2014-15
Professionals Australia
Member Tax Guide
Table of contents
Page
Welcome
4
What’s new in 2014-15
5
Tax rates
7
Income
Employment income
Super pensions, annuities and government payments
Investment income
Business, partnership and trust income
Foreign income
10
10
11
12
13
14
Deductions
Professionals Australia membership dues
Books, periodicals and digital information
Cost of managing tax affairs
Income protection insurance
Interest charged by the ATO
Mobile phone, internet and home phone expenses
Personal super contributions
Seminars, conferences and education workshops
Vehicle and travel expenses
Clothing, laundry and dry-cleaning
Gifts and donations
Home office expenses
Interest, dividend and other investment income deductions
Self-education expenses
Tools and equipment
Deductions for specific professions – Engineers, IT
Calculating depreciation/decline in value
15
15
15
16
16
16
16
18
18
18
26
27
28
29
30
31
32
33
Capital Gains Tax
Exemptions
When CGT occurs
Calculation of capital gains and losses
Calculating capital gains
Companies in liquidation
Small business CGT concessions
Types of small business CGT concessions
35
35
35
36
36
38
38
39
2
Offsets and rebates
Dependents
Health insurance rebate
Income thresholds
Net medical expenses
Senior Australians
Super related tax offsets
Page
40
40
40
41
41
42
42
Tax planning
Transferring income to another taxpayer
Mortgage offset account
Reduce assessable income
Increase the amount of tax deductions from assessable income
Change the timing
Trusts and companies
Salary packaging
Concessional Benefits
Superannuation
Motor Vehicles
Car Parking
Professional Subscriptions
Low Interest Loans (Employer provided)
"Deductible" Fringe Benefits
44
44
45
45
45
45
45
46
47
47
47
47
47
47
47
Negative gearing
Property
Deductions
Features and risks
48
48
48
50
Superannuation
Tax Deductibility of Member Contributions
Self Employed or Unsupported Eligible Persons
Government Super Contributions
Superannuation Guarantee Levy
Member Advantage Portable Superannuation for Professionals
Alienation of Personal Services Income
Growing your super – salary sacrificing super
Personal super contributions
52
52
52
52
53
53
53
54
54
Complaints
56
3
Welcome
We are pleased to present the 2014-15 Professionals Australia Tax Guide for members.
We hope that it provides you with valuable support and assistance in the preparation of your income tax
return for the tax year ended 20 June 2015.
The first thing to note is that your Professionals Australia membership should be claimed as a work expense
– which can save you up to 30 per cent on membership each year (see page 15).
As a summary guide, this publication highlights the major factors and rules for the 2014/15 tax year. It is
important to note that the income tax legislation is detailed, everyone’s situation is different and you
should seek appropriate professional advice where necessary.
If you are in doubt about your tax return or tax in general, contact your accountant or visit the Australian
Tax Office website – www.ato.gov.au
Each year changes occur to key rules and determinations, this guide aims to alert you and explain the
nuances of the 2014-15 financial year. It is important to refer to previous year guides if you are completing
a tax return for another year.
While every care has been taken to ensure that the information is correct, Professionals Australia carries no
responsibility for the application of this information.
Alternatively, if you need specific or further advice, or assistance, in the preparation of your income tax
return, please contact your accountant or contact our partner Matchett Partners on 9809 4469.
Additionally, if you are looking for more information on salary packaging and other tax related issues, we
encourage you to access our salary packaging guide and calculator on our website (only available to
members) - http://www.professionalsaustralia.org.au/financial-edge/tax-related-issues/
Professionals Australia offers a range of guides on topics as diverse as management, remuneration, career
planning and resume writing to transitioning to retirement. Visit our website for more information:
www.professionalsaustralia.org.au
Good luck, may you have a bountiful return this year.
4
What's new in 2014-15
Before you start your tax preparation, note these important changes.
Mature Age Worker Tax Offset
You can no longer claim the Mature Age Worker Tax Offset (MAWTO) in your tax return. Previously, to be
eligible for the offset you needed to be an Australian resident, be born before 1 July 1957, and receive
income from working (within certain limits). This means that the 2013─14 tax return was the last return
that you can claim the offset, so you won’t be able to claim it in your 2014-15 tax return.
Abolition of the Dependent Spouse Tax Offset
You can no longer claim the Dependent Spouse Tax Offset (DSTO) in your tax return. In addition, a person
who is eligible for the zone, overseas civilian or overseas forces tax offset will, from 1 July 2014, only be
entitled to claim for a dependent (incl. a spouse) that is an invalid or cares for an invalid.
If you have claimed the DSTO by reducing the tax withheld by your employer during the year, this may
result in you having an amount to pay when you lodge your tax return. You'll need to give an updated TFN
declaration to your employer for 2015-16 to increase the tax they deduct from your pay.
Phase out of the Net Medical Expenses Tax Offset
The Net Medical Expenses Tax Offset is being phased out. In most cases, you will only be eligible to claim
the offset this year if you received it in your 2013-14 tax assessment. This is the final year you can claim it.
This does not apply to you if you had medical expenses relating to disability aids, attendant care and aged
care. You can continue to claim the offset for these expenses until 30 June 2019.
Temporary Budget Repair Levy
As part of the 2014-15 Federal budget the Government introduced a Temporary Budget Repair Levy.
Individual taxpayers with a taxable income of more than $180,000 per year will have had additional tax
withheld by their employer, starting from 1 July 2014.
The levy is payable at a rate of 2 per cent of each dollar of a taxpayer’s taxable income over $180,000. It
applies to both residents and non-residents from 1 July 2014. In some cases the levy is payable even if you
have a taxable income of $180,000 or less. If the levy applies to your income, it will generally appear on
your Notice of Assessment you receive after you lodge your 2015 tax return.
Small business concessions
The law changed with effect from 1 January 2014 to reduce the instant asset write-off threshold from
$6,500 to $1,000 and remove the special depreciation rules for motor vehicles.
Tax concessions for small business
In the 2015 Budget, the Government announced its intention to allow small businesses with an aggregate
turnover of less than $2 million to immediately deduct assets they start to use or install ready for use,
provided the asset costs less than $20,000.
The small business simplified depreciation pool will apply to assets costing $20,000 or more. The measure is
applied to assets acquired from 7.30pm on 12 May 2015 until 30 June 2017.
5
Changes for 2015-16
Some changes won’t affect your 2015 tax return but they may impact you from 1 July 2015.
Private health insurance
From 1 July 2015, the income thresholds used to calculate Medicare levy surcharge (MLS) and Private
health insurance (PHI) rebate will be frozen for three years. This may result in people with incomes just
below each threshold moving into a higher income threshold if their income increases. This means, if:
You have private health insurance, your rebate percentage entitlement may decrease;
You do not have the appropriate level of private hospital cover, you may have to pay the
Medicare levy surcharge or your surcharge may increase.
No increase to the tax-free threshold
The tax cuts due to commence 1 July 2015 will no longer apply.
This means that the tax-free threshold remains at $18,200 and the second marginal tax rate remains at
32.5%.
6
Tax rates
Tax rates applicable to Australian residents for 2014/15
The basic tax scale and marginal rates for the 2014-15 financial year have been in place for three financial
years, however from 1 July 2014 the top marginal tax rate of 45% for incomes over $180,000 has the 2%
Temporary Budget Repair Levy added to it (for 3 years from 1 July 2014), raising it to 47%.
Additionally in 2014-15, the basic Medicare levy percentage rate has been increased by 0.5% (to 2%).
Resident Tax Rates – 2014/15
Taxable Income
$
Tax Payable
$
0 – 18,200
Nil
18,201 – 37,000
19c for each $1 over $18,200
37,001 – 80,000
$3,572 plus 32.5c for each $1 over $37,000
80,001 – 180,000
$17,547 plus 37c for each $1 over $80,000
180,001+
$54,547 plus 47c for each $1 over $180,000
NOTE: These rates do not include the Medicare Levy.
Medicare levy
Medicare gives Australian residents access to health care and is partly funded by taxpayers who pay a
Medicare levy of 2.0% of their taxable income (this has risen from 1.5% in 2013/14).
It should be noted that there is relief from the Medicare Levy for low income earners whose taxable
income is $20,542 or less.
A phasing-in applies to reduce the Medicare Levy where taxable income exceeds $20,542 but does not
exceed $24,167.
Medicare Levy exemption applies in respect of a family whose total taxable income does not exceed
$40,431 with phasing-in applicable of $3,713 for each additional dependent.
The Medicare Levy low income threshold for those who qualify for Senior Australians Tax Offset pension
age is $32,279. This will ensure pensioners do not pay Medicare when they do not have an income tax
liability.
Medicare Levy Surcharge
If you and all of your dependants do not have an appropriate level of private patient hospital cover for the
full year, you may be required to pay the Medicare levy surcharge, depending on your income.
To determine the rate of surcharge that applies, use your income for Medicare levy surcharge (MLS)
surcharge purposes. This is different to the income test for the Private Health Insurance rebate (see Offsets
and rebates section).
The Medicare levy surcharge is income tested against the MLS income tier thresholds.
The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after
the first child. The MLS income thresholds for 2014-15, 2015-16, 2016-17 and 2017-18 are:
You can visit the ATO’s online Medicare Levy Surcharge calculator to determine your liability:
https://www.ato.gov.au/Calculators-and-tools/Income-for-Medicare-levy-surcharge/
What is included in income for MLS purposes?
If you have a spouse, your combined income for MLS purposes will be used.
7
Your income for MLS purposes is the sum of the following items for you (and your spouse, if you have one):
•
taxable income (including the net amount on which family trust distribution tax has been paid)
•
reportable fringe benefits (as reported on your payment summary)
•
total net investment losses (includes both net financial investment losses and net rental property
losses)
•
reportable super contributions (includes reportable employer super contributions and deductible
personal super contributions)
•
if you have a spouse, their share of the net income of a trust on which the trustee must pay tax
(under section 98 of the Income Tax Assessment Act 1936) and which has not been included in their
taxable income
•
exempt foreign employment income (if you or your spouse had a taxable income of $1 or more and
received such income)
If you (or your spouse) are 55 to 59 years old and received a super lump sum, reduce income for MLS
purposes by any taxed element of the lump sum, other than a death benefit, that does not exceed your
(their) low rate cap.
Income thresholds and MLS rate for 2014-15
Unchanged
Tier 1
Tier 2
Tier 3
Singles
$90,000 or less
$90,001 - $105,000
$105,001 $140,000
$140,001 or
more
Families
$180,000 or less
$180,001 $210,000
$210,001 $280,000
$280,001 or
more
Medicare levy surcharge rate
0%
1%
1.25%
1.5%
For families, the income thresholds increase by $1,500 for each MLS dependent child after the first.
Employment Termination Payment Rates (ETP)
An ETP is a lump sum payment made as a consequence of the termination of an employee’s employment.
Common examples of ETPs are:
• Golden handshakes;
• Unused rostered days off;
• Amounts in lieu of notice; and
• Genuine redundancies.
As a result, the circumstances and documentary evidence surrounding the payment is critical.
It is highly recommended that if this situation applies to you, you read the ATO publication “Tax table for
employment termination payments”, found here
https://www.ato.gov.au/individuals/working/in-detail/leaving-a-job/taxation-of-terminationpayments/?page=10#Whole_of_income_cap
The maximum tax rates can apply to the taxed element of the post 30 June 1983 component of an ETP (any
pre 30 June 1983 component is tax-free). Where the rate of tax would otherwise be less than the relevant
maximum, then the actual rate applies and the specified maximum is irrelevant. Medicare levy is added to
whatever rate (other than nil) is applicable.
The ETP cap amount for the 2014/15 income year is $185,000 (indexed annually).
The whole of income cap amount for the 2014/15 income year is $180,000. This amount is not indexed.
This cap is reduced by the other taxable payments you receive in the income year. For example, salary or
wages that you have been paid.
8
Taxation of Superannuation Fund Income
From 1 July, 1988 a concessional rate of tax of 15% was introduced on all taxable contributions made to
superannuation funds provided that the funds are complying superannuation funds. Non-complying funds
are taxed at the top marginal rate (2014/15 – 47%).
In addition the net investment income of complying funds is also taxed at 15%, and CGT applies to disposals
of assets by all superannuation funds (with a 1/3 discount for assets held for more than 12 months),
approved deposit funds and pooled superannuation trusts made after 30 June, 1988.
The cost base of the assets held by the superannuation fund for the purpose of determining taxable gains
on disposal, is whichever of the original cost or the market value at 30 June, 1988 yields the lower capital
gain or capital loss.
An individual is liable to excess concessional contributions tax of 31.5% if their concessional contributions
for the year exceed the concessional cap for that year. The cap is $25,000 for 2014/15 for all taxpayers
aged up to 59 years and $35,000 for taxpayers aged 60 years or more.
Concessional contributions are generally contributions that are deductible to the contributor e.g SG
contributions, employer contributions made under salary sacrifice arrangement and deductible
contributions made by a self-employed person.
