Category: Finance

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Finance

What is negative gearing?

Negative gearing is a rising trend among investors. People who want to purchase investment properties often need to borrow money from lending institutions. When people borrow, they calculate the risks and potential rewards carefully. Most ordinary investors will try to ensure the monthly profits from their investment property will surpass the mortgage repayments and interest rates.

Negative gearing doesn’t follow the same rules. People borrow money knowing that the profits from the property won’t cover the monthly interest and mortgage repayments. Investors make up for the shortfall between the interest payments and income earned with the help of deductions from their current income tax. Negative gearing is prevalent in Canada, Australia, and New Zealand because of the tax policies and concessions in these countries.

What is the benefit of negative gearing?

Why would you invest in a property that doesn’t offer profits that actively cover your expenses? Even if you get a tax break from the government, you don’t earn enough profit through rent to justify the initial investment. Here’s what you need to understand about negative gearing:

  1. Negative gearing works because investors don’t intend to retain the property over the long-term. Their investment only bears fruit after they pay off their loan and sell the property.
  2. For negative gearing to be profitable, the property must be a part of a thriving housing market. Property values should increase over time instead of remaining steady or decreasing.
  3. If you purchase the right property in the right market, you can potentially earn several hundred thousand dollars in profit. This investment is risky and can potentially lead to complete loss of money.
  4. Investors need to plan carefully and ensure they have enough financial stability to bear the shortfall between interest rates and income even with the tax break.

Negative gearing is a financially sound decision only if your capital gains are greater than your initial investments and related expenses.

How does negative gearing work?

You need to consider a number of factors before you invest in negative gearing. If you don’t plan your investment well, you can face losses amounting to several thousand dollars. Here’s what you need to consider:

  1. The total income from the property. For this, you need to multiply the weekly rent by 52 to calculate the annual income.
  2. Tally all expenses including mortgage repayments, vacancy, repairs, insurance, manager fees, bank fees, council rates, water rates, land tax, strata fees, and property improvements costs.
  3. Subtract the total expenses from the income. Deduct depreciation as well.
  4. Calculate the amount of tax you need to pay and determine how much of it will be refundable.
  5. Consider the capital growth of the property in the market.

All of these factors will help you determine the capital gains from your investment. If you don’t perform these calculations, you won’t know if the property is worth investing in and whether you will get enough money to justify the investment. This is how negative gearing works and delivers profit. It relies solely on the market demand and supply as well as the growth in property rates.

An example of negative gearing

It’s not easy to understand how negative gearing works without considering a real-life example. Here is an example that illustrates how you can earn profit using this investment strategy:

  1. You purchase a $440,000 property on a loan of $400,000 with 7% interest rates. Your interest will be around $28,000.
  2. If you earn around $450 rent every week on this property, you earn $23,400 in annual rent income, which leaves you with a shortfall of $4,600.
  3. If the value of the property increases by 10%, you gain a profit of $44,000 at the end of the year and once you remove the shortfall of $4,600, you have an overall profit of $39,600.
  4. You can deduct the other expenses from this calculation and still get ample profit at the end of the year.

If the value of the property doesn’t grow by 10% or more, you won’t gain enough profit to justify your investment.

Contact local property lawyers

What expenses can you claim as deductions?

In most cases, you can claim a deduction for any expenses related to the management and maintenance of an investment property, this includes any interest you pay on loans. When your asset is negatively geared, you may be able to deduct the full amount of rental expenses against your rental and other income, including your salary and wages.

The rule of thumb is, property investors can claim deductions in three main categories:

  • Building allowances – in most cases you can claim building allowances such as for depreciation over time
  • Revenue deductions – you may be eligible to claim revenue deductions such as the interest on borrowed funds
  • Capital items – major items such as a oven or dryer in a rental property are subject to depreciation over time and can be claimed over several years

Are there any changes in negative gearing in 2021?

The 2021 budget includes a number of measures relevant to property investors, however it doesn’t directly address or change existing arrangements around negative gearing.

How does this affect Australians?

Negative gearing is still a good investment option for Australians, particularly if you have enough financial stability to support the shortfall between the interest rates and the income generated. The housing market is on the upward trend so you can expect the value of the property to grow comfortably over a short period of time.

It’s a good idea to consider a short-term investment instead of long term investment if you intend to use negative gearing. Most people only invest for one year and see several thousand dollars in profit. This can keep you safe from any changes to regulations the government makes in future years.

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Finance

Small business tax advice

Running a small business isn’t always smooth sailing, especially at the end of the financial year. With these few tax return tips, you’ll have your tax return done quick, so you can get back to business.

Prepare your tax return early

Avoid the rush in July by getting your documents together early. For some businesses, this involves manually collecting an inventory of receipts, expense records, invoices or employee details to review your company’s spend. Keeping records helps you understand your business’ financial situation and for tax purposes, receipts should be kept for up to five years. Starting as early as possible is the best way to minimise stress towards the end of the financial year and will help you lodge correct statements. As you go, confirm your business records are up to date and in line with current legislation.

Get ahead of the game and plan ahead by keeping copies of previous years records.

Get in touch with your accountant before June 30 to ensure you’re organised / Source: Stock image.

Tax advice for small business owners – what can you claim?

Being a small business there are plenty of things you’re able to claim tax on. Here’s a brief overview below.

  • If you or your employees travel for business you can claim:
    • airfares, train, bus or taxi fares, accommodation costs, meals and overnight business travel.
  • If you run your business at your home, or your business is based from home, you can claim:
    • the business portion of some expenses, including mortgage interest and electricity.

Match all accounts

Reconciling your accounts ensures bank statements are consistent with your own records, helping you spot any discrepancies in spend and find duplicate transactions. Start by chasing up outstanding payments, pending invoices or unpaid refunds. When all payments are up to date, match your receipts to your bank transactions, asking for copies of receipts where necessary. When you reconcile your accounts, you will also need to consider investment accounts, unpaid or outstanding debts and any leases.

