Our goal is to provide our clients with not only an outstanding service but also an education in the areas of accounting and taxation.

There are many products and services that can make a huge difference to your superannuation, retirement and protection of your wealth creation. Some people don’t fully understand whether these services are right for them, whether they qualify for them or perhaps have never even known they existed.

To assist you in further understanding and educating you on our products and services, we invite you to read through some of the most commonly asked questions and answers.

Q. Is money I have inherited taxable?
A. No, the inheritance is not taxable unless advised by the executor that part is taxable. However, if you invest the income from the estate then any earnings will be taxable.

Q. I have shares and received franked dividends this year but have no other income. Do I have to lodge a tax return to get the franking credit refunded to me?
A. You do not have to lodge a full tax return. You can complete the Refund of Franking Credits for Individuals form which can be lodged by telephone or mailed to the ATO.

Q. I have just moved permanently to Australia. Do I have to pay tax on the money that I have brought with me?
A. No, you will only have to pay tax on any earnings that you make from the time that you moved to Australia. If the money that you brought with you earns interest in a bank account you will have to pay tax on the interest

Q. I have to buy tools/equipment for my job. What can I claim and how much?
A. You are able to claim expenditure incurred in replacing, insuring and repairing tools of trade that you use for earning your income. The amount you can claim will depend on what records you have kept.

Q. I have had to pay for child care during the year. Is this claimable on my tax return?
A. These expenses are not claimable as a tax deduction. Eligible taxpayers may be able to claim the Child Care Tax Rebate (CCTR) through the Family Assistance Office.

Q. Can I claim fees paid to my tax agent?
A. Fees paid to a registered tax agent for preparation of your return, amendments and generally handling your tax matters are all deductible. You can also claim travel to your registered tax agent. Registered tax agents are the only people legally able to receive payment for the preparation of tax returns.

Q. What is a Trust?
A. A trust is a business structure that requires a trustee, a trust and beneficiaries. The trustee holds property and earns and distributes income on behalf of the beneficiaries. A trust is a cornerstone to Tax Minimisation. The trustee (usually a Pty Ltd Company) owns the property and distributes income to the beneficiaries of the trust, who are usually family members. In this way a person who would otherwise earn a large taxable income can split his or her income between beneficiaries who have low marginal tax rates Income is earned by the trust company. The trustee is empowered to distribute the trust income to the beneficiaries and in what proportions he or she chooses. In the case of a family trust the trustee could for example distribute income to the children of the family, thereby reducing the taxable income of the parents.

A trust in its simple form has a settlor, a trustee, and beneficiaries. The settlor sets up the trust. The trustee manages the trust property (investments, assets, etc.) and pays out any net income for the benefit of the beneficiaries.

We recommend several types of trusts, a Discretionary trust, a Unit trust and the Hybrid trust. While the characteristics of each trust are similar, their applications as part of your wealth creation program are different.

Q. If I haven’t bought any investment properties yet, for my first one, do I really need to setup a trust structure?
A. There are varying opinions regarding this. Our opinion is, it’s best to purchase your first investment property in your own name for tax purposes. Thereafter it is wise to consider setting up a trust structure for future properties.

Q. Should I set up a separate trust structure for each property?
A. Options vary regarding this also. It’s up to the individual. It’s wise however, not to put too many properties into one trust, and it’s quite common for sophisticated investors, to set up a separate trust structure to have only one or two properties per trust to increase the level of asset protection in case one trust is breached it’s quarantined from all other properties and assets.

Q. Can 21stCentury Accounting setup trust structures for its Members & friends?
A. Yes. We can do this quickly and easily, simply email your request to accounting@21stca.com.au and we will send you the required form to complete. Or you can go to www.21stcenturyaccounting.com.au and order online or phone 1800 730 491.

Q. How long will it take to setup a trust structure?
A. Allow us 24 hours to arrange, generally upon completion of the paperwork or you can order online at www.21stcenturyaccounting.com.au and it will be processed faster.

Q. What is a Company?
A company is a separate legal entity from the owners. It can sue and be sued in its own name separate from the person who owns it. It has limited liability for its debts. A company can either be a public company or a private company (Pty Ltd).
A company is run by directors.
A company is owned by shareholders.

Q. When should I set up a company?
There are many benefits associated with establishing a Pty Ltd Company. Because a company is a separate legal entity from the owners, company shareholders can benefit from income splitting, profits can be retained in the Pty Ltd Company and be taxed at the 30% corporate rate and excellent asset protection is available if the Pty Ltd Company shares are owned by a discretionary trust.
In our view, you should set up a company in the following circumstances:

Q. How long does it take to set up my Pty Ltd Company?
Generally allow 7-10 working days from when we receive your order.

Q. Should I set up my Company before Trading or Buying Property?
Yes. Once you start trading or buying property, transactions become harder to change for in most instances this will require a change in the legal owner of the asset. While there are rules about changing the legal owner, this action can occur, however it may be expensive and risky.

Q. I just need one company if I wish to run a business, rent shares and purchase property?
If you intend to run an active business it is often a good idea to have this business operating as a separate Pty Ltd Company.
It is not recommended that the one company be used to run a business, rent shares and own property. Why? If something goes wrong inside the business then any property owned by the business will be at risk. If you wish to accumulate other assets such as property, contact our qualified practitioners who will establish purpose built company/trust structures designed to achieve the ultimate in assets protection.

