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INCOME NOT SUBJECT TO TAX

INCOME NOT SUBJECT TO TAX

You may have received amounts that aren’t subject to tax, so they aren’t included as part of your assessable income, but they may be used in other calculations on your tax return. These types of income divided into the following categories:

Exempt Income:

You do not need to pay tax on exempt income but it may be used for other calculations. Exempt income includes:

  • Certain Government pensions
  • Certain Government allowances i.e. carer allowance
  • Some scholarships, grants & awards
Non Assessable, non-exempt income:

You do not need to pay tax on Non assessable, non-exempt income but it may be used for other calculations. Non assessable, non-exempt income includes:

  • the tax-free component of an employment termination payment (ETP)
  • genuine redundancy payments and early retirement scheme payments shown as ‘Lump sum D’ amounts on your payment summary
  • super co-contributions.
Other:

Generally, you do not have the declare the following:

  • Small gifts & rewards i.e. birthday presents
  • Prizes won in ordinary lotteries
  • Prizes won on game shows
  • Child supports payments

For more information or to book an appointment, call one of our friendly staff on 03 9792 2772. Alternatively you can email info@infitygrp.com.au

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Infinity Group

Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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CLOTHING, LAUNDRY AND DRY CLEANING EXPENSES

CLOTHING, LAUNDRY AND DRY CLEANING EXPENSES

You can claim clothing, laundry and dry cleaning expenses if your expenses falls into one of the 3 categories below:

Occupation-specific clothing i.e. checked pants a chef wears

You can claim for clothing that is specific to your occupation, is not everyday in nature and allows the public to easily recognise your occupation – such as the checked pants a chef wears. You can’t claim the cost of purchasing or cleaning clothes you bought to wear for work that are not specific to your occupation, such as a bartender’s black trousers and white shirt, or a suit.

Protective clothing

You can claim for clothing and footwear that you wear to protect yourself from the risk of illness or injury posed by your income-earning activities or the environment in which you are required to carry them out. To be considered protective, the items must provide a sufficient degree of protection against that risk. Protective clothing includes:

  • fire-resistant and sun-protection clothing
  • safety-coloured vests
  • non-slip nurse’s shoes
  • rubber boots for concreters
  • steel-capped boots, gloves, overalls, and heavy-duty shirts and trousers
  • overalls, smocks and aprons you wear to avoid damage or soiling to your ordinary clothes during your income-earning activities.
Work Uniforms

You can claim for a uniform, either compulsory or non-compulsory, that is unique and distinctive to the organisation you work for. Clothing is unique if it has been designed and made only for the employer. Clothing is distinctive if it has the employer’s logo permanently attached and the clothing is not available to the public.

Compulsory work uniform

This is a set of clothing that identifies you as an employee of an organisation with a strictly enforced policy that makes it compulsory for you to wear the uniform while you’re at work. You may be able to claim a deduction for shoes, socks and stockings where they are an essential part of a distinctive compulsory uniform and where their characteristics (colour, style and type) are specified in your employer’s uniform policy. You may be able to claim for a single item of distinctive clothing, such as a jumper, if it’s compulsory for you to wear it at work.

Non-compulsory work uniform

You can’t claim expenses incurred for non-compulsory work uniforms unless your employer has registered the design with AusIndustry. Shoes, socks and stockings can never form part of a non-compulsory work uniform, and neither can a single item such as a jumper.

For more information or to book an appointment, call one of our friendly staff on 03 9792 2772. Alternatively you can email info@infitygrp.com.au

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Infinity Group

Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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WHAT YOU NEED TO BRING TO YOUR APPOINTMENT

WHAT YOU NEED TO BRING TO YOUR APPOINTMENT

Tax season is almost upon us, therefore we have compiled a list of thing we need from you to complete your 2015/16 tax return.

Things we prefer to have prior to a meeting:
  • Your full name
  • Your date of birth
  • Your tax file number (this can be found on your group certificate or previous years ATO Notice of Assessment)

Once we have received the information above, we can set you up on our system and be ready to go when you come in to see us.

Things we need during the meeting:

Income/revenue documents –

  • Group certificate/s (given to you by your employer)
  • Details of termination payments or any other lump sum payments received (given to you by your employer)
  • Details of any interest earned from banks or other financial institutions (this information can be found on summary on online banking or on the bank/financial institution statement)
  • Details of dividends received
  • Details of any income you have received through your ABN
  • Any other income (Capital gains, foreign income etc.)

