BOYD VARJU & Associates in Cheltenham, Victoria | Financial service

BOYD VARJU & Associates

Locality: Cheltenham, Victoria

Phone: +61 431 133 550

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• Tax preparation service
• Accountant
• Financial service
• Business consultant

20.01.2022 If you use your car for work or business related purposes then there are two possible ways of claiming car expenses in your tax return: 1.Logbook method: As a first step purchase a standard logbook from a newsagent and record all journeys undertaken with your car for 12 continuous weeks, both business and private. Also make a note of the odometer reading at the start and the end of the 12 week period. Once done add up all the kilometres (km’s) driven, business/work, private a...nd the total of the two and then divide the business km’s total by the grand total - this gives you the business use percentage. You can claim this percentage figure of all your running expenses (eg. fuel, registration, insurance etc), depreciation and loan interest (assuming the vehicle is under finance). 2. Cents per kilometres (km’s) method: Under this simple method you claim a set rate for every business or work km travelled (68 cents per km for the 2018/2019 year) up to 5,000 business km’s ($3,400 total claim). As you can see, while the logbook method initially involves more paperwork with recording your journeys in the logbook, depending on your overall business usage of your car the expense claims can potentially be substantially higher. I have a client whose claim for work related car expenses went from $3,300 to over $7,000 the following year by using the logbook method!

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18.01.2022 HOW TO SAVE TAX WITH THE MOST APPROPRIATE BUSINESS STRUCTURE: Choosing the most effective business structure can yield significant income tax savings for you, along with protecting your personal assets from liability claims. The most common ones are discussed below - SOLE TRADER - CARRYING ON A BUSINESS IN YOUR OWN NAME:... - Your income is taxed at your personal marginal rates; - Limited scope for income splitting; - Exposure of personal assets; - Losses are quarantined and cannot be offset against other income. PARTNERSHIP - A CONTRACTUAL RELATIONSHIP BETWEEN TWO OR MORE INDIVIDUALS/ENTITIES WITH A VIEW TO MAKE A PROFIT: - Not a separate legal entity - the partnership does not pay tax, the partners pay tax on a personal level on their respective profit shares; - Losses can be distributed (subject to certain criteria) and offset against other income; - Partners are jointly and severally liable for partnership liabilities (this can be mitigated by having entities as the partners); - If there is a change in partners then the whole partnership is taken to be reconstituted with potentially major capital gains tax implications. COMPANY - SEPARATE LEGAL ENTITY ABLE TO DO BUSINESS IN ITS OWN RIGHT: - Owned by shareholders and run by directors (can be the same individuals); - Income tax is capped at flat rate of 27.5% (if small business entity in 2016/17); - Shareholder liability limited to any unpaid amounts on shareholdings; - Losses are retained in the company; - Profits can be retained in company but can only be accessed by the shareholders via dividend payments, however a tax offset (franking credit) maybe available depending on the previous income tax payments made by the company; - Directors personally liable for unpaid employee PAYG withholding and superannuation contributions. (DISCRETIONARY) TRUST - A FORMAL RELATIONSHIP BETWEEN A TRUSTEE THAT HOLDS PROPERTY ON BEHALF OF BENEFICIARIES: - Not a separate legal entity; - Trustee can be either individual or corporate (company), however liability is limited if corporate; - Income can be distributed among beneficiaries based on their personal tax positions and be revised annually (but needs to be minuted); - Any retained income is taxed at top marginal rate; - Losses are retained in the trust. There are several other, less common business structures available. In addition it is possible to use several structures to maximise tax savings. For example, some of my clients who have discretionary trusts use a company as a beneficiary, saving thousands of dollars in income tax. Please note that when choosing an appropriate business structure the potential capital gains tax implications on any future business/asset sale also need to be considered. Please contact us on 043 1133550 if you would like more information on the above or wish to discuss which structure would be most suitable for your business.

10.01.2022 Company Franking Credits Companies pay dividends to shareholders from profits previously taxed, expressed as a dividend rate per share. The shareholders then declare the dividend as assessable income in their tax returns and receive a rebate called a franking (imputation) credit on the tax previously paid by the company, to prevent double taxation. The dividend is grossed up with the franking credit based on the company tax rate which is then available to... offset the overall tax liability of the taxpayer, with any excess refundable if their marginal tax rate is less than the company tax rate (subject to various tax offsets, Medicare levy, HELP repayments etc). The company tax rates for 2018/2019 are as follows: Turnover under $50M and running active business: 27.5% Turnover $50M or above: 30% Example: John owns 10,000 shares in a company that is subject to the 30% tax rate. During the 2018/2019 year the company paid a total dividend of $2 per share. John’s total dividends would be 10,000 shares X $2 per share = $20,000. The franking credit would be worked out as follows (in rounded figures): $20,000 X 30/70 = $8,571 The grossed up (assessable) dividend would be: $20,000 + $8,571 = $28,571. The $8,571 imputation credit would be offset against John’s other taxation liabilities, with any excess possibly refundable to him. As can be seen above, in general investing in companies paying franked dividends can be a useful tax planning strategy for people in tax brackets lower than the corporate tax rate, subject to qualified investment advice. For further information, please call Peter Varju on 043 1133550. See more

10.01.2022 HOW TO MAXIMISE YOUR MOTOR VEHICLE CLAIMS Currently there are two possible methods of claiming motor vehicle/car expenses. a) Under the cents per kilometre (km) method you multiply your work/business related km's (up to a maximum of 5,000 km) with the statutory rate of 68 cents to get the dollar amount of your deduction. In other words, the maximum amount you can claim is $3,400. For this method you do not need to keep an actual logbook but you have to be able to justify your... claim. Business related km's do NOT include travel between home and work unless you need to carry bulky tools. b) Under the logbook method you need to keep a record of all the km's travelled for a 12 week period in a logbook and work out the number of business related km's. You then divide the business km's by the total km's and multiply this percentage with all your annual running expenses, ie fuel/oil, registration, insurance, repairs along with depreciation and interest (if your vehicle is under finance). This method is suitable for taxpayers who drive more than 5,000 business km's and/or have a high business use of their car. This method obviously involves more recordkeeping but can yield a significantly higher deduction. I recently did a client's 2019 tax return and because their business use percentage of their car was 90% and also due to the high amounts of their car-related expenses they elected to use the logbook method and subsequently got a deduction of just over $10,000! (On the other hand, they would have only received $3,400 maximum under the cents per km method). Please call us on 043 1133550 if you wish to discuss motor vehicle expense claims in further detail and to work out which method would be more suitable for you.