AMA - Round Two - Tax and Tax Return Questions - Ask Me Anything - GO!

Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 09:15
Last edited 05/07/2017 - 10:20 by 2 other users

Edit % June 2017

I have now closed this thread.

I will think about posting a third round on the last week of June depending on how many people want me to do it.

I will be ready to prepare everyone's 2017 returns in July. I look forward to hearing from you.

For everyone else, thank you for participating and I hope you appreciated our answers.

Hi All,

I did a tax AMA a few weeks ago and got an overwhelming response (close to 700 replies).

I am going to do another one that will go from today 31 May to Sunday 4th June.

If you have any tax or tax related questions then ask below and I will do my best to get back to you as soon as possible.

Disclaimer: Any advice or answers given will be general in nature and you may need to speak to a tax adviser for more personalised advice.

P.S Please see my previous forum post as we tried to avoid duplicate questions.

I will reply to this thread with a link to the previous post.

Look forward to answering all your tax queries.

Lets do this!

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  • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 09:15
    +4

    Here is the link to my previous post.

    https://www.ozbargain.com.au/node/308427

    • stingy-me on 01/06/2017 - 02:07

      Hi. Thanks for doing this. I'm just wondering if donations can lower down taxable income? Thanks.

      • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 01/06/2017 - 06:49

        Yes they can. That's their purpose.

        • sevendollarsfifty on 01/06/2017 - 13:36
          +9

          You might wish to rephrase this.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 01/06/2017 - 14:02
          +4

          @pfunk09:

          Me or the questioner? I think what they are asking is if donations are tax deductible thereby reducing taxable income.

          The answer is yes.

          Donations however, cannot cause a loss.

        • Shwayne on 01/06/2017 - 14:55
          +2

          @pfunk09: Sadly the truth for most.

        • Eeples on 02/06/2017 - 11:28
          +4

          @nicolemcmilllon:

          But I think the main PURPOSE of donations is to be kind to others.

        • geoffellis on 02/06/2017 - 11:45
          +1

          @nicolemcmilllon:

          That's their purpose.

          I think his point is that the purpose of a donation isn't for lowering taxable income. That might be a beneficial effect of the donation, but generally not the purpose of a donation.

          Donations however, cannot cause a loss.

          I mean, you're out the money that you donated. So if you really do think the purpose of a donation is to lower your taxable income as you suggested above, then theoretically if you donated more money than your taxable income you'd be at a loss…

        • surm on 02/06/2017 - 22:10
          +1

          Are all donations Tax deductible? AFAIK, only donations to the ATO registered charities are tax deductible.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 02/06/2017 - 22:29
          +1

          @surm:
          correct

        • j24bauer on 03/06/2017 - 15:42

          Can they also reduce HECS income?

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 04/06/2017 - 08:24

          @j24bauer:

          You mean adjusted taxable income, which is the calculation used to repay HELP Debt? If so, yes.

    • AssociatedHungnn300981 @ Titanium Accountants & Advisors on 04/06/2017 - 05:27
      -1

      Hi

      Got 1 question about tax return. I earned around 120k and recently got a new born and wife stay home. Any spending for the kid i can claim? Any benefit from goverment i can claim as well?

      Looking forward to your answer

  • shanakatak on 31/05/2017 - 09:26

    I work in liquor, am I able to claim the cost of my RSA course as part of training? Thank you.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 09:30
      +1

      Hi, If your employer did not reimburse you for the course then you will be able to claim it as a deduction.

        • [Deactivated] on 31/05/2017 - 17:01
          +7

          No

    • Plug on 03/06/2017 - 00:06
      +3

      If you were already employed in the liquor business and took the RSA course then yes you can claim it as a deduction. If however you took the course independently with the aim of securing employment in the liquor business then no you cannot claim it as at that point in time you were not in that business. There has to be a direct connection between it and your job. A prospective job is not enough.

      • eggboi on 06/06/2017 - 10:46

        This is half true. If you do your RSA then use it to gain employment requiring an RSA, yes you can deduct it from that income. If you did your RSA then ended up in employment not requiring an RSA, then you cannot claim. Basically the expense (RSA) has to have facilitated the income you would be claiming against (bar work, waitstaff etc).

  • sykeau on 31/05/2017 - 10:01
    +1

    I know it's around overseas and is very popular, but are there any deductions that can be made in Australia for commuting to work via Bicycle?

    • d86 on 31/05/2017 - 22:36

      or on foot.

  • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:04
    +11

    Hi, Unfortunately, costs of commuting to and from work are not deductible regardless of mode of transport.

    • ScroogeMcChicken on 31/05/2017 - 20:43

      The costs of commuting to and from work ARE tax deductible if your work is classed as itinerant. I've rarely found a tax agent that is aware of this. See https://www.ato.gov.au/law/view/document?DocID=TXR/TR9534/NA…

      • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 20:54
        +12

        1 in 1000 tax clients I will see will have work that is classified as itinerant. Therefore its best not to mention it to clients who ask if going to and from work is deductible.

        This particular question is clearly for an employee who is riding to and from work, which will not be deductible.

        All all the best.

        • Milkywayss on 31/05/2017 - 21:58
          +1

          If my place of work is based in one city, and my work decides that for 10 weeks I will need to drive to a nearby different town for work, would this be deductible?

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 21:59

          @mick1705:

          No

        • dexx on 01/06/2017 - 18:16

          @mick1705:
          You could drive to work B via work A, and back, each day. Then the travel between A and B is deductible.

        • Milkywayss on 02/06/2017 - 19:04

          @dexx: I imagine I would need a reason to do this? There are sometimes when I would need to attend A then drive to B, though not often.

        • CheapskateQueen on 04/06/2017 - 21:53

          @mick1705

          Yes you can claim the travel to that other workplace if its not considered to be your normal workplace

      • Plug on 31/05/2017 - 21:12
        +3

        Costs to and from work are not deductable. If however you travel to work at place A and from there to another place of work, B in this case, then the cost of travel between A and B are allowed. The travel between B and home at the end of the day is again not deductable.

        • natslovR on 02/06/2017 - 11:44

          My primary place of work is my home office. One day per week the company pays for me to fly interstate to an office there. Can I claim the cost of train to the airport for my morning flight? ($18 each way)

        • poppit88 on 05/06/2017 - 00:18

          @natslovR: Why are you paying for the train to the airport for your morning work flight? Your employer should be paying for it. Actually they should be paying for a taxi. You aren't traveling to the airport to fill in your day…….

    • stingy-me on 03/06/2017 - 22:55

      Hi. I'm sorry if I had to reply to this comment with an unrelated question because I don't know how to post a separate one.lol For nurses, I heard that they can claim up to $300 of work-related expenses. Does this include the AHPRA Registration fee and any union fees or are these two separate expenses that can be claimed from tax? Thank you.

  • brokeunistudent on 31/05/2017 - 10:05

    I am a uni student with less than $18000 casual income per year. I believe I am entitled to a refund of the tax deducted from my salary. Can I lodge my returns by myself as I do not want to spend money for a tax accountant for this trivial matter. Any tips would be appreciated!

    • scrambledeggs on 31/05/2017 - 10:09
      +26

      Yes you can do it online through the My Gov website, it's extremely easy.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:10

      Hi, As a tax accountant myself, obviously I would recommend going to a tax agent because a simple student return like yours, we would only charge approximately $50. We believe that its worth it for the peace of mind that your return is processed correctly and quickly.

      Of course, if you are confident in being able to do it yourself on the ATO free software then that is relatively simple I believe. As your income is less than the tax free threshold you won't need any deductions to get all of the tax withheld back.

      Don't hesitate to PM me if you have any questions :)

      • markb28 on 31/05/2017 - 13:31
        +7

        Its so easy now, if you have a simple claim you may as well get the experience of tax claims yourslf - you probably have another 40-50 to do in your lifetime.

      • adam456 on 31/05/2017 - 18:49
        -2

        Surely this wasn't worth a down vote? My Lord.

      • martindanny on 04/06/2017 - 13:13

        Can a tax agent claim more tax than DIY from myGov? Any advice is appreciated. Thanks

        • retiredfeline on 04/06/2017 - 17:36

          No, the law is the same no matter who prepares the return, but a tax agent may point out things you missed. And the tax agent fee is deductible the following tax year.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 04/06/2017 - 18:08

          That is correct, by law you can only claim what you are entitled to. As an accountant, I use my experience to point out things that may be deductible for the client. As mentioned, the accounting fees are deductible too so its well worth it (obviously I would have that opinion) :)

    • Hazzard on 03/06/2017 - 07:09
      +1

      Or your university could be providing free tax help like mine did. Had my tax return done at the university for free.

      • brokeunistudent on 03/06/2017 - 11:06

        Thanks for this! Good idea!

