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Superannuation Guarantee Amnesty

Superannuation Guarantee Amnesty

The Government has restored the Superannuation Guarantee (SG) amnesty aiming to provide employers who have fallen behind with their SG obligations the one-off opportunity to “self-correct”. However, this time those continually fail to take any action will be heavily penalised.

The announcement of the Amnesty is proposed to have immediate effect from May, commencing on 24 May 2018 and ending on 23 May 2019. The original amnesty failed to go through Parliament as many claims that the Amnesty is unnecessary to the recalcitrant employers. 

Since the original announcement, the ATO reports that over 7000 employers have come forward to voluntarily disclose historical unpaid super. The government has estimated that around $2.85 billion in SG payments is currently owed in late or went unpaid.

When is the Amnesty effective?

The legislation to give effect to the Amnesty was introduced into Parliament on 24 May 2018, and if enacted, will apply retrospectively and end six months from the date it receives royal assent. During this six-month time frame, employers are required to voluntarily disclose underpaid or unpaid SG payment.

The Amnesty applies to disclosures of previously undeclared SG shortfall amount up to until March 2018 quarter.

How do employers qualify under the Amnesty?

To be eligible for the Amnesty, an employer must voluntarily disclose SG shortfall amounts. Employers are obligated to pay all that is owing to their employees. Alternatively, employers can set up a payment plan with ATO if your company is not able to pay off the full shortfall SG amount. Defaulting on a payment plan will expose the employer no longer qualify under the SG Amnesty.

Should bear in mind that the Amnesty only applies to voluntarily disclosure. The ATO are, in the meantime, continuing its compliance activities against employers during the Amnesty period. Employers will face full amount penalties if they are subsequently caught by paying late or not paying any unpaid superannuation in full. The Amnesty does not apply to the amounts that have been identified by ATO as unpaid SG shortfall or where the employer is subject to an ATO audit.

What do employers pay under the amnesty?

Normally, if employers fail to meet their obligation on time, they are liable to pay the SG charge (SGC) imposed in relation to this SG gap and lodge a Superannuation Guarantee Statement. The SGC cannot be waived even if you pay the outstanding SG soon after the deadline.

No Amnesty Under Amnesty
The SG Charge is made up of The charge is made up of
SG shortfall amounts (this amount might be higher than if it paid on time) SG shortfall amounts
Interests on those amounts (currently 10%) Interest on those amounts (currently 10%)
An administration fee of $20 per employee, per quarter No administration fees
Penalties of up to 200 percent of the SGC payable (minimum 100% for quarters covered by the Amnesty) No penalties
General interest charged if the SGC or penalties are not paid by the due date General interest charged if the SGC or penalties are not paid by the due date
SGC amount is non tax deductible SGC amount is tax deductible

Under the quarterly superannuation guarantee, the interest charged is calculated on the employer’s quarterly shortfall amount from the first day of the relevant quarter to the date when the SGC would be payable (not from the date when the SG was overdue)

Under the Amnesty, employers who voluntarily disclose previously undeclared SG shortfalls are entitled to claim a tax deduction for these “catch-up” payments made in the Amnesty period.

If employers are late in making superannuation payments to their employees, special provisions in legislation applies to automatically protect employees from inadvertently breaching concessional contribution gap limits if the unpaid SG amount is paid to the Commissioner and then transferred to the employee’s superannuation fund. Where employers pay the superannuation directly to the affected employee’s superannuation fund(s), employees then would need to apply to the Commissioner requesting the exercise of discretion to either disregard the concessional contributions or carry them forward to the following year.

What happens if you don’t take advantage?

If an employer doesn’t take advantage of the Amnesty and are caught down the track, they are liable for the harshness fines, equal to double the amount of the SGC, i.e.200 percent of the SGC payable The Commissioner may remit all or part of the additional SGC payable by an employer. The legislation gives the power to the Amnesty to impose significantly higher penalties on employers who are not willing to voluntarily deal with SG gap by removing the ATO’s capacity to reduce the penalties below 100%. In fact, the Commissioner loses power for leniency even in cases where an employer has made a genuine mistake.

