult (in USD)
1              Switzerland  581,000*               10.5%

2              Australia      431,000                 5.0%

3              Norway        359,000                 4.0%

4              USA             348,000                10.6%

5              Sweden       333,000                 4.8%

6              France        317,000                 9.1%

7              Belgium       301,000                11.7%

8              Denmark     293,000                16.1%

9              UK               293,000                18.3%

10           Singapore    290,000                  2.0%

*Dollar appreciation and strong equity performance has resulted in this significant increase and new world record for the Swiss.

Australia is placed nicely in 2nd place, punching well above their weight. When you look at median wealth per adult, which gives an indication of wealth equality, Australia tops the list (as it has for the past 5 years) at USD 225,000.

So what does this mean?

It means that things are still pretty good here in Oz. With high wealth per adult and strong growth in household wealth it’s a good time to be in business.
With only 6% of all Australians with a net worth of less than USD 10,000, that equates to plenty of potential customers.

To Promote & Protect

Depending on your stage of life, having money coming in and compulsory superannuation tucked away for you, it’s important to know that you’re protected and that your future is secure.
Have you considered salary sacrificing into your super to maximize the compound interest effect before you retire?
Or you may already be well set up, are your assets protected?
Australia certainly still is the lucky country, however it’s never a good idea to rest on your laurels.


General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]

More Bang for your Buck

Start planning NOW to maximise your tax refund next year!

We do a lot of tax returns. One thing we constantly hear our clients say is “I didn’t know I could claim that!” or “I wish I had kept my receipts!”

What’s the best way to avoid disappointment at tax time? Start planning NOW.

To help our clients we’ve been giving them a report of what strategies they can implement to maximise their refund next financial year. Here are our top 3 strategies:

1. Keep a Log Book for your Motor Vehicle Expenses
If you use your motor vehicle for work make sure you keep a 12 week log book to work out the work % of your vehicle use. By doing this, you will be able to claim this % of all your expenses during the year including fuel, depreciation, insurance and registration.

2. Prepay the Interest on your Investment Loans
Your deductions are claimed in the financial year they are paid. Therefore, by prepaying the interest on any investment loans means you claim the deduction now instead of waiting to the following financial year.

3. Make sure you have Income Protection Insurance

Protecting your number one asset, your income, is extremely important. It’s also worth noting any premiums you pay outside of superannuation are tax deductible (and when you think about it, the tax refund you receive lowers the out-of-pocket cost of the premium).

Interested in getting More Bang for your Buck? Make sure you talk to us about planning now to maximise your tax refund next year.

Are you using the correct award rates?

Happy new financial year! We hope last years was financially prosperous and here’s to another exciting year ahead.

However, as it is the new financial year, it’s time to ensure that you’re paying up to the correct award rates.

Here is a quick how-to-guide that we’ve put together to make sure you are up to date with the current rates!

To find your minimum pay rates:

1. Head over to the Fair Work Pay Calculator
2. Enter in your award or utilise the built-in tool to help you find your award.
3. Follow through the steps for each employee or employee type till you get to the end and compare that to your staff’s pay rate in your HR files and payroll software.
4. If there is a change, make sure you enter in the new award pay rates for your staff in their HR files and update your payroll software.
5. Feel free to give us a call if you have any questions about this process, your award, or anything else.

For our clients in the Hospitality, Restaurant, Fast Food, Retail and Pharmacy industries, make sure you look through the updated penalty rate changes. We’re looking forward to working with you into the future and to ensure you achieve all your business goals, and a beautiful future!

Tax Planning for Individuals

The biggest super and tax changes in the last 10 years will affect you in 2017 and 2018.

Now’s the time to review what strategies you can use to minimise your tax before 30 June 2017.

Imagine what you could do with tax saved?
• Reduce your home loan
• Top up your super
• Have a holiday
• Deposit for an Investment Property
• Upgrade your Car

Key Superannuation Changes
While you might not be flush with cash now and able to put large amounts into superannuation, it’s important that you are aware of what is possible to maximise your super balance and possibly reduce your tax at the same time.

The tax deductible super contribution limit (or “cap”) decreases to $25,000 per year from $30,000 per year for up to age 49 or $35,000 per year for age 50 to 75, after passing a work test if over age 65. Consider making the maximum tax deductible super contribution this year before 30 June 2017. Individuals may be able to make tax-deductible personal contributions to superannuation to reduce their taxable income. The advantage of this strategy is that superannuation contributions are taxed at between 15% to 30% compared to typical personal income tax rates of between 34.5% and 49%.

Please contact us to verify that you can comply with all the eligibility criteria for this deduction. This includes satisfying the 10% test, meaning that less than 10% of the total of your income for the year must be in respect of your employment. For the purposes of this test, income is assessable income plus reportable fringe benefits plus reportable employer superannuation contributions.

The non-tax deductible super contribution cap decreases from $180,000 to $100,000 per year. The cap will be reduced further to nil for a year if your total super balance is above $1.6 million at the end of the previous financial year.

The bring forward rule, which allows individuals to bring forward two future years of non-concessional contributions (NCC) will be retained for those under age 65. Individuals who are under age 65 at any time in the 2016/17 year and have not already reduced their NCC capacity through earlier contributions, may contribute up to $540,000 (3 years x $180,00 a year) before 1 July 2017. From 1 July 2017, this will be reduced to a $300,000 potential non-concessional contribution into super (3 years x $100,000 a year), depending on their total super balance.

Individuals who reach their 65th birthday in 2016/17 will be unable to trigger the bring forward rule in 2017/18, so they will be restricted to a maximum of $100,000 of NCC’s each year. They will need to meet the work test (employed for at least 40 hours in 30 consecutive days in the income year) to make any level of NCC.

