Income protection insurance replaces the income lost through your inability to work due to illness or injury. It is an important consideration for anyone who relies solely on an income.

Each income protection policy is different but most income protection insurance will cover up to 75% of your income when you are unable to work. You receive the insurance monies after you wait a defined period (wait period) and are paid for a defined period of time (benefit period). There are a few important considerations that can affect the cost of the insurance so here are our tips on where to save money:

Any occupation verses own occupation.
This is important. You should always use your own occupation. This means that your inability to work is in the job you are currently carrying out. Any occupation means you do not receive any funds if you’re capable of doing any other occupation.

Wait Period
This is an area where you can save money. It is worth determining how long you can survive without an income by considering your individual situation and entitlements such as your sick leave entitlement with your employer. In essence the longer the wait period, the cheaper the insurance and the difference can be substantial.

Benefit Period
This is not the area to save money. While a shorter benefit period will reduce premiums we recommend setting your benefit period to age 65. It doesn’t cost that much extra to extend the period to age 65 and you are then covered for all the nasty long term events. You may have some income protection insurance inside your super fund which normally will only have a 2 year benefit period.

It is also worth noting that Income Protection Insurance is tax deductible because in event of a claim the proceeds are taxable.

If you would like further information or have any queries regarding the above please do not hesitate to contact the office, we can put you in touch with a financial planner who can assist with your insurance needs.

Author: Adrian Wardlaw
Email: [email protected]

Selling a property as part of a business? You may be able to apply the margin scheme to reduce the GST payable on the supply of the property.

The margin scheme is a method of determining the GST payable when property is sold as part of a business. The margin scheme only applies where the sale of the property is a taxable supply.

Normally the amount of GST paid on the sale of a property is 1/11th of the sale proceeds, whereas under the margin scheme the GST to be paid is 1/11th of the margin.

The margin is the difference between the sale price and
• the purchase price of the property, or
• an approved valuation of the property as at 1 July 2000 (if certain conditions are met)

The margin scheme can be very useful for reducing GST payable where GST was not charged on the purchase of the property and also where the purchase price of the property is significantly lower than its market value as at 1 July 2000.

The margin scheme cannot be used if you were charged the full rate of GST upon purchasing the property, as you would have been entitled to claim the GST credits back. It also cannot be used when the seller you purchased the property from applied the margin scheme to the sale of the property.

If the margin scheme is going to be used it is important that this be written in as part of the terms of selling the property. The ATO requires written evidence of the decision.

Pro Tips

Get your facts together. Knowing whether you were charged GST on the purchase of your premises could cut down your GST liability upon to selling the property as part of a business.

Compare the market value of your property as at 01 July 2000 to the cost you paid, the higher of the two will give you the best outcome when using the margin scheme.

Author: Heather Cox
Email: [email protected]

At the end of each year, every business undergoes a procedure with regards to payroll. There’s nothing to fear about the process and things will run smoothly if you go through these steps.

Step 1 – Process final pay runs.
Ensure all pay runs are complete for the financial year.

Step 2 – Reconcile end of year payroll to your accounting ledger.
For this step review all the earnings, superannuation and tax amounts recorded in your payroll software and match them to the amounts in the general ledger.

Step 3 – Review & check employee Payment Summary amounts.
This is where you check the placement of amounts on the payment summary. You should review each employee’s payment summary and pay particular attention to:
• Allowances
• Reportable employers superannuation contributions
• Reportable fringe benefits; and
• Union fees (if they are deducted from earnings)
You should also check that the authorised person, employer details (e.g. ABN) and the payment period are correct
This is the information that employees will use in preparing their tax return to proper care must be taken in completing this step to ensure information is accurate.

Step 4 – Distribute Payment Summaries to employees.
After ensuring all payment summaries are completed correctly, you can then distribute them to employees by mail, email or whichever way preferred. It is important to have security on the file when sending payment summaries via email to ensure privacy of TFN. This can be done by having passwords needed in order to open the file. Employers are required to distribute payment summaries by the 14th of July each year.

Step 5 – Send annual payment summary report to the ATO.
An annual payroll report must be sent to the ATO. This can be done through the ATO business portal or with the tax agent through BAS. This report is due on the 14th of August each year.

Author: Heather Cox
Email: [email protected]

Most people know that main residence = exemption from Capital Gains Tax.

Usually you (and your spouse) can only claim one main residence at a time.

If you are changing houses then for a limited time you can treat two dwellings as your main residence.

The concept is that you can buy your new home first and within six months sell your old home.

There is some fine print.

• Your old house must be your main residence for at least three months of the last twelve months.
• You cannot have earned any income (e.g. rent) from the old house in the last twelve months.
• Your new house becomes your main residence (i.e. you can’t just elect for it to be your main residence, you have to actually move in).

Pro Tips
If you are outside the six month period you may wish to elect for the old home to be your main residence (see the six year rule post) so that there is no capital gains tax payable on that home. You would only do this if the taxable gains on the old home is considered to be higher than the potential gains on the new home.

Author:  Stacey Walker
Email: [email protected]

When two or more people are buying a property it is important to identify which ownership structure will be used. Will you be a tenant in common or a joint tenant?

I am a Joint Tenant. What does that mean?

If you are a joint tenant then you and the other owners will have an equal interest in the property. Joint tenancy creates a right of survivorship whereby in the event that a joint tenant dies; the surviving owner will take full ownership over the property. It also means your part of the property cannot be sold or given way without the agreement of all owners.

I am a Tenant in Common. What does that mean?

If you are a tenant in common then you and the other owners will have a stipulated ownership percentage; for example one person may have 25% ownership and the other person may have 75%. This ownership structure is often used when unrelated parties (i.e. friends, business partners) have pooled their funds together to purchase a property, but can also be used by married couples. In the event of a party’s death, their estate will continue to own the percentage of the property. This ownership structure is regularly used when there are unrelated parties or to take advantage of different ownership percentages for tax purposes.

E.g. A couple own a rental property which results in a net loss with one spouse earning considerably more than the other. For a greater tax benefit, it may be beneficial if the higher earning spouse claims more of the rental loss. Therefore, having a tenants in common ownership structure would be ideal so as to allocate a larger percentage of property ownership to the higher earning spouse in order to claim more of the loss. Under a joint tenant structure, the couple would share the net rental loss equally.

To change tenancy, we recommend receiving legal advice.

Pro Tip:
To remember the difference I use the saying – tenants in common – the only thing they have in common is the property so percentage of ownership must be stated (not necessarily true but an easy way to remember the difference).

Author: Allan Edmunds
Email: [email protected]