Menu

Refer a Friend

Appointment

Newsletter

 Welcome to our blog

The ATO is warning taxpayers to avoid incorrect claims for work-related expenses. Assistant Commissioner Kath Anderson noted that the ATO is using real-time data comparing taxpayers in similar occupations and tax brackets, which will enable them to identify higher-than-expected deductions claims.


The ATO notes in particular that:
  • although receipts are not required for claims up to $300, it is a requirement that the taxpayer actually spent the money claimed, and taxpayers need to be able to demonstrate how they calculated a deduction of up to $300 if no receipts are retained
  • it is not generally allowable to claim a deduction for everyday clothes even if the style of clothes is specified for the employer and the clothes are only worn for work - to qualify for an allowable deduction, the clothes must be unique and distinctive (eg a uniform with the employer's logo) or specific to the occupation and not suitable for everyday use (eg chef's pants or coloured safety vests)
  • most employees will not be able to make claims for:
    • travel expenses for travel between home and work
    • car expenses for transporting bulky tools or equipment (unless the tools are needed for the job and the employer requires the employee to transport them)
    • car expenses that have been salary sacrificed
    • meal expenses for travel, unless the employee was required to work away from home overnight
    • the private portion of a trip that is both for work and for private purposes
    • private use of phone or internet expenses, or
    • self-education expenses for future or "dream" jobs"

If you have any questions in regards to claiming work related deductions, please do not hesitate to contact us.

Martin van der Saag

Director

T: 02 9984 7774

E: martinv@northadvisory.com.au

 

Norman Ruan

Accountant

T: 02 9984 7774

E:  normanr@northadvisory.com.au

As 30 June 2017 is fast approaching, we would like to advise of some key tax changes that your business may be in a position to take advantage of before the end of the financial year.

Change in thresholds for small businesses

During the year, the aggregated turnover threshold for small business entities was changed from $2m to $10m. For your business, the following changes can apply to your income tax calculation:

  • the lower small business corporate tax rate (27.5% for the 2016/17 tax year)
  • immediate deductibility for small business start-up expenses
  • simplified depreciation rules (low value pools), including the instant asset write off threshold of $20,000 available until 30 June 2017
  • simplified trading stock rules
  • option to account for GST on cash basis and pay GST by instalments
  • simplified method of paying PAYG instalments calculated by the ATO, and
  • other tax concessions such as the extension of the FBT exemption for work-related portable electronic devices from 1 April 2016.

The increased $10m threshold will not be applicable for accessing the small business capital gains tax concessions.

 

Franked dividends

The imputation system for corporate tax entities will now be based on the company's corporate tax rate for a particular income year. This is worked out in regard to the entity's aggregated turnover for the previous income year.

Therefore, with the change in the definition of small business above, an entity with between $2m and $10m in the 2015/16 income year can fully frank a distribution based on the tax rate of 27.5%.

 

Simpler BAS

Small businesses will have a simpler BAS after 1 July 2017. After this date, a small business (under $10m) will only need to report the following on a BAS:

  • GST on sales (1A)
  • GST on purchases (1B), and
  • Total sales (G1).

 

If you have any concerns about how these changes will affect you, or about other matters relating to your tax, please do not hesitate to contact our office.

 

Martin van der Saag

Director

T: 02 9984 7774

E: martinv@northadvisory.com.au

 

Norman Ruan

Accountant

T: 02 9984 7774

E:  normanr@northadvisory.com.au

As 30 June 2017 is fast approaching, we have briefly summarised the important tax changes to remember when collating your tax information.

Travel deduction for residential rental property

The 2017 financial year will be the last year an individual can claim a deduction for travel to their residential rental property.

This rule is still subject to being passed as legislation. However, to avoid any disappointment a landlord may look to move forward an inspection to before 30 June 2017 to be assured a deduction will be allowed. All regular rules still apply until 30 June 2017 in regards to substantiation.

 

Plant and equipment deductions to be changed after 30 June 2017

Deductions for plant and equipment depreciation on residential property will only be allowed on actual purchases from 1 July 2017. That is, plant and equipment purchased with the property (ie remaining fixtures) will not be allowed a deduction, generally appearing on a Quantity Surveyor's report.

For property held before 9 May 2017 (budget night), it is advised that a Quantity Surveyor's report is prepared for the year ending 30 June 2017. Note: there are no changes to the current Division 43 capital works provisions.

