Tax time sorted with The Hopkins Group

Posted on 04/07/2018 by daniel-admin

Can you believe it? It’s July already!

Like clockwork, another financial year has come to an end so it’s time to start thinking about getting your tax affairs in order. Benjamin Franklin once said that “in this world nothing can be said to be certain, except death and taxes.”

A morose turn of phrase, but nonetheless true – you can’t avoid tax time.

But just because you can’t avoid something, doesn’t necessarily mean you have to suffer through it. Tax time can be a breeze if you arm yourself with the right tools and advice.

That’s where The Hopkins Group comes to the rescue! This tax season, we’re arming you with the latest blogs from our accounting team, discussing some of the different deductions you can (or can’t) claim.

We’re also giving all blog readers access to our comprehensive tax checklist to ease the collation process and help you get the best tax return possible. You’re going to want to download this ASAP (as an added bonus, you’ll also find a vehicle log book and rental property checklist on this page).

Upcoming Deadlines

First things first – it’s not tax-time without a deadline or two.

If you are completing your tax return yourself, you have until 31 October 2018 to file your 2017/18 tax return with the ATO. But did you know, you can get an extension to that deadline?

If you complete your tax with a registered tax agent, like the accounting team at The Hopkins Group, you have until May 2019 to file the same return. This gives you that extra time to get everything together and work with an accountant to hopefully get the best result possible from your return. It also means that if you know you’re probably in for a bit of a tax bill, you’ve got that extra time to save up that money.

If you are looking for that extra time, please note you’ll still need to be on a tax agent’s list by 31 October. To get on the list, all you need to do is contact an accountant and they’ll liaise with you to make it happen. From there, simply get in touch with your accountant again when you’re ready to complete your return (before May 2019). And don’t worry – if they don’t hear from you by March, they’ll send you a friendly reminder.

Latest Accounting Blogs

Working from home: How much can you claim on tax?

Let’s be honest, we’ve all fantasised about dropping the 9-to-5 daily grind and seizing the freedom of working from home. The question is – how much would your tax return benefit from making the switch? Read more…

Get schooled on self-education deductions

Looking to up your professional development education game? You might be able to claim these expenses at tax time! Read more…

Changes to GST on property transactions

Thinking about property development? Our Director of Accounting breaks down the importance of considering GST and tax obligations from the outset. Read more…

Travelling to Inspect Your Rental Property? Pause before you go

Before you claim a deduction on your rental property travel expenses, it’s best to check you’re eligible to continue making that claim. Read more…

How will changes to depreciation deductions affect you?

Recent tax law changes might see a loss in deductions available to property investors. But is there a silver lining for those purchasing new and/or off-the-plan properties? Read more…

Are you ready to get started getting your tax affairs in order? Book an appointment with an accountant at The Hopkins Group today.

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General advice warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.

Get schooled on self-education deductions

Posted on 16/05/2018 by daniel-admin

Is it finally time to buckle down and take on that diploma, master’s degree or other qualification that will take your career to the next level? Planning to up your professional development this year? Or just nostalgic for those good old uni days? Well, what’re you waiting for? Education may provide new knowledge, skills, opportunities, and maybe a step closer to world domination…but most excitingly, the cost of your education expenses may also reduce your tax bill.

Self-education expenses

If you have incurred education expenses and they have a relevant connection to your current employment or income producing activities, the expense may be deductible in your tax return. Short courses, seminars and training undertaken for work may be included as an ordinary work related deduction. Costs you incur to undertake a course of study at a school, college, university or other recognised place of education may also be deductible as ‘expenses of self-education’.

When are self-education expenses deductible?

Self-education expenses are deductible when the study you undertake has a sufficient connection to your current employment and maintains or improves the specific skills or knowledge you require in your current employment, or is likely to result in an increase in your income from your current employment.

