Speaker 1: Hello, and welcome to this episode of The Money Puzzle.
Speaker 1: I'm your host James Gerard's standing in again for James Kirby,
Speaker 1: who will be back next week. In our last episode,
Speaker 1: we had property developer Deichi Samahara, who gave us an
Speaker 1: insider's view on the world of property development. And today
Speaker 1: we're going to continue with the theme of looking under
Speaker 1: the hood, but this time all things tax an accounting.
Speaker 1: To help me do this, we have a superstar of
Speaker 1: the accounting world, and to give our listeners an idea
Speaker 1: of the stardom our guest has. When he's spotted at
Speaker 1: accounting conventions, fellow accountants drop their pencils and calculators in
Speaker 1: all and when our guest goes to his local shopping center,
Speaker 1: he's treated like a celebrity, mobbed by adoring fans who
Speaker 1: are holding their twenty twenty three tax returns, wanting to
Speaker 1: grab our guest attention and garnish his autograph. So, without
Speaker 1: further delay, let me introduce to today's guest. He's an accountant
Speaker 1: and he's actually my accountant. I've known him for over
Speaker 1: twenty years. A big money Puzzle. Welcome to Central Coast
Speaker 1: accountant Timothy Ricardo. Welcome Tim, And how about that for
Speaker 1: an intro?
Speaker 2: Hey, well thanks, James. I give it an embarrassing factor
Speaker 2: of ten, so it's right up there.
Speaker 1: Fantastic. All right, Well let's get straight into it. We're
Speaker 1: gonna have a chat about end of financial year tax
Speaker 1: planning because it's upon us this time of year again,
Speaker 1: but maybe not directly related to that to start up with,
Speaker 1: but to electric vehicles, the prices are dropping, and so
Speaker 1: I wanted to ask, is it worthwhile considering one from
Speaker 1: a tax perspective under an ovated lease?
Speaker 2: Well, this is one of your favorite topics. I think, James,
Speaker 2: you just want to talk about your own electric car.
Speaker 1: I think I do you actually caught me? I want
Speaker 1: to ask you some questions and not have you charge me.
Speaker 2: For a time. Yeah, fair enough. Well, look, the short
Speaker 2: answer is yes, you know, you should definitely consider it,
Speaker 2: especially if you want to get an ev car anyway,
Speaker 2: because they can be a it can be a real
Speaker 2: tax savor getting it through a novated lease, and you know,
Speaker 2: one hundred per tax exempt sounds too good to be true,
Speaker 2: but that seems to be the case at the moment.
Speaker 2: So yeah, definitely worth considering if you're interested in a EV.
Speaker 1: Car excellent, So it sounds like a very attractive way
Speaker 1: to fund a vehicle, and so never at least it's
Speaker 1: pretty tax effective anyway, but under the electric vehicle discount
Speaker 1: scheme that came in a little while ago, it makes
Speaker 1: it even more attractive. So moving on to Stage three
Speaker 1: tax cuts, they start from one July. They were introduced
Speaker 1: by the Coalition and amended recently by the Labor government. So, Timothy,
Speaker 1: is there anything that people need to do given that
Speaker 1: tax rates are higher this financial year for most and
Speaker 1: they'll be slightly lowered next financial year for most.
Speaker 2: Yeah, definitely, I think knowing that the brackets are coming down,
Speaker 2: we want to generally bring forward deductions into this financial year,
Speaker 2: which is a pretty common thing you do anyway for
Speaker 2: tax planning because it sort of gets the benefit sooner,
Speaker 2: but you may also get that benefit it at a
Speaker 2: higher tax rate, which means that you're saving more money
Speaker 2: as if you're compared to deferring it to next year.
Speaker 2: And secondly, obviously on the other side is deferring your
Speaker 2: income to next year. So if you're a small business
Speaker 2: owner and you're wanting to try to manage your tax planning,
Speaker 2: trying to push your income or dividends into next year
Speaker 2: if you can make use of the lower tax rates. Yeah,
Speaker 2: that's definitely something to look at. Yeah, and for low
Speaker 2: income earners, I think you mentioned recently in the Breakfast
Speaker 2: Show the other day, James, about the new pay rise
Speaker 2: from the low income earners. What are they getting?
Speaker 1: That's right, Well, I'll just recap that so that the
Speaker 1: Fair Work Commission they do an annual wage review of
Speaker 1: the minimum wage, and they introduced a three point seventy
Speaker 1: five percent increase this year, which is in line with
Speaker 1: your inflation, the broader inflation rates three point six percent.
Speaker 2: Yes, So I thought that was interesting to bring up
Speaker 2: because in line with the tax cuts as well. I
Speaker 2: looked up the low income earners. They're going to be
Speaker 2: getting another sixteen dollars in the hand per week on
Speaker 2: top of their twenty three dollars from that, So you're
Speaker 2: almost almost at forty dollars a week extra for those
Speaker 2: lower income earners with the two of these combined. So yeah,
Speaker 2: that's pretty good. But across the board, everyone seems to
Speaker 2: be benefiting, and some more than others. But yeah, so
Speaker 2: something else to look forward to with these tax cuts
Speaker 2: coming in.
