2 June 2017

The general rule is that you can claim deductions for expenses your business incurs in its task of generating assessable income. Many of these deductions are obvious – rent, materials, supplies and so on — but there are also some less obvious options left available just before the end of the income year, should your circumstances suit, to further reduce your enterprise’s tax burden for the year.

Continue reading “End-of-year tax planning tips for business” →

8 March 2017

The provision of cars by employers to employees remains an issue that continues to create confusion for some business taxpayers. A not-uncommon situation is where the employer fails to identify that a car fringe benefit has been provided.

This is typically found in family companies or trusts where a car bought by the business is provided to one of the owners who is also an employee (or that person’s “associate” – say a spouse or child).  Remember, a director is still considered an employee.

The ATO in the past has undertaken data matching activities with state base road registration authorities to identify newly registered vehicles under a company or trustee’s name and issue amended assessments where the car has been provided to an employee (or an associate of the employee).

Continue reading “FBT and Cars Explained” →

8 March 2017

There are certain behaviours, characteristics and tax issues that the ATO admits will attract its attention. But as it is more interested to see taxpayers get things right rather than the bother, and expense, of chasing down every misdemeanour, the ATO has spelled out the areas that most concern it — that is, the incidents or details that are more likely to raise a red flag.

Broadly, the following behaviours and characteristics may attract the ATO’s attention:

Continue reading “What Attracts the ATO’s Attention?” →

8 March 2017

Salary sacrifice can be a great way to get a part of your remuneration in a form other than cash – and not personally pay tax on it.

Salary sacrifice (or salary packaging) is where you agree to take part of your wage as a benefit of some kind, equal in value to the salary it is exchanged for. The upside in you doing this is that your income tax is then based only on the reduced amount of salary that results.

If your employer agrees to go into a salary sacrificing arrangement with you, the benefit you get should of course be equal to the GST-exclusive value to the portion of salary that you give up, plus any FBT that is payable by your employer. Options that may be allowed by your employer include a car, shares or payments for your expenses, such as school fees, child care or home internet connection costs for example.

Continue reading “Can Salary Sacrifice Work for You?” →

8 March 2017

From January 1, 2017, the assets test free area and taper rate for pensions increased. The assets test works by reducing a person’s age pension payment for every dollar of assets owned over a certain value. The test takes into account most assets, including any property (except your primary home) or possessions owned, or partly owned, in or outside Australia.

The assets test is one of two means tests used by the Department of Human Services (Centrelink) to determine your age pension eligibility, the second being an income test. The results of these tests that produces the lowest pension payment (or zero) is then applied.

The asset test free area is the amount of assets you can have without affecting your pension. Centrelink will reduce your pension by $3 each fortnight for every $1,000 of assets you own over the assets test free area. This is the taper rate. Before January 1, this rate was set at $1.50 (so it has therefore doubled).

Continue reading “Recent Changes to the Assets Test for Pensioners” →

18 February 2017

Home office expense claims are subject to the same general substantiation requirements as other deductions – that is, it is a requirement that records should be kept for at least five years.

But in practice, full compliance with the substantiation rules may be difficult. It may be simple to keep a receipt for a printer purchased for a home business, but not so easy to prove the deductible proportion of a specific utilities bill. So the ATO has provided some administrative guidelines to ease this burden.

Continue reading “Home office deductions: What substantiation will the ATO accept?” →

2 February 2017

The ATO has issued guidance on making claims for mobile phone use as well as home phone and internet expenses.  It says that if a taxpayer uses any of these for work purposes, they may be able to claim a deduction if there are records to support claims. But the ATO points out that use for both work and private use will require a taxpayer to work out the percentage that “reasonably relates” to work use.

Substantiating claims
The ATO requires that records are kept for a four-week representative period in each income year to claim a deduction of more than $50. These records can include diary entries, including electronic records, and bills. “Evidence that your employer expects you to work at home or make some work-related calls will also help you demonstrate that you are entitled to a deduction,” its guidance says.

Continue reading “Substantiation for Mobile, Home Phone and Internet Costs” →

2 December 2016

A recurrent topic of conversation and enquiry when it comes to possible tax deductions is when taxpayers travel to a work location, and the eligibility or otherwise of certain claims in regard to that travel.

Work-related travel is a hot focus area of the ATO as taxpayers can often get claims wrong.

While trips between home and work are generally considered private travel, you can claim deductions in some circumstances, as well as for some travel between two workplaces.

If your travel was partly private and partly for work, it is the general rule that you can only claim for the part related to your work.

Continue reading “Travel to a workplace: What’s in, what’s out” →

2 December 2016

You might be sick of the daily commute, or want more flexibility of hours – or it could be that you have a talent or skill and feel sure that this can translate into a fulfilling career in your own business. Or it could just be that the idea of working from home seems to offer a better work/life balance.

So if you’re in the position to be able to have your cake and eat it too, there just may be icing for that cake in the form of tax advantages.

Indeed Australian Bureau of Statistics (ABS) reports indicate that home-based work is prevalent in the Australian community. The 2006 Census showed that 426,523 Australians said they worked from home, and the 2011 survey had 443,939 similarly employed. The upward trend is expected to continue, and it will be interesting to see what data comes out of the recently completed 2016 Census.

Continue reading “5 tips to get home office deductions right” →

2 December 2016

Generally, if you rent out part or all of your home, the rent money you receive is  assessable. This means that you must declare your rental income in your income tax return, but you can also claim deductions for any associated expenses.

However, be warned. If you rent put part of your home, such as one room, you also may not be entitled to the full main residence exemption from capital gains tax (CGT). This means you will be required to pay CGT on part of any capital gain made when you sell your house.

Goods and services tax (GST) typically doesn’t apply to residential rents, so you’re not liable for GST on the rent you charge.  However, you also can’t claim GST credits for associated costs.

Income and expenses

If you rent out your home at normal commercial rates you will generally be able to claim tax deductions for associated expenses, such as the interest on your home loan. But if only part of your home is used to earn rent, the ATO generally only allows deductions for the part of your expenses that relate to the rental income. As a general guide, you should apportion expenses on a floor-area basis – that is, based on the area solely occupied by the tenant, together with a reasonable figure for their access to the other general living areas.

Continue reading “Renting out part or all of your home” →