Details of the following expenses –

  • Motor vehicle expenses (log book or any diary notes)
  • Other travel expenses i.e. parking, tolls etc.
  • Uniforms and work related clothing expenses (including laundry expenses)
  • Income protection premiums
  • Payments to approved charities
  • Prior year tax preparation bill
  • Any other work related expenses (mobile, internet, home office, unions fees etc.)

*Please note lists above are not exhaustive.

The allowable deductions will vary from job to job. We therefore recommend you bring along any expenses that you think could be a deduction and we will advise you whether it is claimable or not.

To book an appointment call one of our friendly staff on 03 9792 2772 or alternatively email shehan@infinitygrp.com.au.

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Infinity Group

Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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CLAIMING MOBILE PHONE, INTERNET AND HOME PHONE EXPENSES

CLAIMING MOBILE PHONE, INTERNET AND HOME PHONE EXPENSES

If you use your own phones or internet for work purposes, you may be able to claim a deduction if you paid for these costs and have records to support your claims. If you use your phones or internet for both work and private use, you will need to work out the percentage that reasonably relates to your work use.

Substantiating your claims

You need to keep records for a 4-week representative period in each income year to claim a deduction of more than $50. These records may include diary entries, including electronic records, and bills. Evidence that your employer expects you to work at home or make some work-related calls will also help you demonstrate that you are entitled to a deduction.

How to apportion work use of your phone

There are 4 different methods to claim your phone:

Incidental use

If your work use is incidental and you are not claiming a deduction of more than $50 in total, you may make a claim based on the following, without having to analyse your bills:

  • $0.25 for work calls made from your landline,
  • $0.75 for work calls made from your mobile, and
  • $0.10 for text messages sent from your mobile.
Usage is itemised on your bills

If you have a phone plan where you receive an itemised bill, you need to determine your percentage of work use over a 4-week representative period which can then be applied to the full year.

You need to work out the percentage using a reasonable basis. This could include:

  • the number of work calls made as a percentage of total calls
  • the amount of time spent on work calls as a percentage of your total calls
  • the amount of data downloaded for work purposes as a percentage of your total downloads.
Usage is not itemised on your bills

If you have a phone plan where you don’t receive an itemised bill, you determine your work use by keeping a record of all your calls over a 4-week representative period and then calculate your claim using a reasonable basis.

Bundled phone and internet plans

These days phone and internet services are often bundled. When you are claiming deductions for work-related use of one or more services, you need to apportion your costs based on your work use for each service.

If other members in your household also use the services, you need to take into account their use in your calculation. To claim, you need to identify your work use for each service over a 4-week representative period during the income year. This will allow you to determine your pattern of work use which can then be applied to the full year. A reasonable basis to work out your work related use could include:

Internet:

  • the amount of data downloaded for work as a percentage of the total data downloaded by all members of your household
  • any additional costs incurred as a result of your work-related use – for example, if your work-related use results in you exceeding your monthly cap.

Phone:

  • As noted above

For more information or to book an appointment, call one of our friendly staff on 03 9792 2772. Alternatively you can email info@infitygrp.com.au

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Infinity Group

Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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TAXABLE PAYMENTS REPORTING – BUILDING AND CONSTRUCTION INDUSTRY

TAXABLE PAYMENTS REPORTING – BUILDING AND CONSTRUCTION INDUSTRY

As part of the 2011/12 Federal Budget, the Government announced the introduction of taxable payments reporting for businesses in the building and construction industry. Taxable payment reporting system is applicable to those primarily in the building and construction industry and who make payments to contractors for building and construction services. The aim of the new system is to improve compliance with tax obligations by those contractors who are currently not doing the right thing. The information reported about payments made to contractors will be used by ATO for data matching to detect contractors who have defaulted with their tax obligation. For instance, those who have not:

  • Lodged their tax returns
  • Included all their income on tax returns that have been lodged.
  • Registered for the GST even though they are required to do so.
Do you need to report?

You need to report to the ATO if all of the following apply:

  • you’re a business that is primarily in the building and construction industry
  • you make payments to contractors for building and construction services
  • you have an Australian business number (ABN).

