How COVID-19 will affect your 2020 tax return

The last year has been a year like no other, with COVID-19 changing the way we have gone about our lives. When it comes to your tax return it is important to keep in mind these changes and how they will impact your return.

 

Working from home

Where you undertake work from a home office, the ATO allows a deduction for the costs of using that area. In addition to specific home office costs such as phone, internet and office equipment, the ATO allows a claim for running the home office. This is generally done by either claiming a fixed rate per hour worked from the home office, or a percentage of actual home gas and electricity costs incurred.

 

For the 2019/20 financial year, the ATO has temporarily introduced the ‘shortcut method’. This method is only available for the period 1 March 2020 to 30 June 2020, so you will need to keep records for this period separate to those for the first 8 months of the year.

 

The shortcut method is claimed as a deduction of 80 cents per hour worked from home. This method is intended to simplify your claims and therefore covers ALL home office expenses, so you will not be able to claim other office costs such as utilities, phone, internet, computer or office equipment separately. Unlike the other methods, the shortcut method is available to use whether or not you have a dedicated area set aside as a home office.

 

Protective equipment

Where your work has required you to be in physical contact or close proximity to customers the ATO will allow a deduction for protective items such as gloves, masks, sanitizer and antibacterial sprays. This may be especially relevant for employees in the retail, hospitality and healthcare sectors.

 

Car expenses

If you are usually required to use your own car to travel for work, but this travel either reduced or stopped completely you will likely need to adjust how you claim car expenses. Where you make a claim using the logbook method, it may be appropriate to only claim your car for part of the year up until you ceased work related travel, or adjust you claim based on a lower work use percentage taking into account how your travel requirements were affected.

 

Despite many employees still having to attend the office on occasions, travel from home to your regular work location is still not deductible.

 

Laundry expenses

If your work from home increased, then it is likely that you have worn your uniform less than usual. Therefore, if you are using the common method of calculating laundry deductions based on the number of times the uniform was washed your may have to adjust your claim appropriately.

 

JobKeeper payments

JobKeeper payments are a subsidy paid to employers who have been impacted during COVID-19. Although the wages you receive may have changed due to your employer receiving the subsidy, you do not need to include any JobKeeper payments separately in your tax return as this is already included in what is reported as wages on your income statement. However, if you operate a business as a sole and have received JobKeeper then you will need to be include these payments as part of your business’ income.

 

JobSeeker payments

JobSeeker payments are made to those of working age with minimal income or out of work. The Government increased the amount and accessibility of the payment during COVID-19. JobSeeker payments are taxable income and will therefore need to be included in your tax return.

 

COVID-19 early access to super

The Government allowed early access to super to those whose incomes had been sufficiently affected by COVID-19. The good news is that if you did access your super under this measure, the payment received is tax free and is not required to be included in your tax return.

 

For more information on the above topics contact one of our friendly consultants at Private Wealth Accountants on info@privatewealthaccountants.com.au or 03 9973 5905.

Job Keeper Payment

JobKeeper Payment

What is the JobKeeper Payment?

The JobKeeper Payment is a $1,500 per fortnight per employee subsidy paid to eligible employers and businesses who have had their turnover significantly impacted by the Coronavirus. The payments are available from the fortnight starting 30 March 2020 and will continue for 13 fortnights. The subsidy is reimbursed to the employer in lump sum payments paid monthly in arrears.

Who is eligible?

An employer will be eligible where:

  • On 1st March, they carried on a business or were a not-for-profit organization,
  • They employed at least one eligible employee at 1 March 2020,
  • Their eligible employees are currently employed by the business for the fortnights they start to claim the Jobseeker Payment. This includes employees stood down or re-hired,
  • Their business satisfies the decline in turnover test,
  • They pay their eligible employees at least $1,500 (gross) for the fortnights they are claiming the JobKeeper Payment, and
  • They have successfully enrolled and applied for the JobKeeper Payment.

As well as traditional employers, other business owners not on the payroll but active in the business may be eligible including:

  • Sole traders,
  • Company shareholders and directors,
  • Partners in a partnership, and
  • Adult beneficiaries of trusts.

Note, only one non-employed business owner can receive the JobKeeper Payment. The ATO will provide further guidance for sole traders and other business participants soon including details of a separate enrolment to that for eligible employees.

When is the decline in turnover test satisfied?

The decline in turnover test is satisfied where:

  • A business with a turnover of $1 billion or less has or will likely have a fall in GST turnover of 30% or more,

  • A business with a turnover of $1 billion or more has or will likely have a fall in GST turnover of 50% or more, or

  • An ACNC registered charity, a university or a school has or will likely have a fall in GST turnover of 15% or more.

