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Accounting and Tax

Charity Tax Deductions

Can items purchased from a charity organisation be claimed as a tax deduction?

No, because you are receiving goods, it is not classified as a donation. Raffle tickets from charity groups are also not deductible.

Education

Are Self Education costs tax deductible?

If the education is directly related to your current job, the costs can be claimed.

Family Tax Deductions

Can child care be claimed?

Child care expenses are not claimable as a tax deduction. You may, however, be eligible for Child Care Subsidy (CCS) which is generally paid directly to child care providers to be passed on to families.

Will I have to make any changes to my tax return now that I am married?

Each person that submits a return will need to disclose information about their partner, including income before and after the marriage. This is used to calculate entitlements such as family tax benefits and Medicare levy.

Am I eligible for the Family Tax Benefit?

The Family Tax Benefit is available for those who:

  • have a dependent child or secondary student younger than 20 years of age who is not receiving a Government benefit such as Youth Allowance
  • provide care for a child at least 35% of the time
  • meet an income test

General Tax

Why do I have to pay Pay As You Go (PAYG) income tax instalments when I also have to pay income tax at the end of the financial year?

PAYG income tax instalments are intended to cover your expected income tax liability for the current financial year. You only have to pay PAYG instalments if you earn business and/or investment income and generally, for individuals and trusts, only if you reported $4,000 or more of business and/or investment income in your last tax return. The ATO uses your most recent previous year’s tax return to estimate your income tax liability for the current year and then divides it into four quarterly instalments. In doing this, the ATO expects that at the end of the financial year your income tax liability will either be paid in full or there will only be a small amount still owing. Should your actual income tax liability be less than what the ATO estimated and you’ve paid more than you need to, you will be refunded the excess amount.

Click here for more details on PAYG Instalments.

Why is my June current Quarter’s PAYG instalment is much higher than the last my previous Quarter’s?

The PAYG Instalment amount is reassessed by the ATO every time you lodge your tax return. Therefore, if you have higher business/investment income in your recent tax return lodged in the period March to June, the ATO will readjust the instalment amount required and as a result you may find that the ATO asks for a higher amount for the June Quarter PAYG instalment.

This is to ensure that you will have already paid your estimated tax liability on your business/investment income before your lodge your tax return, to avoid a big tax bill “shock”.

For example, if your total tax paid in the previous financial year was $8,000, but you have only been paying quarterly instalments based on the year before (say $2,000), then the ATO change the amount for the June Quarter to be a top-up on that quarter for the whole year.

The quarters for the year to 30 June already paid may have been:

September Quarter $500.00
December Quarter $500.00
March Quarter $500.00
Total $1,500.00

Based on the tax assessment notice (which was issued in June quarter, before the June PAYG Instalment was released), then the ATO seeks a total PAYG of $8,000 for the year. That means that the last instalments for June becomes:

Total PAYG for Year $8,000.00
Less Paid for the first 3 quarters $1,500.00
Total PAYG for June Quarter $6,500.00

When should I register for GST?

As a business owner, you are required to register for GST if your business has a GST turnover (gross income minus GST) of $75,000 or more. GST turnover is your business’s gross income, not your business’s profit. You must also register for GST if you provide taxi or limousine travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover (this applies to both owner drivers and if you lease or rent a taxi) and, if you want to claim fuel tax credits for your business.

If you haven’t registered for GST and you become aware that your GST turnover will exceed the annual turnover threshold of $75,000, you are required to register for GST within 21 days of reaching the threshold.

If you don’t register for GST and are required to do so, you may have to pay GST on the sales you have made since the date you became required to register. This could happen even if you didn’t include GST in the price of those sales. You may also have to pay penalties and interest.

If your GST turnover is below the $75,000 per year threshold, registering for GST is optional.

You may choose to register for GST if your turnover is below the $75,000 threshold, however once you’re registered for GST, regardless of your business turnover, you must generally stay registered for at least 12 months.

Lodging Tax Returns

Does a tax return need to be done for someone who has died?

If a tax return was lodged the previous year, then a tax return is required to be submitted with details up to the date of death and is to be marked as ‘final’.

My employer has been deducting tax from my regular pay, so why am I still required to pay additional tax when I lodge my return at the end of the financial year?

This could be due to a number of reasons, including:

  • Your employer may not have deducted enough tax. This can happen when you are working more than one job at the same time and wrongly choose to claim the tax-free threshold on both of them. When this happens, both employers calculate your tax liability on the assumption that they are your only source of income. As this is not the case, the result is likely to be a tax bill at the end of the year.
  • You may have asked your employer to withhold PAYG tax, but neglected to ask them to withhold additional tax for your HECS-HELP loans. This likely to result in a tax bill at the end of the year.
  • Your employer may have withheld sufficient PAYG tax, but you if you received other income that hasn’t been taxed yet it, will be added to your tax liability. This may include dividends, money from the sale of shares, capital gains from the sale of property or passive income from another source.

When is my tax return due for lodgement?

If you are a client of AustAsia Accounting Services Pty Ltd and we prepare your tax return, it is generally not due until the 15th of May of the following financial year. For example, for the tax year ended 30 June 2020, your return is generally not required for lodgement until the 15th of May 2021. However, there are some exceptions to this rule. Using 30 June 2020 as the end of financial year for this example:

  • If you had a Self Managed Superannuation Fund in its first financial year of operation, its tax return would be due by 28th February 2021
  • For a medium / large tax payers, companies and SMSFs, the tax returns would be due by 15th January 2021 or 31st March 2021 for individuals.

