July 2015

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The 2015 Federal Budget

As always, the Federal Budget has given a multitude of changes to the various taxes and regulations surrounding the country. Some of the changes that we believe are relevant to you are discussed below.

Many small business owners rejoice as the burden of calculating depreciation on business related assets up to $20,000 has been removed. For those businesses who meet the small business tests, an instant tax deduction is now allowed for each asset costing up to $20,000 purchased from 7:30pm 12th May 2015 up until 30th June 2017. Any items over that amount must still be depreciated.

The tax burden has also been reduced for small business owners with the tax rate reduced to 28.5% from 1st July 2015.

The asset test thresholds for those eligible to receive a government pension have been adjusted. The lower thresholds have been raised and the upper thresholds have been reduced.

Those parents eligible for paid parental leave through their place of employment will no longer be eligible for the government paid parental leave in order to reduce ‘double dipping’. Stay-at-home parents will no longer be able to access the childcare rebate. Eligibility for subsidised childcare has been removed for parents whose children do not have up-to-date vaccinations.

Overseas businesses supplying digital products and services to Australians will be subject to GST from 1st July 2017 so all those who are subscribed to streaming services like Netflix should expect a 10% increase in pricing from that date.

Macquarie Life Active – Insurance That Just Makes Sense

At Veritas Wealth Solutions, we are always thinking about the best way to ensure that you have the appropriate insurance cover that will enable you to make a claim should you suffer a significant health event.

As you know, insurance is crucial but can be complex. We all want to protect ourselves and our families from the financial consequences of illness, injury or death. Traditionally that has involved the need to choose between four different types of cover:

  • Life insurance
  • Total & Permanent Disability insurance
  • Trauma insurance
  • Income protection insurance

It can be hard to know which of these insurances you need. It can be even more difficult than knowing how much insurance you need.

A new product called Macquarie Life Active addresses these problems and provides an alternative solution.

It is based around the idea that you buy a single lump sum of insurance cover. This insurance provides a lump sum not only in the event of Death or Terminal Illness but also provides cover for a whole range of Health Events (ranging from accident injuries to long-term illnesses and fatal conditions). You can also add Income cover to the package.

What that means is that you have one simple policy – and the knowledge that you will receive payments in line with the seriousness of your Health Event. As a condition, such as cancer, deteriorates, or if you have a different Health Event altogether, Macquarie Life Active can continue to pay more funds.

This kind of insurance offers broader coverage and can often be simpler and cheaper than traditional cover. We would always want to discuss your needs and your situation before recommending it to you, but if you think this kind of protection makes sense to you and your family then please contact our office where we can provide further information on the product.

PS: Don’t think you need to worry about insurance? Consider this: the children in 20 per cent of Australian families will endure the death of a parent or watch accident or illness render a parent unable to work.

Source: (Lifewise)

2015 Personal Income Tax Returns

It’s tax time again, which means it’s time to start thinking about lodging your 2014/2015 income tax returns. The ATO will start processing these returns on 7th July 2015, and will proceed to pay out refunds from 16th July. Electronically lodged returns should be received within 12 days of lodgement. Changes for your 2015 personal tax return include:

  • Tax payers with taxable income over $180,000 will have additional tax payable of 2% for every dollar over this amount (the budget repair levy).
  • The mature age worker tax offset (MAWTO) has been abolished and cannot be claimed this year.
  • The net medical expense tax offset can only be claimed if it was claimed on both your 2013 and 2014 income tax returns, unless the expenses relate to disability aids, attendant care or aged care. These expenses can be claimed up until 30 June 2019.
  • The Medicare levy has increased from 1.5% to 2%. This should have been accounted for by your payroll department with additional tax being withheld from your income throughout the year.
  • The name of the dependent (invalid and carer) tax offset has changed to the invalid and invalid carer tax offset to reduce confusion.
  • The dependent spouse tax offset has been abolished and can no longer be claimed.
  • If you have a myGov account that is linked to the ATO, your notice of assessment, tax receipts and other mail will be directly sent to your myGov inbox and are no longer sent out to you in paper form. It is recommended that you check your inbox before taking your information to your accountant to prepare this year’s income tax return.
  • The government has increased the small business instant asset write-off threshold to $20,000 for assets acquired and installed ready for use after 7:30pm (AEST) 12 May 2015.
  • Effective from 7:30pm (AEST) 12 May 2015, there is an accelerated depreciation for primary producers, enabling the immediate deduction for the cost of fencing and water supplies, tanks, bores, irrigation channels, pumps, water towers and windmills; and 3 years depreciation for the cost of fodder storage assets (eg, silos and tanks to store grain and other animal feed).