For the first fortnight commencing 30 March and ending 12 April 2020 the test can be applied by comparing either:

  • GST turnover for March 2020 with GST turnover for March 2019

  • Projected GST turnover for April 2020 with GST turnover for April 2019, or

  • Projected GST turnover for the April to June 2020 quarter with GST turnover for the April to June 2019 quarter.

If a business does not satisfy the turnover test for April 2020 because its turnover has not sufficiently declined, it can test in later months to determine if the test is met and they subsequently qualify. Payments can then be claimed from when the test is met, but not backdated to the commencement of the JobKeeper Payment program.

Where a comparison period is not representative of ordinary turnover, or the business was not in operation in the comparison period, the ATO may allow an alternative test. This may include using another comparison period or average turnover since the business commenced operation.

Once the turnover test is met, a business does not need to meet it again – it will remain eligible for the remainder of the JobKeeper Payment program. However, it will be required to report turnover information monthly to the ATO.

Who is an eligible employee?

Eligible employers only qualify for the subsidy for eligible employees. Eligible employees are those individuals that:

  • On 1 March 2020

    • Were 16 years old or over,

    • Were permanent employees or casuals employed for more the 12 months, and

    • Was an Australian resident, or Australian tax resident with a Subclass 444 visa

and

  • During a JobKeeper fortnight the individual

    • Was an employee of the employer, and

    • Was not excluded because of receiving parental leave pay, dad and partner pay or workers compensation

Individuals with 2 or more permanent (full-time or part-time) employers can nominate as an eligible employee with any one of their employers. Individuals employed on both a casual and permanent basis must nominate with a permanent employer.

How much will eligible employees be paid?

If eligible employees were:

  • Paid less than $1,500 (gross) per fortnight, the employer must ‘top-up’ wages to this amount. This must be done before the end of April in order to receive JobKeeper Payments for this month.

  • Paid more than $1,500 (gross) per fortnight, the employer must continue to pay the ordinary wage.

  • Stood down or re-hired, the employer must pay at least $1,500 (gross) for each fortnight the JobKeeper Payment is claimed for. This must be done before the end of April in order to receive JobKeeper Payments for this month.

Tax must be withheld on wages including those subsidised by the JobKeeper Payment.

If an employee was ordinarily paid less than $1,500 (gross), the employer isonly required to pay superannuation on the ordinary wage, and not on the ‘top-up’ amount.

How to apply for the JobKeeper Payment

In order to successfully receive the JobKeeper Payment a business will need to:

  1. Register interest in the JobKeeper Payment online via the ATO if it believes it may be eligible. This will also allow the ATO to contact the business with updates.

  2. Determine if the business will be eligible based on reduction in GST turnover and, if applicable, having eligible employees.

  3. Identify and notify eligible employees in writing that it intends to nominate them for the JobKeeper Payment. It must provide eligible employees with an employee nomination noticeto complete and return. Eligible employees must provide and return this by the end of April to be included in the April JobKeeper payments.

  4. Continue to pay its eligible employees a minimum of $1,500 (gross) per fortnight from the beginning of the first fortnight it is applying for the JobKeeper Payment. This may require back payments or a ‘top up’ of payments for the April period so that all wage payments have been at least this amount.

  5. Enroll for the JobKeeper Payment online. The form will be available from 20 April. It must be completed by 30 April to be eligible for April JobKeeper payments. It will include providing the business’ bank details and an estimate of number of eligible employees for each April fortnight period.

  6. Apply to claim the JobKeeper Payment online. This can be done from 4 May up to 31 May for the April JobKeeper payments. This must be done before payments are made to the business. It will include recording details of each eligible employee and the number of JobKeeper periods being claimed for each eligible employee for the previous month. A business must also notify eligible employees that they have been nominated for the payments within 7 days.

  7. For each month that a business is entitled to the JobKeeper Payment it must complete a JobKeeper declaration form. The form will include confirming each eligible employee for the previous month as well as providing information on GST turnover for that month, and projected GST turnover for the next month.

Want to find out more?

Talk to us today to find out if your business is eligible for the JobKeeper Payment and how we can help you successfully apply.

Detailed information is also available on the ATO JobKeeper page .

*Information accurate as at 16 April 2020

corona-image

Coronavirus and Employer Obligations

As a result of the Coronavirus isolation requirements, Fair Work has now released guidance on employee arrangements.

Below is a summary of situations that may arise, and the responsibility for employers and employees:

Where an employee HAS contracted Coronavirus and required to self-isolate

Employees who cannot attend work because they are sick with Coronavirus can take paid sick leave. If an employee needs to look after a family member or a member of their household who is sick with Coronavirus, or suffering an unexpected emergency, they are entitled to take paid carer’s leave.