 

Temporary budget repair levy

The 2016/17 income year is the final year of the Temporary budget repair levy, which is an additional 2% levy for individuals with taxable income over $180,000.

Following 1 July 2017, the highest marginal rate of taxation is 47% being the 45% marginal rate plus 2% Medicare levy. This also applies for Fringe benefits tax.

 

Main residence exemption still applies for foreign residents

Clients who are foreign residents may want to consider the change in capital gains tax rules that will apply from now until 30 June 2019.

For foreign residents who held a main residence (or "absence rule" main residence) at 9 May 2017, the exemption from capital gains tax will be removed after 30 June 2019. It is also worth noting that foreign residents do not get access to the general discount either.

 

If you would like to discuss these changes with us further, please do not hesitate to contact.

Martin van der Saag

Director

T: 02 9984 7774

E: martinv@northadvisory.com.au

 

Norman Ruan

Accountant

T: 02 9984 7774

E:  normanr@northadvisory.com.au

Cleaners Tax Deduction Guide

With 30 June fast approaching, we revisit our series on tax deductions for employees in specific industries. We explore the common tax deductions for employees working as cleaners.

Car expenses

You can claim deductions for your car expenses for travel directly from one work site to the next.

From 1st July 2015, the ATO will only allow for two methods for claiming motor vehicle car expenses.
  1. Cents per kilometre method: You can claim up to 5,000 business kilometres per vehicle at 66 cents/km without written evidence to show how many kilometres you have travelled.
  2. Logbook method: Under this method you can claim the running costs (e.g. fuel, repair and maintenance, insurance, rego and depreciation etc) of the car based on a business use percentage of the expenses of the car. To work out your business use percentage, you need to keep a logbook which will cover at least 12 continuous weeks in order to record each journey, km's travelled and indicate whether each journey was business or private during logbook period. The logbook must also include:
  • the odometer readings at the start and end dates for the logbook period, 
  • the total number of kilometres the car travelled during the logbook period,
  • the number of kilometres travelled for work during the logbook period based on the journeys recorded for the period
  • the business use percentage of the period
Each logbook is valid for 5 years, after which a new logbook must be kept to work out your business use percentage. Please note that if you decide to replace a vehicle, you will not be required to produce a new logbook provided your last logbook is valid within the 5 year period.
  • Generally, the cost of normal trips between your home and work is a private expense which you cannot claim an income tax deduction for. However, as an employee cleaner, there are certain situations where you may be able to claim a deduction from your home and workplace:
    • Transporting bulky equipment: You can claim the cost of using your car for travel between home and work if you had to transport bulky equipment you needed to use at work and for which there was no secure storage area at your workplace (e.g. cleaner transporting cleaning tools & equipment from home to workplace).
Clothing expenses

You can claim a deduction for the cost of buying, hiring, repairing and cleaning certain work-related uniforms or protective clothing items.

  • Compulsory uniform: Is a set of clothing that, when worn together, identifies you as an employee of an organisation having a strictly enforced policy that make it compulsory for you to wear the uniform whilst at work. Generally, clothing is distinctive if it has the employer's logo permanently attached and the clothing is not available to the general public.
  • Protective clothingProtective clothing is clothing that you wear to protect yourself from the risk of illness or injury posed by your income-earning activities or the environment in which you are required to carry them out. You can also claim a deduction for the cost of clothing that you use at work to protect your ordinary clothes from soiling or damage, for example, such as gloves, safety glasses & goggles, safety coloured clothing, steel capped boots and breathing masks. If you are required to work outdoors and as a result you are exposed to risk of eye damage from sunlight, you can claim the cost of protective sunglasses.
  • Laundry and dry-cleaningYou can claim a deduction for the cost of laundering and dry-cleaning work clothes that are eligible according to the relevant categories described above (i.e. compulsory uniform and protective clothing). You can claim laundry expenses for washing, drying or ironing such work clothes, including laundromat expenses. If your claim for laundry expenses is $150 or less, you do not need written evidence; you may use a reasonable basis to work out your claim.

You cannot claim:

  • purchasing and cleaning of:
    • plain uniforms or conventional clothing
    • sports clothing
    • clothing worn for medical reasons
    • everyday footwear (i.e. dress or casual shoes)
  • ?items that were purchased or reimbursed by your employer, and
  • a deduction just because you received a clothing, uniform and laundry allowance?

Self-education expenses

Self-education expenses are expenses related to a prescribed course of education provided by a school, college, university or other place of education. The course must be undertaken to gain a formal qualification for use in carrying on a profession, business or trade or in the course of employment.

