Ask an Advisor: Tips to maximise your EOFY deductions

Bryce: [00:00:19] Welcome back to an episode of Equity Mates, a podcast that follows our journey of investing and whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. Now, if you're just getting up to speed with the basics, we recommend that you go and check out our podcast to get started investing and then come and join us here on the main show. But with that said, my name is Bryce. And as always, I'm joined by my equity buddy Ren. How are you? 

Alec: [00:00:44] I'm very good, Bryce. It's good. Thanks for coming in today. Take a seat. Let's unpack why It's your favourite time of year. What sickness do you have in your mind that leads you to think that this is the best time of year?

Bryce: [00:00:55] That's a nice refresh. Halfway through the year, six months in, you get. You get the volume and you get.

Alec: [00:01:00] The volume of paperwork that you have to fill out. The the amount of scrolling you have to do back through the gaps to figure out what you've spent and what you can claim. And is it the frustration of realising that your broker hasn't actually produced a tax report yet and so you can't actually submit your tax return? 

Bryce: [00:01:18] No, none of that. 

Alec: [00:01:19] Is the cost that you have to pay to an accountant or a tax professional to help you do it. 

Bryce: [00:01:25] No, none of that.

Alec: [00:01:26] What is it? I just told you. 

Bryce: [00:01:27] So it's a refresh. It's an opportunity to review portfolio, make sure that you're setting yourself up in the right habits financially going into the second half of the calendar year.

Alec: [00:01:39] Well, this podcast is for all the sickos like Bryce, who love tax time and all the people like me who just get through it.

Bryce: [00:01:45] Well, you shouldn't just get through it. You should pay more attention to it, Ren. And luckily, in today's episode, we are continuing with our Ask an Advisor series. And if you've just joined us for the first time, welcome. The Ask an Advisor series is the chance for you to ask some of Australia's best financial advisors your questions. We understand that financial advice is expensive and it's pretty inaccessible for a lot of us. So we bring them into the studio and ask them your questions.

Alec: [00:02:15] That's right. The numbers are pretty stark. 2007, 20% of Australians had a financial advisor. The latest numbers suggest just 10% of Australians have a financial advisor. So this show is our small part to help the 90% of Australians, which include both of us who can't afford a financial advisor, ask some of their biggest money and investing questions. 

Bryce: [00:02:40] And we've had a lot come in around tax given that we're just about to close out the financial tax year of 2023. So we are joined by Andrew Wilson, who is managing director at Wilson Chartered Accountant. And we have plenty of questions to get through in today's episode that covers general tax questions. We cover investments, and we also cover deductions. Everyone's favourite. 

Alec: [00:03:05] Oh wow, to be fair that is everyone's favourite. I'm not going to dispute that. 

Bryce: [00:03:09] How can I squeeze deductions? 

Alec: [00:03:11] Now, I actually wasn't here for this interview. I was still over in the United States. Is that a tax deduction? The US trip?. 

Bryce: [00:03:18] Yeah, there's elements of it that would be a tax deduction for sure because it was for business purposes. And you can make the link between that and income derived from our business, as you will learn in this episode, Ren. 

Alec: [00:03:30] Great. Well, yeah. As So I wasn't in the room for this episode, so expect to hear 45 minutes of two people that love tax time speaking giddily about it all. But it is important to know we are licensed, but we are not aware of your personal financial circumstances and especially when it comes to tax time. The rules that Bryce and Andrew are speaking about generally on this episode may have a different application based on your specific financial circumstances. So if there's ever a moment to pay a professional to help you, it's tax time. So speak to a tax professional to see how these general rules apply to your specific financial circumstances. 

Bryce: [00:04:12] Now Ren, you mentioned at the top there that you're aimlessly scrolling through spreadsheets and bits and pieces and trying to find pieces of paper and receipts and all sorts of things, and understanding when you sold stocks and when you didn't and it sounds a bit chaotic over on your side. 

Alec: [00:04:25] I'm going to put your Segway here and just name and shame one broker, one broker doesn't give you a tax report until the end of October. I'm not going to mention who, but that's annoying. It's annoying.

Bryce: [00:04:37] But anyway, a lot of people.

Alec: [00:04:38] Well, your Segway, too, will solve this problem for me. 

