ISSUE 10
In this issue...
Capital gains on
investment properties
ATO accounts - whats the difference?
Fred Moss from
Adept Mortgage Management
Basic & standard
variable home loans
Contact Us
TAXP RO
TAXPRO
g
Office
2B/2 Commerce Street
Malaga WA 6090
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Hello and welcome to issue 10 of our weekly newsletters! I hope
you're all busy with your Christmas preparations. This is the
second last issue of the newsletter for 2011, as our office will be
closed as of the 16th December. Please note that if you lodge
your return over the Christmas period, be prepared to experience
some delays in receiving your refund. The ATO expects to begin
releasing the refunds from 3rd January 2012.
Capital Gains on Investment Properties
When selling an investment property, you may be subject to
paying tax on any profit you make on that property. There are
two rules in regards to eliminating capital gains tax you pay on
your investment. Below please find a brief summary on these two
rules:
6 Month Rule – You purchased a property and lived in that
property for some short time. You then decided to purchase
another property, which you want to move into, but would like to
rent your existing property. If this is the case, then after
purchasing the new property, you have up to 6 months to sell
PO Box 1946
Malaga WA 6090
Phone
your existing property and not pay any capital gains. If you do not
sell the property within this time, you will be up for capital gains
tax from the end of the 6 month period. Capital gains is worked
out by:
(08) 9248 5495
1.
Fax
(08) 6210 1177
Email
[email protected]
Website
www.taxproaustralia.com.au
PRINCIPAL:
Joseph Sangiacomo
AIPA ATIA NTAAF
Registered Tax Agent
Member of
2.
Cost price for the house + holding costs (costs whilst
living at that property) less selling price and fees OR
Valuation of the property at the time you moved out less
selling price and fees
I would recommend to all taxpayers that the easiest and best way
to work out the capital gains in this scenario is to get a valuation
at the time you move out of the property.
6 Year Rule – This works similar to the 6 month rule but in this
case, you move out of your residential property and rent it out
without owning any other property. For example: You purchase a
property, live in it for 6 months, then decide to move in with your
parents and rent out your property. As long as you don’t own any
other properties, you can rent that property out for 6 years and
you will not be up for any capital gains when you sell it. Please
note that if during that 6 year period you purchase another
property, you must sell the rental property within 6 months of
signing the contract for the new property.
For more information, please visit the following website or
contact us for further information:
http://www.ato.gov.au/corporate/pathway.aspx?sid=42&pc=001/001/038
l
Income Tax & Intergrated Client Accounts - Whats
the difference?
OUR SERVICES...
I have been approached by a few clients in regards to this topic.
Many taxpayers are confused on the way the tax office works
with different accounts. If you are an individual earning salary
and wages and no investment income,etc then you will only have
an income tax account setup at the ATO. This Income tax account
is an account you have with the ATO to record any refunds or tax
payable you may have.
Individual Returns
Partnership Returns
Trust Returns
Company Returns
BAS Returns
Bookkeeping using MYOB
Tax Planning
Business Advice & Setups
Self-Managed Super Fund Setups
If you have investments, receive a trust distribution, company
distributions or are a sole trader in business, and you receive a
tax bill in one year due to you earning that extra income, the ATO
will place you into a PAYG Instalment system. This creates a new
account called the Integrated Client Account which is also used to
record GST. The PAYG Instalments is a system for paying
instalments towards your expected tax liability on your business
and investment income. For more information on PAYG
Instalments, please visit the following link:
http://www.ato.gov.au/businesses/pathway.aspx?sid=42&pc=001/003/023
The ATO will send you a letter if you are liable to pay PAYG
instalments. At times, you may be able to pay annually but this is
up to the ATO’s discretion. Whatever you pay in PAYG
instalments during the year, this comes off as a credit on your tax
FURTHER READING..
Capital Gains on Investment
Properties
http://www.ato.gov.au/corporate/pathway.
aspx?sid=42&pc=001/001/038
ATO Accounts - Whats the
difference?
http://www.ato.gov.au/businesses/pathway.a
sp x?sid=42&pc=001/003/023
return. The PAYG instalments you will need to pay varies on your
tax bill the previous year. The ATO will nominate a figure to pay
which you may choose to change if you think it is too high or too
low.
So getting back to the two accounts, let me give you an everyday
example of a situation where the two accounts are used. Let’s say
Joe Bloggs had a tax bill based on his business income for the
2009-10 of about $10,000. On August 2010 after his return was
lodged, he received a letter from the ATO stating that he is now
to be placed on the PAYG Instalment system and that he must
pay $3000 every quarter starting from the 1/7/2010. Joe received
his first quarterly PAYG in October covering July-Sept 2010.
