Archive for category: Tax

Can you differentiate surcharges from rebates? Levies from lifetime health cover loading? You can save hundreds of dollars on tax season if you know how your health insurance affects your financial situation.

Here are 5 important things you should be aware of about your health insurance and your tax:

1. Save money by paying for private hospital cover.

Australian singles with an income of over $90,000 annually, or couples and families with income of over $180,000, who don’t own a private hospital cover, can pay an additional tax called the Medical Levy Surcharge (MLS). People who are included in this category will pay no less than 1% of their annual income on the MLS (for singles earning $90,000, that’s $900 annually). This amount may well be greater than the cost of getting private hospital cover, of course, depending on the scope of cover and the provisions in your policy. So you might actually save money by joining health cover.

2. You may claim rebate on the money you pay for your health insurance.

As another inducement to get private health insurance, individuals with income below $140,000 or couples and families earning less than $280,000, you may be qualified for a rebate on the cost of your health insurance. Depending on your income, you may qualify for a rebate of between 9% and 28% if the oldest member in the insurance policy is aged below 65 years. This rebate can be claimed either as a one-time cost at tax time or as a discount in your health insurance cost for the full year.

3. The rebate is higher, the older you are.

When you hit 65 your rebate is higher to assist you in paying your private health insurance premiums. This helps retirees afford health insurance. It also serves as an additional financial support if a person needs to get a policy that has a broader coverage, giving them added protection against exorbitant medical expenses.
The rebate increase is triggered when a person turns 65 years old and then again at 75 years old.

4. If you haven’t taken out a private hospital cover when you hit 31 you could be burdened with higher health insurance costs for the remainder of their life.

Don’t procrastinate with regards to taking out a private hospital cover. If you delay too long, the costs of your private hospital cover could be more expensive. You have until July 31 following your 31st birthday to decide. If you fail to take out private hospital cover before the cut-off date, you could be responsible for a loading on your private hospital cover once you finally decide to become a member. Every year you procrastinate taking out a private cover, you could be liable for a loading of 2% on your total hospital cover premiums (the highest loading is 70%). If you postpone for 10 years, your loading is 20%!

5. Add your spouse’s details to avail of the right rebate.

For individuals with a partner, their combined household income determines their income threshold for the private health insurance rebate. Make sure you are assessed correctly by including your partner’s income when claiming your rebate. You could end up repaying a part or the entire amount of your formerly claimed rebate if you don’t state your partner’s income details.

Understanding how your health insurance impacts your tax can help steer you in the right direction when considering your options. With the existing Government incentives, taking out private hospital cover may be cheaper than you think.

The article provides general information only. Seek advice about financial and taxation issues from an independent taxation expert. PJS Accountants offer expertise in managing your tax affairs with a complete range of compliance, corporate and individual tax services. We service large companies, SMEs, family businesses and individuals. The ever-changing tax laws and requirements could put businesses and individuals at risk. Putting nothing to chance! Contact PJS Accountants and talk to one of our team members now!

The ever-changing business scene is putting pressure on small business owners and single traders to improve their accounting systems annually. This is to make sure that every dollar spent is accounted for. What are some of the tax deductions that employers may overlook when lodging their tax returns?

Donations to Charities

Monitoring bigger, direct charitable contributions is easy, but it’s the small things that are harder to keep track of. You have to donate $2 or more and be sure to give the donation to a deductible gift recipient charity. This will allow you to claim the money on your tax return. Don’t forget to save receipts or bank statements as proof.

Gifts

A “gift” can be deducted if you really voluntarily transferred money or property where you don’t get material advantage or benefit. However, you can’t claim certain things, such as art union tickets or raffles, things such as pens and chocolates, and the money spent on going to fundraising dinners.

Home Office Deductions

The number of small businesses based at home is increasing but many are still unaware of the tax deductibles they can claim for using their home to run a business. They mistakenly believe that the tax deduction process is complicated, or that it would have a negative impact on their property taxes in the future. You should not let these issues prevent you from claiming the deductions that apply time. You can guarantee transparency by seeking tax advice from the very start to know which part of property use you can claim as use for business purposes. The best person to talk to about the process for claiming home office costs is your accountant or bookkeeper.

Startup Expenses

A lot of startup companies, especially in the chaos of getting the business up and running, fail to keep a record of all spending incurred beforehand. So, immediately after making sales, don’t forget to track those startup costs as deductions. It is important to keep accurate and complete records and receipts from the very beginning.