Bryce: [00:04:41] Well, yes, it's important when it comes to tax time that you have an easy way of tracking your investments so you can report capital gains, dividends, capital losses, a platform that I used to do that I've moved away from my spreadsheets is Sharesight. They let you track investment performance over the life of your portfolio. You can look at your capital gains. As I said, you can track your capital losses. It is super helpful not only at tax time but generally throughout the year just to see general portfolio performance. Now you can sign up for free if you have less than ten holdings. Great. Go on, check it out. See how useful it is if you have over ten. It does become an annual premium subscription. But the good news is through equity mates, you can save for months when you purchase an annual premium plan. All you need to do is go to sharesight.com/equity mates. We'll put that link in the show notes and yeah, give it a crack. It's certainly helpful when it comes to portfolio tracking.

Alec: [00:05:38] Now here's the question. Is a sharesight subscription tax deductible?

Bryce: [00:05:41] I think it is, yeah. Ask your tax advisor. Ask your tax advisor. You could argue it. But anyway, we kick off this episode with deductions, Ren. So that feels like the great point to get stuck into this interview with Andrew. Well, Andrew, welcome to the Equity Mates Studio. 

Andrew: [00:05:59] Thanks for having us, Bryce. 

Bryce: [00:06:01] Now, tax time in the financial year, tax time, we have gone out to the Equity Mates community to give them the opportunity to ask all of their tax questions. It is Simon in that office. It's his favourite time of year when he starts thinking about all of the deductions that are available. 

Andrew: [00:06:19] All the deductions, the deductions coming out, coming out of your back pocket. 

Bryce: [00:06:22] Exactly. So we're going to break this into three sections. We're going to generally speak about the deductions and I guess how we can think about them, how we can make sure we're not missing any. Have a chat about concessional Super as well. Then there's some investing specific tax questions and then we'll close out with just some general ones that have come in from the equity mates community. And a reminder, as part of our Ask an Advisor series, you can also submit questions, will let you know when the next episode is coming. But Andrew, let's start with deductions. What are the key deductions and tax offsets that are generally available? And how can I make sure that I am claiming every single one that I'm entitled to? 

Andrew: [00:07:05] Yeah, sure. Bryce, that's the million dollar question, right? So what, what, what, what can I claim? What am I eligible for? The challenge is made is it's deductions that you're eligible for largely, you know, occupation or industry specific. You know, for example what a tradesman builder is eligible for is going to be different from what a financial investment advisor would be eligible for. To give an example, traders can purchase protective clothing, steel cut boots, eyewear, hobbies and the like while you know, an investment advisor who travels the same same office every day, 9 to 5 wears a suit and carries a briefcase, is obviously going to a different, different set of eligible deductions. Okay. Unfortunately, the type of the view that a suit is is a personal type attire and you can't claim for a suit. However, you know, if you're a trader and you're wearing hobbies and boots, they are eligible deductions okay. The two key things to consider when trying to decipher what deductions you may or may not be eligible for is firstly, speak to your tax agent. Is there an expert in. 

Bryce: [00:08:14] I feel like this is going to be a common theme for this episode. 

Andrew: [00:08:17] You might have me say that quite a bit in this conversation, but speak to your tax agent and and the key is also being able to draw a nexus between your occupation or the income that you derive and the expense that you incur. Okay. And the word nexus is, is yeah, it's all over the website. It's what the ATO will look at when you try to verify and claim production, the clear connection and nexus between your income and expense.

Bryce: [00:08:46] It's not black or white. I feel it feels like it's or is it when you go on the website and can you can you filter on like industry specific? Let's for example Simon here in the office, he's trying to look through this. We obviously work in media and financial services. Given the amount of podcasting and media work that we do, could he claim, like his Spotify and Netflix accounts? 

Andrew: [00:09:11] Look. That is another question. I get it quite a bit. Short answer if there is a nexus. So for example, if Simon needs to check that on Spotify, that an ad particularly paid up at a certain point in time, or that a podcast that he manage covered a particular topic or whatever it might be, and Spotify becomes essential to the operation of his occupation and that he's obviously paying for the paid subscription of Spotify and he's paying his $9 or whatever it is at the moment, a month, then yes, he can claim Spotify. However, one of the key things is to remove any personal use. 

Bryce: [00:09:50] Yeah. So it's not the entire month. 

Andrew: [00:09:53] Absolutely. So you know if he's listening to Metallica for nine out of ten hours a week and he's using the last hour on his Spotify. 

Bryce: [00:10:02] He does do that. 