What to from here?

Even if you don’t think you have an outstanding obligation in relation to superannuation, it is wise to undertake an audit of your payroll in order to ensure your superannuation payable is calculated correctly and employees’ pay rates are in line with their entitlements under law and legislation.

If your business has engaged any contractors during the Amnesty period, reviews should be properly undertaken to ensure they are classified as employees under the SG provision even if two parties have reached the consensus that they should be treated as contractors. In other words, you cannot contract out of SG obligations.

If a problem is revealed, you can correct it without excessive penalties applying under the Amnesty. If you are uncertain about what Awards and pay rates apply to employees, there’s a pay calculator available on the FairWork Ombudsman’s website or you can contact them online or call them on 131394.

If you have not previously fulfilled your obligation in relation to superannuation and has the entitlement to the Amnesty, you should start working on this issue or get in touch with Pitt Martin on 0292213345 or connect@pittmartin.com.au.

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Managing Cash Flow

Cash flow is one of the most important components of success for a SME business. Without cash, profits are meaningless. Organisations that don’t implement good cash management may not be able to make the investments needed to compete, or they may have to pay more to borrow money to operate.

Most business owners don’t really have a handle on their cash flow because they are too busy running their business. Inadequate cash flow management is causing more business failures today than ever before.

Cash flow is basically the movement of cash in and out of the business. You should be tracking this either weekly, monthly or quarterly. Positive cash flow occurs when the cash channelling into your business from sales is more than the amount of the cash leaving your businesses through expenses. On the other hand, negative cash flow occurs when your outflow of cash is greater than your inflow of cash. This generally brings concern for a business, but there are steps you can take to remedy the situation and generate more cash while maintaining expenses. You should review operating costs such as electricity, phone and internet frequently ensure you are getting the best deal.

You should have a clear debt collection process because late payments can put a significant strain on your cash flow. You could put your clients on direct debit with pre-authorisation checks so that the banks can draw against their accounts at scheduled intervals. You could also try offering discounts to clients if they pay invoices quickly.

As a small business owner, you might have areas that you are not so strong in. Perhaps you are great at sales but struggle with accounting, tax and bookkeeping. Hiring a professional or consultant who’s an expert in the areas that you need support with makes business sense. At the same time, you won’t have to pay a full-time additional salary ongoing. The consultant can work ‘in’ your business and you can focus ‘on’ your business.

Moving to a cloud accounting solution is a must because you can access your financials at anywhere and anytime. This means you can stay on top of your bookkeeping from overseas, home or on the road. Cloud accounting solution has made it easy for you to log in and add expense as you generate them, track overdue payments or review your profit and loss statement. You can securely share your financial information with your consultant, so they always have a live and up to date data to provide you with any advice as needed.

Most small business owners see growth as the solution to a cash flow issue. They often achieve their goal of growing the business only to find they have increased their cash flow issues in the process. Plan for growth and the related cash expenses in advance, so they don’t come as a surprise.

Cash flow shortages are often hard to predict, largely if they’re caused by a large unpredicted expense or unexpectedly slow payment from a major client. You should always have a plan in place to access additional capital if you need it.

One way to keep the situation under control is by tracking your cash flow results every week, month or quarterly to determine if your management is generating the type of cash flow your business needs. This also helps you get better at creating cash flow projections you can rely on as you make business decisions about expanding your business and taking care of your existing invoices.

Should you require any assistance regarding your accounting and bookkeeping, please do not hesitate to contact Pitt Martin Accountants & Tax Advisers on 02 9221 3345 or connect@pittmartin.com.au

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Deductions Denial of Vacant Land

Deduction Changes of Vacant Land Affecting Small Property Development

A new law has come into effect through the Parliament last month, denying the deductions for holding expenses associated with vacant land, which currently would be deductible in the ordinary course. The legislation is not only retrospective but also go beyond purely vacant land. Before, the old law allows those who hold vacant land with an intention to build a rental property on it to claim the tax deduction for costs of holding the land such as interest expenses, council rates and other ongoing cost.

