CIB ACCountAnts & AdvIsers BusIness & tAxAtIon BulletIn · Insurance duty reductions From 1 July...

CIB ACCountAnts & AdvIsers BusIness & tAxAtIon BulletInkeeping you informed spring 2017

Work-relAted expensesThe ATO is renewing its focus on individuals who have been over-claiming work-related expenses. In order to correctly claim a work-related income tax deduction the following rules need to be satisfied:

You must have spent the money and were not reimbursed;

Expenses must directly relate to earning taxable income and not be private in nature; and

You must have a record to substantiate the expense.

There are no ‘standard deductions’ for employees and receiving an allowance from an employer does not necessarily entitle the employee to a deduction. There are a few exceptions to the requirement for written evidence (eg. Cents-per-km method for vehicles) however there must be a reasonable basis for the calculations.

GIC & sIC rAtesThe ATO has published general interest charge (GIC) and shortfall interest charge (SIC) rates for the first quarter of the 2017-18 income year.The GIC annual rate for July – Sept 2017 is 8.73% and the SIC rate is 4.73%.

In tHIs Issue Work-Related Expenses GIC & SIC Rates NSW State Budget

– First Home Buyers Assistance – Shared Equity Scheme – ‘Off the Plan’ purchases by Investors – First Home Owner Grant (New Homes) – Land Tax Surcharge – Insurance Duty Reductions

Simpler BAS reporting Revenue NSW Keeping your ABN details up-to-date Fuel Tax Credits Small Business Instant Asset Write Off FeAture Have you planned for 2018? FInAnCe Interest Only Loans prIvAte WeAltH Market Commentary Upcoming Key Dates CIB Client News & CIB Staff News

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GeorGe Isaac Partner FCA

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BusIness & tAxAtIon BulletInkeeping you informed spring 2017

nsW stAte BudGetThe announcements in the June 2017 NSW State Budget were focused on housing affordability and associated measures in response to the growing concerns in the community about unaffordable housing, particularly in Sydney.

First Home Buyers Assistance From 1 July 2017, the First Home Buyers Assistance Scheme will allow first home buyers to be exempt from paying stamp duty on new and existing properties up to $650,000 and reduced stamp duty up to $800,000.

shared equity scheme From 1 July 2017, the shared equity scheme can apply when a home buyer purchases a property with an approved equity partner – allowing access to home ownership to more people. An approved equity partner is a registered community housing provider or other approved persons. The guidelines for the operation of the scheme are still being developed but will allow the home owner to have a minimum of 20% equity in a property. The equity partner will have the right to a share in any capital gains but not the right to occupation.

Any subsequent transfers of equity from the equity partner to the home buyer will be exempt from further duty.

First Home owner Grant (new Homes) From 1 July 2017, first home owners can access a $10,000 grant when building a new home where the total house and land contract price does not exceed $750,000. The grant is also available for first home owners purchasing a new home worth up to $600,000.

‘off-the-plan’ purchases By Investors From 1 July 2017, all residential purchases by investors will be excluded from the 12 month off-the-plan transfer duty liability deferral. Purchasers who wish to claim the deferral will need to declare an intention to occupy the property as their principal place of residence.

land tax surcharge For the 2018 year the land tax surcharge payable for foreign residents will increase from 0.75% to 2%. Additionally, any permanent resident will be exempt from the surcharge.

Insurance duty reductions From 1 July 2017, Lenders Mortgage Insurance will be exempt from duty. From 1 July 2018, small businesses will not be liable to duty for a range of insurance products such as commercial vehicle insurance, occupational indemnity insurance and product and public liability insurance.

sImpler BAs reportInGIf you are a small business with GST turnover of less than $10 million you are eligible for the simpler BAS reporting method on your next quarterly BAS.The only items you are required to report are:

Total Sales

GST on Sales

GST on Purchases

If you would still like to complete the full BAS reporting, you may voluntarily do so.

revenue nsWThe NSW Office of State Revenue (NSWOSR) and State Debt Recovery has recently changed its name to Revenue NSW from July 2017. Revenue NSW will complete all the same functions as the old NSWOSR and continue to act as NSW’s principal revenue management agency.

keepInG Your ABn detAIls up-to-dAteThe ATO is often finding that businesses have not been updating their details on the Australian Business Register when their circumstances have changed.

