Posts Tagged ‘What can I claim’

Last week we mentioned a few items that would assist in generating a tax deduction. This week we will look at a few specific areas.

The Education Tax Refund allows you to get back up to 50% of what you have spent (up to a certain amount) on your children’s text books, pens, pencils, etc, computer stationary, education computer programs, internet connection fees etc.  It is important that you retain all receipts for these books, , printer cartridges  etc.

Investment properties.  If you own a rental property there are many items that can be claimed as a tax deduction against the rental income. By the same token, there are a lot of expenses that cannot be claimed.

Items that can be claimed against the rental income include agent fees, insurance, council and water rates, some lawn maintenance, minor repairs, depreciation on items such as ceiling fans, floor coverings such as carpets, linoleum and floating timber, gas heaters, hot water systems (excluding piping), surround sound systems, ducted vacuum cleaning systems etc. If the property is rented furnished then there are many more items available for depreciation.

Items that are not tax deductible include major renovations such as a new kitchen or bathroom. Parts of the renovation may be allowable such as cook tops, dishwashers, freezers, ovens and range hoods but the cost of the cupboards and bench tops is not allowable.

When purchasing an investment property it is always advisable to consider the long term benefits/ detriments of such an acquisition. It may be purchased 99% in the name of the primary income earner so as to maximise the tax deduction but on sale can cost more in capital gains tax.  Talk to us about ways this may be used to your advantage.

If you are thinking of moving and want to keep your current home as an investment property, this can be done tax effectively if you talk to your accountant first.

Superannuation contributions can generate a tax refund in some instances. Contribute to your non working spouse’s super fund. A contribution of $3,000 may get you a $540 refund. A contribution of $1,000 can generate a co-contribution of $1,000 if you earn less than $31,920. This is money for nothing and can certainly help to put something aside for the grey years.

If you salary sacrifice to super you should ensure that your contribution does not exceed the maximum contribution allowable, otherwise you could be paying another 46.5% tax on that contribution.

The rules have changed again this year and any losses on rental income (negative gearing), salary sacrificed superannuation and interest on geared shares are to be added back to income to determine eligibility for various government payment such as Family Tax Benefit Part A or B.

This add-back also impacts on your ability to claim the superannuation co-contribution.

If you have any questions on any of this please send us an email to info@coulcher.com.au.

Clients are often confused as to how long and what records need to be kept to comply with the A.T.O. Confusion can arise as the A.T.O requires some records to be kept for five years and others seven years from the date on that year’s Notice of Assessment issued by the A.T.O or where no assessment is issued from the date of lodgment of the tax return.

• Five years; non-Company records, generally individuals and non-company entities that do not have employees.
• Individual tax payers should keep records for five years. If you have a rental property then you should keep all records for a further five years after the rental property is sold.
• Seven years; financial records for companies, most employee records and all records of fringe benefits and capital gains.
• If you store financial records electronically you must be able to produce a hard copy if required.
• Employee records may need to be kept longer to comply with Workers Compensation Act.
• For depreciating assets, you must keep records for the entire period over which you claim deductions for the decline in value of those assets. You must keep your records for a further five/seven years from the date of your last claim.

If you organise your records weekly including updating your registers and filing the documents away you will reduce stress and stay on top of the task. It also allows you to find documents easily when needed.

Following is a list of ‘typical’ information required to be kept for between five & seven years, although the list is typical information used by business’ not every business will use every one.

• Tax invoices
• Cheque butts
• Income Tax Returns
• Credit card receipts
• Profit & Loss’
• Credit card statements & merchant statements
• Balance sheets
• Loan documents
• Business Activity Statements
• Petty cash book and receipts
• Depreciation Schedule
• Stock Take Register
• Vehicle log books and expenses
• Registrations, permits and licences required to run the business
• Fringe Benefits Tax
• ASIC documents
• Accounts receivable (your debtors)
• Wages and salary records
• Accounts Payable (your creditors)
•  PAYG withholding and superannuation records
• Bank statements/deposit books
• Payment Summaries
• Cash receipt book or journal
• Superannuation payments
• Cash Register Z totals
• Tax file number declaration forms
• Cash sales receipt books
• Timesheets, pay slips, and wages
• Summary cash receipts books
• Workplace agreements, awards and contracts
• Cash payments book and receipts
• Workers Insurance
• Workplace injury register

Further information is available from the Tax Office website.

Did you know… every year the ATO issues a list of occupations that they will monitor for audit purposes, without fail the poor dedicated teacher is targeted. In this article we will outline some do’s and don’ts when preparing your tax return.

If you are an employee teacher, tutor, early childhood, primary, secondary, special education, technical and further education (TAFE) or relief teacher, some of the deductions you may be able to claim and others that are not claimable are identified below.

Clothing that is used to protect your other clothes (apron/lab coat, steel capped boots), and specific uniforms may be deductible. Other items to consider if your work requires you to work outside include; hats, sunglasses and sunscreen. No deduction is available for items such as plain tracksuits or joggers even if you are a physical education teacher. Laundry costs are generally only available where a deduction for clothing is allowable.

Cost of excursions, school trips/camps are deductible if these have an educational benefit and are related to the curriculum or extra curriculum of the school – unfortunately no deduction is available for teachers attending school functions or social dinners. You can also claim teaching aids used for work, this does not include gifts to students or items bought for a single student. The item needs to be used as a teaching aide for all students.