Under the Fair Work Act, casual employees are entitled to 2 days of unpaid carer’s leave per occasion. Full-time and part-time employees can take unpaid carer’s leave if they have no paid sick or carer’s leave left.

An employee must give their employer reasonable evidence of the illness or an unexpected emergency if their employer asks for it.

Where an employee has NOT contracted Coronavirus but does not want to attend work

Where feasible, employers can provide flexible working arrangements that allow employees work from home.

If that is not possible, an employee may seek to take annual leave, long service leave or unpaid leave. However, there is no obligation for the employer to agree to paid leave. Additionally, there is no requirement for an employer to pay the employee for sick leave without the employee providing reasonable evidence (eg a doctor’s certificate)

Where an employee has NOT contracted Coronavirus but is required to self-isolate

An employee may be required to self-isolate because of factors such as returning from overseas or under other government or health officials orders. In this instance the employee is not ordinarily entitled to be paid (unless they use leave entitlements at the agreement of their employer).

The Fair Work Act does not have specific rules for these kinds of situations, so employees and employers need to come to their own arrangement. This may include:

working from home or another location (if this is a practical option), noting they should review any applicable enterprise agreement, award, employment contracts or workplace policies

taking sick leave if the employee is sick

taking annual leave

taking any other leave available to them (such as long service leave or any other leave available under an award, enterprise agreement or employment contract)

arranging any other paid or unpaid leave by agreement between the employee and the employer.

Where an employee has NOT contracted Coronavirus, but their employer has requested they do not attend work

Where an employer directs a full-time or part-time employee to stay home in line with advice, for example in line with the Australian Government’s health and quarantine advice, and the employee is not sick with Coronavirus, the employee should ordinarily be paid while the direction applies.

Where an employer has reduced workload due to deteriorating business conditions

Some employers may need to make employees’ positions redundant in response to a business downturn. If an employee’s job is made redundant their employer may have to provide redundancy pay. The Fair Work Act has requirements that employers have to meet before they can terminate an employee’s employment, such as providing notice or pay in lieu.

If an employer seeks to vary employees’ work rosters, they should review any applicable enterprise agreement, award, employment contracts or workplace policies. Particularly for full-time and part-time employees, an employer is usually required to seek employees’ agreement to change their rosters.

Under the Fair Work Act employees can only be stood down without pay in limited situations. Deteriorating business conditions due to the Coronavirus would generally not be one of these situations.

An employer should carefully review their obligations under the Fair Work Act as well as any applicable awards or agreements before dealing with any of the above situations.

economic stimulus

Coronavirus Economic Stimulus Package

The government recently announced 2 stimulus packages worth $84 billion in response to the impact the ongoing Coronavirus pandemic is having on the Australian economy. A number of the measures announced are aimed at minimising the financial impact on and supporting small and medium businesses. These measures are discussed in more detail below.

Boosting cash flow for employers

Small and medium businesses that employ workers will be eligible for tax-free payments totaling between $20,000 and $100,000. The total received by a business will depend of how much a business withholds. The payments will be made in the form of a credit to upcoming activity statements.

To be eligible businesses must have an aggregated turnover of less than $50 million (based on prior year turnover) and employ workers. There is no need to register or apply for these payments.

For businesses that withhold tax from their employees’ salary and wages, the first payment will be equal to 100% of the PAYG withheld between January 2020 and June 2020 up to a maximum of $50,000. The minimum payment is $10,000, and eligible businesses that pay salary and wages but are not required to withhold tax will still receive this minimum amount. The minimum payment will be applied to the first Activity Statement lodged. If a payment places the activity statement in a refund position, the refund will be delivered within 14 days.

The first payment will be applied to Activity Statements for the period January 2020 through June 2020 after 28th April 2020 once an activity statement is lodged. Businesses lodging on a quarterly cycle will have the first payment applied in the March 2020 and June 2020 quarters. Businesses lodging on a monthly cycle will have the payment applied in the March, April, May and June 2020 monthly Activity Statements. To ensure equal treatment between lodgement cycles, monthly lodgers will receive a payment for March equal to 300% of the PAYG tax withheld in that month.

The second payment will be made to eligible employers that received the first payment and remain active. It will be equal to the total received from the first payment and be applied to Activity Statements for the period June 2020 through September 2020. Businesses lodging on a quarterly cycle will have half of the second payment applied to the June quarter and half to the September quarter. Businesses lodging on a monthly cycle will have a quarter of the payment applied to each of the each of the June, July, August and September monthly Activity Statements.

