End-of-year tax tips

With the end of the financial year fast approaching, CPA Australia has released a series of hot tips to assist employees, small businesses and landlords.

CPA Australia’s head of policy, Paul Drum says as we get closer to year end, there are a range of issues employees and small business owners should be considering that may save them tax.

“There have been a number of tax and super changes this financial year with even more to come into effect from 1 July 2017. Making sure you are aware of these changes and having the latest information is an important part of your decision making process.”

“The ATO has a range of products that can assist you in the preparation and lodgment of your tax return, but we would encourage people to see a CPA-registered tax agent to talk about your specific circumstances and to ensure you claim everything you are lawfully entitled to claim,” he said.

Small business tax tips

  • In 2017 there has been an important uplift in one of the small business thresholds. As a result, certain small businesses with a turnover of less than $10 million may now be eligible for a range of tax benefits including being able to immediately write off the value of assets costing less than $20,000, as well as the new 27.5 per cent company tax rate, simplified depreciation, restructure rollover relief, and accounting on a cash basis.
  • Don’t forget that professional expenses incurred in commencing a new business, such as legal and accounting fees, are now deductible in the year incurred.
    The end of the financial year often sees the emergence of investment products that claim to be tax effective. If you are considering such an investment, seek independent advice before making a decision.
  • If you’re a primary producer then you should be considering the tax planning opportunities that farm management deposits can provide, particularly as in 2017 the cap on deposits per person has been increased from $400,000 to $800,000.
  • There have also been some potentially beneficial changes to the income averaging arrangements that allow primary producers to opt back in under certain circumstances.
  • The reduction in the company tax rate from 1 July 2016 for many small companies may mean some companies could have over-franked dividends declared during the year. We suggest you consult the
  • ATO’s draft PGC 2017/D17 for a more complete explanation of this business risk and what to do if this impacts you.
  • Over 95 per cent of all businesses seek professional advice from a registered tax agent – if you don’t already, make sure your business is one of them this tax-time.

To find out more, speak to a CPA-registered tax agent about your specific circumstances.

Employee tax tips

  • You may wish to consider making the maximum allowed concessional superannuation contribution before year end. The concessional contributions cap for the 2016-17 financial year are $30,000 for the under 50s, and $35,000 if you’re aged 50 or over. Note that a reduced $25,000 cap regardless of your age applies from 1 July 2017 and beyond so it’s best you seek professional advice about your options and choices before year end.
  • Claiming all your work-related deduction entitlements may save you considerable tax. Typical work-related expenses include employment-related telephone, mobile phone, internet usage, computer repairs, union fees and professional subscriptions. Claim only what you are legally entitled to claim, and ensure that you have all necessary receipts or credit card statements to back-up your claims. Note also that the ATO may contact your employer to verify such claims and if you use MyTax the ATO will be checking your claims in real-time.
  • When part of your home has been set aside primarily or exclusively for the purpose of doing work, a home office deduction may be allowable. Typical home office costs include heating, cooling, lighting costs, and even depreciation of your office equipment. To claim the deduction, you must have kept a diary of the hours you worked at home for at least four weeks.
  • Self-education expenses can be claimed provided the study is directly related to either maintaining or improving your current occupational skills or it is likely to increase your income from your current employment. If you obtain new qualifications in a different field through study, the expenses incurred are not tax deductible. Typical self-education expenses include course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers, tablets and printers.
  • Immediate deductions can be claimed for assets that cost under $300 to the extent the asset is used for an income producing purpose. Such assets may include tools for tradespeople, calculators, briefcases, computer equipment and technical books purchased by an employee, or minor items of plant purchased by a landlord.
  • Assets costing $300 or more that are used for an income producing purpose can be written off over a period of time as a tax deduction. The amount of the tax deduction is typically determined by the asset’s value, its effective life and the extent to which you use it for income producing purposes.
  • If you use your motor vehicle for work-related travel, there are now only two choices for how you can claim work related travel. If your annual claim for kilometres travelled does not exceed 5,000 kilometres, you can claim a deduction for your vehicle expenses on the cents-per-kilometre basis. The allowable rate for such claims changes annually so you need to obtain 2017’s rate from the ATO or your CPA Australia-registered tax agent. Such claims must be based on reasonable estimates.
  • Taxpayers should check their eligibility for tax offsets which include, amongst others, the low-income tax offset, senior Australians and pensioners offset and the offset for superannuation contributions on behalf of a low-income spouse.

Landlords and rental properties

With the financial year-end fast approaching, and with changes in the laws applicable to landlords and rental properties announced in the federal budget, it’s very timely to revisit what you can actually claim.

For example, this could be the last year that a landlord will be able to claim for travel expenses relating to inspecting, maintaining, or collecting rent for a rental property – if the recent government-announced change becomes law.

Further, the government has also announced that from 1 July 2017, plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties.

Also plant and equipment forming part of residential investment properties as of 9 May 2017 will only continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.

These changes will impact landlords’ claims for depreciation on items such as stoves, range hoods, flat screen TVs, carpets, solar heating and hot-water systems, and capital works deductions for structural improvements, like re-modelling a bathroom or a kitchen.

If you have a property that is rented out or is available for rent during the 2016-2017 year typical immediate deductions claims would include:

  • property listing fees
  • Wi-Fi connections
  • council rates and water rates
  • body corporate charges
  • insurance
  • repairs and maintenance
  • interest on investment loans
  • land tax
  • agent’s commission
  • gardening, lawn mowing
  • pest control
  • leases (preparation, registration and stamp duty), and
  • reasonable travel to inspect properties.

You should contact your CPA Australia-registered tax agent to clarify if your expenditure is repairs and maintenance and can be claimed immediately or improvements, which can be claimed over time.

To find out more, speak to a CPA-registered tax agent about your specific circumstances.

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