Message from David Shaw

First of all let me say Happy New Year to all of you!

I personally hope that financially this year will be one of the best you have ever had. I know I am hoping that 2014 will be the end of the hard times considering the lows we have all experienced in the past 5 years in business as well as property and share markets.

The new year is a great time for us to sit down with you and do some planning to help you with your financial future. With that in mind I would like to start the new year sharing with you some observations about interest rates, properties and business succession planning to get you thinking:

Interest Rates

As property investors and business owners most of us have significant borrowings. Most of our clients have an average of $1,000,000 in borrowings so a 1% increase in interest rates represents additional annual costs of $10,000. The Reserve Bank recently announced that the trend of cutting interest rates which we have seen over the last 2 years is over, so it is now time to act. 3 and 5 year fixed interest rates are between 1% and 1.5% below the 12 year discounted variable interest rate of 6.7% so savings over the next 3-5 years may be significant.

Businesses Owners

In my view, now is the time to invest in growing your business and ensure your succession plan is in place. Many of our Baby Boomer generation will be looking at retiring in the next 5 years so a succession plan is the key to ensure your business can continue to operate long after you have retired. We are also in a unique position to expand our businesses. With limited funding available from the banks, there is an opportunity to negotiate vendor finance arrangements with sellers and buy businesses at a time when recent business earnings have been down. Most business valuations are based on a multiple of profits so now may be a great time for the budding business builders among us.

Property investors

With over 3,000 property investors who use our services we have had a chance in recent years to examine whether certain strategies work. From our findings we have come to the overwhelming conclusion that traditional ways in creating wealth through property have changed. With a low inflation environment investors can over the medium to long term not expect more than 3 – 5% per annum growth so rent yields are crucial in building a property portfolio to support your retirement.

Dual income or dual occupancy properties are now becoming an important element in the property investor’s portfolio. The strategy where 2 townhouses are built on a block or a single house is built and split into 2 self-contained apartments gives higher than average return and can result in a much higher cash flow in retirement. In fact, I am so impressed with the figures I am making this a topic in the first seminars we are holding this year.

Details of our seminars will be sent to you over the coming weeks.

We would also like the opportunity to arrange a one on one consultation for you with myself or your client manager to assist you in putting together your strategy for the coming year.

Regards, David Shaw

Car expense rates per km – 2013/14

The car expense rates per kilometre have been set for the 2013/14 year (and they have been increased for the first time since 2008/09).

Year | Small car | Medium car | Large car 2012/13 63c 74c 75c 2013/14 65c 76c 77c

Tax help for people affected by bushfires

The ATO has assured people directly affected by bushfires that their refunds will be fast tracked and that they will have additional time to lodge income tax returns and activity statements. The ATO can also provide more time for people to pay tax debts and can help reconstruct tax records where documents have been destroyed.

Editor: If you have been affected by bushfires or other natural disasters, contact us and we'll see what we can do for you with the ATO.

Donations

People donating up to $10 to ‘bucket appeals’ and other disaster relief funds this financial year will be able to claim a tax deduction without a receipt.

Data Matching Programs

The Government has announced that it will request and collect information for the purposes of the following data matching programs.

Credit and Debit Card Data Matching Program

The ATO will request and collect data relating to credit and debit card sales of approximately 900,000 businesses for the periods from 1 July 2012 to 30 June 2014 from major banks and other financial institutions, including American Express and Diners Club Australia.

This data will be electronically matched with certain sections of ATO data holdings to help provide a more level playing field for those businesses which meet their obligations by identifying those who may not, for potential corrective action.

Injured Worker Data Matching Program

The Comcare Chief Executive Officer has announced that Comcare will request and collect from the ATO details of approximately 4,500 individuals who are currently receiving, or have received, incapacity payments in relation to a Comcare workers’ compensation claim for any period during the financial years 2009/10 through 2011/12.

Comcare will collect information reported by individuals to the ATO for each relevant financial year and utilise this information to ensure injured workers have received and continue to receive the correct level of entitlements from Comcare.

Reminder: Lodging SMSF returns

To help prepare for lodgment, the ATO is reminding those with SMSFs that their fund'saudit report needs to be completed before their SMSF annual return can be lodged.

This is especially important for new registrants (i.e., those SMSFs registered in the 2012/13 year), as their 2013 SMSF annual return is due on 28 February 2014.

Note that newly registered funds that did not have assets set aside for the benefit of their members and did not commence operating in their first year of registration may request a 'return not necessary' for their first year only. However, funds that were set up in the 2012 year that have not yet set aside assets for the benefit of members, and have not operated, must have their registration cancelled.

The Importance of BDBNs

Two recent court cases dealing with self-managed superannuation funds (SMSFs) have highlighted the importance of making, and recognising, Binding Death Benefit Nominations (BDBNs).

Editor: A member of a superannuation fund may generally make a 'BDBN' which, if valid, requires the trustee of the fund to pay out their death benefits (i.e., after they die) exactly as set out in the BDBN.

In the first case, a member of an SMSF expressed a desire in her Will that her superannuation benefits be left to her children (and specifically not to her husband).

However, she did not make a BDBN, and the Supreme Court of Western Australia held that the preference in her Will did not affect the rights or duties of the trustee of the fund under the fund’s trust deed. Consequently, the remaining trustee (i.e., the husband) had no obligation to appoint the deceased’s executor as a trustee of the fund, and was also entitled to distribute the death benefits at his discretion, contrary to the direction in the deceased's Will.

In the second case, the deceased member of an SMSF had executed a BDBN in favour of his two children, but the trustees (basically the deceased's spouse and her son from a previous relationship) had wrongly believed that the BDBN was invalid and so had ignored it.

Nonetheless, the Supreme Court of Victoria held that the BDBN was valid and binding on the trustees of the SMSF, and ordered that both the current trustee of the fund and the deceased's spouse personally were liable to make payment of the full amount of the deceased’s benefits as at the date of death, plus an interest component and costs, to the nominated beneficiaries under the BDBN.

ATO compliance: Taxable payments annual reports

The ATO has advised that it is phoning some businesses in the building and construction industry to:

test the levels of understanding of the new reporting requirements for businesses in that industry; and help those businesses to comply with their taxable payments annual reporting obligations. They have also been contacting them to:

ensure lodged reports are correct and complete; follow up with businesses that have not yet lodged a report (where ATO records indicate they should have); and follow up with businesses who have advised that they are not required to report (where ATO records indicate they have a reporting requirement). Editor: If your business is contacted, let us know

Small Business Super Clearing House Reform

The Government has announced that the ATO will take over the running of the Small Business Superannuation

Clearing House.

Editor: The Small Business Superannuation Clearing House is a free online service that helps small businesses with

19 or fewer employees meet their superannuation guarantee obligations by allowing employers to pay superannuation contributions in one transaction to a single location (currently administered by Medicare) to reduce red tape and compliance costs.

According to the Government, the ATO is best placed to increase the take up rate of the Clearing House, as they have access to data on who is eligible for this free service, and employers will be able to remit their compulsory superannuation payments directly to the ATO (which will then distribute contributions to individual accounts).

This move will be followed by an extensive consultation process so the Government can better understand superannuation compliance cost concerns and develop further options to reduce these costs.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only. Please contact your WSC account manager for more information.