Tax Planning for Individuals - Part 2
In our last post we discussed all the tax return items an individual needs to prepare prior to the end of the financial year. (MIss it? Catch up here). This post deals with strategies and practices that can be implemented after the end of the year, at the time of preparing your tax
Tax Return Preparation Time – Be Organised with your Documentation!
SUPPORTING DOCUMENTATION. Work related Deductions can only be claimed if you have supporting documentation. Keep your receipts and if you have a Tax Agent preparing your return provide them with a summary of your claims with explaining notes and / or questions. This will save the Tax Agents time and reduce the cost! Most Tax Agents work on a time basis so being organised will reduce the cost.
DOMANE GOLD TIP:
The Tax Office have indicated that for this 2018 year they will be paying particular attention to Car travel claims, home office, clothing and laundry claims.
CAR RUNNING CLAIMS FOR WORK.
This is often the largest work-related claim therefore the Tax Office will be looking closely at these claims. If you have substantial use of your car for work you must complete a log book at least once every 5 years. And complete a new log book if your work use changes substantially
The logbook must cover 12 continuous weeks.
DOMANE GOLD TIP: You can choose the 12 weeks of the year that gives you the best result!
Note that travel between your home and place of work is generally considered private travel and not part of work related travel.
Where your car use for work covers less than 5,000 kilometres over the year you may choose to use the concessional method of .66cents per kilometre. You do not need a log book for this method but should be able to show how you kept track of the kilometres eg. diary notes.
RESIDENTIAL RENTAL PROPERTIES.
A few new rules apply for 2018 year. NEW TAX TRAPS o From 1 July 2017 you are no longer able to claim travel expenses relating to a residential property investment. Previously travel costs to inspect the property were deductible. But not for 2018 year. o Also, you cannot claim depreciation on second hand furniture, fixtures and fittings acquired after 9 May 2017 (2017 Budget night). For example, no depreciation on these items for a residential investment property purchased after 9 May 2017. o These new rules only apply to residential property (not commercial) held by individuals (not companies or Trusts). Also, they do not apply to residential property held before 9 May 2017.
TAX OFFICE INCREASED DATA MATCHING INFORMATION.
The Tax Office gathers information on taxpayers by matching your Tax File Number against databases of information that are provided to them. They gather this information into a ‘Prefill’ statement which they can later match against the information in your tax return
Each year the Tax Office has been able to gather more data matching information on taxpayers. For 2018 year, the Tax Office will receive new information on the disposal of shares and property, foreign source income, ride sourcing income eg. Uber.
The Tax Office have signalled that for 2018 year they will be looking closely at claims.
KEEP YOUR RECORDS FOR FIVE YEARS
You are required to keep your records for five years from the date of lodging your tax return
And note the tough substantiation rules when claiming work related expenses. The expense must be ‘necessarily incurred in earning your income and not be of a private or domestic nature’. The expense must pass both of those tests.
The Tax Office say you need to ask yourself the question – “Would your employer confirm that the expenses were required to earn your income”
You must have written evidence to prove claims if the total work related exceeds $300. The records must prove the total amount, not just the amount over $300.
The $300 limit does not apply to claims for car expenses, meal allowance, award transport payments allowance, or travel allowance expenses. There are special written evidence rules for substantiating these types of expenses.
And there are a few concessions with substantiation for minor expenses of $10 each or less, providing the total of these expenses is not more than $200
Another minor concession is where you have been unable to obtain written evidence, for example, for toll or parking fees where a receipt cannot be obtained.
DOMANE GOLD TIP:
The Tax Office have a useful download app for claiming work expenses.
Go to My Deductions ATO.
BEWARE OF SCAMMERS!
Tax time is a popular period for scammers to target individuals and businesses. Keep yourself one step ahead by being aware of these scams. Note for example that the Australian Taxation Office (ATO) will never email you and ask for your bank details or tax file number (TFN).