School Building Fund Levy

Tax season is almost upon us! At this time of the year, we often field questions about deductibility of various expenses and donations. Here’s a common asked one – School Building Fund Levy.

Gifts to a school building fund will qualify for a tax deduction where the school building fund has been endorsed as a Deductible Gift Recipient (DGR) by the Australian Taxation Office (ATO) and no material benefit is received by the donor. To be tax deductible, gifts must have the following characteristics:

  • They are made voluntarily.
  • They do not provide a material benefit to the donor.
  • They essentially arise from benefaction.

Gifts to a school building fund will not be tax deductible where the following material benefits are received by the donor:

  • A reduction in school fees.
  • The grant of scholarships to nominated students.
  • Raffle tickets.
  • Tickets to functions.

What You Need To Do

  • Prior to making a donation, confirm with the school that the school building fund is a DGR.
  • Keep all receipts for contributions to the school building fund.
  • Ensure that no material benefits were received by yourself or your family when making the donation.

 

Unsure whether a donation which you made is tax deductible? Send us all your receipts when requesting for your tax return to be prepared. Our tax accountants will check and advise on tax deductibility. Contact us for assistance with your tax returns today!

When Bags Could Be Tax Deductible

Handbags, briefcases and satchels purchased to carry items for work purposes (such as laptops, tablets, work papers or diaries) may be deductible. The deductibility of the bag will depend on:

  • Cost – It’s easier to justify to the ATO that a $300 bag is for work purposes than a $10,000 Prada bag.
  • Type of bag – Large bags that can actually carry work items will more likely be deductible (than small handbags that only fit keys and lipstick).
  • What sort of use – Having a bag exclusively for work purposes will maximise deductions.

3 different scenarios of usage

  • If a bag is used for predominantly personal purposes, such as carrying a lunch box as well as beauty and hygiene products, then the purpose is private and a tax deduction cannot be claimed.
  • If a bag is used predominantly for work purposes eg. to carry a laptop and work diary, and there is another bag used for personal items, then the bag that is being used for work purposes is considered to be used for the production of assessable income, which allows for a full tax deduction.
  • If a bag is regularly used to carry a small laptop and client paperwork to and from work, but is also used to carry personal items and is used outside of work hours, then the bag is considered to be used for both income producing and private purposes, so the deduction would need to be apportioned between both uses.

Types of Tax Deductions

The type of deduction you claim depends on the cost of the asset:

  • for items that don’t form part of a set and cost $300 or less, or form part of a set that together cost $300 or less, you can claim an immediate deduction for their cost
  • for items that cost more than $300, or that form part of a set that together cost more than $300, you can claim a deduction for their decline in value.

News Article: In the bag: tax deductions that didn’t exist a decade ago

 

Unsure whether an expense which you incurred is tax deductible? Send us all your receipts when requesting for your tax return to be prepared. Our tax accountants will check and advise on tax deductibility. Contact us for assistance with your tax returns today!

When Dogs Could Be Tax Deductible

Dogs can be a legitimate tax deduction when used in the following ways:

  • On farms for rounding up sheep, cattle and other livestock.
  • Guard dogs at factories.
  • Guarding tradespersons’ tools on work sites from theft.

The purchase cost of the dog (and training fees) are not deductible as they are capital costs.

In contrast, vet bills and pet food bills may qualify as a tax deduction. Whether an individual’s dog costs are deductible will depend on the facts of each case and whether the dogs are actually helping to generate income.

For this deduction to be successful with the ATO, the taxpayer must be able to explain how the dog generates income. If the dog is mainly used for private and personal reasons i.e. the family pet, then no expenses will be deductible.

ATO ID 2011/18: Deductions: guard dog expenses

 

Unsure whether an expense which you incurred is tax deductible? Send us all your receipts when requesting for your tax return to be prepared. Our tax accountants will check and advise on tax deductibility. Contact us for assistance with your tax returns today!

Claiming mobile phone, internet and home phone expenses

Using your own phone or internet for work purposes is deductible if you have paid for these costs (i.e. they are not reimbursed), and have records to support the claim (i.e. receipts and diary of usage). If the phones or internet is used for both work and private use, you need to work out the percentage that reasonably relates to your work use.

