In this tax update:-
- Work related expense claims under scrutiny
- ATO guidance on work-related travel expense deductions
- Small business asset write offs
- Tax debts – setting up a payment plan
Work-related expense claims
Will you claim work-related expenses on your tax return this year? The ATO now uses real-time data to compare people’s tax returns with others in similar occupations and income brackets. This year it’s focused on identifying higher-than-expected claims for expenses related to work vehicles, travel, internet and mobile phones, and self-education, and may even check people’s work deduction claims with their employers.
The ATO is also concerned about people’s many incorrect claims for work-related clothing and laundry expenses. In 2014–2015, around 6.3 million people made claims against clothing expenses, but work-related deductions are in fact only available for specific uniforms and protective clothing items, not for everyday clothes you buy, launder and wear for work.
TIP: Ever heard that you can make a standard claim of $300 for work-related expenses even if you don’t have evidence? This isn’t true! The ATO doesn’t ask for receipts up front for claims up to $300, but you must have actually spent what you claim, and be able to show how you worked out your deductions if the ATO asks.
Employee travel expense deductions
The ATO has also released new guidance on work-related travel deductions. To claim for transport or other employee travel expenses (like accommodation and meals) in your tax return, you must have incurred the expenses as part of gaining or producing your taxable income. Private and domestic travel expenses, including the costs of your ordinary home-to-work travel, aren’t claimable.
Transport costs for work-related travel may be deductible, but the ATO will consider factors such as:
- whether the travel is a necessary part of performing your work (you can’t pretend your family holiday’s a work trip);
- whether your employer pays you to undertake the travel; and
- whether you have to follow your employer’s instructions during the travel period.
Accommodation, meal and other incidental expenses are deductible as work-related only if your work has “special demands” or “co-existing work locations” that mean you have to sleep away from home.
Small business Asset write-offs
Small businesses with a turnover of less than $10 million can get an immediate deduction for assets that cost up to $20,000 each in their 2016–2017 return. The $20,000 threshold now applies until 30 June 2018.
Assets that cost $20,000 or more can’t be immediately deducted. They need to be deducted over time using a small business asset pool.
Tip: It’s important to apply all of the simplified depreciation rules correctly so your business doesn’t under-claim for its eligible assets.
Small businesses: Setting Up a Tax Payment Plan
Does your small business have a tax debt? The ATO encourages you to get in touch to set up a payment plan. If the debt is $100,000 or less, you can use the ATO’s self-help service to easily arrange paying by instalments.
If a business pays its tax debt late or by instalments, interest accrues on the unpaid debt. However, some businesses with activity statement debts may be eligible for interest-free payment plans.
To deal with a business tax debt of more than $100,000, you can phone the ATO on 13 11 42.
Tip: Your business still needs to lodge all of its ongoing activity statements and tax returns on time, even if you have a payment plan or can’t pay by the due date.
Warning: Company Directors (even if you have since resigned but were a Director at the time) can become personally liable for any unpaid PAYGW or SGC Superannuation!