If you have any queries about what you can or cannot claim, our team of accountants are more than happy to help.

ASIC Fee Changes

From 1st July 2015, the fees which are charged by ASIC on various documents have been updated. The most common fees are listed below with their new cost:

  • Annual Review Fee – proprietary company – $246
  • Annual Review Fee – special purpose company (ie super fund trustee) – $46
  • Late Lodgement Fee – up to 1 month late – $75
  • Late Lodgement Fee – over 1 month late – $312

Annual reviews are sent out on the anniversary of the registration of the company and it is very important for the associated fee to be paid on time or there are significant late fees, as you can see above. Jodie Dickson Accounting and Superannuation is a registered ASIC agent so if you would like to receive your ASIC annual reviews electronically, please contact the office.

How Do I Get a Better Rate of Interest on My Capital Investment?

As official interest rates have declined over the last 12-18months to the current rate of 2.0%pa, many investors are struggling to achieve sufficient interest income to meet their lifestyle expenses. Whilst term deposit rates are about 0.75%pa higher, even they are not sufficient to fund retirees spending requirements in most cases. If tax also has to be paid on that income the situation is exacerbated.

Even where the interest paid is not directly required to meet current expenses such as in a self-managed super fund, those rates of return are at or below the current rate of inflation so a loss of purchasing power is occurring.

So what are the alternatives in the fixed interest sector?

Over recent times access at the retail level has become available to the bonds issued by major corporations. Formerly this was the province of the big institutions as the bonds were denominated in the tens and hundreds of millions. Nowadays though, small or retail investors can purchase bonds in as little as $10,000 lots.

What is a bond?

A bond is a security that pays a defined distribution (the coupon) for a given period of time (the term) and repays the face value of the security at maturity.

Unlike an equity, which is purchased ownership of a company, a bond is a loan from an investor to the issuer of the security. There are many types of bonds, including fixed, floating, amortising, annuities and index-linked.

Bonds can be issued as senior secured, senior unsecured and subordinated debt. Each of these three debt classes has varying risk and reward attributes which are also influenced by the issuing entity’s credit rating.

Advantages

  • Wide variety of maturities
  • Wide variety of issuers rated across the credit rating spectrum
  • Provides steady income
  • Potential for capital gains if sold prior to maturity
  • Can be used to diversify investments in a balanced portfolio
  • Cover three levels of capital structure
  • Government bonds offer greater diversification

Disadvantages

  • Varying liquidity
  • Most bonds are traded over the counter, rather than through an exchange
  • Potential for capital loss if sold prior to maturity
  • Bond markets are currently dominated by Wholesale investors in Australia
  • Corporate bonds offer less diversification than government bonds

Bonds are suitable for a very wide range of investors with differing risk and reward attributes, from conservative investors through to those seeking high risk securities, including retail and wholesale investors.

How do I access bonds?

The bond market comprises of a primary and secondary market. The primary market contains new issue bonds which are sold to the public and enter the bond market for the first time. A bond may be listed and therefore may be bought and sold directly by investors on the Australian Stock Exchange (ASX). The majority of bonds are traded over the counter (OTC) through a fixed income broker, who negotiate the sale of bonds between buyers and sellers. This secondary bond market, allows the sale of purchased bonds prior to maturity. One of the main benefits of investing in bonds is that coupon payments are a legal requirement by the issuer; that is the bond holder must be paid or the entity will be in default. This requirement provides a more stable income from investment than other investment types such as a dividend received from an equity share. This feature is important for investors seeking a regular income from their investment.

Please contact our office if you want to know more about how corporate bonds may fit within your portfolio.