Speaker 1: And what about people who are retired who drawed down
Speaker 1: a pension from their super account, particularly those people that
Speaker 1: were taking the reduced minimums which went on for was
Speaker 1: it like four or five financial years? Is there anything
Speaker 1: that they should be considering this financial year?
Speaker 2: Definitely, Okay, so this is a good thirtieth of June
Speaker 2: sort of tax planning issue to bring up with all
Speaker 2: those retirees, the ones who have self managed supers, or
Speaker 2: even the ones that have pensions with their funds that
Speaker 2: want to make sure that they're complying. And it's I
Speaker 2: think the pension reduction it was half the rate of
Speaker 2: what it normally is. So definitely for this financial gear,
Speaker 2: double check your minimum withdrawal so that your pension can
Speaker 2: stay compliant because otherwise there's a whole lot of messy
Speaker 2: admin work that needs to be done and yeah, you
Speaker 2: might lose some tax benefits there. So yeah, at the
Speaker 2: end of each year, we usually give a letter to
Speaker 2: all of our when we finish their tax to all
Speaker 2: of our self made super clients, and they've got in
Speaker 2: black and white they're what they need to draw down on.
Speaker 2: So you should always double check your end of year
Speaker 2: paperwork and make sure that you've got those that amount
Speaker 2: drawn down before thirtieth of June, which I think for
Speaker 2: a sixty five year old, just to give an example,
Speaker 2: two and a half percent was what it used to
Speaker 2: be and that's now been brought under the harving and
Speaker 2: now it's been brought back up to five percent, So
Speaker 2: it's a pretty significant change absolutely.
Speaker 1: I guess the fortunate thing is that people who are
Speaker 1: in retail or industry super funds the trustee of those funds.
Speaker 1: So if you're an industry fund with like Australian Super
Speaker 1: if you're a retail fund with say BT, the trustee
Speaker 1: will say, hey, you need to increase your pension payments
Speaker 1: and make sure you take out that the minimum you
Speaker 1: were taking two and a half percent, but this financial
Speaker 1: un you need to take out five. But it's probably
Speaker 1: the people in the self managed super funds who are
Speaker 1: the ones that are potentially going to be caught out
Speaker 1: because they're the trustee themselves and they're the one responsible
Speaker 1: for making sure that they meet the minimum requirements.
Speaker 2: Is that right, Tim? That's right?
Speaker 1: Yeah, good well, moving on to family trusts. I read
Speaker 1: about this recently in the Australia and it was quite
Speaker 1: interesting that there's some things that people need to do
Speaker 1: before the end of the financial year if they run
Speaker 1: their own family trust, generally in conn junction with their
Speaker 1: advisor being a tax accountant on the true US. Did
Speaker 1: you want to run through what that is?
Speaker 2: Yeah, certainly. So. The main one is to make sure
Speaker 2: you get your resolutions in place for your income distribution.
Speaker 2: ATO has done a lot of work in this space
Speaker 2: in the last few years in sort of making sure
Speaker 2: that people are making their resolutions and if not, you
Speaker 2: can be caught out being paid paying the highest marginal
Speaker 2: rate of tax inside the trust if it's left undistributed.
Speaker 2: So you've got to make sure you do a resolution,
Speaker 2: make sure that resolution is compliant with your with your deed,
Speaker 2: and yeah, I guess also making sure that you've paid
Speaker 2: through that amount to your beneficiary, which you've got a
Speaker 2: little bit of time to do that, but you need
Speaker 2: to make sure that you're doing what you're saying you're
Speaker 2: going to do in that resolution. It's very important.
Speaker 1: And for individuals, does this apply the instant tax? Right off?
Speaker 1: I believe there's an amount and you can run through
Speaker 1: the details of how many thousands of dollars people can
Speaker 1: buy things for and then write them off straight away.
Speaker 1: Was that more a business thing?
Speaker 2: Yeah, that's definitely a business thing, James. The businesses can
Speaker 2: I think they've passed it in the last budget. It's
Speaker 2: twenty thousand dollars. Now, this is a massive change from
Speaker 2: last year where we had temporary full expensing the under
Speaker 2: the sort of COVID honeymoon rates there, where they were
Speaker 2: letting everyone write off everything they bought, so people would
Speaker 2: go and buy a new piece of equipment could be
Speaker 2: one hundred thousand, five hundred thousand, they'd claim the whole
Speaker 2: thing and write it off. But they've reduced that back
Speaker 2: down to a meager twenty thousand dollars as soon as
Speaker 2: the all the budget provisions passed the parliament. But yeah,
Speaker 2: that's only four businesses and individuals. They're sort of stuck
Speaker 2: with the usual three hundred dollars threshold, which is very
Speaker 2: old and dates back to the eighties or whenever it
Speaker 2: was that was put as a what is an asset
Speaker 2: and over that amount need to depreciate. So if you're
Speaker 2: going to go buy that computer for one thousand dollars
Speaker 2: in your personal tax, you need to depreciate it. But
Speaker 2: but yes, it's three hundred dollars. Anything less than that
Speaker 2: you can ride it straight off.
