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Part 5 Tax Deduction Series – Other Deductions; Mobile Phone, Internet, Union Fees and Overtime Meals

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.

Incidental use

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.

Overtime meals

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.

 

Part 4 Tax Deduction Series – Tools, Equipment and Other Assets

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 Tools, Equipment and Other Assets.

Depending on your industry, you may be entitled to claim a deduction for expenses related to the purchase of Tools, Equipment or Other Assets. To claim a deduction, there needs to be a connection between the tools, equipment or assets you acquire and the income you derive.

If it can be established that there is a nexus or connection to the tools, equipment or assets acquired and the income you derive then you will be entitled to claim a deduction for some or all of the cost. However, If the tools are used for both work and private purposes, you will need to apportion the amount you claim. Say for instance, you have a computer that is used for both work and private purposes and you used it 50% of the time for work and 50% for private purposes, you will only be able to claim a deduction for 50% of the cost.

The type of deduction you will be able to claim depends on the cost of the asset:

  • For items that don’t form part of a set and cost $300 or less, of form part of a set that together costs $300 or less, you will be entitled to an immediate deduction for their cost.
  • For items that cost more than $300 or form part of a set that together cost more than $300, you can claim a deduction for their decline in value. This means that instead of getting an immediate deduction in the full year, you will claim a deduction for the life of the asset under depreciation.

Some examples of tools, equipment or assets and their effective lives (for assets over $300 per TR 2017/2) are as follows:

  • Calculators
  • Computers and Software (Effective Life – Laptop/Tablet 2 years, Desktop 4 years)
  • Desks, Chairs and Lamps (Effective Life – Desk 20 years, Chairs 10 years)
  • Filing Cabinets and Bookshelves (Effective Life – Filing Cabinet 15-20 Years, Bookshelves 15-20 years)
  • Hand Tools and Power Tools (Effective Life – Hand Tools 10 years, Power Tools 3-5 Years)
  • Professional Libraries (Effective Life – 10 years)
  • Technical Instruments

For the above assets that are above $300, the deduction will fall under the decline in value method or depreciation as mentioned before.

It is also important to note that the cost of repairing and insuring your tools and equipment and any interest on money you borrowed to acquire these items is also deductible.

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 other deductions that you may be entitled to claim as a taxpayer such as mobile phone costs, overtime meals, union fees and other expenses you may or may not be aware of.

ChalkBoard Consultancy Co.

Part 3 Tax Deduction Series – Self-Education Expenses

As mentioned in our blog post on the 5th June 2017, this week we continue our multi part series on Tax Deductions for individuals. In today’s issue, we focus on Self Education Expenses.

Depending on your industry, you may be entitled to claim a deduction for expenses related to self-education. Over the course of this article we will address what is an eligible course, what expenses you may be entitled to claim, what expenses you are unable to claim and finally the $250 reduction required for self-education expenses.

Eligible Courses

Firstly, self-education expenses may be deductible when the course you undertake leads to some form of formal qualification and meets the following criteria outlined below:

  • The course must have a sufficient connection between your current employment and:
    • Maintain or improve the specific skills or knowledge you require in your current employment, or
    • Result in, or is likely to result in, an increase in your income from your current employment.

Unfortunately, you are unable to claim a deduction for self-education expenses for a course that does not have a sufficient connection to your current employment even though it:

  • Might be generally related to it, or
  • Enables you to get new employment.

Expenses You Can Claim

If your course is deemed to be an eligible course and deductible as a Self-Education Expense, then you may be able to claim the following expenses in relation to the same:

  • Accommodation and Meals (if away from home overnight)
  • Computer Products and Consumables
  • Course Fees
  • Depreciation on assets acquired over $300
  • Purchase of equipment under $300
  • Repairs to equipment
  • Fares
  • Home Office Running Costs
  • Interest
  • Internet Usage
  • Phone Calls
  • Postage, Printing and Stationery
  • Student Union Fees
  • Student Services and Administration Fees
  • Textbooks
  • Trade, Professional or Academic Journals

With all expenses and deductions, only the portion that is attributable to your Self-Education is allowable as a deduction and any private use will need to be apportioned out.

Expenses You Can’t Claim

Whilst there are a lot of expenses which can be claimed in relation to Self-Education, there are a few expenses which are unable to be claimed:

  • Repayments of Higher Education Loan Program (HELP) loans (although the fees paid by some HELP loans are)
  • Student Financial Supplement Scheme (SFSS) repayments
  • Home office occupancy expenses
  • Meals where you are not sleeping away from home.