Education expenses relating to your occupation are deductible. These are the costs you incur in attending seminars, conferences, education workshops or training courses. As well as relevant courses held by a college, university or other place of education. Self-education expenses can include textbooks, stationery, student union fees, course fees; certain travel expenses and the decline in value of equipment to the extent that they are used for self-education purposes. In certain circumstances you may have to reduce your deduction for self-education expenses by $250.

Motor vehicle and travel expenses can be claimed for allowable travel by a teacher say to attend seminars or courses relating to employment, there are four ways you can  work out your motor vehicle deduction, please refer to the ATO website for further information (or ask us when you next visit).

Other items you may be able to claim a deduction for include;

• First aid courses, provided you are a designated first aid person.
• Home office expenses relating to running a home office that is used to help you produce your income.
• Answering machines, mobile phones, pagers, calculators, electronic organizers and
• dedicated stop watches (not ordinary wrist watches) including the cost of purchase or depreciation, repairs and batteries.
• Allowable meal deductions
• Interest on monies used to purchase work related equipment, telephone costs
• Professional library, Technical and professional publications but not newspapers
• Union and subscription costs relating to your work.

We have mentioned a lot about tax deduction. Here is a reminder of what you need to keep for next year’s claims.

A work related tax deduction is any expense incurred by an employee in the course of earning assessable income, No written evidence is required if the total of all work expenses (excluding travel and meal allowance expenses) is $300 or less, although you still need to justify your deductions.

Generally you need to have receipts (or expect to have them in a reasonable time) for deductions claimed on your tax return, whether they be for donations or work expenses. Deductions must be claimed in the income year they were incurred and receipts kept for generally a period of five years from the date you lodge your tax return with the ATO.

The last decade has seen a lot of technological advances where receipts are not just issued by retailers and bills are not all paid at the post office, so what is an acceptable receipt?

Generally written evidence of an expense must show the following;

Name of supplier; the amount of the expense; description of goods or services provided andthe date the expense was incurred. If this is not on the receipt it can be added by you in pen.

The ATO has advised the following can satisfy the substantiation rules where the above information is shown:

• Bank & credit card statements
• BPay reference numbers combined with a bank statement and/or tax invoice
• Receipts generated by the internet or received by email
• Electronic receipts
• And the good old paper receipts.

If you have small separate expenses that each are less than $10 in value and together do not exceed $200 there is no requirement to hold receipts however there should be some documentation to support these claims such as a diary note.

Expenses where you are not likely to be given a receipt (e.g. car parking) can be claimed where they are recorded in a diary, these expenses can be more than the $10 limit listed above and do not count towards the $200 limit.

Deductions that are made using ‘reasonable amounts’ as declared by the ATO may also be excluded from the receipts requirements, such as allowable meal expenses; travel expenses: laundry expenses and motor vehicle expenses.

Where an item is being used for not only work related activities but also private use you need to keep receipts and also a log book of all use for a period of 3 months. This is then used to determine a percentage of expenses that can be claimed. Keep this in mind for equipment such as computers, the internet, telephones and the like. A claim can be made for electricity based on an hourly basis, the ATO is not very generous here (about 20 cents an hour) but it’s better than nothing.

The question has been raised many times, do I need to be in a health fund in order to save on tax. These days, the answer is not always clear cut.

The way the system works, if you are single and earn over $70,000 per year, and do not have Hospital Cover through a Health Fund, then you will be taxed an extra 1% of your taxable income. The cost of being in a health fund, and you only need Hospital cover to avoid the Medicare Levy Surcharge, can be less than $10.00 per week, or around $500 per annum. This can be worth the effort to save over $700 in extra tax.

If you are married, or one half of a couple, then the total partnership income must be less than $140,000 to avoid the 1% Medicare levy surcharge.

One anomaly with this is if you are in a fund and earn $150,000 per annum, then no Medicare Levy Surcharge applies. However, if you get married and your new spouse is not in a fund, and, if your spouse lodges a tax return and indicates that they are not in a health fund then, unless you have already changed the fund cover from single to Family, you could be hit with an extra $1,500 tax bill because the tax return contains the following words: “For the whole period 1 July 20## to 30 June 20## were you and all your dependants (including your spouse) – if you had any – covered by private HOSPITAL cover?”

This means that unless you have family cover, or each member of the family has single cover, you will be liable for the 1% surcharge.

In addition to this, when you join a health fund, you can agree to pay an excess on admission to Hospital. This excess can be any amount agreed to by the fund, however the Tax Office takes a dim view of any excess deemed too large.

To quote the Tax Office website, “Private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for some or all hospital treatment provided in an Australian hospital or day hospital facility. However, an insurance policy for hospital cover taken out after 24 May 2000 that has an ‘annual front-end deductible’ amount or excess of more than $500 in the case of a policy covering only one person, or more than $1,000 for all other policies, does not provide private patient hospital cover for Medicare Levy Surcharge purposes.

So if you agree to pay an upfront fee on admission to Hospital, and that fee exceeds the $500 (single) or $1,000 (family) threshold, then you are deemed by the tax office to not be in a health fund and will be liable to the 1% surcharge.