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ATO targets holiday homeowners’ and property investors’ deductions and income

Taxpayers merely have three weeks remaining to organize their abodes, particularly the 1.8 million populace owning holiday properties and investments; warning issued by the Australian Taxation Office.

Owners of the homes who have modified their rooms into rent bedrooms to tourists or long-term boarders or into home offices will also have their deductions and gains carefully examined- the ATO says.

The ATO Assistant Commissioner- Kath Anderson says that they will observe taxpayers who place reliance on the agents of tax, utilized by around 66% of the individuals submitting returns, who may be compliant to offering bigger claims and more deductions than they are accredited to.

“We possess state-of-the-art systems that can match data from a number of sources” says Anderson on how the exaggerated claims, fraud or mistakes are identified by the ATO from 9.6 million individual returns on taxes.

Investment property

The ATO will be closely observing the unreasonable claims on interest rate, like where the owners of the properties endeavor to assert borrowing costs on the rental properties and the family home, says the H&R Block Communications Director- Mark Chapman.

An emphasis will be incorrect dispensation of expenses and rental income between the co-owners, like where deductions on a property that is co-owned are asserted by the owner who has more taxable income, than taking it jointly.

Investors making incorrect claims for the newly bought rental estates are on notice.

“The estimates to defects and repair damage present at the period of renovations costs or purchase cannot be instantly claimed”, says Chapman.

“These prices are deductible rather over the years. Be prepared to see the checking of such claims by the ATO”.

The BMT Tax Depreciation’s chief executive- Brad Beer adds: “While rules say that the owners of the second-hand residential property cannot claim on the formerly present equipment and plant, they can claim on the things they have bought and installed in their property on their own, after it started producing income”.

The landlords of any Airbnb are qualified for expense deductions but the assertions must directly relate to the income earned and will be needing records or receipts as an evidence.

“Do not forget that the ATO can access multiple third party data sources which includes access to renowned holiday rental listing sites like Airbnb and Stayz, hence it is comparatively convenient for them to find out that the property was accessible for rent or not”, adds Chapman.

Holiday Homes

Owners of the holiday homes are the principal target of ATO, especially those who are not genuinely trying to rent out their properties.

Anderson refers a holiday home owner in Victoria who made income by the way of rent of around 27,000$ during the year 2014-15, yet claimed expenditures of above 700,000$.

She further extends that issues arrive if the owners of a property attempt to claim 100% of the expenditures for periods when their estates are basically rented to intimates at below market prices, are not rent accessible while on the peak holiday times and are intentionally unoccupied for around 90% of the year. While the others are rented under situations that scare off the rent payers like banning women who use to wear stilettos or golfers and minimum unattractive night stays.

Anderson commends the ones with house offices keep receipts, diary accounts, claims and invoices to prove spending on internet expenses, mobile phones and meals which are linked with business or work.

She further says that the ATO is familiar with the abuse of concessions by the individuals who claim all their laundry, mobile phone, dining or internet costs when they represent only a part of the complete expenses that are linked with business or work and the remaining is personal.

Some individuals are even abusing the provisions that are record-keeping including common car expenses related to work claimed by around 4 million tax payers, combining around $9 billion.

“It is permissible to assert for 5000 kilometers if you did them literally as a segment of making your earnings”, says Anderson. “Yet we are worried that mistakenly, some of the taxpayers presume that it is a usual deduction to which they are entitled, without any need of offering the proof of having that distance travelled”.

“The ATO differentiates taxpayers among the others who are in alike occupations and earning same incomes to discover trips, work travel; not needed as a segment of their jobs”, she adds.

Crypto currencies

Crypto currencies like bitcoin are evaluated for the purpose of tax as a type of property that is considered as an asset for purposes including tax on capital gains.

ATO is working with the state revenue offices, AUSTRAC and banking institutions to discover any suspicious activity, especially for the transactions in property.

The crypto currency movement is unspecified, yet it gets traceable upon modifying into the form of a fiat currency.

“While a number of people hold an opinion that crypto currency offers anonymity, functioning in the digital era, leaves an electronic impact”, says Anderson. “We have got state-of-the-art systems that give us an access to compare data from online exchanges, financial and banking institutions for following the money back to the taxpayers”.

Senior tax agent for the site Etax.com.au- Liz Russell, says losses on dealing with the crypto currencies can counterbalance that sum from the capital gains that are made on any other asset in the later or same financial year. However, losses on the net capital cannot be balanced out against any other income. It is taxable upon selling.

