Tax Time 2019 will soon be upon us and unfortunately, with the recent and proposed tax changes, there is a lot of information to communicate to you – sorry for the long post. Firstly, it appears that the proposed Morrison Government’s tax cuts (of up to $1,080) promised during the recent election are extremely unlikely to be legislated to take effect prior to 30 June, 2019.
However, the following changes are the ones that are in place and will affect you in this year’s return.
Work Related Expenses
You may recall in the 2018 Budget, the Government provided over $130M to the ATO to target compliance (audit) surrounding work related expense claims, specifically citing Laundry and Motor Vehicle/Travel expenses. This focus has been broadened to include home office, internet and mobile phone/data plans. The ATO now has greater access to personal information and it is not unlikely that they will use this information to determine the accuracy and validity of your expense claims.
- It has always been my practise to claim this on an actual laundry cycles per week basis in direct relationship to your individual occupation and I will continue to do so as this calculation methodology best represents a more accurate reflection of such a claim.
Motor Vehicle/Travel expenses
- The ATO are targeting Motor Vehicle/Travel claims. It is therefore extremely important that taxpayers ensure that they have full documentation with which to substantiate any claim.
- Employees can legitimately claim motor vehicle/travel costs when travelling between two separate workplaces or from a normal workplace to a client site visit and back to your workplace.
- Trips between home and work are NOT claimable irrespective of whether you are on call, travel between work and home more than once a day or called out on an emergency.
- There is only one exception – when carrying Bulky Tools and Equipment – and all three of the following criteria must be met:
- you have to carry bulky tools and equipment you need to use at work; and
- it’s essential to transport the equipment to and from work, not a matter of convenience or personal choice; and
- there is no secure storage area at your workplace.
- As at the date of this email, the cents per kilometre method has increased to 68 cents per kilometre for all vehicles – still capped at 5,000 kilometres.
Home Office, Internet and Mobile Phone/Data Plans
There has been a huge change to the rules surrounding these claims with significant reductions to the amounts claimable.
- You can still claim an allowance for using your Home Office for work related purposes. Please note the number of hours spent doing ‘work from/at home’ in your home office in your diary over a 4 week period. I will compile your claim when I do your return.
- There are special rules for device usage expenses and for device data usage claims. For more information, please click here for a comprehensive guide issued by the ATO. The ATO have provided this guide and will be allowing claims on the basis contained therein. Any claims outside this guide would need to be heavily substantiated.
- Many “work related” stationery items used in your home office can still be claimed – perhaps a quick trip to your local Newsagent or Stationery Shop??
Claiming a personal superannuation contributions deduction
The ATO have changed the rules surrounding personal superannuation contributions and from 1 July, 2017 you may be able to claim a personal super contributions deduction this tax time.
To do so, you will need to:
- make personal (after tax) super contributions directly to your super fund before 30 June 2019 (if you haven’t already contributed this financial year);
- give your Super fund a Notice of intent to claim or vary a deduction for personal super contributions;
- obtain acknowledgement from your Super fund of your notice of intent before we lodge your 2019 tax return.
For more information, please follow this link Claiming-deductions-for-personal-super-contributions/
Increase to the low-income thresholds for the Medicare Levy
The Government introduced an increase to the Medicare levy low-income thresholds to reflect recent movements in the CPI so that low-income taxpayers generally continue to be exempted from paying the Medicare levy. For the 2018/19 years, these are as per below:
|Type of taxpayer||Threshold change|
|Single||From $21,980 to $22,398|
|Family (with no children)||From $37,089 to $37,794|
|Single seniors and pensioners eligible for the Seniors and Pensioners Tax Offset (SAPTO)||From $34,758 to $35,418|
|Family of seniors and pensioners||From $48,385 to $49,304|
|Per dependent child or student||Increase from $3,406 to $3,471|
Accelerated depreciation for small businesses – amendments to amounts and tiers
The amendments to the accelerated depreciation for small businesses mean that there will be three tiers to consider within the 2019 financial year, due to Prime Minister Scott Morrison’s announcement to raise the threshold to $25,000 in January.