Andrew: [00:10:03] These last hours to check you know that the ads come on that his podcasts are running as anticipated then you know he would claim 10% of that cost. 

Bryce: [00:10:15] In terms of recording that does he just need to somehow just note that this week it was 10%. 

Andrew: [00:10:21] You've got to be reasonable, you know you don't don't log it every time you jump on Spotify. But to use your mobile phone, for example, a real estate agent obviously taking lots of phone calls from buyers and sellers and what have you, but might jump on Facebook for the end of a Saturday afternoon to check their feed or whatever. Then they might pull out their phone bill for a month or two, that whole lot, and go, okay, I've got a 90-95% workload use, every now and then. By incidentally, do something personal, right? So then you'd claim a 95% use. You'd have to check it, you know, for the full 12 months a year. But you might do a good sample and yeah, and push that out over the course of the year. 

Bryce: [00:10:58] So just to kind of summarise that, if there's a clear link or, as you say, nexus between your occupation and the income derived from that expense, then you're probably in the area of being able to claim some sort of a deduction.

Andrew: [00:11:14] Yeah, absolutely. If there's a connection there, then it's at least worth investigating and talking to your tax agent about. 

Bryce: [00:11:23] Nice. All right. Well, can you explain the rules and requirements for claiming deductions related to home office expenses for all of us who are now finding that we're probably working from home way more than we were pre-COVID. And I know the government brought in some easy rules for us to help with this. I'm not sure if they still stand, so help us through understanding Home Office deductions. 

Andrew: [00:11:46] Yeah, you're absolutely right, Bryce. So during Covid, there are few methods. I think those three methods off the top of my head that you could claim working from home deductions. But they have recently revised that as we sort of return to a bit more normality and people return to the office, that they've now cut that back down to two methods and they are the revised fixed rate method and the actual cost method. Now under the fixed rate method, you're entitled to claim $0.67 per hour that you work from home. But that hourly rate covers things such as your data and phone usage, electricity and gas, printer ink, stationery and the like. Okay. 

Bryce: [00:12:29] $0.67 on the dollar for every hour that you work from home. 

Andrew: [00:12:33] Correct. So it's good to keep some kind of record for the days and hours that you work. You know, I know some people work more hours than others, so it's good to keep track of that. And then on top of that, there are some other separate deductions you can include and things like office desks and computers and cleaning, but only if you have a dedicated office space. Okay. So if you set up your laptop and you're watching State of Origin and you're working within that, you can't claim for cleaning your loungeroom. But if you've got a you know if you've got a spare bedroom in a designated space, you can include those additional costs. Okay. The second method being the actual cost method is a bit more onerous, but it's probably more advantageous for people who generally work heavily at home and have the ability to to keep track of their actual costs. So they're allowed to capture all those internet, mobile phone, electricity and gas station and the like on an actual cost method. Okay. The deductions can be heavier and you can claim more, but obviously the recordkeeping requirements attached to that are more onerous. 

Bryce: [00:13:36] And so by that you mean similarly to the, you know, the Spotify example. If you want to do the method of actual cost, your quarterly electricity bill is 300 bucks. And you say of that quarter, I work from home, 60% of that or X hours, therefore I'm going to claim X percentage of that 300. 

Andrew: [00:13:56] Yeah, absolutely. I really like the ATO guidance on that. They even say we require you sort of detailed calculations and records. 

Bryce: [00:14:04] So they do require it.

Andrew: [00:14:06] Yes.

Bryce: [00:14:07] But what about with the $0.67?

Andrew: [00:14:09] It's just it's no, it's as long as you kept track of your hours that you're working from home and can justify that it's a flat rate. 

Bryce: [00:14:15] It's just. And so just on that one because that feels like the easiest one for a lot of us who probably haven't been diligent with record keeping. If it's $0.67 for every dollar of on every dollar for every hour, let's say you work 24 hours a week at home. So say three days a week. By 48 weeks a year, you have four weeks of annually. That's about $771. So that's the deduction that you can claim against your income. 

Andrew: [00:14:46] Absolutely. Against your salary and wage income. [00:14:48][1.9]

Bryce: [00:14:49] Okay. Yeah. Nice. That's good. So if you're home full time now, they can add up.

Andrew: [00:14:55] Yeah. I think 200 something dollars a year if the top you had if you're working a 40 hour week from home. Yeah. 

