2010 tax time update

Happy New Year

Welcome to the Personal Tax Specialists 2010 Tax Time Update.

The past 12 months have been extremely busy and exciting for us. Last month we launched our new website and we have had some great feedback about it already. If you haven’t had a look yet, go to www.personaltaxspecialists.com.au and let us know what you think.

We also added a 1300 telephone number to make it easier (and cheaper) for you to contact us, no matter where you live in Australia – in case you don’t have the new number it is 1300 335 675.

Your 2010 tax return

When we prepared your 2009 tax return we asked you when you would like us to get in touch to prepare your future returns. We will be contacting you in the month that you indicated to get the process started. But if you would prefer to get your return done sooner this year, just let us know and we will get straight onto it.

Thank you

Over the past 12 months we have received lots of new clients through referrals from our current clients. We appreciate your support and the confidence you show in us when making these referrals. Please ask anyone you recommend to mention your name when they contact us so that we can personally thank you for the referrals.

Major changes in 2010

With all the talk from the Government about simplifying and possibly removing the need for individuals to lodge tax returns, this year’s return is even longer and more complicated than ever. Some things to be aware of this year are:

1. Spouse income details
The biggest change to tax returns in 2010 is that we now need to include a lot more information about your spouse (if you have one) and their income than ever before. In the past we just had to include their taxable income in your return, but now we need to know:
their taxable income,

  • any fringe benefits they receive from their work,
  • any salary sacrificed super contributions they have made,
  • any personal super contributions they have made,
  • any tax-free government pensions they receive,
  • any losses from investments or rental properties that have been included in their tax returns, and
  • any child support payments they have made

This information is used to determine whether you can claim for some tax offsets and whether you have to pay additional costs such as the medicare levy surcharge. It means that it will be much easier if we are preparing both yours and your spouse’s tax returns at the same time, otherwise gathering a lot of this information will be almost impossible. We have updated our checklists to include all of this additional information in case your spouse gets their tax done by another accountant.
2. Self education expenses
For many years the Tax Office have ruled that if you were studying and receiving AUSTUDY, ABSTUDY or Youth Allowance you were not entitled to claim the costs of attending your course, including textbooks, stationery and travel expenses as tax deductions. But in a recent tax case, the court decided that you should in fact be able to claim for your study costs if you receive any of these payments. At the moment the Tax Office is planning to appeal this decision, so it is still a bit uncertain what will happen. If they lose their appeal in the future we will be able to claim for all of your study costs and we will be able to go back and adjust your previous returns, but only for the past 2 years.
So if you, or anyone you know, has been studying during the past 2 years and has been receiving AUSTUDY, ABSUTDY or Youth Allowance, it may be worth letting us know and we can advise the Tax Office on your behalf that you will want to make a claim once the appeal has been decided. If we don’t do that prior to the 2 year deadline you will miss out. If you think this may relate to you, please get in touch with us and one of our accountants will go through the options with you.
3. Overseas study trips
A couple of tax cases have recently been decided that help to clarify when you can (and can’t) claim for trips overseas where you spend all (or part) of your time undertaking research or courses relating to your work. We have put together a checklist to help you determine whether any trips you have made (or are planning to make) could be tax deductible. Please just let us know if you would like a copy.
4. Using redraw facilities on investment loans
The Tax Office have indicated that they will be taking a close look at the interest claimed by investors and rental property owners this year. Particularly at risk are those investors that have a redraw facility on their loan. Banks often promote lines of credit as a simple way to save on interest, but the problem is that if you redraw money from your loan for personal (or non investment related expenses) this redraw is classed as a personal expense and therefore you can no longer claim interest on that part of your loan.
To minimise the risk of the Tax Office reducing your interest claims, you should make sure that any investment related loans are kept completely seperate from personal loans and that you don’t use any redraw facility unless it is to pay for expenses that specifically relate to your investments. If you are unsure how this affects you, please contact us and one of our accountants will go through it with you in detail.

This year’s audit targets

This year the Tax Office will be paying close attention to tax returns lodged by teachers, engineers and mechanics and anyone who has large or unusual tax deductions for their occupation. So what does this mean for you and your tax return? The most important thing is that if you want to claim for your work expenses, you must have the right records in case the Tax Office wants to check them.
At the very minimum, the records you need to keep for your work expenses are:

  • receipts for all work expenses costing $10 or more
  • a diary record of any minor work expenses (costing $10 or less and up to a total of $200 for the year) where you haven’t kept the receipt
  • a diary record of any work related trips you have made in your personal car
  • a diary record of your internet use for work for one month during the year
  • a diary record of your telephone use (mobile and home) for work for one month during the year

If you are unsure about what expenses you can claim for in your occupation have a look at the ‘what deductions can you claim’ page on our website or organise a time to speak with one of our accountants on the phone or via Skype.

If you know of anyone who might find any of the information in this email useful, please feel free to forward it on to them.

Thank you for your support over the last year and as always, if you have any tax related questions, please just ask. We look forward to catching up with you over the next few months.

The Personal Tax Specialists team