You’re considered to be a business that is primarily in the building and construction industry if any of the following apply:

  • in the current financial year, 50% or more of your business income is derived from providing building and construction services
  • in the current financial year, 50% or more of your business activity relates to building and construction services
  • in the financial year immediately before the current financial year, 50% or more of your business income was derived from providing building and construction services.
Details you need to report

For each contractor, you need to report the following details each financial year:

  • ABN – if known
  • name
  • address
  • gross amount you paid for the financial year – this is the total amount paid, inclusive of goods and services tax (GST)
  • total GST included in the gross amount you paid.

You are required to report the payments you make to contractors in the financial year in which the payments are actually made (cash basis).

Payments you need to report

You need to report payments you make to contractors for building and construction services. The definition of building and construction services is broad – it includes any of the activities listed below if they are performed on, or in relation to, any part of a building, structure, works, surface or sub-surface. For further details on payments you need to report, refer to the 2 ATO links below:

Appendix 1:

Appendix_1__Examples_of_building_and_construction_services
Appendix 2:

Appendix_2__Examples_of_buildings__structures__works__surfaces_or_sub_surfaces
Payments you don’t report

You do not need to report the following payments:

  • Payments for materials only
  • Unpaid invoices as at 30 June each year
  • Pay as you go withholding payments
  • Payments within a consolidated group
When to report

Your Taxable payments annual report is due by 28 August each year. Penalties may apply for not lodging your annual report by the due date.

How can we help?

At Infinity Group we understand that the industry is dynamic and challenging, therefore we offer a range of comprehensives services including:

  • Set-up of the most tax effective business structure to ensure protection of assets and minimisation of tax
  • Preparation and lodgement of BAS’s
  • Preparation and lodgement of annual financials (if applicable) and tax returns
  • Preparation and lodgement “taxable payments annual report”
  • Bookkeeping
  • Assist/provide advice (general) with income protection and other insurance
  • Cash flow projections
  • Tax planning

To book an obligation free consultation with one of our friendly staff, please call (03) 9792 2772 or email info@infinitygrp.com.au

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Infinity Group

Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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WHY IS BOOKKEEPING IMPORTANT?

WHY IS BOOKKEEPING IMPORTANT?

Owning your own business can be extremely rewarding and busy all at the same time. With the ever-increasing amount of hats that small business owners have to wear, it can be difficult to find the time and energy to complete everything. One core component of business which is often neglected due to poor time management is bookkeeping. Neglecting bookkeeping can have serious adverse effects on business which may result in the closure of the business.

We have noted below the key reasons why bookkeeping is so vital to all businesses:

  • Record keeping is required by law.
  • Assists with taxation obligations.
  • Allows better financial analysis and management of the business.
  • Allows business planning to occur.
  • Assists when business financing is required.

At Infinity Accounting and Financial Services, we assist by taking the stress of bookkeeping away. This allows you as the business owner to focus on improving and expanding your business. Our experienced Accountants use leading Bookkeeping software, such as Xero, MYOB and QuickBooks, and have the skills to efficiently meet your bookkeeping and accounting needs.

 

We have four packages available:

  • Bookkeeping only – These packages start at $25 per month.
  • Deluxe package – This includes bookkeeping, annual financials, tax returns and BAS’s – These packages start at $150 per month.
  • Premium package – Includes all items in the deluxe package as well as quarterly meetings to discuss progress – These packages start at $200 per month.
  • Platinum package – This includes all items in the deluxe package as well as monthly meetings to discuss progress – These packages start at $250 per month.

For a free consultation please contact us on 9792 2272 or email shehan@infintiygrp.com.au.

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Infinity Group

Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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GOT YOUR CAR LOG BOOK READY?

GOT YOUR CAR LOG BOOK READY?

Many taxpayers miss out on maximising their claims due to inadequate record keeping. Once such instance is failing to maintain a valid log book. The car log book is an important piece of tax substantiation for those who use their vehicle in the course of performing their duties.

Changes to car expense claims make log books critical

From July 1, 2015, the following rules apply for work related car expenses:

  • the cents per kilometre method will use a standard rate of 66 cents per kilometre rather than a rate based on the engine size of the car, and
  • the one-third of actual expenses method and the 12% of original value method has been abolished because the Tax Office found that only 2% of taxpayers used these methods.