More likely than not, the above will apply to most people undertaking some form of education whether that be University, TAFE or some other form of education through a registered Higher Education Provider. As most people will usually get a HELP Loan (Formerly known as HECS) they haven’t paid any course fees as these are paid to the Education provider by the government and thus would not be entitled to claim the costs of their course fees.

$250 Reduction to Self-Education Expenses

In accordance with the ATO, Self-Education Expenses are broken into five categories which are listed below:

Category A Expenses:

  • Tuition fees, textbooks, stationery, student union fees, student services and amenities fees, public transport fares, car expenses worked out using the ‘logbook’ method, running expenses for a room set aside specifically for study.

Category B Expenses:

  • Decline in value (depreciation) deductions such as a computer, desk, or car for which you are claiming a deduction in Category A.

Category C Expenses:

  • Repair costs to assets used for self-education purposes.

Category D Expenses:

  • Car expenses using the ‘cents per kilometre’ method. You cannot claim car expenses under this category if you have included deductions for decline in value or repairs to your car under category B or C.

Category E Expenses:

Expenses you have incurred but cannot use as a deduction – for example:

  • for work-related self-education, travel expenses for the last stage of travel from your home to place of education and then to your workplace, or
  • workplace to your place of education and then to your home
  • for taxable scholarship recipients who are not employed by the scholarship provider, travel expenses from your home to your normal place of education and back
  • child care costs related to attendance at lectures or other self-education activities
  • capital costs of items acquired in the financial year and used for self-education purposes, such as a computer or desk.

If you only have Self-Education Expenses that fall into category A items then you will need to reduce your deduction by $250. However, it is important to note that if you have any expenses that fall into category E, then you can use these expenses to offset the $250 reduction.

For example, if you were attending lectures and required someone to take care of your child then then out of pocket cost you incur for childcare can be used to offset the reduction. Noting that this would not ordinarily be allowed as a deductible expense under the legislation.

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 few issues, we will be focusing on other deductions that you may be entitled to claim as a taxpayer such as mobile phone costs, purchase of tools and equipment and other expenses you may or may not be aware of.

ChalkBoard Consultancy Co.

 

Part 2 Tax Deduction Series – Work Related Clothing Expenses

As mentioned in our blog post on the 29th May 2017, this week we continue our multi part series on Tax Deductions for individuals. In today’s issue, we focus on work related clothing expenses.

Depending on your industry, you may be able to claim a deduction for the cost of buying and cleaning either occupation specific clothing, protective clothing and unique and distinct uniforms. We will cover some specific industries in more detail later in our article however we will start with the following; protective clothing, work related uniforms and finally occupation specific uniforms.

Protective Clothing

You can claim a deduction for clothing and footwear that you wear to protect yourself from the risk of illness or injury posed by your occupation or the environment in which you work. To be considered protective, the items must provide a sufficient degree of protection against the potential risk.

Some items which would be considered protective clothing are as follows:

  • Fire and sun resistant clothing
  • Safety coloured high visibility vests or clothing
  • Non-slip protective footwear such as ones worn by nurses or fast food employees
  • Rubber boots such as the ones used by concreters
  • Steel capped boots
  • Protective gloves, overalls and heavy duty shirts and trousers
  • Overalls, smocks, scrubs or aprons worn to avoid damage to ordinary clothing

Ordinary clothing (such as jeans, shirts, socks, etc) are not regarded as protective clothing if they lack protective qualities designed for the risks of your work. In addition, you are unable to claim the cost of purchasing or cleaning ordinary clothes you wear to work.

Work Uniforms

You can claim a deduction for a uniform, either compulsory or non-compulsory, that is unique and distinctive to the organisation you work for. Clothing is unique if it has been designed and made only for the employer and is considered distinctive if it has the employer’s logo permanently attached and the clothing is not available to the public.

Compulsory Work Uniform

This is a set of clothing that identifies you as an employee of an organisation with a strictly enforced policy that makes it compulsory for you to wear the uniform while you are at work.

You may be able to claim a deduction for shoes, socks and stockings where they are an essential part of a distinctive compulsory uniform and where their characteristics are specified in your employer’s uniform policy. This would include employees such as flight attendants.

