Archive for the ‘Save Money’ Category

How to Spend Less Money
Monday, May 4th, 2009

This was a very interesting article I read about how to spend less money… I noticed I actually do this myself but never thought twice about it. Personally, I only carry $50 notes around and try not to break it into smaller notes where ever possible.

Anyways, the method is to carry smaller notes based on “Want to Spend Less? Carry Bigger Bills“, The results suggest that the denomination effect occurs because large denominations are psychologically less fungible than smaller ones, allowing them to be used as a strategic device to control and regulate spending.

Personally, I’m not sure if this really works but I definitely know that my smaller notes disappear a lot faster than my bigger notes. i.e. I spend my $5, $10 and every $20 a lot faster when I know I have them in my wallet. Nowadays, I use credit cards to pay for everything where possible so that I can track my spending.

Anyways, you might want to try this out and see if it works for you as a way to spend less money… too bad ATMs don’t give out $100 notes…

PAYG Withholding Variation Application 2010
Thursday, April 16th, 2009

Lodge your PAYG withholding variation application 2010 using e-variation from 1 May 2009.

After 29 April 2009, the current 2009 PAYG withholding e-variation will no longer be available.

You can use e-variation to lodge any PAYG withholding variation application: simply enter the relevant reason code.

  • To access e-variation at www.ato.gov.au
  • select ‘Find a form or publication’ from the left menu
  • select ‘All forms’
  • then ‘Search’
  • then enter ’2036′ into the NAT number field
  • then click on the link to the PAYG withholding variation application 2010 (NAT 2036)
  • then follow the prompts.

How long do you have to wait for your PAYG Variation?
When you lodge your e-variation application, you should receive an on-screen message with your reference number. If you do not get this message, the transmission may still have been successful. Do not transmit the e-variation again as this will delay the processing of the application.

We will send you an email confirming receipt or your application. If you do not get this email, please phone 1300 360 221 between 8.00am and 6.00pm, Monday to Friday.

In most cases e-variation applications are processed within 14 days. Please wait 21 days before phoning to check on the progress.

More information
If you have more questions:

  • visit the ATO website www.ato.gov.au
  • phone 1300 360 221 between 8.00am and 6.00pm, Monday to Friday, or
  • email ATO at ITWvariation@ato.gov.au

If you want to find out more information regarding the benefits of doing a PAYG Withholding Variation then you may want to visit:

Tax Bonus – Checklist
Wednesday, March 11th, 2009

What do I need to do to get the Tax Bonus?

  • The bonus will be available to Australian resident taxpayers who paid net tax in the 2007-08 financial year. (This simply means you actually paid at least $0.01 worth of tax in 2007-2008, if you didn’t then you don’t get the bonus)
  • Taxpayers must lodge their tax returns for the 2007-08 financial year by 30 June 2009 to be eligible. (Obviously, they won’t know if you are eligible until you actually done your tax return for 2007-2008, so I guess if you haven’t done it yet, you have a good reason to do it now)
  • Taxpayers will not need to apply for the payment. The Australian Taxation Office will make the payment to taxpayers after determining eligibility for the 2007-08 financial year. (this means, its going to be automatic. If you gave the ATO your bank details last year, then most likely you’ll be expecting the Tax Bonus in your bank account in the next few weeks. Otherwise be expecting a cheque in your mailing address)

You can get all the details of the Tax Bonus here:

How Much Tax Bonus will I get?

  • A $900 bonus will be paid to taxpayers with taxable income up to and including $80,000.
  • A $600 bonus will be paid to taxpayers with taxable income exceeding $80,000 to $90,000.
  • A $250 bonus will be paid to taxpayers with taxable income exceeding $90,000 to and including $100,000.

Remember the aim of the Tax Bonus is to stimulate Australia’s economy and the Government encourage you to spend it. ie. Buying Australian goods/services. Buying electronic goods could mean up to 50% of the price you paid goes to an overseas company. Services are the best way to keep the money in Australia, e.g. plumbers, electrician, builders, gardeners etc.

Happy spending/investing!

Rental Property Depreciation – Is It Really Worth It?
Wednesday, December 17th, 2008

Somebody asked me if it is worthwhile to get a depreciation schedule for his rental property. Strangely I hesitated and did a mental calculation before replying, “Its a numbers game, as long as you can get more back from the rental property depreciation then its worth it. The chances of this is very high”

The cheapest depreciation schedule that I know about is from Tax Shield so lets go through the numbers and do a quick sanity check.

Assumptions

  • Marginal tax rate is 30%
  • Cost of Depreciation Schedule is $275

Obviously, the cost of the depreciation schedule is also deductible as it is a cost of managing your rental property and tax affairs and directly link to the income generation of the rental property. This means the after tax cost of the Depreciation Schedule is $192.50 ($275 x (1-30%))

For the depreciation schedule to be worthwhile there must be $641.67 (192.5 / 30%) worth of depreciation over the life of the schedule. Ideally you would want the $641.67 to be within the first few years so that you can breakeven within the first year or two.

i.e. Tax Shield has to find $641.67 worth of fittings and fixtures to depreciate over the next 30 years in order for you to break-even. The bonus is items that are classified as “low-value pool” can be depreciated over their effective life (which is usually a lot quicker). Examples could be, kitchen stove, oven or range hood.