Children’s Tax Rates
For the year ending 30 June 2015, children’s tax rates applied to persons under 18 years. They do not apply
to these exceptions, if they were;
working full time, or had worked full time for three months or more in the 2014–15 income year
(ignoring full-time work that was followed by full-time study),and;
intending to work full time for most or all of the 2015–16 income year, and;
not intending to study full time in the 2015–16 income year;
entitled to a disability support pension or rehabilitation allowance, or someone was entitled to a
carer allowance to care for them;
permanently blind;
disabled and were likely to suffer from that disability permanently or for an extended period;
entitled to a double orphan pension and received little or no financial support from relatives, or
unable to work full-time because of a permanent mental or physical disability and received little or
no financial support from relatives; or
the main beneficiary of a special disability trust.
The income on which the special rates of tax apply, the eligible assessable income, is the total assessable
income less the excepted income.
Children’s Tax Rates 2014/15
Up to $416
Nil
$417 to $1,307
Nil + 66% over $416
Over $1,307
47% (45% + 2%) of the
total amount of income.
Note that children are not entitled to the low income rebate.
9
Income
Income tax is paid on money you receive, such as salary and wages, Centrelink payments, investment
income from rent, interest and dividends, and profits from selling shares or property.
You can reduce the amount of tax you pay by claiming certain deductions that are directly related to
earning your income. Your tax may be further reduced if you are eligible for certain tax offsets or
government rebates.
When do you need to lodge an income tax return?
Your income is declared on your tax return each year. You must make sure it is accurate and complete.
Resident taxpayers whose taxable income during the financial year ended 30 June 2015 exceeds the nontax threshold of $18,200 must generally lodge an income tax return.
All returns prepared by taxpayers must be lodged by 31 October 2014.
If you are unable to lodge the return by the due date you should write to the ATO asking for an extension of
time to lodge, giving reasons, before the due date for lodgement.
If a taxpayer has a business or professional income schedule to complete, the income tax return must be
lodged electronically.
Income you must declare
You must declare income from:
Employment;
Super pensions, annuities and government payments;
Investment income (including interest, dividends, rent, and capital gains tax);
Business, partnership and trust income;
Foreign income; and
Any income from compensation or insurance payments, discounted shares under employee share
schemes, prizes and awards.
Employment income
Employment income is money you receive from working.
Regardless of whether you have one job or more, are full time, part-time or casual you need to make sure
all of your employment income is included on your tax return.
Salary and wages
The most common type of employment income is salary and wages. Salary and wages includes:
Your normal weekly, fortnightly or monthly pay
Commissions
Bonuses
Money for part-time or casual work
Parental leave pay
Payments from:
o an income protection policy
o a sickness or accident insurance policy
o a workers compensation scheme.
10
Allowances and other employment income
You may receive other payments in connection with your employment such as:
allowances, such as car, travel, clothing and laundry
tips, gratuities and payments for your services
consultation fees and payments for voluntary services
jury attendance fees
If you received a travel allowance or overtime meal allowance paid under an industrial law, award or
agreement, you don't have to include it on your tax return if it meets all of the following:
it was not shown on your payment summary
it does not exceed the Commissioner's reasonable allowance amount
you spent the whole amount on deductible expenses.
Lump sum payments
There are two common types of lump sum payments. When you leave a job, you may receive a lump
sum payment for unused annual and long service leave. Specific information on Employment
Termination Payments can be found here: https://www.ato.gov.au/Individuals/Working/Indetail/Leaving-a-job/Taxation-of-terminationpayments/?page=4#Employment_termination_payments
The second is a lump sum payment in arrears for money owed to you from an earlier income year.
Both of these lump sum payments are assessable in the year you receive them.
Reportable fringe benefits and super contributions
Other employment-related income includes:
reportable fringe benefits given to you by your employer, such as a work car for private
purposes, a cheap loan or free private health insurance; and
reportable super contributions made on your behalf by your employer.
You don't have to pay tax on these items but they are used to work out whether you are eligible to
receive a range of government benefits and tax offsets.
Super pensions, annuities and government payments
You must declare income you received from pensions paid to you as a super income stream, annuities
and some government payments.
Pensions
A pension is a series of regular payments made as a super income stream (this does not include
government payments such as the age pension).
These payments may be made by:
an Australian super fund, life assurance company or retirement savings account (RSA) provider
a fund established for the benefit of Commonwealth, state or territory employees and their
dependants (such as the Commonwealth Superannuation Scheme and the Public Sector
Superannuation Scheme)
as a result of another person's death (death benefit income stream).
Your super income stream payments will have different components. You need to include the
following components on your tax return:
a taxed element − the part of your benefit on which tax has already been paid in the fund
an untaxed element − the part of your benefit that is still taxable because tax has not been
paid in the fund.
11
You do not need to declare the tax-free component on your tax return.
Annuities
An annuity is usually a series of regular payments to you by a life insurance company in return for a
lump sum payment. Most annuities have both taxable and tax-free components.
Government payments
You must declare Government payments such as the age pension, carer payments, Austudy, Newstart
and youth allowance on your tax return.
Some government payments are exempt from income tax but you still need to declare them on your
tax return. This information is used to work out whether you are eligible to receive a range of
government benefits and tax offsets.
The payments are:
disability support pension (if you are below the pension age)
child disability allowance
carer adjustment payment
Veterans' Affairs disability pensions and allowances.
Investment income
You generally need to declare investment income whether or not it's paid directly to you or through
distributions from a partnership (such as a share club) or a trust.
Interest
If you're an Australian resident and you receive interest, you must declare it as income. Interest
income includes:
interest earned from financial institution accounts and term deposits;
interest earned from children's savings accounts if you opened or operated an account for a
child and the funds in the account belonged to you, or you spent or used the funds in the
account;
interest we paid or credited to you;
life insurance bonuses (you may be entitled to a tax offset equal to 30% of any bonus amounts
included in your income)
interest from foreign sources (you may be entitled to a tax offset for any tax paid on this
income).
Dividends
A dividend can be paid to you as money or other property, including shares. If you are paid or credited
with bonus shares, the company issuing the shares should provide you with a statement indicating
whether the bonus shares qualify as a dividend.
Dividend income is usually paid from a:
listed investment company
public trading trust
corporate unit trust
corporate limited partnership (in the form of a distribution).
Some dividends have an imputation or franking credit attached, which you must also declare on your
tax return. If a company pays or credits you with dividends that have been franked, you'll generally be
entitled to a franking tax offset.
12
Rent
You must declare the full amount of any rent and rent-related payments that you receive, or become
entitled to, on your tax return.
Such payments include:
rental bond money if you become entitled to retain it - for example, because a tenant
defaulted on the rent or because of damage to your rental property requiring repairs
an insurance payout to compensate you for lost rent
a letting or booking fee
a reimbursement for deductible expenditure, such as an amount from a tenant to cover the
cost of repairing damage to your rental property (where you would include the whole amount
you receive from the tenant in your income and claim a deduction for the cost of the repairs).
If you receive goods and services in lieu of rent, you must work out and declare the monetary value.
Co-ownership
If you own a rental property jointly or in common with another person, or if you have an interest in a
partnership that carries on a rental property business, include only your share of rent and expenses on
your tax return.
Managed investment trusts
You must show any income or credits you receive from any trust investment product on your tax
return. This includes income or credits from a:
cash management trust;
money market trust;
mortgage trust;
unit trust; and
managed fund, such as a property trust, share trust, equity trust, growth trust, imputation
trust or balanced trust.
Capital gains
Generally, your capital gain is the difference between your asset's cost base (what you paid for it) and
your capital proceeds (what you received for it).
You can also make a capital gain if a managed fund or other unit trust distributes a capital gain to you.
A capital gain is treated as part of your total income and not taxed separately.
Business, partnership and trust income
The net income you receive from carrying on a business is assessable income and you need to declare
it on your tax return.
Income you receive as an individual running a business
If you are an individual running a business you must declare the income that you earn from your
business on your own tax return using a separate business schedule. You don't need to lodge a
separate tax return for your business.
Income from a partnership
While a business partnership doesn't pay tax on its income, it must lodge a partnership tax return
declaring all income earned and all deductible expenses. It will also show how the net income or loss
has been distributed between the partners.
13
Each partner must declare their individual share of the partnership's net income or loss in their
individual tax return, whether or not they have actually received the income.
For capital gains tax (CGT) purposes, each partner owns a proportion of each CGT asset and calculates
a capital gain or capital loss on their share of each asset. It is the individual partners who make a
capital gain or capital loss from a CGT event, not the partnership itself.
Income from a trust
Like a partnership, a trust is not a separate taxable entity but the trustee is required to lodge a tax
return for the trust. Generally, the beneficiaries of the trust declare the amount of the trust's income
to which they are entitled in their own tax return and pay tax on it. This is the case even if the
beneficiaries did not actually receive the income.
An exception to this is that you don't need to declare a trust distribution if family trust distribution tax
has already been paid.
Foreign income
If you're an Australian resident for tax purposes, you are taxed on your worldwide income, so you
must declare any foreign income in your income tax return.
Foreign income includes:
foreign pensions and annuities;
foreign employment income;
foreign investment income;
foreign business income; and
capital gains on overseas assets.
As your foreign income may also be taxed in the source country, it is potentially subject to double
taxation. To overcome this, Australia has a system of credits and exemptions and has signed tax
treaties with more than 40 countries, including all our major trade and investment partners.
If you're not an Australian resident for tax purposes, you are only taxed on your Australian-sourced
income, so you generally don't need to declare income you receive from outside Australia in your
Australian tax return.
14
Deductions
When completing your tax return, you're entitled to claim deductions for some expenses directly related to
earning your income. To claim a work-related deduction:
You must have spent the money yourself and weren't reimbursed;
It must be related to your job; and
You must have a record to prove it.
If the expense was for both work and private purposes, you can only claim a deduction for the work-related
portion. Deductions you can claim fall into the following categories and are explained in detail in this
section:
Professionals Australia membership dues;
Books, periodicals and digital information;
Cost of managing tax affairs;
Income protection insurance;
Interest charged by the ATO;
Mobile phone, internet and home phone expenses;
Personal super contributions;
Seminars, conferences and education workshops;
Vehicle and travel expenses;
Clothing, laundry and dry-cleaning;
Gifts and donations;
Home office expenses;
Interest, dividend and other investment income deductions;
Self-education expenses;
Tools, equipment and other equipment;
Deductions for specific professions; and
Calculating depreciation/decline in value of assets.
Professionals Australia membership dues
Your Professionals Australia subscription should be claimed as a work expense – it can save you up to 30
per cent on membership each year. Make sure you also claim any other subscriptions to professional
societies relevant to your employment (e.g. Institute of Engineers).
The ATO accepts that union subscriptions will be adequately substantiated if they are shown on payment
summaries or pay slips for members who pay their Professionals Australia subscription by payroll
deduction.
These deductions may still appear as APESMA on your payment summaries – they can still be submitted.
However, if you require clarification please contact Professionals Australia’s Membership team – 1 300 273
762 or by email info@professionalsaustralia.org.au
Books, periodicals and digital information
If the item cost less than $300 you can claim an immediate deduction where it satisfies these requirements:
•
It is used predominantly for earning income rather than income from carrying on a business.
•
It is not part of a set of assets acquired in the same income year that costs more than $300.
•
It is not one of a number of identical or substantially identical items acquired in the same income
year that together cost more than $300.
If the item cost more than $300, or is part of a set that cost more than $300, you can add it to your
professional library and claim a deduction for the decline in value.
15
Costs of managing tax affairs
You can claim a deduction for expenses you incur in managing your own tax affairs, including:
•
preparing and lodging your tax return and activity statements
•
travel, to the extent that it is associated with obtaining tax advice - for example, the travel costs of
attending a meeting with a recognised tax adviser
•
appealing to the Administrative Appeals Tribunal or courts in relation to your tax affairs
•
obtaining a valuation needed for a deductible gift or donation of property or for a deduction for
entering into a conservation covenant.
Expenses relating to preparing and lodging your tax return and activity statements include the costs of:
•
buying tax reference material
•
lodging your tax return through a registered tax agent
•
obtaining tax advice from a recognised tax adviser (a registered tax agent, barrister or solicitor)
•
dealing with the ATO about your tax affairs.
Income protection insurance
You can claim the cost of premiums you pay for insurance against the loss of your income. You must include
any payment you receive under such a policy on your tax return.
If the policy provides for benefits of an income and capital nature, only that part of the premium
attributable to the income benefit is deductible. You can't claim a deduction for a premium or any part of a
premium:
•
for a policy that compensates you for such things as physical injury
•
where the policy is taken out through your superannuation and insurance premiums are deducted
from your super contributions.
For example, you can't claim a deduction for:
•
life insurance premiums
•
trauma insurance premiums
•
critical care insurance premiums.
Interest charged by the ATO
You can claim a deduction for interest the ATO charges on:
•
late payment of taxes and penalties
•
any increase in your tax liability as a result of an amendment to your assessment
•
any increase in other tax liabilities, such as GST or pay as you go (PAYG) amounts
•
any underestimation of your tax liability when you vary an instalment for GST or PAYG.
You can claim any interest imposed by the ATO in the year in which it is incurred:
•
when you are charged the interest if your income tax assessment is amended
•
in the year in which the interest accrues, where there is an increase in other tax liabilities.