When the new law enacted, deductions will be denied mostly for individuals, closely held trusts, and self-managed super funds (SMSFs). It applies retrospectively to costs or outgoings incurred on or after 1 July 2019, regardless of whether the land was held prior to this date. Without the grandfathering provision, the new law is likely to have a significant impact not only on those intending to develop vacant land but also those who have already acquired land for development purpose. This is the same target as previous tax changes that carve out travel claims to visit rental properties and depreciation claims on plant and equipment in some residential rental properties.

The new laws, however, go beyond purely vacant land for residential purpose. Deductions would be denied on land if there is no substantial structure on it. The only problem is that there is no clear definition of “substantial” given by the legislation. The Bill suggests that, for example, a silo or shearer is substantial, but a residential garage is not.

The non-deductible holding costs of vacant land under the measure will be added to the cost base of the asset if the expenses otherwise meet the cost base rules for CGT purposes, which will give relief against any capital gain or loss when the taxpayer ultimately sells the property. Please be aware that the cost of holding capital gains assets purchased before 21 August 1991 cannot be added to the cost base, which means it cannot be used to reduce capital gains or increase capital losses.

Is there any exception to the new law? The answer is YES. Some holding costs that relates to vacant land may continue to be eligible for deductions. For example, land leased to third parties under an arm’s-length arrangement who carries a business activity on the land or land used in a primary production business. However, deductions would be apportioned (at least to some extent) if there are residential premises on the land or being constructed on the land.

In addition, vacant land that is affected by natural disasters or out of control by the owner for a certain period are also exempt from the new law.

There is no denial of any deductions where the person or certain related parties use the land in carrying on a business or where the land is owned by companies, superannuation funds (other than SMSFs), managed investment trusts or certain public trusts.

If you have any tax queries about your ongoing and upcoming property development project, please get in touch with Pitt Martin Accountants & Tax Advisers. We are located at the Sydney CBD. Our contact number is 02 92213345 and email connect@pittmartin.com.au.

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Guide to Low and Middle Income Tax Offset (LMITO)

Guide to Low and Middle Income Tax Offset (LMITO) of $1,080

We have received questions from our taxpayers wanting to know the recent tax relief of $1080. Although the immediate relief has been introduced in the 2019 Federal Budget, this article will explain in more detail aiming to provide you with a better understanding about this tax cuts. Firstly, tax offset of $1080 will not automatically come to you when you lodge your tax return. So what is the Low and Middle Income Tax Offset?

From 1st July 2018

The new LMITO was firstly introduced by the federal government as part of 2018-19 Federal Budget, which helps low and middle income earners (taxable income is at or below $125,333) lowers the amount of tax they need to pay. The new LMITO increases from a maximum amount of $530 to $1080 and the base amount increases from $200 to $255 per annum. The maximum threshold increased from $125,333 to $126,000 to ensure tax relief will be delivered to more taxpayers.

First thing to remember is that the LMITO is a tax offset. It can only be used to lower the amount of tax that you owe and not to generate a tax refund. ATO points out on their website:” it doesn’t mean you will automatically get an extra $1080 in your tax return.

The new LMITO threshold is available for the 2018/2019, 2019/2020, 2020/2021 income years. If you are entitled to LMITO, it will automatically apply on your 2018/19 tax return. Before you lodge your tax return, check if LIMTO is visible on your tax return lodgement. See the diagram below to check your entitlement:

Taxable income* Minimum Tax Offset Maximum Tax Offset
<$37,000 $255 $255
>$37,000 – <$48,000** $255 $1,080
>$48,000 – <$90,000 $1,080 $1,080
>$90,000 – <$126,000*** $0 $1,080
$126,000+ $0 $0