Non-compulsory Work Uniform

You will only be able to claim expenses incurred for non-compulsory uniforms where your employer has registered the design with AusIndustry.

Occupation Specific Uniforms

In addition to the above, depending on the industry in which you work, you may be entitled to additional deductions for work related clothing expenses. Below are some additional expenses that may be applicable to the industry in which you are employed in.

Adult Industry Workers

You can only claim a deduction for the cost of clothing you use solely for earning income, including costumes and lingerie.

You can’t claim a deduction for items such as dresses, skirts, blouses, trousers, shirts and shoes for everyday use.

Australian Defense Force Personnel

Military service uniforms are compulsory uniforms, so you can claim a deduction for items such as:

  • military white, blue or khaki shirts with rank or other embellishments
  • standard matching trousers
  • regulation jumpers and jackets
  • official mess uniform
  • hats or caps with rank or other embellishments
  • service dress shoes
  • service handbags and clutch bags
  • socks and stockings
  • camouflage shirts and trousers.

You may be able to claim shoes, socks and stockings where these items are an integral part of a compulsory and distinctive uniform, however, these items must be included the Defence Force uniform policy or guidelines. The policy or guidelines must stipulate the characteristics of the shoes, socks and stockings that qualify them as being distinctive and part of the compulsory uniform.

Business Professionals

You are unable to make a claim for ordinary business attire even though it may be part of your employment contract to wear. If your employer has a corporate uniform that is registered with AusIndustry and you purchase the attire from your employer you may be able to claim a deduction for the cost of this clothing.

Fitness and Sporting Industry Employees

You cannot claim a deduction for the cost of conventional clothing, nor can you claim a deduction for general exercise clothing which is part of ‘conventional clothing’. This includes track suits, shorts, tank tops, running shoes, sweat socks, arm bands, head bands, t-shirts and other such items.

You can claim the cost of clothing that forms part of a compulsory uniform and is required to be worn while on duty.

Other Industries

Whilst we have only covered a few industries above, please note on the ATO website there is a full list of industries and the relevant items which may be available to each specific industry. The link should you require any additional information is: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Other-deductions/Deductions-for-specific-industries-and-occupations/. Alternatively, if you have any queries regarding your own industry, feel free to contact our office as we are always happy to discuss.

Laundry and Dry Cleaning

As most people are aware, if you have a work related uniform that you are required to wear you can make a claim for the cost of cleaning that uniform. You can claim the costs of washing, drying and ironing eligible work clothes, or having them dry-cleaned.

Laundry

To be entitled to claim a deduction for the costs incurred for laundry, you must have written evidence, such as diary entries and receipts, for your laundry expenses if both:

  • the amount of your claim is greater than $150, and
  • your total claim for work-related expenses exceeds $300 excluding car expenses.

If you don’t need to provide written evidence for your laundry expenses, you may use a reasonable basis to work out your claim. For washing, drying and ironing you do yourself, we consider that a reasonable basis for working out your laundry claim is:

  • $1 per load – this includes washing, drying and ironing if you was your work related clothing separately or
  • 50 cents per load if other laundry items are included.

Dry Cleaning Expenses

You can claim the cost of dry-cleaning work-related clothing. If your total claim for work-related expenses exceeds $300 you will need to provide written evidence to substantiate your claim.

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 address self-education expenses and when you may or may not be entitled to claim a deduction for courses of study undertaken.

ChalkBoard Consultancy Co.

 

Part 1 Tax Deduction Series – Motor Vehicle Expenses

As mentioned in our blog post on the 15th May 2017, this week we begin our multi part series on Tax Deductions for individuals. In today’s issue, we focus on the biggest tax deduction generally available to individuals, motor vehicle expenses.

Firstly, it would be a fair assumption to say that most people own a motor vehicle, and that most people drive to work. But are you claiming all that you are entitled to when it comes time to preparing your income tax return at the end of the year?

When you can claim

You can claim a deduction for work related travel for motor vehicle expenses if you use your own car in performing your job as an employee, for example, to:

  • Carry bulky tools and or equipment
  • Attend conferences or meetings
  • Deliver items or collect supplies
  • Travel between to separate jobs – for example you have two jobs
  • Travel from your workplace to and from a client’s premises
  • Travel between separate workplaces – for example multiple work sites or multiple offices

When you can’t claim

You are generally you are unable to claim a tax deduction for normal travel to and from work as this is considered private travel however please confirm with either your accountant or our office on your specific circumstances.

