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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closed Comments

  • tassieeagle on 31/05/2017 - 11:04
    +1

    Hi mate, thanks for doing this.

    I am a student and a stay at home parent with $0 income. My wife works fulls time. I receive Family Tax Benefit A and B. My questions are:

    1. Do I need to lodge a tax return?
    2. Can I claim a deduction for my laptop, internet, textbooks for Uni? Or is there no point anyway because I don't have an income?

    Thank you

    • sween64 on 01/06/2017 - 10:10
      +1

      Absolutely $0 income? I'm sure you'd be below the tax free threshold but do you receive interest on savings? Dividends from shares?

      • tassieeagle on 01/06/2017 - 12:38
        +3

        Haha that gave me a good laugh, shares oh ho ho. I'm not the investment banker type that uses ozbargain, I'm just a guy that tries to get good deals for his family and himself from time to time to save a dollar for something else we might need.

    • frewer on 04/06/2017 - 23:29

      deleted

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

    Hi, I do not think you need to lodge a tax return as you don't have any income. Department of Human Services may require you to lodge a return not necessary with your tax agent. I would recommend contacting them and making sure.

    Secondly, as you do not have any income, your expenses are not deductible.

    Thanks :)

    • tassieeagle on 31/05/2017 - 11:15

      Thank you Nicole, I thought as much but good to get an expert opinion.

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

        No Problem. I appreciate the appreciation :)

  • illumination on 31/05/2017 - 11:18
    -4

    Thanks so much for doing this. I have a few of questions:

    1) If I can provide evidence (through payslips, paperwork, statutory declarations etc.) that I am paying for a mortgage where neither the property or mortgage is in my name, is there any way that I can claim tax benefits from this?
    2) Can someone who permanently lives and works in Singapore claim tax deductions based on their Australian property if it is effectively negatively geared? This individual has a negative net income in Australia and
    3) Is there any way to "gift" a property to someone, like a family member/friend? Asking this with the intention of avoiding stamp duty. (maybe this isn't really a tax question)
    4) Are Frequent Flyer/Loyalty points ever, at all, taxable?

  • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:35
    +3

    Hi there,

    1. If the property is not in your name then you can't claim any deductions incurred.

    2. If they are a non resident of Australia for tax purposes, they are required to pay tax in Australia for their Australian sourced income. If the property is negatively geared then there will be no tax in Australia. I am not able to provide advice on the tax situation of their income in Singapore that would be for their accountant in Singapore.

    Note, this answer will change if they are an Australian resident for tax purposes.

    1. Unfortunately no.

    2. Receiving points is not taxable.

  • misialinac on 31/05/2017 - 11:40

    Hello, thank you for this post.
    I earn about 50k, so far haven't been payin HELP debt (sitting below the treashold). With new budget rules, everyone earning above 42k will have to start paying it back (next year).
    Will I be able to salary sacrifice 8k towards my Super and bring the income down to avoid repaying it?
    Or is there anything else I can do to avoid paying it next year? Thank you!

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:44

      There is no way to avoid paying it unless you don't earn that much.

      The threshold is based on your adjusted taxable income which adds back any salary sacrificed amounts.

      Also worth noting that you should have ticked YES in the box about HELP debt in your tax declaration form when you first started working there so they know to withhold it from you starting 1 July 2017.

      You could also consider paying it off quicker to get it out of the way.

      • sween64 on 01/06/2017 - 10:17
        +1

        HELP debt is a very cheap loan though. It is indexed at the rate of CPI which this year was 1.5%link. Correct me if I'm wrong but aren't you better off just putting the money in a HIOSA (3% interest pa with ING)?

        Note: I have no formal accounting or tax experience so I could be very wrong.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 01/06/2017 - 10:30
          +3

          Psychological factors in my experience are more important than financial factors to most clients.

          For example, studies have shown that paying off the smallest credit card balances first rather than splitting credit card payments to different cards provides one with a better chance of reducing overall debt in the long run.

          In my experience, when a client sees a tax bill of $4,000 at the end of the year due to HECS, the psychological let down can't be measured in financial terms.

          People want to see a refund at the end of the year.

        • sween64 on 01/06/2017 - 13:30
          +1

          @nicolemcmilllon: As long as you increase your PAYG payments to the ATO to account for your HECS debt you can still have a tax return.