Software

Originally, deducting desktop software costs had been simple, as it is basically a complete deduction in the financial year the software was bought and set up. However, that is now a bit complicated due to the rising number of cloud-based solutions, automation tools, marketing platforms, and tracking systems. For the cost of cloud-based solutions, you are entitled to claim the monthly costs that fall within the applicable financial year. You can claim whatever amount, but you need to show documents on your ongoing payment plan.

See a qualified tax advisor, accountant or bookkeeper for tax enquiries specifically concerning your industry or business situation. Each business is unique, so each one is entitled to claim different tax deductions. PJS Accountants can help you organise your tax affairs. We work with large companies, SMEs, family businesses and individuals. For enquiries, contact PJS Accountants.

Do you know that you can claim certain tax deductions as an owner of a rental property? It is important to claim as many deductions as you can because your rental income, and your overall financial well-being, will greatly benefit from the tax dollars you save from your investment property.

But before filing that claim, know some essential rules and criteria relating to property taxes.

Firstly, owners can only claim expenses associated with their rental property for the period the property was leased or available for lease. An example of this expense is advertising costs. Secondly, owners can only claim tax deductions on the part of the property that is being rented. In this case, you have to come up with a reasonable basis to divide up the claim. But as a general rule, a floor-area basis is used for apportionment.

Common Rental property Expenses you Can Claim

Interest Expenses

In negative gearing property investment, the largest tax deduction is interest expenses. You can claim tax deductions on the interest you pay on the loan you used to purchase the property, including the money you paid to acquire the property, make repairs and renovations, or spend on tenant-related issues.

These are tax deductible only if the loan was used for income generating purposes. If it was used for both private and income generating purposes, you need to apportion the interest to come up with the tax deductible amount.

Tenancy Costs

These include the monies paid to advertise for tenants, to property managers for procuring tenants on the landlord’s behalf, and any cost related to preparing or modifying the lease agreement. Also tax deductible are landlord insurance premiums, legal costs incurred for evicting a tenant, and travelling expenses related to inspecting the rental property or collecting rent.

Repairs and Maintenance

Landlords can claim a tax deduction on expenses they incurred from restoring an area or feature in the property to its original condition as a result of tenant wear and tear. However, initial repairs, or pre-existing damages in the property, are not tax deductible.

Depreciating Assets

These include carpets, dishwashers, clothes dryers and other stand-alone functional units that are not normally attached to the property that decline in value over time.

Capital Works

These are extensions, structural upgrades or changes and other works done on elements that are attached to and become part of the land and property. Capital works are typically not tax deductible upfront. Generally, construction expenses on capital works can be claimed at 2.5% per annum on a straight-line basis over 40 years.

There are timing conditions attached to construction works deduction. The construction expenses on the property itself can only be claimed if work commenced on or after July 18, 1985. The cost of structural upgrades, extensions and modifications can only be claimed if work began on or after February 27, 1992.

Other Holding Costs

Body corporate fees, cleaning costs, gardening costs, building and contents insurance premiums, rates, security monitoring costs, pest control, property manager’s fees and commissions and other expenses related to owning the property are considered holding costs and are typically deductible upfront.

Other Tax Deductible Property Expenses

These can include:

• bank charges
• borrowing expenses
• council rates
• land tax
• phone
• stationery and postage
• water charges

Expenses that are not Tax Deductible

Owners cannot claim tax deductions on the following expenses:

• Costs related to the personal use of the rental property
• Utility bills such as water or electricity paid by the tenant
• Borrowing costs associated with borrowing against the equity in the investment property for private use
• Costs associated with the acquisition or sale of the investment property, including conveyancing and advertising fees and stamp duty

The information provided above is general and is merely a guide.  Conduct further research and seek professional advice from PJS Accountants who will help you make an informed decision for your investment property.

Top 5 Fringe Benefits Tax Decoded!

Fringe Benefits Tax (FBT) is available to guarantee that employees are not getting income disguised in other methods and to deter income tax avoidance. The array of fringe benefits is vast and when it comes to taxation, each has its own rules for not only when there is a benefit but also how it should be valued. We will help you clarify your doubts regarding these matters so you may be able to identify the myths and the truths behind FBT that every employer and employee should be aware of.

Company Vehicles

Fiction: FBT doesn’t apply on company cars.

