Frequently Asked Questions

Please select a question to see the answer below:

General:

Are you qualified to the highest standard?
Who has to file a tax return?
How do I file a tax return?
What accounting records do I need to keep? ..and for how long?
Am I exempt to pay the Medicare levy?
What expenses can I claim on my ITR from employment?
Do I need a will?

Bookkeeping:

When do I have to pay my Business Activity Statement?
What is the amount of Annual and Sick leave full time Employees are entitled to?

Superannuation:

What happens to my super when I die?
When can I make contributions to my SMSF?
What are the annual contribution limits from 1 July 2007?
Are there other ways to move money or assets into a SMSF over the above limits?
What assets can I transfer into my SMSF?
How much does it cost to operate a SMSF?
I am over 65 and able to withdraw money from super when I want to. Do I need to worry about setting up an income stream (pension)?
When I die I want to leave my superannuation money to my adult children. Will they pay tax when they receive it?
What can my SMSF invest in?
Can my SMSF borrow or utilize margin lending?
How much superannuation do I need to have an SMSF?
How often should I upgrade my SMSF trust deed?
I can obtain a new trust deed for around $100 online. Why should I come to IPS?
Should the trustees of my SMSF be individuals, or should we use a trustee company?

Audit:

What is an audit?
Why Auditing / What is the purpose of and benefits of an audit?
Do I need to have an Audit / who needs Audit?
What is the difference between Audit and Due Diligence?

Financial Services:

Are you a fee for service based financial planner or do you take commissions?
Will you continue to look after my financial affairs and be proactive in reviewing my portfolio and financial strategy moving forward?
What makes you different?
Are there tax advantages in investing in property and shares?

General

Are you qualified to the highest standard?
Yes. All IPS accountants complete the Institute of Chartered Accountants, Chartered Accountant program, a globally recognised graduate program. We also have a team of dedicated SMSF Specialist Advisors who are registered with SPAA (Self-Managed Super Fund Professionals´ Association of Australia) and fully qualified financial planners as well as Registered Company Auditors.

Who has to file a tax return?
You need to file a tax return if in the last year:

you are an employee or contractor
you were an Australian resident for the full income year
you were 18 or older on the last day - 30 June - of the last income year
your taxable income exceeded the tax free threshold in the 2006-07 income year

How do I file a tax return?

Lodge online using E-tax.
Lodge by phone.
Do it yourself by using Tax Pack and lodge by mail.
Use a registered tax agent.

What accounting records do I need to keep? And for how long?
You should keep records in these main categories:

any payments you have received
any expenses related to payments received
when you have acquired or disposed of an asset ¯ such as shares or a rental property
any tax deductible gifts or donations, and
any medical expenses.

Generally, you must keep your written evidence for five years from the date the notice of assessment is sent to you, or:

if you have claimed a deduction for decline in value (formerly known as depreciation), five years from the date of your last claim for decline in value
if you acquire or dispose of an asset, five years after it is certain that no capital gains tax (CGT) event can happen for which those records will be needed to work out a capital gain or loss, and
if you are in dispute with the Tax Office, the later of five years from the date you lodge your return or when the dispute is finalised.

Am I exempt to pay the medicare levy?
You are in an exepmtion category if:

You were a blind pensioner or you received the sickness allowance from Centrelink.
You were entitled to full free medical treatment for all conditions under defence force arrangements or Veterans' Affairs Repatriation health card (gold card) or repatriation arrangements.
You were not an Australian resident for tax purposes
You were a resident of Norfolk Island.
You were a member of a diplomatic mission or consular post in Australia - or a member of such a person's family and you were living with them - and you were not an Australian citizen and you do not ordinarily live in Australia.
You have a certificate from the Medicare Levy Exemption Certification Unit of Medicare Australia (previously Health Insurance Commission) showing that you are not entitled to Medicare benefits.

If you were not in one of these exemption categories, you are not entitled to an exemption.

What expenses can I claim on my ITR from employment?

Car Expenses
Travel Expenses
Other work-related expenses
Other expenses
Rental Expenses

Car Expenses
The records you need to keep will depend on your estimated business kilometres travelled. However, your claim at the end of the financial year will depend on your actual business kilometres. Therefore, if you cannot estimate your business kilometres, you should keep documentation as required by the logbook method. This will ensure that you will be able to make your claim under the method which gives you the greater deduction.

If your estimated travel will be more than 5,000kms, you can use one of four methods:

cents per kilometre method (restricted to claiming only 5,000kms)
logbook method
12‰ of original value method, or
1/3 of actual expenses moethod.

Cents per kilometre method

You need records showing how you calculate business kilometres travelled and the amount of the claim. For example, diary entries and documents you can use to show the engine capacity of your car.

Logbook method

For each year you need:

odometer readings for the start and end of the period being claimed
business usage percentage based on the log book
receipts or other documents showing fuel and oil expenses, or a reasonable estimate based on odometer readings, and
receipts or other documents showing other expenses related to your car. For example, registration, insurance, lease payments, services, tyres, repairs, interest charges.