Send payment summaries to employees well before July to ensure your business’ accounts are reconciled before PAYG summaries are provided for employees. Use this chance to update employees’ current financial details and superannuation payments, also checking any termination dates and leave entitlements.

A meeting with a bookkeeper or accountant can be useful as the new financial year approaches.

Contact local tax accountants

Shop for what you need

Some business owners use this opportunity to pre-purchase service and supplies to claim a deduction but fall for the trap of spending for unnecessary items, simply for a tax deduction. You can make a tax deduction on any important businesses purchases.

Claim the right deductions for the best refund

Keep accurate and detailed records to help you make the right deductions and concessions for your business. While it may take you some time to delve into the details of what deductions are available, a little effort from the experts will help your business pocket extra savings this financial year.

You can claim expenses related to the running of your business -mostly for day-to-day costs or for expenses that depreciate over time but are used to improve the structure of your business. To see what can and can’t be claimed, Check the ATO website.

Registered businesses with an ABN and a turnover under $2 mil may take advantage of recent tax concessions. This means they can claim any assets (less than $20,000) if an ongoing activity is adequately demonstrated. According to the ATO, your business may be eligible to claim up to $300 on home office equipment, electrical costs, cleaning expenses or repairs although documentation is required to claim deductions that exceed $300.

Plan ahead for maximal tax return savings

The end of the financial year is also an opportunity to compare your business’ performance to last financial year. You can then set realistic business goals for the upcoming year.

Lauren suggests that businesses should consider investing time and money in the right accounting software. This will minimise the risk of tax audits and penalties.

“Be organised. If you have adequate accounting software and bookkeeping procedures, you can do the work as you go,” she says.

The pressure of running a small business is already a lot to handle. When the end of financial year comes around, why not leave it to the experts? From tax accountants to bookkeepers, request a free service and make the right expert connection.

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Finance

How to make the most of your business insurance

Aside from having the right cover, one of the top considerations with insurance is how to maximise your policy. 

Which cover you decide to buy is just the starting point. 

To protect your business against all risks and manage your insurance effectively, it’s essential to understand the policy and increase your chances of a successful claim. Business costs can quickly rack up. But by minimising risks and improving precautions, you’re able to save money and gain more benefits from your cover. 

Here’s how to optimise your business insurance for the most significant results. 

1. Choose the right cover 

Without the right cover, your business is at serious risk. 

The best insurance for your business depends on the industry, number of staff, where you work from and what risks are associated with the work you do. 

Choose the right cover by:

  • Conducting a risk assessment
  • Considering common business threats that apply to your industry
  • Determining what types of insurance coverage you need – for example; professional indemnity insurance (service-based, if you offer advice for a living), public liability insurance (protects against injury/damage caused by your products/services), business insurance (package option to cover multiple policies such as building, contents, theft and general property) and cyber-liability insurance (protects against online risks) 
  • Checking if there are any compulsory policies your business needs

Tip: One of the biggest mistakes business owners make is underinsuring. In fact, according to the Insurance Council of Australia, only 63% of businesses have enough cover. Make sure you weigh up your business assets, include the most valuable in your cover and reevaluate if you buy new equipment or extra stock. 

2. Review your business activities 

Activities grow as your business does, so it’s essential to make sure you’re protected if things change. 

If you have an insurance broker let them know when business activities differ. They’ll be able to review coverage options on your behalf to find the most beneficial one for you. 

Check your policy to see if existing coverages need changing. Or, you may need to buy more protection. Significant changes to report include if you move your business to a new location, change the amount of staff you employ or introduce operational variations like expand product/services offerings. 

Group of three people sit around a desk inspecting a document
A group of people inspect a document / Source: Beger & Co Lawyers

3. Regularly evaluate your protection and risks

The best way to lower your insurance costs is through a yearly evaluation. 

Checking insurance statements is usually on the bottom of the to-do list. But avoid the set-and-forget tactic to review every 6-12 months, so you know what you’re working with. 

Tip: Review your deductibles as well.  Set an amount you can easily come up with if you need to make a claim. Higher deductibles may be beneficial for lower-risk businesses, as they help discourage you from filing smaller claims. Some insurance companies offer discounts for policyholders who don’t file claims. 

4. Avoid bad practices

Bad practices increase the costs of your business insurance. 

Consider the actions you take (and don’t take) if you want to avoid out-of-pocket costs and higher insurance premiums. Failing to provide training to staff and not maintaining a safe workplace are just some of the culprits that can increase your expenses.

Contact local commercial law experts

Make sure you:

  • Keep adequate records for risk management programs
  • Take reasonable care to ensure your staff are safe at work and on the job
  • Provide staff with regular training to prevent accidents
  • Review geographic risks such as natural phenomena
  • Comply with employment laws
  • Choose a reputable insurer, licensed in your location and provides a good service 
  • Implement more robust risk management to reduce insurance costs
  • Understand the policy details, such as contract terms, what it does and doesn’t cover and how you get paid for each claim

Some business owners are better off working with an insurance broker who helps by providing risk management advice and increasing your chances of a successful claim. This prevents high premiums, under or over-insuring and uncertain claims as a result of paperwork not being filled out correctly. 

Getting your cover and policy right is the difference between being adequately insured or leaving your business exposed to incidents.

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Finance

5 common small business myths

When you start your own business, it can be easy to fall into the trap of believing in myths. From bookkeeping to customer service, there are plenty out there – and some of them seem true enough to take seriously. The problem with this? They can steer your business in the wrong direction.

Put simply, it’s about time SMEs stopped spinning so many plates – especially when some plates aren’t worth the time. Here are five small business myths you need to stop believing.

Myth 1: Bookkeeping is just about the numbers

It’s a common myth that bookkeeping is a numbers game. While it’s true that numbers do have a big part to play, it’s actually much more than this. Essentially, a bookeeper is responsible for organising and storing accounting and financial documents such as statements, income tax records, ledgers and journals.

