Our range of clients varies from individuals to large companies. There are no ‘average’ clients, just as there is no ‘average’ tax return. There are a number of questions that we get asked regularly and we have compiled a list to assist you – however, every situation is determined on its own merits.
The FAQs cover the following areas:
The inheritance is not taxable unless you are advised by the executor that a part is taxable. However, if you invest the income from the estate then any earnings will be taxable.
No. All income must be declared by each recipient on the same basis as the accounts are held. Interest from a joint account must be split 50/50. You cannot declare it all on your wife’s tax return and doing so could lead to an ATO audit.
You must declare all interest from all sources no matter how small the amount is.
Since the 2012 income year, even if this is her only income, she will have to lodge a return. Prior to the 2012 income year a minor could have earned up to $3,333 from investments before any tax would be payable on that income. However, from 1 July 2011 the Government removed the ability of minors to access the low income rebate for unearned income (such as interest, dividends, rent, royalties, trust distributions etc.). This means that a minor who earns over $416 in unearned income must lodge an income tax return.
Personal exertion income (such as salary & wages) will still have tax payable on it, but that tax payable can be reduced by the low income tax offset but all unearned income will not attract the low income rebate and be taxed at minors’ rates.
You do not have to lodge a full tax return. You can complete the Refund of Franking Credits for Individuals form which can be lodged by telephone or mailed to the ATO.
If you believe this is incorrect you should contact your bank to verify the income details for your accounts. The bank should notify the ATO in writing if this information is not correct. You have 28 days to correct this information. However, if you have omitted the income, you will not need to contact the ATO. They will amend your return and send you a new assessment requesting payment of the additional tax, a general interest charge and, in some cases, penalties. If you require assistance with your communication with the ATO, AWT Accountants can help.
In most cases overseas pensions are taxable and, if you are an Australian resident, you will need to include the amount in your tax return. There are a few exceptions to this rule. Please call AWT Accountants if you are not sure.
All income must be declared. This is because the tax office needs to determine what tax rate applies to your other earnings for the year.
Centrelink will NOT be issuing PAYG Payment Summaries to taxpayers this year indicating how much income must be included in your tax return (taxable amount). You can access the information required from Centrelink online services, Express plus mobile apps and at self-service terminals at Dept. Human Services Service Centres. AWT Accountants can also look up the required information for you via the ATO Portal after 9 July 2013.
You may be entitled to an offset to ensure that no tax is payable on your benefit.
You will only have to pay tax on any earnings that you make from the time that you moved to Australia. If the money that you brought with you earns interest in a bank account you will have to pay tax on the interest.
You are able to claim expenditure incurred in replacing, insuring and repairing tools of trade that you use for earning your income. If the cost of any item is more than $300 then it will have to be depreciated (i.e. claimed over its effective life). The amount you can claim will depend on what records you have kept and to what extent you use it for income producing purposes.
If technical books, trade books or journals are necessary to fulfil your job function efficiently then the cost of their purchase is tax deductible.
A deduction is available for outdoor workers who buy sunscreen lotion, sunglasses and hats for use at work. The claim must be substantiated and apportioned for private use.
Your travel must be relevant to your job function for you to be eligible to claim a deduction for those expenses. Where this is the case, and you have the necessary documentation, you can claim the cost of transport and incidentals. If your travel involved an overnight stay you would be able to claim for meals. Travel overseas also has the requirement of keeping a travel diary.
A deduction will only be allowed if you have actually incurred a work related expense and have the necessary documentation. Travel to and from your job is generally not claimable unless, for example, you are carrying bulky equipment. Some awards allow for a payment of an allowance even though an expense is not necessarily incurred by the employee. If a deduction can be claimed it cannot be for more than the expense that you incurred even if the allowance that you have received was higher.
Installation costs are not deductible. However, part of the rental costs are deductible where a taxpayer is required to make calls from home. Call costs would be deductible and a log of calls must be kept for a minimum of 4 weeks. Mobile phones are claimed in the same way.
Items like this that you buy for use in your job can be claimed in your return. However, since the cost of these items is most likely to be more than $300 each you will not be able to claim the full cost in one year. It will be necessary to spread your claim over the useful life of the items (depreciation) and only the work related proportion is claimable. You should keep a log of work related use for a period of at least four weeks for each item to determine the proportion that you can claim.
Child care expenses are not claimable as a tax deduction. Eligible taxpayers may be able to claim the Child Care Tax Rebate (CCTR) through the Family Assistance Office.
Expenditure on personal grooming and haircuts are generally not deductible. There are exceptions for some taxpayers involved in the performing arts field.
Fees paid to a registered tax agent for preparation of your return, amendments and generally handling your tax matters are all deductible. You can also claim travel to your registered tax agent (you are limited per income tax return to 5,000km in total across the entire return if claiming the c/km method). Registered tax agents are the only people legally able to receive payment for the preparation of tax returns.
