Did you really know? Tax Time Tips & Traps (Part 2):
-By Anand Shukla
We are into October and for many of you this would be the last month to lodge your tax returns. The first edition of “Did you really know tax time tips and traps” published in the July edition of this very magazine considered some aspects of tax that may have come to you as a surprise. This edition will give you a small joy ride through some more of such Did you really Know’s that will get you thinking. My idea here is to create awareness and the intent is to get you informed about what you are eligible to claim and what you may not be claiming properly.
I always get asked about expenses that can be claimed as a deduction. Here I come up with answers to some questions that were actually raised by clients during my one on one interviews with them during this tax time. Please note, so that I can free up some space I will use the acronym DYRK which implies “Did You Really Know”
DYRK 1: DYRK, travel to your tax agent to prepare your tax return is claimable!
Any travel related expense that can be directly associated with you looking to manage your tax affairs can be claimed on your tax returns. Potentially this could include a Myki pass, car parking or any other travel related expense.
DYRK2: DYRK, there is no such thing as a full refund in the first year.
I have been in this profession for a few years now and every year I come across instances where people say/believe they should be eligible for a full refund in the first year of their tax claim. Does that sound right? I mean think about it, if someone entered Australia on 1 July 2012 and worked full time on a 100k package and had a tax withholding of $25,000 would he get every dollar back from the tax just because it is his first year in Australia and his first tax return? This is not really true. Think about it, would it be a fair tax system? However, in most cases when a person first enters Australia will generally get a full refund in his first year because he may have spent half the year looking for a job and the other half after finding a job may have earned below the tax free threshold of $18,200. Hence he/she would receive a full refund.
DYRK3: DYRK about the specific rules to claim the Laundry & Uniform expenses?
Now this one could come to you as the biggest surprises. I think many of you must have been aware that uniform is only claimable if they are of a specific kind distinguishable as a uniform, but are you aware of the specific rules and the record keeping obligations. After reading the below bullet points make up your mind DYRK this?
- Uniform is only claimable if the uniform is registered by your employer as a non-compulsory work uniform with Aus Industry or it should be a compulsory set of clothing that is prescribed and there is a strict governing policy enforcing the use of such distinguishable dressing at work.
- You will need to substantiate your claims by holding proper records. These records could be invoices, receipts and diary records.
- Protective clothing can be claimed by using the code P signifying the claim is for protective clothing. Claims could include Hard hats, safety shoes, sun protection and so on.
- Laundry is only claimable in relation to wash of compulsory, occupation specific and protective work wear’s. Hence if you do not have a uniform expense, you would generally not have a laundry expense.
- If you do have some old uniforms that you have used during the year and have used the coin laundry or washed clothes by yourselves, you would need to come up with diary records and a claim that is reasonable and one that can be worked out.
- Suits cannot be claimed as uniform.
Think about it. Did you claim any uniform expense in this year’s tax returns? Have you claimed it in the past? Did it fit the above theory? Think about this, DYRK about work related uniform?
DYRK4: If you worked overtime, spent money on food and received an overtime meal allowance you may be able to claim this as a deduction on your tax return.
If you receive an overtime meal allowance under an industrial instrument (such as an award) and buy food and drink on overtime, you can claim the reasonable allowance amount the ATO has set for overtime meal allowance. To give you an example as per the ATO the reasonable amount for breakfast is $24.35, lunch is $27.35 & dinner is $46.70.
DYRK 5: Interest you pay to the ATO is deductible!
Some of you ridicule the Australian tax system when I tell them they need to declare bank interest earned on their tax return. You say we can’t claim interest paid on credit cards and personal loans but we need to pay taxes on interest earned from saving accounts, how is that? Well the truth is that if you borrowed money to invest into a business activity and this can be related to an activity that holds potential to generate income then this is deductible, personal loans & credit cards to pay for personal expenses do not hold a potential to generate income and hence can not be deductible. On the other hand the ATO allows a deduction for interest paid to them on late payments of dues.
While I come to the end, I would like to thank you for reading this article and I will keep on bringing more tax related news, views, tips and traps. I like all the feedback I get from you the readers. I wish you all a happy Navratri and leave you with one final “Did you really know” that will get you to do your taxes on time if you are still waiting and haven’t lodged your tax returns.
DYRK6: DYRK, about penalties for late lodgement of tax returns?
Regardless of whether you owe money to the ATO or owe a refund, you may need to lodge a tax return. Penalties are calculated on per unit basis and if the offence occurred before 28 December 2012 the penalty unit is $110 for every 28 day period to a maximum of 5 periods. Penalties for late lodgement will be $170 per unit for a 28 day period for offences after 28 December 2012 which brings the amount of maximum penalty for late lodgement to $850. The good news is that you could apply for a remission of penalty if circumstances were beyond your control resulting in a non-lodgement and the ATO finds it fair & reasonable to remit the penalty.
This article comes with a full disclaimer; please contact A One Accountants by calling 0386091889 and in writing to access a complete copy of this disclaimer.