Is debt ruling your life?

Student debts, credit cards and personal loans can be a source of unnecessary stress and prevent you from enjoying other things in life.

Clearing your debts doesn’t have to be hard work. With the right professional advice, it’s possible to get your finances on track sooner than you think. Which means you can get back to living the good life, guilt free.

Here are some tips to help you get out of debt.  

Plan your budget

Achieving your goal of being debt free doesn’t have to be daunting; a good way to start is with a budget. Try to keep a diary for your expenses and your spending. This will enable you to track where your money is going and how much spare cash you can use to attack your debt.

Pay extra

Try paying more than the minimum off your debts. Whether it’s personal loans or credit cards, paying the minimum will hardly make a dent as you will only be paying off the interest.

Prioritise

Prioritise all your debts by the interest rate you are paying. Try to get the balance down on high interest debts first, as paying these off first will save you a bit more money. The money you save in interest, you can then use to pay off your lower priority debts. This will get you to your debt free goal that little bit faster.  

Consolidate

Consolidate all your higher interest debts into one lower interest debt. This could be in the form of a low interest rate credit card or a personal loan. This strategy will also reduce your interest repayments.

Ensure you have the right card

There is no need for anyone to be paying 20 per cent interest on their credit cards. Due to the increased level of competition in the credit card space, many lenders are offering much lower interest rates and deals.

When doing your research, make sure you read the fine print, as cards offering low or zero interest rates on balance transfers, do so for a limited time only whereas other cards might offer a low interest rate for the life of the transfer.

Become card free

Once you have selected a low interest rate card to transfer your balance, make sure you don’t use that card for any new purchases until you have paid off the full amount from the initial transfer. The best way to do that is the old fashioned way – cut your card up and throw it away!

Take the first step

If you’re having difficulties repaying your debt, take the first step and speak to your lender. If you’re open and honest about your financial difficulties with your lender, you will probably find they are open to review your repayments and look at other solutions to help you out.

Speak to a professional

If you feel that you are in over your head and struggling with your finances, don’t ignore the situation. It won’t go away! Seek professional advice and take control of the situation.  

Contact our office today on 1300 352235 to book a completely free, no-obligation consultation with our financial planner.

Central Coast Accounting Firm seeks experienced office manager/ accountant.

Alas, our fabulous office manager/senior bookkeeper is leaving us shortly. Sharen is off to manage the expansion of her own successful family business. We’re thrilled for her, of course, but I did consider the possibility of chaining her to the desk in her office so she can’t ever leave (word of warning, Fair Work tends to frown on that kind of thing). 

Now, we’re a small team and so often each wear multiple hats. With the news that our current super-star is leaving us, I’m afraid I’ll be wearing so many hats I won’t be able to hold my head up.

So now the search is on for a multi-skilled candidate who can replace an irreplaceable team member (no pressure!) and support me in different administrative and business development tasks.

What I need right now more than anything is:

• someone who can assist in the preparation of BAS and quarterly reports (minimally, be able to take it to a stage where it just needs review and perhaps adjusting entries);
• someone who can liaise with clients, handle routine requests, follow through and follow up to ensure all client needs are being met, be proactive in developing relationships;
• someone who can manage and instruct the front office staff (delegate tasks, ensure database is maintained, monitor jobflow, implement/update procedures, generally watch over the day-to-day stuff);
• someone who can assist in the preparation of proposals/engagements and other client communications, including marketing materials and newsletter content.

In essence, I need someone who can see what needs to be done and does it.

I don’t expect to find a new and improved hybrid of Sharen and myself who can leap tall buildings in a single bound as they fly in to work on the first day. I do expect a confident all-rounder who can hit the ground running.

It is essential this individual is

• familiar with the accounting environment,
• proficient in fundamental accounts preparation (even better if you’re an experienced accountant who can prepare  business tax returns and financial statements to review stage),
• able to connect with people, and
• know their way around Office software (bonus if you’re already trained in Handisoft).

I need someone who can produce quality output with minimal supervision.

I anticipate the successful applicant would have a proven track record that demonstrates the above. 

Although I am primarily seeking a replacement for Sharen, I’m open to the possibility of an intermediate or senior accountant with a hands-on approach to clients and projects.

If we can get excited about you, and you’re excited to work with us, that’s a great first step… the rest are details to be worked later based on the skill set and expectations brought to the table. 