Speaker 1: So yeah, good and June is a very popular trading
Speaker 1: time for the share market. There's a lot of volume
Speaker 1: that goes through, and that's partially attributed to people selling
Speaker 1: things in June for for tax reasons.
Speaker 2: Running through at a.
Speaker 1: High level what people can and can't do with regards
Speaker 1: to selling shares for a loss. Can they just buy
Speaker 1: the exact same chairs back in July. I know that
Speaker 1: the ATO have a thing called wash sales, which they
Speaker 1: don't really like, so yeah, maybe if you can run
Speaker 1: through all that.
Speaker 2: Yeah, so you've said it. They're basically acting doing things
Speaker 2: for the sake of tax. Now, the ATO have tax
Speaker 2: avoidance rules, which are basically, if you're making a decision
Speaker 2: just for the sake of saving tax, then you've got
Speaker 2: a bit of a problem there. Now, it's obviously everybody
Speaker 2: does things that are tax effective. They try to do
Speaker 2: things that are tax effective. But if you're specifically coming
Speaker 2: up to the end of financial gear and you're trying
Speaker 2: to save some money on tax, and you go, oh,
Speaker 2: I've got these shares sitting there at a twenty thousand
Speaker 2: dollars loss, so I'll sell those shares and lock in
Speaker 2: that loss so that I can offset that against my
Speaker 2: other gains, and then maybe I just buy back exactly
Speaker 2: the same parcel of shares the next day or even
Speaker 2: the same day. It's not going to fly with the
Speaker 2: ATO because they basically they call that a wash sale,
Speaker 2: So it's purely done that tax for the tax advantage
Speaker 2: of it, and they don't see it as a decision
Speaker 2: that's been made for any other reason other than that,
Speaker 2: and that's when you can fall a foul of the ATO.
Speaker 2: But essentially, you know, you've got to be considering if
Speaker 2: you're doing it for a financial decision, which is more
Speaker 2: in your camp there, James. So if you've got clients,
Speaker 2: they've got a good reason to sell things, and obviously
Speaker 2: it works for them to be doing that towards the
Speaker 2: end of financial year, and there's also tax advantages to
Speaker 2: do that, then that shouldn't be a problem. And then
Speaker 2: later on if they want to change their mind on that,
Speaker 2: and there's another financial reason behind that, and that's a
Speaker 2: different issue, but it's more if you're just making that decision,
Speaker 2: you know, just for the sake of tax avoidance, that's
Speaker 2: crystal clear.
Speaker 1: End of financial year. We've been talking about this now
Speaker 1: for ten minutes. What I want to ask in the
Speaker 1: final part of this part of out our chat is
Speaker 1: around who should be having a tax planning meeting with
Speaker 1: their accountant, because we hear that term thrown around tax
Speaker 1: planning the end of financial year? Is it people that
Speaker 1: run businesses? Should an individual who's a page you go
Speaker 1: with one investment property, should they be contacting their account
Speaker 1: and what sort of relevant circumstances should people have to
Speaker 1: be warranting a tax planning meeting?
Speaker 2: Right? Okay, well, I think I do often get asked
Speaker 2: by people can we talk about my tax? And they
Speaker 2: might just be an individual, you know, with just a
Speaker 2: wage that's coming through, and you know they've already spent
Speaker 2: what they've spent on things they're not going to buy
Speaker 2: anymore or do anything different. There's not a lot of
Speaker 2: point to them getting you know, a tax having a
Speaker 2: tax planning meeting, paying hundreds of dollars to an accountant
Speaker 2: or even thousands for them to run through things with
Speaker 2: them if they can't do much. But obviously the benefit
Speaker 2: comes more when you've got complex tax structures and think
Speaker 2: like trusts and companies. And also if you maybe you
Speaker 2: have a lot of capital gains and different assets that
Speaker 2: you own. Maybe you have a family trust with other
Speaker 2: investments that are bought and sold. Well, maybe you have
Speaker 2: even property and you just want to see where you
Speaker 2: could be sitting. Like with property owners. Quite often people
Speaker 2: might in their tax planning meeting might consider maybe pre
Speaker 2: paying a few things which might bring forward a few
Speaker 2: deductions if that's going to benefit them in this financial gear.
Speaker 2: So look at it's all about scale, and it's all
Speaker 2: about what you can do. Your accountant should be able
Speaker 2: to give you a good idea just you know quickly
Speaker 2: whether or not one would benefit you. But yeah, it
Speaker 2: is quite common for me to say, oh, look it's
Speaker 2: probably not going to be worth your while once you
Speaker 2: consider the cost. But yeah, those with businesses, yeah, pretty
Speaker 2: well it could benefit them. It's just whether or not
Speaker 2: they you know how much it's going to benefit and
Speaker 2: really yep, and.
Speaker 1: That makes sense. So pauses for courses. Common sense applies.