Mobile phone, internet and home phone expenses
If you use your own phone(s) or internet for work purposes, you may be able to claim a deduction if you
paid for these costs and have records to support your claims.
If you use your phone(s) or internet for both work and private use, you will need to work out the
percentage that reasonably relates to your work use.
16
Substantiating your claims
You need to keep records for a 4-week representative period in each income year to claim a deduction
of more than $50. These records may include diary entries, including electronic records, and bills.
Evidence that your employer expects you to work at home or make some work-related calls will also
help you demonstrate that you are entitled to a deduction.
When you can’t claim a deduction for your phone
If your employer provides you with a phone for work use and is billed for the usage (phone calls, text
messages, data) then you are not able to claim a deduction. Similarly, if you pay for your usage and are
subsequently reimbursed by your employer, you are not able to claim a deduction.
How to apportion work use of your phone
You will need to determine your work use using a reasonable basis.
If your work use is incidental and you are not claiming a deduction of more than $50, you may
make a claim based on the following, without having to analyse your bills:
$0.25 for work calls made from your landline,
$0.75 for work calls made from your mobile, and,
$0.10 for text messages sent from your mobile.
If you have a phone plan where you receive an itemised bill, you need to determine your
percentage of work use over a 4-week representative period which can be applied to the full year.
You need to work out the percentage using a reasonable basis. This could include:
the number of work calls made as a percentage of total calls;
the amount of time spent on work calls as a percentage of your total calls; and
the amount of data downloaded for work as a percentage of your total downloads.
If you have a phone plan where you don’t receive an itemised bill, you determine your work use by
keeping a record of all your calls over a 4-week representative period.
Bundled phone and internet plans
Phone and internet services are often bundled. When you are claiming deductions for work-related
use, you need to apportion your costs based on your work use for each service.
If other members of the house use the services, you need to consider their use in the calculation.
If you have a bundled plan, you need to identify your work use for each service over a 4week
representative period during the income year. This will allow you to determine your pattern of
work use which can then be applied to the full year. A reasonable way to work it out could be:
Internet
the amount of data downloaded for work as a percentage of the total data downloaded by
all members of your household
any additional costs incurred as a result of your work-related use – for example, if your
work-related use results in you exceeding your monthly cap.
Phone
the number of work calls made as a percentage of total calls
the amount of time spent on work calls as a percentage of your total calls
any additional costs incurred as a result of your work-related calls – for example, if your
work-related use results in you exceeding your monthly cap.
17
Personal super contributions
If you made contributions during the year to a complying superannuation fund or a retirement savings
account (RSA) you may be able to claim a deduction for those contributions if you are between 18 and 75
years old and you are:
self-employed – that is, a sole trader or a partner in a partnership
not employed or you earn less than 10% of your total income from employment.
If you want to make (or vary) a claim for a tax deduction for personal contributions, you must provide a
valid notice of intent to your super fund or retirement savings account (RSA) provider and have this notice
acknowledged (in writing) by your fund. A valid notice can be given by any of the following methods:
• completing a Notice of Intent to Claim or vary a deduction for personal super contributions;
• using a form provided by your fund; and
• writing to your fund, stating you wish to claim a tax deduction for your personal super
contributions.
If you:
• claim a tax deduction for a super contribution, the contribution will incur 15% tax in the fund;
• claim a tax deduction (and it is allowed), you are not eligible for the super co-contribution for the
amount that you claim.
Seminars, conferences and education workshops
You can claim the cost of attending seminars, conferences or education workshops sufficiently connected
to your work activities. This can include formal education courses provided by professional associations. If
attendance involves travel, you need to reduce your claim to exclude any private portion of any trip.
Vehicle and travel expenses
You can claim vehicle and other travel expenses directly connected with your work, but generally you can't
claim for normal trips between home and work – that is private travel. You need to keep records.
Travel between home and work and between workplaces
While trips between home and work are generally considered private travel, you can claim deductions
in some circumstances, as well as for some travel between two workplaces.
If your travel was both private and work, you can only claim for the part related to your work.
You can claim the cost of travelling:
directly between two separate workplaces;
if your home was a base of employment – that is, you started your work at home and travelled
to a workplace to continue your work for the same employer;
if you had shifting places of employment – that is, you regularly worked at more than one site
each day before returning home;
from your home to an alternative workplace for work purposes, and then to your normal
workplace or directly home; and
if you need to carry bulky equipment used for work and couldn't leave it at your workplace.
You can't claim the cost of driving your car between work and home just because:
you do minor work-related tasks – e.g., picking up the mail on the way to work or home;
you have to drive between your home and your workplace more than once a day;
you are on call;
there is no public transport near where you work;
you work outside normal business hours – for example, shift work or overtime;
your home was a place where you ran your own business and you travelled directly to a place
of work where you worked for somebody else; or you do some work at home.
18
Car expenses
If you are claiming a deduction for using your own car (including a car you lease or hire), it is treated as
a car expense. If you use someone else's car for work purposes, you may be able to claim the direct
costs (fuel) as a travel expense. If the travel was partly private, you can claim only the work part.
You can claim a deduction for work-related car expenses if you use your own car in the course of
performing your job as an employee, for example, to:
carry bulky tools or equipment;
attend conferences or meetings;
deliver items or collect supplies;
travel between two separate places of employment (if you have a second job);
travel from your normal workplace to an alternative workplace and back to your normal
workplace or directly home;
travel from your home to an alternative workplace and then to your normal workplace or
directly home (for example, if you travel to a client's premises); or
perform itinerant work.
If you receive an allowance from your employer for car expenses, it is assessable income and the
allowance must be included on your tax return.
Calculating your deduction
There are four different methods for claiming work-related car expenses when using your own car, or
one you leased or hired under a hire-purchase agreement:
1.
2.
3.
4.
Cents per kilometre method;
12% of original value method;
One-third of actual expenses method; and
Logbook method.
You may need to make some adjustments to your claim if the car is jointly owned.
1. Cents per kilometre method
Your claim is based on a set rate for each business kilometre. You can claim a maximum of 5,000
business kilometres. You don't need written evidence but you need to be able to show how you
worked out your business kilometres (for example, by producing diary records of work-related trips).
Where you and another joint owner use the car for separate income-producing purposes, you can
both claim up to a maximum of 5,000 kilometres. The set rates per business kilometre for 2014/15 are:
Normal Engine
Rotary Engine
Rate/km
Up to 1600cc
Up to 800cc
65.0
1061 to 2600cc
801 to 1300cc
76.0
Over 2600cc
Over 1300cc
77.0
2. 12% of original value method
Your claim is based on 12% of the original cost of your car or 12% of its market value at the time you
first leased it. The cost or value is subject to a car limit for the year you first used or leased the car.
Your car must have travelled more than 5,000 business kilometres in the income year (or, if you used
the car for only part of the year, it would have travelled more than 5,000 business kilometres had you
used it for the whole year). You don't need written evidence but you need to be able to show how you
worked out your business kilometres. As a joint owner, you can deduct your share of 12% of the cost
of the car. For example, if there are two joint owners, you can each claim 6% of the cost of the car.
19
3. One-third of actual expenses method
Your car must have travelled more than 5,000 business kilometres in the income year (or, if you used
the car for only part of the year, it would have travelled more than 5,000 business kilometres had you
used it for the whole year). You can claim one-third of all your car expenses, including private costs
(but excluding capital costs, such as the purchase price or any improvements).
For fuel and oil costs, you can keep receipts to work out the amounts, or you can estimate them based
on odometer records that show readings from the start and the end of the period you had the car. You
need written evidence for all the other expenses for the car, as well as records that show the car's
engine capacity, make, model and registration number.
As a joint owner, you can deduct one-third of your share of jointly incurred expenses and depreciation,
and one-third of expenses wholly incurred by you.
4. Logbook method
Your claim is based on the business-use percentage of the expenses for the car. Expenses include
running costs and decline in value but not capital costs, such as the purchase price of your car, the
principal on any money borrowed to buy it and any improvement costs.
To work out your business-use percentage, you need a logbook and the odometer readings for the
logbook period. You can claim fuel costs based on either your actual receipts or you can estimate the
expenses based on odometer records that show readings from the start and the end of the period you
had the car during the year. You need written evidence for all other expenses for the car.
Owned or leased cars
You can claim a deduction for using a car that you owned, leased or hired under a hire-purchase
agreement using one of the four deduction methods.
You may not be considered to own or lease the car if your do not make financial contributions such as
the initial purchase, lease, hire-purchase agreements, and loan or lease payments – even though you
pay for expenses such as registration, insurance, maintenance or other running costs.
This does not stop you from claiming a deduction for the expenses you pay, but you cannot use any of
the four deduction methods. If you have a family or private arrangement where you are effectively the
owner of the car, even if you are not the registered owner, the ATO will treat the car as if you owned it
and you can claim expenses. For example, the ATO would allow you to claim for a family car that was
given to you as a present, even if it was not registered in your name, if you used it as your own and you
paid all the expenses.
Travel expenses
You can claim travel expenses you incurred for:
meals, accommodation and incidentals while away overnight for work, such as going to an
interstate work conference (generally, you can't claim for meals if your travel did not involve
an overnight stay)
the costs you actually incur (such as fuel costs) when using a borrowed car or a vehicle other
than a car for work purposes
air, bus, train, tram and taxi fares
car-hire fees.
You may have to show that you have reduced your claim to exclude any private portion of your trip.
The documentation required for travel depends on the length of stay and whether you have received a
travel allowance. Where you receive a travel allowance and you restrict your claim to the reasonable
amount the ATO advise each year, you do not need to keep written evidence of the expenses incurred.
If your travel expenses are reimbursed you cannot claim a deduction.
20
If you receive a travel allowance
If you are paid a travel allowance:
you must declare the allowance on your tax return as income
you can claim a deduction for the actual expenses you incur, less any private component.
If you get paid an allowance for some travel expenses (including overtime meal allowances, and
domestic and overseas travel allowances), you do not have to keep written evidence of your expenses
provided your claim does not exceed the Reasonable Allowance amount set for each year (below).
If you want to claim more than the Reasonable Allowance amount the ATO set, you need to keep
evidence of your expenditure.
Reasonable Allowance Expense Amounts 2014-15
If you get paid travel allowance under an industrial instrument (such as an award), you can claim up to
the Reasonable Allowance Expense Amount set for 2014-15 without getting written evidence.
However, you can still only claim the amount you have actually spent.
If you need to claim more than the reasonable allowance expense amount, you need to keep written
evidence of your expenses.
Generally, you must include amounts received as overtime meal allowances as income on your tax
return. However, if your award overtime meal allowance was not shown on your payment summary
and was not more than the reasonable allowance amount for each meal, you don't have to include the
amount on your tax return providing that you have fully spent the allowance; and don't claim a
deduction for overtime meal expenses.
Employee's annual salary - $112,610 and below
Place
Accomm. $
Food/drink $
B'fast 25.35, Lunch 28.55
Dinner 48.65
Incidentals $
Total $
Adelaide
157
102.55
18.70
278.25
Brisbane
201
102.55
18.70
322.25
Canberra
168
102.55
18.70
289.25
Darwin
216
102.55
18.70
337.25
Hobart
132
102.55
18.70
253.25
Melbourne
173
102.55
18.70
294.25
Perth
233
102.55
18.70
354.25
Sydney
185
102.55
18.70
306.25
High cost country
Variable
102.55
18.70
Variable
Tier 2 country centres
(see table below)
132
B'fast 22.70, Lunch 25.95
Dinner 44.75
18.70
244.10
Other country centres
110
B'fast 22.70, Lunch 25.95
Dinner 44.75
18.70
222.10
21
Employee's annual salary - $112,611 to $200,290
Place
Accomm.
$
Food and drink $
B'fast 27.60, Lunch 39.10
Dinner 54.75
Incidentals
$
Total
$
Adelaide
208
121.45
26.75
356.20
Brisbane
257
121.45
26.75
405.20
Canberra
223
121.45
26.75
371.20
Darwin
287
121.45
26.75
435.20
Hobart
176
121.45
26.75
324.20
Melbourne
228
121.45
26.75
376.20
Perth
260
121.45
26.75
408.20
Sydney
246
121.45
26.75
394.20
High cost country
centres
Refer table
below
121.45
26.75
Refer table below
B'fast 25.35, Lunch 25.95
Dinner 50.55
26.75
280.60
26.75
255.60
Tier 2 country centres 152
(see below)
Other country areas
127
Employee's annual salary - $200,291 and above
Place
Accomm.