Bryce: [00:15:01] Well not bad. As long as you can. As long as you can show a record in some way, shape or form. Yeah. Now, before the show, we were speaking of deductions and you wanted to mention concessional super contributions because that sort of is a form of tax deduction. Can you try and shed some light on concessional Super, what it means, how it is tax advantageous with the caveat. I think that super, as we said before the show as well as an incredibly unnecessarily complex system. 

Andrew: [00:15:36] Now you're quite right. So super is a very complicated beast. But in short, there are two types of ways you can contribute to your superannuation. So one is a concessional or tax deductible contribution. The second is non-concessional non-deductible and there are ATO imposed limits. That you can contribute each year to imposed limits. You can contribute as a concessional or non-concessional each year. Now, I guess one of the benefits of a concessional contribution, as we're discussing before the show, Bryce, was that, you know, you can claim a tax deduction for putting away for future savings, future retirement. So, you know, in my book, that's fantastic. You know, you really are just putting money for future retirement but you claim it is a tax deduction on the way through. Now, over recent years, the ATO bought in what they call catch up concessional contributions. And what allows you to do any of that unused cap, which is currently 27,500 a year that you did not use in previous years you can bring forward. So that is effective from the 2019 income tax year. So, you know, depending on what you've used, you know, you could be potentially claiming tax, you know, a $100,000 tax deduction if you haven't used your full concessional cap in a tax year and put that in for future retirement savings.

Bryce: [00:16:59] So let's just play this out. The first part you said was that, you know, the concessional super is you love it because it's a tax deduction now for future savings for you in retirement. How how is that the case? 

Andrew: [00:17:14] So, you know, we all have our, you know, nest egg, our super fund, whether it be in a public offer, you know, fund with hostplus something that or whether a self-managed super fund that you can access when you eventually retire. Okay. So I know that particularly some of your young audience are probably younger and probably don't give superannuation the attention it probably deserves. But if you think about it this way, you've got 20 years save $20,000 lying around and you're eligible after checking with your tax agent to to leverage these these, the contribution caps instead of putting it into a know an ETF or a managed fund, you go and then throw that into your retail for public off fund or your self-managed super fund and you invest it in the same stock or the manage fund or whatever it might be that you would ordinarily in your own name or in your own family trust or whatever it might be. But it's packed away for retirement. And, you know, it shows the same growth and dividend stream, whatever it might be, outside of the superannuation environment. So yeah, it's locked away. Yes. However, it's, you know, you're getting the same growth and benefit you would just trust for future years. 

Bryce: [00:18:24] And there's a tax advantage in doing that, which is that it's taxed at the lower rate. 

Andrew: [00:18:30] Correct. So there's two key tax takeaways from it. Firstly, you'll get the tax deduction when you put it in. Okay. And then rather than being taxed, that potentially 47% being an individual, it will be taxed at 15% in the superannuation environment. So yeah, there's this significant advantage too.

Bryce: [00:18:52] So that 20 grand you're talking about, if you have a lump sum, 20 grand and I decide to take out of my bank account and put it in super, that's actually going to a 20 grand tax deduction on my income this year. 

Andrew: [00:19:02] Correct. All right. But you it's very I want to say this again, Bryce. It is very important to check that with your tax agent. Because you know, things that go towards your contribution like your salary and wage. So any superannuation that is included in salary wage goes towards that cap that we mentioned. Yeah. So it's best to check with your tax agent, they'll do the numbers and say, yep, you're on use, Cap is X, you can put up to x in and if you go over that there is some what they call excess contributions tax that you need to consider. So very important. Again, check, check with the tax agent prior to doing it.

Bryce: [00:19:38] Nice. So I guess then at this time of year, you often see people trying to max out that super cap. And so that's what they're doing. They're just saying that of the 27,500 or whatever is available for me to put in additional concessional contributions. If I've got some spare cash, I'm just going to max that out and take advantage before the new tax rolls around. 

Andrew: [00:20:00] Yeah, absolutely.

Bryce: [00:20:01] Yeah. Nice. Alright, well that's, that's it for the deduction side of things from the Equity Mates community. Now we've got a bunch of investing specific ones that have come through from, from our audience as well, rightly so. One that continues to pop up every time is around franking credits. Now can you please explain franking credits? And this is from one of the members of our community. Why? What do I need to know about them at the end of the financial year? 