You cannot claim a deduction for self-education expenses for a course that is too general or doesn’t have sufficient connection to your current employment such as general self-improvement. Also, the cost of study that will lead to future employment or allow you to start a new income producing activity via new employment or business is not deductible.

For example, Richie is a solicitor undertaking a Master of Law degree part-time. As the degree will improve the knowledge required for his current employment, Richie is entitled to claim a deduction for relevant expenses relating to the degree.

Richie’s mate Bruce is also a solicitor and is undertaking a Master of Journalism part time. Bruce is not entitled to a deduction for the related expenses as the degree does not maintain or improve specific skills or knowledge he requires in his current employment.

What expenses can you claim?

The types of deductible expenses which relate to self-education may include the following:

Course or tuition fees incurred, including fees payable under FEE HELP
Textbooks, stationary, and professional or trade journals
Airfares for study tours, sabbaticals, work conferences, seminars, or attending an educational institution
Meals and accommodation for study tours, sabbaticals, work conferences, seminars, or attending an educational institution where you are required to be away from home overnight
Interest paid on loans setup to fund relevant self-education costs

If an expense is partly for your self-education and partly for private purposes only the amount that relates to your self-education can be claimed as deduction unless the private portion is merely incidental.

What’s next?

Get out there and expand your minds, people! The world is your oyster; go and learn everything you can (well, at least everything that relates to your work) and keep a record of your expenses! If you are using Xero Cashbook to track your expenses, try attaching your invoices to the relevant transactions as you go so they don’t go missing! Your accountant will be thrilled to help add in the extra deductions when it is tax return time.

We are here for you.

Please do not hesitate to contact one of our friendly team members at The Hopkins Group here to discuss what you can be included in your tax return this year, what your tax obligations are and how you can best keep track of your expenses.

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Deep dive into the Federal Budget with The Hopkins Group

Posted on 08/05/201825/10/2023 by daniel-admin

We dipped our toes in the water of the Federal Budget last night, but now that the seas have settled, we’re ready to deep dive into the proposals and translate what it means for you.

Whether you’re at the start of your financial journey as a Gen Y, are a little older in the wealth building stage of your career, or are considering retirement (or have already hung up your boots), we have filtered the prawns from the plankton to make sure you have the most relevant and specific information at your fingertips.

Watch our videos below and download our fact sheets to get a better grasp of what impact Budget 2018/19 will have on you and your financial situation.

Superannuation changes, taxes and reforms. It’s all about as exciting as a trip to the dentist, right?

Well, slip into your wetsuit and grab your snorkel for this short video featuring Senior Financial Adviser Michael Williams who chats with three of his Gen Y colleagues to explain how this year’s budget will affect Gen Ys.

Watch video and download fact sheet now

As someone who is at the wealth building stage of your life, you may monitor the proposals put forward by the Treasurer in the Federal Budget each year with great interest – one change here and one change there can really affect the nest egg you’re growing.

This year, we’ve locked down our Head of Advice, Shane Light, and Managing Director and Senior Financial Adviser, Michael Williams, to review the 2018/19 Budget and put it into context for wealth builders.

In this short video, they discuss the key proposals, consider how they might affect you and get you thinking about what you could do now to help chipping away at those savings goals.

Watch video and download fact sheet now

It’s going to be a year for the pre and post retirees with the Treasurer announcing a number of proposals that directly affect our clients around the Baby Boomer age.

In this short video, Head of Advice Shane Light and Financial Adviser James Weir talk about what action pre-retirees, or those who have already hung up their boots, can take to make sure everything is in place to enjoy a comfortable life of financial independence after work.

Watch video and download fact sheet now

So what next?

There’s nothing like personalised, tailored advice, so to get a better grip on what impact the Budget could have on your financial situation, make a time to chat to an adviser using the link below or call us on 1300 726 082.

Book a meeting

General Advice Warning: This blog may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. It is important that you consider your own situation before acting on any information contained in this blog. Please seek personal financial advice prior to acting on this information.