 If this sounds like a position that may interest you, look us up online (we have the blog, website, Facebook , Twitter, etc). Get an idea for yourself on who we are, what we are about and whether or not you see yourself as a fit.

Send a resume by all means, but only with a compelling reason to open it. Let’s face it, what I really want to  know is who you are, what you can do for us, and why we should hire you.

Your time is just as valuable as mine so if you have your own ‘hope-for’s’ or ‘must-haves’ feel free to share them also.  

We can be quite flexible when it comes to hours and working arrangements for the right person.

The question is, are you the person I’m looking for? 

Feel free to send any expressions of interest, questions or applications to christie@lewistaxation.com.au. You might want to check out one of my earlier posts titled Job Applications – What NOT to do for a couple of quick tips.

On Father’s Day the Australian Government started public consultations on its plan to introduce two weeks of paid leave for dads to take time off work to spend with their newborn babies.

From 1 January 2013, the current Paid Parental Leave scheme will be expanded to include a dedicated payment for dads and other partners.  Eligible working dads and other partners will have access to two weeks Dad and Partner Pay at the national minimum wage, which is currently about $590 a week before tax.

The design of Dad and Partner Pay is based closely on the independent expert recommendations of the Productivity Commission.

The new payment will be available to eligible working fathers or partners (including adopting parents and parents in same-sex couples) who share the role of caring for a child born or adopted from 1 January 2013, and who meet the same income test and work test as the current Paid Parental Leave scheme. 

A family may receive Dad and Partner Pay either on its own or in addition to other family payments such as Paid Parental Leave, the Baby Bonus and Family Tax Benefit. The mother or other parent does not have to be accessing the Paid Parental Leave scheme for her partner to be eligible for Dad and Partner Pay.

Dad and Partner Pay will cost the Government a projected $188.5 million over 5 years (2010-11 to 2014-15).

A consultation paper on Dad and Partner Pay has been released to ensure that parents and employers can have their say on the new entitlement. Employer and employee groups, small business groups, family and community groups and individuals are invited to make their comments on the consultation paper. The consultation period finishes on 17 October 2011.

A new data matching initiative between Centrelink and the ATO is expected to claw back millions of dollars from welfare recipients who have debts with the Australian Government.

Beginning on July 1 this year, Centrelink and the ATO will automatically match data on a daily basis as a way of cross-checking former welfare recipients who have a debt with the Commonwealth. 

The new initiative is expected to recover more than $71 million over four years.

Those who are identified as having debts and who haven’t made repayment arrangements with Centrelink may have their tax refunds garnisheed when they lodge their income tax return.

Of course, this is nothing new in itself. More than $27.5 million was recovered from over 43,000 former Centrelink customers’ tax refunds in the 2009/10 financial year through the tax garnishee process.

Apparently this process has been handled manually every year for the past 15 years, involving a significant amount time and people-power. The process will now be automated and, according to Assistant Treasurer, Bill Shorten, will ”result in more people being referred to the tax garnishee process, retrieving more outstanding debt on behalf of taxpayers.”

Mr Shorten said ”The new data matching link is expected to increase the number of former customers identified for this process by an additional 65,000, above current detection levels, over the four years.”

Centrelink is currently writing to over 90,000 people with outstanding debts who aren’t currently receiving a payment from Centrelink or the Family Assistance Office.

To avoid losing a tax refund because of an old debt, people are advised to contact Centrelink to set up a repayment plan. Details on how to do this are in the letter or people can contact Centrelink on 13 6330.

The recent spate of “get private health cover before 30 June or get taxed” campaigns really irritate me. I have nothing against Private health Cover and if you’re likley to be up for the Medicare Levy Surcharge (MLS), you should look into it.

What bugs me is that unless you read the itty-bitty fine print on the bottom of screen, you may not realise that even if you got approriate cover on 29 June, you’ll still have to pay the MLS for the other 364 days of the year you did not have it.

They don’t make that fact crystal clear – in fact, the whole campaign implies that there is an urgency to get it then (ads running during June) in order to avoid this additional penalty that financial year.

It’s then up to the accountant to explain this concept to you. You try to tell the accountant, “But I rushed out to purchase it because the ad said….”  