Medicare Levy

Medicare Levy – I recently changed private heath funds because my new fund gives me a better rebate on Extras such as dental. Do I have to pay the Medicare Levy if I have Extras cover with a private health fund or do I need to have private hospital cover as well?

Unless you qualify for a reduction or exemption, all Australian tax payers pay the Medicare Levy. The amount you pay is calculated as 2% of your taxable income.
For more information on the Medicare Levy.

In addition, if you don’t have private hospital cover and earn over $90,000 as a single or $180,000 as a family, you will need to pay an additional Medicare Levy Surcharge. Up to date information on tiers and rates.

I have had a large pay rise, what can I do to avoid the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is payable where your income is over a threshold amount and you don’t have appropriate private health insurance. The threshold amount for a single taxpayer is currently $90,000 and for families with up to one dependent child is $180,000. If your income for surcharge purposes exceeds the relevant amount and you do not have private hospital cover, you will pay the surcharge.

Please note that the surcharge is in addition to the Medicare Levy and the MLS of 1%, 1.25% or 1.5% is levied on your taxable income, reportable fringe benefits, reportable super contributions and total net investment losses.

Therefore, to avoid the surcharge, we recommend for you to consider taking out an appropriate private health insurance cover.

Other Tax Deductions

Is there a limit that can be claimed as a tax deduction?

There is not a limit on deductions that can be claimed for any expenses related to earning an income that are work-related. Receipts will be required to verify the expenditure.

What is a valid receipt?

The ATO requires full details of the supplier, amount and date of purchased such as credit card slip, Bpay and email receipts. Description of goods purchase can be handwritten on receipt if required.

How long do receipts need to be kept for?

Receipts need to be kept for 5 years after the expense is claimed. For assets being depreciated, the receipt needs to be kept until the item is fully depreciated,which may be more than 5 years.

Can tax agent fees be claimed as a tax deduction?

Registered tax agent fees for managing tax matters and preparing a tax returned can be claimed as an expense. Travel to and from the tax agent can also be claimed (up to 5,000 km when using c/km per income tax return).

Reducing Tax Bill

I have started a second job – what can be done so that I don’t end up with a tax bill?

Some people with two or more jobs or other tax income may be caught in an unintentional tax trap as the problem occurs even if the taxpayer and employers do the right thing – as determined by ATO Tax PAYG scales. The first job attracts the tax-free threshold while second and subsequent jobs are taxed in line with the progressive tax tables supplied by the ATO. It causes taxpayers to be, in effect, under-taxed on their ordinary earnings, which can result in a tax bill at the end of the financial year.

Are there any additional deductions I can claim in my income tax return, to reduce my taxable income?

You’re entitled to claim deductions for some expenses, most of which are directly related to earning your income. To claim a work-related deduction:

  • you must have spent the money yourself and weren’t reimbursed;
  • it must directly relate to earning your income; and
  • you must have a record to prove it.

Common claimable deductions include tools, vehicle and travel expenses, mobile phone, internet, iPad and home office expenses. In addition, there may be expenses specific to your industry that you can claim. For example, if you work in the sun in the construction industry you may be able to claim sunscreen, sunglasses and hats that protect your skin from the sun. Industry memberships, education and other professional development expenses may also be claimable.

Please contact us for information specific to your individual circumstances.

Superannuation

What expenses/payments can be paid from my Self Managed Superannuation Fund?

Self Managed Super Funds can only pay expenses that are related to the operation of the Fund. Broadly speaking, fund expenses include accounting fees, audit costs, lodgement fees, investment advice fees, premiums for life insurance, total & permanent disablement insurance, critical illness insurance and income protection insurance, and other similar expenses.

Expenses related to the operation of the fund include any expense incurred as a result of the fund operating, such as the purchase of investments and expenses incurred by an asset already owned by the fund. For example, if a fund owned a rental property, all related expenses – loan repayments, interest, insurance, furniture, improvement expenses, or any other costs – could be paid through the SMSF. However, please note that these are general guidelines only, the rules regarding investments are strict and individual circumstances vary.

For this reason, it’s imperative to get expert advice on your specific situation. Please contact us for further advice.

Why is my Self Managed Superannuation Fund (SMSF) required to pay PAYG income tax instalments?

SMSF’s are required to pay tax on their income just like any other individual or company. The ATO now requires entities to pay their estimated year-end tax liability progressively throughout the four quarters of a year.

So, an SMSF will generally need to pay tax instalments if either:

  • The instalment rate the ATO has calculated is greater than 0% and the notional tax is $500 or more
  • The instalment income included in the most recent tax assessment is $2m or more

Tax File Number

How do I apply for a Tax File Number (TFN)?

Complete an online form [https://identityservice.auspost.com.au/ato/landing], print out, and then take to a participating Post Ofice or Services Australia centre along with proof of identification.

It can take up to 28 days to receive your TFN.

Work Tax Deductions

Can books or journals be claimed?

Books or journals that are used to keep your knowledge and skills up to date or help you perform your job efficiently can be claimed.

I have tools and equipment that are required for my job. What expenses can I claim on my tax?

An individual is able to claim any expense, including insurance and repairs, of tools used for earning an income. Any cost of an item greater than $300 will need to be depreciated. Receipts for claims are required and you can only claim the percentage used at work.

Published Date: Jun 5, 2020 | Last Modified: September 4, 2020