          It's irrational to consider emotional factors when considering what is best for a person's financial situation but I can see why some people might consider paying their HECS debt off early "to get it out of the way", I just see that as poor financial advice. It might be good life advice.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 01/06/2017 - 13:33
          +6

          @sween64:

          There are more important things than money. Life is about being happy.

      • sabracad on 01/06/2017 - 21:02

        ATI doesn't add back exempt benefits.

  • Pizdets on 31/05/2017 - 11:41

    Was hoping you could answer my previous questions:

    My company is based in Brisbane and I have to go to Canberra for work 12 months. My wife owns the property I am currently 'renting' in Canberra and I fly back home every Friday.
    Are my rent and flights 100% tax deductable?

    Your Response: Do you own your own company?

    My response: Company is owned by two people one of which is myself. So it's 50/50 split.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:46
      +1

      If your wife rents it to the company, the company will claim a deduction on the rent expense but your wife will pay tax on the income. Not sure why you want to do this.

      Your company can deduct the cost of flights to send its employee (you) to work in Canberra.

      • Pizdets on 31/05/2017 - 11:50

        But if my wife doesn't work then she would not have to pay tax because the rent income would fall under 18K a year?

        Thanks again.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:07

          Is the property owned 100% in her name? Also consider the capital gains implications of renting the house.

          Also, your wife has a vacant property that is not currently being rented and no one is living in it?

  • geoffs87 on 31/05/2017 - 11:45
    +1

    Hi Nicole,

    I'm looking at selling my investment property in a couple of months. I purchased the Ultimo (NSW) unit in April 2011, lived in the property until March 2015, where it was rented from May 2015 until now.

    i didnt get a valuation when i left the property and commenced renting it out. How will the CGT be calculated when it comes time to sell the property? I'm sure i can get a couple of agents to give me an approximation, or i can look at the MoM growth for Ultimo Properties since Apr-15 to (say) Oct-17. Just wondering what the ATO expects and how this is treated!

    Thanks :)

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:48

      When it was purchased in April 2011 and you lived in it until March 2015, was it your primary residence. Was it your only primary residence. Do you have a spouse with their own primary residence?

      • geoffs87 on 31/05/2017 - 11:51

        Hi,

        The property is owned in joint names by my friend and I (50/50)

        Apr-11 til Mar-15, this property was the primary residence for both of us. In Mar-15, when we purchased a second property (50/50) and moved into that property, we leased out the investment.

        My fiance lives with us in our current PPOR (has no ownership on either property)

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:59
          +1

          You can get agents to give you a market valuation of your property at the time it started earning income and use that as your cost base.

        • Poolprouk on 31/05/2017 - 12:14
          +1

          @nicolemcmilllon:

          How stringent are the ATO's requirements for this? Do they really accept a few valuations from Real estate agents or does a more formal and documented valuation need to be done by a specialist?

        • SaberX on 31/05/2017 - 12:34

          @Poolprouk:

          It hasn't been said but If you weren't claiming principle place of residence for your new place you purchased would you not be able to claim principle place of residence for your old place - assuming the Capital gains is alot more, and avoid paying tax. 100% PPOR exemption.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:45

          @SaberX:

          As they are claiming PPOR for their new place. and considering they would only be liable on capital gains for 2 years worth of gains on the original property, my guess is that it is much better to pay the small tax on the first property. But obviously it is something they need to talk to their accountant about and provide figures of the properties for better analysis.

          I guess this depends on how long they stay in the second property. This is because for the this property, if they do not claim the PPOR exemption until they sell the first house (which they have not done yet) then they will have to claim only an apportion of the exemption. For example if they sell it next year, two thirds of the gain would be assessable.

        • geoffs87 on 31/05/2017 - 13:07

          @nicolemcmilllon:
          Thanks Nicole.

          Yes, the gains on our PPOR in 2 years are nearly double those of the investment. Lower north shore has been the best investment i ever made :)

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 13:26
          +1

          @geoffs87:

          Speak to your accountant and give them figures before making any decision.

          Remember the decision of a PPOR is made on sale, not on purchase. So you can always choose the best outcome assuming you predict correctly what will happen to the second property :)

  • SaberX on 31/05/2017 - 11:48

    Hello! Just curious - with all the prior questions in the 1st AMA thread around the new government changes to claiming depreciation on purchased equipment - and the suggestions about quantity surveyors - it's been on my mind for the last couple of years (having worked with and seen these reports):

    Going off the report, when does year 1 deductions get claimed when ownership/day 1 of house differs to day 1 of rental?