With the above changes, greater emphasis will be placed on individuals who travel more than 5,000 business kilometres to maintain a valid log book, if they opt for the log book method.

The log book method will therefore benefit an individual if their estimated deduction exceeds $3,300 for the 2015-16 income year (that is, 66 cents x 5,000 Km’s under the cents per kilometre method).

What are the requirements for a valid log book?

The purpose of the log book and accompanying odometer records is to determine the business use percentage of the vehicle. As a general rule, the higher the business-use percentage, the greater the deductions that may be claimed for work-related car expenses

The requirements for maintaining a log book (income tax) include:

  • the log book is valid for five years – after the fifth year, a new log book will need to kept. A new one can be started at any time (for example, if it no longer reflects the business use)
  • the log book must be kept for at least a continuous 12 week period – note that the year in which the log book is first kept is referred to as the “log book year”; otherwise it is referred to as a “non-log book year”
  • where two or more cars are claimed, each log book must cover the same period.
  • the log book must reflect the business use of the vehicle – this can be tricky where there is home to work travel, travel between workplaces, or if the individual’s work is itinerant in nature
  • odometer records must also be kept – this is crucial for working out the total distance travelled during the year and also for the relevant period that the log book is kept.
What information must be kept?

Each log book kept must contain:

  • when the log book period begins and ends
  • the car’s odometer readings at the start and end of the log book period
  • the total number of kilometres the car travelled during the log book period
  • the number of kilometres travelled for each journey (if two or more journeys are made in a row on the same day, this can be recorded as a single journey).
The following will need to be recorded:
  • journey start and finishing times
  • odometer readings at the start and end of the journey
  • kilometres travelled
  • reason for the journey
  • the business-use percentage for the log book period.

In the Tax Office’s view, when recording the purpose of the journey, an entry stating “business” or “miscellaneous business” will not be enough. The entry should sufficiently describe the purpose of the journey so that it can be classified as a business journey. Private travel is not required to be shown, but it may help to include in the records to help with calculations.

Do you have trouble keeping records?

The Tax Office has a smartphone App (Search “ATO”) containing a ‘myDeductions’ tool may solve the record keeping dilemma This feature enables individuals to capture receipts for work-related car expenses as well as enter information for a log book. The App also has online calculators, tax rates, news and updates, payment plan estimators and more.

For further information regarding log books, please contact one of our friendly staff members for an obligation free consultation on (03) 9792 2772.

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Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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TAX DEDUCTION MISCONCEPTIONS

TAX DEDUCTION MISCONCEPTIONS

Tax payers seek to have as many legitimate deductions as possible. Unfortunately, though, some claims which tax payers believe are legitimate get rejected by the Tax Office. While some claims are obviously not deductible, other rejections may surprise some tax payers. The Tax Office has compiled the list below of common rejections:

1.Drivers Licence:

The cost of a standard driver’s licence is considered a private expense and as such is not claimable. This ruling applies even if your job requires you to have a driver’s licence.

2.Vaccinations:

A deduction is generally not allowable for vaccination against diseases that an employee may come into contact with in the course of work i.e. airline employees. Some disease protection, for example for cattle-borne Q fever, may be allowed (case by case determinations).

3.Child minding expenses

A deduction for child minding expenses is not deductible, even when this is necessary to secure job advancement. There is however the child care rebate and the child care benefit available through other means.

4.Commuting to and from work

Travelling between home and work is not generally deductible, even where incidental work tasks are performed on the way. Certain circumstances may allow a deduction, such as carrying bulky tools (tradies) in situations where the equipment cannot be secured or stored at the taxpayer’s place of work.

5.Grooming costs

Even though a high standard of appearance may be required at some workplaces, expenses such as hairdressing or cosmetics are not usually deductible. Not even Defence Force personnel get a deduction for grooming, even if this is to meet military regulations. Anyone constantly exposed to chlorinated water (such as a hydrotherapy assistant) could have a case for claiming moisturisers and conditioners.

6.Relocation expenses made by an employee

Expenses from changing employment, such as costs of moving house or meeting an employment agreement, are not generally deductible. The reason given is that the expense comes “at a point too soon” to be regarded as having been incurred in gaining assessable income.