Disclaimer: John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.

Changes to GST on property transactions

Posted on 05/04/2018 by daniel-admin

If you’ve been around in the tax and accounting game for a while, like I have, you might have noticed that ATO activity in the property arena has been steadily increasing over time. Whether it’s targeting big developers or property ‘flippers’, a quick search on the ATO website shows it is active in making sure taxpayers are correctly recording their income tax and GST liabilities relating to property.

In recent times, the ATO’s activity has been focused on taxpayers correctly remitting their GST liability on new residential premises. If you’re new to the property development game you might be thinking, “There is no GST on residential premises?” Well, that’s not entirely true. If the premises in question are ‘new residential premises’ then the developer must remit GST to the ATO if they are carrying on an enterprise. In my experience, this comes as a surprise to many first time developers.

On the other end of the spectrum, there’s regular developers who register for GST. They claim GST credits along the way, sell the property, but then wind up their structures before remitting the GST on the sales to the ATO. This failure to remit GST has become so common that they’ve made a term for it – phoenixing.

Enter the May 2017 budget, the government announces that they’re introducing legislation that will strengthen compliance with GST law in the property development sector. On 7 February 2018, that legislation was introduced in parliament and it received assent on 29 March 2018. This means from 1 July 2018 purchasers will be required to withhold the GST on the purchase price of new residential premises and remit the GST directly to the ATO as part of the settlement.

What will the new rules apply to?

The new rules will apply to supplies of new residential premises and supplies of potential residential land. New residential premises that have been created as a result of substantial renovations will not be subject to the withholding requirement.

When will they apply?

They will apply to all contracts of sale entered into on or after 1 July 2018. Contracts signed before 1 July 2018 will not be subject to the withholding requirement, provided the consideration for the supply (other than a deposit) is first provided before 1 July 2020.

Accordingly, the new rules will apply to existing contracts and those entered into before 1 July 2018 where the consideration for the supply (other than a deposit) is first provided on or after 1 July 2020.

How will the rules work?

Where a vendor makes a taxable supply of new residential premises or potential residential land, the purchaser will be required to withhold 1/11th of the price and pay that amount to the ATO on or before the day on which any part of the consideration for the supply (other than a deposit) is first provided. This will usually be at settlement and will be done during the settlement process by the conveyancers or property lawyers.

Where the purchaser pays the withheld amount to the ATO, the vendor will be entitled to a credit in its BAS equal to the amount paid by the purchaser. This credit will then be offset against the GST liability on the sale of the property, which the vendor is still required to report in its BAS.

The purchaser must pay the withheld amount directly to the ATO. Alternatively, they can provide the vendor with a bank cheque made out to the ATO. Provided they retain a record of the payment, no penalties will apply to the purchaser for a delay in the ATO receiving payment from the vendor.

Note, where the margin scheme is to be applied to the sale, the GST payable on the supply will be less than 1/11th of the sale price. Instead the purchaser will withhold 7% of the price.

Notification Obligations of the Vendor

To assist purchasers with their obligation to withhold, a vendor is required to give to the purchaser a written notice before the date the supply is made.

The notice must state whether the purchaser is required to withhold and make a payment to the ATO. If so, it must state the vendor’s legal name and ABN, the amount required to be paid, and when the amount is required to be paid.

Importantly, the notification must be provided in respect of all sales of residential premises not just sales of new residential premises.

Failure to provide the notice gives rise to a strict liability offence with a maximum liability of 100 penalty units, which is equal to $21,000 per infringement for an individual. If a company is the vendor, it will be liable for a penalty 5 times that amount.

With the threat of these penalties hanging over them, developers will need to be confident about their GST obligations at the time of sale and not a moment later. For big time developers, this won’t be an issue. My concern is for the mums and dads who are sub-dividing off the backyard and building a property on it, or buying an old knock down and building a couple of townhouses on it. Both scenarios are likely to attract a GST obligation.