Speaker 1: The more complex year situation is, the more likely it
Speaker 1: is it shouldn't you should have a tax planning meeting.
Speaker 1: But it sounds like anyone can have a tax planning meeting.
Speaker 1: Fair accountant, they're just going to be charged for it,
Speaker 1: and the benefit might not be exceeding what the cost is. Yeah,
Speaker 1: all right, well, I'm very excited to get onto our
Speaker 1: next segment. It's around I heard a friend say this
Speaker 1: at a barbecue. Can I do this as well? But
Speaker 1: before we jump into that, let's take a short break.
Speaker 1: Hello and welcome back to the Money Puzzle. I'm James
Speaker 1: Gerard right to, a contributor to the Wealth section of
Speaker 1: The Australian and also founder a financial advisor dot com
Speaker 1: dot au, and this week on the show, I have
Speaker 1: Timothy Ricardo, certified practicing accountant from Central Coast of Sydney. Now,
Speaker 1: before we get started on this particular part of the episode,
Speaker 1: I just want to remind all of our listeners that
Speaker 1: everything that we discussed is general information and should not
Speaker 1: be taken as personal tax or personal financial advice, So
Speaker 1: please seek out a qualified advisor before making any decisions. Now, Timothy,
Speaker 1: I've compiled a list of questions that I've heard over
Speaker 1: the years in regards to to tax and most of
Speaker 1: these have come about from someone saying I was at
Speaker 1: a barbecue and my friend told me that they're doing this,
Speaker 1: Why can't I do this? Or I was at a
Speaker 1: party and someone told me they're doing this. Or I
Speaker 1: was in a taxi and a taxi driver said that
Speaker 1: he's doing this. So I've got a good dozen or
Speaker 1: so of these questions. Are you ready to confirm or
Speaker 1: dispel these tax myths?
Speaker 2: Yeah, this sounds like it's going to be quite a
Speaker 2: painful one here, James. I think this is probably why
Speaker 2: I don't attend many barbecues, apart apart from the obvious
Speaker 2: of you always too busy to do so, I don't know.
Speaker 1: All right, Well, here we go the first one. If
Speaker 1: I have a family trust, can I distribute four hundred
Speaker 1: and sixteen dollars, which is the tax free threshold for
Speaker 1: a minor, to each of my fifty nieces and nephews
Speaker 1: as a tax free distribution? So that would be an
Speaker 1: extra twenty thousand dollars per year tax free. Somebody distributed
Speaker 1: four hundred and sixteen dollars to fifty people under the
Speaker 1: age of eighteen who are family members. So what do
Speaker 1: you reckon about that one?
Speaker 2: Tim, Wow, that's a lot of nieces and nephews there, James,
Speaker 2: I think I've got is it sixteen nieces and nephews?
Speaker 2: So I thought I was doing pretty well, but fifty, yeah,
Speaker 2: that's a good number. Look, I think it wouldn't be
Speaker 2: recommended as an initial comment, mainly because of the ato's
Speaker 2: focus on distributions and making sure you're following through on
Speaker 2: those distributions and issues surrounding just paper distributions and then
Speaker 2: taking the money yourself. But it's also a risky practice anyway,
Speaker 2: distributing to a whole lot of people, because perhaps your
Speaker 2: deed doesn't allow you to distribute to them, or maybe
Speaker 2: you have a family trust election in place which doesn't
Speaker 2: allow you to distribute to nephews and nieces, so you
Speaker 2: can talk you're accountant about that one. But it's certainly
Speaker 2: not a case of twenty grand tax free in your
Speaker 2: pocket if you decide to distribute to your fifty nieces
Speaker 2: and nephews. Do you know all their names, James? I do.
Speaker 2: My beautiful wife, Kiara.
Speaker 1: She's Vietnamese and she her parents, both of them have
Speaker 1: large families, so her mother is like one of twelve
Speaker 1: and her dad's about one of about the same, and
Speaker 1: so almost everybody is family one way or another. So
Speaker 1: picture the scene Timothy family barbecue happens to be a
Speaker 1: bank nearby with an ATM and there's a line with
Speaker 1: fifty little kids there, and someone's standing there pulling out
Speaker 1: four hundred and twenty dollars at a time and distributing
Speaker 1: it to each of the fifty nieces and nephews. And
Speaker 1: the trustee says that that can be done. How are
Speaker 1: we feeling about that now?
Speaker 2: Look, I'm feeling terrible about it, James. But that's okay.
Speaker 2: I think we're going to keep moving. Keep moving. Give
Speaker 2: you the next one, all right?
Speaker 1: I have a contractor. Can I operate through a p
Speaker 1: Toy limited structure to reduce my tax bill by having
Speaker 1: multiple shareholders to pay income to? So just to elaborate
Speaker 1: on that a little bit more, a contractor rather than
Speaker 1: they contract and invoice themselves and pay up to forty
Speaker 1: seven percent tax. The question here is, can we just
Speaker 1: use a company structure and invoice and I can split
Speaker 1: my income to multiple people through that company structure so
Speaker 1: I don't have to pay forty seven percent tax?