* Your taxable income is your assessable income minus your allowable deductions

**LMITO is $255 plus 7.5% of the portion of your taxable income that exceeds $37,000

***LMITO is $1080 less 3% of the portion of your taxable income that exceeds $90,000, up to Nil

For example, if you earned taxable income in 2018-19 of:

  • Less than $21,885, while you have an entitlement to LMITO of $255. Your taxable income is under the tax-free threshold, you don’t have any tax to pay. Therefore, you cannot utilise the offset.
  • $45,000, you will receive a the LMITO of $855, ($255 plus 7.5% of the portion of your taxable income that exceeds $37,000, in this case $8,000). You may also be eligible for the LITO, see below.
  • $85,000, you are entitled to the full $1080 LIMITO.

The LMITO applies in addition to the existing Low Income Tax Offset (LITO). Taxpayer whose taxable income is at or below $66,667 will receive this benefit. The maximum LITO $445 applies to those with taxable income at or below $37,000. For taxpayers whose taxable income exceeds $37,000 but is not more than $66,667, the entitlement is reduced by 1.5 cents for each dollar over $37,000. Similarly, LITO can only be used to lower your tax paid and not a cash bonus given by ATO if you do not owe money to ATO.

From 1 July 2022

New changes come into effect from 1 July 2022

  • Income tax rate thresholds change —— the upper income threshold of the 19 per cent tax bracket increases from $37,000 to $45,000 with effect from 1 July 2022, intending to benefit all taxpayers with a taxable income over $18,200. The change will apply to resident taxpayers and working holiday makers.
  •  
  • The LITO increases —— for taxpayer with a taxable income at or below $66,667, the maximum LITO will be increased to $700 from current $445. However, the LITO reduces quicker than it currently applies. The increased LITO will be withdrawn at a rate of 5% every dollar between taxable incomes of $37,500 and $45,000. LITO will then be reduced at a rate of 1.5% every dollar between taxable incomes of $45,000 and $66,667.

These changes assume that Government does not withdraw the income tax changes in their future budget.

From 1 July 2024

From 1 July 2024, the 32.5% marginal tax rate will be reduced to 30%, The number of taxpayers benefit from such tax rate cut will be increased by the top threshold of the middle tax bracket jumped from $12,000 to $200,000. Tax relief applies to resident taxpayers and working holiday makers. Once again, this assumes that no more changes will be delivered to the future federal budget.

If you have any query about the above contents, please do not hesitate to contact Pitt Martin. We are located at the Sydney CBD. Our contact number is 02 92213345 and email connect@pittmartin.com.au.

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PAYG Withholding Tax Deduction Denial

Government has passed a legislation right before Christmas 2018 which will prevent a deduction from being claimed for salary and wages (and certain other payments) by a business that fails to meet its PAYG withholding obligations. This change will apply to payments made from 1 July 2019 onwards. The existing penalties for failing to comply with PAYG withholding obligations are already significant, this adds another financial incentive for businesses to ensure that they are compliant with PAYG withholding obligations.

 What is Pay As You Go (PAYG) withholding?

When you make payments to employees and some contractors, you need to withhold an amount and send it to the Australian Taxation Office (ATO) at regular intervals. This amount will be sitting as refundable credit amount to offset your actual tax when you lodge your tax return.

What the new legislation says?

If taxpayers do not meet their PAYG withholding tax obligations, from 1 July 2019 they will not be able to claim a tax deduction for payments:

 •             of salary, wages, commissions, bonuses or allowances to an employee;

•             of directors’ fees;

•             to a religious practitioner;

•             under a labour hire arrangement; or

•             made for services where the supplier does not provide their ABN.

 

The main exception is where you realised there is a mistake and voluntarily corrected it. For example, if you made payments to a contractor but then later realised that they should have been paid as an employee and no PAYG was withheld. In these circumstances, a deduction may still be available if you voluntarily correct the problem but penalties may still apply for the failure to withhold the correct amount of tax.

