Tax Tips

Use a car for work - KEEP A LOG BOOK

We really cannot stress the importance of maintaining a log book. Specifically if you travel for work is extensive. A log book must be kept for 3 months and is valid for 5 years (unless you change jobs or vehicles – yes, new vehicle, new log book).

If you do not keep a log book, you can be limiting your claim – cannot claim for petrol, registration, repairs etc. Only a set rate per kilometre is allowed (maximum of 5,000 kms) or 12% of original cost of the car (where you have travelled more than 5,000 kms).

If you are in business – in order to claim your running costs of the car (including GST if you are registered), you must have a log book. If you purchased a new vehicle and are eligible for the TAX BREAK, you must have a log book to substantiate the business use is more than 50% (and claim for GST where applicable).

A log book can also be advantageous for your business where Fringe Benefits Tax is applicable – having a log book with high business usage, can reduce any FBT significantly.

Things to note;

  • Travel to and from work is NOT work related travel.
  • Parking at work is not a work related expense, not deductible.
  • Tolls to and from work are NOT work related and not deductible.
Special rules apply to travel to and from home where you carry heavy Tools / Files – work from home etc. Ensure you contact us to clarify your deductibility.

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Fringe Benefits Tax

Are you providing Fringe Benefits? The following checklist will help you work out if you are already providing a fringe benefit to your employees. If you answer yes to any of the following questions, you may have an FBT liability and your business must lodge a Fringe Benefits Tax Return.

Do your employees take cars home and garage them overnight, even if only for security reasons

Do you make a car or other vehicles owned or leased by the business available to employees for private use?

Do you provide loans at reduced interest rates to employees?

Have you paid for, or reimbursed, non-business expenses incurred by employees?

Do you provide a house or unit of accommodation to employees?

Do you provide employees with living away from home allowances?

Do you provide entertainment by way of food, drink or recreation to employees?

Do any of your employees have a salary package arrangement in place?

Have you provided employees with goods at a lower price than they are normally sold to the public?

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Mature Age Worker Tax Offset (MAWTO)

Australian Residents who are 55 years of age or over and receive income from working. The Offset is $500 which is used to reduce tax paid in an income year. For the 2010 financial year the offset cuts out totally once your income (including reportable fringe benefits and salary sacrificed super) exceeds $63,000.

The offset was introduced to encourage and reward mature age workers who stay in the workforce.

For further information see; Australian Taxation Office

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Medicare Levy & Medicare Levy Surcharge

To help fund Medicare (a scheme which give Australian Residents access to health care) resident taxpayers are required to pay Medicare Levy. Medicare Levy is calculated based on your taxable income at 1.5%. Some taxpayers are exempt from paying Medicare Levy eg. low income earner or prescribed persons.

In addition to Medicare Levy, high income earners & families without appropriate private hospital cover are liable to pay Medicare Levy Surcharge (MLS). The Surcharge calculated at 1% on taxable income and reportable fringe benefits. The current threshold before MLS applies is $73,000 for singles, $146,000 for couples/families (add $1,500 for each additional child after the first born).

For more information click here

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Employer Obligations

Thinking of employing? A list of obligations you must be aware of and comply with

PAYG Withholding

Deducting and remitting tax from employees wages & issuing Pay Slips & PAYG Payment Summary’s

Record Keeping

Employment Contracts, Sick Leave, Holiday Leave, Leave Loading, Long Service Leave

WorkCover

Compulsory insurance to cover your work place and the employees from injury

Superannuation Guarantee

9% of employees gross wages of those who earn above $450 in a month – payable Quarterly

SuperChoice

Employees choice of where you pay the Superannuation Guarantee payments

Fringe Benefits Tax

Providing Benefits to Employees / Employees Associates that are not work related (eg. Vehicle for private use etc)

Payroll Tax

State tax payable once your Gross Payroll exceeds the threshold (Currently $525,000 in Victoria), remitted monthly

Minimum Wages

Refer to the Fair Work Australia website for further details www.fwa.gov.au

High penalties are applied to Employers who do not meet their obligations.

The Australian Tax Office website provides a checklist of your obligations

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Education Tax offset

If your child attended Primary or Secondary school during the financial year and you receive Family Tax Benefit Part A, you may be entitled to the education tax offset.

Eligible Expenses – computers, computer related equipment & software, home internet (disregarding any amount you have claimed as a tax deduction in your return), school stationery and textbooks.

Not Eligible – Uniforms, school fees, musical & sporting equipment, transport fees, school photos, school subject and building levies. The offset equals 50% of your eligible education expenses incurred for each child up to $750 ($375 offset) for Primary and $1,500 ($750 offset) for Secondary children.

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Does PSI apply to you? Personal Services Income

If you are a consultant or contractor who operates as a sole trader or through a company, partnership or trust, income you receive for the work you do may be classified as personal services income (PSI).

To work out if your income is PSI, you first need to work out what percentage of the income you receive from each contract you complete is for:

  • labour – the skills, knowledge, expertise or efforts of the person who performed the services
  • the materials supplied and/or tools and equipment used to complete the job.
If the majority (more than 50%) of your income is for the skills, knowledge, expertise or efforts of the person who performed the services, this income will be classified as PSI. No matter what industry or occupation you work in, it’s important to look at the income you receive from each contract and work out if it’s PSI.

If you operate a company, partnership or trust, you need to treat the PSI as belonging to each individual who performed the services – you can’t keep the PSI as part of your business profits.

Other rules / tests are applicable to determining whether you (or your business) are subject to the PSI rules;

    1. Results Test – do you only get paid after achieving a certain outcome/result, do you provide your own tools/equipment necessary to complete the work, are you responsible to rectify any defects.

    If you answered YES to all of the above, then you are not subject to PSI. If NO, try the 80% Rule.

    2. 80% Rule – If 80% or more of your income comes from one source, PSI rules will apply.

    3. Other Tests – Unrelated Clients Test, Employment Test, Business Premises Test.

It may be beneficial in some instances to obtain a determination from the tax office if your circumstances are unusual. Contact our office if you would like to discuss PSI further.

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Things to consifer going forward - 2010 tax year

  • Things to consider going forward - 2010 tax year Your salary sacrificed super now needs to be considered when assessing your income threshold for certain tax offsets and incentives.
  • If you are a high wealth individual (earnings $250,000+) with a small business trading with a loss – your loss will be quarantined.
  • If you obtained shares via an Employee Share Scheme you will now be taxed upfront. The ability to defer tax on a discount that relates to qualifying shares and rights has been removed effective budget night, May 12th, 2009.
  • Same sex couples are now considered dependants – enabling access to some tax concessions (dependant spouse tax offset, spouse super contributions). Also triggering the Medicare Levy Surcharge rules where no private health cover is held and family combined taxable income is greater than $146,000.

This is to act as a guide for your information only. We recommend you contact our office if you have any questions. Do not rely strictly on the above examples as different circumstances and actions depend on which Section of legislation applies to you.

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