$
Food and drink $
B'fast 32.55, Lunch 46.10
Dinner 64.60
Incidentals
$
Total
$
Adelaide
209
143.25
26.75
379
Brisbane
257
143.25
26.75
427
Canberra
246
143.25
26.75
416
Darwin
287
143.25
26.75
457
Hobart
195
143.25
26.75
365
Melbourne
265
143.25
26.75
435
Perth
299
143.25
26.75
469
Sydney
265
143.25
26.75
435
Country centres
$190, below 143.25
26.75
Variable - see table below
High cost country centres - accommodation expenses
Country centre
$
Country centre
$
Albany (WA)
179
Jabiru (NT)
192
Alice Springs (NT)
150
Kalgoorlie (WA)
159
Bordertown (SA)
135
Karratha (WA)
347
Bourke (NSW)
165
Katherine (NT)
134
Bright (VIC)
152
Kingaroy (QLD)
134
Broome (WA)
233
Kununurra (WA)
202
Bunbury (WA)
155
Mackay (QLD)
161
Burnie (TAS)
149
Maitland (NSW)
152
Cairns (QLD)
140
Mount Isa (QLD)
160
Carnarvon (WA)
151
Mudgee (NSW)
135
Castlemaine (VIC)
133
Newcastle (NSW)
152
22
Chinchilla (QLD)
143
Newman (WA)
195
Christmas Island
150
Norfolk Island (NSW)
329
Cocos Islands
285
Northam (WA)
163
Colac (VIC)
138
Orange (NSW)
149
Dalby (QLD)
144
Port Hedland (WA)
295
Dampier (WA)
175
Port Pirie (SA)
140
Derby (WA)
190
Queanbeyan (NSW)
133
Devonport (TAS)
135
Roma (QLD)
139
Emerald (QLD)
156
Thursday Island (QLD)
200
Exmouth (WA)
255
Wagga Wagga (NSW)
141
Geraldton (WA)
175
Weipa (QLD)
138
Gladstone (QLD)
187
Whyalla (SA)
145
Gold Coast (QLD)
149
Wilpena Pound (SA)
167
Gosford (NSW)
140
Wollongong (NSW)
136
Halls Creek (WA)
199
Wonthaggi (VIC)
138
Hervey Bay (QLD)
157
Yulara (NT)
244
Horn Island (QLD)
180
Tier 2 country centres
Country centre
Country centre
Albury (NSW)
Kadina (SA)
Ararat (VIC)
Launceston (TAS)
Armidale (NSW)
Mildura (VIC)
Ayr (QLD)
Mount Gambier (SA)
Bairnsdale (VIC)
Muswellbrook (NSW)
Ballarat (VIC)
Naracoorte (SA)
Bathurst (NSW)
Nowra (NSW)
Benalla (VIC)
Port Augusta (SA)
Bendigo (VIC)
Portland (VIC)
Broken Hill (NSW)
Port Lincoln (SA)
Bundaberg (QLD)
Port Macquarie (NSW)
Ceduna (SA)
Queenstown (TAS)
Charters Towers (QLD)
Renmark (SA)
Coffs Harbour (NSW)
Rockhampton (QLD)
Cooma (NSW)
Sale (VIC)
Dubbo (NSW)
Seymour (VIC)
Echuca (VIC)
Shepparton (VIC)
Esperance (WA)
Swan Hill (VIC)
Geelong (VIC)
Tamworth (NSW)
Goulburn (NSW)
Tennant Creek (NT)
Gunnedah (NSW)
Toowoomba (QLD)
Hamilton (VIC)
Townsville (QLD)
Horsham (VIC)
Tumut (NSW)
Innisfail (QLD)
Warrnambool (VIC)
23
International locations by cost group
Country
Cost Group
Country
Cost Group
Albania
2
Estonia
3
Algeria
4
Ethiopia
1
Angola
6
Fiji
2
Antigua/Barbuda
4
Finland
5
Argentina
2
France
5
Austria
4
Gabon
5
Azerbaijan
4
Gambia
2
Bahamas
5
Georgia
3
Bahrain
4
Germany
4
Bangladesh
3
Ghana
3
Barbados
5
Gibraltar
3
Belgium
5
Greece
4
Bermuda
5
Guatemala
3
Bolivia
1
Guyana
3
Bosnia
2
Hungary
3
Brazil
5
Iceland
5
Brunei
2
India
3
Bulgaria
2
Indonesia
3
Burkina Faso
3
Iran
3
Cambodia
2
Ireland
4
Cameroon
4
Israel
5
Canada
5
Italy
5
Chile
3
Jamaica
3
China, Macau, HK
5
Japan
5
Colombia
4
Jordan
5
Congo Dem. Rep
4
Kazakhstan
3
Cook Islands
4
Kenya
3
Costa Rica
2
Korea Republic
5
Cote D'Ivoire
4
Kuwait
4
Croatia
3
Laos
2
Cuba
3
Latvia
3
Cyprus
4
Lebanon
4
Czech Republic
3
Libya
3
Denmark
6
Lithuania
3
Dominican Rep
3
Luxembourg
5
East Timor
2
Macedonia
2
Ecuador
3
Malawi
1
Egypt
3
Malaysia
3
El Salvador
2
Mali
4
Eritrea
2
Malta
3
24
Country
Cost Group
Country
Cost Group
Mauritius
3
Senegal
4
Mexico
3
Serbia
2
Monaco
5
Sierra Leone
3
Morocco
3
Singapore
5
Mozambique
2
Slovakia
3
Myanmar
3
Slovenia
3
Namibia
2
Solomon Islands
3
Nepal
2
South Africa
2
Netherlands
5
Spain
4
New Caledonia
5
Sri Lanka
2
New Zealand
4
Sudan
2
Nicaragua
2
Surinam
3
Nigeria
5
Sweden
5
Norway
6
Switzerland
6
Oman
5
Syria
3
Pakistan
1
Taiwan
3
Panama
2
Tanzania
3
PNG
5
Thailand
3
Paraguay
1
Tonga
3
Peru
3
Trinidad/Tobago
5
Philippines
3
Tunisia
2
Poland
3
Turkey
4
Portugal
3
Uganda
2
Puerto Rico
4
Ukraine
3
Qatar
5
UAE
5
Romania
3
UK
5
Russia
6
USA
4
Rwanda
3
Uruguay
3
Saint Lucia
3
Vanuatu
4
Saint Vincent
3
Venezuela
5
Samoa
4
Vietnam
2
Saudi Arabia
3
Zambia
3
Reasonable amounts by cost groups
Cost Group
Salary $112,610 and below
Salary $112,611 to $200,290 Salary $200,291 and above
Meals
Incidentals
Total
Meals Incidentals
1
$60
$25
$85
$75
$25
$100
$95
$30
$125
2
$90
$30
$120
$110
$35
$145
$140
$40
$180
3
$115
$35
$150
$150
$40
$190
$185
$45
$230
4
$135
$35
$170
$170
$45
$215
$215
$50
$265
5
$175
$40
$215
$240
$50
$290
$295
$60
$355
6
$240
$45
$285
$295
$50
$345
$340
$60
$400
Total
Meals Incidentals
Total
25
Clothing, laundry and dry cleaning
You can claim a deduction for the cost of buying and cleaning occupation-specific clothing, protective
clothing and unique, distinctive uniforms. To make a deduction you need to have written evidence that you
purchased the clothing and diary records or written evidence of your cleaning costs. If you received an
allowance from your employer for clothing, uniforms, laundry or dry-cleaning, make sure you show the
amount of the allowance on your tax return.
Occupation-specific clothing
You can claim for clothing that is specific to your occupation, and is not every day in nature.
You can't claim the cost of purchasing or cleaning clothes you bought to wear for work that are not
specific to your occupation, such as a suit.
Protective clothing
You can claim for clothing and footwear that you wear to protect yourself from the risk of illness or
injury posed by your income-earning activities or the environment in which you are required to carry
them out. To be considered protective, the items must provide a sufficient degree of protection
against that risk.
Protective clothing includes:
fire-resistant and sun-protection clothing;
safety-coloured vests;
non-slip shoes;
rubber boots for concreters;
steel-capped boots, gloves, overalls, and heavy-duty shirts and trousers; and
overalls, smocks and aprons you wear to avoid damaging/soiling ordinary clothes at work.
Ordinary clothes (such as jeans, drill shirts, shorts, trousers, socks, closed shoes) are not regarded as
protective clothing if they lack protective qualities designed for the risks of your work.
You can't claim the cost of purchasing or cleaning ordinary clothes you wear for work that may also
protect you. You can't claim for normal, closed shoes, even though they protect your feet.
Work uniforms
You can claim for a uniform that is unique and distinctive to the organisation you work for.
Clothing is unique if it has been designed and made only for the employer. Clothing is distinctive if it
has the employer's logo permanently attached and the clothing is not available to the public. You can't
claim the cost of purchasing or cleaning a plain uniform.
Compulsory work uniform
This is a set of clothing that identifies you as an employee of an organisation with a strictly enforced
policy that makes it compulsory for you to wear the uniform while you're at work.
You may be able to claim a deduction for shoes, socks and stockings where they are an essential part
of a distinctive compulsory uniform and where their characteristics (colour, style and type) are
specified in your employer's uniform policy. You may be able to claim for a single item of distinctive
clothing, if it's compulsory to wear it at work.
Non-compulsory work uniform
You can't claim expenses incurred for non-compulsory work uniforms unless your employer has
registered the design with AusIndustry. Shoes, socks and stockings can never form part of a noncompulsory work uniform, and neither can a single item such as a jumper.
26
Cleaning of work clothing
You can claim the costs of washing, drying and ironing eligible work clothes, or having them drycleaned. You must have written evidence, such as diary entries and receipts, for your laundry expenses
if both:
the amount of your claim is greater than $150, and
your total claim for work-related expenses exceeds $300 - not including car, meal allowance, award
transport payments allowance and travel allowance expenses.
If you don't need to provide written evidence for your laundry expenses, the ATO sets out this as a
reasonable basis to work out your claim:
$1 per load - includes washing, drying and ironing - if the load is made up only of work clothing, and
50 cents per load if other laundry items are included.
Dry-cleaning expenses
You can claim the cost of dry-cleaning work-related clothing. If your total claim for work-related
expenses exceeds $300 - not including car, meal allowance, award transport payments allowance and
travel allowance expenses - you must have written evidence to substantiate your claim.
Gifts and donations
You can only claim a tax deduction for gifts or donations to organisations that have the status of
deductible gift recipients (DGRs). Deductions for gifts are claimed by the person that makes the gift
(the donor). For you to claim a tax deduction for a gift, it must meet four conditions:
The gift must be made to a deductible gift recipient. The ATO calls entities that are entitled to
receive tax deductible gifts 'deductible gift recipients' (DGRs).
The gift must truly be a gift. A gift is voluntary transfer of money or property where you
receive no material benefit or advantage.
The gift must be money or property, which includes financial assets such as shares.
The gift must comply with any relevant gift conditions. For some DGRs, the income tax law
adds extra conditions affecting the types of deductible gifts they can receive.
How much to claim
The amount you can claim depends on the type of gift. For gifts of money, it must be $2 or more. For
gifts of property, there are different rules, depending on the type of property and its value.
A tax deduction for most gifts is claimed in the tax return for the income year in which the gift is made.
However, you can elect to spread the tax deduction over five income years in certain circumstances.
Bushfire and flood donations
If you made one or more donations of $2 or more to bucket collections conducted by an approved
organisation for bushfire and flood victims, you can claim a tax deduction equal to your contribution
without a receipt provided the contribution does not exceed $10.
What you can't claim
You cannot claim as a gift or donation items that provide you with some personal benefit, such as:
raffle or art union tickets;
items such as chocolates and pens;
the cost of attending fundraising dinners;
payments to school building funds made as an alternative to school fees; and
payments that will provide a benefit for you.
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Home office expenses
You may be entitled to claim deductions for home expenses including a computer, phone or other
electronic devices you are required to use for work purposes, as well as a deduction for running costs.
As an employee, generally you can't claim a deduction for occupancy expenses, including rent,
mortgage interest, council rates and house insurance premiums.
Claiming a computer, phone or other electronic device as a work-related expense
If you are an employee and required to use your computer, phone or other electronic device for work
purposes, you may be able to claim a deduction for your costs.
Running costs
If you perform some of your work from a home office, you may be entitled to a deduction for the costs
you incur in running it, including:
for home office equipment, such as computers, printers and telephones, the cost (for items
costing up to $300) or decline in value (for items costing $300 or more);
work-related phone calls (including mobiles) and phone rental (a portion reflecting the share
of work-related use of the line) if you can show you are on call, or;
have to phone your employer or clients regularly while you are away from your workplace;
heating, cooling and lighting (claim 34 cents for each hour of work, proportional to the space in
your house used for work);
the costs of repairs to your home office furniture and fittings; and
cleaning expenses.
If you are operating a small business, you can claim a range of business costs
Running expenses are the increased costs of using facilities within your home because of your
business activities. Including:
the cost of using a room, such as electricity and gas costs for heating, cooling and lighting
(calculate the space used for your business in your home and calculate energy costs using 34
cents per work hour).
business phone costs
the decline in value of plant and equipment, such as chairs, bookcases, computers, grinders
the decline in value of furniture and furnishings, such as curtains, carpets, light fittings
the cost of repairs to furniture and furnishings
cleaning costs.