Salary and contract fees are a big portion of tax deduction for almost every business. Losing such tax deduction, business can be ending to pay massive tax therefore business owner should make sure the PAYG withholding obligation is complied all the time.

Pitt Martin Accountants and Tax Advisers can look after your PAYG withholding obligation. If you have any query about the change of new legislation and your PAYG withholding obligation, please feel free to call us on +61292213345 or email connect@pittmartin.com.au.

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For All Business – Single Touch Payroll

From 1 July 2018, ATO has enforced a new legislation on the payroll reporting system. The new legislation requests business with 20 or more employees to use the Single Touch Payroll (STP) enabled software to report employees’ payroll information including superannuation. Business with less than 20 employees has to implement Single Touch Payroll system too by 1 July 2019 (this hasn’t been lawed yet). Under the new Single Touch Payroll reporting system, payroll information will be instantly sent to ATO at each pay run.
 
20 Employees Definition:
 
The number of employee needs to be counted on the date of 1 April every year for the 20 employees purpose. If the employer misses out the date, they still can back date to count the number of the employees as the date of 1 April.
 
Employees you should include into the headcount:
  • full-time employees
  • part-time employees
  • casual employees and seasonal workers who were on your payroll on 1 April and worked any time during March – there are exemptions to counting seasonal workers who were employed for a short time only
  • employees based overseas
  • any employee absent or on leave (paid or unpaid).
 
Employees you should not include into the headcount:
  • any employees who ceased work before 1 April
  • casual employees who did not work in March
  • independent contractors
  • staff provided by a third-party labour hire organisation
  • company directors
  • office holders
  • religious practitioners.
 
What it affects the employer:
  • Need to upgrade their payroll software to have the Single Touch Payroll function
  • No need to provide employees payment summary and submit PAYG withholding payment summary annual report to ATO
  • Automatically get the new employee tax file number and superannuation details through existing Single Touch Payroll reporting system
  • PAYG tax withheld information will be prefilled on the Business Activity Statement or Instalment Activity Statement.
 
What is affects the employee:
  • Can review the payroll information such as gross payment, PAYG withholding, super payment, etc instantly in Mygov account
  • May not receive the payment summary from employer anymore as it wll shows in Mygov account too
  • No need to provide tax file number and superannuation details to employer anymore.
 
The new Single Touch Payroll (STP) system is likely to affect all business. If you have any query in relates to the new payroll reporting system or need some professional to assist with the system implementation, please do not hesitate to contact Pitt Martin. We are located at the Sydney CBD. Our contact number is 02 92213345 and email connect@pittmartin.com.au.

 

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Ebay and Amazon overseas sellers are hammered by the new GST legislation

Recently, the Australian government has introduced a new GST legislation on the imported low value goods. The new legislation will be effective from 1 July 2018 and it will affect thousands of online platform overseas sellers whose annual GST turnover is over $75,000, such as Ebay, Amazon sellers etc. These overseas sellers under the new legislation will be required to registered GST and reporting their GST on a monthly, quarterly or annually return.

GST is a type of tax enforced by Australian government on the provision of goods and services. Once the business registers GST, it has to charge GST on the goods and services it provides which is 10% of the original price unless the goods or service is a GST free or input taxed item. Every month, quarter or year, the business needs to remit the collected GST on sales to Australian Taxation Office; in the meantime, it will also get credit of the GST charged on the consumptions. For those online platform overseas sellers, once they register GST, they will be requested to do exactly the same as described above except they choose simplified GST registration which cannot claim GST credit at all.

The new legislation doesn’t affect the old rule that GST paid at border on the imported goods over $1000. So that means the business doesn’t need to charge GST on the invoice when a bundle of goods valued over $1000 imported through custom and GST paid at border.

