Highland Accounting Services

SFSS – Student Financial Supplement Loan – 2010 to 2011

If you took out a Student Financial Supplement Loan between 1993 and 2003, you will have an amount to repay if your repayment income is greater than the thresholds in the table below.

The repayment income is your taxable income plus any net rental losses, total reportable fringe benefits amounts, reportable superannuation contributions and exempt foreign employment income.

Hopefully you have told your pay office that you have the debt so that they can take extra tax out on your behalf to cover your obligations. For the 2008 – 09 year your employer will start withholding SFSS if your wages exceed $863 per week.

Unfortunately with the SFSS there is no provision to make any voluntary payments.

At the end of the year when you do your tax return, based on your repayment income the ATO will calculate how much SFSS will need to be paid

The SFSS that is calculated and the extra tax that has been taken out of your wages by your pay office is in most cases enough to offset each other.

2010 – 11

Repayment income	Repayment rate
Below $44,912	Nil
$44,912–$55,143	2%
$55,144–$78,273	3%
$78,274 and above	4%

Higher Education Loan Programme (HELP) and HECS 2010 – 2011

You have or are currently studying at a university, you are most likely to have a HELP/HECS debt.

Hopefully you have notified your pay office that you have the debt so that they can take extra tax out on your behalf to cover your obligations. For the 2009 – 10 year your employer will start withholding HELP if your wages exceed $863 per week.

At the end of the year when you do your tax return, based on your HRI income (HRI= Taxable income + any net rental losses + total reportable fringe benefits amounts + reportable super contributions + exempt foreign employment income.) the ATO will calculate how much HELP will need to be paid. The rates for the 2010 – 11 year are set out in the table below.

The HELP that is calculated and the extra tax that has been taken out of your wages by your pay office is in most cases enough to offset each other.

Voluntary repayments of $500 or more can be made at any time, this will give you a discount of 10%. So if you make a payment of $1,000 it will reduce your debt by $1,100. The ATO has a simple calculator to work out the voluntary payments here.

2010–11

HELP repayment income (HRI*)	Repayment rate
Below $44,912	Nil
$44,912–$50,028	4% of HRI
$50,029–$55,143	4.5% of HRI
$55,144–$58,041	5% of HRI
$58,042–$62,390	5.5% of HRI
$62,391–$67,570	6% of HRI
$67,571–$71,126	6.5% of HRI
$71,127–$78,273	7% of HRI
$78,274–$83,407	7.5% of HRI
$83,408 and above	8% of HRI

Fuel Tax Credit – Changes from 1 July 2010

From 1 July 2010 the new fuel tax credit rate is 15.543 cents per litre.

The new rate replaces the following the fuel tax credit of 16.443 from the 1st July 2009 to the 30th June 2010.

SFSS – Student Financial Supplement Loan – 2009 to 2010

If you took out a Student Financial Supplement Loan between 1993 and 2003, you will have an amount to repay if your repayment income is greater than the thresholds in the table below.

The repayment income is your taxable income plus any net rental losses, total reportable fringe benefits amounts, reportable superannuation contributions and exempt foreign employment income.

Unfortunately with the SFSS there is no provision to make any voluntary payments.

At the end of the year when you do your tax return, based on your repayment income the ATO will calculate how much SFSS will need to be paid

The SFSS that is calculated and the extra tax that has been taken out of your wages by your pay office is in most cases enough to offset each other.

2009 – 10

Repayment income	Repayment rate
Below $43,151	Nil
$43,151–$52,980	2%
$52,982–$75,203	3%
$75,204 and above	4%

Higher Education Loan Programme (HELP) and HECS 2009 – 2010

You have or are currently studying at a university, you are most likely to have a HELP/HECS debt.

The HELP that is calculated and the extra tax that has been taken out of your wages by your pay office is in most cases enough to offset each other.

