PROPERTY INVESTORS

Taxation For Property Investors

Rental Deductions 2017-18

Depreciation Claims

Due to changes in legislation, property investors may no longer be able to claim depreciation on used and second-hand depreciation assets in residential rental properties. While this has created a restriction on depreciation claims, it will also have the corresponding benefit of paying less capital gains tax when they sell the property.

Those who purchase brand new property will continue with the existing depreciation regime where these changes will not affect them. In addition, these proposed changes will only impact residential property. Commercial, industrial, retail and other non-residential properties will also not be affected.

Building allowance and claims on the structure of the properties remains unchanged. Investors will still need to obtain a depreciation schedule to calculate the deductions.

SALARY VS ORDINARY TIMES EARNINGS

Below is a table detailing the differences between “salary” and “ordinary time earnings (OTE)”. It is important as the definition also affects the superannuation payable for an employee. Therefore the superannuation calculated is:

OTE times Superannuation Rate

OTE ($3000) x Rate (9%) = $270 (Superannuation Payable)

Employers must use ordinary time earnings (OTE) to work out the minimum superannuation contribution for their employees. If this base is different from the one in use, and the superannuation calculated is lower than the minimum threshold, the employer could be liable for the SGC (Superannuation Guarantee Charge) and also possible audit from the ATO.

Payments to an employee in relation to: Salary or wages? Ordinary time earnings?
Awards and agreements:
Overtime hours – award stipulates ordinary hours to be worked and employee works additional hours for which they are paid overtime rates Yes No
Overtime hours – agreement prevailing over award Yes No
Agreement supplanting award removes distinction between ordinary hours and other hours Yes – all hours worked Yes – all hours worked
No ordinary hours of work stipulated Yes – all hours worked Yes – all hours worked
Casual employee:
shift-loadings Yes Yes
overtime payments Yes No
Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause Yes No
Piece-rates – no ordinary hours of work stipulated Yes Yes
Overtime component of earnings based on ‘hourly driving rate’ formula stipulated in award Yes No
Allowances:
Allowance by way of unconditional extra payment Yes Yes
Expense allowance expected to be fully expended No No
Danger allowance Yes Yes
Retention allowance Yes Yes
Hourly on-call allowance in relation to ordinary hours of work for doctors Yes Yes
Payment of expenses
Reimbursement No No
Petty cash No No
Reimbursement of travel costs No No
Payments for unfair dismissal No No
Workers’ compensation:
returned to work Yes Yes
not working No No
Leave payments:
Annual leave Yes Yes
Parental leave – eg maternity leave, paternity leave, adoption leave No No.
Ancillary leave – eg jury duty, defence reserve service No No.
Termination payments:
in lieu of notice Yes Yes
unused annual leave Yes No
Bonuses:
Performance bonus Yes Yes
Bonus labelled as ex-gratia but in respect of ordinary hours of work Yes Yes
Christmas bonus Yes Yes
Bonus in respect of overtime only Yes No

DASHBOARD AS A MANAGEMENT TOOL

What a Dashboard Is and Does

A dashboard is a collection of reports displayed together in one main report, where the only logic linking the resulting information is its relevance to the overall business strategy. Data can come from the same database, or from a number of different sources or databases. Even where the reports interrogate only one database, data can be reported in very different ways, and the results returned in a variety of formats.

This is where record-keeping methodology and software selection can help to facilitate the implementation of these BI tools. Many small business owners often assume that this is beyond their budget and fail to understand the greater benefits such reporting brings. In addition, the cost behind such implementation need not be substantial and can often be tailored to individual business needs. What is often critical is that the business starts with the right pillars or foundation. This is often overlooked or carelessly cast aside until bottlenecks occur when it is usually too late!

This high level view of the pertinent aspects of a business issue is an invaluable tool in the interpretation and communication of up-to-the-minute results, and an important aid to strong decision making.

The logical approach to all this boils down to 3 simple steps:

  1. Know your business objectives.
  2. Know what to do to accomplish the objectives.
  3. Know how to measure what your business do. If you can’t measure, you can’t manage.

Some practical starters for new business owners:

  1. Give some thoughts on your record-keeping. Your accountant should be able to work with you to give you an idea on the structure behind these records.
  2. Start with the simplest technology or software, taking into consideration future expansion. The simplest is not always the cheapest. Focus on productivity and efficiency in terms of administration as it will reap benefits for your business in the long run.
  3. Start only with a few drivers to measure your business. Do not be overly-ambitious with too many but really focus on the key drivers. If the wrong drivers are selected, they can always be changed. You can only tell they are wrong if they are being measured!