7.Police clearance and record checks

Any expenditure that is required to meet prerequisites to securing particular employment, such as a police clearance certificate or record check, is not deductible. The reason given is that the expense comes “at a point too soon” to be regarded as having been incurred in gaining assessable income.

8.Meal costs

In general terms, the cost of a meal is not deductible as it is a private expense. There are some situations however, where meal costs are deductible. The taxpayer will need to demonstrate that the expenditure has a sufficient connection to their income earning activity. For example, the cost of dinner incurred by an employee who is required to travel away from home on an overnight business trip would in most instances be deductible.

For further information regarding deductions, please contact one of our friendly staff members for an obligation free consultation on (03) 9792 2772.

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ARE YOU CLAIMING THE CORRECT RENTAL PROPERTY EXPENSES?

ARE YOU CLAIMING THE CORRECT RENTAL PROPERTY EXPENSES?

ATO audits have found that some landlords are incorrectly claiming rental property expenses. In particular, it has found that many property investors are making simple mistakes that could be avoided with a little guidance. These common mistakes include:

  • claiming rental deductions for properties “not genuinely available” for rent
  • incorrectly claiming deductions for properties only available for rent part of the year (like a holiday home)
  • incorrectly claiming structural improvement costs as repairs when they are capital works deductions, such as re-modelling a bathroom and;
  • overstating deduction claims for the interest on loans taken out to purchase, renovate or maintain a rental property.

At Infinity Accounting and Finance, we have compiled a list below of the most common rental property deductions that landlords misinterpret. The expenses have been broken up into three categories:

    Expenses deductible in the year it is paid for (Annual Expenses) Expenses to be claimed over a number of years Non-deductible expenses

Please note that for deductions to be available, the property must be rented out at an arm’s length commercial basis. If it is not an arm’s length commercial basis, the deductions must be apportioned accordingly.

Annual Expenses
Interest

Interest is deductible in the following scenarios:

  • The loan is used for purchase of the rental property and the property is rented or available to rent. Interest is also deductible over the time that a property, which is to become income producing, is under construction.
  • The loan is taken out for renovations, purchase of depreciation assets or maintenance so as long as they relate to the rental property.

If you start to use the property for private purposes, you can’t claim any interest expenses you incur after the time you commence using it in that manner.

Agent fees and commissions

Agent fees and commissions are deductible as long as they relate to fees paid for the letting or collecting of rent for properties. Commissions paid to a real estate agent or other person/s for the sale or disposal of a rental property can’t be claimed. This is normally included in the cost base of the property when sold (capital gains purposes).

 

Repairs and maintenance

A non-capital repair to correct defective or worn-out parts of an investment property, or to return a deteriorated part to its former condition, is deductible. For example replacing a window or repairing electrical appliances.

The improvement, renewal or replacement of a complete structure is however considered to be a capital expense and is not deductible immediately. This is to be deductible over the “useful life” of the asset. Examples include replacing a fence. Similarly, repairs to a rental property shortly after purchase is typically a capital expense if the repair is to rectify a defect that existed at the time of purchase (referred to as an “initial repair”). Care should also be exercised when the materials used in conducting a repair are superior to the original product as the expenditure may be considered capital in nature on the basis that the asset has been “improved”.

Body corporate fees

Body corporate fees and charges that are incurred to cover day-to-day administration costs, maintenance or put into a special purpose fund are deductible. However, payments to a special-purpose sinking fund to cover the cost of capital improvements or capital repairs are not immediately deductible as they typically constitute capital works.

Travelling expenses

Travel expense incurred once you own the property are typically deductible if they are incurred to:

  • inspect the property
  • collect rent
  • showing prospective tenants through the property
  • carrying out repairs, including travel to acquire material for those repairs, or
  • visiting the real estate agents for purposes such as leaving keys, signing lease agreements or discussing matters relevant to the letting. A full deduction is available if the sole purpose of the trip was to the rental property. However, if the trip also includes a private purpose, only a partial deduction will be allowed.

Travel costs associated with searching for a property to buy can’t be claimed.

Expenses to be claimed over a number of years
Borrowing expenses

Borrowing expenses include items such as loan establishment fees, title search fees, costs for preparing and filling mortgage documents, mortgage broker fees and stamp duty charged on the mortgage. If you take out an insurance policy to cover the loan in case you cannot meet repayments, these premiums are not deductible. The loan expense is expense is spread over the lesser of five years or the life of the loan under special rules.

