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Final countdown to avoid a tax hit

TAX time ends one week from today and people yet to lodge their return are being urged to act now to avoid hefty penalties and interest charges.

The Australian Taxation Office says more than 8.2 million of the nations 12.8 million individual taxpayers already have lodged, with eight out of 10 of them receiving a refund.

The average refund is $2400 and refunds are going through in about seven days, says ATO assistant commissioner Graham Whyte.

He says the ATOs free online lodgement tool MyTax has increased in popularity, with the number of self-lodgers up 10 per cent on last year at 2.5 million.

It is automatically pre-filled with information we received from third parties such as your employer, bank and other government agencies, so all you need to do is add in your deductions, check the information and hit submit. About one-third of people say its only taking them 15 minutes to do their returns.

Deakin University Business School senior lecturer Dr Adrian Raftery says late lodgers who owe the ATO money face late penalties and interest charges.

The general interest charge is what they apply the penalty to. It changes each quarter, and the current rate is 8.76 per cent. Thats a strong incentive for people to lodge, he says.

One way to beat penalties is to sign up with a tax agent before October 31, because they can extend your deadline to May next year, Raftery says.

Tax agents typically cost from between $150 and $200 for basic returns, and they will often find deductions you havent thought about, he says.

Most people are due a refund so its your money you are missing out on. Theres a huge incentive to get it Christmas is coming.

H & R Block director of tax communications Mark Chapman says you must be registered with a tax agent to benefit from the ATOs extended deadline.

Self-lodgers who fail to lodge by 31 October could be hit with an immediate late lodgement penalty of $180, increasing by a further $180 for each successive 28-day period that the return remains outstanding, up to a maximum of $900, he says.

Raftery says if you are delaying your return because of a tax debt, its still best to lodge this week and speak with the ATO. Debts are due on November 21.

The ATO are really good in terms of payment arrangements, and there is scope to negotiate 12-month repayment plans, he says.

Talking to them in advance is a lot easier than trying to ask for forgiveness later. Its a relationship and you want to remain in their good books you dont want to stretch the relationship too much because they can come down on you like a tonne of bricks.

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How to be a property investor with just a few hundred dollars

HIGH home prices are no reason to stop Australians from becoming property investors.

Thinking beyond traditional bricks and mortar investment strategies opens a world of opportunity, much of it available with as little as a few hundred dollars.

Property trusts also known as real estate investment trusts or REITs are bought and sold on the sharemarket and allow investors to own slices of Westfield shopping centres, apartment blocks, office towers, Bunnings warehouses, factories and more.

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REIT unit prices can move around like shares, and they have lost about 15 per cent in value since August after surging 50 per cent in the three years prior.

Real estate author and university lecturer Peter Koulizos sees them as a very good option for those without hundreds of thousands of dollars to spend and who are happy to give up control.

As a trust they have to distribute all their income, and there will be some capital growth, he says.

There also can be capital losses, as many REIT investors discovered during the Global Financial Crisis when the then debt-fuelled sector slumped almost 80 per cent and has not yet recovered. So dont put all your eggs in one basket.

A new wave of fractional investing allows people to buy pieces of a single property and share in the ownership, rental income and capital returns.

Companies such as BrickX and DomaCom are among this new breed. BrickX, for example, divides a $1 million property into 10,000 hundred-dollar bricks that can be sold later to other investors on its platform.

Mr Koulizos says the jury is out on these new fractional property investing models.

Its a lovely idea but I want to see how it operates on the secondary market (on-selling later). In a REIT the secondary market is there and you can sell within a matter of minutes.

Other cheaper options for property investors include things such as carparks and marina berths, but their resale markets can be tricky with fewer potential buyers.

Silvertail Property Group managing director Nidal Rasheed has seen a shift in people seeking alternative property investment strategies because of affordability issues.

People are looking for cheaper alternatives to a house, such as carparks, display homes and duplexes, he says.

Others are looking at ways they can go into a deal with someone else, like a syndicate.

We are also finding a lot of people building duplex properties with two homes, living in the smaller home on site, and leasing the larger home to tenants to have them pay off the mortgage.