Individuals earning over $300,000 adjusted taxable income will continue to pay up to 15% additional tax on concessional contributions (up to 30% tax in total). From 1 July 2017, the income threshold for additional tax will reduce to $250,000. Higher income earners should consider making larger super contributions before 1 July 2017 if possible.

Earnings inside a TTR pension will no longer receive a tax exemption and will be taxed in the same way as accumulation phase assets at 15%. If you are currently using this strategy, you may need to review it to ensure it is still beneficial for you.

From 1 July 2017, a $1.6 million cap will be placed on pension accounts. This cap applies to each member, not to a super fund in total. Amounts above $1.6 million per member will need to be kept in accumulation phase. Earnings on the accumulation account will be taxed at 15%. Talk with us about whether it’s better to start pension phase now or wait until later.

12 ways to reduce your tax

The 2% levy for income earners over $180,000 is due toexpire on 30 June 2017. If you are a high-income earner and can defer any income until after 30 June 2017, then you could save 2% tax.

A longer term tax planning strategy can be reviewing the ownership of your investments. Any change of ownership needs to be carefully planned due to capital gains tax and stamp duty implications. Please seek advice from your Accountant prior to making any changes. Investments may be owned by a Family Trust, which has the key advantage of providing flexibility in distributing income on an annual basis and an ability for up to $416 per year to be distributed to children or grandchildren tax-free.

If you have an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) will allow you to claim depreciation and capital works deductions on capital items within the property and on the property itself. The cost of this report is generally recouped several times over by the tax savings in the first year of property ownership.

Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2017. You should make a record of your odometer reading as at 30 June 2017, and keep all receipts/invoices for your motor vehicle expenses. Once prepared, a log book can generally be used for a 5-year period. An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.

5 SACRIFICE YOUR SALARY TO SUPER If your marginal tax rate is 19% or more, salary sacrifice can be a great way to boost your superannuation and pay less tax. By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax. This can be especially beneficial for employees nearing their retirement age.

Expenses relating to investment activities can be prepaid before 30 June 2017. You can prepay up to 12 months of interest before 30 June on a loan for a property or share investment and claim a tax deduction this financial year. Also, other expenses in relation to your investments can be prepaid before 30 June, including rental property repairs, memberships, subscriptions, and journals.

Possibly your greatest financial asset is your ability to earn an income. Income protection insurance generally replaces up to 75% of your salary if you are unable to work due to sickness or an accident. The insurance premium is normally tax deductible, plus you get the benefit of protecting your family’s lifestyle if you cannot work due to sickness or an accident. It’s a small price to pay for peace of mind. Similar to rental property interest, income protection premiums can also be pre-paid for 12 months to increase your deductions.

Don’t forget to keep any receipts for work-related expenses such as uniforms, training courses and learning materials, as these may be tax-deductible.

Tax is normally payable on any capital gains. You should consider selling any non-performing investments you hold before 30 June to crystallise a capital loss and reduce or even eliminate any potential capital gains tax liability. Unused capital losses can be carried forward to offset future capital gains.

If practical, arrange for the receipt of Investment Income (e.g. interest on term deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2017. The Contract Date (not the Settlement Date) is generally the key date for working out when a sale or purchase occurred.

Super co-contribution aims to help eligible people boost their retirement savings. If you’re a low or middle-income earner and make personal (after tax) contributions to your super, the Government also makes a contribution (called a co-contribution) up to the maximum amount of $500. If your total income is less than $51,021 you may be eligible for a super co-contribution from the Federal Government. For each dollar in personal after-tax super contributions, the Government will contribute from 50 cents up to a maximum of $500 for those earning $36,021 or less. For the purposes of this test, total income is assessable income plus reportable fringe benefits plus reportable employer superannuation contributions, less allowable business deductions. Please contact us to verify that you can meet all the eligibility criteria for the Government Co-Contribution.

Now is a good time to seek specific advice in relation to this question, as it may be appropriate to establish an SMSF in conjunction with other tax planning opportunities, to maximise the benefit of the SMSF in your circumstances.

Talk to us TODAY before the 30 June 2017 deadline for assistance to reduce your tax!
Select Accounting | Ph 02 4337 5155 | E

An Eye for Now, an Eye for the Future

Let tax planning be more than just getting a bigger refund It’s the last quarter of the financial year.

It’s the best time to review your profits, estimate your tax bill and determine what you can do to get your tax bill as low as possible (or your refund as high as possible). While we all love spending money on what we need now, tax planning season is also an opportunity to claim a tax deduction for growing your wealth. With the right planning you will not only be getting money back, but you’ll be getting a return on the money you claim as a deduction.

Here’s 2 key areas for you to look at:

Making Contributions to your Super Fund
If you haven’t maximized your contributions to superannuation this year, make sure you do. By putting your money into super not only are you getting a tax deduction now but you are growing your retirement nest egg.

There is a limit to how much you can contribute to receive a deduction ($30,000 if you are less than 49 years old, $35,000 if you are older) so please come and see us to make sure you don’t exceed the cap.

Prepaying Interest on Investments

An important part of growing your wealth is leverage – borrowing money to invest in an asset of higher value. If you have a leveraged asset, consider pre-paying the interest for the next financial year.

If you have the cash available and you have had unusually high income for the year, a one-off prepayment might be what you need for some tax relief. Remember – if you prepay the interest this year, you can’t claim it next year.

Please come and see us first so we can go through the impact of prepaying your interest with you. Contact us today to book in your tax planning meeting.