Are you really going to accept tax advice based on nothing but a 30 second television commercial? Always read the fine print or check with a tax professional if you’re uncertain (preferably not the company who is trying to sell you the product).

If you did rush out and grab it during June, it’s not a bad thing. You won’t be taxed MLS for the days you were covered and, if you keep it up, you won’t have to worry about the surachge at all next financial year. 

Just don’t abuse your accountant if you didn’t get health cover until June and are liable to pay a portion of the surcharge for the preceding days in the financial year.

The Medicare Levy is currently paid by taxpayers at a rate of 1.5% of taxable income.

Low income individuals or families might be eligible for an exemption or reduction from paying the Levy, based on family income.

The 2010-11 Medicare Levy Low income thresholds for individuals and families are outlined below:

Single Taxpayer

Threshold: If you are under the threshold amount, no Medicare Levy is payable.

Phase in: Medicare Levy is payable at 10% of the excess above the threshold.

1.5%: Once you have reached this income, the full 1.5% Medicare Levy applies to the entire amount of taxable income.

Families

DIY

If you are preparing your own tax return and wish to claim an exemption or reduction based on family income, you can do this at item M1 – just pop in the number of dependent children at label Y.

Please remember that all employee superannuation guarantee contributions should be paid into funds by 28 July, 2011.

All employee super contributions actually paid by this date will be eligible for a tax deduction. It is important to meet the 28 July deadline in order to qualify for a tax deduction and avoid having to pay the super guarantee charge.

The June quarter covers the periods of April, May and June, 2011. Please note that the super guarantee applies to all employees; including directors in receipt of a wage. 

The Tax Office is focussing much of their compliance efforts on uncovering instances of employers not understanding and meeting their super obligations. Common mistakes identified by the ATO include:

• paying insufficient super contributions for eligible employees
• missing the quarterly cut-off dates  
• not understanding that in some circumstances super should be paid for contractors
• not keeping accurate records
• not passing on an employee’s tax file number to their super fund
• not lodging a Superannuation guarantee charge statement if employees’ super is not paid into to the fund by the due date or is not the correct amount.

If you have any questions or wish to speak with us about your obligations, please do not hesitate to contact our office on 1300 35 22 35.

Last year a significant number of employers incorrectly reported Reportable Employer Superannuation Contributions (RESC) on Payment Summaries. 

It is important that employees check their Payment Summaries carefully. If your boss has filled out the RESC incorrectly, it could affect the amount of child support you pay or receive and your eligibility for certain Centrelink benefits.

The most obvious mistakes we came accross again and again involved recording compulsory super guarantee contributions under the RESC label.

Reportable employer super contributions are:

• contributions made under a salary sacrifice agreement
• additional amounts paid to an employee’s super fund (for example, an annual bonus paid to super)
• employee negotiated increases in super contributions as a part of their salary package (for example, under individual employment contracts).

They do not include contributions that are made by employers to meet super guarantee or industrial agreement obligations. The Goverment recently amended the definition of RESC.

If you believe you’ve incorrectly been attributed an RESC amount, you should speak with your employer; they will need to issue you an amended Payment Summary.

Did you know that only one in five taxpayers who meet the eligibility criteria for the super co-contribution actually make a personal contribution in order to receive the additional government payment.

The super co-contribution is a Government initiative to help low to middle income earners save for their retirement. You can take advantage of the super co-contribution payment by making a personal contribution into your super fund before the end of the financial year. You could receive up to one dollar for every dollar you personally contribute, up to the limit.

For the 2010-11 income year, the maximum entitlement is $1,000. This starts to shade out at $31,920 and cuts off completely once your income exceeds $61,920. The current income thresholds are reproduced below. 

If you are eligible, when you lodge your tax return, the ATO will calculate the amount of co-contribution you are entitled to and pay it into your fund. The minimum super co-contribution payment is $20.

A lot of our clients have received an unexpected additional tax refund as a result of the ATO amending tax returns of eligible Youth Allowance recipients to include a deduction for study expenses. This came about thanks to the High Court decision in  Commissioner of Taxation v. Anstis.

In the same way that the ATO did this for Youth Allowance recipients, they are now amending the tax returns of eligible Austudy and Abstudy clients. Tax assessments for the 2007, 2008, 2009 and 2010 income tax years will be amended to include a tax deduction of $550 for study expenses for each year of eligibility.