    Say for ease we start with a brand new property: July 1 , 2018 built, keys handed over, day 1. Come 1 Jan 2020 - 1.5 years in, the property begins being rented, and a quantity surveyors report is obtained.

    Would year 1's deductions correspond to the June 2019 tax year, and therefore half of year 2's amount claimed for the 2020 year (given you only started renting 1 Jan 2020).

    In the past people used to claim year 1 from the date of getting the report.. But i understand these reports look retrospectively, from day 1 of the building and not necessarily when renting becomes applicable?

    Seems common sense obviously that your highest level of deductions in year 1 couldn't be claimed on an 8 year old building, but yeah just curious on the official stance.

    Second:

    On another note - I raised this online once and the advice from a few financial advisers (just online free chat forums) was one could not claim interest relating to loan amounts whereby the bank reimbursed yourself personally for legitimate property expenses?

    I live in my own house I built and the thought was, if I ever have to move out of town to vacate for work (future travel potential) what could I do to maximise my future potential. Hence I've put all post construction items: lightening, air conditioning etc through my loan. The money i save not paying out of pocket can therefore go into the offset account and it's as if i paid it anyway - albeit if I ever need to shift out for work or travel/life, I could then draw out of the offset for maximum bang for buck.

    I was told valid invoices submitted to my bank for payment to 3rd parties e.g. painting my house was acceptable. Yet while my bank doesn't mind paying it, for tax purposes I could not reimburse my own paid expenses from my home loan. Something about case law or tax interpretations previously ruling you could not reimburse oneself? It's annoying as not all stores allow tax invoices to be issued and then submitted for payment e.g. bunnings - you pay on the spot. I did not realise some suppliers I paid myself could issue invoices so I was out of pocket for alot of things i paid myself. I have always held back getting the bank to reimburse me as I didn't want to taint the loan and cause future headaches.

    I mean no biggie as obviously I live there, but it'd be good to know if i could get some cashflow back now (cash tight currently) by reimbursing myself through the home loan. Not worth the risk for 5 years down the track if i rent it out and move out of Australia or something and find out i've stuffed up.

    3rd)

    Where do you draw the line for claiming investment deductions (D7 or whatever it is) and substantiation? E.g. i believe i use more than 2/3 of my mobile for monitoring my equities, can i just pick 50% as a conservative amount to claim on my per month cost for my mobile phone plan (includes phone repayment as on 24 month plan).

    I know the commonly investment deductions are interest, software etc but doesnt' cover incidental costs: attending investment information seminars, speakers etc.online website subscriptions for leading identities in the industry etc. Buying investment magazines for pre-reading : say your old money magazine, smart investor magazine etc.

  • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 11:54

    In regards to your first question, the depreciation report will show you which date is year one.

    If that financial year has passed, you could contact a tax agent to amend your prior year tax returns (PM me if you like). You can't start depreciating year 1 from the date you want. In your example, you have lost the depreciation in the years it wasn't rented because, logically, the assets are declining in value over that period, the property isn't rented so you cant deduct that portion.

    Regarding your second question, it will most likely not be deductible. Probably not worth fussing over. The interest (assuming 5%) on $1,000 worth of spending is only $50 which may get you a refund of $20 in your tax return. Probably best to let that one go in my opinion.

    • SaberX on 31/05/2017 - 12:06

      Thanks. I did update my question above as it was abit confusing/convoluted. added a 3rd one in on investment dedcutions if you don't mind looking.

      The second question: it wasn't so much missing out on $20 in the tax return. but the cash flow that helps if say i got $1,000 back in my pocket for bunnings/paint expenses paid for currently, as i can put it on the loan. Didn't want to have that issue of tainting the loan, as it isn't the tax deductions that would be so much the issue.

      Edit: in regards to your response to q1 - thanks.

      Essentially year 1 begins from date of year 1 of the property. So for older properties or rentals that begin after year 1, basically you pick the corresponding year on the report, and any years before that is lost?

      Thanks

      • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:14

        Year 1 begins from the date that has year one on the depreciation report. Which will usually be from when the property was first purchased. Now if you dont rent the property until year 3, you have "lost" that depreciation for the first 3 and a bit years.

        Regarding the tainting, if the expenses incurred were for the rented rental property which has never been not rented, then it wouldn't taint the loan. However, personally, I would not do it as it may create questions and probably not worth jeopardising the entire deductibility of interest.

