A tax refresher on personal tax
With the end of the tax year on the horizon and the May budget likely to bring further changes in tax legislation, the team at Wilson Teis decided it was time for a refresher on some of this year’s changes, as well as some key areas that taxpayers need to be on top of by the end of this financial year on 30 June 2016 (FY2016).
Motor Vehicle Makeover
FY2016 sees a big change in the available methods for claiming motor vehicle deductions, with only two of the four previously acceptable methods now allowed by the ATO.
Cents per Kilometre Method
Deductions are calculated on a set rate per kilometre travelled, up to a maximum of 5000 kilometres in the tax year. Where previously there were different rates for different engine sizes, from FY2016 there is only one rate: 65c per kilometre.
Deductions are calculated on a set rate per kilometre travelled, up to a maximum of 5000 kilometres in the tax year. Where previously there were different rates for different engine sizes, from FY2016 there is only one rate: 65c per kilometre.
This method can only be applied if your vehicle has a TARE of less than one tonne and can carry no more than nine passengers and although written evidence isn’t required, the ATO may ask for an explanation of how you calculated the specific amount of your deduction.
Log Book Method
Work-related travel deductions are calculated using logbook records and must be supported by evidence of fuel and related expenses including receipts or odometer readings.
If you use this method you need to maintain a logbook for a continuous period of 12 weeks in the first year, and it should be a representative period of travel for the tax year.
This logbook is then valid as the basis of deductions for five years, provided your work-related travel doesn’t change by more than 10 per cent, and your job remains the same.
Work-related travel deductions are calculated using logbook records and must be supported by evidence of fuel and related expenses including receipts or odometer readings. If you use this method you need to maintain a logbook for a continuous period of 12 weeks in the first year, and it should be a representative period of travel for the tax year.
This logbook is then valid as the basis of deductions for five years, provided your work-related travel doesn’t change by more than 10 per cent, and your job remains the same.
A logbook should include:
- The period covered by the log book
- Odometer readings at the beginning and end of that period
- Total kilometres travelled for the logbook period
- Total kilometres per business journey
- Business-use percentage for the logbook period – entries can be limited to business only
- Odometer entries for the start and end of each subsequent income year you rely on the logbook for your calculation
You can pick up a log book from a local stationers or newsagent if you are planning to use this method.
Remember taxpayers are no longer allowed to calculate deductible amounts using the one-third of actual expenses method (where no log book was required), or the 12 per cent of vehicle cost price method.
No More Medical Offset
The net medical expenses tax offset has been phased out and FY2015 was the last year most eligible expenses could be offset against tax.
Three exceptions remain until FY2019 are:
- Disability aids
- Attendant care
- Aged care expenses
Don’t Forget to Document!
Work-related claims regularly come under scrutiny from the ATO so you need to be able support deductions with invoices or receipts.
Although claims up to $300 without receipts are accepted, anything over $300 and you need receipts for the full amount. For small items, such as parking, where a receipt is difficult to get hold of the ATO will accept a diary record up to a limit of $200, as long as you make a note of the same information usually found on a receipt. And remember eligible expenses actually need to have been paid before you can claim a deduction, and unsupported claims up to $300 still need to be for eligible expenses.
Laundry and work-related clothes
It’s a popular misconception that laundry costs for any clothes you wear to work are eligible for a tax deduction. In fact only the laundry costs of protective or safety clothes or those bearing a company logo are eligible.
Keep receipts for eligible laundry costs over $150, and remember those costs will be part of your $300 limit for unsupported work-related expenses even if you do have receipts for them.
Keep it ‘Reasonable’ with Food and Travel
If you get a meal or travel allowance as part of your salary award its tax deductible up to a maximum reasonable amount without the need for receipts, but you can only claim what you actually spent. If you are planning to claim any more than the reasonable limit then keep receipts.
If you’re unsure check your payslip for the number and amount of any allowances you have been paid to make sure you get the claim right. The ATO updates the eligible amounts annually in July.
Turn to Wilson Teis at Tax Time
Keeping up to date with tax legislation can be difficult when you’re running a business so it really does pay to get professional help at tax return time.
Wilson Teis has the skills and expertise to help you with all work-related aspects of your tax return. Wilson Teis is about people, we're trusted to provide real-world advice and expertise. Contact us today for a chat about how we can help you get the best outcome from your tax return.