Examples

Bob’s Construction

Bob operates a construction business and employs 10 staff. Each month Bob is required to withhold $12,000 in PAYG from his employees’ wages. Bob’s business will receive:

  • A payment of $36,000 for the March period,
  • A payment of $12,000 for the April period,
  • A payment of $2,000 for the May period (taking total payments up to the $50,000 cap),
  • A payment of $12,500 for the June period,
  • A payment of $12,500 for the July period,
  • A payment of $12,500 for the August period, and
  • A payment of $12,500 for the September period.
  • The total amount received will be $100,000 – $50,000 for each of payments 1 and 2.

Nina’s Bakery

Nina operates a bakery and employs a number of part time and casual workers. Nina is required to withhold PAYG of $6,400 in the March quarter and $8,200 in the June quarter from her employees’ wages. Nina’s business will receive:

  • A payment of $10,000 for the March quarter (being the minimum amount for payment 1), and
  • Payments of $4,600 (balance of payment 1) and $7,300 (being half of payment 2), and
  • A payment of $7,300 for the September quarter (being half of payment 2).

Leslie’s bookstore

Leslie operates a bookstore and employs 2 part-time workers. Both workers generally work only a few hours a week and as such Leslie does not withhold PAYG from the wages. However, one of the staff is required to work full-time for 4 weeks in May while Leslie is away and as a result Leslie is required to withhold $1,000 in the June quarter. Leslie’s business will receive:

  • A payment of $10,000 for the March quarter (being the minimum amount for payment 1),
  • A payment of $5,000 for the June quarter (being half of payment 2), and
  • A payment of $5,000 for the September quarter (being half of payment 2).

Leslie would need to withhold more than $10,000 in PAYG to receive any payments greater than the minimum amounts.

Supporting apprentices and trainees

Small businesses that employ apprentices or trainees may be eligible for a subsidy of 50% of wages paid to these employees. The aim of the subsidy is to help support businesses retain these workers. Where an employer is unable to retain an apprentice, the subsidy will be available to a new employer.

To be eligible a small business must be employing less than 20 full-time staff and be retaining an apprentice or trainee. The apprentice or trainee must have been in training with that business at 1 March 2020. Employers or any size as well as group training organization that re-engage an eligible our-of-trade apprentice or trainee will also be eligible for the subsidy.

The subsidy will be provided in the form of a reimbursement. The maximum subsidy will be $21,000 per apprentice and trainee ($7,000 per quarter). Final claims for the subsidy must be made by 31 December 2020.

Small businesses will need to register and apply for the subsidy which can be done from 2 April 2020. More information on how to apply will be made available as details of this measure are finalised and via Australian Apprenticeship Support Network (AASN) providers. AASN providers will also be responsible for undertaking and eligibility assessment which must be undertaken before the subsidy can be accessed.

Example

Hector’s Plumbing

Hector operates a small pluming business and employs 2 apprentices, Habib and Eliza. Habib is paid $650 per week and has been employed by Hector since 1 December 2018. Eliza is paid $500 per week and has been with Hector since 23 January 2020. Both apprentices were undertaking training at 1 March 2020. Hector’s business will receive:

  • $12,675 for Habib (being 50% of 39 weeks wage)
  • $9,000 for Eliza (being 50% of 36 weeks wage)

Increasing the instant asset write-off

For a number of years small businesses have been able to access an instant asset write-off. The concession essentially allows a business to claim full depreciation on eligible assets in the year it is purchased and ready for use. The asset cost threshold and business eligibility criteria have changed numerous times since this concession was first introduced. In its current format, the instant asset write-off is available to businesses turning over less than $50 million in aggregate and applies to assets costing under $30,000.

As part of the economic stimulus package the government has made the instant asset write-off available to businesses turning over under $500 million. It has also increased the assets eligible by increasing the cost threshold to $150,000. Importantly it continues to apply to both new and used assets.

This measure applies until 30 June 2020. Beyond this date the instant asset write-off is set to revert to a business turnover threshold of $10 million and assets costing under $1,000.

Examples

Stephanie’s Transport

Stephanie operates a transport business. The business turns over $10 million per year. The business purchases a secondhand truck for $75,000 in May 2020. Under the new measures Stephanie can claim a tax deduction in the 2019/20 year for the full purchase price of the truck. Under the existing tax arrangements Stephanie would be required to depreciate the cost of the truck over a number of years as it exceeded the $30,000 threshold.

Franco’s Farm

Franco operates a farming business. The business turns over $200 million per year. The business purchases a new mower costing $20,000 in May 2020. Under the new measures Franco can claim a tax deduction in the 2019/20 year for the full purchase price of the mower, Under the existing tax arrangements Franco would be required to depreciate the full cost of the mower over a number of years as the businesses turnover exceeded the $50 million threshold.

Backing Business Investment

Small and medium businesses will be able to accelerate the depreciation claimed on purchases of new assets. The assets must be new (not secondhand) and be purchased and installed or used in the business by 30 June 2021.