        • Hazzard on 03/06/2017 - 13:59
          +1

          No worries.

          Better yet, ask the volunteers if they would let you do the tax return while they supervise. That way you can learn how to do it too. The volunteers at my university have been more than willing to let me do it while they gave me directions.

    • CheapskateQueen on 04/06/2017 - 21:56
      +1

      There is absolutely NO need to pay a tax agent to lodge your return in a very simple case like yours. MyGov is super easy, most info will be prefilled and if you're under 18k don't need any deductions.you'll get all your tax back.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:11
      +3

      Hi, are they batteries? if you use them for work purposes then you will be able to claim the cost of purchasing them.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:20

          I am not sure if this is a serious question. If so, the cost of charging them would probably be less than $30 per year, you can claim that but it won't make much of a difference.

  • railspider on 31/05/2017 - 10:10
    +1

    Hypothetical: I work as a freelancer, and bill all my invoices from a Trust that I am the trustee of. The trust holds all the earnings, and then distributes them to beneficiaries (me & my kids) when it is most tax effective - maybe five years in the future.

    In this process, when is income tax paid? Does the trust pay anything, or is it only charged when distributed to a beneficiary at their marginal rate?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:14
      +3

      Hi, As a freelance worker, you may be subject to the personal services income rules. I would first recommend searching the ATO website to see if you are bound by the personal services income rules.

      If you are not bound by the PSI rules, then the trust has to make a distribution to beneficiaries each year. If it chooses not to make a distribution, the trust will pay tax each year (at the highest marginal tax rate) so obviously it is better to distribute each year.

      You cannot defer distribution for 5 years into the future.

      • railspider on 31/05/2017 - 10:27

        Thanks Nicole, this is really good knowledge!

        Can the trust distribute 5-10% annually and hold on to the remaining balance without paying tax?

        Also would you recommend seeing an accountant, lawyer or financial adviser when looking to set up a Trust with Corporate Trustee structure?

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:47

          An accountant can set up a trust and corporate trustee for you.

          The trust must distribute 100% of the income each year or pay tax on any undistributed amount each year. You can't "hold on" to any amounts and not pay tax on them.

        • donkey12 on 31/05/2017 - 21:15

          Speak to your accountant - if PSI isn't applicable, then you could set up a Trust with Corporate Trustee and a separate "bucket" company to dump the excess earnings to. It would be taxed at corporate rates, but you would need to "drip" the earnings back to the shareholders over 7 years to comply with Div 7a. Definitely speak to a qualified accountant.

          PS - I'm a Chartered Accountant and Chartered Tax Adviser, so I work with this structure daily.

        • railspider on 31/05/2017 - 22:05
          +1

          @donkey12: Thanks, this seems like what I'm after. Will seek out an accountant that specialises in this structure. I did the ATO PSI online test and I'd be excluded from PSI rules (service-based freelancer to multiple clients).

          The idea would be to take advantage of the company tax rate, selectively distributing earnings, and potentially extra deduction opportunities.

  • Fancy on 31/05/2017 - 10:13

    I am self employed, what is the maximum amount I can put in my super (AustralalianSuper) this financial year. I am in my mid 30s, in your opinion should I invest in super to lower my tax or invest somewhere els. Thank you very much in advance.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:19
      +12

      Hi, A tax accountant should not be giving advice on whether or not you should be investing into superannuation. That would probably be a question for your financial advisor.

      I can however explain the law to you. The concessional contributions cap for you in 2017 (this current financial year) is $30,000. From 1 July 2017 (1 month away) the cap will reduce to $25,000. Caps are calculated for each financial year period (1 July to 30 June).

      An important thing to note is that if you salary sacrifice $20,000 into superannuation, it will be taxed at 15% in your superannuation fund and you will not have access to the money for another 30 years or so.

      Please PM me if you would like to discuss further :)

      • Fancy on 31/05/2017 - 10:22
        +3

        Thank you very much for your very informative reply to my question

        • big on 31/05/2017 - 22:52

          I believe that answer is only correct if you don't fall under Division 293 Tax.

  • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:14
    +6

    Keep the questions coming!

  • enzioFirenze on 31/05/2017 - 10:20

    say you are a professional getting anywhere between 50k-80k who holds a white-collar job in the CBD and don't own a PPOR or Investment property, are there any creative ways to reduce the amount of tax you have to pay? Also, for such an individual, is there a tax implication in getting private health insurance? Thanks!