Speaker 2: Okay? So I think there's a lot could be said
Speaker 2: about this one. I've had this question recently. It's it's
Speaker 2: a pretty common thing people wanting to try to use
Speaker 2: structures as a bit of a sham business, you know,
Speaker 2: to try to distribute income. The bottom line is you
Speaker 2: just need to watch out for what's called personal income.
Speaker 2: The Personal services Income provisions and the ATO don't really
Speaker 2: allow you to split PSI what's called PSI income, so
Speaker 2: they what they're looking at doing there would probably be
Speaker 2: contrary to the rules. You just need to look at
Speaker 2: how the business is running, whether it satisfies other conditions
Speaker 2: eighty twenty rule results tests to see if maybe it's
Speaker 2: a personal services business. But generally the question surrounding these
Speaker 2: is to try to make people, like I said, set
Speaker 2: up businesses that are not really businesses and they're charating
Speaker 2: as such. So yeah, watch out.
Speaker 1: Okay, So it sort of sounds like the tax office
Speaker 1: just look at intentions. If something looks like you're doing
Speaker 1: something to try and get around paying tax illegitimately, that
Speaker 1: they're probably going to rule it that way.
Speaker 2: In short, well, they've probably already got rules in place
Speaker 2: to close those loopholes. But yeah, certainly, if that's your
Speaker 2: taxi cab driver giving you that advice, James, I'd be
Speaker 2: very wary.
Speaker 1: All right, zero from two. Let's see if we can
Speaker 1: get a yes on something. Can I become a taxed
Speaker 1: resident of a tax free country such as Vanowatu and
Speaker 1: then register a business there, start invoicing through that and
Speaker 1: pano tax.
Speaker 2: It sounds pretty good, doesn't it. It sounds amazing for
Speaker 2: all of our except that I'd be out of a
Speaker 2: job if I moved over there. That's the only problem, James,
Speaker 2: not having any tax to pay. But for all of
Speaker 2: our Vanua to listeners, potentially they could, they could be
Speaker 2: over there and operating. But for any of you who
Speaker 2: want to actually live and reside or have a home
Speaker 2: or work in Australia, then most of the time the
Speaker 2: answer is going to be nut James. So I don't
Speaker 2: think that that's that's really a viable option if you're
Speaker 2: if you're in Australia and operating in Australia, and yeah,
Speaker 2: there's there's lots of complex rules here. You need to
Speaker 2: talk to your advisors about this one, particularly if you
Speaker 2: maybe looking at a dual sort of citizenship or residency.
Speaker 2: There's all sorts of tax residents issues to consider there.
Speaker 1: So okay, So sounds like if you live in Australia
Speaker 1: work in Australia, there's no way it's unlikely to be
Speaker 1: able to be classified as a hard to in taxism
Speaker 1: and pay no tax. Well let's try again. Can we
Speaker 1: buy an investment property or investment properties all around the
Speaker 1: country and travel to them and claim the travel costs
Speaker 1: as a tax deduction because I'm going to inspect my
Speaker 1: investment property and coincidentally it lines up with a school holiday.
Speaker 1: I mean, they just might take a bit of extra
Speaker 1: time staying in that location as well.
Speaker 2: Okay, so this one's been a no as well, James.
Speaker 2: You should have mixed these up a bit more and
Speaker 2: put some yes ones in there. But I feel like
Speaker 2: a bit of a wet blanket. But no travel has
Speaker 2: not been allowed with rental properties since twenty seventeen something
Speaker 2: like that, so it's been a number of years now
Speaker 2: that travel can't be claimed. But also with holiday homes,
Speaker 2: you've got to be careful because you've got to reduce
Speaker 2: your claims when you're using them personally as well. So
Speaker 2: there's also a bit of another trap to be to
Speaker 2: be watching out for when you're when you're looking at
Speaker 2: holiday investment properties.
Speaker 1: Okay, well, I'm determined to get a yes out of you.
Speaker 1: Let's try this one. Assume I have a dog and
Speaker 1: I work from home as well. Can I claim my
Speaker 1: dog food and pet bills as a expense because my dog,
Speaker 1: well that was the Chihawa, doubles as a guard dog.
Speaker 2: Once again, like I said, I don't attend many barbecues.
Speaker 2: If these are the type of questions, I don't think
Speaker 2: I'll go to any anytime soon. But generally no. Well,
Speaker 2: pretty well, it's that's going to be a no, especially
Speaker 2: if it's chihuahua. They're James. But some businesses that require
Speaker 2: legitimate guard dogs, you know, then you know, they can
Speaker 2: sort of claim that those sort of expenses for those
Speaker 2: for looking after their guard dogs and that sort of thing.
Speaker 2: But for the general, run of the mill sort of
Speaker 2: home office worker, that's going to be a definite no.
Speaker 1: Okay, I feel like there's a yes coming on this one.