CHrIs Coulton

Partner FCA

A few house-keeping steps will help reduce unnecessary contact from the ATO:

Cancel an ABN when a business is no longer in operation or the structure has changed to trade under a new entity.

Check authorised contact details. If a business has only one authorised contact, they cannot be removed until a new contact has been added.

Register your trading names with ASIC. From 31 October 2018 if your trading name is not registered with ASIC it will not display under the ABN Lookup function.

Your ABN details can be updated on the Australian Business Register using your AusKey. Alternatively, contact our office and we can assist you through the process.

Fuel tAx CredItsThe next 6 monthly rate change for fuel tax credits (due to indexation) commenced on 1 August 2017.The fuel tax credit rates are changing regularly so it is very important to keep good records to support your claim. For fuel used in heavy vehicles, you are required to apply the applicable rate on the date you acquired the fuel.

smAll BusIness InstAnt Asset WrIte-oFFThe small business instant asset write-off for assets less than $20,000 has been extended to 30 June 2018. For a business to qualify as a small business, the aggregated turnover must be less than $10 million. If a business wants to utilise the instant asset write-off, they must comply with all other aspects of the simplified depreciation rules including:

Write off assets costing less than $20,000 each

Pool most other depreciating assets that cost $20,000 or more

Write-off the small business pool balance if it is less than $20,000 at the end of an income year

Only claim a deduction for the portion of the asset used for business

Depreciation of a small business pool is calculated at 15% in the first year and 30% in each subsequent year.



CIB LEADING ACCOUNTANTS &BUSINESS ADVISERS

Joel Halbert

Partner CA

rAdlee moller Partner

CA

ronelle Wilson Partner CA

GrAeme Bellach Partner CA

use oF Fuel tYpe oF Fuel From 1 FeBruArY 2017

From 1 AuGust 2017

vehicle greater than 4.5 tonnes Gvm travelling on a public road

Petrol, diesel or blended fuels

eg. E1014.2 cents 14.5 cents

specified off-road activities


40.1 cents 40.3 cents

All other business uses including power to auxiliary equipment of a heavy vehicle


eg. E1040.1 cents 40.3 cents

LPG 13.1 cents 13.2 cents

LNG or CNG 27.4 cents 27.6 cents




Now I know what some of you are thinking ‘Of course I have a plan for next year! I’ve been thinking about it all the time. It’s all in my head’.To those people let’s think about this:

Have you put your strategic plan on paper so you can refer to it at all times when you have too much on your mind to remember?

Have you discussed your plan with your business partner? Are they in agreement? (this is especially important if your business partner is your spouse!)

Have you discussed your plan with your key management staff so they are aware of the direction the business is taking?

strAteGIC plAnnInGStrategic planning is a absolutely essential for any business no matter how big or small, because if you don’t know the destination, your journey might lead you to nowhere!Strategic planning is the process of defining the goals for the next year and then deciding the steps and resources required to achieve these goals. Spending time to put your plan onto paper is saying ‘I am ready to take this business to the next stage of success’.

Strategic planning does not need to be a daunting task and for most small to medium businesses this process should take a ½ to 1 day to formulate. If you are unsure how to get started, here are some tips and tricks to use when preparing strategic plans.

1. knoW Your vIsIonBefore you start any planning you should have a clear understanding of your vision for the business. For anyone who doesn’t know what their vision is, ask yourself the question ‘What is the purpose of my business?’. Your vision is one sentence that defines where you want to take the business over the long haul.Examples include:

Google’s vision – To organise the world’s information and make it universally accessible and useful.

