It looked very similar to other letters you might get directly from the company (for example if the company was involved in a merger or takeover).

Here is what it said:

HFSS offers to buy the 544 BHP shares you own for $8,611.52 on the terms set out below and on the enclosed Acceptance Form (the Offer). The market value of your shares is $21,134.40. The Offer price per share is $15.83. The market value of a BHP share on the date of this offer was $38.85.

So is this a good deal?  

Sell shares you own worth $21,134.40 and get $8,611.52. Yep – sign me up! (sarcasm just in case you didn’t pick it).

Why would anybody sell their shares for less than they are worth??????

In previous letters like this I’ve seen, they didn’t give you the market value of the shares. So some people might have accepted the deal because they didn’t realise the share price was much higher than the offer price.

Why doesn’t the company (or ASIC who regulates companies) stop this?

This is currently within the law. Obviously it is deceptive and really a scam that really prays on those less financially astute and the elderly. But it is still legal.

Selling Shares you own

For those that have shares but don’t have a broker – if you provide your share documentation to a broker they can usually sell your shares. You will pay brokerage on the transaction – but you will be a lot better off overall than selling them to an unsolicited share offer.

More Info

 http://www.abc.net.au/news/stories/2008/08/21/2342417.htm

 http://www.nib.com.au/home/shareholders/Pages/unsolicitedoffers.aspx

Please consider sponsoring me to eat for $2 a day (August 2 -6th) My target is $1000, for every $250 above this mark I will stay below the line ($2 a day) for another day.
To find out more please visit http://www.everydayhero.com.au/team_mercer

Why $2 a day

Obviously many people in Poverty live on virtually nothing each day.

But how do you get to $2 a day? 

I found that in calculating the $2 per day they took a few factors into account like purchasing power & Australian $ (see http://livebelowtheline.com/about/why-1-25/ for more info).

$2 a Day – is it even possible??

My next question (OK -  after asking if he was crazy) is whether it is even possible to eat for $2 a day.

To make it even harder, in the rules http://livebelowtheline.com/rules/ there are no freebies and no using the pantry or vege garden!

I found a blog post of a girls shopping list on how she plans to live on $2 a day ($10 over 5 days) here http://livebelowtheline.com/2010/07/08/my-shopping-list-and-meal-plan/  There is a group meal plan (purchasing $30 worth of food for 3 people) and an individual plan.

So yes it appears possible (although very, very hard!)

What to take away from this

Well reading the shopping list article makes you realise again how lucky we are in Australia.

Its also made me think about how much I spend on junk food and fast food (I’ve cut down a bit in the last few months but still spend a bit).

Sponsor Team Mercer

If you want to sponsor my mate (OK so it isn’t tax deductible but still worthy) - his link is here http://www.everydayhero.com.au/team_mercer 

I would laugh if everyone sponsored him and he had to go a few extra days on the diet like he has promised above.

But to check out the regular site (e.g. if you are strong willed enough to sign up for the challenge) is www.everydayhero.com.au

A new financial year could mean a new start or a fresh look at things. Or I suppose it could mean nothing at all.

One thing I’ve been thinking about in the last week is habits.

Habits

Before my nephew (4) and niece (1.5) go to bed there is a ritual. They say their goodbyes, and go and clean their teeth. Then we read a story  in bed (ok 2 or 3 stories) and then say goodnight.

I’ve  watched by nephew clean his teeth a few times and – lets face it, he doesn’t do the best job. He is all over the place! I asked my mum (his nana) whether someone should clean his teeth for him & do a better job. She says its fine – the reason for getting him to clean his teeth is more about the habit.

Habit and routine make up a lot of what we do.

Example: Cross your arms. Notice which arm is on the outside and which is closer to your chest. Then go back to normal and then try to cross your arms with the other arm on top. Very difficult!

Save 10%+ – no matter what you earn

I have encouraged lots of friends to transfer 10% of what they earn and put it into a separate bank account (and don’t touch it!). For more about this – read my first article.