The government haven’t given explicit measure how to scrutinize the compliance of the overseas seller. However, some discussion is on stopping the IP address of the online seller if their GST is not complied, so they cannot continue to sell on the online platform to the Australian consumers. Some others argue that the online platform or other operators can charge and collect the GST on behalf of overseas sellers and remit to the Australian Taxation Office. No matter how, since the new legislation has been kicked in, overseas sellers had better to prepare for registering and complying the government’s request as earlier as possible to avoid the penalty notice from the Australian Taxation Office and business damage caused by blocking of IP address.

Pitt Martin Accountants and Tax Advisers are here to look after your business. If you think the new legislation might be affecting you and you are concerning about it, please feel free to call us on +61292213345 or email robert@pittmartin.com.au.

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Find Your Suitable Business Structure

If we metaphorize a business to a building, structure to the business will be as important as foundation to the building. A suitable structure can provide tax effectiveness and assets protection to a business. Contemporarily, sole trade, company and trust are common structures used in business. Next, we will use a table to illustrate the difference between these structures. 

  Sole Trader Company Trust
Cost Cheap Expensive Expensive
Tax Individual rate with 8% discount and will be 16% (capped $1000) 27.5% and will be reduced to 25% Beneficiary tax rate
Assets protection None Limited liability Strong
Superannuation contribution Not compulsory Compulsory Compulsory
Income streaming No No Yes

As you can see, cost wise, sole trader is cheaper than company and trust to be set up and managed. As a sole trader, you can either use your own name or register a business name. Like other business entity, a sole trader can register ABN, GST, PAYG Withholding, etc. Because of the complexity of company and trust, in addition with government and document platform charges, the cost of company and trust’s setting up and management are comparatively higher.

In terms of the tax rate, sole trader used to be the same to individual tax rate. There is an 8% discount capped with $1000 however for the sole trader with less than $5 million business turnover from 1 July 2016 due to the government new legislation announcement. The discount rate will be gradually increased to 16% in about a decade time and the capped amount is so far is still the same. Company tax rate has been dropped from 30% to 27.5% since 1 July 2016 for business turnover under $10 million and the turnover threshold will be increased to $25 million from 1 July 2017. The company tax rate will be finally reduced to 25% for all business with less than $50 million turnover in about a decade time. Trust net income is usually taxed in the hands of beneficiary. Therefore, if beneficiary is an individual, individual tax rate will be applied; likewise, company tax rate will be applied to corporate beneficiary.

Sole trader business runs under the personal capacity; therefore, the business owner’s personal assets will be exposed to all creditors. Assets protection is vastly low in the sole trader business structure. Proprietary limited gives company comparatively higher assets protection to both shareholders and directors. However, director may be forced to be personal liable to company debt under the Corporate Act 2001. Since trust structure separate the legal ownership and beneficiary of trust assets, trust assets generally protected well from beneficiary’s personal bankruptcy. Nevertheless, care needs to be taken of when trust structure is set up and trust income is distributed.

Employer superannuation guarantee is not compulsory to sole trader him or herself but they are still liable for employee’s superannuation guarantee payment. Company and trust need to pay superannuation guarantee if they hire  employee and pay them over $450 a month. This includes director himself.

Compared to sole trader and company structure, one of trust structure’s advantage is that it can stream the prior-taxed income to beneficiaries at different proportion each year. Therefore, it can fully use the tax free threshold of each beneficiaries and their tax loss if any. This strategy is often used by a family trust and hence the family members can overall pay less tax.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartin.com.au.

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Investment property tax return

Investment property tax return can be very tricky and complicated, especially new laws will be enacted according to the recent federal budget. No matter you are in Australia or an overseas investor, you will have to lodge the tax return by 31 October every year if you are having an investment property and earning rental income or capital gain in Australia.

Generally, you need to report all rental income including the bond or compensation made by tenant due to their damage to your property. Of course, you also can claim all eligible tax deductions, such as mortgage interest, borrowing expenses, advertisement, insurance, cleaning, land tax, council rate, strata levy, water, real estate agent management fee, travel expenses, capital allowance, capital work, repair and maintenance etc. Among them, travel expenses and second-hand property capital allowance will be wiped out after 1 July 2017. Also, some of the above expenses can be deducted in one year while others need to be deducted by spreading out for a few years. Some of the expenses even cannot be deducted at all, such as initial purchase cost.