Deductions can be claimed for the 2011 year for study expenses incurred by Austudy, ABSTUDY and Youth allowance recipients.

Keep in mind that this is likely to be the last time you can claim a deduction against an assistance payment. The government announced its intention in the recent Budget to change the law to prevent deductions being claimed against all government assistance payments from 1 July 2011.

You can now work out your finances on the go with new MoneySmart mobile phone apps.

The new apps, which can be downloaded for free onto your iPhone or Android handsets, have been developed by the Australian Securities and Investments Commission (ASIC) as part of the new MoneySmart.gov.au website.

“These new mobile phone apps give Australians the ability to access the free, unbiased guidance of the MoneySmart website no matter where they are,” said Parliamentary Secretary to the Treasurer, David Bradbury.

“A fantastic feature of the new apps lets you calculate the real cost of repayments on interest-free deals, so you can make a better-informed choice about your financing arrangements while you are in the store.

“The apps also let you work out your savings goals, mortgage repayments or superannuation contributions on the go.

“The new smart phone apps expand the ways people can use the helpful tools and resources that are available on the MoneySmart website.

For more information, go to http://www.moneysmart.gov.au/, or search for “MoneySmart” in the Apple iTunes App store or the Android Market on your mobile device.

Did you know that you can now search for Australian patents from 1904 onward through IP Australia’s AusPat database.

This free online tool has a range of useful features that can help you find the patent you’re looking for, including:

• eDossier – access responses, reports and amendments to the patents you have searched for
• eJournal – search, browse and print information from Australian patent journals
• eRegister – search, browse and print extracts from the Register of Patents.

For further information or to access AusPat, visit the IP Australia  website.

On Friday, the ATO released  ’100 People,’ a  representation of all the individual taxpayers in Australia as though they were just one hundred people.  

The numbers are drawn on information from Taxation statistics 2008-09, which is summary of tax returns, and other tax data for that financial year.

Transcript Highlights

Twelve point three million people sent their tax returns to us in the 2009 income year. Below we represent the millions of tax returns we received as 100 people.

We received 52 from males and 48 from females.

We received tax returns from five different generations:

• 6 from generation Z
• 21 from generation Y
• 33 from generation X
• 30 from baby boomers
• 10 from seniors.

People lodged their tax returns in different ways:

• 71 through a tax agent
• 19 using e-tax
• 10 by paper.

 After we assessed the tax returns:

• 84 people received a refund
• 12 people owed tax
• 4 balanced perfectly.

Ten people received the government superannuation co-contribution.

Eight people operated a business in their own name

• 2 made a loss
• 6 made a profit.

Below we show the proportion of all net tax paid when we ranked our 100 people by their taxable incomes.

• People with the top three taxable incomes paid 31% of all net tax.
• The next six paid 18% of all net tax.
• The next 31 paid 41% of all net tax.
• The next 35 paid 10% of all net tax.
• The last 25 didn’t pay any tax.

The above is copied from the presentation at the ATO website. ’100 People’ can be viewed in it’s entirety at www.ato.gov.au/100people

“The aim of the ’100 People’ concept is to provide an easy to understand and entertaining insight into taxation system statistics,”  Tax Commissioner, Mr D’Ascenzo said.

“This new concept gives people a better understanding of our country’s tax system. It’s a good way for people to get a greater appreciation of how our community is represented in our tax system and also allows people to see how their personal circumstances fit in with everyone else’s.

“’100 People’ shows, for instance, which states and territories taxpayers live in, their broad occupational groupings, which generations they belong to, how many have car salary packaging, who pays the majority of the income tax and how many people make tax-deductible gifts.

“I encourage the community to take advantage of this innovative and informative resource.”

IMHO, I think the concept of making plain the Tax Stats for the general public is a great idea. I look forward to more like this! What do you think?

Austrade’s team in Auckland is compiling a supplier database to assist Australian companies to help rebuild Christchurch.

Through the Canterbury Supplier Program, Austrade will identify needs and align Australian services and technologies to support reconstruction, following the devastating earthquakes of 4 September 2010 and 22 February 2011.

Austrade is working with the New Zealand Government and related agencies, acting as a conduit for qualified supplier information, project and opportunity notification and engagement.

Australian businesses with capabilities across a wide range of sectors are invited to register for the rebuilding of Christchurch and the restoration of essential infrastructure and services.