2009–10

HELP repayment income (HRI*)	Repayment rate
Below $43,151	Nil
$43,151–$48,066	4% of HRI
$48,067–$52,980	4.5% of HRI
$52,981–$55,764	5% of HRI
$55,765–$59,953	5.5% of HRI
$59,954–$64,919	6% of HRI
$64,920–$68,336	6.5% of HRI
$68,337–$75,203	7% of HRI
$75,204–$80,136	7.5% of HRI
$80,137 and above	8% of HRI

2011 Income Tax Rates

2011 Individual Income Tax Rates.

The Australian financial year runs from the 1st of July to the 30th June each year, for the year ending in June 2011 the following tax rates apply to an individual residents taxable income.

The taxable income is the balance of assessable income less allowable deductions.

The tax payable is calculated on the taxable income as per the tax rates below. As the taxpayers earnings increase it will pass through the relevant tax brackets.

Some mistakenly think that as you move into a higher tax bracket, all of your earnings are taxed at the higher tax rate. Thankfully this is not the case, only the income above the tax bracket is taxed at that rate.

Using the chart below if your income was $85,000, only $5k would be taxed at 37% not the full $85k.

The income tax rates for the financial year ending 30th June 2011 for and individual who is a resident for income tax purposes.

Taxable income	Tax on this income
$1 – $6,000	Nil
$6,001 – $37,000	15c for each $1 over $6,000
$37,001 – $80,000	$4,650 plus 30c for each $1 over $37,000
$80,001 – $180,000	$17,550 plus 37c for each $1 over $80,000
$180,001 and over	$54,550 plus 45c for each $1 over $180,000

The above rates do not include the Medicare levy of 1.5%, which is subject to income thresholds.

Nor does it include any income tax offsets, these apply to the taxpayers individual circumstances.

The reductions in tax from the 2010 year means that the following savings in 2011 will be made on these weekly incomes:

$600 per week the savings are $2.00

$900 per week the savings are $8.00

$1,200 per week the savings are $7.00

The ATO Environmental Policy – Are they taking it seriously?

The Australian Taxation office has an Environmental Policy which can be found at www.ato.gov.au a short extract is as follows.

“To acknowledge the impact the ATO has on the environment and outline the ATO’s commitment to being a good environmental citizen by reducing its environmental footprint.”

Recently, in January 2010, the Australian Taxation Office substantially upgraded their software system, this has resulted in major changes on how the ATO reports to the individual taxpayer in regards to their yearly Notice of Assessment (Tax return).

The average Notice of Assessment has now gone from 1 sheet of paper to 2 sheets of paper, and if the taxpayer has an outstanding debt, or is in business, then the number of sheets of paper will increase even further as they will receive a statement of account. One may ask themselves, what is the extra information about the taxpayer that is included on the extra paperwork, well nothing, fundamentally it is the same information just formatted across more paperwork.

So you may be asking, what is another sheet of paper? Try over 12 million sheets of paper as there are 12 million taxpayers in Australia, which equates to, on the minimum, 24,000 reams of paper, 1440 trees and 130 tons of green house gases.

In today’s climate of being more aware of our usage, and our waste, why is the Australian Taxation Office not only doing the contrary to public sentiment but to their own Environmental Policy.

Super Co-Contributions Update – July 2010

Still one of my most suggested government incentives to my clients is the Super co-contribution. As from 1st July 2009, if your earnings is less than $31,920 and pay up to $1,000 in to your super as a voluntary contribution the government will pay $1.00 for every $1.00 you deposit.

If your assessable income is more than $31,920 but less than $61,920 your co-contribution will be reduced by 5 cents for every $1 over $31,920. The minimum amount payment is $20.

Unfortunately if your assessable income is over $61,920 you will not receive any co-contribution.

If your assessable income is less than $61,920 and you have the opportunity to choose between a co-contribution or a salary sacrifice, the co-contribution will in most cases be the most beneficial.

Holiday Homes – Taxable income and apportionment of rental tax deductions.