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:24
      +1

      Hi, If you have adjusted taxable income of less than $90,000 then you will not be required to pay the medicare levy surcharge. For that purpose, you will not need private health insurance. However, you may consider private health for all the other benefits it provides.

      With regards to your other question, unfortunately the reality is that most full time employees don't have that many deductions (as employers would usually pay for anything you need to perform your duties at work).

      You may be entitled to minor deductions such as internet, mobile, some home running costs if you do work at home but they would usually result in you getting back approximately $500 more each year.

      • enzioFirenze on 31/05/2017 - 10:30
        +1

        Plight of the commoners I guess, so the only way to claim a tax deduction is to have an investment property?

        • abb on 31/05/2017 - 12:32

          You can claim a deduction for any interest paid for investment, doesn't have to be a property. (Margin Loan to buy shares, for example)

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:41

          @abb:

          Are the shares paying regular dividends. You might be able to claim interest on the margin loan. Would have to check that though.

        • Wallyt99 on 04/06/2017 - 12:19

          @abb:

          I got a car loan to invest in a classic car… or at least a future classic (2004 Honda Jazz). I assume because I class it as an investment that I can claim a deduction for the interest paid. What if it also by ssome strange chance it fails to increase in value? Can I also claim my losses? Note: I dont use the car myself but have asked my wife to drive it occasionally to ensure that 'all the pieces keep moving' and that my investment doesn't "sieze up".

        • Slo20 on 04/06/2017 - 12:35
          +2

          @Wallyt99: good luck with that.

        • abb on 05/06/2017 - 08:17
          +1

          @Wallyt99: Do you charge your wife a rental fee? ;)

          You can claim a deduction for expenses incurred in earning interest, dividend or other investment income.

      • ibuy on 01/06/2017 - 08:32
        +2

        Some suggestions to minimise your tax include
        - salary sacrifice of work related equipment such as computers, ipads and mobile phones (the impact is not only are these items paid with pre tax dollars but you also receive them GST free as your employer can claim back the GST

        • motor vehicle salary sacrifice - especially where the car is predominately for business use. The rules have changed significantly over the last few years so check with your accountant/tax agent to see if this still works for you.

        • spouse superannuation contributions have change recently and is more generous in terms of the rebate of tax that you can receive.

        • if you have a home loan then the most tax effective thing to do is to actually pay this off as fast as you can given that the interest on these loans don't provide any tax deduction at all. It's just like credit card debt for personal purposes. The home may go up in value over time however you don't receive any benefit until you sell so why pay more interest than you have to when there is no tax benefit.

        DISCLAIMER: The above suggestions are general in nature and not specific to any person or situation. It does not take into consideration any specific personal situation and is geared towards tax minimisation without consideration of personal circumstances or situations which may affect the ability for you to make such claims or implement such strategies. The writer of this article is a qualified Chartered accountant with licence to provide advice on tax, SMSF and related superannuation issues

        • Dpkmax on 02/06/2017 - 04:35
          +2

          ibuy Should have mentioned Disclaimer OzBargainer that should have been sufficient !!!

        • Wallyt99 on 04/06/2017 - 12:22
          +1

          Thats bad advice. You are better off putting your money into an interest offset account on your ppor so that you can claim negative gearing on the full borrowed amount should you move out and rent the property.

      • exa on 01/06/2017 - 09:56

        I'm on a 457, earning more than 100k.

        Is there anything else than medicare that I can claim in my tax return?

        • exa on 02/06/2017 - 09:24

          @nicolemcmilllon

        • chumlee on 05/06/2017 - 08:31

          Since when can you claim medicare?

          You pay a medicare levy

        • chumlee on 05/06/2017 - 10:08

          @exa: that's an exemption. You don't claim a deduction for it if you don't pay the levy. The levy is calculated when you do your tax

        • exa on 06/06/2017 - 12:38

          @chumlee: Proof that I need tax advice :D

          Ok so I guess that the deduction I get is about the private insurance I'm required to have.

  • tio on 31/05/2017 - 10:27
    +1

    Hi, thanks for doing it, really appreciate the effort.

    Say I have a sole trader business, part of my business activity includes engageing overseas contractors for administrative work. All works/products are in electronic format (i.e. code and software) so no physical goods leaving/entering the border. Is there any tax liability on my side to withhold some tax on the earning of the foreign contractors. I'm aware of the Royalties for Foreign Residents Withholding Tax, but not sure if that's applicable. Is there any other tax requirement for foreign contractors that servicing Australian business?