Fact: FBT only applies when an employee begins taking the company car home, drive it to and from work, use it on weekends, or mostly take it for personal use. FBT also applies even if the company car stays in the garage of the employee and doesn’t actually use it. If the business address is similar as your work place, FBT will most likely apply.

When travelling for personal or private purposes, FBT also usually applies. Same goes with employees travelling to and from work with road tolls paid by the company.

The ATO has also been trying to find out the use of luxury vehicles within the company where FBT has not been stated. We assume they have been trying to identify these high value vehicles with their new date matching program that they have lately announced and updated.

Directors

Fiction: FBT isn’t relevant to directors who are also shareholders.

Fact: If you are a director and conduct your business through a company or a trust, chances are you may be an employee of that specific company or trust. In this situation, you will need to account for and pay FBT on any fringe benefits you provide to yourself since the same rules will apply to you as if you are an employee even though you own the company.

FBT applies when you drive a company car or when one is provided to you. The same goes with associates of Directors who pick up expenses for their immediate family or relatives, or they themselves and their families purchase discounted goods and services from the business or company.

In certain cases you may reason out that you got a benefit in your role as a shareholder and not as a director. While FBT may not be applied, you will be faced with another set of rules that will tax you personally based on the benefit you received.

Staff Benefits

Fiction: You don’t pay FBT with salary packaging.

Fact: Salary is not subject to FBT, but health insurance and personal health care packaged into an employee’s salary can attract FBT. These additional benefits are even true in industries where an employee must undergo medical examinations. Apparently, anything with a value of $300 or more is more likely to incur FBT. Nevertheless, there are a few exceptions.

Private schools that give discounts to teachers on their children’s school tuition and fees or retailers that provide employee discounts have traditionally been entitled to more beneficial FBT. These are companies that offer salary packaged in-house fringe benefits, which can include discounted goods and services that are also offered to their customers. However, the Federal Budget plans to scrap the FBT concessions that apply to these benefits. Under the proposed changes, FBT will be applied on salary sacrificed in-house fringe benefits based on the full value of the products or services starting 22 October 2012.

Loans

Fiction: FBT doesn’t apply to advances and loans offered to employees.

Fact: For instance, an employee has been overpaid by a lot of money due to an administrative error and he or she cannot afford to repay the total amount all at once. Thus, a repayment plan is drawn up. Since it wasn’t the employee’s fault and it is not fair, no interest would be charged. The overpayment would be considered a loan by the ATO. FBT would apply immediately since no interest was charged and it would be considered a loan by the ATO. The FBT would apply because no interest is being charged. Loans must have an interest rate of at least the ATO’s published interest rate for 2015/2016, which is 5.65%.

However, the most usual scenario is the company loaning money to shareholders. This is when the business owner or their associate (such as a spouse) need cash and the money is taken out from the business. These loans are treated in two ways. If the loan is granted to the person in his/her capacity as a company shareholders, there are typically no carry over tax issues provided the loan is fully paid up before the company files its tax documents for the year. But FBT can apply on these loans if they are granted to the business owner in their capacity as an employee even if the they were paid up by the end of the financial year.

Another issue is when repayment is not needed for the loans. FBT can be trigger if the employer decides to forgive the loan.

Meals

Fiction: Meals offered to employees are not covered by FBT.

Fact: There are many situations where the food and drink provided to employees is not subject to FBT, but there are exceptions when FBT would apply.

Food and drinks consumed in a party or any social occasion are generally subject to FBT. The exemption to this rule is when a meal is consumed by an employee while travelling for business purposes or a working lunch in the office. In a similar way, Christmas parties or any other special occasion that is celebrated can be exempt from FBT if the cost per person for food and drink is under $300.

GST credits can be declared and the costs are naturally deductible if the advantage of having food and drink is being subject to FBT. Although it is not deductible to the company if food and drink gives rise to entertainment that is not subject to FBT.

Having food and drink be subjected to FBT is good in a way because the costs are usually deductible and GST credits can be claimed. The business cannot claim a deduction on food and drink consumed for entertainment but is not subject to FBT.

Ensure that your business doesn’t get entangled with rules and regulations relating to tax. Hire a professional chartered accountant to manage your tax affairs. PJS Accountants has various clients across the Redlands, including large companies, SMEs, family businesses and individuals. For more information about our services, contact PJS Accountants.