Carrying crypto currency as an investment, for over a period of one year will qualify the holder for a CGT discount.

“Be it a short-period trading strategy or a long-period investment, the tax consequences need the taxpayers to maintain records”, alerts Anderson.

Payments on crypto currencies that are made for services and goods are required to be maintained as a standard income.

Family Trusts

Family trusts are a highly common layout for holding investments of a family which includes shares, property and other assets and excludes their residence. Current tightening of the rules of superannuation is complementing them. Income of all the trust members is to be offered for the present financial year and typically an estimated statement on the income for further periods. It is recommended that an accountant should present tax-efficient methods to portion out any income.

The HLB Mann Judd Director- Bill Nussbaum says- “The key element is to find out that how the trust’s income is to be allocated to the trust beneficiaries for the current financial year. Trustees must speak with their accountants regarding how the trust income shall be paid like payments, dividends from interest or a business”.

Trustees also have to create a recognized resolution in writing to the ATO about the allocation before 30th of June, he says.

Advises are of the view that the perfect scenario for increasing the beneficiaries distribution is when the spouse is not paying or is paying a little amount of tax and youth does not have much income sources. Distribution tax to the children is punitive, usually about 47% on the things that are over the range of 1300$.

Why you should hire an expert tax agent?

expert tax agentWhether you wish for it or you don’t, the season of tax happens each year meaning that you will soon have to be stressed out facing a jumble of financial forms. While in the same period, you have the option of escaping the tax returns hassles by securing the assistance of an expert tax accountant in Melbourne, who will handle majority of the tasks for you.

Surely for an individual whose finances are not that complex, can deal with his taxes without any professional assistance as paying hundreds of dollars to firms or individual tax agents in Melbourne may sound a bit unworthy.

Yet, do you know that above 60 % of the taxpayers opt for removing the tax preparation accountability burden from themselves and turn over to proficient and skilled tax return agents in Melbourne to take care of this? Here we have compiled the top reasons to employ a tax professional for your organization.

  1. Mistakes are going to cost you more than taking expert services

Taxes are complex to many individuals, particularly for the ones who have complex income and have not been managing them from a long period. Making mistakes while filling out forms, missing vital information that does not seem to be crucial to an inexperienced person is especially more probable when you do not apprehend the basic elements of the tax return procedures.

  1. Circumstances that complicate taxes

There is a grand list of financial situations, legal statuses and circumstances that makes tax returns in Melbourne more complex. This in turn results in obligating taxpayers to draft even more thorough financial reports as well as present specific tax preferences which an uninformed individual would not be capable of making the complete use, if there is a lack of expert assistance.

  1. Keeping up with the regulations on taxes

It is not that easy to commence with a tax law. Yet, the frequent and constant modifications in its norms, provisions and added regulations entering into force are even more grinding to keep up the pace with. Tax agents are proficient at being well-informed with regard to the tax laws. Thus, they explain the most current modifications to their clients concerning the tax regulations.

Concluding statement

Filing your taxes through individuals or firms offering tax refund Melbourne services ease down the strenuous tax process. You can also get expert help from such agents in other matters as well- such as finding the ideal plan for you, which ultimately results in overall smooth business operations.

Benefits of using offshore accounting services

offshore accounting servicesThe bookkeeping and accounting industry is facing a lot of difficulties and challenges today which prompts them to explore more productive and efficient ways of doing the business. Several accounting firms in Australia have been using offshore accounting in the past decade to gain a competitive advantage and sustain their operational efficiency.

A high quality bookkeeping and accounting service can offer an organization better charge over its cash flow, thereby assisting it to make more informed decisions. Here we have highlighted how outsourced bookkeeping and accounting services certainly help enhance the core functioning of a company.

Minimal errors

Appointing an in-house professional to keep a check on the accounting errors is an exorbitant and time-taking process. An outsourced accounting expert can assist the accountants in conducting numerous levels of review developed into the accounting procedure, which allows them to rectify any error in a timely manner.

Better industry compliance

Accountants can rely on up-to-date and detailed knowledge of offshore accounting professionals on intricate tax regulations and multiple accounting principles, which has become more of a vitality in the current times than merely an option. Having their skilled knowledge will bring out enhanced industry compliance.

Shared risk

Amongst the key reasons of a number of accounting firms employing offshore outsourcing is to portion out the associated uncertainties to their outsourcing partner. Accountants can count on their offshore teams to carry out the operations timely and error-free.

