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Tradespersons’ Tax Deductions

Everyone has the right to claim tax deductions in Australia. A tradesperson can definitely claim deductions so you can maximise your tax refund. If you’ve just heard about this good news, lucky you! We know it’s tiring to comply with all those tax requirements but saving money should be your top priority. So, here are a couple of tax tips to help you maximise your tax deductions as a tradesperson.

1) Tools and equipment qualify as tax deductions.

How much have you spent on your tools and equipment? You’ve probably spent a lot of money for that. Don’t worry, using them for your business or for your job is good. What’s even greater is that you can use them as tax deductions depending on how you run your business or job. There are different ways to claim your tools and equipment.

  1. The first method is if you are running your business – If you have the receipts, you can claim tax deductions by using the cost of your tools and equipment you bought for less than $30,000. The tools should be bought after April 2, 2019. Previously, the cost limit is $25,000 between January 29, 2019, and April 2, 2019, and $20,000 before January 29, 2019.
  2. The second method is if you are a self-employed tradesperson – This means that you can directly deduct the cost from your taxable income. Since you bought all your tools and equipment, this is the best thing you can do to save money as long as you have the substantiation.
  3. Third, if you are an employed tradesperson – You can only claim tools costing $300 as tax deductions in the year they were purchased and for the full amount. If the tools are more than $300, you have to write it off over the tools useful life ie claim depreciation.

Note that tools and equipment qualify under this section. Your computers, phones, printers, and tablets can be used as tax deductions as long as they are being utilised for your business or job.

Equipment that you use for a proportion of personal purpose, the proportion of personal use is required to be deducted.

2) Vehicles as tax deductions

Yes, your vehicles can be used to maximise your tax deductions too! Just imagine spending a good amount of money for your ute or van. The cost may be prohibitive for some tradespersons but since you can claim it, no need to worry. If you use the vehicles for your business or job, here are the ways you can claim them.

  1. For tradespersons who are running a business – the same rule for tools and equipment applies. If your van/ute/car costs < $30,000, you can claim it 100% write off (less any personal use). However, if it’s more than the threshold, you have to write it off over its useful life.
  2. For those who work for someone else eg an employee – you can claim the depreciation of your vehicle as tax deductions. But, keep in mind that you need a logbook of your usage, whether personal or private so the ATO can distinguish how much you can deduct. Your logbook is used for all your Vehicle deductions eg work-related expenses attached to the vehicle such as fuel, maintenance, repair, and so on.

If you are on business travel, you can also claim your 68c/km allowance every time you travel up to a maximum of 5000km. Remember that the distance between your home and work can’t be deducted unless your employer requested for you to carry heavy tools that you can’t leave at work.

NB: Yes you receive an immediate write-off for a vehicle/equipment purchased under $30,000, but when you trade-in the vehicle the amount of the trade-in is taxable income as it is recouped depreciation.

3) Work-related clothing as tax refunds

Work-related clothing also qualifies as tax deduction. If you are wearing a uniform or protective clothing, which is very common for tradespersons, keep the receipts so you can deduct the costs.

Aside from the cost of them, you can also claim your laundry, dry-cleaning expenses and repairs.

 

Sounds interesting?

However, the ATO still evaluates the type of clothing being claimed. Some common types used by tradespersons as tax deductions:

  • Clothing that is made to survive work with dangerous conditions where normal clothing can’t be used.
  • Clothing that is designed to give protection like heavy-duty top and trousers. These types of clothing are unique from ordinary cotton drill trousers and shirts. Ordinary clothing cannot be used as uniforms.
  • Clothing that has a density of weave so to protect the worker from UV when the job is required to be done outside workplaces.
  • Protective clothing and footwear that give protection from injuries or illness.

Under this section, you can also claim fire-resistant clothes, gloves, hardhats, safety coloured vests, steel-capped boots, overalls, heavy-duty shirts and trousers, non-slip safety shoes, and required uniform with your company’s logo.

4) Laundry and dry cleaning of your uniforms and protective clothing.