Most rental property would have fixtures and fittings like carpets, laminates, floorboards, tiles, blinds, curtains and/or light fittings. These few items alone would make it easy for companies such as Tax Shield to find thousands of dollars worth of depreciation.

In my opinion, it’s almost certain you’ll get your money back for the schedule PLUS more for your back pocket!

Some things you will want to consider are:

  • Age of property
  • Recent renovations or improvements

I must admit, I have an investment property that is really old, it was built back in the 1960s and I didn’t think it would be worthwhile paying for a rental property depreciation. After going through this exercise, I decided to invest my $275 and to my delight the depreciation schedule is being paid for within a year. i.e. there was more than $641.67 worth of depreciation within the first year that I could claim.

This also made me think about how much my accountant really understood about property taxes and rental property depreciation. They obviously don’t invest in rental properties of their own; otherwise they would have encouraged me to get one especially when I asked them whether I should or not.

Depreciation Schedule – The Benefits
Friday, October 24th, 2008

Last week I wrote about Depreciation Schedule – Where Can I Get One?, I realised that some people may not know what a depreciation schedule is and why you actually want to get one. So I better explain myself…

The dictionary definition for depreciation is: “A decrease or loss in value, as because of age, wear, or market conditions.”

The good news for property investors is that the Australian Tax Office (ATO) allows us to claim this “decrease or loss in value” an expense. The best thing is that we actually didn’t pay for it, i.e. we didn’t have to pay anybody for the “decrease or loss in value”, but we are allowed to claim it! People in the accounting industry call this paper loss since no money actually comes out of the investor’s pocket.

Let me help you understand with an example. I will be using a slightly modified version of my personal transaction:
Property Purchase Price: 370,500
Loan Amount: $359,385
Annual Interest (8.2%): $29,469.57
Annual Rental: $15,600
Water Rates: $800
Council Rates: $800
Strata Rate: $1,000
Depreciation (First Year): $3,000 (This is the number from your depreciation schedule – and will vary from property to property and is dependent on the age of the property and capital improvements that has been done on the property)
Tax Rate: 30% (My Assumption)

If I don’t have a Depreciation Schedule:
Net Income: $15,600 – $29,469 – $800 – $800 – $1,000 = -16,469
Tax Deduction (30%): $4,940.7
Actual Cash Outfow: $4,940.7 – $16,469 = -$11,528.3

If I have a Depreciation Schedule
Net Income: $15,600 – $29,469 – $800 – $800 – $1,000 – $3,000 = -19,469
(used for tax calculation)
Net Income: $15,600 – $29,469 – $800 – $800 – $1,000 = -16,469 (actual
cash out flow – however depreciation does not cost you real cash and is not included)
Tax Deduction (30%): $5,840.7
Actual Cash Outfow: $5,840.7 – 16,469 = -$10,628.3

As you can see there is $900 worth of savings (real money). That’s potentially a short holiday, a new computer, an iPhone, 15 months subscription to Your Success Club, saving to offset your interest paid, the list goes on!

Depreciation Schedule – Where Can I Get One?
Thursday, October 16th, 2008

I was talking to some people who owned investment properties last week and I was astonished that even though they knew about depreciation they didn’t know they could actually buy a depreciation schedule. Most people know about claiming depreciation for investment properties, but obviously not everybody knows that you can pay a qualified valuers to get an Australia Tax Office (ATO) approved depreciation schedule which you can used in your tax return. So this post is dedicated to closing this gap!

I have used several companies to purchase depreciation schedule for my properties, this is just the ones I have personally used and this is definitely not the definitive list. Feel free to Google one or ask your friends or even go look through the yellow pages

  • Deppro (full service – a valuer will come to your property and calculate the depreciation for your property)
  • Tax Shield (budget service, desktop estimates are done, I don’t think an actual real life valuer actually comes on site to see your property. This is better for those older type properties with not much depreciation left, ie. no new renovations or improvement done to the property for decades)
  • Local Valuers (full service – a valuer will come to your property and calculate the depreciation for your property. Its usually cheaper than Deppro and those bigger companies, you can find them in the yellow pages or Google)

So if you have an investment property, do yourself a favour and order a depreciation schedule especially if you don’t already have one. You are literally throwing good money away if you don’t have a depreciation schedule.

PS: You can actually negotiate on the price with Deppro (for that matter, with anybody), I told my colleague about deppro and he was smart enough to ASK for a better price. I think he got $100 off simply because he asked! So the question is, are you brave enough to ask?