Andrew: [00:20:33] Have you got six hours or. Yeah, look, look. This is one of my favourite topics. And, and yeah. And it's, it is a very complicated beast. And you might remember Bill Shorten tried to play with everyone during spring credits and everyone got upset and that was a bit of a failure. So don't touch. Different credits. But look at it. It is very complicated. But to make it or to to put it across in the simplest way possible is the the principle behind them is that companies in Australia, their corporate entities, and they generally pay tax at 30%. Okay. And then when that company declares dividend and pays it out into Bryce's hands, the principle on it is they don't want that post-tax profit being taxed twice again in Bryce's hands. So there is a what they call a 30% credit attached to that particular dividend. Okay. And that to you personally, Bryce, is refundable. Sorry, It reduces existing tax that you might be payable, but it is also potentially refundable depending on your individual circumstances. You got to consider what entity receives that dividend. So for example, a company can't get that refunded, but it can reduce company tax. Okay, Super fund receives the refund, you know, and individuals receive refunds, but companies do not. So that's where this is where the technicalities come in because often, depending on the recipient, depends on, you know, the actual tax treatment.

Bryce: [00:22:06] And so during the year I'm paid dividends that are fully franked, meaning that for the entirety of that dividend, the tax has been paid by the company. And so it comes with that franking credit that I can then I will get refunded at tax time. Are there any other uses for that credit or is it just a direct refund? 

Andrew: [00:22:28] Not always a direct refund. Okay. So if you are a high wage earner and you're on the highest marginal tax rate, you will pay what they call a gap tax between the company tax rate and your higher rate. So it will reduce you by that particular franking credit portion. Yeah. It will only result in a refund if your circumstances allow it to, if you know what I'm saying. 

Bryce: [00:22:57] Yeah. And do I have to. Is it done automatically or do I have to if I'm getting Vanguard dividends every quarter and I'm getting BHP and CommBank, do I have to be like, okay, that was fully franked. That one was 70% and then somehow had all the math at the end of the day. 

Andrew: [00:23:14] So look at that. That's, that's, that's a good question. So historically you had to do a lot of this manually. Okay. But the ATO have very good data matching capability now. And often when you open up an investment account with a particular provider, you take in and a whole bunch of personal details and they report that annually to the ATO. So, you know, when we as tax agents log on to your profile and now in our tax agent portal, we'll see a lot of that and a lot of that can get imported and pre-filled into our software. So that removes I'll call a good chunk of that. However, there are still sort of platforms or I'll call it people who made an investment 20 years ago that sitting on some platform or some brokerage account that hasn't got a TFN located to it. So you still got to go through the manual process of tracking the dividends, tracking different credits, what's franked, what's not franked and things like that and, and cross-checking it. You can't just sort of, you know, rely on what's fed to you from the ATO.

Bryce: [00:24:10] Again, it seems like a unnecessarily complicated system given I feel like many countries around the world don't do franking credits. It's just like make it simple, pay us the dividend and let us pay the tax on it. 

Andrew: [00:24:24] Yeah, absolutely.

Bryce: [00:24:25] So we've got a couple a few overseas listeners, but we also have many of our listeners investing overseas and receiving dividends and income from investments overseas. So what are the tax implications for receiving income from overseas sources or overseas assets?

Andrew: [00:24:44] Look, assuming you are an Australian resident for income tax purposes, a foreign asset is largely treated no different from an Australian Australian asset. If you had an interest in a US stock versus an Australian stock, there's no real difference, right? The capital gain is treated the same, the dividend stream is treated the same, it falls into you into a pool of income for the year and you get assessed at your individual tax rate or whatever entity you might hold this particular asset in where it can get be different and be a little bit different, difficult or different to track. Is that some of these particular, I'll call it foreign income streams have foreign tax credits attached to them that you can claim in your tax return. So that is where it's different. You know, different jurisdictions have all different nuances of how they withhold tax and all this kind of stuff. So yeah, you've got to keep track of that and make sure you capture the correct credit in your in your returns.

Bryce: [00:25:50] All right. Another one from the community we encourage on the show to take advantage of dividend reinvestment programs or plans, just get that compound going over a long period of time, reinvest those dividends. But what are the implications from a tax point of view? I haven't actually received the income in my bank account. Is it treated the same? 

Andrew: [00:26:11] Yeah, unfortunately, it is treated the same, Bryce. The view is exactly the same as receiving physical cash. You know, you've received another asset in place of cash. It is assessable to you on the date that you received that asset or received that cash. So, yeah, really no difference. And you also get the benefit of the different credit that might be attached to that as well. 