Suggestions on how to substantiate the expenses:

  • If the deduction is greater than $50, you need to keep records for a four-week representative period (i.e. diary entries, electronic records and bills).
  • Letter from the employer confirming that you are required to use your phones and/or internet for work purposes.
  • Where usage is itemised on your bills, you need to determine your work use percentage over a 4-week period on the basis of the number of work calls made, time spent on work calls or data downloaded for work purposes.
  • Where usage is not itemised on your bills, you calculate your work use percentage by keeping a record of all work related calls over a 4-week period.
  • Where phone and internet services are bundled, and you are claiming deductions for work-related use of one or more services, the costs need to be apportioned based on the work use for each service.

ATO Website: Claiming mobile phone, internet and home phone expenses

News Article: ATO cracks down on home office claims

 

Unsure whether an expense which you incurred is tax deductible? Send us all your receipts when requesting for your tax return to be prepared. Our tax accountants will check and advise on tax deductibility. Contact us for assistance with your tax returns today!

Dividend Deductions

Possible Deductions

  • Interest and borrowing costs on loans where the borrowed funds are used to buy shares.
  • Ongoing management fees paid to financial planners, stock brokers, and investment managers.
  • Travel expenses for going to visit investment managers, attend company meetings, etc.
  • Investment journals, subscriptions, and training.
  • Computer depreciation and software programmes.
  • Telephone, internet and home office running costs.

Interest and Borrowing Costs

If you borrow money to buy a share portfolio, you can claim a tax deduction for the loan interest. However, if the loan has a private component, you will only be able to claim interest incurred on the part of the loan used to acquire the shares.

The benefit of such a strategy is that the interest expense can be used to offset any dividend income received, thus freeing up franking credits that can be offset against other taxable income.

Investors who use this strategy hope that their shares increase in value under this strategy and any capital gains are only realised in a later year when the taxpayer is on a lower tax rate, for example, in retirement.

However, be aware that borrowing is a good strategy in a rising market, but it can multiply any losses in a falling market. The last thing you want is a loan to repay but no shares to show for it. Don’t consider borrowing if you are new to investing.

Records You Need To Keep

Proper records must be kept, regardless of whether you use a tax agent to prepare your tax return or do it yourself.

You must keep:

  • your acquisition and disposal statements (your ‘buy’ and ‘sell’ contracts) – keep these records for five years from the date you dispose of your shares
  • your dividend statements – keep these records for five years from 31 October or, if you lodge later, for five years from the date you lodge your tax return.
  • invoices/receipts for all deductions claimed.

You will receive most of the records you need to keep from:

  • the company that issued the shares
  • your stockbroker or online share trading provider
  • your financial institution, if you took out a loan to buy the shares.

ATO website: Shares: helping you to avoid common mistakes

 

Unsure whether an expense which you incurred is tax deductible? Send us all your receipts when requesting for your tax return to be prepared. Our tax accountants will check and advise on tax deductibility. Contact us for assistance with your tax returns today!

Tax Deductions for Construction Industry

As a general rule of thumb, work-related expenses are tax deductible if:

  • they were paid by a you and were not reimbursed by your employer
  • they relate directly to earning your income
  • you have a record to prove it.

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion. Work expenses reimbursed to you by your employer are not deductible.

ATO may seek information from your employer if they think you have claimed a deduction for an expense that you have already been reimbursed for.

List of Possible Tax Deductions

  • Motor vehicle travel to and from work if having either shifting workplaces (working at more than one site each day before returning home), or transporting bulky equipment.
  • Motor vehicle travel between job sites, to pick up materials, or attending training courses.
  • Computers, tools and equipment.
  • Dogs, when used at worksites to guard the electrician’s tools against theft. The purchase cost of the dog and training fees are not deductible as they are capital costs. In contrast, vet bills and pet food bills may qualify as a tax deduction.
  • Phone and internet – work %.
  • Overnight travel expenses visiting clients or attending different workplaces – includes meals and accomodation.
  • Protective clothing including sun-protection clothing, safety-coloured vests, steel-capped boots, gloves, overalls, and wet weather gear.
  • Overtime meals – if overtime meal allowance received under an industrial award.
  • Sun protection costs including sunglasses and sunscreens.
  • Union fees, licences, registrations and subscriptions.
  • Courses, seminars and self-education expenses.
  • Home office running expenses.
  • Compulsory work uniform branded with the employers logo.