Most businesses work out the deductions they can claim for decline in value under the uniform
capital allowance system. However, if you have less than $2 million turnover you can choose to use
the simplified depreciation rules, which is an easier and more generous method. Using the
simplified depreciation rules, you can:
immediately write off most depreciating assets that cost less than $1,000 each
pool most other depreciating assets and claim a deduction for them at a rate of 30% if their
effective life is less than 25 years, or 5% if their effective life is 25 years or more
newly acquired assets are deducted at either 15% or 2.5% (half the relevant pool rate) in
the first year, regardless of when they were acquired during the year.
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Records you must keep
You must keep records of home expenses, such as:
receipts or other written evidence of your expenses, including receipts for depreciating assets
you have purchased;
diary entries you make to record your small expenses ($10 or less) totalling no more than
$200, or expenses you cannot get any kind of evidence for, regardless of the amount;
itemised phone accounts from which you can identify work-related calls, or other records,
such as diary entries (if you do not get an itemised account from your phone company); and
a diary you have created to work out how much you used your equipment, home office and
phone for business purposes over a representative four-week period.
Interest, dividend and other investment income deductions;
You can claim a deduction for expenses incurred in earning interest, dividend or other investment
income. You cannot claim a deduction for receiving an exempt dividend or other exempt income.
Interest income expenses
You can claim account-keeping fees where the account is held for investment purposes - for example,
a cash management account. You will find these fees listed on your statements.
If have a joint account, you can only claim your share of fees, charges or taxes on the account. For
example, if you hold an equal share in an account with your spouse, you can only claim half of any
allowable account-keeping fees paid on that account.
Dividend and share income expenses
You can claim a deduction for interest charged on money borrowed to purchase shares and other
related investments from which you derived assessable interest or dividend income.
Only interest expenses incurred for an income-producing purpose are deductible.
If you used the money you borrowed for both private and income-producing purposes, you must
apportion the interest between each purpose.
What you can claim
Ongoing management fees or retainers and amounts paid for advice relating to changes in the
mix of investment
A portion of the costs if they were incurred in managing your investments, such as travel costs
The cost of specialist investment journals and subscriptions
Borrowing costs
The cost of internet access
The decline in value of your computer.
If you were an Australian resident when a listed investment company (LIC) paid you a dividend,
and the dividend included a LIC capital gain amount, you can claim a deduction of 50% of the
LIC capital gain amount.
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What you can't claim
You can't claim a fee charged for drawing up an investment plan unless you were carrying on
an investment business;
Some interest on money borrowed to purchase shares, units in unit trusts and stapled
securities, which is attributable to capital protection under a capital protected borrowing, is
not deductible and is treated as a payment for a put option;
Forestry managed investment scheme deduction;
If you make payments to a forestry managed investment scheme (FMIS), you may be able to
claim a deduction for these payments if you:
o currently hold a forestry interest in an FMIS, or held a forestry interest in an FMIS during
the income year, and
o have paid an amount to a forestry manager of an FMIS under a formal agreement.
o You can only claim a deduction if the forestry manager has advised you that the FMIS
satisfies the 70% direct forestry expenditure rule in Division 394 of the Income Tax
Assessment Act 1997.
Self-education expenses
You may be able to claim a deduction for self-education expenses if your study is work-related or if you
receive a taxable bonded scholarship. In some circumstances you have to reduce the amount of your
claim by $250.
Eligible courses
Self-education expenses are deductible when the course you undertake leads to a formal qualification
and meets the following conditions. The course must have a sufficient connection to your current
employment and:
maintain or improve the specific skills or knowledge you require in your current employment,
or
result in, or is likely to result in, an increase in your income from your current employment.
You cannot claim a deduction for self-education expenses for a course that does not have a sufficient
connection to your current employment even though it:
might be generally related to it, or
enables you to get new employment.
Taxable bonded scholarship recipients
You can claim a deduction for self-education expenses if, in doing the course, you are satisfying study
requirements to maintain your right to a taxable bonded scholarship. If you are employed by the
scholarship provider, normal work-related self-education rules apply.
Expenses you can claim
You can claim the following expenses in relation to your self-education:
accommodation and meals (if away from home overnight)
computer consumables
course fees
decline in value for depreciating assets (cost exceeds $300)
purchase of equipment or technical instruments costing $300 or less
equipment repairs
fares
home office running costs
interest
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internet usage (excluding connection fees)
parking fees (only for work-related claims)
phone calls
postage
stationery
student union fees
student services and amenities fees
textbooks
trade, professional, or academic journals
travel to-and-from place of education (only for work-related claims)
Some travel for journeys cannot be claimed, but you may be able to offset the cost of these journeys
against the $250 reduction.
If an expense is partly for your self-education and partly for other purposes, you can only claim the
amount that relates to your self-education as a deduction.
Expenses you can't claim
You cannot claim the following expenses in relation to your self-education:
repayments of Higher Education Loan Program (HELP) loans (although the fees paid by some
HELP loans are)
Student Financial Supplement Scheme (SFSS) repayments
home office occupancy expenses
meals (unless sleeping away from home), where not sleeping away from home
$250 reduction
Self-education expenses are broken into 5 categories. If all of your self-education expenses are
'category A' items then you have to reduce your deduction by $250.
However category 'E expenses' can be used to offset the $250.
Expenses you can offset against the $250 reduction
While you can't claim a deduction for the following expenses, they can be taken into account in
determining whether you have to reduce your overall claim:
childcare
computer purchase
fares, travel or car expenses for these journeys:
for work-related self-education, the second leg of a trip if you went from home to your place
of education and then to work, or the other way around
if you receive a taxable bonded scholarship and are not employed by the scholarship provider,
travel from home to your normal place of education and back.
Tools, equipment and other equipment.
If you buy tools or equipment to help earn your income, you can claim some or all of the cost.
If the tools are used for both work and private purposes you will need to apportion the amount you
claim. If you have a computer that is used for private purposes for half of the time you can only deduct
50% of the cost. The type of deduction you claim depends on the cost of the asset:
For items that don't form part of a set and cost $300 or less, or form part of a set that together
cost $300 or less, you can claim an immediate deduction for their cost.
For items that cost more than $300, or that form part of a set that together cost more than
$300, you can claim a deduction for their decline in value (see section below).
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Examples of tools, equipment or assets:
calculators
computers and software
desks, chairs and lamps
filing cabinets and bookshelves
hand tools or power tools
protective items, such as hard hats, safety glasses, sunscreens and sunglasses
professional libraries
safety equipment
technical instruments.
You can also claim the cost of repairing and insuring your tools and equipment and any interest on
money you borrowed to purchase these items.
If you use items for both personal and work-related purposes you need to keep records, such as a
diary, so that, if requested, you can show how the amount of private use and work-related use.
Occupation specific guides for claiming work expenses
Engineers
If you are an employee engineer, consider these deductions in your claim:
Work-related daily travel expenses you can claim
Generally, the cost of normal trips between your home and work is a private expense you cannot
claim an income tax deduction for. However, as an employee engineer, there are certain situations
where you may be able to claim deductions for travel between your home and workplace.
Transporting bulky tools and equipment
You can claim the cost of using your car to travel between your home and work if both of the
following apply:
you have to carry bulky tools and equipment you need to use at work, and
there is no secure storage area at your workplace.
Travelling between workplaces
Work-related car and travel expenses also include the cost of travel:
directly between two separate workplaces – for example, when you have a second job from
your normal workplace to an alternative workplace while you are still on duty, and back to
your normal workplace or directly home; and
from your home to an alternative workplace, and then to your normal workplace or directly
home.
ICT professionals
Contractors and employees have different tax and super obligations. In the information
communication and technology (ICT) industry, individual workers are either employees or contractors.
This guide is for employee information technology (IT) managers and project managers. Common
work-related expenses are:
car
travel
uniform, occupation-specific or protective clothing, laundry and dry-cleaning
self-education
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other expenses - such as phone, home office, computers and laptops.
Specific guides for professionals
The ATO has produced a range of specific guides for various professions, they can be found:
https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Deductions-for-specificindustries-and-occupations/Deductions-for-specific-industries-and-occupations/
Calculating depreciation/decline in value
For items that cost more than $300, or that form part of a set that together cost more than $300, you
can claim a deduction for their decline in value/depreciation.
The decline in value of a depreciating asset is worked out on the basis of its effective life. Generally,
the effective life of a depreciating asset is how long it can be used for:
a taxable purpose, or the purpose of producing
o exempt income, or non-assessable non-exempt income.
For most depreciating assets, you may either:
make your own estimates of effective life, or
use the Commissioner’s effective life determinations (refer to Taxation Ruling TR 2014 http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20144/NAT/ATO/00001: Income tax:
effective life of depreciating assets (applicable from 1 July 2014).
The two methods of working out a deduction for the decline in value of a depreciating asset such as a
computer, tools and equipment are the:
diminishing value method; or
prime cost method.
Diminishing value method
produces a progressively smaller decline over time, and
gives a higher deduction for decline in value in the earlier years than the prime cost method.
You work out the deduction for the decline in value of your equipment using the diminishing value
method in this way:
Where start time of asset is on or after 10 May 2006:
Base value
X
Days held
X
365
200%
Asset’s effective life
Where start time of asset is before 10 May 2006:
Base value
X
Days held
365
X
150%
Asset’s effective life
The base value is:
for the income year in which the asset's start time occurs, the asset’s cost, or
for a later year, the sum of its opening adjustable value for that year and any amount included
in the second element of its cost for that year (such as the cost of an improvement).
Days held is the number of days you held the asset in the income year from its start time, ignoring any
days in that year when you did not:
use the asset, or
have it installed ready for use for any purpose.
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Start time of a depreciating asset is when you
first use it, or
have it installed ready for use for any purpose.
If the item is used for both work and private purposes, identify the percentage of time it is not used for
work. Reduce the decline in value to the extent that the item is used for other than a work purpose to
work out your deduction.
Prime cost method
Under the prime cost method, you work out the deduction for the decline in value of a depreciating
asset by allocating the cost of the asset uniformly over its effective life.
Under this method, the deduction for the decline in value is based on the cost (first and second
elements) of the asset.
Asset’s cost
X
Days held
X
365
100%
Effective life
If the item is used for both work and private purposes, identify the percentage of time it is not used for
work. Reduce the decline in value to the extent that the item is used for other than a work purpose to
work out your deduction.
Can you change the method of working out decline in value?
No. Once you adopt one method of working out the deduction for the decline in value of a
depreciating asset, you cannot change to the other method for that asset.
Low-cost and low-value assets
You can choose to allocate low-cost assets and low-value assets you hold to a low-value pool. You
cannot allocate assets costing $300 or less which are eligible for an immediate deduction to a lowvalue pool.
A low-cost asset is a depreciating asset whose cost is less than $1,000.
A low-value asset is a depreciating asset that is not a low-cost asset but:
which has an opening adjustable value of less than $1,000, and
for which you have worked out any available deductions for the decline in value for a previous
income year under the diminishing value method.
Adjustable value of a depreciating asset is:
its cost (first and second elements)
less its total decline in value since you
o first used it, or
o installed it ready for use for any purpose including a private purpose.
The total decline in value includes both:
the decline in value for which you are able to claim a tax deduction, and
any notional decline in value that is not deductible.
The deduction for the decline in value of depreciating assets in a low-value pool is worked out using a
diminishing value rate of 37.5%.
For the income year you first allocate a low-cost asset to the pool, you work out your deduction for
that asset at a rate of 18.75% (being half the pool rate). This eliminates the need to make separate
calculations for each asset based on the date it was allocated to the pool.
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Capital Gains Tax
Capital Gains Tax (CGT) events are the different types of transactions or events that may result in a capital
gain or capital loss. Capital Gains events can include: Disposal; Hire purchase and similar agreements; End
of a CGT asset; Bringing a CGT asset into existence; Trusts; Leases; Shares; Special capital receipts;
Cessation of residency; Rollovers; Other CGT events and Consolidations.
A taxpayer may make a capital gain or a capital loss when a CGT event happens such as on the disposal of
an asset under a sale contract.
Exemptions
Generally speaking you disregard a capital gain or capital loss on an asset you acquired before 20
September 1985. In addition, various other CGT assets are specifically CGT exempt including the following:
your main residence (but there are exceptions)
your car (that is, a motor vehicle designed to carry a load of less than one tonne and fewer than
nine passengers), motorcycle or similar vehicle
pre-CGT assets (assets you acquired before 20 September 1985) with the exception of some preCGT shares in private companies, or pre-CGT interests in private trusts, where a combination of
factors can occasionally trigger a CGT event giving rise to a taxable capital gain
personal use items acquired for less than $10,000, and some collectables
depreciating assets used solely for taxable purposes, and trading stock
a decoration awarded for valour or brave conduct, unless you paid or exchanged property for it
assets used solely to produce exempt income or some types of non-assessable non-exempt income
compensation or damages received for any
o wrong or injury you suffered in your occupation
o wrong, injury or illness you or your relatives suffered
winnings or losses from gambling, a game or a competition with prizes
the transfer of a super interest in one small super fund (that is, a complying fund that has fewer
than five members) to another on the breakdown of a relationship between spouses or former
spouses
rights in relation to a superannuation agreement (as defined in the Family Law Act 1975) being
created or ended
a CGT event happening to the segregated current pension asset of a complying super fund
some payouts under a general insurance policy, life insurance policy or annuity instrument
shares in a pooled development fund
a payment or grant under prescribed industry re-establishment or exit grants (such as the dairy,
sugar and tobacco industry exit programs)
shares of certain profits, gains or losses arising from disposal of investments by certain venture
capital entities
a financial arrangement where gains and losses are calculated under the TOFA rules
some types of testamentary gifts.