You are eligible to claim your self-education expenses as a work-related deduction if you can show that the study has a sufficient connection to your current employment; that is, the study:
  • maintains or improves the specific skills or knowledge you require in your current employment, or
  • results in, or is likely to result in, an increase in your income from your employment.
You cannot claim costs met by your employer or costs that are reimbursed. Similarly, you cannot claim a self-education course for the purposes of finding new employment or starting a new income-earning activity (such as running your own cleaning business).

Other deductions

  • Capital allowances/Tools & Equipment: You can claim a deduction, called a capital allowance, for the decline in value of equipment used for work. If the equipment is also used for private purposes, you cannot claim a deduction for that part of the decline in value. You cannot claim a deduction if the equipment is supplied by your employer or any other person.

Equipment for which you may be able to claim capital allowance includes:
  • electronic organisers
  • computers and computer software
  • answering machines, telephones, facsimile machines, mobile phones, pagers and other telecommunications equipment
  • Insurance of tools and equipment: You can claim a deduction for the cost of insuring your tools and equipment to the extent that you use them for work.
  • Interest costs: You can claim a deduction for the cost of insuring your tools and equipment to the extent that you use them for work.
  • Overtime meals: You can claim a deduction for overtime meal expenses only on those occasions when:
    • you worked overtime, and
    • your employer paid you an overtime meal allowance under an industrial law, award or agreement
  • Repairs: You can claim a deduction for the cost of repairing tools and equipment for work. If the tools or equipment were also used for private purposes, you cannot claim a deduction for that part of the repair cost.
  • Sunglasses, sunhats and sunscreens: You can claim a deduction for the cost of sunglasses, sunhats and sunscreen lotions if the nature of your work requires you to work in the sun for all or part of the day and you use these items to protect yourself from the sun while at work.
  • Stationery: You can claim a deduction for the cost of street directories, logbooks, diaries, pens and other stationery to the extent that you use them for work.
  • Technical or professional publications: You can claim a deduction for the cost of journals, periodicals and magazines that have content sufficiently connected to your employment as an employee cleaner, for example the magazine 'Inclean''.
  • Telephone calls, telephone rental and connection costsYou can claim a deduction for the cost of work-related telephone calls. You need to keep records for a 4-week representative period to determine your percentage of work use in each income year to claim a deduction of more than $50. These records may 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. To claim a deduction for your telephone rental, you must show that you are on call or are regularly required to telephone your employer while you are away from your workplace. If you also use your telephone for private purposes, you must apportion the cost of telephone rental between work-related and private use.
  • Union and professional association fees: You can claim a deduction for union and professional association fees. If the amount you paid is shown on your payment summary, you can use it to prove your claim. You can claim a deduction for a levy paid in certain circumstances, for example, to protect the interests of members and their jobs.

If you have any questions or other enquires, please contact:

Martin van der Saag

Director

T: 02 9984 7774

E: martinv@northadvisory.com.au

 

Norman Ruan

Accountant

T: 02 9984 7774

E:  normanr@northadvisory.com.au

 

Simpler BAS reporting from 1 July 2017

From 1 July 2017, Simpler BAS will be the default GST reporting method for small businesses with a GST turnover of less than $10 million. The simplified GST reporting means that businesses will only need to report:

  • Total sales
  • GST on sales
  • GST on purchases

Please note that this does not change the reporting cycle, record keeping requirements, or how other taxes are reported on the Business Activity Statement.

The ATO will automatically transition eligible small business' GST reporting methods to Simpler BAS from 1 July 2017.

New small businesses that are registered for GST after 19th January 2017 are eligible to start using Simpler BAS reporting straight away.

If you have any questions about the simplified GST reporting method how this may affect your particular circumstance, please do not hesitate to contact us.

 

Norman Ruan

Accountant

T: 02 9984 7774

E: normanr@northadvisory.com.au

 

Martin van der Saag

Director

T: 02 9984 7774

E: martinv@northadvisory.com.au

Tax Time 2017 ATO Service Commitments

The ATO have announced their service standard commitments for the upcoming 2017 tax year.


Tax returns

The ATO will aim to finalise the majority of electronically lodged current year tax returns within 12 business days of receipt. This includes both individual and non-individual tax returns.

Tax returns lodged on paper could take up to 50 business days from receipt to be finalised.

 

Amendments

The ATO will aim to finalise the majority of electronically-lodged amendments within 20 business days of receipt. Amendments lodged on paper could take up to 50 business days from receipt to finalisation.