Next Steps

If you are thinking about doing any sort of property development, it is important to consider the income tax and GST obligations of doing so from the outset. The team at The Hopkins Group are here to help you understand these obligations and assist you in achieving your financial goals.

Get started today.

Travelling to Inspect Your Rental Property? Pause before you go

Posted on 08/03/2018 by daniel-admin

Did you know that for the financial year ending 30 June 2015, rental property travel expenses claimed by individual taxpayers amounted to approximately $450 million? So it’s not surprising to see some reform with respect to these claims!

As of 1 July 2017 landlords are no longer able to claim a tax deduction for travel costs associated with residential rental properties. Nor will travel costs be allowed or recognised in the cost base of the property for Capital Gains Tax purposes on sale.

This exclusion applies to the costs of attending inspections, maintaining the property and attending a strata meeting whether you travel by your own car, taxi, public transport, or even an airplane. You also cannot claim the lunch you had when you attending the meeting with your property manager or the money you spent in a motel for your trip to repair the property.

Not all taxpayers are impacted

While this change does impact the typical “mum and dad” investor, it will not apply to entities that are carrying on a business of “letting rental properties”. This includes providing retirement living, aged care, student accommodation or property management services.

Institutional investors are also excluded from this change, and will continue to be allowed a travel deduction. Examples of these types of investors include corporate tax entities, superannuation plans that are not SMSFs, public unit trusts, managed investment trusts, or partnership or unit trusts if all members of the partnership or trust are entities included on this list.

Moreover, the change in legislation will not prevent an investor from claiming a deduction where a property has a dual purpose. Examples of a dual purpose include where the property is both a commercial and a residential premises. In this instance, travel costs will need to be apportioned between deductible expenditure and non-deductible expenditure.

Not all is lost – other rental property expenses still remain deductible

While many investors have lost a deduction with this change, fortunately there are still a number of expenses for your rental property you may be able to claim! Some examples include:

Advertising for tenants
Body corporate fees and charges
Council rates
Water charges
Land tax
Interest on loans
Cleaning
Gardening and lawn mowing
Pest control
Insurance (building, contents, public liability)
Agent fees and commissions

Knowing which deductions you can and can’t claim can be a minefield if you’re not in the know. Thankfully experts like the accounting team at The Hopkins Group are on your side, to help you make the most out of your tax return. To get up to date advice on what deductions may be available to you, contact an accountant today.

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Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.

How will changes to depreciation deductions affect you?

Posted on 26/02/2018 by daniel-admin

Do you own, or intend to own, a residential investment property earning rental income? New measures affecting Australian residential property have now become law including changes which may mean losing the benefit of depreciation deductions. But do not despair, for those buying off-the-plan the benefits are still there.

What has changed?

In the past the decline in value of a rental properties plan and equipment (e.g. carpets, ovens, dishwashers, heaters, blinds, and washing machines) could be claimed as a deduction in the landlord’s tax return, reducing their total taxable income.

From 1 July 2017 tax deductions for depreciation of residential property fixtures will only be allowable for expenses actually outlaid by an investor. The change will apply to landlords who purchase a property after 9 May 2017.

So what happens to your depreciation claims if you are planning to purchase a residential investment property now? It will depend on the type of residential property you purchase and what plant and equipment you purchase for that property.

For example, you may purchase an existing older home in good condition however the hot water system needs replacing after a few months, so you pay for a new system to be installed before renting the property to tenants. In this case, you will be allowed to claim depreciation deductions for the cost of the new hot water system over its useful life in your tax return. However, you will not be able to claim depreciation deductions for all of the existing plant and equipment that came with the house when you bought it. This means that you will have less deductions to report in your tax return, potentially resulting in higher taxable income and therefore higher tax to pay (or a smaller refund) than property investors have enjoyed in the past.

The good news?

