Financial ratio and Financial Institution

I woke up this morning and as i generally do, i looked at the business news on ABC, and Westpac being in news i could not help but reading more into it(a close relative working for the bank; always makes me curious when the name pops up); so as Westpac releases its financial results showing same profits as last year this time, the investors as ABC news put it "ditched the second biggest home lender."

The accountant in me could not help but prod more into what is it investors generally prefer as a measure of its financial performance. While financial institutions prefer various methods to measure its financial performance, ranging from price-earning ratio, dividend payout ratio, dividend yield ratio and many many more; as seen from the Wespac Interim results 2015 notes, it uses the "cash earning per share" ratio to measure its earnings.

Now the reason why the financial institutions use the cash earning per share ratio is that as the formula suggest: 

Cash EPS=          Operating Cash flow

                      Ordinary shares outstanding

As we know operating cash flow is that amount which is actually generated when a particular amount is invested in the business. So from my understanding cash EPS would give the most fair idea to the investors about the earnings per share, also because it considers the diluted number of shares including any convertible share warrants and share options. Investors would be disappointed to see that Westpac shares would not be earning much more than last year interim results.

Now for a new investor like me who is thinking of investing in a financial institution it would be helpful to know the interim results of other banks and then compare the Cash EPS of all of them.

Working overseas? Here's what comes along!

Since a few days i have been going into reading up about what if you go to a different country for work for an extended period of time and you extend your work holiday(as in more work and a bit of holiday) in that particular country, how would the tax dragons look at you?

So ATO first of all establishes whether you are a resident for tax purpose or not, and the questions it asks to establish that are 1) Whether you live in Australia 2) Whether you are a resident returning back to Australia 3) Whether you have stayed or you intend to stay for half the year or more in the land down under<even though in parts> 4) Whether you have social or economic ties with any country other than Australia to determine whether you receive any long term payments from any other country. Looking at these questions if for example Mr. Watson is living in a different country from July 2014 and is there till August 2015 for work, he would still be an Australian resident for tax purpose because now he is back and intends to stay in Australia now on. So only if he was out of Australia for work say from; July 2014 to June 2016; he would be considered a non-resident for tax purpose for the year 2014-15.

Different country, different rules:

Now if tax in one country is a web, it is of course a network of webs when taxes of different countries are considered together. Like if an individual is an Australian resident working overseas temporarily then that person would have to pay the taxes here on the income earned overseas and would get a "foreign income tax offset" from the tax to paid in Australia.

From what i came across in one of the CPA magazines there is no obligation on the foreign government in Hong Kong or Singapore to deduct tax on an ongoing basis and employees pay their own tax at the year end. The tax rates in the US are higher brackets for different categories. Also many countries have tax treaties(Double Taxation Avoidance Agreements) with each other, like Australia has with a few countries including India, UK, US and China. These treaties decide the tax rates for interest, dividend and royalties to be paid and taxed only in any one of these countries, to avoid the foreign tax traps for confused individuals sailing between two countries to earn their bread(okay! a little more than that). This would help avoid being taxed twice in your home country and country where you work.

This is a vast topic with too many possible arenas to look into. Will come back with a new possibility soon.

The Dental plight..is it??

As we all would painfully agree to it, tooth ache is on the reign of all the; not so long-lasting cramps and headaches and strains and sprains. And so it certainly is an area for me to look into for tax purpose to be claimed as deduction. As much as i like to pick tax claims and payments and read up about them understanding their implications on income; my recently subsided but long lasting toothache and the "gold coins" the "lord of my jaws" asked for; acted as a spur for this one.

The Australian tax office groups dental expenses with all the other medical expenses for tax purpose. Which means like all other medical expenses your dental expenses could only be claimed depending on how much you spend and not exactly the amount you spend. You can claim your net medical expenses(which is your total medical expenses less refund from Medicare and Private Health Insurance).