ATO website: Tradesperson: work-related expenses

ATO poster: Tradesperson

 

Unsure whether an expense which you incurred is tax deductible? Send us all your receipts when requesting for your tax return to be prepared. Our tax accountants will check and advise on tax deductibility. Contact us for assistance with your tax returns today!

FY 2017 Year End Tax Tips for Individuals

With just 6 days to the end of the financial year, here are some tax tips for individuals to reduce your taxes.

Record Keeping

We cannot emphasis this enough. Too often, we meet clients who have deductible expenses which they incurred for income producing purposes BUT they have misplaced or forgotten to keep their receipts.

If the total claim for work-related expenses is more than $300, ATO requires written evidence to prove your claims. Generally, you need to keep these for five years from when you lodge your tax return in case of a tax audit.

If you are tech-savvy and prefer to do things on the go,  check out the app developed by ATO to help taxpayers keep tax deductions and income records all in one place!

Motor Vehicle Log Books

If you plan to claim motor vehicle deductions, you would need to keep a log book.

Under this method you need to:

  • keep a pre-printed logbook (available from stationery suppliers) or make your own logbook
  • have written evidence of your fuel and oil costs, or odometer readings on which your estimates are based
  • have written evidence for all your other expenses.

You can create a logbook and record work-related car trips using the myDeductions tool in the ATO app. If you use and record your trips using myDeductions, you don’t need to keep paper records as well.

Donations

Donations to charities which are deductible gift recipients (DGR) are tax deductible. To check if the charity is a DGR, you can check on the ABN lookup portal. It is important to note that crowdfunding campaigns may not be tax deductible.

Salary Packaging

If your employer provides salary packaging benefits, it will be worthwhile exploring and discussing these options with your trusted accountant (that’s us!). Some expenses which can be salary sacrificed include cars, health insurance, loans, school fees, childcare fees and other expenses such as mobile phones.

Super Contributions

You can make concessional contributions (“before tax” contributions) which are tax deductible, and are generally taxed at 15% within superannuation. Such contributions are capped at $30,000 per year if you are under 50.

If you make contributions to a complying superannuation fund or a retirement savings account (RSA) on behalf of your spouse (married or de facto) who is earning a low income or not working, you may be able to claim a tax offset. You will be entitled to a tax offset of up to $540 per year if you meet certain conditions.

Always seek the advice of your financial planner or your accountant who must have an AFS licence to provide advice on superannuation. [Fortiz Accountants holds an AFS Licence, so feel free to make an appointment to chat with us about superannuation.]

Private Health Insurance

If you are a high income earner, the Medicare levy surcharge (MLS) payable. MLS is designed to encourage individuals to take out private hospital cover, and where possible, to use the private hospital system to reduce demand on the public Medicare system. The MLS is payable in addition to the Medicare levy. The base income threshold (under which you are not liable to pay the MLS) is $90,000 for singles and $180,000 for families. To avoid this surcharge, all you need to do is to take out private health insurance cover.

Income Protection Insurance

The cost of premiums for income protection insurance are tax deductible.

Premiums paid for other insurance cover (life insurance, trauma insurance and critical care insurance) are not tax deductible. However, these insurances may already be paid via your superannuation fund.

If you do not hold income protection insurance, life insurance, trauma insurance, or TPD insurance, we are able to assist by arranging for our referral partner to contact you.

Capital Gains/Losses from Shares or Properties

Any capital losses can be used to offset capital gains (but not employment income). If you do not have capital gains, the capital losses can be carried forward to offset capital gains in future years. Therefore, it may be worthwhile to look at your non-performing investments to see if any investment should be sold before 30 June, so that the capital loss can offset against the capital gain.

If you intend to sell any investments and realise a capital gain, consider deferring the sale till after 1 July 2017 to ensure any Capital Gains Tax liability is deferred for another year.

We would be more than happy to assist our clients with CGT calculations prior to EOFY, so that informed decisions can be made.

Other Matters (Family Tax Benefits)

You have 1 year to submit a lump sum claim and confirm your income for that financial year. That means that you will need to submit your income tax returns for FY 2016 by 30 June 2017, or FY 2017 by 30 June 2018. Failure to lodge your tax returns on time may result in Centrelink cutting your family assistance payments.

 

Hate being hit with a huge tax bill year after year? Contact us to make a tax planning appointment.

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