NSWROA NIGHT RACING COCKTAIL FUNCTION – CANTERBURY RACECOURSE

As members are aware, the Association conducted a Cocktail Function to celebrate the opening of the Night Racing Season at Canterbury Park on Thursday, 3 December.

The function was attended by members, friends and supporters of the Association and, in following with the other functions held by NSWROA throughout the year, it was another “sell-out” success.

I would like to take this opportunity to thank our members for their support via membership and attendance at our functions throughout the year.

Some of the happy guests from Laurel Oak Syndicates		(L-R) Jane Henning, Suzette Halliwell & Christine Mathers

Our sincere gratitude to the Hon. Kevin Greene, MP, Minister for Gaming and Racing, and his staff for their attendance at the function. The 3rd of December was an incredibly busy day (with a new Premier being elected) so the Minister’s attendance demonstrated yet again his great interest and support of the thoroughbred industry.

A big thank you also to the Sydney Turf Club for allowing the Association to utilize their Directors Room for our cocktail function. The room which overlooks the Winning Post, provided our guests with a fantastic view of the action on the track whilst they enjoyed the superb food and beverages on offer.

The Cashman family enjoy themselves on the night		(L-R) NSWROA President Ray McDowell, Stephen Brassel, Jane Lundmark & Mick Robbins

The night was primarily an “informal function” but there were a couple of short addresses by the President, Ray McDowell highlighting the achievements of the Association throughout the year, a “thank you” electronic presentation to supporters and sponsors of the 2009 NSWROA Racings Night of Champions, and a raffle for our charity of choice, Redkite.

The Chief Executive of Redkite, Jenni Seaton was also in attendance at the function and was overjoyed at the success of the raffle. Ms Seton said “my thanks to the NSW Racehorse Owners Association for their continued support of Redkite”.

(L-R) NSWROA Director Narelle Anderson with Jenni Seton, CEO Redkite		NSWROA Treasurer John Vouris and wife Ann (second and third from left) with some happy guests)

The cocktail function was the last event of the year for NSWROA.

The Association has had tremendous success with our functions throughout 2009 and looks forward to welcoming members to our events in 2010.

"BEST OF THE BEST” WISHES FROM LUXBET.COM

LUXBET would like to wish all NSWROA members and their families the very best for Christmas and a safe & prosperous New Year. We are also delighted to announce the continuation of two of our favorites, BEST OF THE BEST and LUXDIV - perfect bet types for punters to get the most out of the festive season racing!

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For those punters who like to bet right up until the jump, LUXDIV* gives you the best price of Best Tote or the official on-course Starting Price (SP), whichever pays more! LUXDIV* is available on all metro meetings (excluding Perth).

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*Conditions apply. See luxbet.com for details.

2010 MEMBERSHIP RENEWALS

With the 2009 NSWROA membership year almost at a close, it is now membership renewal time again. Where has the year gone !!

Last week, Membership Renewal documentation was sent to you by either email or post.

I confirm that membership fees for 2010, inclusive of GST, will remain at the same rate as last year. The “Early Bird” Membership Renewal Competition will be conducted again in 2010 with three great prizes on offer. Entry to the competition is automatic if you renew your membership by Friday 5 February 2010.

A new initiative of the Association in 2010 is the introduction of a Country Membership Rate. We are hopeful that this will assist our country friends to continue to participate in membership and will also encourage new country patronage of the Association.

The Association appreciates our members’ previous support and welcomes the renewal of your membership.

WINNERS ARE GRINNERS

A WINNER – there are no better words for an owner to hear!

As members are aware, as part of our membership renewal process, NSWROA requested members to forward the names of their racehorses in order for us to acknowledge their racing triumphs in our publications.

By popular demand, this feature has been “upgraded” for the 2009/2010 racing season. Accordingly, hereunder are the lucky NSWROA members who had winners in November 2009:

BOBS & BOBS EXTRA UPDATE

The month of November saw another record set for BOBS bonuses – a total of 76 won, worth $488,750. In the first four months of the 2009-10 season BOBS payments have come to $1.77 million, so owners who nominate their horses for BOBS are certainly reaping the benefits.

It’s also good to see that this extra prizemoney is being spread throughout NSW, and it certainly makes it much more cost effective to run horses at country meetings.

Sheikh Mohammed leads the owners list with 16 BOBS bonuses worth $145,000, followed by Patinack Farm (10 bonuses, $80,000) and Geoff and Beryl White/Invermien P/L (5 bonuses, $40,000).

