Claiming your tax deductions

Posted on 11 November '20, under Uncategorized.

There are different types of deductions which individuals can claim to reduce their taxable income. 

Work-related expenses

In order to claim work-related tax deductions, the expenses must have to meet three criteria. Firstly, all the expenses have to be paid by the individual, without being reimbursed by the employer. Secondly, they must be directly related to earning your income. Finally, there must be a record of the expenses (i.e. a receipt). 

There are various different expenses which can fall under this category. 

  • Vehicle and travel expenses: Commuting between different locations but not usual travel between home and work
  • Clothing, laundry and dry-cleaning expenses: Cost of work uniform which is distinct and unique (i.e. has a specific logo)
  • Self-education expenses: Any courses or study associated with employees current role, such as textbooks
  • Tools and other equipment: If you purchase tools or equipment, then a deduction for some or all the cost could be claimed

Investment expenses

The cost of earning interest, dividends or other investment income can also be claimed. This can include:

  • Interest charged on money borrowed to invest
  • Investment property ex[enses
  • Investing magazines and subscriptions
  • Money you paid for investment advice

Home office expenses

A portion of the costs associated with installing your home office can be deducted. The process is now much easier due to COVID-19. It allows people to claim 80 cents per hour for all running expenses. Additionally, people living in the same house can claim this individually, there is no need for a dedicated office. 

Other deductions

There are also other deductions available. These include:

  • Union fees
  • The cost of managing your tax affairs
  • Income protection insurance (If not through super)
  • Personal super contributions
  • Gifts and donations to organisations that are endorsed by the ATO as deductible gift recipients

How innovation can help business

Posted on 5 November '20, under Business.

Innovation doesn’t have to be a revolutionary and world-changing breakthrough. It can also be small changes you make to continually improve your business. Innovation can help in multiple aspects of business.

  • Improve sales and customer relationships: Putting the time and effort into improving your products and services is essential if you want to retain customers. Customers will recognise the changes you make and your commitment to doing the best you can for them. This will inevitably translate into improved sales.
  • Reduce waste and costs: Implementing changes which utilise new ways to eliminate waste and increase efficiency are extremely important. This will help you either increase your profits, or invest the money you save back into other necessary improvements for the business.
  • Improve employee performance: Creating a work environment that promotes innovation is more likely to keep employees stimulated and interested in their work. When employees are given the opportunity to suggest and implement changes, they are more likely to take pride in their work. This will also result in greater productivity.
  • Boost your market position: Innovation is also important in keeping up with changes in the market. Creating a company culture which is flexible and facilitates regular changes will mean that you can transform according to the needs of the market. This will differentiate you from competitors and boost your position in the industry.

Super scams: What to look out for

Posted on 5 November '20, under Super.

The market for super funds is extremely competitive.Scammers take advantage of this by promising unrealistic benefits to acquire personal or account details. They are able to use this information to steal your identity or transfer your super to an account they can access. 

Scammers can approach you in various ways. You could receive a phone call, email or be contacted online. 

This is what you should be weary of: 

  • Advertisements promoting early access to super
  • Offers to ‘take control’ of your super
  • Offers to invest your super in property
  • Offers of quick and easy ways to access or ‘unlock’ super

The best way to spot a scam is to know what the rules about your super fund are. Knowing when you can legally access your super will protect you from false promises. Additionally, the ASIC website lets you check if someone is licensed, if they are not licensed, more likely than not, they should not be trusted. 

If you believe that you’re being targeted by a scam, then rather than simply ignoring approaches and not engaging, you should report the scam. You can do this by calling the ATO or completing the online complaint form on the ASIC website. 

How are investments taxed?

Posted on 5 November '20, under Tax.

Investment income needs to be included when conducting tax returns. This includes any income acquired through interest, dividends, rent, managed funds distributions and capital gains. The income yielded from investments is taxed at a marginal tax rate. 

Individuals are able to claim deductions for the cost of buying, managing and selling an investment. However, the Australian Tax Office (ATO) provides rules about what an or cannot be claimed as a tax deduction. 