So the way it works is that you can claim 20% of the "Net Medical expenses" over AUD 2162 if your Adjusted Total Income(ATI) is AUD 88000 or less. Same would be 10% of the "Net Medical expenses" over AUD 5500 if ATI is 88000 or more. This is if you are Single. But if you have a Spouse or Children or both; the ATI threshold changes to AUD 176000.

The conditions to claim the above have been changes for the Assessment year 2013/14 which says:
You can claim the offset in 2013/14 only if you received it in 2012/13. So unfortunately if you did not receive any offset in the year 2012/13 you would not be able to claim any in future years.
Or you can claim if the medical expenses are paid for disability aid, attendant care or aged care.

Would provide an example to make the above more clear:

• Zoe spends a total of $3000 on dental and medical bills in the tax year 2012/13.
• Zoe received a total of $500 back from Medicare and $900 back from private health insurance
• Zoe’s Net Medical expenses= $3000 minus $500 (Medicare rebate) minus $900 (private health) = $1600
• As Zoe’s net medical expenses are less than $2162, she can’t claim any medical expense deduction on his tax return.

As Zoe did not receive any offset in 2012/13 she cannot claim any in 2013/14 either.

Ending this one with what i found out regarding what you can and cannot claim in regards to dental expenses:

Can
Payments to dentists, orthodontists or to registered dental mechanics.:)

Can't
Payment to private health insurance provider
Payment for cosmetic dental treatment
Payment for "over-the-counter", non-prescribed medicines like pain-relievers.
Travel or accommodation expenses for your dental work.

Hope this provides a heads up for those who are preparing to sit in that chair; and information for others.

More jobs or no jobs is the question!

A few months ago the talk of almost all the Asian and Western economies was the US Federal Reserve stimulus program. This hit the emerging economies of India, Brazil, Indonesia as the wealthy people in these countries began to invest in the US markets believing the the US economy is going to recover with rise in interest rates. Debts are only increasing in the world and there is an "imbalance"(a word seen often in the accountants' trajectory)..lol

All this also affected the land down under. And the slowing growth in Australia did not help much with falling exports from this region.

Now with the Budget released a couple of days ago my concern is how is this going to help or "not help" the unemployed. With the "harsh" measures of the "Repair Budget" where in there are budget contributions towards infrastructure development of about 11.6 billion; wherein government has also planned funds towards Entrepreneurs' Infrastructure Program and Growth programs, encouraging more jobs and new businesses, i wonder how the unemployed who are on Government support take the budget. Along with major cuts in the various employments support programs and activities, job seekers seeking benefits and welfare support would be under a more stringent eye of the Government. Also with the increase in age limit for the New Start from 22 to 25 and the six months on and off cycle to be eligible for New Start; it is stricter limits than the smooth eligibility before. The fund allocation towards the dole program suggest the same measure of encouraging people to work and earn the benefits, as it would be compulsory for people between age 18 and 30 to work with budget allocations provided to the job brokers. These measures are impressive in terms of encouraging people to work rather than survive on government support.

The question is with industries dooming in Australia(and the Automotive Industry measures decided but not yet announced), to what extent would these support structure reduction help the redundant employees. And to top it up the harsh budget impact on families with the limit for family tax benefit increased might not make the genuine hardworking Aussie bunch.

The plunge from ICAI to CPA Australia

It always requires a bit of a research when you are starting to do a new course especially in a new country. And now after all the work i have finally enrolled into the two units i have to crack to become a CPA Australia. Two units because i get an exemption for other units, considering my CA qualification from India. 