Among the stallions Hussonet was leading by prizemoney ($90,000 from 11 bonuses), followed by More Than Ready ($85,000 and 8 wins), Mossman ($82,500 and 10 wins), Redoute’s Choice ($80,000 and 9 wins), Fastnet Rock ($75,000 and 6 wins) and Commands ($71,250 and 13 wins).

It will be really interesting to see what happens this time next year as BOBS Extra will have been paying bonuses for 4 months and we’ll be able to compare figures for 4-year-old milers and middle distances horses against those for juveniles.

With the yearling sales season about to begin I hope there will be additional interest from potential owners in purchasing horses which are likely to race on as older horses over longer distances. BOBS Extra will reward owners’ patience!

For further information please contact:
John Gatfield,
BOBS Executive Officer,
Racing NSW,
(02) 9551-7574,
jgatfield@racingnsw.com.au

2010 YEARLING SALES

With the 2010 Yearling Sales almost upon us, I thought it was timely to obtain some “tips” for members when purchasing yearlings.

Paul Carrazzo from Carrazzo Consulting and Kingsley Edwards from Gow Gates Insurance have kindly provided the information under for members.

Our best wishes to those of our members, both buying and selling yearlings at the 2010 sales.

FIVE TIPS BEFORE BUYING YOUR FIRST YEARLING

Our good friend and Racing’s Night of Champions supporter, Paul Carrazzo of Carrazzo Consulting, has provided his views on the abovementioned issue.

I’m sure there are many of you out there contemplating your first yearling purchase in the months ahead. Good luck to all of you and enjoy the ride!

However, what many overlook is the tax considerations that should be considered before the first investment is made – for many this investment can be in the many thousands of dollars. Get the tax ins and outs of this investment wrong and you can imagine the tax that may find its way to Wayne Swan instead of remaining in your bank account….

To try and get you all off on the right tax note, I provide below 5 important tips for new buyers of yearlings.

Tip 1: Find out - are you a business or hobby?

This is a crucial question as it will determine whether:

1. Your activities will be subject to income tax. Especially crucial as tax losses may be incurred in the formative years and a deduction for these will be most welcome; and

2. Your activities will be eligible for GST registration. GST is generally levied on the sale of horses and everyday maintenance and training expenses, thus registration will allow the claiming back of these GST amounts.

ATO tax ruling TR 2008/2 is a good reference in determining this issue. If wanting to start a tax business, I would also draft a Business Plan demonstrating how you will be profitable in the future as it will help enormously with any ATO review of your activities.

Tip 2: If you are a “hobbyist”, consider Capital Gains Tax (CGT) exemption

There is a popular myth out there that a hobby owner does not pay CGT on the profitable sale of a horse. This is simply not the case.

However, there can be some joy if proper planning takes place. Under the CGT laws, a racehorse (or share in a racehorse) acquired for $10,000 (inc. GST) or less is exempt from CGT when sold.

Accordingly, if buying a horse with your spouse or partner, give consideration to joint ownership if it means that your respective shares cost less than $10,000 each, e.g. if a horse costs $19,250, it should be owned 50/50 so each person has a cost base of $9,625 (50% @ $19,250).

Tip 3: Use the right tax structure

If you are a tax business and can take advantage of tax losses in the early years, give thought to buying in a structure where these losses can be used immediately to offset against your other income. e.g. a partnership of you and your spouse/partner or in your own name. N.B. If asset protection is your main priority, this may not suit.

If buying as a “hobbyist”, give thought to buying jointly to take advantage of the CGT exemption (see above). Furthermore, be mindful that buying in a company will not give you access to the general 50% CGT discount.

Lastly (and this is often overlooked), a racehorse (i.e. a personal use asset) held by an individual does not get counted in determining if your net asset value is within the $6 million requirement so as to enable access the CGT Small Business Concessions.

Tip 4: Losses may not be automatically deductible - review

Even where you meet the tax business criteria at Tip 1, a tax loss may not be automatically deductible if you do not meet the “Non-Commercial Loss” rules, thus I urge you and/or your adviser to review these rules prior to entering the market.

If your “Adjusted Taxable Income” (ATI) is less than $250,000, four objective tests need to be met before a loss deduction can be claimed or special grounds for relief are met (see below).

Per the latest 2009 Budget, if ATI is over $250,000, the loss cannot be claimed immediately unless a special viability request is approved by the ATO or special circumstances prevented a profit from occurring.