        • SaberX on 31/05/2017 - 12:24

          Would the fact that as property owners we take much better care of the property, let alone being a single owner I do have more unused room than a family occupying the whole house, impact the fact that the assets would be declining less in value (wear and tear)? Or do they not care and they assess the report as at day 1 of the property (year 1)? Do they not assesss the state of the property at year 3 and reassess that decline in value has been slower and less aggressive?

          Regarding tainting why would not renting it for some periods make a difference in this scenario, vs having rented it out fully from day one? Surely if you could reimburse yourself for expenses but rented it out from day 1 continuously, it would be the same as having lived in it for 5 years (and reimbursing for DIY work that is required for a property had it been rented e.g. painting, fitting flooring)?

        • SaberX on 31/05/2017 - 12:28

          Thanks for your responses by the way. Can i throw in one other related item.

          Where a proper third party tax invoice can be issued and therefore i can legitimately reimburse and pay these out of the loan directly, would the following items add to the capital cost base of my house , and would the interest on the loan be deductible should I move out in 5, 6 years etc. in a similar light?

          Installing paving for the outside/around house
          Installing my incidentals for outside e.g. clothes lines on side of house, fake lawn etc. if no paving

          I assume yes, as if you had built a property with the sole intention to rent it out from day 1, you'd have had to incur these costs to put paving in and things around the house (structurally)? And it's therefore no different to having put in air conditioning and tiling, painting etc - which if you paid out of the loan, interest would be fully deductible if you ever started renting out the property?

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:30

          @SaberX:

          The reason I asked is that if the loan was for your house that you initially lived in, therefore was not an investment loan, there would be factors that would need to be considered.

          Also, are you living in this property? If not, how can you make any difference in terms of the effective life of the assets. That would be up to the people renting the property.

          You can self assess the effective life of assets but once again, I would not recommend it.

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

          @SaberX:

          are you living in the property? If so, none of this matters and you can do whatever you want with the loan as the interest is not deductible.

        • SaberX on 31/05/2017 - 12:40

          @nicolemcmilllon:

          Hi, yes I am living there since I built. I posed the question as i was covering myself if i moved out in years ahead - whether I could increase my cashflow now by reimbursing myself, yet not causing issues for the loan deductibility down the track. Obviously no intentions to move out now, but it was more a 'what if' i move out in years ahead (still young, so work/moving abroad is a possibility).

          Am aware it makes no difference what i reimburse form the loan now so long as it is my principle place of residence.

        • SaberX on 31/05/2017 - 12:42

          @nicolemcmilllon:

          WHat sort of other factors need to be considered then? Given yes, am living there , and the intention is to live there indefinitely. But I was trying to maximise future flexibility in the event i did rent this out in years ahead. I would like the cash back in my pocket if i could put it on the loan account, hence why everything issued an invoice from a 3rd party I have been putting through on the loan. But yes, as mentioned I didn't want to shoot myself in the foot now by reimbursing my own receipts if it isn't allowed.

          With your second point - yes living there. But it's a larger family house (i built with my future in mind) and so I am there by myself, so would think one wouldn't be wearing down the whole house much compared to a full family living there?

  • FrugalFrella on 31/05/2017 - 11:58
    +3

    Hypothetically if I made, say, $500 profits from trading Cryptocurrencies (i.e. Ethereum) over short period, are those profits subject to tax and need to be declared?

    I've read the official ATO stance on Crypto's but as someone tax-illiterate I'm a tad confused.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:06
      +1

      Were you in the business of trading Cryptocurrencies (such as bitcoin) If so, you will include the income and expenses just like any other business.

      If you held the currency as an investment, it will be subject to capital gains.

      If you held the currency as a personal asset, just to purchase personal stuff with, then it will not be subject to tax.

      Please note as Cryptocurrencies are quite new, probably best to seek detailed personalised advice from your accountant.

    • MercSal on 31/05/2017 - 17:34

      You'd only need to pay tax once you trade your Eth back to AUD, which i assume you arnt doing yet.

  • Peanut money on 31/05/2017 - 11:59
    +1

    If claiming cents per km does the car need to be in your name
    And are items purchased overseas claimable

    Thanks

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:03
      +1

      The car does not need to be in your name as long as you are the one driving those kms. Remember trips to and from work-home are not business kms.

