Year
End Tax Tips June 2016 for Employees – CPA Australia
Do you know what tax deductions and offsets you may be
eligible for? The following tips may help you legitimately reduce your tax
liability in your 2015-16 return.
Claim
work-related deductions
Claiming all your work-related deduction entitlements may
save considerable tax. Typical work-related expenses include employment-related
telephone, mobile phone, internet usage, computer repairs, union fees and
professional subscriptions. Note that
for the first time ever the ATO is checking these claims in real time. Claim only what you are legally entitled to
claim and ensure that you have all necessary receipts or credit card statements
to back-up your claims.
Claim
home office expenses
When part of your home has been set aside primarily or
exclusively for the purpose of doing work a home office deduction may be
allowable. Typical home office costs include heating, cooling, lighting costs,
and even depreciation of your office equipment.
To claim the deduction you must have typically kept a diary
for at least four weeks of the hours you worked at home. For more information
on home office expenses see www.ato.gov.au or your CPA Australia-registered tax
agent.
Claim
self-education expenses
Self-education expenses can be claimed provided the study
is directly related to either maintaining or improving your current
occupational skills or it is likely to increase your income from your current
employment. If you obtain new qualifications in a different field through
study, the expenses incurred are not tax deductible.
Typical self-education expenses include, course fees,
textbooks, stationery, student union fees and the depreciation of assets such
as computers, tablets and printers.
However, any Higher Education Loan Program (HELP)
repayments are not deductible. You must also disallow $250 of self-education
expenses, which can include non-deductible amounts such as child-care costs.
Claim
depreciation
Immediate deductions can be claimed for assets that cost
under $300 to the extent the asset is used for an income producing purpose.
Such assets may include tools for tradespeople, calculators, briefcases,
computer equipment and technical books purchased by an employee, or minor items
of plant purchased by a landlord.
Assets costing $300 or more that are used for an income
producing purpose can be written off over a period of time as a tax deduction.
The amount of the tax deduction is typically determined by the asset’s value,
its effective life and the extent to which you use it for income producing
purposes.
Maximise
motor vehicle deductions
If you use your motor vehicle for work-related travel,
there are now only two choices for how you can claim work related travel. If
your annual claim for kilometres travelled does not exceed 5,000 kilometres,
you can claim a deduction for your vehicle expenses on a cents per kilometre
basis. The allowable rate for such claims changes annually so you need to
obtain this year's rate from the ATO or your CPA Australia-registered tax
agent. Such claims must be based on reasonable estimates.
If your business travel exceeds 5,000 kilometres, you must
use the log book method to claim a deduction for your total car-running
expenses. You can contact your CPA Australia-registered tax agent to clarify
what constitutes work-related travel, and which of the above methods can be
applied to maximise your tax position.
Rental
property deductions
Owners of rental properties that are being rented out or
are ready and available for rent can claim immediate deductions for a range of
expenses such as:
interest on investment loans
land tax
council and water rates
body corporate charges
insurance
repairs and maintenance
agent's commission
gardening
pest control
leases (preparation, registration and stamp duty)
advertising for tenants
reasonable travel to inspect properties.
Landlords may be entitled to claim annual deductions for
the declining value of depreciable assets (such as stoves, carpets and
hot-water systems), and capital-works deductions spread over a number of years
(for structural improvements, like re-modelling a bathroom). It’s worth noting that the ATO has indicated
it is closely examining these claims again this year.
You can contact your CPA Australia-registered tax agent to
clarify if your expenditure is repairs and maintenance and can be claimed
immediately or improvements, which can be claimed over time.
Maximise
tax offsets
Tax offsets directly reduce your tax payable and can add up
to a sizeable amount. Eligibility for tax offsets generally depends on your
income, family circumstances and conditions for particular offsets.
Taxpayers should check their eligibility for tax offsets
which include, amongst others, the low-income tax offset, senior Australians
and pensioners offset and the offset for superannuation contributions on behalf
of a low-income spouse.
Proposed
changes to tax thresholds
The government has proposed to increase the threshold at
which the 37 per cent tax rate begins from $80,000 to $87,000. For those
earning above $80,000 this typically may present an opportunity to delay
earning income to the following year and bringing forward expenses to the
current year, however it is uncertain whether this proposed increase will
become law therefore we suggest that taxpayers be circumspect.
Be circumspect on superannuation The proposed changes to
superannuation announced in the Budget and the calling of the election make it
difficult to provide tips on what people should do with their super. Given the
uncertainty at the time of writing, it may be prudent to wait until further
detail is released on the proposed changes.
However, if your circumstances permit you may wish to
consider making the maximum allowed concessional contribution before
concessional contributions cap kick in. The concessional contributions cap for
the 2015-16 financial year is $30,000 if you're under 50 and $35,000 if you're
aged 50 or over. Concessional contributions
include any contributions made by your employer, salary
sacrificed amounts and personal contributions claimed as a tax deduction by
self-employed or substantially self-employed persons.
If you're making extra contributions to your super, and
breach the concessional cap, the excess contributions over the cap will be
taxed at your marginal tax rate, although you can have the excess contribution
refunded from your super fund.
High-income earners also need to be aware that the
contributions tax on concessional contributions is effectively doubled from the
normal 15 per cent rate to 30 per cent if their combined income plus
concessional contributions exceeds $300,000.
Importantly, don't leave it until 30 June to make your
contributions as your super fund may not receive the contribution in time and
it will count towards next year's contribution caps, which could result in
excess contributions and an unexpected tax bill.
A self-employed person will be able to claim their
contributions to a complying superannuation fund as fully tax deductible up to
the age of 75 in the 2015-16 tax year. However, such contributions will only be
deductible if less than 10 per cent of the total of a person's assessable
income, reportable fringe benefits or reportable employer superannuation
contributions is attributable to their employment as an employee. Such a
deduction cannot increase or create a tax loss to be carried forward. Employers
can also claim deductions for superannuation contributions made on behalf of
their employees.
However, please be aware that government is proposing a
$500,000 lifetime non-concessional contributions cap, effective from 1 July
2007.
Consider
the superannuation co-contribution
An individual likely to earn less than $50,454 in the
2015-16 tax year should consider making after-tax contributions to their
superannuation to qualify for the superannuation co-contribution if their
circumstances permit. The Government will match after-tax contributions fifty
cents for each dollar contributed up to a maximum of $500 for a person earning
up to $35,454. The maximum then gradually reduces for every dollar of total
income over $35,454 reducing to nil at $50,454.
Consolidate
your super
For most employees it makes a lot of sense to have your
entire super in one place. You'll reduce the amount of fees you're paying, only
receive one lot of paperwork, and you only have to keep track of one fund.
Consider consolidating the super funds you do have into one
fund. Compare your funds to work out which best suits your needs. Important
things to look at are fees and charges, the investment options available and
life insurance cover. You can look at past investment performance as well but
remember it is no guarantee of how the fund will perform in the future.
Once you've chosen the fund you want to keep, contact them
and they can help transfer the money from your other super funds.
If you've moved
around or changed jobs occasionally, your old super fund may have lost track of
you and you may miss out on some of your super when you need it. To find your
lost super check out SuperSeeker on the ATO website at www.ato.gov.au
Disclaimer
Every effort has been made to offer the most current, correct and clearly expressed information possible within this site. Nonetheless, inadvertent errors can occur and applicable laws, rules and regulations may change.
These materials on this website are general in nature. It is made available on the understanding that the JH Business Services & Taxation is not thereby engaged in rendering professional advice. Before relying on the material in any important matter, users should carefully evaluate its accuracy, currency, completeness and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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