    Best regards,

    Tio

  • 2jzzzz on 31/05/2017 - 10:32

    What are your go to deductions that require no receipts or records to claim? Heard you can claim up to certain dollar levels without any proof (small, miscellaneous items you bought but didn't keep receipt)?

    Laundry costs for uniform, stationary, driving personal car between work sites, sunscreen and other small PPE, and mobile/Internet costs.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:42
      +2

      Hi, only the first $300 deductions do not need to be substantiated. If you are claiming anything above $300 then all deductions (including the first $300) will need to be substantiated if you are subject to an audit.

      • karimaka on 31/05/2017 - 11:19

        Follow up question. is that $300 for each item? eg laundry, mobile internet costs, or collectively?

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:32

          Collectively in your entire tax return.

        • chriise on 31/05/2017 - 13:40

          @nicolemcmilllon: Sorry to be a broken record.. but would the claim on 1200KM work-related travel take you over the $300 also?

        • buckster on 31/05/2017 - 19:21

          @chriise: very easily, as (I might be wrong) I believe you claim ~65cents per km

        • AAAB on 31/05/2017 - 22:03

          @buckster:

          66c/km :) up to 5000km without a logbook.

          Need to show your methodology as to how you calculated the 1200km as well, but not as strict as recording the logbook.

        • 2jzzzz on 01/06/2017 - 16:22

          @AAAB:

          How do I satisfy ATO of what I did to claim 4500km? Say I drove from here to here 3 times a week for x purpose?

        • AAAB on 01/06/2017 - 19:07

          @2jzzzz:

          I would say that should be enough - as far as I know, the ATO does not provide specifics as to how detailed the substantiation needs to be for claiming under cents per km. Also it would probably be a good idea to err on the side of caution and use conservative numbers if you're on the fence.

      • Ruckmauler on 01/06/2017 - 10:53

        How long has it been $300 - it feels like a decade or more - crazy

    • techboy on 01/06/2017 - 13:28

      There are other ways to claim if you have recorded the transaction:

      (1) For expenses of $10 each or less, providing the total of these expenses is not more than $200

      (2) If your client has been unable to obtain written evidence, for example, for toll or parking fees where a receipt cannot be obtained. Also coin-operated laundromat costs etc

      https://www.ato.gov.au/Tax-professionals/Your-practice/Tax-a…

  • Gunther on 31/05/2017 - 10:43

    Broadly speaking, for my investment property - what is the difference between a tax deduction & deprecation? e.g New carpets - what category do they fall under? Why?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:09
      +1

      Hi, If you purchase assets or incur expenses for your investment property, some of these expenses are an immediate deduction such as painting a room, or repairing part of an asset.

      Most assets however have an effective life and you are required to deduct the cost of purchasing that asset over that effective life.

      If your property is recently purchased and relatively new, you should consider if getting a depreciation report may benefit you.

      Thanks for your question.

  • yoonibear on 31/05/2017 - 10:47

    If I requested that payroll take a bit more from my pay to put into my super - would this lower my taxable income?

    Also how does the whole contributing super affect my tax return? (I've asked this question to the accountant I use, but never got a clear reply)

    Thank you!

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:03

      Hi, If you contribute extra money to super (by salary sacrificing) you are reducing the taxable income in your personal name.

      Broadly speaking, if you earn $70,000 a year but salary sacrifice $15,000 into super. It means your taxable income is now $55,000 and obviously the tax on 55,000 is lower than the tax on 70,000.

      Please note your superannuation fund pays 15% tax on these contributions.

      Also, you are losing access to this money until you can withdraw it from super. This is the most important thing to consider as most people want access to their money immediately.

      • frewer on 04/06/2017 - 23:24

        The 15% on super is capped or variable ?

  • BensonP on 31/05/2017 - 10:49

    Girlfriend works for a travel agent. Can she claim her own holidays as a deduction?

    'Familiarisations', maybe?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 10:51

      Hi, unfortunately she can't as her holiday is private in nature. If it was for work purposes then they would be paying for it :)

      • BensonP on 31/05/2017 - 10:56
        +1

        Ok one more!

        If she's on a work paid for trip, are expenses (food taxis etc) deductable?

        Thanks for your AMA! Good read :)

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:01

          If it is a work trip, then work would be reimbursing her for taxi's and other costs.

          If they don't, she may be able to claim the transport costs on her work trip. She should gather all her expenses and take them to her accountant at year end. They will be able to determine what is deductible and what isn't.

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