Source: Conveyancing.com.au NSW

In fact, there are many skills that a good bookkeeper needs to help keep a business afloat that goes beyond being savvy with numbers. Discipline, good communication and a high level of organisation are required. They also need to have a solid understanding of the bigger picture, which means, knowing how expenses or new staff hires will impact the business six or 12 months down the track.

Proper bookkeeping makes it easier to fulfill tax obligations, analyse and manage finances, make plans for the business, and abide by the law. Consult with a local bookkeeper for some professional advice.

Myth 2: Be active on all social media platforms

For small businesses, it’s important to be active on social media. However, it’s equally as important to be active on the right platforms in the right way.

The truth is, being present on every single platform can be overkill. While it might seem easy to use software tools to publish your content automatically across several channels, what works on Facebook doesn’t necessarily work on Twitter or LinkedIn.

Take extra time to optimise your content for each platform. Think about the tone, angle and word length of each post, making sure it’s appropriate for your different audiences. Do your research and find out where your customers are having promising conversations and narrow your presence to where this is happening.

Myth 3: You should be working all the time

Running a small business will certainly keep you busy. It often feels like there is so much to do and so little time to do it. So we overwork ourselves to keep on top of things. However, everyone is human – and everyone needs a break.

Need proof? It’s actually scientifically proven that prioritising your breaks at work will make you happier, more focused and more productive. Taking breaks gives our brains a much-needed rest, allowing us to get back to our tasks with renewed energy and focus. They also relax our brains, helping us retain information and make valuable connections, as well as reevaluate our goals.

Simply put, making time for breaks equals making time for your business.

Myth 4: Voluntary administration is the end of your business

While some people might see it as an extreme action, voluntary administration can be a smart move. The truth is, when your business is in a sticky situation where debts can’t be paid, restructuring your operations, creditors and assets is a way of potentially improving your financial position.

The aim of voluntary administration (VA) is always to get a business back to financial health if possible, or to make sure that creditors get a better return than if the business was liquidated.

If you’re up against the wall, going into VA can give your business breathing space, as an external administrator takes control of your business while its finances can be reviewed. It’s a simple process, and contrary to what some people believe, can help your business get back on track.

Contact local bookkeepers

Myth 5: The customer is always right

There’s no denying that customers are crucial to your business. However, it’s important to balance their needs with yours and your employees’ needs too. Here are three instances when the customer is actually wrong:

  • When they make you or your staff unhappy
    Nobody deserves abuse. Sometimes customers get angry and expect people to be held accountable. However, if you know you or your employee to be right, it’s best to hold your ground. 
  • When they’re bad for business
    If a customer is disrespectful for absolutely no reason – it’s better to let them go. It shouldn’t be a matter of finances, especially if it’s causing you or your staff unnecessary trouble.
  • When they’re not worth it
    Some customers simply aren’t valuable to your business, particularly if they’re giving your staff trouble time and time again. Instead, it’s better to focus on customers that deserve your services and are willing to work with you.

Be a small business myth buster

Sometimes it can be tricky to figure out myth from reality. While busting myths is something you’ll naturally do when running a SME, it’s always helpful to know what to believe and what to dismiss before going in.

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Finance

Top 7 tax deductions for tradies

Tax deductions are a great way to claim back much needed cash at the end of financial year. There are many expenses that you are able to claim in your tax return, the top 7 tax reductions for tradies are explained below:

1. Transport expenses

As a tradie chances are your van or ute is your main method of transportation for taking you from job to job. As long as you can prove that you are using your vehicle for business purposes then you are able to claim back the purchase cost and any ongoing operating costs associated with the vehicle.

There are two different ways in which you can track your mileage in order to claim back the cost of running your vehicle for business purposes: the logbook method and the cents per kilometer method. If you choose to use the log book method you will need to prove your odometer readings for a time period of at least 12 consecutive weeks. By tracking the mileage you can claim the percentage of vehicle expenses allocated to business use, including running costs and depreciation. The cents per kilometre method allows you to claim $0.66 per kilometre on up to 5000 kilometres of business travel.

Source: Wills Plumbing And Property Maintenance Pty Ltd

2.  Tools and equipment

You can claim GST credits for the tools and equipment that you purchase to help you run your business. Items that cost up to $300 can be claimed as a tax deduction immediately. For items that cost over $300 you are able to claim a deduction on the items decline in value.

3. Clothing

If your profession requires you to wear specialist protective clothing such as steel capped boots, high-vis jackets, safety glasses and helmets can be claimed as a deduction. It is also possible to claim GST credits for the cleaning of your work clothes. Should the cost of cleaning exceed $150 you will need to provide receipts. For cleaning specialist work clothing on a regular basis you can claim a deduction of $1 for an entire load of work clothing; or $0.50 when the load is partially work wear.

4. Training courses, licences and certificates

If you’re undertaking any training courses or studying for any qualifications that relate to your trade, you are able to claim back the cost. You must be undertaking said qualification or training course to improve or maintain your skills in your profession only in order for them to be tax deductible.

5. Communications

You’re eligible to claim back the cost of work related phone and internet expenses. For claims more than $50 you need to work out the percentage that is used for work time only over a 4 week period, this can then be applied to the full income year. You will need to prove this with records in the form of bills, electronic summaries or diary entries.

6. Travel expenses

You can claim expenses associated with travelling for work purposes, such as accommodation, meals and transportation costs  i.e. taxi fares. These costs are deductible as long as you have proof of purchase in the form of receipts.

7. Union and association fees

The cost of union fees or subscriptions to professional associations are claimable in your annual tax return. Use your statement of fees or subscriptions paid as proof of your membership when submitting your return.

Other small business tax deductions

Everyone has tax obligations and must part with a percentage of their income at the end of every year. Business owners have additional tax burdens based on their business process and profit. It’s important that they conduct a break-even analysis and examine expenses and income carefully to determine how much they need to pay every year.

Source: Receipt Books

What is a small business?

Before you look at possible tax deduction options, you need to know whether your business is legally considered a small business. According to the government, businesses that have an annual turnover of $2 million or less are considered small. All of your businesses, including connected and affiliated ventures, are included in this bracket. This means you can’t split your business in order to remain under the $2 million mark.