During the 2010-2011 financial year, Joe received 4 PAYG
instalments of $3000 totalling $12,000. This went through his
integrated client account, which then became a credit on his
income tax account when he lodged the 2010-2011 return.
Let’s look at what happens if Joe doesn’t pay any of his PAYG
Instalments. His account at the ATO will look like this:
Joe Bloggs
Income Tax Account
Integrated client Account
TOTAL
WE COME TO YOU
DAY & NIGHT
7 DAYS A WEEK
AT YOUR
HOME OR OFFICE
Fred Moss
Mortgage Broker
Adept Mortgage
Management
Phone: (08) 9470 4974
$0.00
$12,000.00 Dr
$12,000.00 Dr
This shows that he owes the ATO $12,000. Now at the end of the
year we prepare Joe’s tax return and after working out his
income, his tax for the 2010-2011 financial year is $13,000. After
lodging his tax return, his account at the ATO will look like this:
Income Tax Account
Integrated Client Account
TOTAL
$1,000.00 Dr
$12,000.00 Dr
$13,000.00 Dr
So you can see that even though he never paid any of the PAYG
instalments that we raised, the ATO still credits his income tax
account with the $12,000 leaving him with an income tax bill of
$1000 ($13,000 less $12,000) and leaving him with an integrated
client account debt of $12,000.
If you are looking at financing a new home or
refinancing, then Fred Moss from Adept
Mortgage Management can help you. I have
known Fred for about 5 years now and he is the
only broker that said “Yes we can do something”
when i purchased my investment property in
Perth, when the banks said no. This is what Fred
had to say:
Hi, my name is Fred Moss. For many years I have managed hotels
and motels throughout Western Australia. In the year 2000 (the
year of the Millennium bug) I felt I needed a change however I
Fax: (08) 9470 2715
Mobile: 0438 947 108
Email:
[email protected]
wanted to do something that still had me involved with people.
After much deliberation, I entered the mortgage industry. I
started with RESI Mortgage Corporation and worked with them
for two and a half years under their strict training regime. I then
sat for my broker’s licence and ventured out on my own working
through AFG (Australian Finance Group), the biggest aggregator
in Australia. I have undergone training with all major funders and
have had to attend various training programs each year to keep
abreast of all the changes taking place in our industry. I still run
my own business Adept Mortgage Management; although I now
operate through Ebtide Finance and AFG.
Basic and Standard Variable Home Loans
Finance for the Australian Dream
Just about everyone has an opinion; you’ll have heard “it’s a
seller’s market right now” or “this is the ideal time to buy, not
sell”.
I understand that the rise and fall of the housing market doesn’t
necessarily fit with your plans for the future, that’s why I am
dedicated to researching and staying ahead of the pack when it
comes to home loan options that provide you with the best
results.
There are literally hundreds of home loan products in the
Australian marketplace today. Let me wade through the facts and
figures and provide you with only the best, most suitable options.
Standard variable loans are currently the most popular type of
home loan in Australia. The interest rate of your loan will rise or
fall over the period of the loan, essentially following the official
rate set by the Reserve Bank of Australia and variations in funding
costs. Your regular repayments pay off both the interest and
some of the principal. You may also choose a basic variable loan
option, which generally offers a discounted interest rate but has
fewer loan features, such as a redraw facility and repayment
flexibility. However being able to make extra repayments may cut
short the length and overall cost of your mortgage. At the same
time, basic variable loans often don’t come with a redraw facility,
which removes the temptation to spend money you’ve already
paid off your loan!
It's important to remember though, that increased loan
repayments due to rate rises could impact your household
budget, so you need to take potential interest rate hikes into
account when working out how much money to borrow. If you
run a tight budget, this might not be the best option for you. You
need to be disciplined around the redraw facility on a standard
variable loan. If you dip into it too often, it will take much longer
and cost more to pay off your loan. If you have a basic variable
loan, you won’t be able to pay it off quicker or get access to
money you have already repaid if you ever need it.
It's worth discussing any queries or concerns you have with me, I
am always happy to help. Next time I will discuss the pro and
cons of a fixed rate home loan.
Written by Fred Moss
Adept Mortgage Management
Phone: (08) 9470 4974
Mobile: 0438 947 108
Fax: (08) 9470 2715
Email: [email protected]
Web: www.adeptmortgage.com
KEY DATE: For all businesses who report monthly for their BAS
and PAYG Withholding, your due date for the November month is
the 21-12-2011.
So this brings us to the end of our second last newsletter for the
year, thank you all for reading. I hope you all have a great
weekend.
Quote of the week:
"Try to make at least one person happy every
day, and then in ten years you may have made
3650 happy, or brightened a small town by your
contribution to the fund of general enjoyment."
– Sydney Smith
Kind Regards,
Joseph Sangiacomo AIPA ATIA NTAAF
Registered Tax Agent and Founder of TAXPRO