New services introduced to the client

With the expanding cost of maintaining and engaging an in-house employee, it is immensely challenging for accounting companies to widen their service offerings to their clientele. Accountants can leverage the pool potentialities of their remote team that allows them to diversify their services beyond the services of their current in-house team.

Nowadays, an expanding number of payroll and tax preparers get assistance from outsourced bookkeeping and accounting in Australia to offer a complete-service experience in accounting to their clients.

Outsourced bookkeeping and accounting services helps your organization to boost its practice, effectively and profitably. Such services also helps in cutting down your staff expenses, enhancing your operational productivity, ultimately allowing you to generate high level of profits in the longer run.

The significance of getting professional training from pros in accounting

accounting training melbourneAlthough the educational system in Australia is made up of institutions and universities that play a vital part in driving productivity, fuelling innovation and providing students the skills they require for success in their careers, it somewhere lacks emphasis on practical training of the students.

Why is Practical Know-How Crucial?

Practical knowledge is highly significant to apprehend how things are going to actually work. It leads to much deeper apprehension of concepts with the help of personal experience. Paucity of practical know-how is amongst the major reasons why people are not getting ideal jobs and here comes the need to undergo internship program in certain spheres to establish your stand in the industry.

Significance of getting practical training in Accounting:

In the current times of unfettered competition in each of the areas of our lives, it is highly vital for every individual to master in their respective segments of profession.

Same is true for the accounting graduates. After undergoing numerous levels of examinations, one needs to undergo accounting training under an expert CA or CPA to ace accounting, though it is not mandatory.  Here we are going to emphasize on the significance of getting trained from the accounting professionals to give a boost into your career!

Whether it is practical knowledge or theoretical, each of them alone cannot transform an individual into a thorough professional. Both the elements need to go hand in hand to attain the intellectual skills and qualities of an expert. Just as you cannot learn swimming merely by going through a book that guides on swimming; practically you are required to jump into the waters. Similarly getting successfully through the examinations will not assist you in the application of theory until it has been done pragmatically.

People even after acquiring first-class education in commerce from among the renowned universities are not able to catch up with their ideal jobs. With the guidance and enlightenment of an expert in accountancy, one can get assurance of securing a good job. Additionally:

  • The probability of hiring candidates with communication and analytical skills are more as such people are competent enough to excel in their jobs. All this can be gained through practical sessions in accountancy.
  • With the expanding ratio of businesses, companies and accounting firms in Australia and other parts of the world, students who have real world experience are preferred more.
  • Accounting job training assists in sharpening skills while on the training phase, this in turn provides clarity to the students and help them in choosing their stream sagaciously.
  • Leading accountancy trainers also offer complete knowledge on the use of productive software such as MYOB, XERO etc. to help manage various concepts of accounting in a much convenient and organized manner.

Some Final Words

Getting an incredible job in accounting requires detailed knowledge of the subject, and that can be attained with a deep ken on the pragmatic aspects. Accounting training in Melbourne by a professional can assist you through the same and surge up your career by sharing his proficiency in multiple accounting segments such as bookkeeping, taxation, auditing etc.

5 Top Tips For a First Home Buyer

First Home BuyerWill you believe us if we tell you that it’s completely possible to own your dream home just few years into your work life? Well, if this looks like a distant dream, a dream nonetheless, let us bring you closer to it. Let us apprise you of the possibilities and how we can make that dream a reality for you.

You would definitely want to read through these quickers, the top tips that we have collated for a first-time home buyer like you to help you understand what you are aiming for.

Research, research and more research

We just cannot emphasize enough on this point. Starting with assessing your own credit worth, eligibility, to the property you want to own, the neighborhood, the community, things like work to home commute, amenities, types of loans available, kinds of interests that you can opt for etc.

This list can be endless and quite overwhelming, especially for first-timer. But reach out for help, connect with the consultants or brokers who can hand-hold you through the entire process and get you the deal you want.

The deposit amount

It is advisable to save as much as you can in your initial work years because then you’ll be able to make the deposit figure from your end to the maximum. You should be aiming to meet at least 20% of the total property amount as deposit, so you can get 80% as the loan. If your deposit amount is less than the said 20%, you’ll have to take a Lender’s Mortgage Insurance (LMI) which is an insurance for your bank should you default in the payment.

The First Home Owners Grant (FHOG) and concessions

As the name suggests, this grant encourages the fence-sitters to take the first step and become the first home owners. The grant varies from state to state, and for the state of Victoria, the grant is $10,000. But if your home is in regional Victoria, you are eligible for the FHOG of $20,000.