Australians receiving government financial assistance will no longer need to worry that additional superannuation contributions, prescribed by law or the rules of their super fund, will be considered when determining their eligibility to receive that financial assistance.

The Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, today introduced into Parliament an amendment to the definition of reportable employer superannuation contributions (RESC).

“Basically, if a working Australian who is receiving government financial assistance gets additional superannuation contributions they have no control over or cannot influence, because the amount of contribution is prescribed in law or the rules of their super fund, then that superannuation will no longer be considered as reportable employer superannuation contributions, so it won’t be considered income when determining their eligibility for financial assistance,” Mr Shorten said.

“It means we’re not penalising people who are saving for their retirement through superannuation but who still require assistance. This gives effect to the Government’s original intention that RESC should only be those contributions that employees can control, such as salary sacrifice-like arrangements.”

The amendment will apply retrospectively back to July 2009 when RESC was first legislated. RESC are generally superannuation contributions made under formal salary sacrifice arrangements, but include other contributions an employee can influence.

Examples of additional superannuation contributions that will no longer be considered RESC include:

• Contributions required to be made under an enterprise agreement if the employee makes a post-tax contribution (‘matched’ contributions)
• Contributions required by legislation.

The Government is also considering wider issues concerning the RESC definition.

“These things are important to get right. In addition to introducing this amendment today, to provide clarity for those affected, we will have a further process to determine what, if any, additional refinements may be needed,” Mr Shorten said.

There won’t be a “Ratio to Know” cast today as I’m heading out of town for the funeral of a family member. 

I would encourage you instead to take a look at the Key Issues Announced in the Budget. This article was included in the special Federal Budget 2011 issue of  our Business Plus+ newsletter. It contains a brief overview of those issues which are likely to impact upon small business.

Regarding the Budget, I have received a number of queries this week concerning changes to HECS. I will update you on this and other ‘individual taxpayer’ issues when I return. Until then, if there is anything you would like more information on concerning proposed budget changes, let us know.

I was met with a mix of both scepticism and delight this week as I contact taxpayers who have received an unexpected, addition tax refund as a result of the Anstis case. (Let’s face it, it’s not often I call people to say “Hey, the Tax Office have sent us money for you although you weren’t expecting it”).

The case received a fair amount of coverage at the time. Essentially, the High Court decided that the taxpayer was permitted to claim education expenses against their Youth Allowance income. As a result, the ATO have been amending eligible taxpayers assessments with a standard additional $550 deduction for each of the 2007 – 2010 years they were eligible.   

This has been a positive for many of our client base who’s refund payments are starting to flow through now

Don’t get used to it, though. According to budget papers, the Government will amend the tax law to prevent deductions being claimed against all government assistance payments, with effect from 1 July 2011, in response to the 2010 High Court decision in Commissioner of Taxation v Anstis.

Commencing the measure from 1 July 2011 will allow individuals who receive Youth Allowance (Student) to claim a deduction for expenses incurred in gaining their payment for the 2010/11 income year. This is to ensure individuals who have maintained records of their expenditure following the High Court decision are not precluded from claiming a deduction.

The Government will remove the ability of minors (children under 18 years of age) to access the low income tax offset (LITO) to reduce tax payable on their unearned income, with effect from 1 July 2011.

This is clearly targeted at discretionary trusts where you can currently stream $3,333 tax free to each beneficiary child. In a statement, Assistant Treasurer Bill Shorten said “The Gillard Government will enhance the fairness of the taxation system and discourage the tax avoidance that currently occurs when high income earners allocate their income to children under 18 years of age.”

The majority of small business operators I know who operate through a trust structure are not particularly “high income” at all.   Combined with the flood levy, carbon tax, cuts to Private Health Rebates, increased compliance burden for contractors, FBT changes and all of the rest,  this has got to start hurting a number of small businesses.

Income earned by minors from work will still be eligible for the full benefit of the LITO. Unearned income of minors who are orphans or disabled, as well as compensation payments and inheritances received by minors, will not be affected by this measure.

This measure has an ongoing gain to revenue, estimated at $740 million over the forward estimates period.

The Federal Treasurer, Mr Wayne Swan, presented the Gillard Government’s budget on 10th May 2011. None of the items contained within the budget will become law until they have been passed by the House of Representatives and the Senate, and signed by the Executive Council.