FAQ

Frequently Asked Questions

TAXATION

I was recently told that nobody other than a quantity surveyor is qualified to estimate the

construction cost of a building for the purpose of claiming a building cost depreciation

deduction. Does it mean that if I don’t get a quantity surveyor to do an estimate I will not

be able to claim such deduction at all?


That is correct. Estimates by taxpayers are not acceptable. On occasion, builders can prepare a

schedule of actual costs on completion of a dwelling and this is also acceptable.




We have moved to new premises and spent about $500,000 for interior design and fit-out

for the new office.

This is a capital expenditure and will be amortised over a period of years.

Contractor’s invoices were paid by progress billing and all invoices were paid except for a

small retention which will be paid after defects liability period.

What depreciation rate are we going to use and over how many years can we amortise the asset?


It depends on whether you are a Small Business Entity and the nature of the expenditure. “Office

Fit-out” is a general term.

Structural improvements fall within the definition of the capital allowance (deductible at 2.5%) and

we suggest some of the expenditure may come under this term.

Plant and equipment items are basically items that can be ‘easily’ removed from the property as

opposed to items that are permanently fixed to the structure of the building. Plant items also

include items that are mechanically or electronically operated, even though they can be fixed to the

structure of the building. Plant and equipment items include (but are not limited to):

Hot water systems

• Carpets

• Blinds

• Ovens

• Cook tops

• Range hoods

• Garage door motors

• Door closers

• Freestanding furniture

• Air Conditioning

The building write-off allowance is based on historical building costs and includes such items as the

bricks, mortar, walls, flooring, wiring etc.




My colleagues are asking what they can deduct and up to what limit from their individual

tax returns if they do not have any receipts.


Division 900 of ITAA97 provides rules for substantiating certain expenses. There are some special

circumstances where taxpayers are not required to provide written evidence:

- Where the total of all work related expenses, including laundry expenses total $300 or less

(the $300 limit excludes travel allowance expenses, meal allowance expenses, car expenses

and award transport allowance expenses).

- Where laundry expenses do not exceed $150.

- Where the claim is limited to expenses covered by an ‘award transport payment.’




Are employee gifts tax deductible?


Yes, as long as they do not constitute “entertainment” gifts, and if they are less than $300 each and

deemed to be “minor and infrequent” then FBT does not apply either.




Can I claim telephone bills if I use my phone for work and personal calls?


Yes to the extent they are work related. We recommend you keep a one monthly log to establish a

business percentage and continue to claim the expenses on this basis.




ATO Tax Debt. Have a tax debt and not sure what to do?


Think you might be heading towards an ATO tax debt and not sure of your options? With PJB you will:- Receive expert and accurate advice and planning on how to manage the debt in the best possible way and Confidence that a repeat of the issue is highly unlikely. The ATO’s stance has hardened considerably and evidence suggests that this will not soften in the future. With Small Medium Enterprise debt exceeding $18 Billion and a government desperate to reduce the budget deficit it is unlikely that the ATO will lighten collection priorities in the near future. Sometimes the tax debt burden has become unmanageable. PJB can also provide comprehensive advice on your options in this situation. As professionals in our field the conversations we have on your behalf are very different than those you would have if you were to manage this kind of communication yourself. For peace of mind and surety moving forward call or email us for a confidential conversation about how best to manage your individual circumstances.




How long do I need to keep my tax records for?


You must keep all the records, receipts and other documentation you have used to prepare your tax return. If you are claiming deductions, you must keep written ecidence to verify your claims for those deductions. If you are an individual, you must keep proper records relating to your tax affairs for at least five years from the date you lodged your tax return. If you are a small business, you must keep proper records relating to your tax affairs for at least five years from when the business record is prepared or the transaction is completed, whichever occurs later. If at the end of the five-year period, you are involved in a dispute with the Commissioner (an audit, for example), the five-year period is extended. If you use information from your records in a later tax return, you may have to keep records for longer. So, if you carry forward a tax loss, you must keep the records until the end of any period of review for the income tax return in which the loss is fully deducted. If you own an asset which will be subject to capital gains tax on disposal, you will need to keep records covering the entire period of ownership until five years after lodgement of the tax return recording the disposal of the asset. Given that paper records get lost or fade, it makes sense to securely keep documents electronically, suitably backed up of course in case the computer you use breaks down or is lost.




What do I do when I get a job?


When you start a job you must give your employer your tax file number (TFN) and your bank account details. You must do this so your employer can pay you and deduct the right amount of tax, Your employer will ask you to fill out a TFN declaration form, because if the employer doesn't have your TFN, your wages will be taxed at the top tax rate of 47%. The first $18,200 you earn will be tax-free. This is called the tax-free threshold. When you lodge your tax return at the end of the financial year, you will be entitled to a credit for the amount of tax that has been withheld from your pay over the course of the year. This amount is shown on the payment summary.