Small business tax deductions you can claim

As a business owner, you know that you need to spend money to make it. Generally, the biggest portion of your income is funnelled back into your business to pay for essential business expenses and to generate more income. You can get tax deductions for most of the money you cycle back into your business. Many small business owners attempt to abuse this system and claim deductions for frivolous and unneeded expenses. Conversely, many miss opportunities to deduct tax and end up paying more than they need to. Here is a small business tax deductions list that most businesses can lay claim to:

  1. Advertising and sponsorship – Advertising raises awareness of your brand and brings customers to your doorstep, which generates income and profit for your company. Any investment you make towards advertising is tax deductible because it is an essential business expense. You also get tax deductions for advertising during the recruitment process, as hiring employees is also an essential business expense.
  2. Business-related travel – Travelling for business can be an expensive affair, especially if you need to travel to distant locations on a regular basis. As this travel is needed to help generate income, the expenses are deductible. You just need to maintain a clear record of your expenses. Preserve all your receipts, keep copies of your itinerary, record all your expenses and provide reasons for your travels. All of these expenses will be tax deductible. Make sure you don’t include any expenses that are counted as entertainment. For example, if you visit a different country and attend a concert during the business trip, you can’t claim deductions for the money you spent on the concert.
  3. Bad debts – Small business owners often struggle with bad debts, especially when they’re first starting out and have problems with cash flow. Some business debts have to be written off because business owners simply don’t have the resources to pay back the debt. This debt should be included as accessible income in the current year or previous year’s statements. It should also be written off as bad in the same year in order to claim a deduction.
  4. Borrowed money – If you need to borrow money you can claim deductions on that. You just need to prove that the money you borrowed helps provide accessible income to your business. Expenses on borrowed money can be legal costs, valuation fees, overdraft guarantee fees, registration fees, etc. These deductions are different from the deductions you get for paying interest on borrowed money, so make sure to claim both.
  5. Fringe benefits – If you provide fringe benefits to your employees, it’s considered a business expense and you can get tax deductions on it.
  6. Repairs and maintenance – Repairs and maintenance of your commercial property is an essential business expense and helps generate income as well. You need to make sure these expenses aren’t considered “capital costs.” You can claim deductions for thing like painting, plumbing, cleaning, up-keep, machine servicing and maintenance.
  7. Insurance – A number of insurance schemes are tax deductible as they’re considered essential business expenses as well. For example, you can get deductions for Worker’s Compensation, fire, public liability, vehicle, theft and loss of profit insurance premiums.
  8. Superannuation funds – You get deductions for contributions you make to your employee’s superannuation funds. You can also get deductions for your own superannuation funds.
  9. Salary – Salaries and wages paid to employees and workers are tax-deductible because they contribute towards your company’s revenue and profit. However, you need to keep in mind that all salaries are connected to your business and generate profit for your business. Sole traders can’t claim salaries paid to themselves. 
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Finance

What’s best for a small business to outsource?

Small businesses have a limited budget and can’t always afford to have full-time employees on their payroll to handle different tasks. This doesn’t mean you need to handle all essential business tasks on your own. Small business owners should focus most of their energy on business tasks and processes that require their particular skill and attention.

They can delegate ordinary business processes to a third party through outsourcing. You can maintain a lean organisation, stay within your operations budget and still get work done.

What can you outsource?

Different businesses have different requirements so it’s important to study your business processes, understand your budget and look at your employees’ skills and abilities before you determine what you should and shouldn’t outsource. Mentioned below is a list of services you can easily outsource. You can study the pros and cons of every option and make your decision.

HR outsourcing

When you have employees, you need to manage their needs and requirement though a Human Resource system. The HR department of a company maintains employee records, keeps track of their insurance cover, performance reports, leaves and absences, complaints and requests and other such information. All of these records need to be properly managed and maintained.

HR is also responsible for employee development and helps organise training. If your employees don’t have proper support from HR, they might not be inclined to remain in your company and seek employment elsewhere.

As a business owner you need to provide this support system and you can do it by outsourcing the task to an external HR company. They will handle all aspects of HR support and development, so your employees will be satisfied and perform well.

Payroll outsourcing

Business owners often underestimate how complex payroll management can be. It goes beyond keeping a record of employee payments and salaries. You need to keep track of their working hours, record leaves, bonuses and make sure all the employee information is up-to-date. Mistakes can lead to penalties, fines and sanctions, so it’s important to keep a good payroll record and ensure all the information in it is accurate.

One of the best ways to achieve this is to hire a professional bookkeeper and use a software program to manage the data. If you outsource payroll, you don’t need to worry about the details involved. You can trust the outsourcing professionals to keep all the information up-to-date and ensure there are no mistakes in the records

IT outsourcing

Modern businesses, especially small businesses, rely heavily on their IT systems. They use IT to get work done, store information, manage business processes, handle marketing and provide customer support. Unfortunately, IT systems aren’t infallible and can develop problems like viruses, data loss, software glitches, hardware issues, etc. Big companies have IT departments that can handle these problems and provide essential maintenance.

Smaller businesses can get the same security by outsourcing IT support and maintenance. IT support companies have expert technicians on their staff that can handle all kinds of computer and IT problems. They offer both remote and on-site maintenance and repairs.

IT support and maintenance companies also provide additional services like cloud system, processing power from their server, hosting services, etc. You don’t need to invest in data banks and servers to store your information; you can simply purchase one of the many cloud plans offered by IT support companies

Small business bookkeeping

All businesses need to keep track of their expenses and income through bookkeeping and accountancy. If you don’t keep track of your financial information, your business will suffer and eventually fail. You also need to maintain accurate financial data in order to file your taxes with the government at the year end. If you make mistakes and don’t pay as much tax as you’re supposed to, you’ll face penalties, fines and may even lose your business license.