The accelerated deduction will be in the form of a 50% deduction of the cost of the asset when it is purchased and installed or first used in the business. The balance of the assets cost will be depreciated under existing depreciation rules.

Businesses must have an aggregated turnover of less than $500 million to be eligible. Most depreciating assets will be eligible, but certain assets such as buildings are excluded. Importantly the asset must be new.

Examples

Stephanie’s Transport

Stephanie operates a transport business. The business turns over $10 million per year. The business purchases a new truck for $180,000. The truck is ordered in June 2020, but it is delivered and begins being used in the business in August 2020. Under the new measures Stephanie can claim a tax deduction of $90,000 as well as claim depreciation as normal on the balance of the truck cost in the 2020/21 year. Under the existing tax arrangements Stephanie would be required to depreciate or pool the entire cost of the truck over a number of years.

Franco’s Farm

Franco operates a farming business. The business turns over $200 million per year. The business purchases a new tractor costing $200,000 in May 2020. Under the new measures Franco can claim a tax deduction of $100,000 as well as claim depreciation as normal on the balance of the tractor purchase in the 2019/20 year. Under the existing tax arrangements Franco would be required to depreciate the full cost of the tractor over a number of years.

ATO support measures for those affected by Coronavirus

In addition to the stimulus measures announced by the government, the ATO will implement a range of administrative measures to assist businesses experiencing financial difficulty as a direct result of the Coronavirus pandemic.

These measures will be tailored to each business’ situation, but may include:

  • Deferral of payment of BAS, income tax and fringe benefit obligations/
  • Variation of March PAYG income tax instalments to nil, and claiming a refund for September and December 2019 instalments already paid,
  • Remission of interest and penalties applied after 23 January 2020 on existing tax liabilities,
  • Allowing businesses to enter into low interest payment arrangements for existing and upcoming tax liabilities.

Want to find out more?

Talk to us today to find out more on these recently introduced measures and how your business can benefit from them.

changes-account

Is It Time To Change Accountants?

The decision to change accountants can be a difficult one. Especially if you have had a long-term relationship with your current accountant. You need to ask yourself if, after all these years, are they still providing the service that you require and expect. As your business has evolved, have they kept up the pace? Do they support you with the potentially stressful matters related to auditing, payroll, business advice and tax compliance?

In this article, I will give you some ideas to help you making the right decision.

When and Why Should You Change Your Accountant?

Here are the possible signs you should look out for to determine is a change to your accountant needs to be considered:

30 mins Free Consultation

In the Call, you will get:

  1. Review your current financial situation
  2. Review your current tax position
  3. Discuss investment goals
  4. Tax minimisation strategies

Click Here To Book You Call Now!

1. Strained Relationship with Your Current Accountant

current accountant

Is your accountant getting back to you with answers to your queries in a prompt manner? Can you call them at a time that suits you? If not, it may be a good time to start looking for a more suitable accountant who will meet your needs. It can be hectic during busy periods, but you shouldn’t be left unanswered for days or even weeks. The lack of communication is usually indicative of how valuable you are as a client.

2. Changes to Your Own Business

Running Business

As your business grows, sometimes it is worth revisiting whether your current structure is still beneficial and relevant to your circumstances. If you haven’t had the discussion recently, it could be time to change your accountant. This situation could arise if you started as a sole trader but are now employing others, or have grown your personal wealth and assets etc. Has your accountant kept up to date with the changes in your circumstances? If not, it may be time to switch as your accounts may be getting too complex for your current accountant.

3. Your Current Accountant is Confusing

accountant-confusing

Your accountant could be going through some changes of their own such as retiring or moving away. Are they getting too big? Which means you become less important to them? If this situation occurs, you may want to  start looking for a new accountant.

3. Your Current Accountant is Confusing

fees-getting

As overheads and other costs increase, it is usually for accounting fees to also go up. However, if your business and circumstances have not changed dramatically, your fees should not increase too drastically from one year to another. If they are increasing quite significantly, it could be a sign to start comparing prices and services.

How Do You Change Your Accountant?

Changing your accountant is a simple process. And usually you don’t have to lift a finger:

    1. Shop around. Find an accountant who fits your needs. Has the experience and expertise to take care of your business.
    2. After you agree to the terms of service, your new accountant will draft a professional clearance which is a courtesy between accountants to inform them of your change.
    3. Your new accountant will then arrange for the transfer of files and documents.

I hope this article will help you to decide if you should change accountants.

If you have any questions feel free to email us at admin@privatewealthaccountants.com.au or call us at (03) 9973 5905. We are here to help.

tax-deduction

Top 4 Tax Deductions that Most People Miss

Tax returns are complicated. There are many things that you can and can’t claim.