The first tier will be the $20,000 threshold for depreciable assets that are acquired before 29 January 2019; the second being the $25,000 threshold for assets first used or installed between 29 January 2019 and 2 April 2019; and the third tier being the $30,000 threshold for assets first used and installed after the 2 April budget announcement and before 1 July 2020.
From 1 July 2020, the threshold reverts to $1,000 for small business entities only.
Contractor Payment Reporting System
The contractor payment reporting system has now been introduced for the following industries:
- Building and construction industry
- Cleaning services
- Courier services
- Security providers and investigation services;
- Road freight transport services; and
- IT and Computer system design and related services
Under the contractor payment reporting system, businesses are required to report payments to contractors to the ATO. Please get in touch with us if you believe this applies to you.
Economy-wide Cash Payment Limit
From 1 July 2019, the Government proposes to introduce a limit of $10,000 for cash payments made to businesses for goods and services. This measure will require transactions over the threshold to be made through an electronic payment system or cheque. As at the date of this email, there was still uncertainty surrounding this issue and we were unable to locate a definitive determination in relation to the introduction of this measure.
There still remains an increased responsibility placed on me as your Tax Agent in certain reporting areas regarding your spouse and your family situation.
I must complete and cross reference Income details of your Spouse including certain Superannuation details, Pension information, Rental Property, Child Support and Foreign Income information. Whilst this information is automatically cross referenced into each return if I am the Agent for both parties, if your Spouse does not complete their tax return through me, you will need to bring these details in with you when we meet to complete your tax return.
The ATO is seeking this information to calculate your entitlement to certain offsets or government concessions and will use this information to work out whether you need to pay tax or the Medicare levy surcharge.
Private Health Funds – Tax Rebate based on income level:
Your entitlement to the rebate will depend on your level of income. This income threshold has stayed the same for the 2019 year.
You will receive a statement from your private health insurer, which is required to complete your tax return. Please bring this statement with you when you meet with me to prepare your tax return.
Medicare Levy Surcharge – If you DON’T have qualifying Hospital Cover:
The Medicare levy surcharge has remained unchanged.
- 1% Medicare Levy Surcharge applies from $90,001/$180,001.
- 1.25% from $105,001/$210,001; and
- 1.5% above $140,000/$280,000.
Net Medical Expense – Tax Offset
- This offset is now only available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019.
Other matters to consider are as follows:
- Give some thought to purchasing Business supplies, stationery items, an extra Ink cartridge etc., before 30 June.
- The “simpler” depreciation rules surrounding small business assets and new motor vehicles still apply.
- Small gifts for clients and/or key business contacts can be claimed. Keep each under $100.
- Also – please forward your BAS spreadsheets ASAP after 21 July.
- Whilst I can more often than not obtain your bank interest information, for my early lodgers especially (mid July to late August) it is best if you obtain this from your internet banking and bring this with you. Please locate ALL Interest received on ALL Bank Accounts – the ATO now receives this information from all Financial Institutions.
- Give some thought to perhaps making that long overdue donation before 30 June. Donations made before 30 June can be claimed this year and as these generally result in a tax refund to you, this can be “returned” to you in your Tax refund shortly after lodging your return, otherwise you will have to wait another 12 months or more for the refund.
- Perhaps that last minute dry cleaning of your work uniform/protective clothing. Please ensure the Dry Cleaner notes the receipt as “Work Clothes”.
- If you are not sure, please ask but nevertheless, KEEP ALL YOUR RECEIPTS!!!
Bronwen is still with me and an integral part of my business. She is most particular about the accuracy of your returns and is the reason why your returns are processed quickly and efficiently. Bronwen shares my attention to detail and between us, we are able to keep up-to-date with the many administrative, policy and software changes to the various Accounting, Business and Taxation systems.
I do appreciate your continued business and welcome you as an ongoing client.
In the past, the ATO has been slow at updating individuals’ tax reports. As such, I suggest you make appointments to complete your 2019 tax returns on and from say, 23 July, 2019. Please feel free to contact Bronwen or myself during normal business hours – Tuesday to Friday – and I look forward to seeing you all shortly.