Unfortunately, bookkeeping isn’t easy, even for small businesses. You need to keep track of all expenses, look at your cash flow, maintain a record of your income, determine what expenses are tax deductable and perform other related tasks. While accounting software can help you maintain the records, it’s not easy to consolidate all the information at the end of the financial year.

How to hire an accountant that meets your business requirements? A well-trained and experienced accountant can help you consolidate information, determine your tax burden, look for tax deductable expenses and provide other financial advice. This can be easily outsourced as well.

Contact local bookkeepers

Legal process outsourcing

Businesses need to handle a number of legal processes like registering trademarks for their brand, developing terms and conditions, creating contracts for customers, employees and business associates, etc. You need advice from a legal professional with experience in the industry to ensure there are no mistakes. Errors in legal process management can lead to law suits and other legal difficulties, so it’s a good idea to hire a company to keep track of all legal aspects of your business.

There are a number of third-party companies with excellent legal experts and lawyers on their team. They can advise you on all aspects of your business and ensure you stay on the right side of the law.

Business process outsourcing

A business is a complex machine with several moving parts. All of these parts must function well and without interruption for the business to move forward. Every business has a number of background processes like customer service, sales, marketing, internal maintenance and repair, etc. A business owner must keep track of these processes and ensure that they’re on track.

Thankfully, you can outsource a large number of these processes as well. For example, you can hire a company to clean and maintain your commercial property instead of creating a permanent cleanup crew.

Wrap up

Outsourcing is easy and affordable, so all you need to do is find a reliable service provider to handle all your processes. Outsourcing allows your business to grow at a reasonable pace and minimises the initial investment. You can direct your resources to areas of your business that truly need it.

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Finance

How the tax on dividends is calculated

What is an investment?

An investment is an asset that is purchased with the intention of making a profit in the future. The asset can be stocks, a piece of property, or something such as precious metals or coins. You can wait to receive payment when the asset is sold, or you can gain a profit from it along the way. Some examples of these types of assets include rent from property, dividends from shares, and interest from a bank account. The ATO treats different kinds of assets differently, and you can soon see your profits dwindling when tax time comes around if you are not careful.

What investment income must you declare?

  • Interest: When you open a savings account or other interest-bearing account at a bank, you will receive a certain percentage of additional money from the bank. This is typically a certain percentage based on the amount of the account.
  • Dividends: The shareholder of companies receives dividends. They are taken from profits and usually paid on a semi-annual basis.
  • Rent: Rent is money that someone pays you for living on your property. It is in the form of a regular monthly income.
  • Managed investment funds: A managed investment is an asset, such as a trust, that someone else manages for you. Some of them are set up to pay regular sums of money. Some different types of trusts include cash management, money market, mortgage, unit, or managed fund.
  • Capital gains: Capital gains are realised when you sell an asset, such as when you sell your home or a stock. A capital gain is a profit that you earn from the sale.

Dividends:

Dividends are one of the most misunderstood assets of many people. Let’s start from the beginning.

When a company needs money for something such as an expansion, new equipment, or to increase capacity, they have several different tools to use to obtain what they need. They can go to a lending institution and get it through traditional means, apply for grants, or try to find a private investor.

Another method that they have is to offer shares of their company up to the public. The public can buy shares with the hopes of making a profit in the future when they sell them. In this case, the public acts as the lender. Some stocks pay dividends, which can provide regular income for as long as you hold the stock. Here is a bit more about what a dividend is and how it works.

How do they work?

When a company makes a profit, they can choose to keep some or all of it. They can also choose to make owning shares in their company more enticing by sharing some of the windfalls with their shareholders. These funds are typically distributed to shareholders in July and December.

How are they paid?

The most common form of dividend payment is in the form of cash. This means that for tax purposes, they are taxes as a cash payment. This can have significant tax repercussions. Sometimes, the dividends can be paid through a trust or share club. Also, you can arrange to have the dividends reinvested instead of being sent to you. All of these options have different tax consequences.

Why are dividends so important when declaring investment income?

If you are a shareholder, when the company makes a dividend distribution, it counts as income for the shareholder. It must be reported as such on taxes. It is always wise to keep your dividend statements because you will need them when you file your taxes.

How are dividends taxed between residents and non-residents of Australia?

How dividends work depends on whether you are a resident or non-resident. A non-resident of Australia can own stock in an Australian company. Residents and non-residents are taxed differently and have different tax burdens when it comes to dividends.

If you are a non-resident and became a resident later in the year, you might not have had the proper withholding taken out. In this case, you need to report the dividends on your tax form. If you are a non-resident, you cannot use a tax offset for franked dividends. However, you can use it to offset other Australian income. You will have to pay a withholding tax on unfranked dividends. You do not have to pay tax on unfranked dividends because it is considered conduit foreign income.

If you are an Australian resident, you will pay taxes based on an imputation system. This system dictates how the taxes paid on company profits should be allocated. It determines whether the tax burden belongs to the company, the shareholder, or a portion to each. This system is to make sure that a double tax is not paid on the same profits by two different entities.

A tax accountant can help you to maximise your profits from investments / Source: ASR Partners

What is the difference between franked and unfranked dividends?

When a company makes a profit, they must pay a certain amount of tax on it, typically around 30% for most companies. When an individual shareholder receives income via dividends, they pay a tax on share profit. Without the franking system, double tax jeopardy can occur where both the company and the individual pay taxes on the same profits.

When shares are franked, it means that the company has paid the taxes on the shares held by the individual. If the individual receives franked dividends, they receive a credit for tax on shares that they own. The difference between franked shares and unfranked shares is who is responsible for the tax burden on the profits.

Franked dividend:

To receive a franked dividend, you must purchase franked shares. These are shares that are already marked as having the taxes paid on them. Dividends can be fully franked or partially franked. A fully franked dividend means that the shareholder will receive a full tax credit for the shared. A partially franked dividend means that the tax burden is shared between the company and the shareholder. The franked dividend tax rate depends on which tax bracket you fall into based on your total income. If your tax rate is below the corporate tax rate of 30%, the ATO will refund the difference to you.