Calculating your deductions

As of the 1st July 2015 there are two methods under which work related car expenses can be claimed in an income tax return, the cents per kilometre method and the logbook method. We will address each method below and the record keeping requirements to ensure you maximise your deduction come tax time.

Cents per kilometre method

Under the cents per kilometre method, you may be entitled to a deduction of $0.66 for every kilometre travelled for work related purposes. There is however a limit on the total number of kilometres you are entitled to claim as a deduction, being 5,000 kilometres per annum per motor vehicle.

This is the simpler of the two methods to claim a deduction for the work-related use of a motor vehicle, with the record keeping requirements being the ability to show how you worked out your business kilometres in the event the ATO conducts an audit. With the ATO becoming more stringent around claiming of deductions in personal income tax returns, there are some additional items we would suggest you have on hand before seeing your accountant at the end of the financial year:

  • Reasonable calculation of your work-related trips on a simple excel spreadsheet or diary entries in a diary that shows the purpose of your trip and the total kilometres travelled for work related purposes.
  • Letter from your employer(s) explaining briefly as to your requirement to use your vehicle for work related purposes; and
  • If transporting bulky tools and equipment a simple photo illustrating the size of the tools in question will also assist in the event of an ATO audit.

Our office can provide you templates for the above-mentioned diary entries and can liaise with your employer should you wish to discuss preparing a letter to assist in the preparation of your income tax return.

Logbook method

Under the log book method, your claim is based on the business-use percentage of the motor vehicle. As an example, let’s assume you use your motor vehicle 50% for business and 50% for private purposes, you will be entitled to claim 50% of the expenses associated with the motor vehicle as a tax deduction.

The expenses that you will be entitled to claim a tax deduction for under this method include:

  • Decline in value or depreciation on the motor vehicle
  • Interest on any finance taken to acquire the vehicle
  • Insurance and registration costs
  • Fuel and oil costs
  • Repairs and maintenance costs

This is the more complex of the two methods to claim a tax deduction for. Under this method, you are required to keep the following for substantiation and record keeping purposes:

  • Logbook for a minimum 12-week period that details all kilometres travelled within the period for both work and private use purposes and the purpose of each journey.
  • The opening and closing odometer readings for the beginning and end of the financial year.
  • Copies of receipts for expenses claimed except for fuel where a reasonable estimate can be made based on the opening and closing odometer readings. We would suggest retaining copies of receipts for the fuel as well.

In addition to the above, we would also suggest having the following on hand at year end before seeing your accountant at the end of the financial year.

  • Letter from your employer(s) explaining briefly as to your requirement to use your vehicle for work related purposes; and
  • If transporting bulky tools and equipment a simple photo illustrating the size of the tools in question will also assist in the event of an ATO audit.

If you would like an example of how to complete a log book or would like any additional information on the above, feel free to contact our office to discuss.

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 address protective clothing and work related clothing expense deductions including some tips for specific industries which may be relevant!

ChalkBoard Consultancy Co.

“… but in this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin

I am sure we have all heard the above at some point in our lives, and whilst Benjamin Franklin was correct in his infamous quote regarding death and taxes, there can still be at times uncertainty when it comes to preparing our taxes. But there doesn’t have to be!

At ChalkBoard Consultancy Co. we offer a range of services to try to account for each person’s individual needs. Whether you are on salary and wages, a sole trader or a corporate entity such as a company or trust, we have the knowledge and expertise to ensure that you and or your business are meeting your compliance needs, taking the uncertainty out of preparing your tax returns.

Compliance services are available in all areas, however the more common services provided are;

  • Individual Income Tax Returns
  • Rental Properties
  • Sole Traders
  • Partnerships
  • Trusts
  • Companies
  • Business Activity Statements
  • Self-Managed Superannuation Funds

Over the coming weeks leading up until the end of the financial year, we will be releasing a series on the most commonly claimed deductions for individuals to ensure you are fully aware of what you may be entitled to claim. We will also break down what is required from a record keeping perspective to ensure that you are fully compliant with the ATO, so keep an eye out!

If you would like certainty surrounding the preparation of any of the above, know someone who would or wish to discuss your circumstances in more detail please feel free to contact us today! Please note that all our appointments include a free financial health check to ensure you are in the best position possible as well as the completion of your outstanding income tax returns.

We look forward to hearing from you soon!