Boost your tax return this year with the top five most overlooked tax deductions.
When it comes to your yearly tax refund it pays to remember that every little bit helps!
While each extra deduction may be relatively small, in total they add a significant boost to your refund. For someone earning $50,000 per year, an extra $600 of deductions can provide an extra $180 of refunded cash in your pocket.
The following are deductions that are sometimes overlooked as circumstances occur during the year and once forgotten are not easily reinstated at tax time.
Certain occupations are well aware that they can claim car expenses on their annual tax return and keep the appropriate records for either a log book or rate per km claim. However, there are many other workers who during the year use their personal vehicles for work related purposes.
For example, you might regularly pick up stock or run other work-related errands. These trips are potentially claimable and the easiest way to do this is by using the rate per km method. This allows the km to be claimed at 66c per km in your return. You should note down the km you do in a diary or logbook and take them each year to your registered tax agent.
Please note that travel each day to and from your workplace is not allowed as a tax deduction, so if you are running these errands in this manner, some special rules and calculations may apply.
As part of modern life, nowadays employees often log-in to workplace servers and generally work from home after hours. Others have a full work from home day/s as part of their employment. Keep track of these hours (a one month log will establish an average that can be used across the year). You can claim 45c per hour for this type of work from home.
Claims for internet expenses are often closely related to the work from home claims. If people choose or are required to work from home often they log into work using their home internet. If this is the case you may be able to reasonably estimate a percentage of your internet that you use each month and claim these on your return. You will need to keep a month long diary to show the work percentage to claim in your tax return.
The use of a mobile phone is so common in everyday life that it is easy to forget that you also use it for work. Whether it is phoning a client away from the office, taking a photo on site or remotely logging into work emails, the percentage that you use your phone for work related purposes is once again potentially a tax claim. A diary record or detailed phone statement will also be needed to make this claim.
If you are required or choose to be part of a workplace union or professional association these fees are likely to be deductible. The membership must be to a body that relates directly to your trade or profession. The cost of subscriptions to journals and magazines related to your trade or profession also are possible claims.
Remember all receipts and diary records must be kept to substantiate your claims.
Understanding the Superannuation Reforms
If you are waiting for the Australian superannuation reforms announced in the Budget to pass Parliament before working out what they mean to you, you might miss out on any opportunities available.
When enacted, the reforms will represent the single biggest change to superannuation since its inception. While there has been a softening of the original Budget announcements, there are still some very big changes coming your way.
Accumulators: Under 65s
The reforms likely to impact on you are:
Reduction in non-concessional contribution caps
If you are close to retirement age and looking to build your super balance, this change is incredibly important. From 1 July 2017, the annual non-concessional contributions cap will be reduced to $100,000 (from the current $180,000).
Don’t get things wrong with your Rental Property Reporting
- Declare all rental property income in your tax return
- Claim expenses!
- Claim depreciation on building and fixtures
Get in touch with Affinitas Accounting for your rental property Depreciation Reports and Deduction Checklists
Owners of income producing properties are eligible to claim tax deductions for a number of expenses involved in holding a property.
Most investors are aware of some of the deductions they are entitled to.
For example they know they can claim their property manager’s fees, Council rates, and any repairs and maintenance costs. However, all too often investors are unaware of property depreciation and as such they frequently miss out on the valuable returns these deductions can provide them with when they complete their annual income tax returns. To help investors maximise the deductions they can claim from an investment property in the lead up to tax time, let’s take a look at some key points to help you understand depreciation.
What is depreciation?
Over time, any building and the assets contained within it will experience wear and tear. Legislation allows the owners of any income producing property to claim this wear and tear as a tax deduction called depreciation. Unlike other expenses involved in holding a property, such as repairs and maintenance for example, an investor does not need to spend any money to be eligible to claim it. For this reason, depreciation is often described as a non-cash deduction.
Types of depreciation deductions available:
The Australian Taxation Office (ATO) clearly defines two types of depreciation allowances available for property investors:
• Division 43 capital works allowance
• Division 40 plant and equipment depreciation
The capital works allowance refers to what an investor can claim for the wear and tear that occurs to the structure of the property. This includes any structural improvements that may have been made during a renovation.
As a general rule, any residential building where construction commenced after the 15th of September 1987 will entitle their owner to capital works deductions at a rate of 2.5 per cent per year for up to forty years.
Owners of older buildings constructed prior to 1987 should still find out what deductions are available, as often these buildings will have undergone some form of renovation which can result in capital works deductions for the owner.
Plant and equipment depreciation, on the other hand, refers to the deductions an investor can claim for the wear and tear that occurs to the easily removable fixtures and fittings found within the property.
There are more than 6,000 different assets recognised by the ATO which an investor can claim depreciation deduction for. Some examples include the carpets, blinds, air conditioners, hot water systems, smoke alarms and ceiling fans.
Unlike structural items, no date restrictions apply when claiming depreciation on plant and equipment assets. Each of the assets is assigned an individual effective life and depreciation rate by which depreciation should be calculated.
Who should you contact to calculate and maximise your deductions?
Often an investor will make the mistake of thinking their Accountant will claim all of the deductions available in their investment property. When it comes to depreciation, however, it is important to consult an expert in this area.
Legislation recognises Quantity Surveyors as being one of a few select professionals with the knowledge necessary to estimate construction costs for depreciation purposes.
A specialist Quantity Surveyor will use their skills to provide a depreciation schedule which outlines the deductions an investor can claim for any specific property at the end of financial year. An Accountant will then use the figures outlined within the depreciation schedule when submitting the investor’s individual income tax return at the end of financial year.
How will depreciation help an investor?
The additional funds an investor receives by claiming depreciation can have a significant impact on their available cash flow. On average, an investor can claim between $5,000 and $10,000 in depreciation deductions in the first financial year.
To see an example scenario which shows the difference depreciation can make for you, visit BMT Tax Depreciation’s property investor case study page. Alternatively, for a free assessment of the available deductions in any investment property, speak to one of BMT’s expert staff on 1300 728 726 today.
Article provided by BMT Tax Depreciation. Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.
New rules that apply from 1 July 2016 mean that small businesses can potentially restructure their business operations without triggering adverse tax outcomes.
The Federal Budget will be brought down on 3 May and there will be an election (one way or another) soon after. This puts tax and tax reform firmly back on the national agenda…. again.