Liability limited by a scheme approved under Professional Standards Legislation.

           December 2008 Newsletter           

Another year is nearly over, and they seem to go past quicker with each one.

I am pleased to say that we have a stable team of people and no-one has left our business this year.   We continue to promote continued education of our team, and some of them have achieved their own particular milestones this year.

Michele Cornell has finished her studies for her NIA (National Institute of Accountants) Program, and now has so much time on her hands, she does not know what to do with it.   Scott Patrick has finalised his CPA (Certified Practising Accountants) Program as well.   Well done to both given they have families, work full time and were studying.

Angela Mann is only one subject away from completing her NIA Program.   Michelle Drake finished her first CPA subject this semester, and did extremely well.   Adam Taylor is over halfway through his CPA program, and Robert Milanese is well through his CA (Chartered Accountant) program.

I am also pleased to advise that Adam and his partner Abbie are expecting their first child in early April next year.

We are always looking for new business clients, so if you have any friends or acquaintances looking for a new accountant that can help them with their business, wealth creation or superannuation, please pass on our name.

Our office will close on Tuesday the 23 ^rd December at 1 pm and reopen on Monday morning the 5 ^th January 2 0 0 9.

On behalf of all the team at Symes Accountants I would like to thank you for your continued support of our firm and wish you a peaceful and safe Christmas and a prosperous New Year.

Peter Caddy CEO

We invite you to visit our enhanced website at www.symes.com.au

We’ve tried to keep our website simple, easy to use, and available as a resource which can provide links to other organisations which our business clients are likely to utilise.

We are always trying to improve our service levels and we therefore welcome any feedback you care to provide.

If there are any other features you would like us to include, please let us know.

The Northern Adelaide Business Enterprise Centre (NABEC) has recently opened the Gawler Business Centre.

Located on the first floor at the Gawler Visitor Centre ( 2 Lyndoch Road ), it aims to assist business operators.

At Symes Accountants, we believe one of the strengths of NABEC is its ability to assist businesses network.   As an example, for businesses considering exporting, NABEC’s website has links to Austrade’s New Export Development Program, the Export Markets Development Grant Scheme and a number of other sources that may assist businesses.

As its services are partially funded by the Australian Government and the government of South Australia , it is able to provide a range of training programs at very reasonable cost.

At Symes Accountants, we believe that NABEC can be a very useful reference source for our clients.   Their services are complimentary to ours and we recommend you visit their website at www.nabec.com.au or call them on 8256 0930.

We have a number of “mature aged” clients – both employees and self-employed business operators who invested in rental properties a decade or two ago as part of their wealth creation / retirement strategy.

As they approach retirement, many people in this situation look to sell one of their properties to fund activities like overseas holidays, upgrading their home furnishings, helping their children financially or a combination of these.

The Capital Gains Tax (CGT) payable on the sale of a property can amount to tens of thousands of dollars.

For example, consider an investor who purchased a property in the mid 1990s for $100,000.   It’s conceivable that such a property could sell for say $300,000 today.

To calculate the CGT payable, the gross capital gain of $200,000 would be reduced by 50% as the asset has been owned for more than twelve months.   Assuming our investor is an employee or business operator with $80,000 of other income, their $100,000 capital gain would be taxed at 41.5% (the “marginal tax rate” for income between $80,000 and $180,000).   This would leave a CGT bill of $41,500.

A strategy that can reduce the CGT payable by nearly $30,000:

If the investor was an employee, they would almost certainly be ineligible to claim a tax deduction for any personal contributions they make into superannuation.

However, if our investor defers the making of their capital gain, retires from the workforce and receives all their entitlements before 30 ^th June in a given year, and their income in the following financial year is limited to the capital gain of $100,000 from the rental property, they would be eligible to claim a tax deduction for their personal contributions into superannuation in that particular year.

As an example, assuming a capital gain of $100,000, and negligible other income: if the investor makes a tax deductible contribution of $66,000, their taxable income would be $34,000 (that is $100,000 capital gain less the $66,000 super contribution).   Up to $34,000 taxable income, the marginal rate of tax is 15%, and a $1,200 low income rebate applies.   Therefore income tax of $3,510 would be payable on the $34,000 at 2008/09 tax rates.  

The $66,000 superannuation contribution which is claimed as a tax deduction is subject to 15% tax, making additional tax of $9,900 (which is payable by the super fund).   

The total tax payable in this well planned strategy is $13,410 ($3,510 plus $9,900), a reduction of $28,090 compared with the first scenario.  

Self employed investors usually have even greater flexibility under the current tax laws than employees to plan their affairs tax effectively.

This example illustrates the benefits of advance planning to legitimately minimise tax and optimise wealth creation / lifestyle choices.

Please note that the above information is general in nature and everyone’s circumstances are different.   For example, how much you can contribute into superannuation differs with a person’s age and whether or not you work; the maximum amounts that individuals can contribute into superannuation also differs with age; the timing of when a capital gain is actually taxable is another factor that needs careful consideration.   For these reasons, this article is not intended to constitute professional advice.   We strongly recommend that you call us to discuss your specific situation before acting on this matter.

As always, should you have any queries, please contact your team accountant.

HAPPY HOLIDAYS