When CGT occurs
In applying the CGT provisions you need to typically determine the date on which the ownership of an asset
changed. This will usually be the date on which a contract for the sale of an asset was signed as which time
the seller will be regarded as having disposed of that asset and the purchaser having acquired that asset.
Where there is no sale contract the relevant date will be the date that the entity disposing of the asset
stops being the asset’s owner. Other separate rules apply in less typical circumstances where a CGT event
occurs which does not involve a change in the ownership of an asset.
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Calculation of capital gains and losses
To calculate a capital gain or capital loss it is necessary to determine the sale proceeds (i.e. capital
proceeds) arising from the CGT event and the cost (i.e. cost base) of the asset. Where the capital proceeds
exceed the cost base, a capital gain arises. If the capital proceeds are less than the cost base, then it is
necessary to determine the asset’s reduced cost base (i.e. the cost base less allowable deductions and
certain asset holding costs). If the reduced cost base exceeds the capital proceeds, there is a capital loss.
The capital proceeds from a CGT event comprises the total of the money the taxpayer has received, or is
entitled to receive, plus the market value of any property the taxpayer received, or is entitled to receive.
Capital proceeds also included any liability owed by the seller of the asset which are assumed by the
purchaser as part of the sale agreement.
The cost base of a CGT asset (other than a personal use asset) will comprise the following elements:
the money paid, or required to be paid, in acquiring the asset and the market value of any property
given, or required to be given;
certain incidental costs relating to the acquisition or disposal of the asset including fees paid to a
surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser; transfer costs;
stamp duty; advertising and marketing costs; valuation and apportionment costs; search fees;
conveyancing kit costs and borrowing expenses such as loan application and mortgage discharge
fees;
certain non-capital costs incurred in owning a CGT asset acquired after 20 August 1991 where no
deduction is allowed for such costs including interest on money borrowed to acquire the asset,
repairs and insurance, rates or land tax and interest on money borrowed to make capital
improvements. For example, these costs would arise where a holiday home is used for private
purposes and no rental income is derived. However, these costs are excluded from the calculation
of an asset’s reduced cost base in calculating a capital loss;
improvements to an asset being capital expenditure incurred for the purpose of increasing or
preserving the asset’s value; and
capital expenditure incurred to establish, preserve or defend title to the asset or a right over the
asset.
Calculating capital gains
The CGT rules affect a taxpayer's income tax liability because assessable income includes a net capital gain
for the income year. A net capital gain is the total of a taxpayer's capital gains for an income year reduced
by any current or prior year capital losses. There are two methods for calculating capital gains: the
Indexation Method and the Discount Method. A detailed worksheet to calculate gains/losses is available at:
https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/CGT-gain-or-loss-worksheet-2015.pdf
Indexation method
You can use the indexation method to calculate your capital gain if:
a capital gains tax (CGT) event happened to an asset you acquired before 11.45am (by legal time
in the ACT) on 21 September 1999, and
you owned the asset for 12 months or more.
If you are not a company, you meet the two conditions above and you want to use the indexation
method, you must choose to do so, otherwise the discount method will apply.
Under the indexation method you increase each amount included in an element of the cost base (other
than those in the third element, costs of owning the asset) by an indexation factor.
If the CGT event happened on or after 11.45am (by legal time in the ACT) on 21 September 1999, you
can only index the elements of your cost base up to 30 September 1999. You use this formula:
Indexation factor
=
CPI for quarter ending 30 September 1999
CPI for quarter in which expenditure was incurred
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Note: The CPI for the quarter ending 30 September 1999 is 68.7.
If the CGT event happened before 11.45am (by legal time in the ACT) on 21 September 1999, you use
this formula:
Indexation factor
=
CPI for quarter when CGT event happened
CPI for quarter in which expenditure was incurred
Work out the indexation factor to three decimal places, rounding up if the fourth decimal place is five
or more (for example, 1.4125 would become 1.413).
For most assets, you index expenditure from the date you incur it, even if you do not pay some of the
expenditure until later. However, there is an exception for partly paid shares or units acquired on or
after 16 August 1989. If the company or trust later makes a call on the shares or units, you use the CPI
for the quarter in which you made that later payment.
Discount method
You can use the discount method to calculate your capital gain if:
you are an individual, a trust or a complying superannuation entity
a capital gains tax (CGT) event happens to an asset you own
the CGT event happened after 11.45am (by legal time in the ACT) on 21 September 1999
you acquired the asset at least 12 months before the CGT event
you did not choose to use the indexation method.
Generally, the discount method does not apply to companies, although it can apply to a limited number
of capital gains made by life insurance companies.
In determining whether you acquired the CGT asset at least 12 months before the CGT event, you
exclude both the day of acquisition and the day of the CGT event.
You can use the discount method to work out your capital gain from the property if:
you acquire a property and construct a building or make improvements to it that are not separate
assets;
• you owned the property for at least 12 months (even if you did not construct the new building or
improvements more than 12 months before the CGT event happened).
•
In certain circumstances, you may be eligible for the CGT discount even if you have not owned the asset
for at least 12 months. For example, if:
• you acquire a CGT asset as a legal personal representative or as a beneficiary of a deceased estate,
the 12-month requirement is satisfied if the asset was acquired by the deceased
o before 20 September 1985 and you disposed of it 12 months or more after they died, or
o on/after 20 September 1985 and you disposed of it 12 months or more after they acquired
it;
• you acquired a CGT asset as the result of a marriage or relationship breakdown and rollover applies
(see Marriage or relationship breakdown and transferring of assets), you will satisfy the 12-month
requirement if the combined period your spouse and you owned the asset is more than 12 months
• a CGT asset was compulsorily acquired, lost or destroyed and you acquired a rollover replacement
asset, you will satisfy the 12-month requirement for the replacement asset if the period of
ownership of the original asset and the replacement asset is at least 12 months.
The law has been amended to remove or reduce the 50% discount on capital gains made after 8 May
2012 by foreign resident individuals on taxable Australian property. For more information see Capital
gains tax (CGT) discount for foreign resident individuals.
37
Discount percentage
The discount percentage is the percentage by which you reduce your capital gain. You can reduce the
capital gain only after you have applied all the capital losses for the income year and any unapplied net
capital losses from earlier years.
The discount percentage is 50% for individuals and trusts, and 33 1/3% for complying superannuation
entities and eligible life insurance companies.
Companies in liquidation
Broadly, where a taxpayer owns shares in a company, and a liquidator or administrator declares in writing
that there are reasonable grounds to believe that there is no likelihood the shareholders will receive any
further distributions on those shares, the taxpayer can elect to make a capital loss equal to the reduced
cost base of the shares. Such a capital loss can be applied to reduce a capital gain.
Small business CGT concessions
To qualify for the small business CGT concessions, you must satisfy several conditions that are common to
all the concessions. These are called the ‘basic conditions’.
Each concession also has further requirements that you must satisfy for the concession to apply, except for
the small business 50% active asset reduction, which applies if the basic conditions are satisfied.
Follow the steps below to determine whether you satisfy the basic conditions:
Step 1
You must first satisfy one of the following:
you are a small business entity
you do not carry on business (other than as a partner) but your CGT asset is used in a business
carried on by a small business entity that is your affiliate or an entity connected with you (passivelyheld assets)
you are a partner in a partnership that is a small business entity, and the CGT asset is
o an interest in a partnership asset (partnership assets) or
o an asset you own that is not an interest in a partnership asset (partner's assets) which is
used in the business of the partnership
you satisfy the maximum net asset value test.
Step 2
The asset in question must satisfy the active asset test.
Step 3
This step is only applicable if the CGT asset is a share in a company or interest in a trust. Where this is
the case, one of these additional basic conditions must be satisfied just before the CGT event:
the entity claiming the concession must be a CGT concession stakeholder in the company or trust,
or
CGT concession stakeholders in the company or trust together have a small business participation
percentage in the entity claiming the concession of at least 90% (the 90% test).
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Types of small business CGT concessions
There are four small business capital gains tax (CGT) concessions. They are:
1. Small business 15-year exemption;
2. Small business 50% active asset reduction;
3. Small business retirement exemption; and
4. Small business rollover.
Detailed information on the eligibility and application of each concession (the concession rules change each
year, so it is important to refer to the specific year’s rules) is available at:
https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Small-business-concessions/
For more on the concessions available to small business entities, go to
ato.gov.au/sbconcessions
For more on the CGT concessions for small business entities
go to ato.gov.au/businesscgt
For more on the ATO range of online services, including the Business Portal, go to:
ato.gov.au/onlineservices
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Offsets and rebates
Tax offsets (sometimes referred to as rebates) directly reduce the amount of tax payable on your taxable
income. In general, offsets can reduce your tax payable to zero, but on their own they can't get you a
refund. Offsets fall into these main categories:
If you receive government benefits
If you have dependents
Health insurance
Medical expenses
Senior Australians
Super related tax offsets
Low income earners
Zones and overseas forces
Dependents
The Government abolished the Spouse Tax Offset on 1 July 2014. Given this change, members are
encouraged to visit this website for further, more detailed information:
https://www.ato.gov.au/Calculators-and-tools/Dependent-%28invalid-and-carer%29-tax-offset-calculator/
You may be entitled to a tax offset if you maintained your:
spouse
child or sibling aged 16 years or older
spouse's child or sibling aged 16 years or older
parent, or spouse's parent
and they are an invalid or carer.
An invalid must have received one of the following:
a disability support pension under the Social Security Act 1991
a special needs disability support pension under the Social Security Act 1991
an invalidity service pension under the Veterans’ Entitlement Act 1986.
A carer must have cared for your or your spouse’s invalid child or sibling aged 16 or older and:
received a carer payment or carer allowance under the Social Security Act 1991 for the care they provide
for that person, or
been wholly engaged in providing care to a person receiving:
a disability support pension under the Social Security Act 1991
a special needs disability support pension under the Social Security Act 1991, or
an invalidity service pension under the Veterans’ Entitlement Act 1986.
Final details of the offset were not available at the time of printing, please visit this website for the latest
information: https://www.ato.gov.au/Calculators-and-tools/Dependent-%28invalid-and-carer%29-taxoffset-calculator/
Health insurance rebate
Your entitlement to a Private Health Insurance rebate or tax offset depends on your income level. If
you have private health insurance:
the amount of private health insurance rebate you are entitled to receive is reduced if your
income is more than a certain amount;
we will calculate the amount of private health insurance rebate you are entitled to receive
when you lodge your tax return.
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You can claim your private health insurance rebate as a:
premium reduction, which lowers the policy price charged by your insurer;
refundable tax offset through your tax return.
This may result in you receiving a tax offset or a liability, depending on:
how you claim your rebate;
the level of rebate you have claimed for your policy; and
your income for Medicare levy surcharge purposes.
Eligibility for the private health insurance rebate is income tested against the PHI income thresholds, which
are normally adjusted annually (however now frozen for three years).
On 1 April, all rebate percentages are adjusted annually by a rebate adjustment factor. This means your
rebate percentage for premiums paid before 1 April is different to your rebate paid on or after 1 April.
Rebate entitlement by income threshold, 2014–15
Status
Income thresholds
Base tier
Tier 1
Tier 2
Tier 3
Single
$90,000 or less
$90,001 – $105,000
$105,001 – $140,000
$140,001 or more
Family
$180,000 or less
$180,001 – $210,000
$210,001 – $280,000
$280,001 or more
Age
Rebate for premiums paid, 1 July 2014 – 31 March 2015
Under 65 yrs
29.040%
19.360%
9.680%
0%
65–69 yrs
33.880%
24.200%
14.520%
0%
70 yrs or over
38.720%
29.040%
19.360%
0%
Age
Rebate for premiums paid, 1 April 2015 – 30 June 2015
Under 65 yrs
27.820%
18.547%
9.273%
0%
65–69 yrs
32.457%
23.184%
13.910%
0%
70 yrs or over
37.094%
27.820%
18.547%
0%
Income thresholds for 2015–16, 2016–17 and 2017–18
From 1 July 2015, the income thresholds used to calculate Medicare levy surcharge (MLS) and
Private health insurance (PHI) rebate will not be adjusted for three years. The thresholds will
remain at the 2014–15 levels for 2015–16, 2016–17 and 2017–18.
This change was announced in the 2014–15 federal Budget and passed into law on 26 November
2014. Not adjusting the income thresholds for three years may result in individuals with incomes
just below each threshold moving into a higher income threshold sooner if their income increases.
This means, if:
you have PHI, your PHI rebate percentage entitlement may decrease
you do not have the appropriate level of private patient hospital cover, you may have
to pay MLS or if you paid MLS in the previous year, your MLS rate may increase.
Net medical expenses
Net medical expenses are your total medical expenses minus refunds from Medicare and private health
insurers which you, or someone else, received or are entitled to receive.
The net medical expenses tax offset is being phased out.
