My motivation for writing this book was the number of families out there who didn't understand all the different types of government benefits and tax concessions that were available to them. I hope that this book will help reduce the confusion and that you will start claiming more of what you are legally entitled to.
This book is split into various parts in line with some key areas surrounding your finances:
• you and your family
• your employment
• your education
• your investment property
• your shares
• your superannuation
• your business.
In each part I will share with you a number of tips and strategies that you can implement to save money on your taxes — legally!
You should leave no stone unturned in your quest to legally minimise your tax. While everyone should pay their fair share of tax, Kerry Packer summed it up best when he famously said ‘don't tip them!'
Now I don't expect that every single tip will be applicable to every single person out there but I am confident that there will be at least one tip that will save you more than the cost of this book. Some tips will maximise your refund, others will minimise your tax, while others will simply save you money. Some may save you millions over a lifetime, others just a few dollars. But times are tough and every dollar counts.
Whatever you get out of this book, I hope it is positive and not too taxing! And this is my gift to you.
PART I
YOU AND YOUR FAMILY
From marriage and children right through to divorce, retirement and ultimately death, all families encounter many life-changing events. And in nearly all of these events, there are tax consequences along the way.
The Australian tax system offers a range of tax benefits including credits, refunds, offsets and bonuses to support families. Some people feel ambivalent about putting their hand out for government entitlements. But don't be shy in claiming your fair share. After all, the government doesn't get shy when it comes to taxing you!
Tax evasion and tax avoidance are illegal ways of reducing your tax payable. Tax planning and tax minimisation are legal ways of reducing your tax payable.
Part I looks at the tax concessions available to families, the special considerations you need to look out for, as well as some simple strategies to save tax within your family.
You need a tax file number (TFN) to be eligible for any of these tax concessions, as do your spouse and your children if they have income, superannuation or investments.
1 MARRIAGE
Accountants are frequently asked two questions by couples who are just about to get married: ‘Are there any tax implications once we tie the knot?' and ‘Do we need to start doing joint tax returns?'
Your wedding day is a special day. So I'm perplexed as to why on earth the bride and groom are thinking about the ATO during such an exciting time in their lives!
You don't need to worry about tax in the lead-up to your nuptials. Unless you are involved in a business together, you don't have to lodge a combined tax return. Any share of joint investments, such as interest, dividends and rental properties, is still recorded separately in your respective tax returns.
You don't have to lodge a combined tax return if you're married. Any joint income is recorded separately in your respective tax returns.
You do need to show on your return that you now have a spouse, and disclose his or her taxable income each year.
The combined income of married couples is taken into account if you don't have private health insurance (an extra 1 per cent Medicare levy is charged if you earn over $180 000 combined, increasing to 1.5 per cent for couples earning more than $280 000) as well as when calculating Family Assistance Office benefits such as child care rebates and family tax benefits.
If you elect to change your name, you can notify the tax office:
• by phone on 13 28 61
• by post after completing the Change of details of individuals form (NAT 2817)
• or online via your MyGov account at www.my.gov.au. Make sure it is linked to the ATO.
You will need either your Australian full birth certificate; your Australian marriage certificate; or your Australian change of name certificate.
According to the ATO, the definition of spouse has been extended so that both de facto relationships and registered relationships are now recognised. Your ‘spouse' is another person (whether of the same sex or opposite sex) who:
• is in a relationship with you and is registered under a prescribed state or territory law
• although not legally married to you, lives with you on a genuine domestic basis in a relationship as a couple.
Since 1 July 2009, people living in same-sex relationships have been treated in the same way as heterosexual couples for tax purposes. The ATO has outlined some of the tax concessions now open to same-sex couples, including:
• Medicare levy reduction or exemption
• Medicare levy surcharge
• net medical expenses tax offset
• dependant (invalid and carer) tax offset
• senior and pensioner tax offset
• spouse super contributions tax offset
• main residence exemption for capital gains tax.
It is not unusual to find a couple where each owns a main residence that was acquired before they met. However, spouses are only entitled to one main residence exemption for capital gains tax (CGT) purposes between them. If both members of a couple own a main residence they must do either of the following:
• select one residence for the exemption
• apportion the CGT exemption between the two residences.
Provided the homes meet the requirements for the main residence exemption, they will both be wholly exempt from CGT for the period prior to the couple being treated as spouses. However, from the time the couple became spouses, only one exemption is available, though this may be divided between the two dwellings.
Mary bought a house in 1992. She lived in it right up to the day she married Matthew in 2006 and moved into