Bryce: [00:26:34] So just to follow on from that. Another question was around dividends. Is it the X date or the pay date that counts? Is the the point of recognition for tax? 

Andrew: [00:26:44] Yeah. As an individual, it is the pay date. So as you probably quite, quite aware, you know, a company might declare a dividend in February, but you might not receive the cash until August and 30th June being the Australian end of tax year cut off. That will fall into the time that you actually receive the cash into your bank account. 

Bryce: [00:27:03] Okay. Nice. So for those of us who have lost money, which is a lot of us at various points in time, when you get to the end of the taxi, you have a decision where you can sell your losses for a capital loss and use that against capital gains in the future. Do capital losses have a use by when you're deferring them? i.e. if I had a capital loss from ten years ago at uni on one of my specific stocks that I have recorded all your bitcoin losses. Yeah, all my bitcoin losses. Can I. I guess it's a two part question. If I hadn't recorded that loss in that tax year, can I retrospectively go back and say I actually had a capital loss back then? Here's the record. And secondly, if I did record it back then but haven't used it against a capital gain until now, ten years later, is it still active?

Andrew: [00:27:59] Yeah, sure. So the first question, absolutely. So what your capital losses carry forward. Yeah, indefinitely. Okay. Right. But it's very important that when you're complaining of tax return, you you capture that in your, what I call you, CGT losses schedule and your losses record so that that will sit there and pop up in your tax return each and every year that you lodge your your tax return until such time you go and use that. Okay. And also, it's important to note that capital losses can only be used to offset capital gains that can't be used to deduct against any other assessable income. So if you've got a salaried wage, but you've made a loss in a stock, unfortunately you can't deduct that. Then okay. So it's specific to capital losses and capital gains only. Now, if you made an investment and you made a loss, you know, five years ago, ten years ago, the correct way is to technically go back to the year in question and amend your return. Okay. With that loss. Okay. Yeah. If all of a sudden you had a big loss just pop up in a tax return, you might trigger, I'd look at it and say, Oh, hang on, you've made a large gain this year and you've pulled this loss. Please provide the history behind it. But if it's included in your return every year, you can track it, they can see it, the visibility of it. And it's less of a surprise when you when you go and utilise it if you don't use that loss. 

Bryce: [00:29:22] Okay. That's interesting. So you can do it, but you need to go through the formal process of amending that tax return. It's then formally recorded. Yes. And then just to clarify, if I'm doing a tax return myself online, where do I record those capital losses? 

Andrew: [00:29:38] There's the look. It's a bit of a tricky part of the of the of the return of the return is that, as I call it, there is a specific section in there and you generally complete what they call a capital gains tax worksheet that should pre fill that. As I said, it is complicated, okay? Because, you know, you've got to include things that discount, again, discounted and non discounted gains and you've got to apply losses in the correct order and the like. So my strong suggestion would be if you've got a material capital gain or loss that you're looking to include on your tax return is to get a tax agent to review it or to in order to complete that for you just because, you know, we've seen some we often get clients come out, come up to us in the year and say, hey, Andrew, I've done my capital gains cap, this is what it is. And then they're off by hundreds of thousands. Yes. 

Bryce: [00:30:31] So for those of us who have been burnt by Bitcoin over the last 12 months, strongly recommend seeing a tax agent.

Andrew: [00:30:38] And all that. One thing, Bryce, depending on what platform you invest on and things like that, a lot of these platforms will give you tax statements where they've done the hard work for you, so strongly employ your listeners to to download your tax statements and they'll say, this is what you bought, this is what you really. The losses were unrealised. This is what you discount of gains and things like that. So that will take some of the grunt work out of it. But if you're literally just buying and selling, yeah. And you need to you don't have that a platform that manages that aspect for you, then you've got to be able to do the calculation yourself. 

Bryce: [00:31:07] Just on that, confirming that from a tax point of view, unrealised gains or losses mean nothing.

Andrew: [00:31:14] Correct. Correct. Again, I think you're one of your further questions that we'll touch on is not assessable until until it's realised. Yes. You know, so you can hold on to an asset forever and a day and it will. Yeah. 

Bryce: [00:31:32] Sweet. Now, is there any difference in tax rates for dual listed assets such as, you know, ASML or a lot of those companies that are listed in America, but also over in European or here in Australia and in America as well? 

