Firstly, thank you to all those clients who entrusted us with their taxation affairs since we took over the business previously operated by Chris & Tracey. We understand that there was some trepidation initially but hopefully we have earned your respect and continued support. We remain committed to provide first-rate professional services and to achieve the optimum tax result for our clients. As we approach another tax season, we comment on some tax topics.
Key Points for 2017
Employees are generally required to be able to substantiate their work-related travel expenses by maintaining written evidence such as invoices and a travel diary. However, where the expense being claimed relates to a travel allowance, the substantiation exception may apply (i.e. no invoices or travel diary required) if the employee is paid a bona fide travel allowance to cover the cost of food, drink, accommodation and/or incidental travel expenses. A bona fide travel allowance is one which could reasonably be expected to cover such costs – The Tax Office does publish guidelines on what is considered reasonable. Claims for overseas accommodation expenses must be fully substantiated by written evidence (receipts and a travel diary) where the trip is for 6 or more continuous nights. There are also separate reasonable allowance amounts prescribed for food & drink expenses incurred by truck drivers who travel overnight for work-related purposes.
As from 1 July 2015, the zone offset for living in a remote area is only claimable if your main residence is within the zone. This change effectively rules out fly-in/fly-out workers whose main residence is outside the zone. The claim is no longer based on the number of nights you were staying in a remote area for work.
Phone & Internet Costs
If you use your phone, internet or other digital device for work then you can claim a portion of these costs; but, unless you are only claiming a maximum of $50 for each of these expenses, your claim should be supported by receipts and a diary kept for 4 weeks every year. The diary needs to identify work versus private use so that the work use percentage can be determined. We do not need to see this diary – Just advise us of the expense and work percentage.
Medicare Levy Surcharge
If you don’t have Private Hospital Insurance and your income exceeds $90,000 for singles or $180,000 for families, you will be required to pay a minimum 1% Medicare Levy Surcharge on top of the compulsory 2% Medicare Levy.
Claim All Deductions
Remember that items purchased partly for work and partly for personal use can still generate an apportioned tax deduction. If you are not sure whether you can claim a deduction for a particular item, simply supply us with the details. We do not need to sight the receipts but you need to retain them for at least 5 years from the date you lodge your Tax Return. If you are in business, then we have a checklist of business deductions which we are quite happy to send – Just ask.
If you are planning to sell an asset, it may be prudent to check with us in advance whether there are any Capital Gains Tax (CGT) implications – It’s better to be forewarned and prepared rather than receive a nasty surprise later on. Sometimes you may be able to defer selling the asset to a year when you anticipate lower income and so reduce the impact of CGT.
Rental Property Repairs
Repairs of income-producing assets are generally tax deductible but bear in mind that repairs are any works carried out to restore something to its original state or function. In order to meet Tax Office standards for repairs, whatever works are carried out must rectify defects, damages or deterioration of the asset. For instance, if a tree were to fall on your rental property and damage the fence, you would be expected to replace the fence using the same materials so as to restore it to the same state before it was damaged. If you decided to take the opportunity to replace the fence using a different type of material, this would be considered an improvement, not a repair, and treated differently for tax purposes. Note the Government is proposing to legislate that from 1 July 2017, travel expenses relating to residential rental properties will no longer be tax deductible, even for the purpose of arranging or effecting repairs & maintenance.
Individual Tax Rates for Australian Residents
|Taxable Income $||Tax Payable|
|0 – 18,200||Nil|
|18,201 – 37,000||19% of excess over $18,200|
|37,001 – 87,000||$3,572 + 32.5% of excess over $37,000|
|87,001 – 180,000||$19,822 + 37% of excess over $87,000|
|180,001 +||$54,232 + 45% of excess over $180,000|
|Plus levies such as Medicare where applicable|
Kerry, Diane & Renee – Your Personal Tax Specialists team