Not all is lost. Purchasing new property may still be attractive to investors wishing to maximise deductions. If you purchase a brand new property, off-the-plan for example, you are purchasing the new property along with the new plant and equipment so will be allowed to claim depreciation deductions on these new items in your tax return over their useful life. This will therefore reduce your taxable income particularly in the first few years when the depreciation deductions are greatest. This can be very helpful for a new landlord’s cash flow in the early years of ownership. In other words, to get the best tax result possible it may well be best to buy a brand new property!

Owners of existing residential rental properties with plant and equipment acquired before 9 May 2017 and used in a residence that has been a rental property on or before 30 June 2017 will still be able to claim a depreciation deduction as normal per the old rules.

How can we help?

Please do not hesitate to contact a member of The Hopkins Group team to discuss any of the abovementioned issues and what you may be able to do under these measures to assist in achieving your individual financial goals. To view our currently recommended properties, please click here.

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Tax on vacant residential property

Posted on 14/02/2018 by daniel-admin

As part of a string of new housing initiatives announced in last year’s Victorian State Budget, a new Vacant Residential Property Tax has taken effect from 1 January 2018.

The tax – charged at a rate of 1% of a property’s capital improved value of taxable land – has been designed with the intention of reducing the high number of houses and apartments being left vacant in the inner and middle ring of Melbourne, by owners who have been previously happy to leave their properties empty and accumulate capital gains instead.

It is hoped by the government that this tax will trigger an increase in housing supply across the state, and release pressure on house and rental prices by encouraging landlords to offer their vacant properties for rent or sale. It is predicted to generate $80 million in revenue for the state over four years.

Who will have to pay this new tax?

The Vacant Residential Property Tax will only apply to the owner of a property that is unoccupied for more than six months within a calendar year. This six months does not need to be continuous.

This tax is self-reporting, meaning that owners of vacant residential property will be required to notify the State Revenue Office (SRO) of the extended vacancy (by 15 January each year).

Whilst the tax applies from 1 January 2018, it will be based on use and occupation in the preceding year (ie. an owner’s tax liability for 2018 will be based on use and occupation in 2017). Owners who miss the deadline are encouraged to notify the SRO about vacant property as soon as possible. Late disclosures are treated more favourably than if vacant properties are identified as the result of an investigation.

Are there are exemptions?

There are a number of practical exemptions applied to this tax – recognising legitimate reasons as to why a property may be vacant. Aside from the existing exemptions in place for land tax purposes, new exemptions include:

holiday homes
city apartments/homes/units used for work purposes
property transfers during the preceding year
new residential properties

Does this tax apply to all properties?

No; the tax only applies to vacant residential properties located in Melbourne’s inner and middle suburbs. Properties outside these suburbs are not subject to the tax.

The tax applies to properties in these local council areas:

Banyule
Bayside
Boroondara
Darebin
Glen Eira
Hobsons Bay
Manningham
Maribyrnong
Melbourne
Monash
Moonee Valley
Moreland
Port Phillip
Stonnington
Yarra
Whitehorse

What does this mean for me?

For many of our clients, this tax will not apply as we recommend against keeping your investment property vacant. If your property is managed by The Hopkins Group, we pride ourselves on minimising vacancy and ensuring your property is always tenanted.

However, if you do own a property that you are keeping vacant and is not exempt from this tax, please contact your adviser to discuss the implications of this in the context of your broader financial strategy.

Where can I learn more?

The SRO provides a comprehensive summary of the tax exemptions and implications on its website. Alternatively, if you would like to discuss the leasing of your vacant property, contact our property management team today.

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General Advice Warning: This blog may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Tax deductions for nurses

Posted on 02/10/2017 by daniel-admin

Nursing is a specialist profession with a number of specific job requirements that aren’t necessarily shared with other professional occupations. While many deductions that are allowable for nurses are available to most working Australians, there are deductions available to nurses which are more unique to the profession than they would be to any other; you wouldn’t need a fob watch as a construction worker, would you?