      Items purchased overseas will be deductible if they would otherwise be deductible had they been purchased in Australia.

  • AnotherDola on 31/05/2017 - 12:12

    Thanks so much for doing this. I have been given conflicting answers for this and would appreciate some clarity or further directions.

    I am paid an income by my employer. As part of my contract, I am bound to reside in an accommodation on the employers property while paying rent to my employer. I am not able to opt out of residing in this place or to not pay them rent if I would like to be continued to be employed. Is this compulsory rental payment tax deductible?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:17

      Without running my fingers through the law, I would probably say it is not deductible as rent is private in nature. The logic being, if you were renting anywhere else, it would not be deductible.

    • Typical16-bitEnjoyer on 05/06/2017 - 21:15

      Defence Force?

  • aurotaro on 31/05/2017 - 12:21

    Thanks for doing this.

    I have just renovated the bathroom in my IP which was approximately $9k in labour and $3k in materials. Can I tax deduct the labour part of this straight away in this FY16/17? I understand the $3k in materials will be accounted for in the depreciation schedule, correct?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:25
      +1

      The labour forms part of the work being done. If you renovated the bathroom, it would most likely be in the depreciation schedule in terms of building works. It wouldn't be depreciated as it is the fixture of the house. The labour is treated as part of that and not separately.

      • spiff on 31/05/2017 - 12:47

        In this case, if the depreciation report was already done prior to the renovation, and you didn't want to pay for another depreciation report, would you add 12k to the asset's cost base and claim the 2.5% capital deduction each year?

        • techboy on 01/06/2017 - 13:42

          This does not get added to the cost base of the house, but as a new capital works depreciation item.
          The first year would be apportioned to the number of days left in the financial year.
          e.g. Cost ($12,000) x days left (?) x 2.5%
          The remaining years (except the last) would be $12,000 x 2.5%.

  • sweepy on 31/05/2017 - 12:23

    I sold a % of the company I own shares in for 52k. I have not yet paid tax on that sale and have also been generating interest off this since the sale. Do I wait for my tax return to show me what I owe before I pay back the tax owed on the sale? Or do I transfer the money to a nominated account? Also, do I have to pay tax on the interest I earned from the proceeds?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:27
      +2

      You will pay tax on the interest in the year the interest was paid to you. You will have to pay capital gains tax on those shares in the year you sold them. The actual tax is paid when you lodge the tax return. You do not have to pay the tax straight away when you sell the shares.

      • sweepy on 02/06/2017 - 13:42

        Thank you

    • Thazza on 04/06/2017 - 10:33

      You may also want to check if you are eligible for the Small business cgt concession.

  • Sestrooper on 31/05/2017 - 12:35

    Thanks OP for your generous time! I had a question which I was a little unsure about.
    I'm a junior medical doctor and had a few quick questions
    1. A few colleagues have told me that their accountant has allowed them to claim a watch as a tax deduction as long as it has a second hand (rationale being that we need one to calculate how many beats per minute and how many times a patient breathes). Have you heard of this?

    1. Overseas travel + conferences
      Last year I did my first holiday whilst working. I incorporated a conference whilst overseas (3 days). My total travel time to canada was 3 weeks. In terms of tax deduction, I assume I can claim 100% of the conference fee and the meals/accommodation during the days.. but in terms of flights, can I claim the entire flight or only a percentage of it ? Say (3-5/21).

    Thanks!

  • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:38
    +1

    1. Yes should be fine (as long as you're not spending $1,0000 on a watch).

    2. Only a percentage of your flight based on the days you were at the conference compared to total days.

  • Mickeyj23 on 31/05/2017 - 12:38

    Hi, regarding latest budget changes to depreciation of plant and equipment for investment properties.
    If the contracts were signed and exchanged before the budget and the settlement is after the budget does that still qualify the investment under the old rules?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 19:55

      Depending when the contracts were exchanged. If you exchanged contracts to purchase a second hand property before 7:30pm on the 9th May 2017 you will be able to claim under the old rules.

      Also, get a depreciation report!

  • abb on 31/05/2017 - 12:39

    Hi Nicole, thanks for doing this.

    I did some work overseas, and received a travel allowance (under the ATO limit, so un-taxed).

    Can I still claim work expenses I incurred whilst overseas? I had to purchase a foreign SIM for my phone in order to do my work.

    And is clothing considered a work expense? It was below 0 degrees so I bought warm clothes specifically for the trip.