Facebook’s vision – People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.

2. dIsCuss And deFIne Your oBJeCtIves And GoAlsThe first thing your plan will need are the objectives (or goals) you want to achieve over the next 12 months in order to be on track to achieve your vision. As these objectives are big targets for the whole year, you should keep your objectives to no more than three. This will mean that you will need to focus and prioritise which objectives need to be completed first.Always ensure that your objectives are SMART objectives, which means they are Specific, Measureable, Action-oriented, Realistic and Timely.

3. orGAnIse And deleGAte Your strAteGIes And tACtICsOnce your objectives are defined you will need to devise your strategy (how you achieve the objectives) and your tactics (what you do to achieve the objective). At this stage of the process its best to bring in your staff or key management for their input, since they will be executing the strategy and tactics.Once you have worked out your strategy and tactics you need to delegate who will manage each one and also when they will be completed over the year (if you try to do everything at once nothing will get done!!)

4. keep Your strAteGIC plAn sHort If your plan goes for more than 2 pages you are overdoing it. Your plan should be something that is simple and easy for everyone to pick up and refer to whenever they need a reference point.

5. seek Independent AdvICeFinally, if you are unsure about what to do, seek some independent advice. Sometimes when you are deep in the thick of your business it’s worthwhile to seek a fresh perspective on where the business is going and what opportunities lie ahead. So by following these five keys steps you will be ready to take your business to the next stage of success!

CIB FeAture ArtICle – BY dAvId rosentHAl CA HAve You plAnned For 2018? As many of us are stressed about closing off 2017 accounts as soon as possible, unfortunately plenty of small businesses don’t ever stop and properly plan for the next year.

dAvId rosenthal

CA

A dYnAmIC AssoCIAtIon oF experIenCed proFessIonAls



FINANCECIB

We BuIld suCCessFul lonG-term

relAtIonsHIps WItH our ClIents

FrAnk schiraldi

tHe FAmIlY pledGe optIonThe Australian Prudential Regulation Authority (APRA) – the prudential regulator of the Australian financial services industry – has been concerned about the strong growth of lending to property investors and interest-only borrowers for some time; particularly in Melbourne and Sydney. APRA is concerned that a downturn in property prices could lead to an increase in loan defaults so they want to see a higher proportion of principal and interest debt reduction in Lender portfolios.The increase in investment lending has also influenced a large rise in interest-only loans; primarily for investment purposes but interest-only lending has also increased for owner occupied loans.

As a result, interest rates on investment and some owner occupied loans, in particular Interest-Only and Line of Credit facilities, have increased across all lenders.

For simple home loans, the difference between Interest Only repayment rates and Principal and Interest repayment rates is already around 0.50% pa variable (the rate is higher for Interest-Only).

There has also been a host of changes to lending policies; all driven by APRA and aimed at ensuring sustainable growth in the home loan investment sector and improving the strength of Australia’s financial services industry.

AprA’s neW CApItAl requIrementsIn july, APRA announced their new requirements for the majority of Lenders in Australia to increase the amount of capital they currently have, so that they meet the “unquestionably strong” benchmark recommended in the 2014 Financial System Inquiry (FSI).

The four major banks will be required to raise large amounts of capital and whilst they have two and a half years to achieve their imposed targets they (together with other Lenders) may need to raise their interest rates to cover the increased costs influenced by this requirement.

Interest onlY expIrY & extensIonsIn conjunction with the above, extension of Interest-Only periods following their initial expiry is becoming more difficult with many lenders now treating this as a “credit critical” change, and requesting full financial information to reassess the applicant’s servicing capacity, noting that any interest-only period reduces the available term thereafter, over which the loan must be repaid. The loan must be contracted in such a way so that it is fully repaid within the contracted term. A 30 year loan with an interest only period of 5 years results in the loan having to be repaid over the remaining 25 years. For loan assessment/approval purposes, the Interest-Only period essentially reduces your borrowing capacity.

lIne oF CredIt FACIlItIesThe rate increases are also applicable to Line of Credit facilities which are ‘Interest-Only’ by nature, and now carry a premium well above the Standard Variable Rate for standard loan products.If you have an Interest-Only Loan or a Line of Credit and you are concerned by the recent interest rate increases please contact our office to discuss a possible switch to a Principal and Interest loan. The switch may be as simple as a one page switching request and free of any bank fees.