Good news! You can now claim your laundry and dry-cleaning expenses for uniforms and protective clothing that qualify as tax deductions. If the total amount of your expenses reached $150 or less and your total work-related expenditures are $300 or less, no need for receipts. You can claim them right away.

If you are doing the laundry yourself, you need to keep this in mind: $1 per load claim if you are washing, drying, and ironing and $0.50 if there are other items other than uniforms and protective clothing.

5) Unusable items as tax claims

In addition to the above items, you can also claim any unusable, damaged, or obsolete items that are left on the site where you did your job as a business or as a tradesperson. You can write off the cost before the end of the year so you can maximise your tax deductions. Under this claim, you can deduct the cost of items that the customers did not pay for. Write off should be done by June 30.

 

 

To know more about claiming a tax deduction for any of your expenses, or for help filling out the paperwork, please get in contact with us at support@smbaccounting.com.au or P 1300 854 159.

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Maximising your Tax Deductions | Minimising your Tax Payable

Maximising tax deductions is every business’s/taxpayers’ goal. This is one way you can save from paying higher taxes than you need. But, let’s face it, this is one of the toughest things to do when you are running your own enterprise especially If you don’t know how the Australian Taxation Office (ATO) works.  So, is there any way you can avoid paying high taxes? Yes, there is! The greatest secret to counteracting this negative effect on your finances is to always keep your records. Your tax deductions will increase if you have more transactions with substantiation.

The Australian Taxation Office (ATO) has thousands of personnel who do tax collections. One way you can prove that you don’t have to pay all the tax they impose is to give them documents that support your claims, thus increasing your refund. If you can’t give them enough evidence, the ATO will keep their hands in your pockets. Note that claiming tax deduction without evidence is a big move and the ATO gets serious about it.

Don’t let ATO take away the money you’re supposed to count as yours. Don’t lose $$$’s like other Australians out there who don’t claim their tax deductions. You can do better than that!

Develop a habit of record-keeping

So to Maximise your tax deductions, the first step is to develop a habit of great record-keeping. It’s easy, just simply update your records with your receipts from your old to new transactions. Do not miss out on a single receipt! You need them all to claim your deductions so you won’t have to pay higher tax than necessary.

Take note, apart from proving your tax deductions, record keeping will save you a lot at tax time! If you have claims that make it questionable by ATO, you can simply hand them your complete receipts and show them that you are 100% ready no matter what happened.

Did you know that you can also use your receipts as references to your other business needs? Let’s say you are trying to estimate your income and expenses. Without these receipts, you won’t make a good outline of them. They serve as your support in case you need financial advice in the future. Record keeping is not just about saving tax time. It also helps you manage the other sides of your enterprise.

 

The next question is, what type of transaction receipts do you need to keep?

Type of transactions you need for tax refund

When keeping your records, you need to make sure that you are keeping the records of both your income and expenses. In this section, you will be given a list of the items that you may never had thought would qualify as tax deductions. Many Australians are failing to keep records of them for the mere reason that they don’t know that they could actually be used as deductions.

Let’s start off with your income. You must keep the records of your salary, any investment that you have, the dividends you receive from your investments, your managed funds, your allowances, and your rental income from your rental properties.

Some of the good records you can keep are your statement of income or earnings from your employer, funds manager, and real estate agent. Don’t forget to contact them for this document!

Next, you need to break down all your expenses into different categories. These are lists of items that can qualify as tax deductions:

 

  • Work-related travel – parking fees, tolls, personal car costs, public transportation fees, airplane tickets, general travel expenses, taxi fares, accommodation, meals.
  • General expenses – tax agent fees, charity donations, income protection costs, mobile phone usage
  • General work-related expenses – gifts, union fees, professional fees, license fees
  • Education expense – course fees, textbook fees, accommodation, meals, and professional fees for libraries and work related to magazines
  • Equipment purchased or leased for work – computer supplies, calculators, electronic organizers, computers, laptops, iPad, phones, mobile accessories, software, briefcases, carry-on bags, safety equipment, tools for the trade, technical instruments.
  • Home office expense – desks, chairs, office furniture, home utility fees, postage, stationery
  • Clothing – protective clothing, laundry of uniforms and protective clothing, uniforms
  • Costs of newly bought assets, expenses on rental properties and other investments, transactions of assets sold, and expenses related to attendant care, disability aids, or aged care.

