Deductibility of Property Investment Loan Interest

Rental Property Advice, A Grade Tax Penrith

The Australian Taxation Office has flagged it will crack down on property investors claiming deductions for interest expenses on certain types of loan arrangements.

Property owners using some or all of the rental income from an investment property to pay off their own home loan while adding the interest from the investment loan to the principal of the investment loan and claiming it as a deduction would come under the scrutiny of the Australian Tax Office.

In a determination last month, the ATO said it would reject such arrangements.

The capitalisation of interest on an investment loan while the loan repayments are used to pay down the principal of a private loan is now under the spotlight.

The ATO's determination will apply retrospectively and could affect a landlord's past income and deductions, potentially costing them thousands of dollars.

A conservative approach should be adopted and property investors would be well advised to avoid claiming deductions for any compounding interest on their investment loan.

For further information contact A Grade Tax Accountants Penrith (02) 4731-1405.

Medicare Levy and Medicare Levy Surcharge Changes

A Grade Tax Penrith NSW

As a result of the 2009-10 Federal Budget, the government will be introducing an income test for the Private Health Insurance Rebate to apply from 1 July 2012.The rebate, which can be received as a reduction in policy premiums or as a rebate on your tax return, is currently 30%. From 1 July 2012 that rebate and AND the Medicare Levy Surcharge will be income tested against three income tier thresholds.

The ATO says the  "Higher income earners will receive less private health insurance rebate or, if they do not have the appropriate level of private patient hospital cover, the Medicare levy surcharge may increase."

The table below illustrates the income thresholds and rates to apply:


Tier 1

Tier 2

Tier 3


$84,000 or less



$130,001 or more


$168,000 or less



$260,001 or more


Aged under 65





Aged 65-69





Aged 70 or over





Medicare levy surcharge

Senior Citizens and Stamp Duty Concessions

Retirement Planning, Penrith Accountant

If you are a Senior who owns property in New South Wales or is thinking of purchasing a property in New South Wales you need to be aware of the new legislation passed through Parliament exempting you from the payment of stamp duty in certain circumstances.
This important piece of legislation is called the Duties Amendment (Senior’s Principal Place of Residence Duty Exemption) and will be in effect from 1st July, 2011 to the 1st July, 2012. This legislation contains good news for Senior Citizens who are looking to relocate to smaller accommodation.
What is the Senior’s Principal Place of Residence Duty Exemption?
The Senior’s Principal Place of Residence Duty Exemption is an exemption from stamp duty for Senior’s between the age of 55 and 65 years purchasing a new house which has never been occupied before or purchasing an off the plan home.
How long is the stamp duty exemption available?
The Senior’s stamp duty exemption is only available for contracts entered into after 1st July, 2011 and before 1st July, 2012.
How do I qualify for the stamp duty exemption?
To be eligible to receive the Senior’s stamp duty exemption you must satisfy the following criteria:
1. Be between the ages of 55 and 65 years.
 2. Enter into a contract for the purchase of a new house which has never been occupied before or an off the plan home between the 1st July, 2011 and the 1st July, 2012.
 3. Move into the house within twelve months of the settlement of the purchase and occupy the house as your principle place of residence for a continuous period of twelve months.
 4. Owned and occupied a home in New South Wales in the previous twelve month period and sell this property within six months of entering into the contract for their new home.

Taxable Payments Reporting - Building and Construction Industry

Bookkeeping Penrith

From 1 July 2012, businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year. You need to report these payments to the Australian Taxation Office (ATO) on the Taxable Payments Annual Report.
To make it easier to complete the annual report you may need to change the way you currently record your contractor information.


As part of the 2011-12 Federal Budget, the government announced the introduction of taxable payments reporting for businesses in the building and construction industry.

The aim of the system is to improve compliance with tax obligations by those contractors who are currently not doing the right thing.

The information reported about payments made to contractors will be used for the ATO's data matching to detect contractors who have not:

  •     lodged tax returns
  •     included all their income in returns that have been lodged.

Who needs to report?

From 1 July 2012 you need to report if all of the following apply:

  •     you are a business that is primarily in the building and construction industry
  •     you make payments to contractors for building and construction services
  •     you have an Australian business number (ABN).

You are considered to be a business that is primarily in the building and construction industry if any of the following apply:

  •     in the current financial year, 50% or more of your business activity relates to building and construction services

Cancellation of ABN's

Cancel ABN - A Grade Tax

The Australian Business Register (ABR) is running a program to cancel the Australian business numbers (ABN) of individuals where records show they are not carrying on an enterprise. The program started in December 2011 and will continue throughout 2012. The ABR regularly reviews applications and cancels the ABN's of individuals who are no longer entitled, or who have never been entitled, to an ABN.

The program aims to improve the accuracy of data held in the ABR. The ABR helps the community in
a number of ways, including:

■■ through the use of ABN Lookup to check information regarding the ABN status of businesses, and

■■ supporting more than 300 government agencies that use ABR data to identify and interact with business.

If your ABN is cancelled, you will receive a letter providing the reason and your review rights.

If you don’t agree with the Registrar’s decision, you can object. If you can show you are entitled to have
an ABN, your registration will be reinstated.