Work-related expenses are one category of deductions that can be claimed. They are the most common way to increase your tax refund. The more that you are able to claim, the better outcome you will be able to achieve.

Let’s have a look into the Top 4 Tax Deductions that Most People Miss:

1. Car Expenses

car-expenses

You may claim expenses for your car if you use it for work. This includes:

  • Travelling to meetings
  • Travelling between workplaces
  • Travelling to clients’ premises
  • Transporting goods and other items

2. Travel Expenses

travel-expenses

If you travel around Victoria, interstate or overseas for work, you may claim these expenses:

  • Car hire/taxi fares
  • Accommodation
  • Flights and transfers
  • Meals and food while travelling

30 mins Free Consultation

In the Call, you will get:

  1. Review your current financial situation
  2. Review your current tax position
  3. Discuss investment goals
  4. Tax minimisation strategies

Click Here To Book You Call Now!

3. Uniforms and
Protective clothing

protective-clothing

Some workplaces require their staff to wear a uniform. Or if you’re a tradie, you will be required to wear steel capped boots, heavy duty protective clothing and other items. You could claim:

  • Uniform
  • Laundry
  • Protective shoes or non-slip shoes
  • Safety equipment and protective clothing
  • Sunglasses and sunscreen.

4. Education Expense

education-expense

Sometimes you take on additional study and courses to upskill and be eligible for a promotion or raise. You could claim:

  • Seminars/Conferences
  • Short and long courses
  • Reading materials and books
  • Studying from home and its related costs like internet, computers etc.
  • Sunglasses and sunscreen.

Above are the Top 4 Tax Deductions that Most People Miss. And there are some others that people miss too. Here, I am giving you a quick view on them.

5. Other Expenses

Other Expences There are also a plethora of other expenses that can be claimed.  Whether they are deductible is dependent on  the job that you perform. Some examples are:

 

 

  • Union fees and memberships
  • Tools and Equipment
  • Stationery
  • Journals, books etc
  • Phone costs
  • Internet costs
  • Computer expenses
  • And any other expenses that are directly related to you performing your job and earning income.

Conclusion

I have shared with you the Top 4 Tax Deductions that Most People Miss. I hope that this article can help you better understand what you can claim to increase your tax refund.

If you have any question, free feel to email us at admin@privatewealthaccounts.com.au or call us at (03) 9973 5905. We are here to help.

trustworthy-accountant

Top 5 Reasons You NEED a Trustworthy Accountant

As another financial year passes, the age-old question that has dividend man since the beginning of time raises its head again – should you use an accountant or lodge your tax return yourself?

Yes, you SHOULD!

If you are unsure, here are the Top 5 Reasons You NEED a Trustworthy Accountant for yourself.

1. Claim ALL Your Deductions

Tax AccountantThere are a lot of expenses that are potentially deductible. Unfortunately, most people only know of the basic deductions. Not claiming everything you are entitled to means less money in your pocket (or if you are payable – more owing)!

2. Avoid an audit

AuditThe ATO is smart. Well, at least when it comes to recognizing if you have claimed too much. This year they will see more details than ever about what exactly you are claiming. If you claim something you are not allowed to, you are actually putting yourself at a greater risk of audit and potential penalties.

3. Save Your Time

Save Your TimeAn accountant can tell you what you can claim and what records to keep. On top of that, a trustworthy accountant knows his game inside out. Why do you want to spend hours of your time sorting through your records or trolling the ATO website for information on deductions?
Save time and your sanity!

4. Save Your Money

Save Your MoneyDo you know that an accountant’s fee is tax deductible? I bet you don’t. Let me tell you this. You can get money back after paying an accountant to maximise your claims, reduce your chance of audit and make your life easier. And it’s completely legal!

5. Gain Extra time to Lodge

TimeThe sad fact is that sometimes you will owe the ATO money at tax time. Having an accountant lodge your return will generally mean you have more than 6 months extra time to file your return and pay any amount owing. That’s half a year the money could be in your pocket working for you.

Conclusion

We just went through the Top 5 Reasons You Need a Trustworthy Accountant. Let’s recap

    1. aim ALL Your Deductions
    2. Avoid an Audit
    3. Save Your Time
    4. Save Your Money
    5. Gain Extra time to Lodge

I hope this post helps you to learn more about the benefit of having an accountant for yourself.