    • techboy on 01/06/2017 - 13:46
      +1

      Work related sim and call costs x Business use = Yes
      Warm clothing = No.

  • 2ndeffort on 31/05/2017 - 12:47

    My wife and I are the directors in a private company. We have not paid ourselves out of the company previously but the company stands to make a profit this year. My wife and i both work PAYG jobs as well. I earn significantly more than my wife, several tax brackets higher (top bracket) and my wife is a low income earner (normally pays almost no tax ($100 ish). If we were to take some payment from our company could I pay my wife the profits instead of myself as she will pay less tax on the personal earnings or is there a better way.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:49

      There are a variety of factors to consider. Probably best to discuss with your accountant so they can see the figures and make a more informed decision.

      Are you and your wife also the shareholders of the company?
      What work does the company do?
      What work do you and your wife do in the company?

      • 2ndeffort on 31/05/2017 - 12:53

        Yes i will speak with my accountant but to answer questions:

        Wife and i are the only shareholders in the company, 2 shares each!
        Company does software development
        I manage the company, write all of the tender proposals, hire all of the staff, sack the useless ones, basically do everything I havent hired a staff person to do all alongside working a 50 hr week for my current fulltime employer (a lot of late nights). I am very involved.

        My wife doesnt have much to do with the company in a practical working sense.

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:57
          +2

          Speak to your accountant if the business is a personal services business and not be bound by the personal services income rules then your wife can be paid wages for admin work.

          Also consider paying tax in the company, issuing Class A shares to your wife, and paying her a dividend.

  • Cleartype on 31/05/2017 - 12:49

    Hi Nicole, thanks for the AMA.

    I travelled overseas for 8 weeks earlier in the year. 50% of my time was on leave while the other 50% was spent working in one of our overseas offices, working with their local clients. My employer did not contribute to any expenses such as flights etc, as it was agreed I was travelling O/S regardless on annual leave. Am I able to claim a deduction for work related expenses, apportioned by time spent working vs holiday, or any other method?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:55
      +1

      Most likely you will only be able to claim 50% of the flight costs. Most of the other costs will be private in nature. Be sure you are being paid whilst overseas to prove that you were working there.

  • stingy bastard on 31/05/2017 - 12:50

    Hi Nicole, thanks for your time.

    I work a standard office job earing $80k but also work as a flying instructor on weekends earning roughly $100 a week. Can I claim the cost of my own flying lessons (as long as it meets the self-education expense requirements) on my entire taxable income, or just what I earn from my second job?

    Thanks

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 12:56

      Are you being paid as a flying instructor as an employee or on ABN?

      • stingy bastard on 31/05/2017 - 12:56

        Employee

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 13:02
          +1

          Should be fine to claim against your entire income.

          The expenses have to be deductible (see the standard education expense deductions). Ensure you were employed the entire time you were incurring the expenses.

  • idonotknowwhy on 31/05/2017 - 12:56

    Say I mined a lot of different shitcoins (Dogecoin, Sexcoin, etc) and automatically sold these for bitcoin as they were mined. I have no idea what they were worth a the time, what I sold them for. It would have been thousands of tiny trades. Were I to cash out AU$2000 worth of bitcoin, would I have to declare this?

  • [Deactivated] on 31/05/2017 - 13:15

    Hello I work for a my for profit NGO in community sector and I'm having trouble working out my HELP repayment debt while receiving salary sacrifice. Is there an easy way to organise this? Our office manager has showed me on the ATO website that the proper amount of tax is being deducted according to my salary and debt etc - but every time I do my tax I get a bill from 2-4K?

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 13:23

      That is because the computer software calculating the tax withheld is calculating the withholding on your income after salary sacrifice.

      1. Either increase the withholding or
      2. Just pay it at the end of the year, at least it means you get to use that money all year round until you pay your bill in your tax return.
  • Shazam82 on 31/05/2017 - 13:17

    Hi, I asked this question previously….but is this something you could shed some light on? I've tried to look on the ATO website and found nothing. Thanks for your time on this thread.

    'I have an investment property under my name and my partner's name. At the moment I'm paying 100% of the costs and can prove it. Do I still need to put 50:50 split in ownership on my tax return or can I claim 100% of the deductions. Any advice would be ace!'

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 13:24
      +1

      Income and deductions have to be based on the ownership of the property. The property is incurring the expenses and it doesn't matter who is paying them. You would most likely have to include 50% into hers.