Lots at uni say – I don’t earn enough to make it worthwhile. Even if it is only $10 a month, putting aside 10% is a habit and  setting up the habit now will make it easier when you start earning real money. (Ok maybe this isn’t worth it if you pay $5 bank fees a month)

My Savings

My first experience of savings was a Commonwealth Bank Dollarmites account. I think everyone in Kindergarten got one and we would deposit $1 or $2 a week in class and watched it build.

I was 12 or 13 when I got a paper run .The money was paid directly into the account and I saved most of it (and took money out when I wanted to buy something).

When I got part-time jobs when I was 14/15 I well used to saving. I got paid in cash and deposited most of the money each week into the ATM at the station (Yes – you can deposit into ATMs outside a branch, I am always surprised when people don’t know this!).

When I got a full time job I did find it a bit harder. When you are paid monthly you want to leave a bit of cash just in case. But as the habit had already been set, I was used to it. Otherwise I’m sure I would have spent what I made.

So good luck on setting up good habits!

 I have provided a bit of info about each of the main types of tax deductions.

Australian tax rules are not simple – which is why a lot of Australians pay a tax agent to do their tax return (and you can claim the tax agent costs under D10 in next years return – i.e. the year you paid).

And of course – this is only a VERY Brief summary – so to clarify what you can actually claim – probably best to speak to a tax agent or review e-tax and/or the ATO website.

Standard Deduction of $500 from 2013 

Luckily the government has announced that in 2013 year that you can get a standard deduction of $500 (and $1,000 in the 2014 year) that might mean you don’t have to lodge a return.

Tax Deductions

Some of the most common types of tax deductions claimed would be:

D1 – Car Expenses, D5 – Other Work Expenses, D9 – Gifts and Donations, D10 – Cost of Managing Tax Affairs

 Types of Tax Deductions

Work Expenses – D1 to D5

Gifts – D9

Managing Tax Affairs – D10

Non-work Deductions D6-D8

Supplementary Deductions D11 to D16

Work Expenses

D1       Work related car expenses              

If you have used your car to travel to a client (i.e. not work from home)

Easiest Way to claim: Cents per kilometre

The ATO Cents per km changes but in the 2009 year a 1.6-2.6 engine you could claim 74c per business kilometers (up to a maximum of 5,000 kilometres).

So 5 trips to client x 5kms (x 2 if you went back to work afterwards) x 74c = $37 tax deduction.

D2       Work related travel expenses                      

 If you have paid for a work trip (accommodation, flights, etc.)

 D3       Work related uniform, occupation specific or protective clothing, laundry and dry cleaning expenses              

 If what you wear for work has a logo (for example McDonalds), or you need steel capped boots or sunglasses (Tradies),

 D4       Work Related Self-Education Expenses     

 If you work and are doing a course relating to your work. I did an accounting cadetship –so I claimed textbooks, stationary and car expenses.

 People this might apply to: Accountants, Tradesmen, Apprenticeships.

 D5       Other Work Related Expenses                     Job

 Other job work deductions not listed above which may include the business percentage of:

 Working from home expenses – telephone, internet

 For example you might claim 10% of your internet cost (10% x $50/month x 12 months) as you do some work from home and $80 for home phone calls (you made about 16 interstate long calls which cost about $5 each).

 Depreciation from working from home assets – Depreciation on a desk or computer you bought

 Income Protection Insurance (life insurance is not tax deductible)

Non Work Deductions

D6       Low Value Pool Deduction                Business or Rental

 Assets purchased put into a low value pool

 D7       Interest Deductions                                       Bank

D8       Dividend Deductions                                     Shares

 For example if you spent time managing your share portfolio, you might be able to claim your magazine subscription, internet costs, etc.

Unfortunately if you only have 1,000 Telstra shares – the ATO might not like you claiming your subscription to Money Magazine (and they definitely won’t like you claiming your Foxtel subscription).