 

In addition, refunds for 2017 tax returns will start being received from Tuesday, 18th July 2017 onwards.

 

If you have any questions about your income tax affairs for the financial year ended 30th June 2017, please do not hesitate to contact us.

 

Norman Ruan

Accountant

T: 02 9984 7774


 

Martin van der Saag

Director

T: 02 9984 7774

 

The Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017 has been introduced into parliament.

The Bill amends the accelerated depreciation rules for small business entities (SBEs) to extend by 12 months (from 1 July 2017 to 30 June 2018) the availability of an immediate deduction for depreciating assets, amounts included in the second element of a depreciating asset's cost and general small business pools, where the amount is less than $20,000 (rather than $1,000).

It should be noted that the small business aggregated annual threshold for 2016/17 and later income years is $10m.

The Bill also extends the period for which the operation of the "lock-out" rule is suspended until 30 June 2018.

 

The end of the financial year always seems to crop up faster than it should.  Given the impending July 2017 superannuation changes, being on top of your end of financial year planning is as important as it has ever been.

This year it is essential that you consider maximising the existing contribution limits for superannuation before they decrease on 1 July 2017.  While maximising contributions should be front of mind it is imperative you don't forget your other obligations as trustee of your SMSF and ensure that your SMSF stays on track!

Decreased concessional contributions cap

For anyone who was under 49 years of age on 30 June 2016 the maximum amount of concessional (tax deductible) contributions that can be made to superannuation without penalty is $30,000.  However, for anyone who is at least 49 years of age or older on 30 June 2016 the maximum amount is $35,000.  This includes amounts your employer may make as compulsory super and salary sacrifice contributions as well as any personal deductible contributions you may have made if you qualify. 

From 1 July 2017, this cap will fall to $25,000 for everyone, so ensure any reserving and salary sacrifice strategies are appropriate. If you wish to maximise your contributions before June 30 make sure you talk to your professional advisor so that your salary sacrifice agreement with your employer allows the maximum to be salary sacrificed. Also ensure that all contributions are deposited with enough time so they are received by your fund before Friday 30 June 2017.

If you are older than 65 you will need to meet a work test to contribute to super in most cases.  You need to work for at least 40 hours during 30 consecutive days at any time during this financial year to make tax deductible and non-deductible contributions to super.

Claiming a tax deduction for personal superannuation contributions

If you are self-employed, an investor or in receipt of a pension and receive less than 10% of your income, fringe benefits and other related payments as an employee you may be eligible for a tax deduction for personal contributions to superannuation.  If you intend to claim a tax deduction make sure you are eligible to claim a deduction and seek advice if you are unsure.  You need to notify your fund of the amount you wish to claim as a deduction before the end of the next financial year, that is, before 30 June 2017.  Make sure you keep all relevant paperwork to save stress when the time comes to see your SMSF advisor.

From 1 July 2017, everyone who is eligible to make a contribution will be able to claim a tax deduction for personal superannuation contributions without needing to satisfy the 10% rule.

 

Making after tax contributions to super

You can make after tax contributions to super which could come from your personal savings, transferring personal investments, an inheritance or from the sale of investments.  This financial year the maximum personal after tax contribution is $180,000, however, if you are under 65 years of age you can contribute up to $540,000 over a fixed three year period.  This allows you to make substantial contributions to super and build up your retirement savings.  The way it works is that if you are under 65 and make total after tax contributions of more than $180,000 in a financial year the bring forward rule is triggered.  This allows you to make non-deductible contributions of up to $540,000 in total over a fixed three year period commencing in the year in which you contributed more than $180,000.

From 1 July 2017, this cap will fall to $100,000 per annum with a $300,000 fixed year bring forward. This also means if you triggered the bring forward rule before 2016/17 but the full $540,000 was not contributed, you will be limited to a transitional bring forward cap.

Those with a total superannuation balance of $1.6 million or more will not be able to make after tax contributions past 1 July 2017.

Beware of excess contributions tax

Anyone making large superannuation contributions should exercise extreme care for any type of contributions to avoid excess contributions penalties.   This can apply to any tax deductible and non-tax deductible contributions made to super.  Making sure you do not exceed the contribution caps will save you both the money and time of dealing with excess contributions tax.

Drawing superannuation pensions

If you are in pension phase make sure the minimum pension has been paid to you for this financial year.  If you do not take your minimum pension, the pension account is to cease and the assets that supporting this pension are deemed to not be in retirement phase for the whole year meaning your fund will lose its tax exemption on earnings!