      • Shazam82 on 31/05/2017 - 13:39

        Thanks that was also my hunch.

  • ohsotight on 31/05/2017 - 13:26

    Hi Nicole,

    Great initiative and super effort to respond to the many questions. I have a few of my own unfortunately!

    1. I have two properties in Melbourne which are negatively geared and rented out. If I live in another country for the next 5 years I am assuming I will carry a tax loss on these until at some point I have some assessable income (foreign or from Aus) to offset the loss from the two properties? Is this correct.

    2. Secondly if both properties happened to become positively geared, given I will be a non-resident for tax pursues I assume I will need to pay 32.5% of tax on every dollar of net income (no tax free threshold) I receive from these two properties. (on the basis that this is the only income I will receive from Aus)

    3. When it comes to negative gearing it does take into account the Medicare levy doesn’t it? Also I assume it doesn’t but does it matter for tax purposes if your investment property is classed as owner occupied or IP with the bank?

    4. Do non-residents actually declare the wages they get paid in a foreign country? Does the ATO have a method to track this income? I feel this is very unfair if the local income tax is only 10% why should we have to pay the ato possibly another 22.5% when the person isn’t even living in Australia and using any services.

    5. For my investment property I currently have some funds offsetting my loan account. When claiming my interest I should only claim the net interest I was charged from the bank isn’t it? I.e. I can’t put the interest which should have been charged on the full loan excluding funds in offset.

    6. I am currently on the highest tax bracket and if my wife were to stop working do you think at some point it would make sense to start a family trust if we have kids? Does it help in some way to pay school fees by paying a dividend to the kids and that goes directly to the school thereby paying tax on a lower rate? I am aware this question might not make any sense! Generally given my tax bracket will a family trust make sense in the future.

    7. Lastly I do a fair bit of my own repairs on my rental properties. On my tax returns I do claim the parts portion but can I claim some sort for the labour component given its my time?

    Thank you.

    • retiredfeline on 31/05/2017 - 13:56

      I will be a non-resident for tax pursues

      Just wondering why you think you will be a non-resident for tax purposes. As they on this page:

      https://www.ato.gov.au/Individuals/International-tax-for-ind…

      We don't use the same rules as the Department of Immigration and Border Protection.

      You might want to compare your situation with their scenarios.

  • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 13:30
    +1
    1. Correct
    2. Correct
    3. I don't understand your question. The medicare levy is paid on taxable income.
    4. If you are a non resident for tax purposes you are only taxed on Australian sourced income. So if you are working in the foreign country as a foreign resident for tax purposes you would not be taxed here.
    5. Only claim the interest incurred, which is the net interest charged on your loan. Not the interest which would have been charged on the full loan.
    6. Income for minors is taxed at the highest marginal rate. If you are an employee, a family trust won't make a difference as you can't funnel the money through there. If you are running a business that does not receive personal services income then you pay be able to start the trust and distribute to your wife.
    7. You can't claim the labour component if you are doing your own repairs as you have not incurred the expense. You can only claim if you have incurred the expense and physically paid it.
  • sund00bie on 31/05/2017 - 13:47

    Thanks for the offer for advice.

    I have a Pty Ltd who is the trustee for a unit trust (eg ABC Pty Ltd as trustee for the ABC unit trust.) The unit trust will be engaging in business and im trying to get an ABN for the trust.

    Should the naming for the ABN be something like this "ABC Pty Ltd as trustee for the ABC unit trust ?", im struggling to work out how to get an ABN only for ABC unit trust.

    When we made the bank account they were very specific and ensured the name of the account was ABC Pty Ltd ATF for the ABC unit trust

    I hope this makes sense and i appreciate any advice.

    Thanks!

  • akpv on 31/05/2017 - 13:51

    Is there any difference in the way an mortgage with an offset account vs a mortgage with a redraw facility is treated if I decide to move out of my property to lease it out?

    Assume I've got 100k additional to minimum repayments that I want to redraw / remove from offset account.

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 14:02

      If you redraw the loan becomes tainted. You can only claim the interest that specifically relates to the purchase of the property. Also very difficult to calculate if you keep withdrawing for various purposes as you have to apportion the repayments being for both purposes too. You can't say that the repayments were for the house rather than for your redraws.