To be eligible to claim the offset in your 2014-15 income tax return, you must have either:
received the offset on your 2012-13 and 2013-14 income tax assessment (the final year you can
claim is 2014-15), or
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paid for medical expenses relating to disability aids, attendant care or aged care (people with these
expenses can continue to claim until 1 July 2019)
You may not be eligible to receive the medical expenses offset if other tax offsets have reduced your tax
payable to zero.
This offset is income tested. If you are eligible for the offset, the percentage of net medical expenses you
can claim is determined by your adjusted taxable income (ATI) and family status.
Senior Australians
If you are a Senior Australian, you may be eligible for the seniors and pensioners tax offset.
The seniors and pensioners tax offset (SAPTO) can reduce the amount of tax you are liable to pay. In some
cases, this offset may reduce your tax liability to zero and you may not have to lodge a tax return.
To be eligible for this tax offset, you have to meet certain conditions relating to your income and eligibility
for an Australian Government pension.
If you are a senior, you must meet the age requirement for the Age pension to be eligible for the offset.
In some cases, you may also be able to transfer your eligible spouse's unused SAPTO to you. The ATO
calculates their transfer amount available and includes this amount when calculating your SAPTO.
SAPTO
2014/15
Rebate income
Above threshold no
longer eligible
Maximum
Rebate
Amount
You did not have a spouse and your rebate
$32,279
income was less than…
$50,119
$2,230
You had a spouse and the combined rebate
income of you and your spouse was less $ 57,948
than…
$83,580
$1,602
At any time during the year you and your
spouse had to live apart due to illness or
because one of you was in a nursing home $62,558
and the combined rebate income of you
and your spouse was less than…
$ 95,198
$2,040
Eligibility condition
Threshold max tax
offset applies
No change to the maximum tax offset values or the reduction rate 12.5 cents applied for every $1
over the maximum rate threshold up to the cut off threshold.
However it should be noted that calculating the SAPTO can be finicky and complex, especially where
taxpayers are part of a couple where both partners are eligible. The difficulty lies in working out the
amount of unused SAPTO transferred between the couple. The reason this may cause confusion is because
this part of the calculation may be based on rates and thresholds from previous financial years.
Super related tax offsets
There are two super-related tax offsets for which you may be eligible:
Australian super income stream tax offset
Tax offset for super contributions on behalf of your spouse
Australian super income stream tax offset
If you receive income from an Australian super income stream, you may be entitled to a tax offset
equal to:
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15% of the taxed element, or
10% of the untaxed element.
The tax offset amount available to you will be shown on your payment summary.
You're not entitled to a tax offset for the taxed element of any super income stream you receive before
you turn 55 years old unless the super income stream is either a:
disability super benefit, or
death benefit income stream.
You're not entitled to a tax offset for the untaxed element of any super income stream you receive
before you turn 60 years old unless:
the super income stream is a death benefit income stream; and
the deceased died after they turned 60 years old.
Tax offset for super contributions on behalf of your spouse
If you make contributions to a complying superannuation fund or a retirement savings account (RSA)
on behalf of your spouse (married or de facto) who is earning a low income or not working, you may
be able to claim a tax offset.
You will be entitled to a tax offset of up to $540 per year if you meet all of the following conditions:
the sum of your spouse's assessable income, total reportable fringe benefits amounts and
reportable employer super contributions was less than $13,800
the contributions were not deductible to you
the contributions were made to a super fund that was a complying super fund for the income
year in which you made the contribution
both you and your spouse were Australian residents when the contributions were made
when making the contributions you and your spouse were not living separately and apart on a
permanent basis.
The tax offset for eligible spouse contributions can't be claimed for super contributions that you made to
your own fund, then split to your spouse. That is called a rollover or transfer, not a contribution.
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Tax planning
With a little planning you can reduce the tax payable on your income. Here, we examine some of the
best tax-minimising strategies for employee professionals.
Transferring income to another taxpayer who has a lower tax rate than your own
Transfer income-producing assets, (e.g. open your next income-earning account in your spouse's name if
they have a lower taxable income) provided the recipient retains control of the capital. You can achieve
this by forming a partnership with your spouse, in effect lowering the average taxable income.
A formal partnership deed should be enacted and your taxation adviser consulted before proceeding with
this course of action, as in some circumstances, the Commissioner does not allow the
operation of Partnerships. Consideration also needs to be given to the effects of the Alienation of Personal
Services Income legislation.
Mortgage offset account
One of the simplest everyday strategies is setting up an offset account against a mortgage to harbour any
extra cash. If you’ve accumulated some cash or sold some assets and you’re not sure what to do with the
proceeds and you’ve got a home loan, you can put this extra cash into an offset account can not only
reduce the amount of interest payable on the loan but it will also stop you paying tax on the interest you
would otherwise have earned.
Reduce assessable income
Use income exemption provisions, (e.g. by investing surplus funds) in companies which pay "Franked"
Dividends. You can do this by restructuring your remuneration package, (e.g. salary packaged company
vehicles or additional superannuation contributions.
Increase the amount of tax deductions from assessable income
Top up your superannuation deductions to the maximum limits.
Also consider:
Gift Deductions;
Prepayments.
Change the timing
Change the timing of the receipt of the assessable income either to bring the income within the period in
which the effective rate of tax is lower or to postpone the payment of tax and retain use of the tax money.
Arrange deposit interest to mature in a tax year when you will be subject to lower tax rates (if possible).
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Trusts and companies
Trusts
Trusts which have distributed all income to beneficiaries or unit holders are not taxed. Taxable income
distributed in the terms of the trust agreement to the trust beneficiaries who are presently entitled and not
under any legal disability, is declared by the beneficiaries as taxable income in the year it is derived.
The advantage of trusts is that income may be distributed at the end of the financial year to
beneficiaries who are in a lower tax bracket. Possible beneficiaries could include your spouse, parents,
children, relatives, related companies and related trusts. At present, children under the age of 18 are taxed
at penalty rates on income from a trust. Above $1,307, the rate is the top marginal tax rate, plus Medicare.
The tax rates featured in the table below apply in the 2014-15 income year for minors who:
are Australian residents; are not excepted persons; and have no excepted income.
Other income
Tax rates
$0 – $416
Nil
$417 – $1,307
Nil + 66% of the excess over $416
Over $1,307
45% of the total amount of income
that is not excepted income
If the minor’s taxable income is less than $67,667, they will get the low income tax offset. The maximum
tax offset of $445 applies if their taxable income is $37,000 or less.
This amount is reduced by 1.5 cents for each dollar over $37,000. However, the low income tax offset will
only reduce tax payable on excepted income.
Minors cannot use the low income tax offset to reduce tax payable on unearned income such as trust
distributions, dividends, interest and rent.
Adult beneficiaries are taxed at the normal marginal tax rates.
It is also possible to distribute income to overseas beneficiaries through trusts, however non-resident rates
of taxation would apply.
It is clear however that a person cannot avoid being taxed on salary or wages income earned by him in his
own right by interposing a trust between himself and his employer. Such arrangements may be
characterised as arrangements entered into primarily or principally to avoid liability for income tax by
means of splitting of the income.
This income is commonly described as "personal exertion" income and applies to income arising under a
contract wholly or principally for the labour of the person.
This does not extend to the true business situation. Where there are assets such as plant and machinery,
trading stock, goodwill, etc, these may be transferred into the trust for the benefit of the beneficiaries. The
income in this situation is not characterised as personal exertion income as it flows from the ownership of
the business assets.
Companies
Companies are taxed at 30 per cent.
If a company dividend is declared, then that should be included in the shareholders' individual returns.
Any dividend declared and paid should be included by the shareholder in his/her individual income tax
return with special treatment for "Franked" Dividends.
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The comments concerning "personal exertion income" under trusts would apply equally to companies
where income splitting or diversion of personal exertion income is involved.
Salary packaging
Despite changes to the Fringe Benefits Tax Act, remuneration packaging still has some benefits (albeit such
benefits are included on your group certificates when calculating your liability to levies such as the
Medicare Levy surcharge and HELP debt repayments, etc).
The trend with remuneration packaging is, first of all, to identify the total employment cost associated with
employment.
This total covers the cost to the employer of salary, superannuation and any other "fringe benefits".
Having calculated the total employment cost, employers are increasingly providing scope for employees to
configure their remuneration package (total employment cost) in a way which is most suited to the
employee's circumstances.
In determining the most suitable and tax effective configuration, a number of fringe benefits receive
concessional taxation treatment.
Employees in government and local government employment have additional scope because of the
absence of company tax on their employer.
This remuneration packaging for optimised tax effectiveness is also referred to in some areas as salary
sacrificing (to finance the fringe benefits).
Concessional Benefits
The areas which are most tax effective for private and public-sector employees are:
Superannuation
An important part of any remuneration package should be allocated to Superannuation. There are,
however, some points to bear in mind in relation to taxation on Superannuation:
15% of the contributions paid from a pre-tax remuneration package is deducted as Superannuation
contribution tax.
Motor Vehicles
Over the last four years from 10 May 2011, the ‘statutory formula’ method for calculating the value of a car
fringe benefit has been phased out and replaced with a flat rate of 20%, applicable from 1 April 2014
Where the vehicle is used for both business and private use, the FBT can be calculated according to this flat
rate (20%) or by using a log book to record business and private use over a 12 week period. The log book is
accepted by the ATO as an accurate representation of the proportion of business and private use, and FBT
is payable on the private use proportion of the total costs associated with the provision and running of the
motor vehicle. The cost to the remuneration package is also calculated as the proportion of the costs
attributable to private travel (including FBT).
Car Parking
The cost of car parking is subject to FBT, where an employer provides car parking facilities to an employee
free or at reduced cost. The taxable value will be the lowest fee above the car parking threshold (in
2014/15 the threshold was $8.26 (set 31 March 2015) for all day parking charged by any commercial car
parking station within 1km of the place where the car is parked.
46
Professional Subscriptions
Within a remuneration package it is possible to allocate a certain sum of money for the payment of
subscriptions to professional associations (Professionals Australia, The Australian Institute of Management,
etc.). As these subscriptions would normally be tax-deductible, no Fringe Benefits Tax is payable on them.
Low Interest Loans (Employer-provided)
Where an employer provides an employee with a low-interest loan at, say, 4%, FBT is payable on the difference
between the rate paid and the current statutory interest rate of 7.40% (for year ending 31 March, 2015).
"Deductible" Fringe Benefits
Where a provision of a benefit is caught by FBT, the taxable value can be reduced by the otherwise
deductible rule.
The rule recognises that a fringe benefit used fully or partially for “business” purposes should be subject to
less tax than one only for private purposes. In essence, if the employee were to pay for the benefit
themselves and receive tax deductions as part of their expenses then the employer should not be taxed.
For the employer to apply the otherwise deductible rule, the fringe benefit must be one of the following; a
loan, expense payment, airline transport, board, property, or residual fringe benefit. In addition, the
employee must provide the employer with a statement detailing that the benefit will be deducted had the
employee paid for it.
Due to changes in the FBT legislation, you may be worse off by packaging some benefits. The exception to
this is the packaging of motor vehicles. Due to the method of the calculating motor vehicle fringe benefits,
it may still lead to an increase in net disposable income.
Negative gearing
Negative gearing has long been one of the most tax-effective means for high-income earners to
accumulate assets.
Gearing simply means borrowing to invest. Gearing provides access to a larger capital base and magnifies
the benefits of potential growth returns, on both the investor's funds and the borrowed amount. It can
also magnify the losses.
Property or share-based investment offers the additional benefit of tax-free (or tax-deferred) income. This
stems from dividend imputation (in the case of shares and equity trusts) and depreciation allowances
(property or property trusts).
Property
A property is said to be "negatively geared" when the annual interest on borrowings used to finance the
acquisition of the rental property investment and costs such as rates, repairs, etc, is greater than the net
rental income derived from that property.
"Negative" refers to the taxpayer's negative cash flow and the property is "geared" because the taxpayer
borrows to purchase the property.
Taxation implications
Where interest on borrowing’s used to purchase a rental property exceeds the net rental income (i.e.
rental income less expenses such as rates, insurance, property maintenance and management), the loss
resulting will be fully deductible against income from any source earned in the same year.
Income from other sources includes salary and wages, interest income from deposits in banks or
building societies and "unfranked" dividend income on shares.
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Accordingly, the deductible tax loss resulting from the negative-geared investment property will enable
a taxpayer to reduce his or her tax payable on his or her salaries.
This tax feature will enable in particular, PAYG employees, to restructure their investment strategies as
well as their tax planning to take advantage of the tax system legally in reducing their tax liabilities.
Further tax benefits are also available by way of a building depreciation allowance of 2.5 or 4 per cent,
depending on the date the construction of the building commenced or of the contract entered into.
Cash Flow Implications
It is important to emphasise that while there may be tax savings derived from negatively geared
investments, the taxpayer still has to fund the cash shortfall between rental income and expenses from
some other source.
It is possible to vary your PAYG Withholding from salary where the deductions claimable for negative
gearing would result in a refund to the taxpayer of 10% of PAYGW deducted or $500, whichever is the
lesser.