Your logbook is valid for five years. If this is the first year you are using this method (or the five years has expired) you will need to keep a log book for this year. The logbook must cover at least 12 continuous weeks and show:

when the logbook period begins and ends
the car's odometer readings at the start and end of the logbook period
the total kilometres travelled in the log book period
the kilometres travelled for work activities based on journeys recorded in the logbook. In recording the journeys, you need the start and finishing times of the journey, the odometer readings at the start and end of the journey, kilometres travelled and the reason for the journey, and
the business use percentage for the log book period.

Other work-related expenses
Clothing, uniform, dry cleaning, laundry and sun protection

These records may include:

receipts or other documents showing expenses for uniforms and occupation-specific and protective clothing
a basis for your claim for laundry costs if claiming less than $150
diary entries, receipts or other documents evidencing claims greater than $150
receipts or other documents showing dry cleaning costs, and
receipts or other documents showing expenses for sun protection items.

For more information on expenses you can claim on you ITR please visit the ATO website on our links page.

Do I need a will?

Yes, simply a will helps ensure your family's needs are met according to your wishes. Apart from distributing your wealth and assets a will allows you to; provide for children from a previous relationship, exclude immediate family members if you so wish, provide for children with special needs, decide the guardianship of your children, allocate assets that do not form part of your estate such as family trusts etc.

The most important things to decide when leaving your will are; who to appoint as executor, who will receive your assets and how and when your assets with be distributed.

If you do not have a valid will at the time of your death the state will appoint an executor. This person will take into account your family situation and distribute your wealth and assets. This can be a very long and slow process and there is no guarantee that your estate will be divided how you had wished.

Your will should be reviewed as circumstances change, things such as marriage or divorce, birth or death of family members, significant changes to the value of your assets, residency changes, if you enter or exit a business or if your retire.

Bookkeeping

When do I have to pay my Business Activity Statement?
Payment should be made as soon as the Business Activity Statement has been lodged. This way there will be no interest charged and no fines or penalties applied.

What is the amount of Annual and Sick leave full time Employees are entitled to?
Each week an Employee accrues an amount for both Annual and Sick leave. The amount for Annual leave per week is 2.923 and the amount for Sick leave is 1.462. Therefore the Employee accrues 20 days of Annual Leave and 10 days of Sick Leave a year.

Superannuation

What happens to my super when I die?
Your superannuation benefits do not automatically form part of your estate. Your legal personal representative (e.g. the executor of your will) acts on your behalf as trustee of the fund and has control and responsibility for the payment of death benefits. Your death benefit nominations cannot be legally challenged.

When can I make contributions to my SMSF?
No restrictions on personal or employer contributions if you are under age 65. If you are between 65 and 75 your must meet the work test: at least 40 hours in a 30 day period. If you are over 75 you can only have employer contributions which relate to certified agreements or industrial awards.

What are the annual contribution limits from 1 July 2007?

From 1 July 2007
Age	Concessional (Tax Deductible)	Non-Concessional (Undeducted)
Under 50	$50,000	$150,000 or $450,000 over a 3 year period
Over 50	$100,000 (until 30 June 2012)	$150,000 or $450,000 over a 3 year period
65 to 75	$100,000 (until 30 June 2012)	$150,000

These amounts will be indexed but only increased in $5,000 amounts.

Are there other ways to move money or assets into a SMSF over the above limits?
Yes:

Small Business CGT Rollovers
Active Asset Rollovers
Golden Handshakes & Employer ETPs
Transfers from Overseas Superannuation Funds

What assets can I transfer into my SMSF?
Assets you own personally typically cannot be transferred to your SMSF.
There are 3 exceptions to these rules :

Business Real Property
Listed Shares
Widely-held Unit Trusts (e.g. Managed Funds)

How much does it cost to operate a SMSF?
The annual cost of administering your fund depends on the type and quantity of investments the fund has. The average cost is around $2,000 per annum.

I am over 65 and able to withdraw money from super when I want to. Do I need to worry about setting up an income stream (pension)?
When you establish an income stream, all the income used to fund your payments such as interest, dividends and rental income become tax free. If you leave your SMSF account in accumulation phase, all the income will be taxed at 15%. This would cost your fund thousands of dollars in unnecessary tax.

When I die I want to leave my superannuation money to my adult children. Will they pay tax when they receive it?
Your superannuation is made up of a taxable component and a tax free component. The tax free component is tax free whoever it is paid to. The taxable component is only tax free to 'financial dependents' such as your spouse or children under 18. If the taxable component is paid to a non-financial dependent, such as adult children, they will be taxed at 15% plus Medicare. Please come and see us about ways to reduce or eliminate tax on death benefits.

What can my SMSF invest in?
The investments available depend on 3 things: Investment Strategy, Trust Deed and Superannuation Laws. Typical investments include shares, property, and managed funds. Non-typical investments include artwork, wine and even antiques. Please seek advice from us prior to purchasing any unusual investments for your SMSF.

Can my SMSF borrow or utilize margin lending?
An SMSF cannot borrow however it can utilize certain geared investments such as installment warrants - provided the investment strategy and trust deed allows it.