You cannot claim a deduction for this because it is not a donation to the charity; rather you are receiving something for your money. Buying an item from a charity does not make your purchase tax deductible. The same applies to the purchase of raffle tickets. Only donations to registered charities are tax deductible.
You cannot just claim $300. You must actually incur any expense before it is claimable. Whilst you may not need receipts for expenditure up to $300 you must have spent the money and it must be relevant to your employment.
There is no limit on the amount claimed each year, provided the expenses are necessarily incurred in earning your income. The expenditure must be work related and you may need receipts to substantiate the expenditure. Keeping incomplete, incorrect or no records at all may be limiting your ability to claim deductions. Advice can be obtained from a registered tax agent. AWT Accountants are happy to advise their clients on appropriate record keeping that will enable them to maximise their allowable deductions.
Provided it gives full details of the supplier and date of purchase the tax office would accept a credit card slip as proof of purchase. Taxpayers can make a notation on the document indicating the type of goods that were purchased. Many taxpayers use the internet to purchase or pay for their work related expenses and so the ATO will also accept Bpay or email receipts provided they contain the necessary information; date, supplier, nature of the goods and the amount.
Documentary evidence should be kept for five years from the date of lodgement of the tax return in which the claims are made. If you are depreciating an asset the receipt should be kept until the item is fully depreciated (even if over 5 years).
There needs to be the necessary nexus (connection) to your current income for these expenses to be claimable. This means that the self education needs to help you in your current job and not be undertaken to open up new job opportunities.
The costs associated with seminars are tax deductible provided that they relate to your current income producing activities.
From 1 July 2007 a limit of $150,000 per year was placed on non-concessional contributions which are post-tax amounts that you have not claimed as a tax deduction. This cap amount may be indexed annually but is still unchanged for the 2012-13 income year. If you contribute more than the cap amount you will be taxed at the highest marginal rate plus Medicare (46.5%) on those excess contributions. There are transitional rules that apply to taxpayers who are nearing retirement.
If you are entitled to a co-contribution the payment will be made to your fund after you have completed the relevant details on your tax return and lodged it and your fund has reported your contributions to the government.
Your superannuation fund or RSA provider will notify you of the amount of Super Co-contribution received on your annual membership statement for the financial year in which the Super Co-contribution was received. The ATO will also provide you with a notice at the time the Super Co-contribution is paid and accepted by your superannuation fund or RSA.
If you do not tell your superannuation fund what your TFN is then the fund will be required to pay additional tax on any contributions made by your employer (including salary sacrifice amounts). Without having your TFN recorded, your fund will not be able to accept any personal contributions that you make and the government co-contribution that you may be entitled to cannot be paid into your account.
If you married during the year you may be eligible to claim a tax offset for your spouse, which will depend on your spouse’s and your own adjusted taxable income. A Medicare reduction may also be available. You will need to know the income of your spouse before and after marriage. If your spouse has earned income during the year, they will also have to lodge their own return. On both of your returns you will be required to disclose information about the other partner so that any entitlement you may have to certain benefits can be calculated correctly.
From 1 July 2012 the dependent spouse rebate has been phased out for taxpayers with a dependent spouse born on or after 1 July 1952. The aim of this reform is to address a barrier to participation by progressively removing tax concessions for taxpayers with a non-working spouse and no dependent children. Taxpayers with an invalid or permanently disabled spouse, supporting a carer, or people who are eligible or the zone, overseas forces and overseas civilian tax offsets will not be affected by this reform.
You may also be eligible for the Dependant (Invalid and Carer) Tax Offset if your spouse (born after 1 July 1952) is genuinely unable to work because they are an invalid or they care for an invalid. The invalid must be in receipts of a Government disability payment to qualify.
From 1 January 2013, families receiving Family Tax Benefit Part A will receive up to $410 for each child in primary school, and up to $820 for each child in secondary school. The Schoolkids Bonus will be automatically paid to eligible families (ie those receiving Family Tax Benefit Part A) in two separate instalments each year – half in January and half in July. Because the Schoolkids Bonus will be paid automatically and upfront, this means eligible taxpayers don’t need to keep receipts for education expenses or make a separate claim.
You have 12 months after the end of the year to lodge your tax return so that the FOA can check that you have been receiving the correct amount. If you overestimated your income you will receive a top-up payment but if you underestimated your income they will require the overpayment to be paid back. This means that for payments received during the 2012-2013 income year you will be required to lodge your 2013 tax return by 30 June 2014. If you have a partner their tax return will also have to be lodged by that date. Failure to meet the deadline could result in your payments being stopped and the repayment of amounts already received. If you are not required, by the tax office, to lodge a tax return then you should notify the FAO.
Maintenance payments are not tax deductible.