Unfranked dividend:

Unfranked dividends are just like regular stocks or investment instruments. You will have to pay the full amount of tax on any dividends or other taxes that you earn from them. They count as income and will increase your overall revenue, which could bump you up into a different tax bracket.

What are franking credits?

Franking credits refer to the offset that you receive when your tax bracket is less than what the company paid for the credits. For instance, if you own 1,000 shares of a company and the company makes $5 per share in profit. They will have to pay 30% on those shares, which is $1.75 per share. This leaves $3.50 that they can keep or distribute to shareholders as dividends. The shareholder would then receive a 30% imputation credit. This means that for 1,000 shares, the shareholder gets $2,500 in taxable income. Of this, $1,170 is dividend income, and $750 is franking credit.

How to hire a tax accountant

As you can see, the topic of dividends can become complicated when it is tax time. Hiring a good tax accountant can help you wade through the regulations and keep the amount to which you are entitled. Here are a few tips for hiring a tax accountant.

How to create an accurate estimate

You can help your tax accountant by taking a few simple steps. These steps will help your professional make sure that you get the proper franking credit for your stocks.

  • Keep your dividend statements and other income records in a safe place.
  • Make your accountant aware of any changes that have occurred, such as residency.
  • Keep your receipts for any buying or selling transactions.

Licencing and qualifications

To practice in Australia, a tax accountant must meet at least the following minimum requirements.

  • Complete a Bachelor’s in some form of accounting.
  • Pass the Certified Public Accountant (CPA) program.
  • Be a member of a qualifying trade organisation.

How to save money hiring a tax accountant

Everyone likes to save money at tax time. Here are a few tips to help you save on accounting fees and the taxes owed.

  • Save every receipt and write down what it is.
  • Keep your files organised so that your accountant does not miss anything.
  • Ask about fees before you agree to an accountant’s services.
Categories
Finance

Tax on rental income

The tax on rental income would typically be categorised as accessible, but you’re entitled to claim tax deductions for the different expenses associated with having people rent out the property. The amount you have to pay in taxes depends on how much money you earn, which means you may need to set aside 20 to 49 per cent of your earnings for taxes. What you owe also depends on the amount of tax that is deducted from your other sources of income. This makes it necessary to obtain help from a tax agent to ensure the calculations are accurate and you’re informed of the laws.

Short-term rental hosts must pay Schedule C or self-employment tax, which includes social security and Medicare tax. You can also expect to pay local and state occupancy taxes on your rental income. You have the option of paying PAYG instalments if your income is inconsistent or you want more convenience. It means you won’t have to worry about getting a big tax bill at the end of the year.

What deductions can Airbnb hosts claim?

Maintenance

The money you spend to maintain the property or perform repairs is eligible as a tax deduction, which makes it necessary to keep thorough records and recipes. You can write off the cost of repairing a leak or replacing the new roof to maintain a desirable, safe, and functional setting.

Utilities, fees and insurances

The money you spend on water, power, and sewage are all tax deductions to report. The homeowner’s insurance or private mortgage insurance (PMI) you pay each month is also eligible. The fee you pay to Airbnb or other websites can also be included in your tax dedication and should consist of the dates of your payments. You can also report fees you paid to collect the rent.

Marketing and promotion

Whether you pay for Facebook or Instagram, the money you spend to promote your Airbnb and attract more renters is considered to be deductible.

Financial and asset-related issues

You can also deduct any items stolen from the property or if the furniture was damaged when you had people renting out the property.

Personal costs of managing the property

You may have personal expenses associated with managing your Airbnb, which includes upgrading the furniture or paying for cleaning services.

Council rates

Keep thorough records of your council rates, which is known to fluctuate each year and can be written off.

Claiming deductions:

How do you claim them?

You can claim your Airbnb tax deductions by obtaining the help of a tax preparer and by itemizing the tax deductions. You’ll need to prepare a Schedule C attachment, which is considered to be a separate calculation from your net profit. Avoid deducting anything that you do not have proof of paying.

How much can you claim?

You can only claim the number of days or weeks you rented out the Airbnb, which may be four weeks or 50 weeks, depending on how much business you received. You can only claim what’s related to running the Airbnb and can’t claim anything associated with your personal use of the home.

Airbnb & capital gains tax (CGT)

Pros

  • You can obtain a lower Airbnb and capital gains tax rate when you sell the property.
  • Defer capital gains tax when selling one property and buying another.

Cons

  • It doesn’t apply to your inventory.
  • It doesn’t apply to corporate income.

Airbnb & goods and services tax (GST)

Many people may assume they need to be aware of GST on residential rent if they use their property as an Airbnb. GST doesn’t apply to residential rentals, which means it’s up to you to add the amount to your rental property when reporting it to the government. You aren’t liable for GST on rent for the rates you charge and the money you collect. This also means you also can’t claim any Airbnb GST credits for any associated costs.

Byron Bay – a popular location for Airbnbs / Source: Shuterstock

Tips for Airbnb hosts:

Keep all of your receipts

Keep every paper receipt and digitally scan everything, so you have evidence of your expenses if the IRS contacts you in the future.

Obtain tax advice

It can be easy to owe different types of taxes for your Airbnb. This makes it necessary to talk to an expert to avoid missing anything. A qualified tax professional will be able to take a close look at your earnings and determine how much you owe.

Depreciate your property

Many people also forget to consider the depreciation of their property and any money they spend to upgrade the kitchen or remodel the bathroom.

Record your bookings

You need to track all of your bookings and also vacancy dates throughout the year so you can report how many times someone uses the property. This will ensure your reported earnings and the taxes you owe are accurate. Tracking how often the property was rented can allow you to communicate your deductions for the Airbnb taxes.

How to hire a tax accountant

Read online reviews

Consider looking at a review of former customers online to determine how respected a tax accountant is before you use their services. Look for someone with a high rating without many complaints to ensure you hire someone reliable and experienced.

How to create an accurate estimate

Determine your different sources of income

Consider the number of places you earn an income. The more income you earn in different areas, the more time it’ll take to prepare your taxes, which will mean you can expect to pay more for tax preparer services.