If you have any question, feel free to email us at admin@privatewealthaccounts.com.au or call us at (03) 9973 5905.We are here to take care of your wealth

tax-cuts

ATO Tax Cuts July 2019

The new financial year has started with some good news for taxpayers. The proposed changes to the Low and Middle Income Tax Offset (LAMITO) have now become law. This will mean extra money in taxpayer’s pockets each pay period going forward, as well as a boost to refunds when they lodge their 2018/19 tax returns

budget

As part of the 2018/19 budget the Government announced in May 2018 a staged 7 year ‘Personal Income Tax Plan’ was introduced. The plan included the new LAMITO which would be available alongside the existing Low Income Tax Offset from 1 July 2018. The offset allowed for a maximum $530 non- refundable reduction in tax for those earning up to $90,000. The offset phases out completely at $125,333.

The LAMITO is being referred to as the ‘Lamington’ by some because of the similarity in name and ‘sweet taste’ it will leave with taxpayers.

Cake

The original LAMITO was passed as law in June 2018. This meant that tax withheld by employers from July 1 2018 should have taken into account any relevant reduction in tax as part of the LAMITO.

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As part of the 2019/20 budget the Government announced further changes to the LAMITO. The changes mean an increase to the minimum offset from $200 to $255 as well as an increase to maximum offset from $530 to $1,080. Importantly, the changes are retrospective, so will apply from 1 July 2018. Anyone entitled to the maximum LAMITO should automatically be $550 in front when it comes to lodging their 2018/19 tax returns.

What to expect from the LAMITO changes.

LAMITO- table

It is important to note that the benefit for the 2018/19 year will only be realized when you lodge your tax return. So don’t delay, book an appointment with Private Wealth Accountants today.

I hope this article helps you learn more about your tax return.

Conclusion

I have shared with you the Top 4 Tax Deductions that Most People Miss. I hope that this article can help you better understand what you can claim to increase your tax refund.

If you have any question, free feel to email us at admin@privatewealthaccounts.com.au or call us at (03) 9973 5905. We are here to help.

tax-refund

5 tips to maximise your tax refund

The best way to maximise your tax refund this year (and every year for that matter) is to make sure you claim everything that you are entitled to. The greater the tax deductions you claim, the larger your refund is likley to be.

Below are a few helpful hints and tips on how you can go about claiming the deductions that you are entitled to.

1 – Be organised

car-expenses

In general, before you can claim a deduction, you must satisfy three basic principles:

  • You must have spent the money yourself;
  • The expenditure must be related to your income; and
  • You must have a record to prove the expense.

More often than not, the expense is not claimed simply because it has been forgotten. Either the receipt has been thrown out, misplaced or was never received.

There are many ways to keep track of your costs. Here are a few you can implement before completing your 2018 tax return:

    • If you have a lot of cash expenses, you will need to go through all your receipts and keep all the ones that relate to the earning of your income. For example, this could be fuel for your car, materials/tools for work, stationery, books etc. Nowadays, there are many free apps you can use to scan and store them online or on your phone. And even though it is 2018, we find keeping receipts and invoices in folders or boxes still works just as well.
    • If you have a lot of expenses on your bank/credit card, every month, you should go through your statements and highlight all the work-related transactions. Come tax time, you will have a neat and simple record of all your expenses. If your statement does not show the supplier’s name or a description of the purchase, you must write these details in yourself.

2 – Claiming your car travel

Car travel expenses are some of the most incorrectly claimed deductions and, as a result, the ATO will be placing extra attention on taxpayers who claim these expenses in 2018.

A lot of people mistake traveling from home to work as a deductible expense. This is not the case and should not be claimed in your tax return.

However, there are many situations where claiming your car travel is perfectly allowable. These include:

      • Traveling between workplaces/worksites
      • Traveling to client meetings, training sessions, seminars etc
      • Traveling to and from work if you must carry bulky tools/equipment and cannot store them at work
      • Carrying private patient files and other sensitive materials between home and work

If you’re using your car a lot for work, it is best practice to keep track of all your car expenses (fuel, repairs, registration, insurance, tolls, parking etc). Keeping a logbook is also essential to maximising your car claim.

3 – Claiming your home office expenses

In today’s society, many people find themselves working longer hours. This trend often results in working additional hours from home both after hours and on weekends. This is especially true of small business owners who, more often than not, are burdened with record keeping for their business.

Depending on your personal situation, you may able to claim a proportion of costs such as:

  • Rent or mortgage interest
  • Gas and electricity
  • Internet and home phone
  • Home office stationery and furniture

The types of expenses that you can claim, and the amount you can claim are dependent on whether you work solely from home, or whether you only work part time/nights from home. It also depends on the type of work you do and the whether you have a dedicated space at home used solely for work.

4 – Charities and Donations

Another expense that is often forgotten are the donations made during the year.

Donations are given out of kindness and dedication to a cause, and we often don’t think about the tax benefits we can receive for our generosity. Nevertheless, the Australian Government reward your kindness with a tax deduction.