D9       Gifts & Donations                                          All

Receipts from amounts paid to charities (note you can’t claim where you get a pen/stuffed toy, raffle tickets, etc.).

Usually charities give you a receipt that says they you can claim $x in your tax return. If not – you can look them up on The Australian Business Register at www.abr.gov.au

D10     Cost of Managing Tax Affairs                      Accountant

Your accountants costs for managing your tax affairs

Possible other costs to get your tax return lodged

Supplementary Deductions

D13 Personal Superannuation Contributions

If you are self-employed or have more than 90% of your income not from your job (i.e. business/investments) – then you might be able to claim a deduction for money paid into super. You would have to make the payment and tell your super fund so they issue you with a special notice that allows you to claim this deduction.

Other (Rare) Deductions 

Aside from personal super contribution, the other supplementary deductions are rarer & I have listed them below. Mostly they relate to special circumstances/industries when you can claim a deduction but the ATO want to know about it.

 D11 Film Industry Incentives

D12 UPP of Foreign Pension

D14 Deduction for Project Pool

D15 Forrestry Managed Investment Scheme Deduction

D16 Other Deductions

Claim what you might be entitled to

The basics

You must incur the expense in the course of earning your assessable income that isn’t private, domestic or capital in nature.  And where it is partly private, etc. you can only claim the business %.

What does that mean in ENGLISH!

Basically -just because you buy something for work doesn’t mean you can always claim it. You can’t claim your suit, lunch, clients lunch, speeding fine you got on the way to a customer, etc. 

And you can’t claim entertainment and fines either (pretty hard to get a tax deduction for those).

See more on the ATO website  at:http://www.ato.gov.au/individuals/content.asp?doc=/content/16077.htm&page=2&H2

General Office Job – What you might be able to claim

Here are a few of the main tax deductible expenses that employees might have.

 - Client Calls you make from your mobile/home phone.

 - Taxi/Car travel from work to client (if you have paid – not if you have been reimbursed by your boss).

Car Expenses There are a few different ways to claim car expenses.

Under 5,000km business kms (cents per km or logbook)

Cents Per Kilometre This is the simplest method (and least documentation).

Business kilometres (up to 5,000) x ATO Cents per km  = Tax Deduction.

The ATO Cents per km changes but in the 2009 year a 1.6-2.6 engine you could claim 74c per business kilometre.

So say you did 6,000 business kms you can only claim 5,000kms maximum x ATO rate (say 74c) = $3,700 deduction.

So 5 trips to client x 5kms (x 2 if you went back to work afterwards) x 74c = $37 tax deduction.

Logbook – if you keep a logbook, write out which trips are business at the end you will get a business percentage (e.g. 120 business kms/ 1,200 total kms = 10% logbook percentage). Then you can claim X% of your car expenses like petrol, rego, etc.

But it does gets a bit complicated when you add depreciation and whether the car is on lease or HP.

If you have travelled over 5,000km business kms there are two other methods you can choose to use -12% original cost or 1/3rd actual expenses (but if you use your car mainly for business you might be better off under the logbook).

Doing Work at home

 - Business Percentage of your internet/home phone, etc. cost.

For example you might claim 10% of your internet cost (10% x $50/month x 12 months) as you do some work from home and $80 for home phone calls (you made about 16 interstate long calls which cost about $5 each).

 Things that you might be able to claim if your work hasn’t already paid

 - Travel for a predominately business trip (bad news if you tacked a long holiday on the end).

  - Associations/Union fees (note you can’t claim social club fees)

 - Professional journals/memberships 

See also ATO Miscellaneous work related expenses  http://www.ato.gov.au/individuals/content.asp?doc=/content/18839.htm&pc=001/002/013/008/001&mnu=924&mfp=001/002&st=&cy=1

False. Your tax refund (or tax payment owing) is the net figure between Tax Payable (incl Medicare) + HELP repayment (if applicable) less any offsets and tax paid on your behalf.