So as i started to look into the steps for becoming a CPA Australia member i at first, took the normal path towards it which you will get onto very easily as a first option on http://www.cpaaustralia.com.au/. But oops! i had to take a different route as i am already a CA and wanted to enroll under the migration program. Though the CPA Australia has quite a user friendly website, because i have followed the process, let me run you through the steps to start with getting yourself assessed under the CPA Program if you are a qualified CA from India. You can get all the basic information as well as the application form from the ICAI's MRA with Australia page on http://www.icai.org/new_post.html?post_id=4289 as well as on CPA Australia page of course on http://www.cpaaustralia.com.au/become-a-cpa/migration-assessment. Now this is how you get yourself assessed and wait for the result which wold take about 15 to 20 "working days" as they say. Now the assessment result if you are a CA from India would be to appear for one unit which is "Global Strategy and Leadership" and another online exam module which is called "Better Practice in Governance and Accountability". The next step which follows is to enroll yourself in the exam which is twice every year. So you either enroll in the first semester or the second one. Now you will receive a username and password from CPA Australia through which you can either enroll online or can get a form from https://www.cpaaustralia.com.au/become-a-cpa/steps-to-become-a-cpa/international-affiliations/institute-of-chartered-accountants-india which can be mailed on the address mentioned in the form. Be back with another informative and interesting post!

P.S. This enrollment exam form applies to students qualified from CGA Canada, CMA Canada, CPA Ireland as well as ICASL. 

The property pool for non-members

I was wondering about the elementary stages of buying a house for a foreign resident in other country and it raised my curiosity all the more when while driving my friends got into this discussion of what could be the possible complexities for a foreign resident to buy a real estate in Australia or there would be none<maybe it could be as effortless as it can get>.

So research says that the proportion of first home buyers have dipped down the lowest this year than in past 20 years. The actual number of first home buyers were around 6000 in Australia which was the lowest since February this year. But at the same time Investment lending took a leap this year which meant that the first home owners could not afford to purchase but because of relative affordability it was quite smooth for the investors to invest in properties. In a market where the local investors investment is on a high in, the foreign real estate investors are infusing their money in a ratio of one in every eight properties in this country. 

Now comes the question as to, "How effortless the sailing is or is going to be for the foreign investors?" A  non statutory body called FIRB(Foreign Investment Review Board-www.firb.gov.au) regulates and advice the Treasurer and Government on Australia's Foreign Investments and conducts its Administration. The guidelines mentioned on the FIRB website contains details regarding the conditions for a Temporary Resident as well as a Non Resident/Short term visa holder has to take into account before buying a house. The Government's policy as mentioned is to encourage foreign investment where it is increasing Australia's housing stock; which is channeling the foreign investment into "new housing" and bring benefits to local industry. Thus the conditions mentioned in the guidelines considers the above policy application in mind. 

This means if you are a temporary resident or a foreign buyer for that matter you can buy a new dwelling with application which is always approved in normal circumstances, also if you buy a vacant land it would normally be approved(condition being that the ongoing construction begins within 24 months). Its only when you want to purchase an already established dwelling and if you are a student or any other temporary visa holder, there is a restriction of buying it solely for your residential purpose and sell it once it ceases to be your residence. Whereas non residents cannot buy any established or second hand dwellings. This still makes it clearly an easy job for foreign residents to buy property in Australia.

It would be interesting to study the tax effects in Australia for the same for the foreign residents. Would get back with that soon. For now i should go and worry about my dinner.

US Federal Reserve stimulus

I have been reading about the US Federal Reserve's recent stimulus policy announcement and was asked a very basic question by my husband; "whether printing more money would really help to make the market more wealthier?"

I think the major policy initiative which is termed as "quantitative easing" which broadly covers reducing the mortgage rate, and that too through two major sources only which are housing market and stock market.
It would merely benefit the rich more than the poor...It does not seem to benefit the poor here.  More buying houses means prices there would be soaring more for properties ultimately leading to inflation But with the banks having their magnifying glasses on towards lending money would only lend it to those with strong credit records.

Secondly more money would splurge into the stock market as investors would want to earn maximum returns from low rate securities as well as risky ones as well. This again i feel is a blessing for only the investment friendly population, the reason for the same being less earning and more spending which would not leave much money for investments.

With all this i end it here for now with a hope that with the lower interest rates its more property development, more business investments and more lending by the banks.