You have just spent a relaxing time with your family in your favourite holiday destination, and you are thinking, wow this would be an ideal place to purchase a holiday home for future vacations and as an investment for retirement. To offset the expenses of running your holiday home, your plan is to have the holiday home available for rent for most of the year and use the home for your holidays for some of the year.

How does the Australian Taxation Office deal with a situation like this, do they allow you to claim any deductions against the holiday home rental income?

First we should look at what is assessable income. Renting your holiday home to family and friends at a minimal cost isn’t considered assessable income as it is merely re-imbursing you for out of pocket expenses. The rent received via commercial renting on the other hand is assessable income. The next question, how are the expenses offset against the assessable income?

As with all tax deductions, the Australian Taxation Office requires that the personal use of a deduction can not be claimed. Clearly using the property for yourself and letting your family and friends use it at none commercial rental rates is personal use. Therefore no deductions are allowed for the property’s expenses for these periods.

So, what you use and what friends and family use is not tax deductible, therefore the expenses for the rest of the year are tax deductible, well, no its not quite that simple. What you now need to prove is that you are actually trying to rent the property out, this will need to be done by going through a property agent, or maybe listing on an internet holiday rental web site. The more that you can show that you are actively finding a tenant the more likely you will be able to claim the deductions for the property.

In one year if you personally use the property for say 6 weeks and actively look for tenants for the remainder of the year, then you can claim 46/52 of your deductions for the property. Also bear in mind that while you are actively looking for tenants it doesn’t mean that your property needs to be tenanted 100% of the time.

To see what can be claimed. Look at my other post http://www.accountantplus.com.au/wordpress/?p=261

Rental Properties – Australian Tax Deductions

From the day you first purchase a property for rental you will have tax deductions. So all paperwork needs to be kept. One of the first pieces of information you will receive is a settlement statement from your conveyancer, this will have the purchase price of the property stamp duty and pro rata amounts for property rates and taxes.

The conveyancer letter has 2 types of expenses, one is capital which includes the purchase price of the property, stamp duty, registration of mortgage, search and settlement fees and the conveyancer or legal fees. These are not tax deductible and form part of the capital gain calculation at the sale of the property.

The second expense on the conveyancer letter is the pro rata amounts for council rates, water rates, body corporate fees and other fees or levies that your State may charge. The expenses are tax deductible and will need to be included on you tax return.

When purchasing a rental property most will borrow a substantial part of the properties value from a financial institution. Of course financial institutions charge up front application and legal fees for your loan. If these amounts are less than $500 then they can be claimed in the first year, otherwise the borrowing costs will need to be claimed over a 5 year period.

Now we come to the day to day running of the property, you will receive rent from your tenants, which is included as income, you may also receive a reimbursement from the tenant for excess water usage, this to is income. If you were unlucky and had a bad tenant and needed to make a claim against the bond or your insurance, the amounts received will also be included as income. Most claims from insurance and the bond will also have a corresponding deduction for the repairs.

General rule of thumb with any tax deduction is that it must be relevant to an income producing activity, the most common deductions are;

Advertising for tenants,
Bank charges,
Cleaning,
Gardening,
Interest payments on a loan,**
Monthly or annual Loan fees,
Borrowing costs,**
Insurances,
Land tax,
Body corporate/Strata fees,**
Lease document expenses,**
Legal expenses,**
Council rates,
Property management fees,
Pest control,
Quantity surveyor’s fees,
Bookkeeping fees,
Security,
Repairs and maintenance,**
Water rates,
Emergency services levy,
Rubbish removal,
Tax related expenses,
Travel and car expenses in relation to the property,**
Depreciation,**
Phone Calls to tenants or property manager,
Stationery (rent books),
Cost of home office.

Some of the above expenses marked with the double asterisk** will need to be expanded on, which will be subject matter in future blog posts. To make sure you don’t miss out on future posts, please subscribe in the to right of the website to receive notifications.