For example if you had $10,000 interest income verses $10,000 employment income your refund would probably be different (as your boss might have withheld some of your salary)

If you earn X taxable income you pay Y tax .True or False?

True. Tax on Taxable Income is calculated based on Taxable Income.

If you are in the 30% tax bracket you pay 30% tax on your taxable income? True or False?

False. Tax is marginal so you pay (on 2010 rates) $0 on the first $6,000, 15% from $6,001 to $35,000, 30% from $35,001 to $80,000, 38% from $80,001 to $180,000 and 45% above $180,000.

So you would pay less tax on average. For example (on 2010 rates) $50,000 taxable income means $8,850 you would pay 17.7% average tax.

You can earn $10,000 and not have any net tax (*Net tax meaning tax less tax offsets)? True or False

True. The low income tax offset (currently $1,200 for 2009 year) is applied automatically by the ATO when you lodge your return), will offset your Tax on Taxable Income to nil.  Note this is a non-refundable offset (i.e. it will reduce your tax but you will never get it back in cash)

If you have a deduction of X your tax refund will increase by X? True or False

False. A deduction reduces taxable income. You will only get Deduction x Marginal Tax Rate = Tax Back.

For example I spent $100, my marginal rate is 30%, I’d get an extra $30 refund.

If you buy a computer for $2,000 you can claim it as a deduction this year? True or False

False – Because a computer is an asset – you can only claim it over a few years (assume you use it for a tax deductible purposes like work/your business). A computer is deemed to have an effective life of 3  or 4 years – so you could claim over that time.

If you make a loss on your rental property (i.e. negative gearing)–  you get a lower tax refund if you are on a lower tax bracket? True or False

True – You get less of a tax refund (as you are paying less tax). I.e. If you have a $5,000 rental loss your tax will be reduced by 45% 2,250, 40% – $2,000, 30% – $1,500, 17% – 850, 0% – nil.

You only pay Medicare if you earn over a certain amount and don’t have private health insurance? True or False

False – This is true for Medicare Levy Surcharge (1% of taxable income).

Medicare Levy is 1.5% and is charged if you earn above 17k (it is charged on a sliding scale until $20k)

I suppose for a lot of people it might not matter too much. A bit like how I think about my car. I just take my car to the mechanic when it is due for a service and let the mechanics do their stuff.  

But If I knew about what goes on under the hood – I think I would probably make the car last longer and make my servicing costs lower.

I suppose it depends on the car too – my current car is 5 years old. But I am sure my old car (13 years old) would have lasted longer if I knew what I was doing.  And I might not have blown a head gasket…  

Tax Quiz

I don’t think the following questions will help you get a bigger tax refund this year. But understanding how tax works (and possibly how to legally reduce your tax) can help you in the long run.

All the questions are true or false.

1. If you earn A income you get B refund of your tax.

2. If you earn X taxable income you pay Y tax.

3. If you are in the 30% tax bracket you pay 30% tax on your taxable income

4. You can earn $10,000 and not have any net tax (*Net tax meaning tax less tax offsets) 

5. If you have a deduction of X your tax refund will increase by X

6. If you buy a computer for $2,000 you can claim it as a deduction this year 

7. If you make a loss on your rental property (i.e. negative gearing)–  you get a lower tax refund if you are on a lower tax bracket

8. You only pay Medicare if you earn over a certain amount and don’t have private health insurance.

The full answers will be posted up next Tuesday but for those who need to know here are the True/Falses). Check back on Tuesday for the full reasons.

 (1. F, 2. T, 3. F, 4. T, 5. F, 6. F, 7. T, 8. F)

Car Insurance & Rego - easy as ABC

I got my car insurance in the mail a month ago (3^rd party – the one that is required by everyone so that victims of car accidents can be cared for if the driver doesn’t have any money).

 I couldn’t believe it… the insurance company no longer accept credit card payments. WHAT!?!!? Am I expected to pay cash?

