It has been 18 long months since the Reserve Bank of Australia (RBA) made a change to interest rates…but yesterday they reduced rates by 25 basis points to 2.25 per cent.

In the preceding days, there was much hype in the media regarding the first interest rate decision for the year, and few leading economists tipped a rate reduction.

The intention of the RBA in making a rate reduction is to stimulate spending – no doubt you’ve seen lower petrol prices lately, but those alone have not been sufficient to lift our economy.

What does a rate reduction mean to you? 

It all depends on the amount of your mortgage, who you have your mortgage with and how much of the rate reduction they pass on – by way of example: if your lender passes on the full reduction, and you have a mortgage of $300,000, you will save approximately $47 – $50 per month.

Should I change lenders if I don’t receive the full benefit of the rate reduction?

While changing lenders is certainly worth investigating…the final decision will depend on a number of factors such as:

• whether your loan is fixed or variable
• the effective interest rate (you should never compare advertised rates as they usually don’t take into account other fees and charges)
• the relationship you have with your lender

The Tax Chic’s tip:

If financially viable for you, it may be prudent to “ignore” any interest rate reduction provided by your bank and maintain your repayments at their current level – this will help reduce your overall interest and the life of your loan – just a thought!

Regards

Whether it’s a new car, a truck or tractor, a suite of computer equipment or some other large scale item – when you pay for these things with finance, there is some information that you should provide to your Accountant!

Significant items, such as the ones mentioned above, need to be capitalised and depreciated in your financial statements – but the finance transaction also has an impact with regards to an interest deduction.

I always recommend the following:

• if you are not sure how to process the transaction in your accounting system, contact your Accountant for their advice – this will help ensure you claim the correct GST throughout the year, and avoid unnecessary amendments at year end
• enter as much detail as you can in the “Memo” section in your accounting system – this includes make and model information, as well as registration numbers if applicable
• keep a copy of the invoice in a separate “year end” folder to give to your Accountant – this makes it easier (read – cheaper) for them to get any information they need without them having to come back and ask you
• also include a copy of the “finance summary” with your “year end” folder – the “finance summary” will provide details of any charges by the finance company, the number of payments and the amount of payments as well as the total interest for the term of finance

If you need help creating a “year end” folder, or processing these transactions, Contact The Tax Chic!

Regards

I know they say that “time flies when you’re having fun”…but seriously, wasn’t it just Christmas?  I really don’t want to be one of those people always complaining that time goes faster as you get older, but it’s a little hard not to be sometimes…

Personally, I have really enjoyed taking a relaxed approach to January this year.  It was important for me to take some time out for myself (easily done by spending hours browsing travel brochures for my trips later in the year!) – but now it’s time to get back to business, for real!

Before the Christmas break, I was asked by my mentor to reflect on my successes of 2014 – the obvious one was the launch of The Tax Chic – I am so very proud of myself for the work I’ve done to date, but there’s more to come – so watch this space.

My diary for February is already jam packed and I can’t wait to get stuck into it.

So how will I spend my last weekend in January?  I’m heading to the “big smoke” – I’ve got some work planned and some play planned, including a belated birthday celebration (yes, this 40th birthday of mine is still going!)

What about you?  Are you back into things or still on holiday?

Regards

In the event that you are left an inheritance, there are some important things you should consider.

Quite often I come across the situation where a client has inherited shares.  It may be a recent inheritance or they may have held the shares for a number of years, but at some stage the shares may be sold.

The taxation consequences of this sale transaction depends on a when the shares were purchased or acquired by the deceased.

I understand that at the time a deceased estate is being processed, documentation may not be at the forefront of your mind – but I hope this post will help you to remember the things you need to find out if/when you inherit shares.

If the shares were acquired by the deceased before the introduction of Capital Gains Tax (CGT), then you need to consider the value of the shares at the date of death, as this will form part of your cost base and purchase date for CGT purposes.

If the shares were acquired by the deceased after the introduction of CGT, then you need a lot more information including the original date purchased and the original amount paid.  You will also need to determine any CGT events that may have taken place during the deceased’s ownership (such as dividend reinvestments or share re-structures), as this will form part of your CGT calculations.

If you sell the shares you inherited after some time has passed from the date of death, you may find it difficult to access the information and documents you need…

So if you hold shares I recommend you ensure your records are up to date and easily accessible for your family members, and if you inherit shares I hope you can now remember to ask some questions of the Executor so you can get the information you need, sooner rather than later.

PS Remember to read the disclaimer

Regards