Deductions – Individual Tax Return

Most people understand the basic tax components of income and expenses, however, what some of you may not know is what you are able to specifically claim as a deduction. Here are some helpful tips on some deductions you may not be aware of but are eligible to claim.

1. Laundry – work-related washing, drying, ironing and laundromat costs can be claimed up to a maximum of $150 where total work expenses exceeds $300 for the financial year.

2. Home Office – where you perform work from a home office, costs incurred in running the office are deductible. Office equipment including electronics are deductible, however the cost of the item will determine the type of deduction available. Work related phone calls and internet usage can also be claimed along with heating/cooling, lighting and cleaning expenses to the extent they are used for income producing purposes. A set rate is used to calculate the latter expenses based on the number of hours used.

3. Self-Education – you can claim a deduction for self-education expenses when your course of study is directly connected to your current employment.

4. Work Assets – you may be able to claim a deduction for tools and equipment you use for work. Items that cost $300 or less may be claimed immediately.

Construction Industry – Reporting Requirements

A change to the reporting requirements for businesses in the building and construction sector became a reality on July 1, 2012.

The new ‘Taxable Payments Report’ will require operators to report on certain payments made to contractors. The Tax Office says data from the Taxable Payments Report will improve compliance and detect contractors who have either not lodged returns or not included all of their income.

Who is affected?

The additional payments reporting burden will fall mostly upon:

– building and construction businesses – required to report on payments made to contractors they engage, and

– contractors working in the construction industry – required to report on payments made to sub-contractors they engage.

What needs to be included

The business will be required to report actual payments made to contractors, and include the following details:

– the contractor’s name*

– their ABN

– the contractor’s address

– total amount paid or credited to the contractor over the income year, and

– whether any GST has been charged.

*A contractor can be an individual, partnership, trust or company.

It will not be necessary to report payments which are subject to PAYG withholding.

The Tax Office maintains that all the details needed for the Taxable Payments Report will be contained in the invoices a construction business receives from its contractors – that is, the sort of information which businesses will already be keeping in their business records under existing tax law.

A construction business is not required to report on payments where the invoices are for goods only, such as building supplies and materials. However where there is a mixture of labour and goods, the whole amount must be included.

ATO Email Scams

phishing email claiming to be from the ATO is currently circulating.

The email claims that the recipient is entitled to a tax refund and states they should click the embedded link and complete the online form.

Do not click on the link in the email as it opens a fake webpage that will attempt to obtain your tax file number.

The ATO will never email you asking for personal or credit card details and you should never provide this information. If received you should delete the email immediately.

When accessing our online services, only do so by typing directly into your browser.

Please visit the ATO website for more information http://www.ato.gov.au/General/Online-services/In-detail/Online/Online-security/

Contribution Clarity

Knowing how much money you can contribute to your superannuation is one of the most important aspects of a retirement savings strategy. With several changes of government and countless shifts in attitudes toward super over the last few years, the situation has only become more confusing.

Super contributions are separated into two categories, Concessional Contributions and Non-Concessional Contributions. Another way to consider these is contributions that you have claimed a tax deduction for, and those that you have not. Contributions made by your employer are concessional contributions as you have not been taxed on this income in your personal tax return.

The limit on Concessional Contributions is the source of the most confusion, having changed multiple times since 2009. The following table outlines the contributions cap over the 2012, 2013, and 2014 Financial Years.

It is important to remember that only the self employed or the substantially self employed (at least 90% of income from business) can make Concessional Contributions out of their own pockets. If you are a salary and wage earner who would like to increase their contribution to super, you can do so by salary sacrificing a portion of your income.

What are the consequences of exceeding the cap?
In the past, a member who exceeds the contributions cap has had to pay tax of 46.5% on the entire contribution. However, from the 2014 Financial Year onwards, the ATO has stated that it will allow members to withdraw any excess contributions and simply pay their marginal tax rate as well as an interest charge. Regardless, it is important to keep these limits in mind when formulating a retirement savings strategy.

If you have any questions regarding your superannuation or contribution limits, feel free to contact the superannuation team here at CNS.

Stay tuned on the Blog in the new year for more information regarding Non-Concessional Contributions.

What’s the Plan after Christmas?

The festive season is upon us and hopefully a good time will be had by all. Inevitably thoughts will then turn to the obligatory New Year’s Resolutions. Whether you consider promising to lose weight, get a better job, or be nicer to your mum, most people make an effort to assess their current situation and look at ways to improve their lives. But what about a long term plan? How far ahead do we really think and actively prepare for?

Now would be a perfect time to set some long term goals so that our hard work counts for something! When you sit down to prepare the wish-list for the New Year, ask yourself some questions like:

– When would I like to retire?
– How much money will I need to be comfortable?
– What will happen if something goes wrong (eg health)?
– Why can I not seem to get ahead?
– Where can I find the amount of money needed to retire?