CIB FInAnCe ArtICle – BY FrAnk sCHIrAldI Interest onlY loAnsthere has been significant changes in the Australian investment loan and interest-only loan market over the past 12 months.

Markets were mostly flat during the June quarter; however, since the beginning of February the ASX200 Accumulation Index is up 3.98%.

outlook Despite numerous concerns over the past year, investment returns have been good.We are relatively optimistic about the prospects for the year ahead due to;

1. The global growth outlook looks reasonable. At its july meeting, the RBA reiterated its positive global growth view, repeating “The broad -based pick-up in the global economy is continuing”.

2. Corporate profits are rising;

3. Australian economy improving. Overall, the Australian economy is continuing to show signs of strength. Expectations are that economic conditions will continue to improve and the economy will grow at a modest rate, supported in part by rising export volumes. On the labour market, the RBA repeated it “remains

mixed” as “Employment growth has been stronger over recent months”, but “Wage growth remains low” and “this is likely to continue for a while yet”.

As housing construction peaks we have an infrastructure boom taking off. As reported before the federal budget, from a cyclical low in 2015-16 of $19 billion, we’re on our way to spending $33 billion on road and rail construction in 2018-19 according to Macromonitor.

4. Monetary policy across the globe remains extremely supportive. The RBA’s july board meeting again held the cash rate at 1.50% as widely expected. Overall, the RBA policy stance remains broadly ‘neutral’, concluding that “holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy.

5. Equity market valuations, with the exception of the US, look reasonable.




CIB prIvAte WeAltH ArtICle – BY pAul IsrAel mArket CommentArY In this update we examine highlights of the quarter, the outlook for the year ahead and a very interesting long term research report from macquarie Bank.

pAul Israel

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19851980 1990 1995 2000 2005 2010 2015

Australia China Eurozone US World ex US Source: Fidelity International, February 2017

CYCLICALLY ADJUSTED PRICE TO EARNINGS RATIOS

talk to us about your business today

Contact CIB Accountants & Advisers:

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www.cibaccountants.com.au

+61 2 9683 5999

ImportAnt: Information contained in this newsletter is not advice. Clients should not act solely on the basis of material contained in this bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The bulletin is issued as a helpful guide to our clients and for their information.

lonG term outlookMost research focuses on the ultra-short term. Macquarie Bank recently did a very interesting long term strategy paper that tips the ASX to hit 10,000 over the next 10 years, underpinned by a booming superannuation sector.Macquarie makes the point that over the past 25 years, Australia’s real GDP growth has outstripped the average for the advanced economies by 0.7% p.a. According to the IMF, this growth premium will rise rather than fall over the coming five years.

They go on to add that against a backdrop of rising political uncertainty, Australia is well positioned to be a relative economic outperformer, due to:

1. Being asset-rich with a large natural resource endowment;

2. Largely food and energy self-sufficient;

3. Positive demographic vis-à-vis other developed economies (i.e. solid organic population growth, strong immigration, young and educated);

4. Geographically well positioned with proximity to the East;

5. A well-regulated and respected corporate sector with an independent and credible central bank.

Australia’s trump card is its colossal super retirement schemeOver the coming 25 years, the pension asset pool is projected by the Treasury to grow from US$1.7tn to above US$6.6tn (it already sits at 120% of GDP and 100% of the current ASX market capitalization). This is a powerful backstop for equities. Australia has the added advantage of being reasonably attractive on a cyclically adjusted PE multiple of only 16x.Australia has posted earnings growth in line with the developed world through the past 20 years. Macquarie expects this to continue through the cycle at between 5 and 6%. Assuming this to be the case, without any contribution from multiple expansion, this would put the ASX200 at 10,000 in a decade.