Speaker 1: Who can claim gym membership as a tax deduction? So
Speaker 1: someone asserts that I need to be physically fit for
Speaker 1: my work, and so part of me staying fit for
Speaker 1: my work is going to the gym, I want to
Speaker 1: claim that as a tax deduction. Is this possible under
Speaker 1: any circumstances?
Speaker 2: Absolutely? There we go, we go. Yeah. So look as
Speaker 2: far as someone who's got an elite level of fitness.
Speaker 2: Someone that's emergency services workers that are at that higher level,
Speaker 2: you know, and we've got your personal trainers, are the
Speaker 2: professional athletes, anyone that sort of ticks those boxes of
Speaker 2: requiring an elite level of fitness, then yes they can
Speaker 2: claim that for your I mean, you've got your Simpson's
Speaker 2: picture of what police officers look like. I'm not saying
Speaker 2: that that's what they all look like, but obviously the
Speaker 2: general police officer or the you know, your sort of
Speaker 2: general worker that doesn't require that higher level of fitness.
Speaker 2: It's it's going to be you know, but but yeah,
Speaker 2: there's certainly options there when ability to claim when you've
Speaker 2: got that higher level of fitness required.
Speaker 1: Look like, what, what's an elite sort of level of
Speaker 1: things we talk like a laborer who works on in
Speaker 1: the building industry.
Speaker 2: No, it is. It is going to be few and
Speaker 2: far between, to be honest, it is. Yeah, I wouldn't
Speaker 2: have many of these that I've I've I've had I
Speaker 2: had a few professional sort of sports people and they
Speaker 2: all are able to claim their their gym membership. You've
Speaker 2: also got I had an actual specific rescue worker that
Speaker 2: you know required a higher level. Certainly you know, like
Speaker 2: your sas your army, people that require that higher level
Speaker 2: as well of fitness. Yeah, they are few and far between.
Speaker 2: And you know, out of every thousand tax returns you
Speaker 2: might have maybe maybe half a dozen or so, there's
Speaker 2: not going to be many James. So it's not nothing
Speaker 2: to really write home about. But yes it is, it
Speaker 2: is a possibility.
Speaker 1: All right. What about if I'm a professional dog walker
Speaker 1: and I'm walking five dogs at a time, five times
Speaker 1: a day. I need my cardio fitness? Tim, Can I
Speaker 1: claim you just want me.
Speaker 2: To say no again, don't you? All right?
Speaker 1: I think everyone knows the as to that, and I
Speaker 1: think Tim thinks that the ATM is listening to this.
Speaker 1: We'll move on to the next word. Now continue on
Speaker 1: the home office team. I work in a home office.
Speaker 1: I just bought a new TV and speakers for my
Speaker 1: home office. Can I claim that as a tax reduction?
Speaker 2: Okay, So this would be a capital asset anyway, because
Speaker 2: we spoke before about the three hundred dollars threshold. But
Speaker 2: that aside, it depends on whether you're using it for
Speaker 2: business or not, so it would need to be depreciated
Speaker 2: Number one, and which means basically you have to claim
Speaker 2: it over a number of years. So you can't just
Speaker 2: claim ten thousand dollars off your tax for that. But yes,
Speaker 2: you certainly would need to have a legitimate claim there
Speaker 2: as far as it's not being used privately, and any
Speaker 2: private use would have to be apportioned out of that. Now,
Speaker 2: how you did that? The problem you're going to come
Speaker 2: up with is substantiation, So trying to prove that you
Speaker 2: use it for work. Certainly, if you're in the audio
Speaker 2: visual space and you have lots of meetings and it's
Speaker 2: set up on in your home office that you've got
Speaker 2: specifically set up for work, and it's being used one
Speaker 2: hundred percent for work, then yes, that would be a
Speaker 2: potential to claim. But trying to prove that is often
Speaker 2: the challenge people have the substantiation requirements, which the onus
Speaker 2: is sort of on the taxpayer there to be able
Speaker 2: to prove that.
Speaker 1: So yeah, good, all right, Well, before we go through
Speaker 1: more of my friend told me that they're doing this.
Speaker 1: Can I do this? Let's take another short break. Hello,
Speaker 1: and welcome back to today's episode of The Money Puzzle.
Speaker 1: I'm James Gerry, this week's host, and I have Timothy
Speaker 1: Ricardo certified practicing accountant from the Central Coast of Sydney. Now,
Speaker 1: Timothy is the next. One's a little bit risky and
Speaker 1: any listeners with children maybe just pause. This will skip
Speaker 1: a minute forward, so you've been warned. Now the question is,
Speaker 1: if I worked in the adult industry, can I claim
Speaker 1: silicon implants as a tax deduction being tools of trade?
Speaker 2: Well, James, I would have left the barbecue at this point,
Speaker 2: so I don't. I don't know that I'm that keen
Speaker 2: on these questions.
Speaker 1: But you're not going to dodge this one. I want
Speaker 1: an answer out of you for this time.