Businesses with an annual turnover of $75,000 or more are required to register for GST. If your business has a lower turnover you are not required to register but you may do so if you wish. You will only be required to charge your customers GST if you are registered. AWT Accountants can assist you with your application to register for GST.
Provided that you satisfy the eligibility criteria, you will be able to claim a deduction for the contributions you have made to a complying superannuation fund or retirement savings account. To do so you must be fully self employed or no more than 10% of your assessable income (including Reportable Fringe Benefits and Reportable Superannuation Contributions) is from an employer. You must also have first notified your superannuation fund of your intention to make the claim and received a confirmation.
You may be eligible for the government co-contribution if more than 10% of your total assessable income is from running that business, eligible employment or a combination of the two. Investment income is not eligible income. If you claim any of your superannuation contributions as a tax deduction only the amount that you do not claim will be eligible for the co-contribution.
If your turnover is less than $2 million you will qualify as a small business entity and will be able to claim certain eligible pre-paid expenses in the year they were paid. Some examples of prepaid expenses that can be claimed in the year they are paid are: rent, insurance and subscriptions to professional associations. Eligible expenses will be payments that are made for periods of 12 months or less and that the period covered ends in the next income year. Your pre-paid rent qualifies because the period it covers does not exceed 12 months and that period will end before the end of the next income year. The whole amount will be claimable on your tax return this year.
Your return can be completed using the details from a copy of the PAYG Payment Summary (your employer can provide this), a letter from your employer detailing the information on the PAYG Payment Summary or by reviewing your pay slips for that period. If you are unable to obtain the payment summary details from an employer a Statutory Declaration would need to be completed. The detail from your PAYG Payment Summary may also be accessible by your tax consultant on the ATO Portal.
Your wife does need to lodge a return even though her income is below the tax free threshold. Any earnings that have had tax withheld, no matter how small, are required to be reported on a tax return. This is also the only way to get a refund of the tax paid.
No, you cannot do that. A PAYG Payment Summary from a past year cannot be included with the current year tax return as the income on it was not earned in the current year. It can only be included in the return for the year to which it relates. You will need to submit an amendment to last year’s tax return. H&R Block can assist you to lodge an amendment.
It is necessary to complete a tax return to date of death if a return has been lodged in past years. This return, marked final, must show all income received to the date of death.
Generally payers are required to supply a payment summary within 14 days of the end of the financial year – i.e. 14 July. If an employee ceases employment part-way through the year, one must be supplied within 14 days of receiving a written request from the former employee and the request must not be made any later than 21 days before the end of the financial year. If a former employee has been receiving reportable fringe benefits (RFB) and leaves before the end of March then the 14 day limit may need to be extended.
It isn’t necessary to complete a return before leaving Australia unless you will not be back before the due date for lodgement of your return (31 October). If you won’t be back until after that date contact the Australian Taxation Office or a registered tax agent to apply for an extension of time to lodge.
A net medical expenses offset is available where you and your dependants have incurred out-of-pocket medical expenses. Eligible expenses include doctors’ fees, hospital accommodation and related charges, dental work, medicines, etc. Where procedures are of a cosmetic nature only, they will not be eligible expenses that can be included in a calculation of this offset. If the dental work you are having is for the correction of a problem then the cost incurred will be counted towards the out-of-pocket expenses for this offset.
Taxpayers with an adjusted taxable income above $84,000 for singles or $168,000 for a couple or family in 2012-13 (with the family threshold increasing by $1,500 for each dependent child after the first) can claim a reimbursement of 10% for eligible out of pocket expenses incurred in excess of $5,000 (indexed annually).
Taxpayers with an adjusted taxable income below these thresholds can claim a reimbursement of 20% for net medical expenses over $2,120 (CPI indexed for 2012-13) when they lodge their tax return.
Taxpayers with two or more income sources – beware of a possible tax trap caused by the new tax free threshold.
As the tax free threshold was raised to $18,200 this year, it is likely that you had less tax withheld by your employer (and therefore received more money each pay) which has resulted in a smaller refund or a bill payable.
This is particularly the case for taxpayers with multiple jobs (and Payment Summaries). Even if each employer follows the ATO tax scales properly to calculate tax withheld, the total tax paid on your income may not be enough to cover the tax payable because of the progressive tax scales.
Have one of your jobs deduct a greater amount of tax each pay period to cover the shortfall. Contact your payroll/HR department to arrange this change. Your Tax Consultant can advise you of the shortfall amount per pay period based on this year’s tax.
Alternatively contact AWT Accountants by the end of March and advise how much you have earned from each job and how much tax you have paid and they can let you know any shortfall and you can adjust what you pay as you go.
AWT Accountants can defer your tax return for lodgement until the due date next year. You will need to finalise the tax return now and we will hold for lodgement in May 2014 or your due lodgement date according to the ATO.