The MoneySmart website has a simple and easy-to-use tax calculator that may give an indication as to what the annual tax will be. However, it is recommended that if an individual has a diverse portfolio that yields income from multiple sources, then should consult an accountant or advisor that can lead them through the process as it can become quite complex. 

In order to minimise taxation on investment income, individuals should consider tax-effective investments which provide concessional taxation. These include superannuation and insurance bonds. 

PAYG instalments for business and investment income

Posted on 29 October '20, under Tax.

Pay as you go (PAYG) instalments are payments you can make throughout the year to avoid accumulating a large tax bill to pay at the end of the year. Making these payments is a great way to budget for income tax and keep a healthy cash flow. 

To qualify for PAYG instalments, you must earn over a threshold amount from your business or investment income (also known as instalment income).

The amount that you pay in PAYG instalments throughout the year will be offset against any owed tax for the entire year. But it is important to lodge your activity statements and pay all PAYG instalments before lodgment of tax returns if you want these to be included in your tax assessment. 

There are two options for calculating and paying PAYG instalments:

  • Instalment Amount: Simplest option which involves paying instalment amounts the ATO calculates based on relevant information. 
  • Instalment Rate: You calculate the instalment amount using instalment rate provided by the ATO and your instalment income. Therefore, dependent on income as you earn it and not predetermined. 

How to get the most out of your bank account

Posted on 29 October '20, under Money.

Banking is often more complicated than you expect it to be with different types of accounts, fees and fine print to take into consideration. You are able to get more out of your bank account if you pay closer attention to certain details. 

Re-evaluate your bank

Due to the competitive market space, new offers that might be much better suited to your needs than the 10-year-old bank account you are using may be available. Keep a lookout for these offers so that your bank account is helping you put more money into your pocket. 

You should also consider changing accounts if your bank is asking you to pay high fees or requires a high minimum balance. You may find that other banks are offering better options or attempt to renegotiate terms of your account with your current bank.

Don’t assume your bank is giving you the best rate

Your bank may not be giving you competitive rates and assuming that they will do right by you lets them get away with this. Make sure that you keep up to date with different types of rates and what they should be. Discuss these with your bank and how they might be able to give you more competitive rates to the ones you are currently receiving. 

Plan interactions with your bank strategically

Other than when it’s regarding an urgent matter, plan interactions with your bank ahead of time. For example, if you need to visit the bank about your mortgage, aim to have a mortgage specialist with you, this will ensure that you get the best out of your visit. 

You may be able to resolve your request by calling the bank. In this case, aim to call in off-peak hours to reduce waiting time. Before you call, make sure you’ve checked whether the bank has provided an online method to complete the process. 

Don’t forget cards and bank accounts you don’t use

Carrying a spare credit or debit card is okay as long as you aren’t being charged annual fees on it. If you find that you rarely use the card but it has a high annual fee, it might not be worth continuing to pay for it. 

The same applies to bank accounts that you may not be using or using rarely. Banks may charge a dormant account fee if there is no activity in the account over a period of time (check details that apply to your bank). However, using your bank account every few months should be enough to prevent dormant account fees from being charged. 

Maximise holiday sales during the pandemic

Posted on 29 October '20, under Business.

This holiday season is not going to be like any other. Preparing for how your business will tackle the change ahead of time will help maximise sales. 

  • Maintain a human and compassionate approach in all customer communications: This will make your customers feel more comfortable and be pleasantly different to the technology-based interactions they are likely to have had due to the pandemic. 
  • Use real-time data to understand buying trends and change the products that you focus on selling depending on this data: Using the data your business has access to in an effective way can be extremely helpful to plan advertising campaigns that are catered to your consumers and what they desire.
  • Promote sales as early as possible: This gives customers an opportunity to spread out their buying and minimises in-store traffic closer to the holidays. This is especially important due to restrictions placed on the number of people that can enter stores. 

Considering the financial difficulties every business has experienced this year, it is important to take advantage of the holiday season where possible. These tips will assist your business in making use of the surge of buyers that is likely to occur.

First home super saver scheme

Posted on 29 October '20, under Super.

