There have been a number of strange items over the years which people have successfully claimed as tax deductions, including sex toys, X-Box consoles, dogs and pedicures. Most of us would probably have a hard time justifying these as work related to the tax office. There are however a few things you may not have thought about which you might be eligible to claim. Financial Dynamics director and chartered accountant Shane Tagg discusses a few.
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With just weeks to go until the end of the financial year, there’s limited time left to get your money matters in order for the Australian Tax Office, but there are still some last minute strategies available. In addition to this, there were also many further deductions and tax saving strategies which could be carried out after June 30 to bring some financial relief.
If you carry items to and from work you might be able to claim a deduction on your handbag – but Mr Tagg warned you need to be able to prove a connection between its use and work requirements. “For example, carrying your lunch … will not be sufficient,” he said. Also if you were thinking about a designer tote – think again. “[It] may be seen as an unnecessary private expense and could be challenged.”
“In past years, the motor vehicle cents per kilometre rate was determined by the size of your car’s engine,” Mr Tagg said. “For 2016 the ATO has lowered the rate and there is now just one fixed rate of 66 cents per kilometre for all cars regardless of engine size. This will reduce the amount that some people can claim as a deduction so using a logbook may work better for you.”
You will always be out of pocket by chasing tax deductions.
- Financial Dynamics director and chartered accountant Shane Tagg.
Owners of investment properties could be paying less tax by getting a quantity surveyors report. “If eligible, this one-off cost can help maximise property deductions through access to two separate ATO claimable components: Capital Works Allowance under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) and Plant and Equipment depreciation under Division 40 of the ITAA 1997,” Mr Tagg said. The report can be done after June 30 and if it’s done right might allow your previous two tax returns to be amended retrospectively to increase your lost deductions, he said.
“Another post June 30 saving strategy for those who have completed a university degree after June 30, 2008, prior years’ claims can still be lodged but you will need to act quickly,” Mr Tagg said. “Was your degree in mathematics, science, statistics, education, nursing or midwifery? Then you may be entitled to the HECS Help Benefit which will provide a taxation saving for those with compulsory HELP debt repayment of up to $1918.39 in the 2016 financial year.” For degrees completed before this time, claims need to be made before June 30, 2016.
Changes revealed in the May Budget to pre-tax or concessional contribution caps mean the caps may fall to $25,000 from July 1, 2017. “Those with disposable income or salary sacrificing to build retirement funds may want to maximise their superannuation deduction because of the current higher thresholds this year, particularly given the potential tax saving and the announced budget changes,” Mr Tagg said.
He also advised against getting carried away with purchases. “Don't fall for the trap of buying an item just for the tax deduction; make the work related purchase if you need the item,” he said. “You will always be out of pocket by chasing tax deductions.”
There are also some tax updates for small businesses. “Small businesses have now been given the opportunity to restructure without incurring an income tax liability,” Mr Tagg said. “The small business restructure rollover allows small businesses to transfer active assets from one entity to one or more other entities on or after July 1, 2016. This may allow some critical planning opportunities to enter a structure which is more appropriate, provides taxation relief and asset protection.”
Small businesses account for much of the Shoalhaven’s workforce and have access to a number of financial programs that can help their business grow and employ more people, Mr Tagg said. “We have recently been working with several local business to help them access small business grants to improve their operations. If you are in small business this is a great time to review your grant and funding opportunities,” he said.