We all need a plan. Very few people are lucky enough to win lotto, inherit fortunes or earn so much money that it simply doesn’t matter. The exciting part about living in Australia is that we all have the opportunity to live comfortably if we plan, prepare and manage the process, ideally over a long period of time.
If you would like to plan ahead and set yourself or your family up for life, now is the time to start. If you would like our help in this process, talk to Alan King about how we can work with you to achieve your goals. Until then, enjoy the Christmas cheer guilt free!

Christmas Deductions

With summer well and truly upon us, many business owners will be spreading the Christmas cheer with staff and clients. With this in mind, it is important to consider the possible tax implications of providing these benefits.

Generally the cost associated with having a Christmas party is not deductible. The only exception is where Fringe Benefits Tax (FBT) is paid on the expense.

Are your gifts entertainment? That is the question you need to answer to ascertain if your gifts are tax deductible. Gifts not considered to be entertainment are often; hampers, wine, vouchers (not for entertainment), perfume, flowers etc.
1. Where these gifts are provided to employees at a cost less than $300, no FBT is payable and a deduction is allowed for income tax purposes.
2. Where the cost is greater than $300, FBT is payable and a tax deduction is allowed.
3. Where these types of gifts are provided to clients, no FBT is payable and a tax deduction is allowed.

Gifts often deemed to be entertainment include; tickets to attend performances, sporting events, holiday tickets etc.
1. Where these types of gifts are provided to employees at a cost less than $300, no FBT is payable and no tax deduction is allowed.
2. Where the cost is greater than $300, FBT is payable and a tax deduction is allowed.
3. Where these types of gifts are provided to clients, no FBT is payable and no tax deduction is allowed.

To seek any clarifications on the deductibility of your Christmas expenses, please contact the staff at CNS Partners.

Selling Your Business – Capital Gains Tax Concessions

Nearing the end of the year many self- employed people stop to contemplate the new year ahead. For some 2014 may be the year that they decide to sell their business. Reasons for this decision could include retirement plans, a business transition to the new
generation, an underperforming business, ill health or just the need for a change. Fortunately some significant Capital Gains Tax (CGT) concessions may be available to help you achieve the best after-tax sale result.

The value of these concessions can have a major impact on the after-tax sale value of your business. It is well worth investigating your eligibility before listing your business for sale.
There are four small business CGT concessions that may be available:
1. small business 15-year exemption
2. small business retirement exemption
3. small business 50% active asset reduction
4. small business rollover
To be eligible for these concessions, the taxpayer must, along with related entities:
 – have annual turnover of less than $2 million and run a business, or
 – have net assets of less than $6 million excluding the family home and any superannuation benefits.
Depending on which concession is available the result can be a capital gains tax free sale or a sale with a greatly reduced capital gains tax debt. Utilising the concessions can also be a great way to put more money into superannuation.

If you would like more information on the small business CGT concessions or you are thinking of selling your business and would like to know the possible tax consequences please contact CNS Partners.

Small Business Christmas Spending Splurge

Changes to instant asset write off and accelerated motor vehicle depreciation

The Government has announced that, due to the abolition of the mining tax, certain tax concessions will also go along with it.

The one that will affect small businesses, those with an aggregated turnover (annual turnover from you, connected entities and affiliates) less than $2 million, is the scrapping of the instant asset write off and accelerated depreciation for motor vehicles.

From 1 July 2012, the instant asset write off meant assets costing less than $6,500 could be claimed outright. The accelerated depreciation was a $5,000 up front deduction of the cost of new motor vehicles with the remaining cost being depreciated.

What does this means for you?

You must act fast. These tax concessions are now only available on new plant and equipment and motor vehicles purchased and installed ready for use by 31 December 2013.

If you have not purchased any new assets this year, a Christmas splurge could provide additional tax savings for the 2014 financial year. The good news is the $6,500 is per asset, which means to be eligible each individual asset has to be less than $6,500.

There are also benefits for second element costs. These are costs that come after you already hold the asset and could include improving the asset or transporting it from another location. If a second element cost is less than $6,500 it is also eligible for the immediate write off. These amounts, however, do not have to be installed and ready for use by 31 December 2013, although the investment must have been made. For example you must hold an invoice prior to 31 December 2013 for the works.

Key Points:
1.  Small Business Entity
2.  Capital expenditure under $6,500
3.  Installed before 31 December 2013
4.  100% deductible this year

Please contact CNS Partners should you wish to discuss the above.

Changes to how super excess concessional contributions are taxed

Excess super concessional contributions made from 1 July 2013, will be included in an individual’s assessable income and taxed at their marginal tax rate. As part of the assessment process clients will receive a non-refundable tax offset of 15% of their excess concessional contributions along with an additional excess concessional contribution charge.

To assist payment of the additional tax and charge, individuals can request up to 85% of their excess concessional contributions to be released from their super fund. When released from the fund, it is not counted as non-concessional contributions.

For the 2011-12 and 2012-13 financial years only, individuals with excess concessional contributions of $10,000 or less may receive a once only offer to refund their excess concessional contributions. If refunded, the amount is still assessed at their marginal tax rate rather than pay excess contributions tax.