Claiming deductions for TFN & ABN ?

You can claim a deduction for most expenses you incur at work or in running your business as long as they are directly related to earning your assessable income.

Remember the three golden rules for claiming your business expenses:

1-The money must have been spent for your business (not a private expense).

2-If it is for a mix of business and private use, only claim the portion that is related to your business.

3-You must have records to prove it.

If your accountant is falling short in spending time for recognizing deductions, then perhaps it is time to seek a new accounting partner.

Cars and Tax

From 1 July 2018 the following car threshold amounts apply.

Income tax

There's an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.

The car limit for 2018-19 is $57,581.

Goods and services tax (GST)

Generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount.

You can't claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.

Luxury car tax

From 1 July 2018 the tax threshold for luxury cars increased to $66,331.

The threshold for fuel efficient luxury cars for the 2018-19 financial year remains at $75,526.

In general, the value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.

Ref:https://www.ato.gov.au/Newsroom/smallbusiness/Lodging-and-paying/Cars-and-tax/

Income tax return

Sole Traders:

If you operate your business as a sole trader, you must lodge a tax return even if your income is below the tax-free threshold. This includes:

-tax return for individuals including the supplementary section.

-business and professional items schedule for individuals.

In your return, your business income less the business deductions you can claim.

Partnerships and partners:

If you operate your business as a partnership, the partnership lodges a partnership tax return, reporting the partnership's net income. As an individual partner, you report on your individual tax return. your share of any partnership net income or loss

any other assessable income. The partnership doesn't pay income tax on the income it earns.

Trusts and Beneficiaries:

If you operate your business as a trust:

the trustee lodges a trust tax return, and each trust beneficiary lodges an individual tax return. The trust reports its net income or loss. As a trust beneficiary, you report on your individual tax return:

- any income you receive from the trust

- any other assess able income

Companies:

If you operate your business as a company, you need to lodge a company tax return. The company reports its taxable income, tax offsets and credits, PAYG installments and the amount of tax it is liable to pay on that income or the amount that is refundable. The company's income is separate from your personal income.

Tax Tips to remember for 2018

Do you know the tax deductions and offsets for which you might be eligible?

The following tips may help you to legitimately reduce your tax liability in your 2017-18 return.

1. Claim work-related deductions

Claiming all work-related deduction entitlements may save considerable tax. Typical work-related expenses include employment-related telephone, mobile phone, internet usage, computer repairs, union fees and professional subscriptions. 

Note1:

The Australian Taxation Office (ATO) will again check claims made in real time. Claim only what you are legally entitled to and be sure to have all necessary receipts or credit card statements to support them.

2. Claim home office expenses

When part of your home has been set aside primarily or exclusively for the purpose of work, a home office deduction may be allowable. Typical home office costs include heating, cooling, lighting and even office equipment depreciation. 

To claim the deduction, you must have kept a diary of the hours you worked at home for at least four weeks.

3. Claim self-education expenses

Self-education expenses can be claimed provided the study is directly related to either maintaining or improving current occupational skills or is likely to increase income from your current employment. If you obtain new qualifications in a different field through study, the expenses incurred are not tax deductible.

Typical self-education expenses include course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers, tablets and printers. Higher Education Loan Program (HELP) repayments are not deductible.

4. Claim depreciation for assets

Such assets may include tools for tradespeople, calculators, briefcases, computer equipment and technical books purchased by an employee, or minor items of plant purchased by a landlord.

Assets costing $300 or more that are used for an income producing purpose can be written off over a period of time as a tax deduction. The amount of the deduction is generally determined by the asset’s value, its effective life and the extent to which you use it for income-producing purposes.

5. Maximise motor vehicle deductions

If you use your motor vehicle for work-related travel, there are only two choices for how you can claim. If the annual travel claim does not exceed 5000 kilometres, you can claim a deduction for your vehicle expenses on the cents-per-kilometre basis. Such claims must be based on rate & reasonable estimates. If your business travel exceeds 5000 kilometres, however, the log book method is required to claim a deduction for total car-running expenses.

6. Rental property deductions

Owners of rental properties that are rented or are ready and available for rent can claim immediate deductions for a range of expenses, such as:

• Interest on investment loans

• Land tax 

• Council and water rates

• Insurance 

• Repairs and maintenance

• Agents’ commission

• Gardening

• Pest control

• Leases (preparation, registration and stamp duty)

• Advertising for tenants

• Reasonable travel to inspect properties.

Landlords may also be entitled to annual deductions for the declining value of depreciable assets (such as stoves, carpets and hot water systems), and capital works deductions spread over a number of years for structural improvements like remodeling a bathroom.

Disclaimer: none of the above information is tax advice, it is general information only. For more information please contact us or visit www.ato.gov.au or contact your Australia-registered Accountant & Tax Agent.

Registering for GST, Do you need to register for GST?

You must register for GST if:

-your business or enterprise has a GST turnover (gross income minus GST) of $75,000 or more

-your non-profit organisation has a GST turnover of $150,000 per year or more

-you provide taxi or limousine travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover – this applies to both owner drivers and if you lease or rent a taxi

-you want to claim fuel tax credits for your business or enterprise.

If your business or enterprise doesn’t fit into one of the above categories, registering for GST is optional. However, if you choose to register, you generally must stay registered for at least 12 months.

Do you need to claim GST credits?

If you are conducting irregular activity that generates income but no profits, You need to know you may:

•have a hobby, not a business

•be unable to claim GST credits on your purchases.

To claim GST credits, you must be able to demonstrate you are in business with an intention to make a profit. Some factors that may support this include:

•having a current business plan

•repetition of your activity

•the size and scale of your activity is consistent with other businesses in that industry

•commercial sales

•marketing and advertising your activity to attract clients.

If you are conducting a hobby, we need to advise you to:

•cancel your GST registration

•amend past activity statements if you've claimed GST credits for purchases associated with your hobby.

When you can claim a GST credit:

-You must be registered for GST to claim GST credits.

-You can claim a credit for any GST included in the price you pay for things you use in your business. This is called an input tax credit, or a GST credit.

-You claim GST credits in your business activity statement.

-You can claim GST credits if the following conditions apply:

1-You intend to use your purchase solely or partly for your business, and the purchase does not relate to making input-taxed supplies.

2- The purchase price included GST.

3- You provide or are liable to provide payment for the item you purchased.

4- You have a tax invoice from your supplier (for purchases more than A$82.50).

When claiming GST credits, make sure your suppliers are registered for GST. 

A four-year time limit applies for claiming GST credits.