For further information contact A Grade Tax Accountants Penrith for tax accounting, bookkeeping and tax advice on (02) 4731-1405.

Accessing Your Super Early

A Grade Tax Penrith - Superannuation

There are special circumstances where super savings can be legally accessed early. These include:

    Severe financial hardship,
    Certain compassionate grounds,
A terminal medical condition,
    Permanent or temporary incapacity.

If a taxpayer legitimately needs some of their preserved super early, they should start by contacting their super fund for more information.

Severe penalties apply if taxpayers illegally access their super early. They will have to pay tax on the money they access early and other penalties may also apply depending on their involvement in the scheme. Recently, two promoters were both sentenced to two years imprisonment for a scheme that involved accessing super benefits early.

For more information, refer to Accessing Your Super Before Retirement at:

Contact A Grade Tax Penrith on (02) 4731-1405 offering a full range of taxation, accounting, superannuation, tax returns, tax planning and advice to Personal and Business clients.

Self Managed Superannuation Fund - Parent and Children Members

Family Members in Superfund

The investment risk profile for parents is not the same as that of their children.

Accordingly, the potential for problems when including your children in your Self Managed Superannuation Fund is significant and could be an unwanted trigger to unrest amongst the family.

Possible problems include:

  • Trustee decisions have to be unanimous and therefore parents have to seek approval from the children members with regard to the investment strategy and distribution of their retirement savings.
  • Children members may feel disadvantaged from a conservative investment strategy preferred by their parent members.
  • Possible complications from divorce are more likely with both parent and children members and their respective spouses having a claim on the investments of the SMSF.

The different risk and investment strategies, the lack of investment and life experience and the influence by outside parties, suggest that parents should maintain conrol of their retirement savings away from the influence and involvement of their children.

Children may also have the inherent motivation to keep the parents retirement savings in the fund for as long as possible to maximise their own inheritance.

Contact A Grade Tax Accountants Penrith on (02) 4731-1405 for tax accounting, bookkeeping, superannuation, tax returns, tax planning and advice for Personal and Business clients.

ATO Closes the Net on Tax Cheats

Tax Accounting Penrith

The Australian Taxation Office ("ATO") is making it harder for people in business who deliberately use cash transactions to hide income and evade tax obligations - making it fairer for everyone.

This includes businesses:

  •     paying cash in hand wages
  •     skimming some or all of the cash takings
  •     running a part of their normal business activities off the books
  •     not reporting barter transactions
  •     operating underground; avoiding their obligations by not registering or lodging returns.

The ATO strategies to tackle the cash economy and detect these businesses doing the wrong thing include:

  •     the publication of benchmarks which provide a guide as to the expected profitability on over 100 business industries
  •     educating the broader community about the risks of not getting a receipt for cash jobs,
  •     reviewing the records of businesses to ensure they are reporting all business income and expenses, and
  •     acting on information received from the community on suspected tax evasion.

The focus of this work is on industries which have ready access to cash in their business dealings. Examples include businesses in the hospitality industry such as coffee shops as well as the building and construction industry.

Reductions to the Superannuation Co-Contribution Scheme

A Grade Tax Penrith,  Co-Contribution Scheme

In the 2011-12 Federal Budget, the government announced that the freeze of the indexation applied on the superannuation co-contribution income thresholds will apply for an additional year.

As part of Mid-year economic and fiscal outlook (MYEFO) 2011-12, the government announced further reductions to the co-contributions scheme, for personal contributions made from 1 July 2012.

From 1st July 2012 the current $1,000 Government Co-Contribution will be reduced to $500.This co-contribution will phase out progressively if your income is above $31,920 and will cease altogether once your income reaches $46,920 previously $61,920.

 These proposed changes are not law as they have not yet been passed by parliament or received royal assent.

Contact A Grade Tax Accountants Penrith (02) 4731-1405 for tax accounting, superannuation and retirement planning for Individual and Business clients.

Superannuation Guarantee Contribution increasing to 12%

Superannuation Penrith

More Money in Retirement - an Historic Boost to Superannuation

In the biggest change to superannuation in 20 years, around 8.4 million Australians will have their superannuation savings boosted as a result of the superannuation guarantee rate legislation introduced into the Parliament today.

The Superannuation Guarantee (Administration) Amendment Bill 2011 increases the superannuation guarantee (SG) rate from nine per cent to 12 per cent.

The Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said "This is an historic reform. Today, the Gillard Labor Government has taken another important step towards increasing the adequacy and fairness of retirement incomes for Australian workers."

"Australians should not have to work hard and retire poor. Nine per cent super is simply not enough."

An employee aged 30 earning around $70,000 today will retire with an extra $108,000 in superannuation under these reforms.

The increase in the SG will boost the superannuation savings of Australian workers by around $500 billion by 2035. A proportion of these savings will be channelled back into the Australian economy to fund jobs and nation-building infrastructure.

The revenue from the MRRT will go towards funding the increase in the SG which will comes at a cost to Government revenue of an estimated $740 million over the forward estimates.

Contact A Grade Tax Penrith for superannuation tax advice.

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