Speaker 2: You just want me to it's a no again, which
Speaker 2: I'm going to say it is a no from me. Certainly,
Speaker 2: cosmetic medical has been ruled out for a long time,
Speaker 2: and cosmetic sort of you know, cosmetic medical procedures have
Speaker 2: been sort of excluded from you know, being able to
Speaker 2: be claimed. Certainly not as the tools of trade either,
Speaker 2: So I think, yeah, I'm going to I couldn't say
Speaker 2: that I've had experience with this one, but I wouldn't.
Speaker 2: I wouldn't be jumping to allow that one.
Speaker 1: All right, moving right along and listen as you can
Speaker 1: bring your children back in the room. Can I claim
Speaker 1: my ildren's school fees as a tax deduction as an
Speaker 1: education expense because I plan to employ my children in
Speaker 1: the future in my business.
Speaker 2: No, unfortunately, they's That's another one that people used to
Speaker 2: distribute actually through their trusts because a lot of education
Speaker 2: you know, the facilities, they're all charities under education charities.
Speaker 2: So people used to distribute to this city, you know,
Speaker 2: twenty odd years ago. I remember it happening quite a lot.
Speaker 2: But then they decided that that was an actual benefit
Speaker 2: to the beneficiary rather than to the charity itself. So yeah,
Speaker 2: this hasn't been allowed for some time in any sort
Speaker 2: of way, shape or form. So that's another no, James.
Speaker 1: All right, feel free to say, yes, we indemnified ourselves.
Speaker 1: We said that this is just general information, so no
Speaker 1: one's going to go and do anything. No one's going
Speaker 1: to go get any implants or anything like that, so
Speaker 1: it's all okay. Next one is, can I register them
Speaker 1: as a motor vehicle dealer buy luxury cars not pay
Speaker 1: the luxury car tax, which I think that doesn't happen
Speaker 1: when you're a motor vehicle dealer, But anyone you can
Speaker 1: answer this, drive the car and then sell it for
Speaker 1: profit a year or two later because you didn't sell
Speaker 1: the luxury car tax. So something along the lines of
Speaker 1: you spend two hundred thousand dollars in the car, and
Speaker 1: I don't know what the luxury car tax is, at
Speaker 1: least to say it's like thirty thousand, So it cost
Speaker 1: you one seventy, You drive it for a year, you
Speaker 1: sell it for one seventy or thereabouts, and then you've
Speaker 1: got a free car, and you just keep doing that
Speaker 1: over and over.
Speaker 2: Sounds great, it sounds really great. They're probably you're going
Speaker 2: to fall into there is fringe benefit tax, and that
Speaker 2: is if you're using the car personally anyway, it's going
Speaker 2: to be caught up. And fringe benefit tax is something
Speaker 2: you pay on the full value of the car. So
Speaker 2: if you're talking about your two hundred thousand dollars Ferrari
Speaker 2: aspirations there, James, and you're using that car personally, you
Speaker 2: know obviously the ATO wants you to pay some tax
Speaker 2: on that. So what that means is fringe benefit tax
Speaker 2: applies on the full value of the car, and yeah,
Speaker 2: that would all need to be factored in. Yeah, as
Speaker 2: far as any scheming here, James, I certainly would not
Speaker 2: want to support anything there that's, you know, just to
Speaker 2: try to fund your your two hundred thousand dollars Ferrari,
Speaker 2: So I would as your accountant, I would advise against
Speaker 2: this as well.
Speaker 1: All right, last one, then, on social media platforms I
Speaker 1: see all the time there's ads for self help business
Speaker 1: incubator type things. Go out there and make a squillion dollars.
Speaker 1: We can help you to do it. Come join our
Speaker 1: program and it's good as done. Can you claim the
Speaker 1: cost of those things as a tax reduction in the
Speaker 1: education area?
Speaker 2: Okay, so education is something that they've actually released a
Speaker 2: ruling on this just recently. The ATO have to give
Speaker 2: a bit more already surrounding education claims. There were two
Speaker 2: things that that you know, sort of limbs of being
Speaker 2: able to claim education expenses. One of them being that
Speaker 2: it was going to increase your income in your current
Speaker 2: income earning activity, and the other one is that it's
Speaker 2: going to improve the skills in your current income earning activity.
Speaker 2: So there's there's got to be the connection to what
Speaker 2: you're doing, and the problem that people usually have with
Speaker 2: education self education is that it doesn't link up with
Speaker 2: what they're currently earning their income on. So if I'm
Speaker 2: I'm an accountant, and I think that we'll find on
Speaker 2: financial planning is pretty easy, and look, most of us
Speaker 2: do think really, so you know, we think we might
Speaker 2: become financial planners as well, like you, James, because you know,
Speaker 2: you're someone that we all look up to as as
Speaker 2: a successful individual. So if I start doing some financial
Speaker 2: planning courses and what I claim them, my current income
Speaker 2: earning does relate to that, now I would have a
Speaker 2: hard time trying to link up and you know that
Speaker 2: would seem quite related to accounting, but you'd have a
Speaker 2: hard time linking that up to your income earning. Now,
Speaker 2: there may be some crossover there and you might get
Speaker 2: some increase in skills relating to your your accounting, but
Speaker 2: it's a real they're really cracking down on this one
Speaker 2: as well. So specifically for your question, I wouldn't say
Speaker 2: they'd be earning any money from that particular venture initially,
Speaker 2: certainly initially, so getting those self education claims upfront is
Speaker 2: probably not going to occur either.