Where the PAYGW variation (sec 15-15) is approved by the Commissioner, the surplus can be used to
partially fund the cash flow deficit upon negative gearing.
The taxpayer’s cash position should be preserved in the long run when the capital appreciation of the
property covers the cash losses sustained, plus any capital gains tax liability arising from the sale of the
property.
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Example of "negative gearing" and its tax benefits is as follows.
Percentage of
Borrowed Funds
100%
80%
60%
$
$
$
100,000
100,000
100,000
5,900
5,900
5,900
10,000
8,000
6,000
Net Loss
4,100
2,100
100
Tax Benefit (46.5%)
1,906
976
46
After Tax Cost
2,194
1,124
2,054
-
1,000
2,000
Total Cost
2,111
2,087
2,052
Capital gain required
to break even (subject
to Capital Gains Tax
Payable, if any)
2.1%
2.1%
2.1%
Cost of Property
Net Rental Income (i.e.
after deduct rates,
repairs, etc.)
Interest (10%)
ADD Opportunity cost
of taxpayer's fund (5%
interest rate)
List of deductible expenses for rental property owners
Accounting - Tax agent for preparation of returns or bookkeeping of account books.
Advertising - Advertising for tenants.
Borrowing Cost - Legal fees and mortgage transfer, etc. to be amortised over five years or term of the loan,
whichever is the lesser. If borrowing costs incurred are $100 or less, wholly deductible year incurred.
Cleaning and Repairs - Dry cleaning of curtains, carpets, etc.
Commissions Paid - Fees for rental collection to real estate agents.
Depreciation of Household Items -
Depreciation rates are:
Effective Life
Prime Cost
%
Diminishing Value
%
Carpets
10
10.0
20.0
Cupboards
10
10.0
20.0
Curtains
6
16.67
33.33
Furniture
15
6.7
10.0
Heater
10
10.0
20.0
Hot Water Serv.
15
6.67
13.33
Lawn Mower
7
14.29
28.57
Light Fittings
5
20.0
40.0
Linoleum
10
10.0
20.0
Refrigerators
10
10.0
20.0
Stove
12
8.33
16.67
TV Sets
10
10.0
20.0
Vacuum Cleaners
10
10.0
20.0
Washing Machine
7
14.29
28.57
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Depreciation of building - where construction of building commenced:
Type of Construction
Start Date
Rate (%)
Years
Short-term traveller
accommodation
22/8/79 – 21/8/84
22/8/84 – 17/7/85
18/7/85 – 15/9/87
16/9/87 – 26/2/92
27/2/92
2.5
4
4
2.5
4
40
25
25
40
25
Non-residential incomeproducing buildings
20/7/82 – 21/8/84
22/8/84 – 15/9/87
16/9/87 –
2.5
4
2.5
40
25
40
Buildings used for eligible
industrial activities
27/2/92 –
4
25
Residential income-producing
building
18/7/85 – 15/9/87
16/9/87
4
2.5
25
40
Income-producing structural
improvements
27/2/92 –
2.5
40
R&D Buildings
21/11/87
2.5
40
Environment protection
earthworks
19/8/92 –
2.5
40
Additional deductible expenses for rental property owners
Gardening and lawn mowing expenses - maintenance expenses not paid by the tenant.
Legal Fees - Lease preparation or renewal and collection of arrear rents.
Management Fees - Fees paid to agent to oversee the property.
Pest Control - Fumigation, etc.
Printing & Stationery - Rent receipt book, etc.
Repairs and Maintenance - All repairs relating to the property which are part of the tenancy
agreement.
Rates and Taxes - All rates paid to various municipal or public utility bodies.
Travel Expenses - Inspection of property.
It should be noted, you can negatively gear a share portfolio. The same principles as a property apply, and
in fact, given the ease and low cost of share disposals, the benefits can often exceed those of negatively
geared property.
Features and risks of real estate investments
The features of good quality real estate investments are:
Regular cashflow in the form of periodic rent;
Potential appreciation in value over time;
A hedge against inflation and, on sale, profit can be taxed under the concessional capital gains
legislation;
Possibility of favourable rezonings;
Possibility of withdrawing capital gains from a property without disposing of it by refinancing the
property, because a mortgage up to a high percentage of its value can be secured against good quality
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property, and provided that these funds are used to make further income producing investments,
interest will be deductible;
Special tax deductions on newer buildings provide a non-cash expense to reduce taxable income, but
not cash flow;
Unlike share investments, banks rarely make “calls” on the loan in the event that the value of the
property falls; and
Increased return through use of gearing.
The risks attached to real estate investments are:
Investigating real estate alternatives requires knowledge, time, and often money;
High entry costs (mainly stamp duty) mean an investor may need to borrow a substantial part of the
investment, magnifying both the return and the risk;
Relatively slow marketability, depending on the property and its location;
Vacancies being higher and rent being lower than anticipated;
Inflation and inflationary expectations;
Paying more than a property is worth as an investment;
Fluctuations in real estate price values;
Interest rate fluctuations;
Devaluation during ownership caused by external factors such as rezonings or a freeway construction
nearby;
Compulsory acquisition by a government authority;
Difficulty of converting property to cash because of its illiquid nature;
Damages caused by tenants which are not recoverable;
The possibility of legislation which is detrimental to property owners, such as rent control or increased
tenants’ rights.
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Superannuation
Tax Deductibility of Member Contributions
The tax treatment of a member's contributions to a superannuation fund depends on whether or not the
member falls within either of the following categories.
Self-employed and unsupported eligible persons; or
Supported members.
Self Employed or Unsupported Eligible Persons
From 1 July 2012, self-employed and unsupported persons were able to claim up to $25,000 as a deduction,
regardless of their age. From 1 July 2013, the amount increased to $35,000 for those aged 59 as at 30 June
2013.
It should be noted that with the introduction of compulsory Superannuation Guarantee contribution by
employers it is extremely rare that an employee would be an unsupported eligible person.
A substantially self-employed person will be treated as wholly "self-employed" where that person's income
from employment in respect of which employer financed superannuation is provided is less than 10% of the
person's assessable income plus reportable fringe benefits and reportable superannuation contributions.
A deduction for a member's contributions cannot exceed the member's assessable income for the year. It
cannot create or increase a loss to be carried forward to future years.
Complying funds pay tax on deductible contributions which they receive.
A taxpayer will be eligible for a deduction for personal contributions to a complying superannuation fund
only if the taxpayer has given a notice to the fund stating that he or she intends to claim a deduction for
those contributions and has received acknowledgment of the notice from the fund. This requirement
applies to contributions made to a fund on or after 1 July 1992, other than contributions made by a person
who has ceased to be a member of the fund before the amending legislation receives assets.
Government Super Contributions
A government measure to boost super savings. If your total income is below $49,488 you may be able to
receive the government super co-contribution by making eligible personal super contributions to your fund.
Personal super contributions are amounts you choose to contribute to your super fund from your after-tax
income. This is in addition to any employer contributions and does not include contributions made through
a salary sacrifice arrangement.
You will be eligible for the super co-contribution if all of the following apply:
you make a personal super contribution by 30 June 2015 into a complying super fund or retirement
savings account (RSA) and don't claim a deduction for all of it
your total income is lower than $49,488
10% or more of your total income (without a reduction for allowable business deductions) is from
employment income, carrying on a business or a combination of both
you are less than 71 years old on 30 June 2015
you do not hold an eligible temporary resident visa at any time during the year, unless you are a
New Zealand resident or holder of a prescribed visa
you lodge your 2015 tax return.
52
Superannuation Guarantee Levy
Employers who fail to provide each employee with a prescribed level of superannuation support will be
subject to a non-tax deductible superannuation guarantee levy. The minimum level of employer
superannuation support that has applied from 1 July 1992 to avoid the superannuation guarantee charge is
set out in the following table:
Charge Percentage (%)
Financial Year
2002/03 and
subsequent years
9
2013/14
9.25
2014/15
9.5
The charge percentage is applied against each employee’s salary and wages, based on ordinary hours of
work, up to a maximum contribution base is $49,488 per quarter (2014/15). Compliance with
superannuation guarantee is determined each quarter (the contribution must be in the superannuation
fund within 28 days of the end of each quarter). For the June quarter to be deductible in that financial year,
it must be in the superannuation fund by 30 June, otherwise that amount will not be deductible until the
following financial year.
Member Advantage Portable Superannuation for Professionals
The Member Advantage Superannuation Fund has been established by Professionals Australia to provide
portability of Superannuation for its members.
The Fund has the following components:
1. A Superannuation fund to which employers can direct the Superannuation Guarantee
contributions.
2. A Superannuation fund to which employers can contribute in respect of their employees and to
which those employees can contribute themselves.
3. The fund provides the facility to "roll-over" any Superannuation payments received when changing
employment (and thus defer the Superannuation tax).
4. The Fund provides generous death and disability benefits.
Components of 1,2 and 3 of the Fund are "accumulation funds". This means that the benefit payable
in respect of each component is the accumulated contributions with interest compounded at the Fund
earning rate less insurance and administration charges.
Alienation of Personal Services Income
The alienation of personal services income (PSI) rules were introduced to effectively tax contractors, who
were deriving their income from their own skills, expertise or the provision of personal services, on a similar
basis as employees. The rules applied regardless of whether the contractor operated as a sole trader or
through a company, trust or partnership entity.
The PSI rules apply only to personal services income. They do not apply to independent contractor (or their
entity) that is accepted as conducting a personal service business. That would include:
Independent contractors (or their entities) that contract on a results basis;
Independent contractors (or their entities) that have self assessed and satisfied one of the following tests:
the unrelated clients test,
the employment tests, or
the business premises test;
Agents that satisfy the unrelated clients tests; or
53
Independent contractors (or their entities) that obtained a personal services business
determination from the ATO.
Where the alienation measures apply, an individual will be assessed at a personal level on income derived
from personal services, regardless of the structure used to conduct such activities. Further, certain
‘business’ expenses will not be allowable deductions (e.g. bookkeeping by a spouse, certain motor vehicle
deductions, certain home-related costs, etc).
Growing your super – salary sacrificing super
Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for
your employer providing benefits of a similar value.
One example of a salary sacrifice arrangement is to have some of your salary or wages paid into your super
fund instead of to you.
If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the
super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.
The sacrificed component of your total salary package is not counted as assessable income for tax
purposes. This means that it is not subject to pay as you go (PAYG) withholding tax.
If salary sacrificed super contributions are made to a complying super fund, the sacrificed amount is not
considered a fringe benefit.
Salary sacrifice limitations
If there are no limitations specified in the terms of your employment, there is no limit to the amount you
can salary sacrifice.
However, you should also consider whether:
• the additional salary you wish to sacrifice will cause you to exceed the concessional (before-tax)
contributions cap and attract additional tax – this cap limits the amounts that can be contributed to
your super fund and still receive the concessional tax rate of 15%
• the salary amount you sacrifice will attract Division 293 tax – this occurs when you have an income
and concessional super contributions of more than $300,000 in one year.
Personal super contributions
You can boost your super by adding your own contributions to your super fund or into your spouse’s super
fund.
Personal super contributions are the amounts you contribute to your super fund from your after-tax
income (that is, from your take-home pay). These contributions:
are in addition to any compulsory super contributions your employer makes on your behalf
do not include super contributions made through a salary-sacrifice arrangement.
Personal contributions are non-concessional (after-tax) contributions and will count towards your nonconcessional contributions cap unless you have claimed a tax deduction for them.
If you’re an employee you generally can’t claim a tax deduction for personal super contributions, though
you may be eligible for a super co-contribution.
If you wish to claim a tax deduction for personal contributions, you must complete and lodge a notice of
intent with your super fund and have this notice acknowledged (in writing) by your fund.
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If you claim a deduction for your personal contributions, you may not be eligible for a super cocontribution.
Adding to super if you’re not working
If you’re under 65, you can make personal after-tax contributions to your super fund if you’re not working.
If you’re 65 years of age or over, you can only make personal after-tax super contributions if you:
aren’t yet 75 years of age and
have been gainfully employed for at least 40 hours over 30 consecutive days during the financial
year.
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Complaints
In the unfortunate event that you wish to make a complaint about any element of the income tax return
process, the ATO provides a formal process for the treatment of complaints and takes complaints seriously.
To lodge a complaint you can phone 1800 199 010 or the National Relay Service on 13 36 77 (if you have a
hearing, speech or communication impairment)
You can also write to:
PO Box 1271
ALBURY NSW 2640
Once a complaint is lodged in the ATO complaints system, a tax officer will contact you; the ATO aims for
the contact to occur within three working days. To progress the complaint, the resolver will need to speak
to you to confirm your identity (if your complaint requires us to access and disclose your sensitive or
personal information).
The resolver may also need to obtain further details about your complaint and work with you to resolve it.
During this process the resolver will keep you informed of the progress made and will advise you of the
final outcome.
Other avenues available to you
If you are still not satisfied after lodging a formal complaint you can contact the Inspector- General of
Taxation.
Inspector-General of Taxation
phone 1300 44 88 29
or write to:
Inspector-General of Taxation
GPO Box 551
Sydney NSW 2001
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