The general rule is that transport expenses incurred for ordinary travel between home and a regular place of work are not deductible, regardless of the distance involved; whereas, transport expenses incurred by an employee in travelling between different work locations usually are deductible. However, an exception to the non-deductibility rule may come about if the following factors apply:
- the travel occurs in work time;
- the travel occurs when the employee is under the direction of the employer;
- the travel fits within the duties of employment;
- the travel is relevant to the practical demands of carrying out the work duties; and
- the employer asks for the travel to be undertaken (Suggestion: Obtain evidence)
Work-Related Expense Claims Denied
An employed taxpayer recently had both his car expenses (worked out under the logbook method) and other work-related expenses disallowed primarily because:
- the logbook contained multiple inconsistencies – entries therein were not contemporaneous (i.e. not made at or as soon as possible after the journey) and did not match other supporting documentation;
- the home office expenses could not be substantiated by a requirement or need to work from home and there was no evidence showing how such expenses were calculated or apportioned between private & work.
25% penalties were imposed in addition to the tax initially avoided.
The Australian Taxation Office (ATO) is continuing with its “lifestyle assets” audits by requesting further information from over 30 insurance companies about taxpayers who own marine vessels, thoroughbred horses, fine art, high-value motor vehicles (>$65,000) and aircrafts. The information is intended to be used by the ATO as part of its compliance profiling activities. For example, if a taxpayer is reporting a taxable income of say $70,000 but owns an expensive boat (>$100,000), then this is likely to raise some red flags. Additionally, SMSFs suspected of acquiring lifestyle assets, even for the occasional personal enjoyment of the fund’s trustees or members, are also likely to be scrutinised by the ATO.
The ATO is warning the one million plus taxpayers who have engaged in buying, selling or transferring cryptocurrency to either pay up the tax on any gain or face the music.
Entertainment expenses are not tax deductible except in very limited circumstances. This prohibition extends to entertainment in the form of food, drink, accommodation & associated travel. In general, the prohibition applies no matter who the recipients of the entertainment are and irrespective of whether there is a genuine connection with business activities. Exceptions include:
- The cost of providing food & drink on working days to employees (including directors) in an “in-house dining facility” (i.e. not an external restaurant or café).
- Entertainment expenses incurred in promoting or advertising the business or its goods & services to the general public (i.e. not restricted to invited guests).
- Entertainment of clients, suppliers & employees on which expenditure FBT is paid.
- Non-entertainment Christmas gifts costing less than $300 per person.
Note that you cannot claim a deduction for superannuation contributions paid by your employer to your super fund from your before-tax income such as:
- the compulsory super guarantee,
- salary sacrifice amounts and
- reportable employer super contributions shown on your annual payment summary.
You may be able to claim a tax deduction for personal super contributions which you made to your super fund from your after-tax income; but, before you can do so, you must have given your super fund a Notice Of Intent To Claim Or Vary A Deduction For Personal Contributions and received an acknowledgment from your fund. We need a copy of this acknowledgment. Also note that there are other eligibility criteria which must be met.
Be aware that if you have linked the ATO to your myGov account, most of your ATO mail will now come direct to your myGov Inbox, rather than through the post. The types of ATO communications you may receive in your myGov Inbox include:
- income tax assessment notices,
- statements of account,
- reminder notices and
- activity statements or instalment notices.
So, remember to periodically check your myGov Inbox, especially if you are expecting something such as an Assessment Notice or Activity Statement.
We now offer referral discounts of at least $55.00 off your next invoice from us if you refer a new client. These discounts can increase for work resulting in above-average fees.
Insurance Payouts From Disasters
Insurance payouts for damaged or destroyed personal items are not taxed. For example, any insurance payout received for a wholly family home is not taxed. However, insurance payouts for business or income-producing assets may be taxed.
Direct Phone Number For PTS Clients
Personal Tax Specialists clients can now phone direct on 0428339764 where they will either be answered immediately or leave a message which will be replied to as soon as possible.
Instant Asset Write-Off
On 12 March 2020, the Prime Minister announced that the Government was lifting the threshold for the instant asset write-off from $30,000 to $150,000 and expanding it to businesses with an annual turnover up to $500 million (previously $50 million) until 30 June 2020.
Motor Vehicle Logbook
If you started to use your car for work or business-related purposes less than 12 weeks before the end of the income year, you can continue to keep a logbook into the next year so that it covers the required 12 continuous weeks. A properly maintained logbook is valid for 5 years; but you may start a new logbook any time (for example, if your work usage increases). Remember, the work usage percentage reflected in the logbook determines the percentage claimable of car expenses (including depreciation, fuel, insurance, rego, services, tyres, etc).