Q. How many Directors / Shareholders do I need to set up a Company?
Directors - Every proprietary company must have at least 1 director that must ordinarily reside in Australia. A director must be at least 18 years of age. There is no upward age limit. An undischarged bankrupt or a person subject to disqualification under certain sections of the Companies Law cannot act as a director or be involved in the management or promotion of a limited liability company in Australia. A Director may, or may not be, a Shareholder of the company.
Shareholders – While a Pty Ltd Company must have at least 1 shareholder (individual or company) but are limited to a maximum of 50. There is no requirement for any shareholder to be a resident of Australia.

Q. What other the other advantages of trading through a Pty Ltd Company?
A limited liability company is liable only for assessment of taxation on its own profits and any taxation assessed is payable by the company itself and not personally by the directors or shareholders. The profits of a limited liability company are assessed at a flat rate, which under the New Tax System is 30%. This is substantially less than the current highest marginal tax rate of 48.5 per cent, as per the personal income tax scale. Directors of course pay income tax on any personal income tax and on profits derived from the company.

Q. Can I get a margin loan for share renting with a Company as easy as if it was in my personal name?
Yes. Ask our recommended Share brokers who can arrange this for you

Q. I already have a Company that I use for my Business. Can I just use that for Trading and Property Acquisition?
We recommend no. If someone sues you in your business, all assets in the company are at risk. We recommend that your trading be in a separate structure such as a trust, otherwise all your trading capital is at risk if you get sued in your business.

SELF MANAGED SUPERANNUATION FUND

Q. What is a Self Managed Superannuation Fund (SMSF)?
A. A SMSF is a superannuation fund which you manage yourself.
As a trustee of Your SMSF, you decide where to invest your superannuation monies. You take control of your retirement.
You are no longer dependant upon the conservative investing of fund managers and upon excessive fees.

Q. Why would I establish a SMSF?
A. By establishing your own Self Managed Superannuation Fund, you take control of your retirement planning, you become responsible for your own investment decisions and you become entitled to tax savings that you would otherwise not be entitled to.
SMSFs can also be used to protect your assets to a limited degree. In many instances, assets held in Your SMSF cannot be touched by creditors in a bankruptcy petition.

Q. Can I use a SMSF to trade options or do buy writes? What about futures or CFDs?
A. Yes you can trade options. However there are difficulties with futures or CFDs.
However, there are restrictions. You need to have a proper investment strategy and your fund rules need to allow you to do it. Not only that, but there are other duties and requirements as to prudent investing which the law places on you. It is important that you seek professional advice before doing any trading from Your SMSF.

Q. How much should I have in superannuation before setting up a SMSF?
A. It depends entirely on the level of returns you can reasonably expect to generate per annum.
We recommend you have at least $20,000 before setting up Your SMSF. Ultimately you need to calculate your expected returns against your estimated running costs and determine if it is worth your while to set up a SMSF.

Q. How many people can you have in an SMSF?
A. You can have a maximum of 4 members (related or unrelated). Each member must be a trustee of the SMSF (or a director of the trustee company).

Q. What are the tax rates?
A. Superannuation is useful to save tax for employees and business people. You only pay 15% tax instead of your marginal rate (apart from the superannuation surcharge which You pay if Your income exceeds certain thresholds). Once you turn 55, subject to the reasonable benefit rules, your maximum rate of tax is 15% (plus Medicare levy).

Further, as an existing trader, you can use pre-tax dollars to pay for all the usual running costs of Your SMSF. Expenses such as audit fees, life insurance, limited sickness and accident insurance, some home office costs, education and training costs, and Your computer equipments and trading software costs, can all be paid out of the pre-tax income of the SMSF.

However, you should seek professional advice before claiming any of the above, or spending any money from Your SMSF.

Q. Asset Protection: What Is It and Do You Need It?
A. Most people have assets; that is, money and stuff. You might own a home and a car, a business, a professional practice; have a bank account, some jewellery, maybe a collection of baseball cards or coins, perhaps some furniture. Those of you lucky enough to have a good deal of valuable assets, creating a portfolio of wealth, need a way to protect those assets from risk. Asset protection planning is a process by which you organize your assets--personal, business and/or professional--and employ legal tools to guard against risk of future creditors. Asset protection techniques are designed to deter potential creditors from going after you, and discourage them if they do, generally by making it difficult or impossible for them to take hold of your assets or collect judgments against you.

There is a very sharp dividing line between "legal" asset protection planning and actions to defraud legitimate creditors, which are criminal. For that reason it is essential to have an attorney guide you through the process. It is also a good idea to integrate asset protection into your estate and tax planning; and, like a portfolio, asset protection should be diversified. Don't rely on one method.
So who are these creditors? These days, professionals (doctors, lawyers, accountants, etc.), as well as business and property owners all face increased risk from out-of-control jury awards and zealous regulators. If you are sued, your insurance should cover some of your losses. Asset-protection planning isn't a replacement for insurance, but it is a backstop--a way to shield some of your wealth should you be hit with a big judgment that isn't fully covered. And the time to tuck assets behind shields is when you are not being sued. Wait until a creditor comes knocking and there is a greater risk that a transfer will be invalidated as fraudulent.
How do you know if you need asset protection? To some extent, most people should try to protect their assets to the best of their ability, but there are some people who need more asset protection than others. Below is a list of the most common people who need asset protection:

Even if you aren’t in any of the above groups, you should consider some degree of asset protection. If you own your own business, you probably need some sort of asset protection. Injuries on your property could lead to a lawsuit that could cause you to lose many of your assets, and insurance companies can often find loopholes to avoid paying all (or any) of the amount that is owed.

To assess exactly how much asset protection you may need, consult with a qualified attorney and/or financial advisor to determine your risk. This will help you decide what assets you should protect and what asset protection techniques will work best for you.