The ATO has enforced strict guidelines on tax deductions for rental property owner’s travel expenses.
As a rental property owner, you are not able to claim deductions for travel expenses relating to inspecting, maintaining or collecting rent. If you have already claimed a tax deduction for the cost of travel to and from your property in your 2018 return, you will need to request an amendment. The law change came into effect on 1 July 2017 and affects tax returns from 2017-18 onwards.
You may claim these travel expenses on your tax return if you are carrying on a rental property business or are an excluded entity.
An excluded entity is a:
Corporate tax entity
Superannuation plan that is not an SMSF
Public unit trust
Managed investment trust
A unit trust or a partnership, all of the members of which are entities of a type listed above
The Australian Tax Office (ATO) has released draft guidelines changing its previous stance on Fringe Benefits Tax (FBT) for utes. Amendments originated from reports that dodgy tax returns were responsible for a loss of $8.7 billion in income tax due to wrongful claims. Failure to comply with the new requirements listed below may result in a 20 percent FBT imposed on the cost of the vehicle.
The requirement of a logbook
New rules require employers to ensure their workers using these vehicles keep detailed logbooks. Whether the logbooks are the electronic or hard copy, it is vital that the process be effective for returns lodged in the 2019 FBT year, when the law takes effect. Employers receive confirmation via email from employees using the vehicles at the end of the 2019 FBT year with their logbook including all regulated diversions and private use.
Diversions and private use rules
The guidelines introduce capped limits for the log books to comply with. Professional travel means that the vehicle must not deviate more than 2km from its usual route. However, 1000 km of non-work related travel is allowed, provided that there is no single trip exceeding 200 km. Such regulations provide greater flexibility than previous guidelines. What the ATO deems “minor” or “irregular trips” like carpooling the children to and from school or an occasional trip to visit relatives will not render you non-compliant so long as it is recorded as non-professional use.
The Tax Office has released further findings that reveal cash-only businesses could be missing out on a significant chunk of revenue simply by not offering customers the option of electronic payment.
An ‘inconvenience’ was the most popular word consumers surveyed in the study used to describe when a business does not provide the option to pay via card.
Cash-only may also be having a direct effect on the business’s reputation. The results determined that Australian customers are twice as likely to perceive ‘cash-only’ as negative rather than positive – with many respondents questioning whether the business is honest and paying less tax (regardless of whether this may be fact or fiction).
While change may be difficult, cash-only businesses might like to consider the benefits that exist with no longer operating in cash. For instance, electronic tap-and-go payments take less time and cost around 9 cents less than payments made in cash.
By providing electronic payment only, a business can find it easier to keep more accurate record-keeping as well as help them to meet their tax and super obligations.
Employers are being reminded by the Australian Tax Office (ATO) not to forget that along with permanent residents; temporary residents are also entitled to super guarantee (SG).
In most cases, an employer will be required to pay SG on top of their employee’s wages (temporary residents included) if they pay them $450.00 or more before tax in a calendar month.
Providing the temporary resident has met all the requirements, they can submit their claim for the super that their employer has paid as a ‘department Australian superannuation payment’ (DASP) once they have left Australia.
The ATO is encouraging employers to notify their temporary resident workers of the DASP application as it will be easier for these individuals to get the required supporting documents certified in Australia and then lodge once they have left the country.
The Tax Office has confirmed the rate for work-related car expenses will rise to 68 cents per kilometre for the income year beginning 1 July 2018.
The new rate will affect those eligible individuals who elect the cents per kilometre method when calculating the income tax deductions for their work-related car expenses for the 2018-19 income year. This rate also applies to the following income years until the Commissioner of Taxation deems it should be varied (these rates are reviewed each year).
Taxpayers working out their car expenses for the 2015-16 year, 2016-17 year and the 2017-18 year should remember that the previous rate of 66 cents per kilometre still applies to their calculations.
When selecting the cents per kilometre method, eligible individuals:
- are not required to supply the ATO with written evidence of how many kilometres they have travelled;
- may need to show how they worked out their business kilometres calculations;
- cannot claim more than 5,000 business kilometres per car;
- and cannot make a separate claim for depreciation of the car’s value.
It is also important to note that the amount will take into account all the vehicle running expenses.
The Tax Office has flagged work-related car expenses as a concern this tax time.
The ATO is targeting those who make mistakes or deliberately lodge false claims. Examples include:
- Claiming things they are not entitled to, i.e., private trips such as work to home travel
- Making claims for trips that did not occur
- Claiming expenses that their employer has already reimbursed them for.
Advancements in data-matching technology allow the ATO to match individuals with peers in similar occupations, earning similar amounts of income. Analytics is also used to identify claim patterns, i.e., over 800,000 people claimed exactly 5,000kilometres under the cents per kilometre method last year.
The best way to avoid making a mistake include:
- only making a car claim if you paid for the expense yourself and were not reimbursed;
- it was directly related to earning your income; and,
- you must have a record to support the claim.
An example of a legitimate car claim is travelling between work sites or between jobs as part of your job.
Before you submit a car claim, consider if your employer would agree you needed to undertake the trips as part of your job. Employers may be contacted if your claim raises a red flag.
Federal Budget 2017: How much the Medicare levy increase will cost you
One of the most expensive measures announced by the government in last night’s budget was its commitment to fully fund the National Disability Insurance Scheme until 2020.
This doesn’t exactly come cheap.
Before Morrison announced he would increase the Medicare Levy by 0.5 percent – from 2 percent to 2.5 percent – there was a gaping $55.7 billion funding shortfall for the scheme.
So what is the levy, and how much will it cost you?
Under the government’s new plan (if it passes through the senate) the Medicare levy will increase to 2.5 percent on July 1, 2019.
The only people who won’t have to pay are singles earning $21,655 or less, and families earning $36,541 or less.
You can check how much you’re currently paying under the 2 percent Medicare Levy at the ATO’s online calculator.
But just because the government has laid out these plans does not automatically make them gospel – under Morrison the measures have been moved to be legislated, which means they’ll still be debated in parliament.
And that just may prove to be the toughest sell yet, as many pollies have already come out against the Medicare Levy increase.
“I think they need to start that maybe in the mid-$30,000 mark – I think starting around that $22,000 is too low,” Crossbrench senator Jacqui Lambie told Sky News today.
“These guys are (earning) just over what welfare recipients receive. I am concerned about that and I believe Labor is concerned about that as well.”
Greens leader Richard Di Natale said the income threshold should be lifted, but he had wider concerns about the need for extra taxes on low-income earners.
“Why are you giving a tax break to someone on a million bucks but increasing taxes if you are on $22,000 a year?” he told reporters in Canberra.
“We will be talking to the government about how they can make that reform fairer.”