Editorial from The Northern Star & The Advocate newspapers on the 30/08/2010

With the annual task of preparing your tax return now upon us, you need to make sure that you are claiming all your tax deductions and tax offsets.

My experience as a tax accountant over the last 20 years has shown me that many valuable tax breaks available to employees, retirees and investors are often overlooked.

I have set out below the most common tax benefits that are overlooked when tax returns are being prepared:

• Failure to claim your private motor vehicle when used for work related activities including attending conferences and seminar’s, dropping off or picking up bulky supplies and driving directly between two places of work
• Not claiming the tax offset for medical expenses where over $1,500 has been spent by the family on dental, optical, chemist, hospital, ultrasounds, hearing aids etc. Please note that the $1,500 threshold is after refunds from health funds and medicare
• Not claiming depreciation on rental properties built or improved after the 17^th July 1985
• Failure to claim travelling costs to rental properties for inspections and repairs. Costs here include motor vehicle, airfares, accommodation and meals. Apportioning these costs may be necessary where private holidays are also included in the trip
• Not offsetting previous years capital losses against current year capital gains
• Failure to add interest, rates, land tax and fences to the cost base when calculating the capital gain on the sale of land
• Not contributing $1,000 into superannuation to take advantage of the superannuation co-contribution scheme. This scheme has now being extended to the self-employed
• Not claiming for educational expenses of your children at primary or high school  
• Not claiming the trip to your accountant last year to do your tax return
• Not claiming for gifts and donations made during the year

If you want to take control of your superannuation or pension, then the setting up of your own superannuation fund could represent an attractive alternative.

With your own fund, you make all the investment and asset allocation decisions. This compares with the traditional superannuation funds where you have no or minimal control over your investments.

Benefits of Your Own Superannuation Fund

• Control over what investments are made;
• Flexibility in deciding when to buy the investments;
• Ability to assess all the benefits of the new superannuation rules starting from the 1st July 2007;
• Can be cheaper than managed funds, if you have more than $250,000 to invest;
• The fund can purchase residential real estate itself or in partnership with you;
• The fund can purchase your business premises;
• Provides asset protection as amounts held within superannuation cannot be assessed by the trustee in bankruptcy;
• Fund can recieve imputation refunds on dividends and the dividend component of share buy-backs;
• The fund can be used to invest directly into term deposits to minimise investment risks;
• The new account based pensions can be paid from the fund.

Disadvantages of Your Own Superannuation Fund

• Additional paperwork.
• Statutory regulations apply to trustees to ensure the fund is operated within government guidelines.
• Time is needed to make and implement investment decisions.

It should be noted that in a recent study, 87% of people who had their own Self Managed Superannuation Fund felt that running their fund was easy or very easy.

The question of whether you can “do it better” than the professional superannuation fund managers, is something only time will tell, but for many investors who have experienced high fees and no control over the investments purchased, they are willing to try.

Death Beneifts

The new simplified superannuation rules which take effect from the 1st July 2007 introduce a number of changes on how superannuation is taxed upon the death of a superannuant.

Superannuation accounts on the 1st July will be divided between an exempt component and a taxable component. The exempt component is received by the beneficiary tax-free while the amount of tax payable on the taxable component will depend upon whom it is paid to.

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