Licencing and qualifications

You’ll end up paying more for tax accountants with more credentials and experience because they’ve spent the time and money to become educated and credentialed. If you hire someone reputable and with experience, it can allow you to save more money. Furthermore, it will ensure they’re aware of all of your Airbnb tax benefits.

Categories
Finance

Car allowance tax guide

Saving money at tax time is something that everyone wants to do. If you have work-related car expenses, then you might be able to deduct work-related car expenses under certain circumstances. Let’s explore when and how you can deduct your vehicle expenses at tax time.

Here are a few examples of times when you might be able to deduct your car expense when using it for business.

  • Hauling tools and equipment used for your job.
  • Pick-up and delivery of items for your employer.
  • Travelling between two different places of employment.
  • Your work begins at home and involves various sites.
  • Travel for meetings, conferences, and other work-related events.
  • Travel to your workplace, but only under certain circumstances.

How do I track & claim my car-related expenses?

The Australian government allows two different methods for claiming the car allowance tax deduction. When claiming car expenses, you can use either method. Here is a break down of how they work.

Cents per kilometre method

Using this method, you can deduct a set rate for each kilometre that you travel for business-related activities. If you use this method, you must demonstrate that you used the kilometres claimed for work. A simple logbook that includes the miles travelled is sufficient. Let’s take a look at an example.

Jim is a manager for the construction industry. He uses his personal car to deliver and drop off supplies to a remote worksite that is 7km away. The round trip is 14 km to and from the home office. He does this once a week, every week of the year except for two weeks of vacation. The current allowable rate is $0.68/kilometre.

  • 14km per week X 50 weeks = 700 kilometres that can be claimed
  • 700 allowable kilometres X $0.68 = $47.60 that can be deducted

Pros

  • Easy to calculate using a simple formula.
  • Computed using a standard rate set by the government.
  • Suitable for people who use their car less than the maximum allowable kilometres.
  • Record keeping is simple for this method.

Cons

  • Limited to 5,000 kilometres per vehicle per year.
  • Cannot claim separate vehicle expenses.

Logbook method

This method requires more record keeping of motor vehicle expenses. Still, if you use your personal vehicle for work frequently, it can add up to a more significant deduction. Let’s see an example.

Now, let’s say Jim uses his own vehicle for 1,000 km during the 12 week period when he tracked vehicle mileage in his logbook. Let’s also say that Jim kept records of fuel, repairs, service, insurance, and took depreciation on his new vehicle. The current deduction rate using the logbook method is 85%.

  • 1,000 km X 0.85 = $85
  • $8,430 of vehicle expenses X 0.85 = $7,165.50
  • $7,165.50 + $85 = $7,250.50 deductible expenses

Pros

  • Only have to keep a motor vehicle logbook for 12 consecutive weeks.
  • You only need to complete the logbook once every five years.
  • More detailed record keeping.
  • Can deduct expenses such as registration, fuel, service, insurance, etc.
  • Based on a percentage of all costs.
  • An excellent choice for those who exceed the 5,000 km limit for the cents per km method.

Cons

  • You must own the car.
  • Must record all business and all personal trips.
  • Must keep all receipt for related expenses.
  • More restrictions apply to this deduction method.

What car-related costs can’t I claim on my taxes?

Both vehicle expense deduction methods have different rules that apply to when you can and cannot take the deduction. Here are a few examples that might apply to your circumstances.

  • Travelling from home to your regular place of employment.
  • Car expenses that are reimbursed or are included as part of a salary package.
  • Picking up something for your employer on your way to your regular work location.
  • Fuel when using the cents per km method.
  • An employee is driving your personal car for work.
  • You are working overtime, and public transportation is not available.
  • You have to drive back to work for after-hours calls.

What about owned or leased cars?

You can deduct expenses from a car that you own, lease, or is under a lease-to-own agreement. This can be claimed using either the logbook or cents per km method. In some cases, you might be able to claim the car tax deduction for vehicles, such as motorcycles, passenger vans, or trucks fitted to haul equipment.

How to hire a tax accountant

Sometimes, deciding how the rules for the car tax deduction apply to you can be tricky. Hiring a tax accountant can help you take the maximum allowable deduction for your circumstances and help you to avoid any penalties for claiming something that is not allowed. Here are a few tips for hiring a tax accountant.

How to create an accurate estimate

To claim your tax deduction and get the proper credit for your circumstances, you need to do a few things to help your tax professional:

  • Keep all vehicle-related receipts.
  • Print out all electronic receipts.
  • Place all of your receipts in a file.
  • Keep your logbook with you at all times.
  • Place your logbook in a place where you will see it.

Licencing & qualifications

Hiring a tax professional is an important decision. You must choose carefully because utilising the wrong one can land you in trouble. Here are some of the requirements needed to become a tax accountant.

  • Must have a Bachelor’s degree in accounting.
  • Must participate in the Certified Practising Accountants (CPA) program or be a member of the Institute of Public Accountants or Chartered Accountants Australia.
  • Be sure to ask how long they have been a tax accountant and their experience with similar tax circumstances.

Contact local tax accountants

How to save money hiring a tax accountant

Tax accountants use different methods of charging for services. Some charge a flat fee, while others work on a percentage basis. Here are a few tips for saving money when hiring a tax professional.

  • Ask what they charge and how they charge upfront.
  • Save your receipts, or you cannot deduct all of your eligible expenses.
  • Keep your records in the proper order to save your preparer time.

FAQs

Can you claim fuel on tax?

Claiming fuel on tax is only allowed if you choose the logbook tax method. A matching receipt must accompany a fuel claim, and you must keep a travel logbook for tax purposes. You can only claim a portion of your fuel expense that was used for work purposes. You cannot claim this deduction if you use the cents per km tax deduction method.

Categories
Finance

How to do a Tax Return in Australia

A man calculating and filing his taxes for tax season

Worried you’re missing out on a bigger refund? Each year, many taxpayers miss out on deductions that may be available to claim and, on average, may leave up to $525.50 on the table.