Macquarie concludes by stating that Australia’s long term growth outlook remains extremely attractive in a world struggling for growth.

portFolIo ImplICAtIons & ConClusIonWe continue to target stocks with a combination of relatively predictable earnings growth and reasonable yield. Key themes continue to be Healthcare, Overseas earners, Asian middle classes, infrastructure, and fully franked income. May to September normally encounters seasonal weakness. We are looking to add to portfolios where opportunities arise.

If you have any questions please let us know.



CIBPRIVATE WEALTHS E R V I C E S

7%

6%

5%

4%

3%

2%

1%

0%Australia Advanced

EconomiesAustralia Advanced

Economies

1991-2016 average 2022 IMF forecast

Real GDP InflationGLOBAL GROWTH PROSPECTS

2.5%

3.2%

5.7%

2.0%

2.2%

4.2%2.5%

2.7%

5.2%

1.6%

1.7%

3.3%

We treAt our ClIent’s BusIness As IF

It Were our BusIness

CIB ClIent Corner

ConGrAtulAtIons lIAne morIArtY CIB Client Liane Moriarty has been an author for many years. Recently her New York Times Best Seller book ‘Big Little Lies’ was turned into a mini series starring Nicole Kidman and Reese Witherspoon.

CIB neW stAFF David Rosenthal – Manager for Team Coulton/Wilson Deepak Sachdev – SMSF Manager jia He – Team Isaac/Halbert Andrew Guan – Team Audit Lachlan Imms – Admin Team Marven Youssef – Business Mate

CIB WelComes neW ArrIvAlsAbdullah Chowdhury and his wife Samia welcomed baby boy Hamza in july. Samantha Shorten, her husband Ryan and big brother Phoenix, welcomed baby girl Monique to their family in August. Krystina Wildman, her partner jason and big brother Max, welcomed their baby girl Piper into their family in late May. All the babies are doing well, and a big Congratulations from all at CIB.

ImportAnt: Information contained in this newsletter is not advice. Clients should not act solely on the basis of material contained in this bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The bulletin is issued as a helpful guide to our clients and for their information.




21 AUGUST 2017 July 2017 Monthly Activity Statement due for lodgement and payment

25 AUGUST 2017 April – June 2017 Business Activity Statement due for electronic lodgement and payment

21 SEPTEMBER 2017 August 2017 Monthly Activity Statement due for lodgement and payment

21 OCTOBER 2017 September 2017 Monthly Activity Statement is due for lodgement and payment

21 OCTOBER 2017 Quarterly PAYG Instalment Activity Statement due for lodgement and payment for head companies of a consolidated group

28 OCTOBER 2017 Superannuation Guarantee Contributions due for payment for July – September 2017 quarter

28 OCTOBER 2017 July – September 2017 Business Activity Statement due for paper lodgement and payment

31 OCTOBER 2017 Due date of lodgement of 2017 income tax returns for taxpayers with one or more outstanding prior year tax returns at 30 June 2017

21 NOvEMBER 2017 October 2017 Monthly Activity Statement due for lodgement and payment

25 NOvEMBER 2017 July – September 2017 Business Activity Statement due for electronic lodgement and payment

1 DECEMBER 2017 2017 Income Tax Payment required for Large and Medium taxpayers (lodgement due 15 January 2018)

1 DECEMBER 2017 2017 Income Tax Payment due for head companies of a large or medium consolidated group

1 DECEMBER 2017 2017 Income Tax Payment due for companies and super funds when lodgement of the return was required on 31 October 2017

21 DECEMBER 2017 November 2017 Monthly Activity Statement due for lodgement and payment

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