Drawing superannuation lump sums

Once you reach 60 years of age all lump sums from superannuation are tax free.  However, before age 60 any lump sums that include a taxable component can be taxable.  The taxable component includes the tax deductible contributions plus any income that has accumulated on your superannuation benefit.  No tax currently is payable on taxable amounts of up to $195,000, in total, you receive prior to age 60. 

If you are eligible to draw amounts from superannuation you may like to defer receiving the amount until after reaching the age of 60 or until a later financial year when you may end up paying a lower rate of tax. 

SMSF fund expenses

For SMSF members in the accumulation phase, tax deductions for expenses are usually not significant, but it's important to ensure expenses are actually incurred or paid before 30 June to be deductible in the current financial year.

Preparing for the $1.6 million transfer balance cap and capital gains tax (CGT) relief

Be aware of the new $1.6 million transfer balance cap that will limit the amount you can keep in the pension phase of superannuation from 1 July 2017. This new cap will limit the assets you can have supporting superannuation pensions to $1.6 million.  

You should make sure that as of 1 July 2017 you only have $1.6 million in pension phase.  This may require you to roll some assets currently supporting a pension back to accumulation phase where their earnings are taxed at 15 per cent.  You may be eligible for CGT relief on assets affected by the new rules.

It is essential that your plan to comply with the transfer balance cap and all relevant documentation is formulated by 30 June 2017. Minutes should be created detailing the fund members' intent to transfer assets out of retirement phase to avoid breaching the new transfer balance cap. Minutes documenting how CGT relief is intended to be undertaken should also be produced.

Rebalancing accounts between spouses

The end of financial year is also the perfect opportunity to rebalance pension accounts between spouses before the new superannuation rules take effect on 1 July 2017. As long as you have available contribution space and are eligible to withdraw, rebalancing will ensure that super balances are as even as possible and the $1.6 million transfer balance cap is maximised per member.

Transition to retirement income streams losing their tax-exempt earnings status

From 1 July 2017, superannuation fund members will lose the tax-exempt treatment of earnings on assets that support a transition to retirement pension (TTR). Members will still be able to start new or maintain existing TTRs, but they should be reviewed before 30 June in accordance with their SMSF's objective.

How can we help?

If you have any questions, require assistance or would like further clarification with any aspect of your end of year superannuation tax planning, please feel free to give Cayle Petritsch or Martin van der Saag a call on 02 9984 7774.

Recently the Federal Budget included new strict reporting requirements for payments to contractors in the courier and cleaning industries with effect from 1 July 2018.

From 1 July 2018, all entities predominately in the courier or cleaning industry will need to report the following to the Australian Taxation Office. A list of each contractor and their ABN, name, address, the gross amount paid to them in the financial year (including GST), and the total GST included (if any) in the gross amount paid.

The reason behind this policy change was to improve the compliance of both the contractors and the businesses who make payments to contractors for services.

There are major implications for a business when they hire an employee do complete work as opposed to a contractor. These implications can be important from both a commercial perspective as well as for tax purposes.

There are heavy penalties for businesses who are in an agreement with individuals to provide services as a contractor when the law would state that they are employees. As such, a Black Economy Taskforce has been established by the government and will be enforced by the Australian Taxation Office.

If you would like us to undertake a review of your payments for services that are necessary in your business, we would be happy to do so. We will be able to help you make the decision whether the payments are to a contractor or an employee. Please call us to arrange an appointment.

 

Norman Ruan

Accountant

T: 02 9984 7774

E: normanr@northadvisory.com.au

 

Martin van der Saag

Director

T: 02 9984 7774

E: martinv@northadvisory.com.au

Deductions for travelling to a residential rental property will no longer be allowable for individuals after 1 July 2017. This removal is for individuals travelling to collect rent, maintain the property or complete an inspection.

Announced in the 2017/18 Federal Budget, this removal allows only a short period before 30 June for taxpayers to obtain a final deduction before the change.

This measure will not prevent investors from engaging third parties such as real estate agents for property management services. This expenses will remain deductible.

Our firm would be please to discuss this matter with you further. Please do not hesitate to contact us if you have any concerns relating to your tax.

 

Norman Ruan

Accountant

T: 02 9984 7774

E: normanr@northadvisory.com.au

 

Martin van der Saag

Director

T: 02 9984 7774

E: martinv@northadvisory.com.au