Depreciating assets and structural improvements

Decline in value of depreciating assets such as air conditioners, heaters, hot water systems, vacuum cleaners etc. can be deducted over the life of the asset (“effective life”). This will vary from asset to asset so please talk to us or visit the ATO website for further information.

The building and other structural improvements (building new garage due to fire) to the rental property can also be deducted. The decline in value for these items is generally apportioned over 40 years (can vary for certain items).

Non-deductible expenses

Common expenses that are not deductible include:

  • acquisition and disposal costs – such as purchase cost of the property, advertising expenses, stamp duty on the transfer of the property and legal costs. These expense may however be included in the cost base for capital gains purposes.
  • expenses that your tenants pay such as electricity or water charges, and;
  • expenses not related to the rental of a property such as during personal use of a holiday home that is rented out for part of the year.

The information mentioned above relate to common mistakes made by landlords and does not include other expenses which can be claimed by a landlord in relation to a rental property.

For further information regarding rental property deductions, please contact one of our friendly staff members for an obligation free consultation on (03) 9792 2772.

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Infinity Group

Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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BENEFITS OF PROPERTY INVESTMENT

BENEFITS OF PROPERTY INVESTMENT

Investment in property is a popular method for Australians to build wealth and diversify their risk. Investing in property tends to be a safe and easy option compared to other investments such as stocks. We have outlined below reasons to consider investing in property:

Control over the investment

Unlike other investments, you can be in complete control of your property investment. You will be able to decide type of property investment, location, rental charge etc.

Capital Growth

The value of your property should grow over time and if chosen well can be extremely beneficial. For example if you invest in a $300,000 property and expect it to increase in value by 5% each year for 10 years the value of the property would be $488,668. This is approximately a $189k increase in value for an asset which is highly leveraged (use of debt to increase value). The capital growth ties in well with rental income and the tax benefits associated with property investment.

Rental Income

Rental income is a benefit of investing in property, although this increases your taxable income (see below). Rental income can be utilised to pay the loan and other maintenance expenses (if funds are available) which offsets the income earned (reduces taxable income). With interest rates at an all-time low, many properties are cash flow neutral (cash income = cash expenses) or cash flow positive or ‘positively geared’ (cash income > cash expenses).

Tax Benefits

As noted above, a benefit of renting out your investment property is the receipt of income. This income is however taxable. To offset this income you can claim costs associated with the rental including but not limited to interest on property, council rates, agent fees, insurance etc. If the property is ‘negatively geared’, that is expenses exceed income, you can deduct this against your taxable income (increases taxable income if positively geared). Expenses exceeding income may seem like a negative however in most instances, it is depreciation (non-cash expense) which provides the largest portion of the loss. Depreciation is an expense provided for the “wear and tear” of the building i.e. similar to a car losing value over time. Depreciation is at its highest when a property is new (includes fixtures and fittings) and then decreases over time until only the building is being depreciated (this lasts for 40 years).The examples below show both positively and negatively geared properties.

 Person APerson BPerson C
Taxable Income$60,000$60,000$60,000
Rent Received$20,000$20,000$13,000
Interest on loan($10,000)($12,000)($12,000)
Depreciation($3,000)($8,000)($8,000)
Other Expenses($3,000)($3,000)($3,000)
New Taxable Income$64,000$57,000$50,000

In the scenarios above, ‘Person A’ is positively geared whilst ‘Person B’ and ‘Person C’ are negatively geared. ‘Person A’ would therefore need to pay tax on the amount earned from the rental income. ‘Person B’ is negatively geared however without the depreciation they would be positively geared. This is an ideal situation as your cash inflow (money received) outweighs your cash outflow (money paid) but a tax benefit is still received due to the depreciation. ‘Person C’ is also negatively geared but in this instance cash outflow exceed cash inflow. Although not ideal, the tax benefit received (given the above facts) would exceed cash outflow during the year. As you can see from above, each situation will have their pro’s and con’s.

To arrange an obligation free consultation to discuss investing in property, please call Infinity Accounting & Financial Services on (03) 9792 2772.

DISCLAIMER:

All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.

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Established in 1999, Infinity Group is a multi-service firm that specialise in the areas of Finance, Property, Accounting & Taxation, Insurance and Migration Services.

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