Andrew: [00:31:45] Yeah. No. So the short answer is no. So I think we're going back to your question on foreign assets and the like. The same principle applies just because a stock is listed on one particular exchange and also on another. It doesn't change the way in the eyes of the ATO that that asset or that income stream of that asset is traded as May's a tax it resident Australia, you know it again, it doesn't matter if it's Australian or overseas or what exchange it's on, it's, it's still the same income stream or it's still the same capital asset. Okay. But again, where, where things might differ is on whether any credits attached to that foreign tax credits attached to that might change across different different jurisdictions with different listings. 

Bryce: [00:32:29] All right. Two more to close out on investing around dividends. Firstly, for those that are weighing up the tax benefits of capital growth compared to dividend payments, how would we think through that? And then when reporting dividends, is there a minimum that I need to report? 

Andrew: [00:32:47] So I'll start with the first one. And the answer is, you know, your first cent of dividend needs to be included. 

Bryce: [00:32:54] Any any dividend income. 

Andrew: [00:32:56] Any dividend income there. There's no secret dividend income that you don't include. Unfortunately, your first cent that you derive needs to be captured in your tax return. But going back to the first part of the question around capital growth versus dividend. So as we alluded to earlier, you know, you can buy an asset, it could be a house, it could be a portfolio of shares. And as long as you don't hold on to those, you'll never pay any capital gains tax on that growth. It's only when you realise and sell the asset that you've got a CGT consideration. Contrary to that dividends, obviously you know your first cent that you receive in a particular year, you need to declare on your on your tax return, include on your tax return. So there is a consideration on an annual basis for that. But two things to consider when you're weighing that up is dividends. You know, generally you have franking credits attached to them and depending on your circumstances can result in potential refunds to you or reduction in your tax. Similarly, capital gains can be subject to what they call the 50% discount and can reduce tax. And if you do have capital losses available to you and you can also offset those with your losses. So there's pros and cons of each and it all come down to your circumstances at the time. 

Bryce: [00:34:19] Well, Andrew, we're going to take a very quick break. But on the other side, we're going to close out with some of the general tax questions that have come through from the community around self-managed super funds, tax on your spouse's income, medical expense deductions. There's plenty to go. So let's take a quick break and we'll pick it up on the other side. Welcome back. We're here with Andrew Wilson, managing director at Wilson C.A. Chartered Accounting. Is that right? The chartered accountant. So, Andrew, we've had plenty of questions come through from the community on deductions and investing. So we'll close out this episode with just some general ones. And I'll start with one which is around self-managed super funds. Worth it or not, for people my age sort of early in their careers, but starting to develop a decent sized nest egg. 

Andrew: [00:35:16] Yeah, look, that's a good question. So technically, you know, unless you're licensed when allowed to give superannuation advice, but the commentary is generally around unless your, your fund is up to around 200 to 200, $300,000 a year. So in balance, then it's not really worth the administration and costs burden attached to running a fund. Generally, if one of our clients is a looking to invest in super sorry, start a self-managed super fund the generally to be a strategy around that. You know there might be a small business owner looking to they want to acquire the premises that they operate out of in their superannuation or something similar like that. Otherwise, you know it make your life a lot easier being in a public fund where you know, all the administration costs and headache is, is managed by someone else and you don't as trustee of your fund have to have to carry that. 

Bryce: [00:36:19] All right. So this one has come in if an individual's spouse earns a lower income. Are there any strategies available to help reduce the overall combined tax burden that the couple face together? 

Andrew: [00:36:34] Look, this is something we get asked quite a lot and there are ways and means of sharing income around the family. Okay. But it often depends on how that income is derived and the nature of it. So to give you an example, Bryce, you used to work at Woolworth's, you know, your last six figure salary that used to have there, that's, that's, that's your salary. You can't go and share that with your, with your partner. Yeah. That's, that's personal exertion, that belongs to you. How about if you have an investment asset or investment portfolio. There are ways and means of sharing that amongst the family group. Now these are generally and the manner in which that is done is via what they call a family trust or a discretionary trust account. And they are also very technical based, the way the mechanism and the foundations of how trust works. But to put it across as simply as we can, they are assets or that are held for and on behalf of the beneficiaries or in this case of the family group. And it kind of works like a family tree. So you'd have, you know, husband and wife at the top of the family tree or, you know, the partners at the top, the family tree and then, you know, brothers, sisters, aunts, kids and things like that. So it gives you flexibility that, you know, the the dividend flow and the capital gain flow out of that pool of assets that are held by that trust to it gives them the trustee discretion to share that amongst the family group. Okay. And there's rules around that and how that needs to be done from a I'll call it a tax compliance perspective, but it does give you the ability that, you know, if your wife's on maternity leave and you've got a pool of assets and dividends coming through that you can allocate, the trustee can allocate that flow of income to the the lower the lower income earner for the for the year in question.