One of the most overlooked deductions within this category are school building fund contributions. If your child is enrolled in a semi private, fully private or catholic school, these contributions could add up to thousands of dollars per year. Keep a record of these payments and the invoices provided to you by the school.

To be able to claim donations to a charity, the payment must satisfy a few conditions. They are:

  1. The donation must be $2 or more;
  2. You must have a valid receipt/invoice;
  3. The charity/organisation must be a Deductible Gift Recipient;
  4. The donations must be monetary or a financial asset (eg you can donate a car and claim a deduction in certain circumstances. But you can’t get a deduction for donated clothes).

5 – Other work-related expenses

Different occupations have different expenses that are able to be claimed. Generally, deductions are occupation specific. For example, a doctor will claim different deductions to an electrician, and a plumber will incur different expenses to a teacher.

There are many small expenses that you incur for work which add up over the course of the year.

Some expenses are more obvious than others such as tools, seminars/training and so on. But some are missed like your mobile phone expenses, stationery, memberships/subscriptions etc.

If you incur an expense related to your work, then more often than not, it will be deductible.

As always, keep track of all these expenses and come tax time we will assist you in maximising your tax deductions.

Find out more

Listed here are a small sample of what you might be able to claim.

For more information on what you are entitled to and to maximise your tax refunds, please speak to us and we can steer you in the right direction.

contributions

Super concessional contributions: beware of going over the limit

If you are either an employee or a self-employed person and you top up your super by making deductible contributions, you need to be aware of not breaching the annual $25,000 concessional (before-tax) contribution cap. If that happens, your tax bill will increase, not to mention the administrative inconvenience you may face.

As an employee, your employer is obliged to pay you the 9.5% of Superannuation Guarantee Contributions (SGC), which count as concessional contributions. So if you are a high-income earner, especially, with more than one employer (eg, a doctor working for more than one hospital) you could risk going over the limit.

“You could also be in danger of reaching the cap if you, as an employee, have salary sacrifice arrangements already in place from last year when the annual concessional cap was higher ($35,000 or $30,000 depending on your age).”

Given that the annual cap was lowered to $25,000 (regardless of age) from this 2017–2018 year, it is advisable to review your current arrangements and adjust your contribution amounts so you don’t inadvertently contravene the new lower cap.

What exactly are concessional contributions?
Concessional contributions are those made to a super fund out of an individual’s pre-tax income and are taxed at 15%.

Generally, concessional contributions include:

  • Employer’s super guarantee contributions, that is, the compulsory 9.5% of your salary that your employer puts into your super.
  • Salary sacrifice payments made to your super fund by entering into a salary sacrifice agreement with your employer.
  • Personal contributions, for which a deduction has been claimed, typically, if you are self-employed.
  • Insurance premiums and administration fees when your employer paid those costs to your super fund on your behalf, rather than these being deducted direct from your super fund.

What happens if the limit is breached?

If you go over the $25,000 concessional contributions cap, whether deliberately or unintentionally, the ATO will send you an excess concessional contributions determination, which indicates that:

  • The excess contributions will be included in your assessable income and you will be taxed at your marginal tax rate (plus Medicare levy).
  • You will receive a non-refundable tax offset of 15% for your excess concessional contributions. This amount acknowledges the tax already paid by the super fund on those contributions. (Remember: concessional contributions are taxed at 15% when received by the super fund.)

You will need to pay an “excess concessional contributions charge” (ECC charge) at an approximate rate of 4.70% (the rate is updated quarterly). The ECC charge period is calculated from the first day of the income year to which the charge relates, ending on the day before the day on which payment is due under the first notice of assessment.

Making the election

After receiving the excess concessional contributions determination, you can choose to pay the tax bill from your own money, or use a release authority issued by the ATO to pay the debt using you superannuation money.

However, before paying the excess, contact us, or your superannuation fund, to confirm that there was an excess of contributions and that this was not a mistake. There could also be a narrow possibility of challenging the excess based on “special circumstances”, but do speak to us first to evaluate your position.

The release authority allows you to use up to 85% of the excess concessional contributions from the superannuation fund to cover the additional personal tax liability. The election to release must be made in the approved form within 21 days of receiving the excess concessional contributions determination.

Once you send the election form to the ATO, it will issue the nominated super fund with an excess concessional contributions release authority. The super fund will then be required to pay the amount to be released to the ATO within seven days. Due to the short seven-day timeframe, trustees of self-managed super funds (SMSFs) should ensure that they have sufficient cash to make the expected payment on time. Note that administrative penalties apply for failing to make a payment to the ATO.

Talk to us first

There are various practical things you can do to avoid paying additional charges. However, talk to us first before making any decision about your super.