Another type of income from investment property can be the capital proceed from the selling. This might trigger capital gain tax which needs to be put on your tax return as well. Generally speaking, capital gain tax is the tax charged on the gains by deducting the capital proceeds with the cost base and other related transaction cost. There might be adjustment of the depreciation depending on the year of the purchase of the investment property. Some investment property might even be exempted to capital gain tax whereby the six years rule applies. Given the rapid growth of Australia property price, capital gain tax of selling an investment property can be stunning. One of the strategy is selling the investment property in the year when you receive less other income and hold the investment property more than 12 months which will gives you 50% discount on the taxable capital gain.

In Pitt Martin, we specialised in investment property tax return and advise. We can prepare your tax return through email and telephone meeting, so you don’t have to be physically coming into our office considering you are overseas or busy with your daily work. All we need is your personal details, TFN, rental statement, interest and property depreciation schedule if any. Please be mindful that investment property tax return can lead to thousands dollars difference if you do not do it in a proper way. So please speak to us if you are not sure.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartin.com.au.

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Income tax return and tax deduction

Along with the closing of financial year 2017, here comes the tax return time again. During the years, we have seen many clients made mistake with their tax return and led to either ATO penalty or hundreds and thousands dollars losing in tax payment which shouldn’t have happened if it had prepared by a qualified tax agent.

For most income tax returns, tax deduction is the critical part to reduce your tax liability. When completing your income tax return, you would probably have some expenses that are tax deductible. Australian Taxation office (ATO) sets three basic principles for a work-related deduction:

  1. You must have spent the money yourself and weren’t reimbursed
  2. It must be directly related to earning your income
  3. You must have a record to prove it

Under these principles, what are some common categories of tax deductions that you can claim? Today, we will give you some examples to have better understand of those tax deductions.

  1. Cost of travelling directly between two separate workplaces, or cost of travelling from your normal workplace to an alternative workplace while still on duty, and back to your normal workplace or directly home.

E.g. Alex works as a nurse in a child care centre on a full-time basis in Botany. After this job, he travels to Woolworth near his home to do the evening part time shift. Alex can claim tax deductions for travel expenses between the child care centre and Woolworth in her income tax return because they are two separate workplaces.

Notice: you can’t claim tax deduction for normal trips between home and work – this is considered private travel.

  1. Car expenses for using your own car in performing your employment duties (including a car you lease or hire). Generally, car expenses can be deducted either through logbook method or cents per kilometer method.

E.g. Colin works as a business analyst in a commercial bank in Sydney CBD. During his normal working hours, he was asked by his manager to pick up some documents from another branch in Parramatta. Colin decided to drive his car to complete this job. After collecting the documents, Colin drove back to his workplace in Sydney CBD. Colin can claim tax deductions for car expenses for trip between the CBD branch and Parramatta branch in his income tax return because he used his own car in the course of performing his job as an employee.

  1. Accommodation costs (and meal and incidental expenses, if applicable) if you need to do work away from home for a short period of time. However, there are different way to deal with this kind of tax deductible expenses. Please see details in following examples.

E.g.1. Jane works with a company in Brisbane, but is required to attend training at the company’s head office in Sydney one week every month. Jane stays at a hotel close to the head office in Sydney for the weeks she is required to be in Sydney for training. Jane receives a travel allowance from her employer to cover the costs of accommodation, meals and incidental expenses for the periods she is required to stay in Sydney. The travel allowance is not shown on her payment summary. Jane spends her travel allowance on accommodation, meals and incidental expenses when in Sydney for work. Jane chooses not to declare her travel allowance on her income tax return and does not claim her expenses. At the end of financial year when Jane needs to lodge her income tax return, she can choose not to declare her travel allowance as income and does not claim her expenses, or to declare her travel allowance as income and claim her expenses.