 

Keeping of tax receipts

ATO recommends that you keep your receipts for 5 years under the following circumstances:

  • You recently claimed tax deductions for depreciation – you need to keep the receipt for 5 years from the date of your last claim.
  • You acquired or sold an asset – you need to keep your support for 5 years until after capital gains tax (CGT) is no longer required. You will need this document to calculate your capital gain or loss.
  • You are disputing about certain transactions with the ATO – you need to keep the documentation for 5 years after the dispute has been completed.

The era of digital technology, most records can be kept electronically and therefore will be usually kept indefinitely

At least 2 years of safe record-keeping is needed for taxpayers who have simple tax transactions generally Salary Wage employees

How to develop a habit of record-keeping

1) Always get a receipt

Whenever you are buying something or doing a transaction that has taxes, you need to ensure that you get an equivalent receipt of the expense. Even without categorising the expense, you can assess later on if the expense can qualify as a tax deduction or not. Keep in mind that without a receipt, you can’t file for tax deduction.

 

2) Keep a copy of your receipts

Some receipts will fade and you will lose some in the process of record-keeping. What you need to do is to keep a picture or scanned copy of the receipts after getting them. A soft copy will help you preserve the information in that document.

 

3) Organise your receipts

If you can organise your receipts in a chronological manner (date order or expenses category eg petrol receipts), just do it. You can either arrange it from oldest to newest or from newest to oldest depending on your preference.

 

4) List down your deductions

List down all your expenses and sum them up. You will have to categorise them this time based on the list of deductibles above. Do this regularly so you won’t face big job at year end tax time.

 

To know more about claiming a tax deduction for any of your expenses, or for help filling out the paperwork, please get in contact with us at support@smbaccounting.com.au or P 1300 854 159.

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Are you behind in your tax returns?

This article explains to you the simple steps to take to catch up on outstanding tax returns or late tax returns. With the right assistance, you could be up to date with all your refunds within a month

 

1.   Find out how many years of tax returns are overdue

Best to contact your accountant and ask them to check your lodgement status. If you don’t have a current accountant send our office a message https://www.smbaccounting.com.au/contact/and one of our accountants will be in contact to discuss as tax agents, we have more access to your tax records via the tax agent portal. This is a 2 minute job where we can look back to 2001 to see which returns are outstanding.

 

2.    You may not need to lodge a return at all!

You need to lodge either a tax return or in many circumstances a non-lodgement advice as long as certain conditions are met eg your income was less than the tax free threshold and you had paid no tax.

Again your accountant can advise you on whether any conditions apply to your circumstances https://www.smbaccounting.com.au/contact/

 

3.    Get all your paperwork together

This is the most overwhelming step for most, and this is where we can assist as accountants by providing your ATO prefilling report. This is a report where the ATO collects information from various sources by matching up your Tax File Number.

Prefilling reports are available from 2007 onwards, however you will still need to collect your receipts if you wanted to claim any deductions. Just remember though, some deductions are available without substantiation which your accountant can assist you with https://www.smbaccounting.com.au/contact/

 

4.    Complete your returns

An accountant can prepare the returns for you as our software backdates to the year 2000, if not further beforehand. Otherwise you would have to manually lodge prior years and this can take a lot longer to finalise.

 

Your refunds could be back in your bank within 2 weeks!

 

If you are a business,  have outstanding returns and financial statements to prepare and you are avoiding due to the cost of getting them done, we will allow that cost to be paid over a 12 month period!

Contact SMB Accounting now! Phone 0437 726 731 or https://www.smbaccounting.com.au/contact/

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Six key requirements for tax compliant invoicing

There are a number of critical parts to your invoicing in order to make sure your invoices are tax compliant.

What are the must haves?