The first home super saver (FHSS) allows individuals to save up for their first home in their super fund. The money saved in the super fund is taxed concessionally and therefore, individuals are able to save faster. 

Individuals can make voluntary concessional (before-tax) or voluntary non-concessional (after-tax) contributions into their super fund. They can then apply for those contributions to be released. This also releases any earnings associated with those contributions. 

This scheme can only be used by a first home buyer if both of the following apply: 

  • They are living in the premises they are buying/intend to buy (when practicable)
  • Intend to live in the property for at least 6 months within the first 12 months (when practicable to move in) 

The eligibility criteria to participate in FHSS is as follows: 

  • Make super contributions from any age BUT only request a determination or release of amounts after 18 years of age
  • Never have owned a property in Australia (includes investment property, vacant land, commercial property, lease of land in Australia, company title interest in land in Australia) other than if there has been financial hardship as deemed by the Commissioner of Taxation.
  • No previous request to the Commissioner to issue an FHSS release authority in relation to the scheme. 

Eligibility is assessed on an individual basis; couples, siblings, or friends can access their FHSS contributions to purchase the same property.

There are many other considerations for FHSS which individuals should take into account if they plan to use the scheme. 

Small businesses and mental health

Posted on 21 October '20, under Business.

Owning and running a small business often means that you are responsible for most or all of the tasks that need to be completed. Often, owners will find their time being entirely occupied with their business. This can take a toll on their mental health and cause work related stress. Which not only inhibits one’s ability to complete the duties of their role, but also puts them at greater risk of developing mental health conditions.

Keeping work hours in check

Although it is tempting to focus on your business at all times, this can prevent individuals from participating in other activities which are important for physical and mental health. Business owners may feel motivated and enthusiastic to put extra time into their work, however, long work hours have been associated with poorer mental health, fatigue, burnout, worry, and irritability.

Creating a work life balance by setting time limits on work hours might be a necessary precaution at the start. Taking breaks during the work day and setting time aside during the week will be extremely beneficial.

Accessing support

Running a small business can often be isolating as there is rarely someone to share concerns of the business with. This will mean that owners are dealing with all of the issues on their own.

Discussing issues that arise with family or close friends can help reduce the feeling of being isolated. Alternatively, there are groups of small business owners who, and business mentors who may be able to understand and relate to what owners are experiencing, and potentially provide relevant advice.

Maintaining a healthy lifestyle

A healthy lifestyle can help individuals manage stress and work towards improved mental health. This will also improve the ability to focus and concentrate when working.

Developing good sleeping habits is a great way to kickstart this process. It can also be helpful to try different relaxation techniques such as meditation and exercise is an important start. Remember that this is a trial process, so trying different techniques to find the most effective one is essential.

Consolidating your super

Posted on 21 October '20, under Super.

Consolidating your super can save you time and money. Consolidating your super means that rather than having multiple different accounts, all your super is in one account.

Why you should consolidate your super:

  • Choosing to consolidate your super means that you will no longer be paying fees to multiple super funds.
  • There is also less paperwork to complete each time
  • You will be able to track your super more easily

Before you consolidate your super:

  • Consider how changing super funds affects employer contributions: Certain employers may contribute more to one fund than another. In which case, you should consider switching to the fund that your employer is most compatible with.
  • Consider how changing super funds impacts insurance you have through the fund: Changing funds might mean you no longer receive benefits of the insurance. Double checking the details of this is particularly important if you have a pre-existing medical condition or you are aged 60 or over.
  • Inform your employer of any change in details they may need, to pay to your chosen super account.

Don’t simply choose the account with the highest balance. Rather, take into consideration the performance of that super fund, the fees you are required to pay, whether it is linked to any insurance and any other factors. Upon reviewing this, you may find that rather than choosing between your current super funds, starting with a completely new fund might be the best way to go.

How to consolidate to one of your current super funds:

  • Create an account on the myGov website
  • Link your myGov account to the ATO
  • Go to ‘Super’ and then ‘Manage’
  • Select ‘Transfer Super’

Transferring to a new fund

In the case you decide that transferring to a new fund is the best option, you can consolidate either by contacting the new fund directly, or using an ATO rollover form.