As of June 2025, lodging late could result in a $330 fine every 28 days past the deadline. If you’re more than five intervals (or 140 days) late, the fine can reach the maximum of $1,650 per return, based on the Australian Tax Office’s  (ATO) updated penalty table.

It all comes down to preparation before the October cutoff. By getting your tax documents in order now, you’ll be better placed to claim eligible deductions, avoid costly mistakes (where applicable), and lodge confidently.

To help you nail it this year, let’s look at how to file and track your tax return online, which records the ATO requires, and how to streamline the entire process.

Disclaimer:The information provided in this article is general in nature and does not constitute tax advice. Always consult a qualified tax professional about your specific circumstances before making decisions.

Key tax dates

According to the ATO website, the Australian financial year runs from 1 July to 30 June, with tax returns due by 31 October for individuals filing themselves. When a due date falls on a Saturday, Sunday, or public holiday, you can lodge or pay on the next business day.

DateSignificance
30 JuneEnd of financial year
1 JulyTax return lodgment period begins
31 OctoberStandard filing deadline for individual tax returns
15 May (following year)Extended filing deadline for those using registered tax agents

If you use a registered tax agent or accountant to complete your tax return, you’ll be eligible for an extended deadline as late as 15 May of the following year. To apply for a lodgement deferral, the ATO stipulates that you must sign up with a tax agent before 31 October.

How to complete your tax return online

Step 1: Gather your paperwork

Organizing your tax documents is the first step, regardless of whether you plan to file them yourself or have an accountant handle them.

To lodge your tax return easily, log in to your myGov account linked to the ATO website and open myTax. MyTax is available 24/7 and is usually pre-filled with information from your employers, banks, government agencies, health funds, and other providers.

All you need to do is verify the details and upload the supporting documents. Before you upload any documents to verify your claims, the ATO recommends gathering three key types of paperwork: income documents, deduction documents, and medical and health insurance documents.

Income documents

Income documents list what you’ve earned in the financial year. The ATO uses them to calculate your tax or refund.

Although some information may be automatically reported, it is your responsibility to ensure all income is correctly declared. 

Some income documents include: 

  • Payment summaries – Records of income from employers, superannuation funds, or government agencies such as Centrelink or the Department of Veterans’ Affairs
  • Bank statements – Records showing interest earned from savings accounts, term deposits, or offset accounts during the financial year
  • Investment statements – Dividend notices from shares, distribution statements from managed funds or unit trusts, and annual investment summaries
  • Share trading records – Buy and sell confirmations from your stockbroker or online trading platform for any shares purchased or sold during the fiscal year
  • Rental property records – Income statements from your property manager or tenancy records if you own investment properties, including any capital gains from sales
  • Foreign income details – Records of overseas wages, foreign pensions, or international investment income that must be declared in Australia.

Deduction documents

Claiming deductions may reduce your taxable income, but the ATO requires proper documentation. Without evidence, the ATO may deny deductions and potentially apply penalties.

Here are some examples of potential deductions. For the complete list, visit the ATO website.

Medical and health insurance documents

If you have private health insurance, declaring this with the right documentation could save you serious money. Without proper cover or the correct paperwork, the Medicare levy surcharge of up to 1.5% of your income on top of the standard 2% Medicare levy may apply.

While the ATO pre-fills most health insurance details, it is your responsibility to double-check them against your health fund’s year-end statement. Remember, an error here could mean paying the Medicare levy surcharge.

Step 2: Claim your tax deductions

Time to hunt down every legitimate deduction you are eligible to claim. Before you start, make sure each expense meets these criteria:

  • Relevant – The expense must be directly related to earning income or performing duties.
  • Real – You must have paid for it, with your own money and not been reimbursed by your employer.
  • Recorded – You must have proper evidence like receipts, invoices, or bank statements to prove the expense.

These deductions may be claimed in your tax return form under the work-related expenses. 

Some occupations and industries may have specific deductions available. For instance, teachers, tradies, healthcare workers, and other professionals often have unique work-related expenses they may claim, and you should consider if you meet any criteria.

Step 2.1: Use myDeductions

For employees and solo traders claiming work-related expenses, you may also download the ATO’s free myDeductions tool and start logging expenses as they happen. Using this can help you record work-related expenses, store photos of receipts, log charitable donations, and track car trips for work purposes throughout the year.

If you’re a small business, partnership, or company with an ABN, you’ll need proper accounting software or professional bookkeeping to manage your deductions.

If you’re unsure about eligibility or record-keeping requirements, seek professional tax advice before lodging.

Step 3: Track your tax return

Once you’ve gathered your documents and identified your deductions, it’s time to lodge your return and keep tabs on its progress.

  1. Lodge your return: Submit your tax return through myTax via your myGov account. The system will guide you through each section and perform automatic calculations as you go.
  2. Check your myGov inbox: You’ll receive a tax receipt confirming your submission after lodging. Keep an eye on your myGov inbox for your Notice of Assessment, which shows your final tax calculation and any refund or debt owing.
  3. Track your refund: Most refunds are processed within two weeks if you lodge online and have no issues with your return. You can check the status anytime through myGov.

Skip the stress and book an expert

Getting your tax return right involves juggling deadlines, tracking documents, understanding complex deduction rules, and staying ATO-compliant. While it’s possible to do it yourself, making one mistake could cost you hundreds in missed deductions or penalties. 

That’s why it often pays to book a registered tax accountant through Oneflare to get expert help. Simply post your tax preparation task and receive competitive quotes from individuals ready to help you navigate tax season successfully. 

Remember – if you are engaging someone to help you with your Taxes, you should always verify that they have the appropriate qualifications.

Use this Australian Government Tax Practitioners Board tool to assist with selecting a tax professional with the credentials or qualifications required for your job.

Why book on Oneflare?

  • Compare quotes and choose the right person for your budget
  • Read reviews from real customers before booking

Ready to lodge your return confidently? Organise your tax return on Oneflare today!