TRAVEL DEDUCTION

I have a good question regarding claiming travel expenses. I have shares in BHP Billiton and their AGM is in Melbourne and I would like to go to see what goes on. It’s on the 17th November, 2011 starting at 10.30am. Do I need to fly in and out the same day? What can I claim?


It is suggested that if your dominant purpose for the travel is to attend the meeting you can claim a night’s accommodation prior to the meeting, reasonable sustenance and the airfares. You don’t need to fly in and out on the same day. This presupposes the quantum of shares you hold makes this commercially realist.




I have several employee clients required to travel to remote north of Western Australia on a 2 and 1 week(s) “fly-in fly-out” basis. They incur costs and are not reimbursed by their employer for taxi fares to and from the airport, long-term parking at the airport and excess baggage charges for transporting tools. Are any of these costs tax deductible to the employee?


From the ATO fact sheet, “Mining Site Employees – What Expenses Can I Claim” • You can claim deductions for your car expenses from home to work if you had to carry bulky tools and equipment that you are required to use at work, as long as there is no secure area provided to leave them on site. There are a number of variables here, including vehicle capacity etc. For specific details please refer to your tax adviser. Note, the ATO have recently announced that expense claims for this profession are to be closely scrutinised, ensure your claims are valid.




If a contractor for our business has to travel from where he resides to work i.e. air travel, are the airfares tax deductible for him?


There are many variables to this arrangement, and more information would be required. In the case of a genuine contractor, these costs should be tax deductible. There are key ATO tests that define whether a person is actually a contractor, and having an ABN alone does not suffice.





SUPERANNUATION

I’m trying to find the new limits for concessional superannuation contribution caps for 2014/15 to verify what my accountant told me. It looks like the most recent information on TSA is for 2013/14. Can I not find it, or is it still waiting to be updated?


It is in our forthcoming annual book. Concessional contributions cap Age at 30 June prior to financial year commencing 2014-15 2015-16 49 or more $35,000 1 $35,000 1 Less than 49 $30,000 2 $30,000 2 1. Unindexed 2. General concessional cap is indexed to average weekly ordinary time earnings (AWOTE) in $5,000 increments.





HOT TOPIC 2018

Travel deductions to and from rental premises no longer allowed


If you own residential premises that you rent out, you should be aware that you may no longer be able to claim travel deductions connected with trips you make to and from those premises.

Travel expenditure incurred on or after 1 July 2017 in connection with residential premises from which you earn rent or other assessable income will not be deductible (subject to certain exceptions – see below). This includes expenses for travel undertaken to, for example, collect rent, inspect, or maintain the premises.

The measure was originally announced in May as part of the 2017–2018 Federal Budget. We now have legislation that will implement this.

Travel expenditure includes motor vehicle expenses, taxi or hire car costs, airfares, public transport costs, and any meals or accommodation related to the travel.

It does not matter where the residential premises are located. For example, if you travel by car to mow the lawn of a house you rent out, you will not be able to deduct those car expenses. Similarly, if you fly interstate for a couple of days to inspect an apartment you rent out and you stay in a hotel, you will not be able to claim a deduction for your flights, hotel, meals and taxis (eg, to and from the airport or from the hotel to the apartment).

There are a number of exceptions to this, which are as follows:

Ÿ if the expenditure is incurred in carrying on a business (eg, if you own many residential rental premises and you are treated as carrying on a business);

Ÿ if the expenditure is incurred by a company;

Ÿ if the expenditure is incurred by a managed investment trust or a public unit trust;

Ÿ if the expenditure is incurred by a superannuation fund – but this exception does not apply if the fund is a self-managed fund (SMSF), so travel expenditure incurred by an SMSF will not be deductible.

If the residential rental premises are owned by a partnership, the travel expenditure will not be deductible unless all members of the partnership are one of the excluded entities listed above – ie, a company, managed investment trust, public unit trust or superannuation fund that is not an SMSF.

You should also be aware that any travel expenditure that is not deductible will be ignored in working out your capital gain (or loss) should you sell the premises – in other words, the expenditure cannot reduce the capital gain (or increase the loss).

The changes will not prevent you from engaging third parties such as real estate agents to provide property management services for an investment property. These expenses will remain deductible.

Other restrictions

There are two other related measures that were announced in the Federal Budget:

Ÿ limiting depreciation deductions for second-hand depreciating assets used or installed in residential rental premises; and

Ÿ imposing an annual vacancy fee on foreign owners of residential property that is not occupied or genuinely available for rent for at least six months in a 12-month period.

Do you rent out residential premises?

If you rent out residential property that you own, please contact our office (peter@pjbbizsolutions.com) for further information on what is deductible from the tax you may owe.





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Contact:

PJB Business Solutions

Ormiston, QLD, 4160

Mobile: 0403 989 064

Email: peter@pjbbizsolutions.com

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