Top 5 tax tips – Businesses and Individuals for 2016

With the end of financial year fastly approaching it’s a good time to discuss tax planning and tax deductions.

OUR TOP 5 BUSINESS TAX TIPS FOR 2016:

Get your business tax ready with our top 5 Tax Tips for 2016.

Tax Planning1: Use your instant asset write off – for small businesses 

  • An instant write off is available for any business assets you purchase at a cost of less than $20,000, GST included.
  • Your purchase of an eligible asset by 30 June 2016 will give rise to a full $20,000 deduction in the 2016 year. This threshold will revert to $1,000 from 1 July 2017.
  • Small businesses qualify for the write off if their business has an annual turnover of less than $2 million (proposed to increase to $10m from 1 July 2016)

2: Check your super contributions

  • If your employee super contributions are paid and cleared by the bank by 30 June you can claim a tax deduction in 2016.
  • Ensure your accounting software is set to apply the correct super rate of 9.5% for the 2016 year.

3: Write off bad debts

  • Bad debts must be written off through your accounting software before 30 June.
  • In order to qualify for a tax deduction, the debt must be bad, not merely doubtful. This bad debt must also have been included in assessable income.
  • If not processed through your accounting software, written evidence must be put in place before the end of the financial year.

4: Record your motor vehicle expenses

  • Ensure all logbooks and travel diaries related to business travel are up to date to substantiate any related expense deductions.
  • An odometer reading should be taken on 30 June each year to calculate kilometres travelled. Maintaining your logbook will help maximise the deduction you can claim. If your logbook is more than 5 years old you will need a new one for a continuous 12-week period. The start date for the 12-week period must be on or before 30 June 2016.
  • Non-logbook methods of calculating motor vehicle expenses were removed from 1 July 2015. The only option, if you do not have a logbook, is to claim a work related deduction based on kilometres travelled up to a maximum of 5,000 km’s at $0.66/km.

5: Check your stock and asset listing

  • Completing a stock-take before the end of the financial year helps ensure your 2016 profit is accurately recorded.
  • Obsolete stock can be scrapped, reducing your tax liability by reducing your profit.
  • This is also an opportunity to review your latest fixed asset depreciation schedule. Writing off equipment that is no longer in use will help increase your tax deductions.

OUR TOP 5 PERSONAL TAX TIPS FOR 2016:

With the end of the financial year fast approaching it’s a good time to discuss tax deductions – Tax deductions people can claim, but either forget or don’t know about.

1: Work related car deductions

  • People who use their personal car for work-related reasons, (apart from driving to and from work) can normally claim fuel and maintenance costs as a tax deduction. As of 2016, these claiming methods have changed – you can either use a 12 week logbook (which once completed is valid for for 5 years) or the cents per kilometre method.
  • The ATO defines work-related kilometres as kilometres travelled in your car while you are earning your income. You must be the owner of the car and your travel must be part of your working day – e.g driving between offices, special trips to the bank/post office or moving from one job site to another. You cannot claim trips between work and home unless you’re carrying heavy equipment for work, or transporting heavy tools required to do your job.
  • Depending on your personal circumstances, either a logbook or the cents per kilometre may be a better method for you. If you’re unsure which to use, please contact us for more information on which would be the best method for you personally.

2: Home office deductions

  • Have you ever found yourself working from home? How about checking over and responding to your work emails in the evening or on the weekend? If this is you, then you may be able to claim the cost of using your personal computer as a tax deduction.  The ATO allows employees who work from home occasionally to claim part of their home office expenses.
  •  If you work entirely from home (either self-employed or as a home-based employee) you can claim the ”occupancy cost” of your home office space as a tax deduction. These expenses can include software, equipment, furniture and a percentage of your rent/mortgage and electricity.

3: Cost of managing your tax affairs/income protection insurance

  • Did you use Moss Financial Solutions or another tax agent to prepare and lodge your tax return last year? If you did, then you can claim the amount you paid last year – on this year’s return. The fees you pay for tax return help are always tax deductible.
  • Income protection insurance is also tax deductible to the extent that the insurance premium paid is attributable to your income earned.

How do I qualify for an income protection tax deduction?

The ATO allows you to claim a deduction for the costs of your premiums for income protection, if the policy is held outside of your super fund. Generally, you can only claim expenses as a tax deduction that are incurred in the generation of their assessable income and are not of a capital, private or domestic nature. Other insurances, ones that are designed to pay a benefit for physical injury, death, or accidents, are not generally tax deductible. These non-tax deductible policies generally include:

  • Life insurance
  • Trauma Insurance
  • TPD insurance.

Now is the perfect time to review your current Insurances. Call us today to help you with reviewing your personal insurances.

4: Membership/Union fees

  • Are you part of a union or about a professional membership body related to your work? If you pay work-related union or professional membership fees you can claim the total cost of these fees.

5: Mobile phone expenses

  • Using your personal phone to make and take work related calls?  Are you sometimes required to call clients or other staff members on your personal mobile phone?
  •  If this is you, then you can claim these cost of these calls as a deduction on your tax return.
  • Remember, you can only claim the cost of your work related calls, not your entire phone bill. It’s a good idea to keep a logbook or record (for at least one month) of when you use your personal phone, to determine the average percentage of your calls that are work-related.

Example:

Arthur pays $69 per month for his mobile phone plan. He estimates that 70% of his monthly phone calls are work related. Therefore:

  • 70% of $69 = $48.30 per month
  • $48.30 x 12 = $580 per year

Arthur can claim $580 on his tax return as a deduction for mobile phone expenses.

Is it really worth the hassle/what do I really get out of it?

  • Some of these items may seem small but when added together they could save you a hefty amount of money. If we used just the example we listed in item 5 we would have almost $580 of extra deductions to add to a tax return. For someone earning $60,000 per year this could see an increase in their tax refund by $174!

To take the stress out of your taxes please contact us today.

 

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Categories: Business, Checklists, Income Tax, Insurance, Superannuation, Tax Planning