So what exactly can you claim as a nurse? Let’s break down a few common deductions you can and can’t make.

Union fees and professional associations

Nurses can claim a deduction on the annual fees they may pay for membership to unions or professional associations/bodies, although a deduction on joining fees is not available. You also cannot claim any contributions you may make to staff social clubs.

Internet usage

If you use your home internet for professional development, you can claim the proportion of your monthly fees that is strictly related to work use. This could include emailing, research relating to your job and research for your training courses.

Overtime meals

Provided you have been paid an allowance by your employer you can claim up to a maximum of $30.05 (2018 rate) per meal without having to keep any receipts, as long as you can show how you have calculated the amount you spent.

Personal car used to travel between jobs

Traveling between home and work is generally considered private in nature, but if you need to use your personal car to travel between work sites (e.g. from one hospital to another), you may be able to claim the expense of this travel. More information on claiming motor-vehicle deductions can be found in this blog post.

Uniform and Protective clothing

A deduction is allowable for the cost of the uniform if the clothing is protective in nature, occupation specific and not conventional in nature, i.e. compulsory uniform. This deduction can also include laundering costs (claims under $150 require no records. If you are claiming the cost of repairs or dry cleaning, you need to have receipts).
Protective clothing can also include safety items such as protective glasses, non-slip nursing shoes, lab coats, aprons and gloves.

Training and self-education

If you pay to attend work-related training, such as a short course that is not run by a university or TAFE (for example first aid, OH&S), you can usually claim this as a tax deduction. You can also claim the cost of self-education course run by a university (not including HECS/HELP fees) or TAFE provided it is directly related to your current work.

Studies directly related to your current job as a nurse that may lead to an increase in income are tax deductible. Self-education cannot be claimed if it is to obtain a new job, start a business or indulge a hobby or passion you have – such as flower arranging.

Computer and other equipment

Nurses, like most other employees, are able to claim a deduction for depreciation of computers and related software (if purchased together) that are used for work-related purposes. If the software is bought separately from the computer, a deduction is allowable in full in the year of purchase. Any deduction must be apportioned between work-related and private use.

In the case of other equipment, a deduction is allowable on the depreciation of equipment owned and used by a nursing employee during the year for income-producing purposes. In addition, a deduction for depreciation is allowable on items of equipment that are not actually used during the year for income-producing purposes but are installed ready for use for that purpose and held in reserve. A deduction for the cost of the equipment is not allowable.

Stationery

A deduction is allowable for the cost of buying log books, diaries, etc., to the extent to which they are used for work-related purposes.

Books and journals

Good news! If you’re an avid reader of content specifically related to your nursing career, you can claim the cost of buying or subscribing to journals, periodicals and magazines that are related to your employment (and are not general in nature).

Work related phone

Like many other professions, nurses are able to claim work-related phone use as a deduction. We’ve written a blog on how this can be done, here.

Fob watch

A deduction is allowable for depreciation and maintenance of specialist watches, such as a fob watch used by a nursing employee. Where a fob watch is purchased after 1 July 1991 and the cost of the fob watch is less than $300, an immediate 100% deduction for depreciation is allowable.
A deduction for the cost and maintenance of a conventional wrist watch is not allowable.

Vaccinations

Vaccinations are designed to cover diseases that any taxpayer from the general community can catch therefore they are considered personal medical expenses (private in nature) that can’t be directly related to any individual taxpayer’s occupation. Therefore, a deduction is not allowable for the cost of vaccinations as a precaution for nursing employees against contracting infectious diseases. The ATO backs up this view regarding nurses in TR 95/15.

What records do I need to keep?

If you’re planning to make deductions this tax season, you will need to ensure you keep records to substantiate your claims. While not all deductions require receipts, it doesn’t hurt to keep them on hand just in case. Make sure you note down your work related purchases/payments, with comments on the total cost, what these costs are associated with and the date the cost was incurred.

