As mentioned in our blog post on the 21st June 2017, this week we continue our multi part series on Tax Deductions for individuals. In today’s issue, we focus on other deductions which may be available to individuals.
Depending on your industry, you may be entitled to claim a deduction for expenses related to the following which we will address in more detail later in this article:
- Books, periodicals and digital information
- Cost of managing tax affairs
- Mobile phone, internet and home phone expenses
- Overtime meals
- Seminars, conferences and education workshops
- Union fees and subscriptions to associations
Generally, if you need to incur an expense to earn income, then you are usually allowed to claim it either as an immediate deduction or over time. To be a legitimate expense claim, you must be able to show:
- You need to incur the expense to earn income
- The expense is not private in nature
- The expense is not an outgoing of capital or of a capital nature related to a capital asset
Below, we will address each of the above-mentioned expenses and provide an insight into the record keeping and substantiation requirements stipulated by the ATO.
Books, periodicals and digital information
Digital information includes online subscriptions, electronically published materials such as e-books or e-journals and other digital materials.
If the items purchased cost less than $300 then you can claim an immediate deduction where it satisfies the following requirements:
- It is used predominately for earning assessable income that is not income from carrying on a business.
- It is not part of a set of assets acquired in the same income year that costs more than $300.
- It is not one of a number of identical or substantially identical items acquired in the same year that together cost more than $300.
If the items cost more than $300, or is part of a set that costs more than $300, then you can add them to your professional library and claim a deduction for the decline in value (10 years).
Cost of managing tax affairs
If you go and see your accountant or tax agent every year to have your tax returns completed or other business-related advice then you can claim a deduction for the expenses associated with managing your tax affairs including:
- Preparation and lodgement of your income tax return or activity statements
- Travel, to the extent it is associated with obtaining tax advice
- Appealing to the Administrative Appeals Tribunal or courts in relation to your tax affairs
- Obtaining a valuation needed for a deductible gift or donation of property
- Interest charges imposed by the ATO
Expenses which also relate to preparing and lodging your income tax return and activity statements include the costs of:
- Buying tax reference material
- Lodging your tax return through a registered agent
- Obtaining tax advice from a registered tax advisor
- Dealing with the ATO
Mobile Phone, Internet and Home Phone
If you are required to use your own phones or internet for work related purposes, then you may be able to claim a deduction if you paid for these costs and have records to substantiate your claims.
If you use your phones and internet for both work and private purposes, then you will need to work out the percentage that reasonably related to your work use.
How to apportion work use of your phone
As there are many different types of plans available you will need to determine your work use using a reasonable basis.
If your work use is incidental and you are not claiming a deduction for more than $50 in total, you may make a claim based on the following without having to analyse your bills:
- $0.25 for work calls made from your landline
- $0.75 for work calls made from your mobile
- $0.10 for text messages sent from your mobile
Usage is itemised on your bills
If you have a phone plan where you receive an itemised bill, you will need to determine your percentage of work use over a minimum 4-week period, which is then applied to the full financial year. You will need to work out the work use using a reasonable basis, which could include:
- Number of work calls made as a percentage of total calls
- The amount of time spent on work calls as a percentage of your total calls
- The amount of data downloaded for work purposes as a percentage of your total downloads.
Whilst the minimum requirement is a 4-week period, we would suggest a 3-month period which an average is then calculated to apply to the full financial years phone expenses. To comply with substantiation requirements, a method we would suggest would be going through your phone bills for a 3-month period and highlighting all work-related calls. You should be able to identify numbers of your employer, other workers or contractors depending on your employment. You can simply then write a brief description next to each call, or make a diary which states the number, who the person is, their relationship to you, i.e. employer, foreman, contractor etc and a brief purpose for the calls. You would then calculate your total minutes to these persons, work it out as a percentage of the total minutes and then apply this to your total bills for the financial year. The same would apply to the data.
How to apportion internet usage
If you are required to use your home internet for work related purposes then you may be entitled to a deduction for the costs of maintaining this connection.
To apportion your internet costs, you will need to keep a diary for a 4-week period detailing the number of hours spent on the computer for work related purposes and the amount of time for private purposes. You will then total the hours and work out a work-related percentage which will then be applied to your total internet bills for the period.
If you get paid an overtime meal allowance under an industrial instrument (such as an award) and buy food and drink on overtime, you can claim up to the reasonable allowance expense amount the ATO have prescribed without getting written evidence. Currently the ATO prescribed rate for overtime meal allowance is $29.40 (Per TD 2016/13).
However, the ATO still advises you can only claim what you have spent. If you need to claim more than the reasonable allowance amount, you will need to keep written evidence (receipts) of your expenses.
Seminars, conferences and education workshops
Depending on your industry, you may be able to claim the cost of attending seminars, conferences or education workshops that are sufficiently connected to your work activities. This can include formal education courses provided by professional associations.
If attendance involves travel, you should reduce your claim to exclude any private portion of the trip as the ATO may require you to show this in the event of an ATO audit.
Union fees, subscriptions to associations and bargaining agents fees
Depending on your industry, you may be able to claim a deduction for:
- Union fees
- Subscriptions to trade, business or professional organisations
- The payment of a bargaining agent’s fee to a union for negotiations in relation to a new enterprise agreement award with your existing employer.
You can only claim payments of levies to a strike fund where the fund is used solely to maintain or improve the contributors pay.
If you have paid any union fees or association expenses then the union or association should send out a member’s statement illustrating the fees paid.
We hope the above has assisted you in some way in understanding what you may be entitled to claim when it comes time to preparing your income tax return. If you would like any further information on the above or wish to discuss with our office in more detail, please feel free to contact us.
In our next issue, we will be focusing on income protection insurance and how it can impact you as an employer and ways in which our associates can assist in ascertaining the correct insurance based on your personal circumstances.
ChalkBoard Consultancy Co.