The first home owner is also eligible for an exemption in the stamp duty payment. This amount too varies state to state, and Victoria offers a $10,000 grant and transfer fee concessions.

The First Home Owners Grant eligibility criteria

The criteria may vary state to state but overall in general, you need to be falling into these to be able to apply for the relevant grant and concessions.

  • The applicant must be a real person and not a legal entity, such as a company or a trust.
  • At least one applicant should hold a permanent visa or be an Australian or New Zealand citizen.
  • Each applicant must be at least 18 years of age.
  • The total value of the property must be below the cap amount. Each state has different property value cap amounts so it’s essential you check this.
  • This must be the first time that you and/or your spouse/de facto will receive a grant under the FHOG Act 2000 in any state or territory.
  • At least one occupant will occupy the home continuously for at least 6 months, commencing within 12 months of settlement or construction of the home.
  • All applicants (including spouses) must not have owned a residential property in any state or territory before 1 July 2000.

The other costs

Keep in mind that the costs don’t just mean the property value. You’ll have to factor in about 3-5% of the property value for extra costs like fees, charges etc without getting a brunt for it later.

You may also like to read more about this in our post on 5 top things to know before taking a home loan.

Do drop us a mail or call us if you wish to understand this in depth. We would be happy to help you unlock your new, first home!

5 top things to know before take a home loan

So, after that coveted college degree followed by years of putting in hard work at your dream job, you are finally at one of the most important decisions of your life – to buy your first house. Now, that does mean taking up a home/residential loan, assuming we all can’t be saving 100% of the loan amount for our first home, right? Don’t let the marketing jargon bog you down while you go looking for the best home loan for your dream home.

We have decoded and collated a quick good-to-know list for first home buyers and even for property investors, to help you settle for the best choice.

1. Save for your deposit
The math is simple. The more you save, the less you borrow. Ideally, you need to save at least 20% of the purchase price. So if you end up borrowing more than 80% of the purchase price, you need to pay Lender’s Mortgage Insurance (LMI). LMI is to cover the lender in case you default on the payment.

2. First Home Owner Grant scheme
Even though it is extremely challenging to get this grant with strict eligibility criteria, but if as a first home owner, you meet all those checklist, you may get one. However, the size of the grant varies state to state. Do check out for your state home loans guidelines for that.

3. Interest rate – Now, interest rate has several interesting aspects to it.
A) For an investor buyer – Interest rates may be higher if the lender knows you are not looking to stay there.
B) Fixed and Variable interest rates – While a fixed rate of interest will give you a sense of how much exactly you have to dispense with month-on-month, a variable interest rate gives you the benefit of lowered payments in case interest rates fall. Both have pros and cons, you need to weigh in everything before you opt for either of the two.
C) Split rate – Alternatively, you can also decide a part of your loan at a fixed rate of interest and the rest at variable. This gives you the best of both, obviously with disadvantages for either of the case.
D) Repayment – You can opt for weekly, fortnightly and monthly payouts of the mortgage. Do keep in mind that banks or lenders calculate interest on a daily basis. So opt for the payout that you don’t end up paying more over the term of the loan.

4. Frills and Features
Any additional feature that is being offered in the bouquet may also cost more in terms of extra fees or payments. That being said, most loans offer a variety of features that you can use to your benefit.
A) Additional repayment – You can pay any additional amount you may have got (hello, family inheritance or a lottery!) towards setting off your loan figure.
B) Refinancing – Home loan market is extremely competitive so expect variations in interest rates, different features being offered etc. You can opt to switch your mortgage to another lender or to some other product with the same lender. Just stay updated with the interest rates.
C) Offset account – A transaction account attached to your loan account, the balance of which you can use to set off the outstanding loan amount.

5. Fees and duty
Be very mindful and provide for all the fees, charges and stamp duty that may come up while on your way to the home loan.
A) Stamp duty – As a first time home owner, your stamp duty may stand to be exempted.
B)Lenders Mortgage Insurance (LMI) – Like discussed in the first point, you have to factor in this cost in case you have saved less than 20% of the loan amount.
Most of the one-off fees and costs can also be negotiated upon with the lender, considering the highly competitive nature of the mortgage market. Make sure you bargain hard!

We hope this list gave you enough roadmap on taking that mortgage for your first home. Hit us up in case you have any doubts or queries. We’ll be happy to resolve those for you.

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