What’s next?

The Hopkins Group’s accounting team is on hand to help you make the most out of your return, come tax time. With so many deductions available to you, getting a helping hand from an expert can put you in good stead to reap the most out of your return for the least amount of effort. To learn more about how our team can help you this tax time, contact us today!

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Valuation of assets in SMSFs

Posted on 13/09/2017 by daniel-admin

With recent changes in the superannuation environment coming into play from this financial year, accurate valuations for all SMSF investments are becoming more and more important. Getting these valuations wrong may adversely impact your fund’s compliance and subsequently your ability to make non-concessional contributions and/or commence a pension.

So what do you need to know about accurately determining the market value of your investments? Let’s find out!

What is market value?

According to the SIS Act (subsection 10(1)) ‘market value’, in relation to an asset means “the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller”. The definition also assumes:
(a) that the buyer and the seller dealt with each other at arm’s length in relation to the sale;
(b) that the sale occurred after proper marketing of the asset;
(c) that the buyer and the seller acted knowledgeably and prudentially in relation to the sale.

Why is market value important to all SMSFs?

In a word – compliance. Ensuring all investments in the SMSF are valued accurately is important to remain compliant with superannuation law. These valuations are used to determine:

Member balances
The minimum and maximum amount of pensions payable to pension members
Non-concessional contribution caps
Eligibility for government co-contributions
Eligibility for a tax offset where contributions are made for a spouse
Whether the new catch-up concessional contribution cap can be used
Whether the segregated method for claiming exempt pension income can be used

Who checks this information (for compliance purposes)?

The fund’s independent auditor checks to ensure that the market values reported in the annual financial statements are based on objective and supportable evidence. If the auditor isn’t satisfied with the provided information, more support evidence may be requested or they may report a qualified opinion to the ATO, which may result in a follow up from them. If the ATO is not satisfied with the market values reported in the financial statements, a fine of 10 penalty units (currently $2100) per trustee may be imposed.

How do I go about determining the market value?

The value of some super fund investments, such as listed company shares and bank accounts, are easy to obtain. However for investments such as real estate, unlisted investments, collectables and personal use assets, the market value may not be readily available or obvious and may require a qualified person to make a professional valuation. These valuations can be obtained as follows:

Real estate

Trustees are not required to have real estate formally valued each year. Rather, the general rule of thumb used by most SMSF auditors is that real estate held by the SMSF must be valued at least once every three years. There are situations where a valuation is required on a more frequent basis are:

When a pension has commenced, a valuation no older than 12 months prior to the commencement of the pension is needed
When the auditor believes that the valuation is unacceptable and is either too high or too low
Where the SMSF has in-house assets and the 5% in-house asset ratio needs to be considered

Additionally, a valuation for the preparation of the SMSF’s financial reports may be required if an event has occurred that may have affected the value of the property since its last valuation, such as a renovations, changes in market conditions or a natural disaster.

The valuation can be undertaken by anyone (including the trustees of the fund) as long as it is based on objective and supportable data. However from an auditor’s perspective, a valuation determined by a party independent to the SMSF (such as independent valuers and real estate agents) would hold more weight compared to a valuation made by the SMSF’s trustee.

Units in unlisted trusts and shares in unlisted companies

When valuing an unlisted security, it can sometimes be tricky to gather reliable support evidence for audit. The unlisted trust or company may not need to have its assets valued at market value or have its financial statements independently audited each year. Therefore just relying on the reported values on the financial statements may not be adequate from an audit perspective.

Instead, consideration of other available information such as recent sales or purchases of the company’s shares or units and/or independent valuation of the underlying assets of the trust or company may provide a more dependable market value to the SMSF’s financial reports.

