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Financial Year End Roundup 2008 Queensland Bar Association

Financial Year End Roundup 2008 Queensland Bar Association. Chris Wyeth BA LLB MTax DFP FTIA Senior Financial Consultant. important notice.

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Financial Year End Roundup 2008 Queensland Bar Association

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  1. Financial Year End Roundup 2008Queensland Bar Association Chris Wyeth BA LLB MTax DFP FTIA Senior Financial Consultant

  2. important notice • The information provided in this presentation includes, by its very nature, general information about complex areas such as taxation, superannuation and investing in securities. The information is current as at 3 June 2008. • In compiling the information, Tynan Mackenzie has not taken into consideration the investment objectives, financial situation or specific needs of any particular person. We caution you that before making any decisions based on this information, you will need to consider, with or without the assistance of an appropriately qualified adviser, whether the information is appropriate with regards to your particular needs, investment objectives and financial situation. • We would be delighted to offer you this assistance. • TYNAN MACKENZIE PTY LTD ABN 94 066 074 744 AFS Licence No. 230764 • Head Office, Level 10, Gateway Building, 1 Macquarie Place, Sydney NSW 2000 • Telephone (02) 8274 1900 Free call 1800 250 444 • www.tynanmackenzie.com.au

  3. Overview • Budget Changes • Salary Sacrifice vs Home Loan • Borrowing for Super Investments

  4. Tax Cuts

  5. Tax Cuts • salary sacrifice • effect on gearing + higher interest • benefits of imputation credits • defer income • bring forward expenses

  6. Year End Planning • deductions worth more this year - prepay expenses • change loans from variable to fixed and prepay (not applicable to a line of credit) • pay deductible expenses & tax (IT2582 / ATOID 2006/269) from investment debt – not on home loan • employed spouse – wage plus super • borrowings to pay spouse salary & super are deductible – use business debt

  7. Medicare Levy Surcharge Increases • Singles threshold $100,000 pa • Couples threshold $150,000 pa • Private Health insurance rebate continues

  8. Co-contribution – reduced access 2007 - 2008 2009 - 2010 Salary Salary Sacrifice to Super “Income” $75,000 ($45,000) $30,000 $75,000 ($45,000) $75,000 No entitlement to co-contribution

  9. Tax Reform • Tax review • Entire system except: • GST rate • GST items • Tax free superannuation benefits

  10. Salary Sacrifice vs Home Loan • funds committed once invested in super • balance preservation and liquidity • helped by NCP • immediate tax saving and tax free income on withdrawal

  11. Salary Sacrifice vs Home Loan • ongoing after tax interest cost • opportunity cost if need equity in home for other investments • consider duration risk, age and risk profile • value reduced if necessary to withdraw pre-60 and pay lump sum tax • legislative risk

  12. Case Study • Bob (50) earns $130,000 pa indexed • assume no super & $300,000 loan • living costs $50,000 indexed • contractual debt repayments $2,510/mth • either pay off debt asap or • salary sacrifice as much as possible and pay out debt tax free at 60 • interest at 7% or 9% over 10 years

  13. Salary Sacrifice vs Home Loan

  14. Borrowing for SF Investments • Instalment lending arrangements Bank Security Trust Property SMSF

  15. Borrowing for SF Investments • Still considerable amount of questions to be answered • ATO has focused on super law – not tax • TA 2008/5 - lender may be a related party but • non-arms length rates of interest – high or low • capitalised interest • guarantees from related parties/members

  16. Borrowing for SF Investments • “Instalment Warrants and Super Funds – Questions and Answers” • CGT or stamp duty on transfer to fund? • GST credits? • Depreciation? • Deductions? • Cost of establishment and cost of funds

  17. Borrowing for SF Investments • Is there any easier way? • Geared managed funds • Geared unit trust – with home as security • Geared unit trust – property as security with multiple parties • Simple off the shelf structure • Simple banking arrangements • Tax implications well understood

  18. Borrowing for SF InvestmentsSingle Family

  19. Borrowing for SF Investments2 Families

  20. Questions? Chris Wyeth 3223 9377 chrisw@tynmack.com.au

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