  1. Ensure the words ‘Tax Invoice’ are prominent
  2. Clearly display your full business name and address
  3. Your ABN (Australian Business Number) must be on the document
  4. The date of invoice is displayed
  5. The description of the product purchased by your customer, quantity and of course the price
  6. Display the total and the GST amount. You have 2 options of how to display this.
  • Display the GST separately and then the total value of what is sold (including GST) – Called a GST Exclusive Invoice
  • Total price of sale (including GST) with the wording “Total price including GST” – Called a GST inclusive invoice

 

NOTE: If you have sales of more than $1000 on your tax invoice you are also required to add your customer’s identity and their address or ABN.

 

If you would like any further information, please do not hesitate to conact our office 0437 726 731

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Interest Earned from the bank…

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If you have any money in a bank account, more than likely you have earned an amount of interest on your money. This interest is required to be declared in your tax return as part of your Taxable Income for the year.

The ATO compares the amount you have declared with the amounts reported by the banks to the ATO directly. If there is a difference, they will adjust your income, and this usually happens many months after you have received your refund. This adjustment may result in tax to pay to the ATO and will include a penalty as well as interest to be paid.

Therefore, it is important to ensure all the amounts of interest earned are declared in your Income Tax Return. SMB Accounting can easily ensure this when completing your return by using data available from the ATO

How to find out your interest amounts…

Usually you will receive a statement from your bank or institution which details the amount of interest earned on each account held with that bank. If not, you can always check your internet banking or go to the branch itself

Joint accounts…

If you have a joint account with a family member or an associate/friend remember to only include your share of the interest earned which is usually 50%. Eg if your joint account with your spouse earned $300 interest, then each of you would include $150 (50% of $300) in your tax returns.

Do not deduct account keeping fees from the interest amount

Trusts, Partnerships or other sources of Interest Income….

If you have earned interest from any of these sources, they are returned in a different section of your tax return which SMB Accounting can complete this when compiling your return.

Failure to provide a tax file number…

When opening a bank account you would have had the option to provide a tax file number (TFN) . If you didn’t provide your TFN, the bank is obligated by the law to withhold tax from your interest payments. If this has happened, you will be provided with the amount of tax withheld on your interest statement and this amount is to be included in your Tax Return as it will be offset against other tax payable or be refunded.

This can become quite complicated, so if you are unsure whether you need to include your interest or any other questions on your tax return? Contact us on mailto:stephen@blakeaccountants.com.au and we can provide you with guidance and advice based on your own particular circumstances.

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Self-Education deductions…

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With most universities now back hard at the study and attending classes, it is a great time to look at the available tax deductions for your self-education expenses which you have and will incur into the future.

What are Self-Education Expenses?

These are expenses incurred in relation to courses provided by a school, college, university or other training provider that you personally undertake. You must be undertaking this course to gain a formal qualification in your current profession, business or trade in order to be eligible for any tax deductions.

You can only claim if there is a direct connection between the course you studied and your employment at the time

According to the ATO, you must satisfy ONE of these four conditions.

You need to be:

  1. Upgrading your qualifications for your current role.
  2. Improving your skills or knowledge used in your current role.
  3. A trainee and the course you take forms part of the traineeship.
  4. Able to show the course you were taking led to, or was likely to lead to, an increase in your current salary.

You cannot claim expenses if your intention is to change to a different job or you are looking at obtaining money from  different income stream eg starting a new business

Expenses you can claim

You can claim the following expenses in relation to your self-education:

  • accommodation and meals (if away from home overnight)
  • computer consumables
  • course fees
  • decline in value for depreciating assets (cost exceeds $300)
  • purchase of equipment or technical instruments costing $300 or less
  • equipment repairs
  • fares
  • home office running costs
  • interest
  • internet usage (excluding connection fees)
  • parking fees (only for work-related claims)
  • phone calls
  • postage
  • stationery
  • student union fees
  • student services and amenities fees
  • textbooks
  • trade, professional, or academic journals
  • travel to-and-from place of education (only for work-related claims)

Some travel for journeys cannot be claimed, but you may be able to offset the cost of these journeys against the $250 reduction.

$250 reduction

Self-education expenses are broken into five categories. If all of your self-education expenses are ‘category A’ items then you have to reduce your deduction by $250. Above are examples of category A items

However ‘category E’ expenses’ can be used to offset the $250. Some category E items are childcare costs, computer purchases and travel from place of study to home.

