Stay up to date with what’s happened in the Australian economy and markets over the past month.
Welcome news on the inflation front in October pointed to the Reserve Bank of Australia (RBA) holding steady on rates this month.
The latest quarterly inflation figures show inflation has slowed to its lowest level since the height of the pandemic and now sits within the RBA’s target range at 2.8%.
Global share markets softened in the final two weeks of October, reflecting economic and geopolitical uncertainly.
The S&P/ASX 200 closed slightly down over the month of October, after again reaching record highs mid-month.
With the US election on the horizon there is much speculation about what that will mean for markets and the economy, both in the US and Australia.
Click the video below to view our update.
Please get in touch if you’d like assistance with your personal financial situation.
Most people intend to retire between ages 65 and 66, according to the latest data and, surprisingly, despite growing superannuation balances, the Age Pension is the main source of income for many retirees.i
The intended retirement age has increased significantly in the last two decades, from just over 62 years on average in 2004.
Australian Bureau of Statistics (ABS) figures show that, in 2022-23, a government pension or allowance was still the main source of personal retirement income. This was followed by super, an annuity or private pension.
More than 60 per cent of those aged over 65 years were receiving the Pension in 2021ii
Am I eligible?
It is important to remember that, while you may not meet the eligibility requirements today, you may qualify later in life.
In 2021, only 44 per cent of people aged 65-69 received either full or part Age Pensions but this increased to 81 per cent for those aged 80 to 84 years.iii
Veterans who have served in the Australian Defence Force may be eligible for pensions or benefits from the Department of Veterans Affairs.iv
You are generally eligible for the Age Pension if you:
are over 67 years (depending on when you were born)
are an Australian resident and have lived in Australia for at least 10 years
can meet an income and assets test
What are the income and assets tests?
The Age Pension means tests considers your income and the value of any assets you own. If the value of your income and assets exceed certain limits, your payment will be reduced.
Income includes money from a job (including salary packaging), other pensions or annuities, earnings from investments and any earnings outside of Australia.v
Assets are items of value you or your partner own or have an interest in such as investment properties and artworks; caravans, cars, and boats; shares; and business assets. While your family home isn’t included in the assets test, your pension may be affected if you sell it.vi
Can I still work?
Singles can earn up to $212 per fortnight without their pension being affected. For every dollar over that amount, their pension will be reduced by 50 cents. Couples can earn up to $372 per fortnight and for every dollar over that amount, 25 cents in the dollar will be deducted from their pension payment.vii
If your income in a fortnight goes over a certain amount, you will not receive a pension payment. This cut-off amount is $2500.80 for a single person and a combined $3,833.40 for a couple. There are other higher cut-off allowances for those affected by ill-health.
The Work Bonus may help you earn more from working without reducing your pension. You don’t need to apply for it, the Bonus will be automatically applied to your eligible income – you just need to declare your income.viii
What does the Age Pension pay?
There are different rates of pension for singles and couples.
The current maximum basic rate for a single person is $1047.10 per fortnight. A couple would receive 1,578.60 per fortnight. With extra supplements, those on a full Pension could receive a fortnightly total of $1,144.40 for singles and $1,725.20 for couples.ix
Get in touch if you’d some help to work out your eligibility for the Age Pension and other government entitlements.
With Treasury estimating the government misses out on billions in potential tax revenue from rental property deductions and the ATO recently warning extra care is needed when lodging returns with this type of income, rental investors can consider themselves well and truly in the tax man’s sights.
In fact, the ATO’s Random Enquiry Program (REP) showed 9 out of 10 returns reporting net rental income needed adjustment, leading ATO second commissioner Jeremy Hirschhorn to note: “This is startling and clearly something we need to address”.
So, if you’re a rental property investor, it’s time to ensure you’re getting your deductions right.
Deductions under the microscope
Rental property investors can claim a wide range of deductions for expenses associated with maintaining and financing their property interests. These include interest expenses, capital works and other deductions required to maintain the property.
It’s clear from the REP, however, many rental property investors need to learn a little more about what is deductible and also when they can claim a deduction for the amount.
Common mistakes rental property investors are making include failing to include rental income for short-term arrangements and insurance payouts, overclaiming deductions, and claiming for improvements to private properties.
Rental income must be the gross amount received and must be reported in the same financial year the tenant pays.
Another common mistake is claiming an immediate deduction for initial repairs when purchasing. Existing damage must be claimed over several years as a capital works deduction and is also used to work out your capital gain or loss on selling.
Improvements such as renovating a bathroom, are a building cost and must be claimed at 2.5 per cent annually over 40 years from completion, while damaged detachable items costing more than $300 should be claimed as a depreciating asset.
Tips to get your tax return right
When completing your return, it’s essential to apportion both your rental income and deductions in line with your ownership share of the property.
If there is a mortgage over the property and the loan is also used for private purposes (such as a buying a new car or taking a holiday), your interest expenses must be apportioned. This needs to continue for the duration of the loan, even if you repay the personal expense.
Deductions also need to be split to reflect any private use. This also applies if you only use part of the property to earn rent.
Ensure your deductions are in order
Borrowing expenses (such as loan establishment fees and title searches costing over $100) must be deducted over five years. In the first year, these expenses should be apportioned for the number of days of ownership.
Purchase costs (such as conveyancing fees and stamp duty outside the ACT) cannot be claimed but form part of your capital gains tax (CGT) calculations.
Ask the previous owner for details of any capital works deductions claimed so you can correctly calculate your own deductions. Alternatively, hire a qualified professional to estimate previous construction costs.
Although payments to a body corporate administration fund are fully deductible in the year incurred, payments to a special purpose fund for capital improvements or repairs are not immediately deductible.
Don’t forget CGT
It sounds obvious, but it’s essential to have evidence of all your rental income and expenses when lodging a claim. This needs to be retained while you own the property and for five years after selling.
Another tip is to ensure you calculate your capital gain (or loss) correctly when selling.
You are not permitted to include amounts already claimed as a deduction, including depreciation and capital works.
Capital gains must be included in your tax return for the income year the property is sold, while capital losses can be carried forward.
Please don’t hesitate to call if you have any questions regarding the preparation of documentation for your next tax return.
Stay up to date with what’s happened in markets and the Australian economy over the past month.
Despite some signs of a weakening economy with stalling growth and a softening labour market, persistently high inflation is acting as a roadblock to the RBA’s possible rate cuts.
Markets have now priced in a risk that the RBA could hike rates as soon as the next meeting in August.
Australian shares finished the month close to where they started, with investor sentiment influenced by news of higher inflation and fears of another interest rate hike.
Click the video below to view our update.
Please get in touch if you’d like assistance with your personal financial situation.
Stay up to date with what’s happened in markets and the Australian economy over the past month.
Consumer prices eased by more than expected in October. The news that inflation may have been tamed means interest rate rises may be behind us, for now.
Even the Organization for Economic Cooperation and Development (OECD) is optimistic about our economic recovery, predicting rate cuts from late 2024.
The ASX200 regained most of its October losses through November. Hopes the US may be ceasing its interest rate hikes impacted investor sentiment, as did the better than expected inflation figures locally.
Click the video below to view our update.
Please get in touch if you’d like assistance with your personal financial situation.