E.g.2. John works for a company in Melbourne, but is required to attend the Adelaide branch for one working week each fortnight. John purchases a two-bedroom apartment in Adelaide to stay in when he is there for work. During the time he is not there for work, the apartment is vacant. John receives a travel allowance from his employer to cover the costs of accommodation, meals and incidental expenses for the periods he is required to stay in Adelaide. The travel allowance is shown on his payment summary. The costs of financing, holding and maintaining the apartment in Adelaide for the year are not disproportionate to the cost of John obtaining suitable short-term commercial accommodation for the periods he is required to stay in Adelaide. John does not use the Adelaide apartment for private or domestic use during the year. John must include the travel allowance as income in his tax return because it is shown on his payment summary. John can claim a deduction for the costs of financing, holding and maintaining the Adelaide apartment for the year.

  1. The cost of buying and cleaning occupation-specific clothing, protective clothing and unique, distinctive uniforms.

E.g. Mark works as a tally clerk in a supermarket. He has two sets of uniform that have the supermarket’s logo permanently attached and the uniforms are not available to the public. Mark can claim tax deductions for the cost of purchasing and cleaning the uniforms in his income tax return.

  1. Gifts or donations to organisations that have the status of deductible gift recipients.

E.g. Terrence works as an interior designer. He makes $50 monthly donations to an environmental organization endorsed by ATO. Terrence doesn’t receive any material benefit or advantage from the environmental organization he makes donations to. Terrence can claim a tax deduction for his donations to this environmental organization. However, if he received an equivalent valued gift in return for the donation, that donation will not be deductible.

  1. Home expenses including a computer, phone or other electronic devices you are required to use for work purposes, as well as a deduction for running costs. Deduction on occupancy cost need to be careful, such as mortgage interests, strata rate, building depreciation, etc. The may trigger capital gain tax.

E.g. Denis works as a car dealer in Rockdale. He is required by his manager to organize an office contact number to keep touch with clients. Denis bought a new cell phone to set up the office contact number in JB Hi-Fi. During his business trips, he needs to make regular phone calls to his manager and clients. Denis can claim tax deductions for the cost of purchasing a new cellphone and making phone calls.

  1. Expenses incurred in earning interest, dividend or other investment income.

E.g. Eunice works as a financial adviser. She has a cash management account for investment purposes. She also has an investment property using borrowed money. Eunice can claim tax deductions for account-keeping fees and interest charged on money borrowed.

  1. Self-education expenses if your study is work-related or if you receive a taxable bonded scholarship. The first $250 is not deductible though.

E.g. Healey works as an assistant accountant. She decides to take a CPA course to obtain the CPA qualification. The CPA course has a sufficient connection to her current employment and maintains or improves the specific skills or knowledge she requires in her current employment, or result in, or is likely to result in, an increase in her income from her current employment. Healey can claim a tax deduction for the CPA course expenses.

  1. If you buy tools, equipment or other assets to help earn your income. Assets under $300 can be deducted in full in the purchased financial year otherwise it has to be depreciated over a period.

E.g. Jefferey works as a graphic designer for a real estate company. During the first month of his employment, Jefferey bought an Adobe Creative license to use graphic design software which would continue to a monthly payment of $40. Jefferey didn’t receive an allowance for this monthly payment. Jefferey also uses this graphic design software for private purposes. Jefferey needs to apportion the amount of tax deductions he claims.

  1. Other expenses that contribute to earning your income.

E.g. You can claim a tax deduction for accountancy fee if you let a registered tax agent to prepare and lodge your tax return and activity statements.

The above tax deductions can be applied differently from case by case. The examples are hypothetical examples and don’t represent any advice from us. Before you apply the examples to yourself, please speak to a registered tax agent.

Pitt Martin is registered tax agent and CPA practice. We specialised in individual tax return, business and all other tax returns. If you are not sure about whether you have eligible tax deductions in your tax return, please speak to one of our tax accountants.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartin.com.au.

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