Collectables and personal use assets

There is no requirement for formal market value assessment for transfer/disposal of collectables and personal use assets to a related party, if they were acquired by the SMSF before 1 July 2011.

However if the asset was acquired post 1 July 2011, the transaction must be made at market value determined by a qualified independent valuer.

Where can I learn more?

The ATO provides comprehensive guidelines regarding the valuation of assets held in SMSFs.

Alternatively, should you wish to discuss what these guidelines mean for you, please do not hesitate to contact The Hopkins Group accounting team today.

Self-imposed exile won’t HELP you avoid HECS Repayments

Posted on 19/03/2017 by daniel-admin

Since its inception in 1989 the Higher Education Loan Program (HELP – also known as HECS pre 2005) has become an integral part of the Australian higher education system.

It has allowed many young graduates to work for a few years and accumulate some cash post-study without the burden of repaying their debt until their earnings reached a certain threshold. This system of government-funded, interest free “loans” has also enabled many young Australians to earn enough money to travel to see the world and work overseas – with the added perk being able to put their HELP debt repayments on hold indefinitely.

You see, overseas earnings were never counted toward the repayment income levels – so if you ran away and never came home, you never had to pay the loans back. That is until the 2015 Federal Budget flagged the loophole and marked changes to come in from 1 July 2017.

With student debts expected to hit $70.4 billion by 2018, the Australian government was looking for ways to stop this self-imposed exile of young university graduates who were avoiding their debt. Their solution? From 1 July 2017, those with a study debt who move – or are already living – overseas, will now need to make repayments on their HELP debts based on their income – wherever in the world it is earned.

What does this mean for me?

From 1 July 2017, repayments against your HELP debts will be based on your worldwide income for the 2016/17 income year. So if you live and work overseas and earn any type of income (including Australian and foreign sourced income) that exceeds the minimum HELP repayment thresholds, you will be required to make repayments against your loan.

What is the repayment threshold?

The repayment threshold is AUD$54,869 for the 2017 income year.

If you earn above this amount you have to make an overseas levy repayment.

The ATO has provided guidance on how to convert your foreign sourced income into AUD, which will help you calculate whether or not your earnings are above the threshold.

I am going overseas. What do I need to do?

If you are going overseas for 183 days or more, in any 12 month period, you will need to let the ATO know within seven days of leaving Australia. This is cumulative and does not have to be all at the same time.

You can notify the ATO through your myGov account. If you don’t already have an account, visit the ATO’s overseas obligations webpage for details on creating your myGov account.

I’m already living overseas. Do I need to do anything?

Yes. If you have a HELP debt, then from 1 July 2017 you will be required to report your worldwide income to the ATO. If your 2016/17 worldwide income exceeds the minimum repayment threshold, the ATO will raise a compulsory repayment known as an overseas levy.

How do I declare my worldwide income?

You can engage an Australian tax agent, like The Hopkins Group, to submit your worldwide income on your behalf. Alternatively, you can do it yourself through myGov.

If you choose to lodge yourself through myGov, then your declaration will be due by 31 October each year. Should you engage an agent, like The Hopkins Group, then the due date will be extended to the date usually afforded to tax agents (usually 15 May of the following year).

When calculating your income, there are currently three income assessment methods available.

What if my worldwide income is below the minimum repayment threshold?

For the 2017 income year, if you are a non-resident for tax purposes and your worldwide income is at or below AUD$13,717 then you simply need to submit a non-lodgment advice to the ATO and there will be no HELP repayment consequences.

If your worldwide income is above AUD$13,717 but below AUD$54,869, you will need to declare your income to the ATO. However no overseas levy will be raised as you’re below the minimum repayment level.

As the saying goes – all good things must come to an end. Come 1 July, there’s no running away from your HELP debt repayment obligations. If you have any further questions about what this might mean for you or if you would like to discuss anything else related to your HELP debt and/or tax matters generally, please do not hesitate to contact us and speak with one of our accountants today.

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General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

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