Tip 5: Have your buying structure ready

Under the GST “attribution” rules, GST can only be claimed by the entity that acquired the horse.

Accordingly, a tax business should have the appropriate structure ready before you buy the horse(s). I have often seen instances where a horse is acquired by an individual and in the ensuing weeks/months, the structure is set-up to ultimately hold this horse and other tax business horses acquired. However, as the horse was acquired by the “hobby” individual, no GST can be claimed on the original purchase.

You are welcome to contact me if you wish me to clarify or expand upon any of the matters raised in this article.

DISCLAIMER: Any reader intending to apply the information in this article to practical circumstances should independently verify their interpretation and the information’s applicability to their particular circumstances with an accountant specialising in this area.Prepared by:

PAUL CARRAZZO CPA
CARRAZZO CONSULTING CPAs
22 BLACKWOOD ST, NORTH MELBOURNE VIC 3051
TEL: (03) 9329 7044
FAX: (03) 9329 8355
MOB: 0417 549 347
E-mail: paul.carrazzo@carrazzo.com.au
Web Site: www.carrazzo.com.au

INSURING YEARLING PURCHASES

Our good friends and corporate partner Gow Gates Insurance Brokers, have kindly prepared, via Kingsley Edwards, B.Agr.Ec (Syd.), Dip.Fin.Serv. (Ins. Broking), ANZIIF (Snr. Assoc.), C.I.P., the following:

Not many people drive a car out of the showroom or buy a house without insuring it. These new assets are insured to protect this financial investment, so it makes sense for yearlings purchased in the sale ring to be likewise insured, in the unfortunate event that the horse dies, to reduce the impact of that financial loss.

This is particularly so given the death of a yearling within one year of purchase is far more likely than a house burning down or a car being written off. With the yearling sale season for 2010 commencing in the first week of January, it is thus an appropriate time for intending purchasers to consider insurance as an essential part of buying a yearling.

The Lloyd’s equine insurance policy covers the owner for the death of the horse due to accident or illness. It includes the horse being put down if it is injured or becomes sick and the vet certifies that the horse’s suffering is incurable and so excessive that immediate destruction is imperative for humane reasons. In addition, the policy covers theft of the horse.

Cover under the policy may also include the following which are of particular benefit to yearling owners: transport anywhere within Australia (including yearlings from sale to their new home which may be a considerable distance such as an interstate trip); and surgery conducted by a qualified veterinarian under local or general anaesthetic (including gelding which commonly occurs in the ensuing 12 months).

The policy is intended to indemnify the owner for loss of their asset by paying the horse’s fair market value at the time when the incident occurred which resulted in the claim being made. The premium paid by the owner for the insurance policy is calculated as a percentage rate of the Sum Insured. The Sum Insured should represent the fair market value at any given time and is the maximum amount the policy will pay out in the event of a claim.

Fair market value for yearlings bought at sale is generally considered to be their purchase price until they have their first start (provided no circumstances arise which substantially alter their worth in the interim). After their first race, the Sum Insured should therefore be reviewed in view of the ability shown and its performance.

When purchasing a horse at public auction, it is a condition of sale that they are presented as sound, so a Veterinary Certificate is not required to satisfy evidence of good heath. Risk passes from the vendor to the purchaser at the fall of the hammer. It is therefore prudent for those intending to buy at a yearling sale to make arrangements with their insurance broker beforehand for “Fall of Hammer” cover whereby any purchases are covered immediately from when a lot is knocked down to the new owner.

Yearlings in the 12 month period after purchase are exposed to a unique set of risks including the new experiences associated with breaking-in and training, as well as spending extended periods in a stable, which all consequently carry a greater risk than those for seasoned racehorses. Despite this higher risk profile, the premium rate charged is lower than for racehorses, making such insurance comparatively more affordable and better value for the owner.

The aim of yearling purchasers is to buy a future champion, however before any horse has the opportunity to achieve this goal, they face a host of risks, especially those encountered as they are introduced to their racing career. A worthwhile tool on that journey from sale ring to racing is insurance, providing peace of mind for owners in the knowledge that their financial loss is limited if their horse dies in this high risk period.

For more information on this subject, please contact Kingsley Edwards, Thoroughbred Insurance Manager at Gow-Gates on (02) 8267 9940 or kedwards@gowgates.com.au.

Disclaimer: The information in the above article is intended as a guide only and should not be relied upon without reading the policy wording and seeking independent professional advice.