How much superannuation do I need to have an SMSF?
Typically $200,000 or more to make the administration costs comparable with the percentage in fees you would be paying in a retail or industry fund. You effectively are paying for having full control over where your superannuation monies are invested.

How often should I upgrade my SMSF trust deed?
Virtually all deeds drafted prior to 2007 (and some after!) do not take into account the Simpler Super reforms. We review all our clients' deed on an annual basis and arrange an upgrade when necessary.

I can obtain a new trust deed for around $100 online. Why should I come to IPS?
You get what you pay for! Our deeds are drafted by the foremost expert on SMSF's in Australia. Please read our free report "The $99 trust deed exposed".

Should the trustees of my SMSF be individuals, or should we use a trustee company?
We always recommend a special purpose SMSF trustee company to be the trustee of your fund. To see why, please read our free report: "Individual or Company Trustees?"

Audit

What is an audit?
An audit is a formal examination of an organisation's or individual's accounts or financial situation. An audit may also include examination of compliance with applicable terms, laws, and regulations.

Audits are a planned, independent, and documented assessment that can be used to determine whether:

agreed-upon requirements are being met
procedures are being followed
procedures are as effective as they could be
claims made as part of a business acquisition are true

Why Audit / what is the purpose of and benefits of an audit?
An audit, in accordance with AUSs, provides assurance to the presented financial statements. It allows the reader to feel confident that the financial statements are free from errors or omissions or material misstatement. The objective of an audit is to enable the auditor to express an opinion whether the financial report is prepared, in all material respects, in accordance with an identified financial reporting framework. The auditor should adopt an attitude of professional skepticism throughout the audit and will need to obtain evidence regarding management representations and not assume they are necessarily correct. There are inherent limitations on any audit as to the extent to which risk can reasonably be expected to be reduced.

Do I need to have an Audit / who needs Audit?
If you are a foreign owned company, publicly listed company, large company or non-profit organisation you require audit services. Other reasons why an audit of the financial services is required include trust account audits, travel compensation fund audits and franchise code of conduct audits.

The Corporations Act 2001 requires the following entities to prepare and lodge audited financial reports:

Public companies;
Disclosing entities;
Large proprietary companies;
Managed investment schemes;
Small proprietary companies (foreign controlled);
Small proprietary companies (ASIC direction to lodge financial reports)

The audited reports must be lodged within three to four months of the end of the financial year, depending on your organisation.

Note that the requirement to prepare and lodge financial reports with ASIC is not affected by whether the company has made a profit or traded during the financial year.

Difference between Audit and Due Diligence?
Due Diligence is the intense examination of a target business for a merger or acquisition by a prospective buyer and it can be described as fact-finding to assist in determining whether to buy the business at all, how much to pay for the business and how to structure the acquisition. The principal purpose of Due Diligence is to verify assertions made by the Seller and to identify caveats that may not have been disclosed to the Buyer. It is a reasonable investigation about the state of affairs of the business to be acquired, focusing on matters which may have an effect on the future of the business.

More specifically, a due diligence audit is performed to help a buyer understand details of the development process, degree of regulatory compliance, etc. of a target company.

The level of assurance required from due diligence will determine what level of audit needs to be conducted.

Financial Services

Are you a fee for service based financial planner or do you take commissions?
We are a fully fee for service business. We charge based on the nature and extent of the service we provide irrespective of how much money you have to invest. In the event that a commission is received from an investment (and we can not rebate it back to you), we will give you a 'credit' equal to the amount of the commission we receive to offset other fees on other matters we are working on.

Will you continue to look after my financial affairs and be proactive in reviewing my portfolio and financial strategy moving forward?
Most definitely. We have a range of service packages for you to select from which formalises your preferred level of ongoing service whilst also providing you with guaranteed turnaround times for general correspondence. If you do not wish to have a service package we can review your portfolio and strategy, upon your prior written instruction, for an hourly rate.

What makes you different?
We are committed to excellence in everything we do. We devote considerable resources to ongoing professional development to ensure that our staff are up to date and abreast of the latest issues confronting your investments and financial strategy. Additionally, we have access to a superior range of investment opportunities and can tailor a portfolio to your specific needs, above and beyond the capabilities of many other investment professionals.

Are there tax advantages in investing in property and shares?
Australian shares

Investing in directly listed Australian shares, or Australian share based managed funds, can provide high levels of tax efficiencies within your portfolio if selected wisely. 'Franking Credits' which are often attached to the dividends received from Australian shares (so as to avoid any 'double taxation' at both the company and share holder levels) can be specifically targeted as part of your investment strategy so as to minimise or offset any expected or potential taxation consequences.

Property based managed funds

Investing in property based managed funds (such as listed property trusts or direct property) can also be a great way of maximising tax efficiencies within your investment portfolio. This is because some of the income received from such investments is classified as 'tax deferred income' which essentially means that you do not have to pay tax on the earnings when received (instead, the amount of the tax deferred income is subtracted from the 'cost base' of the investment, thereby deferring the tax until the investment is sold).