      • akpv on 31/05/2017 - 14:09
        +1

        Assume 400k loan
        100k paid as minimum repayments
        100k paid as additional repayments
        100k re-draw from above to spend at the casino
        that leaves loan balance of 300k but I can only claim interest expense on 200k?

        • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 14:14
          +1

          Correct, your additional repayments have gone against the investment purposes of the loan. So even though the balance of the loan is $300,000, the investment purposes of the loan is $200,000. Therefore would be claiming 2/3rds of the interest.

        • akpv on 31/05/2017 - 14:15
          +1

          @nicolemcmilllon: Great, thanks!

        • SaberX on 01/06/2017 - 17:16

          @akpv:

          what hasn't been mentioned is i believe now that you have paid down to 200k, redrawn to 300k, you have 1/3 non-deductible debt (100k).

          Any future repayments will also be apportioned according to your private usage. So no, you can't just pay down the 100k non deductible debt directly with future repayments. So you're always going to be bitten.

  • tripix on 31/05/2017 - 14:00

    Hi!
    I've recently purchased a rental property (in qld). What parts of the purchase are tax deductible (eg. Lenders mortgage insurance, conveyancing, stamp duty, etc)?

    Thanks!

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 14:03
      +1

      None of them. Most of the costs incurred will form part of the cost base. Also be careful in deducting repairs in the first 12 months as the ATO may deem them part of the cost base too.

      Think about obtaining a depreciation report if the property isnt too old.

    • techboy on 01/06/2017 - 13:55

      Don't forget about claiming borrowing expenses for the costs incurred with getting the loan:

      https://www.ato.gov.au/general/property/residential-rental-p…

  • Oipjo on 31/05/2017 - 14:04

    I've just purchased my first home (or rather; placed a deposit on a L+H package). I work as an independent IT contractor; while often I'm onsite for clients, I am sometimes working from home. Is there anything I can and should do before the build finishing around Christmas to place me in a better situation when it comes to tax? And is there any aspects of a owner-occupier I can claim back, or later furnishings for a room like a study/home office? Likely not - but worth every try!

    Thanks!

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 14:07
      +1

      As an owner occupier there isnt anything you can do.

      What you can consider is claiming running expenses as opposed to occupancy expenses as a home office when you are moved in and ready.

      Examples include proportion of your electricity, telephone, internet for the area you use to work from home.

      Probably best to discuss with your accountant when you do your tax return. :)

      • Oipjo on 31/05/2017 - 14:18
        +1

        Thanks Nicole! Was worth the ask! I'll look to go through the options for electricity, telephone, internet, etc. with my account when I do move in :)

        • techboy on 01/06/2017 - 14:00

          Depending on the actual floor area being used it may be better claiming Home Office Expenses of 45 cents per hour.

          My wife runs a business from 1 room out of a very large house (area was only about 3%) and so the running costs that we could claim (we don't pay rent or a mortage) was less than claiming Home Office expenses.
          Either way there will be CGT to pay if we ever sell it.

          https://www.ato.gov.au/general/property/property-used-in-run…

  • jax2017 on 31/05/2017 - 14:04

    Hi Nicole, thanks so much for your help.

    I have just bought a flat (off the plan) for investment use and we are getting the commission rebated to us (realtor is a friend). I just wanted to know, would this rebate be taxable? It is technically not income earned and just a rebate so my feeling is no (I am not a realtor) but just wanted to check.

    Thanks Again

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 14:08

      Not taxable. Just reduces your cost base of your property as you would originally have paid the commission (increased your cost base) now you reduce your cost base as you did not technically pay it :)

  • LKJ899 on 31/05/2017 - 14:10

    Hi, I'm married with no kids. My husband and I are both working full time and we have a mortgage together (owner occupied property).

    1) If my husband and I do tax return together, what are the pros and cons? What are the tax implications?
    2) If we continue to do our tax returns separately, what are the pros and cons? What are the tax implications?

    Thank you

    • Associatednicolemcmilllon @ Titanium Accountants & Advisors on 31/05/2017 - 14:16

      In Australia each person does their own tax return. You can't prepare a tax return as a couple.

      However in each tax return, you are required to input information about your spouse which is used for various calculations.

      In short, each of you have to prepare and lodge a tax return. Best to go to the same accountant though to have both spouses on the same system to ensure you're not chased down for other amounts later on by the ATO.

      • LKJ899 on 31/05/2017 - 14:17

        Thank you….I thought we can submit tax return as a "household"

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