I am usually pretty easy going with stuff like this but I really could not be bothered to walk there or provide a cheque (who has cheques anymore?). Like anyone, I don’t like it when you are charged an extra  1.5% for using your credit card, but at least you have the choice of using the card.

So I decided to change insurance providers. They can GET STUFFED!

Finding a new insurance company online
Lucky there are not that many insurance providers around.

I came up with www.greenslips.com.au which provided a link to a calculator to calculate various premiums for company’s that provide green slips.

In the end I decided to go with the company that I use for my Comprehensive Insurance (AAMI). On the few occasions I have dealt with them they have been smart and efficient.

They were actually one of the more expensive options from the calculation. But I must admit – I am happier to give the money to people who I already know and trust and who make my life easy.

 How to change Green Slips

You need:

1. Your Rego Notice from the RTA
2. Exact type of car (I found this on my comprehensive motor vehicle insurance invoice).

 I did the application for the green slip on the internet. In the end I  needed to call the insurance company because the last step didn’t work. But it was an easy process.

E-safety check (pink slip)

If you car is over 4? years old – you need to take it to a mechanic to check. Most mechanics would be registered to do this I imagine, but you can check the list on www.rta.nsw.gov.au

 Paying rego

Once the insurance and e-safety check were paid, paying the rego was actually pretty simple. Going on to www.myrta.com.au, click pay rego, enter your rego and billing number (on rego notice).

Then you get into the main screen and there are ticks or crosses if you have paid your Green slip and E-safety check (if required). If everything is ticked you are good to pay by credit card.

 Done – rego paid for another year!

P.s. I hate rego month – I’ll have to come up with some good savings tips for next month!

Well…I figure if James Cameron can spend umpteen millions on Avatar, then at least I can pay $15 at the movies (or $25 to purchase the DVD).       

But it got me thinking about how people spend(and avoid spending) their money (and what the definition of tightarse is).

 Just so we are clear – nomoney.com.au is NOT about being a TIGHTARSE.

I think that is why most young people avoid learning about finances. They either assume:

1. That learning about finances is boring and hard. Or they assume that:
2. it will turn you into a tight-fisted, scrooge mcduck who doesn’t go out/buy stuff because it costs money.

What nomoney.com.au IS about is being SMART with your money so that one day you will reach your goals.

Smart Saving

Being SMART means saving some of your money. Set a goal of at least 10% (see my article The one trick to Saving).

But if you are like most (and I fall into this category) – you spend what is in your bank account.

A few ways I try to spend wisely

Obviously my ways might not work for you (you may love your lunch out). If not you may wish to think about other ways.

I don’t purchase coffee – my work has a coffeemaker.

I bring my own lunch – I just buy a loaf of bread each week and either spreads or salad bits.

At the shops – I look at the specials

I try to plan my nights out – so I can avoid taxis where possible

A few ways I just spend money (and don’t worry too much!)

I also thought I’d include a few ways that I don’t worry if I’ve spent too much – as life is too short!

-          Having fun with friends – going to the pub, out to dinner, having fun.

-          Car costs – insurance, servicing, petrol, etc.  It is pretty expensive running a car – but that is the price of being able to go where you want.

-          Gifts –charity, presents for friends.

That is because it contains my HELP Loan Repayment Estimator.

In A Nutshell –  If you enter your current or estimated salary and your HELP debt – it will estimate how long it will take you to pay off the loan (estimate being the key word there are a number of variables that could change in the future).

In a few articles -I explain more about HELP-HECS, how it works, should you make voluntary repayments to repay your loan. Check out posts marked Uni http://nomoney.com.au/category/uni/.

I have spent hours and hours trying to get it to work in all situations, to make it simple (and look pretty!).

Not on the newsletter? You are missing out.  Sign up now and you’ll get access to the HELP Loan Repayment Estimator.  

I have attached a screen shot of the spreadsheet below (I posted it small – you can click to view the larger version)