Cash Flow Assistance For Businesses
Small and medium business entities with aggregated annual turnover under $50 million and that employ workers will be eligible for a cash flow boost from the Australian Government. Such payments will be tax free! Eligibility will generally be based on prior year turnover.
- The payment will be delivered by the ATO as a credit in the Activity Statement system from 28 April 2020 upon businesses lodging eligible Activity Statements. No new forms will be required to be completed.
- Eligible businesses which withhold and remit tax to the ATO on their employees’ salaries & wages will receive a payment equal to 50% of the amount withheld, up to a maximum payment of $50,000.
- Eligible businesses which pay salaries & wages will receive a minimum payment of $10,000 even if they are not required to withhold tax.
- Where such credit places the business in a refund position, the ATO will deliver the refund within 14 days.
- Quarterly lodgers will be eligible to receive the first payment or credit for the quarter ending March 2020 with additional payments delivered as an automatic credit in the Activity Statement system. These additional payments will be equal to half of the initial payment following the lodgment of June 2020 & September 2020 Activity Statements (up to a maximum of $25,000 but with a minimum of $5,000 per quarter); so businesses should progressively receive a total minimum cash flow boost of $20,000 subject to a maximum of $100,000. For example, quarterly lodgers should receive 3 minimum instalments: $10,000 for the March quarter + $5,000 for the June quarter + $5,000 for the September quarter = $20,000 in total.
- To summarise for quarterly Activity Statement lodgers, the payments or credits should be delivered as 50% in respect of the March 2020 quarter, 25% in respect of the June 2020 quarter and 25% in respect of the September 2020 quarter = 100%.
- To qualify for the additional payments, entities must continue to be active.
- The minimum payment or credit will be applied to the business’ first lodgment.
Confused? If you need clarification of this cash flow boost or require any assistance, do not hesitate to contact us. There is also Government support available for small businesses (employing fewer than 20 full-time staff) to help retain apprentices or trainees.
Working From Home
Many employees across the country are now working from home as the coronavirus pandemic rages; but there could be serious implications at tax time. Spending the day working at home instead of the office will leave many out of pocket as they use their own power, mobile phones, internet and rack up other work-related expenses. The good news is that such expenses can be tax deductible; but note the following warning from the ATO:
“In order to claim home office expenses, you will need to have paid for those costs, not be reimbursed by your employer and have records to support those claims including an apportionment between private & work use where applicable (unless claiming under the cents per hour method). As an employee, generally you cannot claim a deduction for occupancy expenses such as rent, mortgage interest, property insurance and rates. The exception is if your home office is your place of business, meaning that you work solely from your home office. This includes instances where an employer does not provide an employee with another location from which to work. An employee’s home office will not be considered a place of business if he/she is only working there temporarily (say as a result of the virus).”
On 30 March 2020, the Australian Government announced a rescue package to hopefully prevent further workers from being stood down by businesses suffering because of the coronavirus. Small businesses with a turnover of less than $1 billion and with their turnover reduced by more than 30% will be eligible to register with the ATO. Under the program, those full-time, part-time & long-term casuals (>12 months) who were stood down or rehired because of coronavirus and who were employed by that business at 1 March 2020 will be paid $1,500 per fortnight before tax via their employers.
Payments will flow by May but backdated to March. It will also be open to those still working but at risk of losing their jobs and means that businesses can top up payments by paying staff more than the $1,500 per fortnight. As stated, eligible businesses will have to register with the ATO and be prepared to supply supporting information demonstrating a decrease in turnover of more than 30%. Sole traders and businesses without employees who were similarly affected can also register their interest in applying for JobKeeper payments. Monthly updates will be required by the ATO.
This JobKeeper Program, administered by the Tax Office, is not to be confused with the JobSeeker Program, administered by Centrelink.
Our Office & The Virus
During this coronavirus pandemic, our office will operate as normal (health permitting) but we encourage contact by phone or email rather than face-to-face interaction, unless the latter is considered essential. Also, a reminder that our normal office hours are 9am to 5pm Monday – Friday. When out of the office, we attempt to remain contactible via mobile phone. We wish all our clients good health – Stay active and keep washing those hands!
Your Personal Tax Specialists team
Personal Tax Specialists Pty Ltd
YOUR TIME AND TREE FRIENDLY TAX ACCOUNTANTS
Comments herein are general in nature and are not intended to be specific advice.
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