Speaker 1: Sure thing, all right, Well, I'm out of questions. Hopefully
Speaker 1: our listeners learnt a lot bit from that. Yeah, If anything,
Speaker 1: they probably learned don't invite anything to their barbecue, and
Speaker 1: don't ask if any tax questions because you can't say
Speaker 1: no to everything, but we want or two yeses and
Speaker 1: a few maybes in there. So I think that was
Speaker 1: somewhat us.
Speaker 2: This was orchestrated. That's trying to make me look bad, jameson.
Speaker 1: No, it shows that there's tax laws in place and
Speaker 1: everything's black and white, and it's there for a reason.
Speaker 2: I'm going to throw one more.
Speaker 1: Curve ball question actually before we wrap up for today.
Speaker 1: It's a really big question, but try and pick your
Speaker 1: brain and get some concise answers here.
Speaker 2: Now.
Speaker 1: Over the years, people constantly ask me for recommendations to accountants,
Speaker 1: and my observations are that the best accountants, such as
Speaker 1: Timothy Ricardo here, have lots of clients, but they also
Speaker 1: focus somewhat their time on the clients that have structures
Speaker 1: so run businesses, have family trusts, run self managed super funds,
Speaker 1: and I'm sure Timothy would love to be able to
Speaker 1: help absolutely everybody, but there's only a certain amount of
Speaker 1: time that these elite accountants have, so they need to
Speaker 1: focus their time with the right clients. So my question is,
Speaker 1: how can an every day mum and dad for a
Speaker 1: relatively simple tax situation, two income, maybe an investment property,
Speaker 1: maybe a share portfolio. How do they make sure that
Speaker 1: they're getting the best tax advice and tax service when
Speaker 1: they do their tax returns every year if they want
Speaker 1: to use a professional because generally the best accountants busy
Speaker 1: with the bigger fisher I guess you.
Speaker 2: Could say, yeah, well, look, that's a really good question individuals. Yeah,
Speaker 2: it is a difficult one because accountants are often looking
Speaker 2: at those sort of touch point required you know, touch
Speaker 2: points required with a client, and how much you're having
Speaker 2: to spend with each client. But essentially, if you can
Speaker 2: find an accountant that obviously ticks the boxes as far
Speaker 2: as their registrations are concerned, and they're either CPAs or
Speaker 2: c as, they've got the qualification being able to have
Speaker 2: that conversation with them either before or after your tax return,
Speaker 2: feel free to ask any of your questions and if
Speaker 2: you can do it at the same time, you know,
Speaker 2: rather than the ad hoc little questions throughout the year,
Speaker 2: it's easier if you can you can sort of you know,
Speaker 2: try to build that I suppose structure surrounding that annual
Speaker 2: meeting you have with them to get the use out
Speaker 2: of that. And certainly it might cost you a little
Speaker 2: bit more seeing a qualified professional that's willing to give
Speaker 2: you the time face to face, but but yeah, certainly
Speaker 2: it can pay dividends. So I suppose from that point
Speaker 2: of view, James, try to find someone that you can
Speaker 2: you can actually access and and have and and you know,
Speaker 2: sort of drawer on their experience and and also one
Speaker 2: that's going to provide them updates and you know, like yourself,
Speaker 2: sending out newsletters and making sure that key issues are
Speaker 2: being addressed so that they don't get they don't miss anything.
Speaker 1: Yeah, I agree, And from personal experience, I'd add that
Speaker 1: you have to actually like your accountant. So whichever accountant
Speaker 1: you use, you have to feel comfortable to be able
Speaker 1: to communicate with them, email them, pick up the phone
Speaker 1: and get back to them when they're asking you things
Speaker 1: as well.
Speaker 2: Do you agree to him? Yeah? Absolutely, there we go.
Speaker 1: Well, that's a wrap for today's episode. Timothy Ricardo, certified
Speaker 1: practicing accountant from Sydney Central Coast, thank you for your
Speaker 1: contribution today. It was very informative and we went through
Speaker 1: lots of different tax and accounting topics. Very good thank
Speaker 1: you for having me my pleasure, and to our listeners,
Speaker 1: thank you for tuning in to today's episode of The
Speaker 1: Money Puzzle. The show will return to its regular format
Speaker 1: next week when James Kirby returns, but in the meantime,
Speaker 1: send us your questions. I'm sure James would love to
Speaker 1: see a full inbox to dig his teeth into. Next time.
Speaker 1: You can tweets your questions and thoughts. Just use the
Speaker 1: hashtag the Money Puzzle or one word, or email us
Speaker 1: at The Money Puzzle at the Australian dot Com. Today
Speaker 1: you until next time, I'm James Gerard. Talk to you
Speaker 1: soon at