Bryce: [00:38:25] All right. So another general general, one can out of pocket and medical expenses be deducted? 

Andrew: [00:38:31] Unfortunately not. I think it was the 2019 tax year. She was the last year where they used to be called what the out of pocket medical expenses offset. So where there was you know if a for people who had incurred medical expenses over certain value that you could wasn't a deduction it was an actual tax offset with a calculation behind it. But the long and the short of it is that that's no longer viable. And you know, medical expenses are not cheap. They have an unfortunately deemed personal in nature, and there's not much you can really do about it. 

Bryce: [00:39:05] It is what it is. Now. What are the potential benefits or considerations of structuring one's income as a business entity instead of paying personal tax? And at what income level does this start to make sense? Now, I'd be interested to know if this is even possible other than becoming a sole trader or a contractor. Like I don't If I was at Woollies, I couldn't start structuring my income as a business entity.

Andrew: [00:39:31] You're quite correct. So investing is a passive activity, right? Like it's you're not actively engaged in business. You're, you're, you're placing money into and developing an asset pool. You're not buying and selling widgets or providing a service. So you couldn't say that structuring an investment portfolios business. It doesn't work that way. But what I will say is if you are genuine undertaking a business and whether it be a professional services business, a construction business, whatever it might be, seeking the advice to get your correct structure in place from the outset is is so vital. Similarly with an investment portfolio and the reason I say that is, you know, if if you were to start a business tomorrow and it grows in ten years time to be this behemoth that if you haven't got the right structure in place, then you could be slammed with full capital gains and all this kind of nightmare that that I find people come to me in five, ten years time saying of you have built this business, but I've done that. I skimped on advice to begin with, and now you've got a capital gains issue to Tom one and similarly with an investment portfolio. Okay. If you kept on investing with the incorrect structure without having due regard to your family circumstances and your future goals and aspirations, and you could end up this big pool of asset that you that you're going to pay unnecessary tax on when you eventually sell or you know, or exit that that particular investment. 

Bryce: [00:40:57] Nice. Andrew. That brings us to the end of our end financial year tax special. We do one every year. It was great for you to join us in the studio. Plenty of questions to get through there and I hope we covered enough off for the community that they feel a little bit more confident on how to approach the end of financial year tax time. I think just one question for me about setting yourself up for FY24 is just around best practice for record keeping because there's obviously heaps of stuff that you could do around dividends and when you bought and when you sold and and everything to do with working from home. I think just to make it as simple as possible. What I've taken from this is just if you can have a decent representation of how you have used your work from your home environment and those sorts of things, then that is I guess good enough. And then when it comes to tax and and dividends and, and, and you know, when you've purchased stocks, a lot of the platforms these days do it for you. But if they don't, that's where you really need to make sure you have a pretty good record keeping system so that capital losses particularly you can report. 

Andrew: [00:42:03] Yeah absolutely. I mean there's no excuses now, Bryce, everyone's got access to all the computers, all the apps. You know, if you need to log your driving, you've got the I give you a digital log book, all this kind of stuff, then you know that, that, you know, back in the day people sell my logbook that I kept in my glove box. You know, I sold the car and disappeared, that kind of stuff. So now there's no really no excuses and it shouldn't be that onerous. As long as you know you're reasonable and rational, then you should be well prepared to pay your tax.

Bryce: [00:42:35] Nice. Well, we certainly do appreciate you coming on answering all of our questions. If anyone wanted to find out more about you or in fact actually go and see a tax agent like yourself, where can they find you? 

Andrew: [00:42:47] Yes, sure. So our website is www.wilson-ca.com.au and you'll see all details and how to contact us there or feel free to drop us an email at info@wilson-ca.com.au.

Bryce: [00:43:03] Awesome Well we'll make sure that we put that information in the show notes. If you would like to get in contact with Andrew to get sorted for this tax year or set yourself up for FY24. But again, thank you so much. Been an absolute pleasure. We really. 

Andrew: [00:43:19] Appreciate it. No, it's been fantastic. Thank you.