This can become quite complicated, so if you are unsure whether you need to reduce your claim on this year’s tax return? Contact us on stephen@blakeaccountants.com.au and we can provide you with guidance and advice based on your own particular circumstances.

 

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Your Most common Tax Deductions…

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With everyone now in the midst of compiling their information to complete their tax return or to give to their accountant/tax agent to complete, it is timely to be reminded of the common deductions available to most taxpayers.

  1. Mobile Phones

Almost everyone now uses a mobile phone for work purposes. Either calling a colleague or clients for information regarding your work performed as a convenience to you or the other person. Well, if you do, then you are entitled to claim the costs of those calls as a deduction. Remember though, you can only claim the costs of the work related calls, not private calls.

Example: if your mobile phone plan is $60 per month and you estimate that 45% of use is for work purposes, you can then claim 45% of $60 = $27 x 12 for the year, which equals $324 deduction

      2. Cost of Managing Tax Affairs

You can claim a deduction for expenses you incur in managing your own tax affairs, including:

  • preparing and lodging your tax return and activity statements
  • travel, to the extent it is associated with obtaining tax advice – for example, the travel costs of attending a meeting with a recognised tax agent
  • obtaining a valuation needed for a deductible gift or donation of property, or for a deduction for entering into a conservation covenant
  • an interest charge the ATO impose on you for any outstanding tax payable

generally these expenses are claimed in the year you paid for them

     3. Home Office Expenses Claim

If you ever have to do some work at home ie checking emails and responding, you may be entitled to claim deductions for home expenses including a computer, phone or other electronic devices you are required to use for work purposes, as well as a deduction for running costs.

As an employee, generally you can’t claim a deduction for occupancy expenses, including rent, mortgage interest, council rates and house insurance premiums. however as a self employed or home based employee, occupancy costs maybe a tax deduction.

How to claim these expenses can become complicated so best to contact SMB Accounting (Contact) and we can increase your tax refund.

      4. Claiming Work Related Car Expenses

You maybe required to use your own vehicle for work reasons which would enable you to usually claim fuel, maintenance and registration costs. Only two methods for calculating your deduction are available, either logbook method or cents per kilometre method.

the logbook method you are required to keep a logbook for a 12 week period to calculate the claimable percentage of your costs. Work-related kilometres are those traveled in a car you own while you earn your income eg driving between jobs. Cents per kilometre is an allowance of 66cents per work related kilometres up to a maximum of 5000km can be claimed

Example: if you traveled in total for the year 1254km for work, your claim would be 1254 x 66cents = $828 tax deduction

Depending on your circumstances, either method may result in a larger claim, so if you are uncertain contact SMB Accounting on our Contact page and we can help you out with which method is best for you!

These and many more deductions may apply to your circumstances, Contact SMB Accounting now and let’s increase your tax refund

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Company owners get ready for the price hike courtesy of ASIC..

imagesThe Australian Securities and Investments Commission (ASIC) has released details of the arrangements to be set in place to recover actual costs in performing their role as a regulator. Their costs for operating expenditure (excluding depreciation and fee-for-service activities) and capital expenditure will be recovered from the areas they regulate regulate.

All business which are regulated by ASIC eg Companies, are being encouraged to be conscious of the increase fees in this financial year 2017-18.

The new fees will begin to be billed by ASIC in January 2019 but will apply to this financial year and this is the reason it is imperitive that businesses be aware now.

For the larger listed companies, the annual fees will be calculated by a calculationinvolving their market value, whereas smaller listed companies under $5million will pay a fixed fee of $4000.

Small Proprietory companies are to be charged a flat levy, via an increase in the annual review fee for those companies from 1 July 2018. The amount of this increase to recover costs fro this sector is anticipated to be available later in the year in October.

If you have any questions in relation to these fees or other issues you may have, please message, email or call our office ph 1300 854 159

 

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End of Financial Year soon to be here

Another financial year comes to an end it is time to take stock of where you would like to go, where you have come from and the successes you have had throughout the last 12 Months.

Look at how you can improve and build on the successes of the past year.

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