A new tax year has arrived and with it comes more rules and changes. After July 15th, 2022, most finalisations of STP will be through to the ATO and this will allow tax agents to process your tax returns.
Get your data ready for any expenses that you have incurred that relate to your employment.
In summary and the issues that I will discuss in this post include
Individuals
Rental properties
Capital Gains Tax
Individuals
Work Related Clothing, laundry and dry cleaning expenses can be claimed only if they are for
occupation specific clothing
protective clothing
compulsory uniforms
non-compulsory uniforms registered with the Ausindustry TCF Corporatewear Register
The cost of buying, hiring, cleaning or repairing conventional clothing is not deductible.
N.B. Written evidence is required for laundry expenses greater than $150
Work Related Car Expenses
Generally, expenses relating to travel from home to work are not deductible. However expenses of travel to multiple work locations other than your primary work locations, are deductible. i.e. your home has become the base of operations. This may be because of COVID, or your mode of operation has changed. The claim is usually calculated at 72 cents per kilometer, less any allowance paid to you by your employer.
So keep a record of all business related travel. You will need this to substantiate your claim. Please see the guidelines published on Taxme previously.
Working from home expenses (WFH)
If your employer has given you an option or mandate to work from home, then working from home expenses are deductible less any alloewance provided by your employer.
There are 3 methods available to calculate these expenses. The fixed method which is 52 cents per hour. This covers decline in value of home office furniture, electricity, heating, cooling and lighting, and cleaning costs. Additional claims for operational items can be added to the 52 cents per hour. e.g. printing, phones, supplies.
The shortcut method, which finishes in 2022, is 80 cents per hour, but you cannot claim any other costs as in the fixed rate method.
The last method is actual cost. This is where you calculate the office space area used as a dedicated home office and pro rata all costs of maintaining this space. This includes interest on borrowings. I dont recommend this method because of the possible Capital Gains Tax payable on the sale of the property. You should speak with your accountant before you claim WFH expenses using the actual cost method.
$300 work related expenses substantiation
Where work related expenses (excluding car, travel and overtime meal allowances) total less than $300, written evidence is not required.
Remember that you must incur the expense to claim deductibility, you must be able to show that the expense was related to your work income, and that it has not been reimbursed by your employer.
Covid Tests (R.A.T.)
RAT’s and face masks are deductible if they were purchased to verify your eligibility to attend work, or to protect yourself at work (most were).
So keep or retrieve records of money spent of R.A.T.’s and face masks.
Non- commercial losses
Generally, you cannot offset losses from a hobby or business activity, against your employment income. These losses can be ‘quarantined’ and carried forward to future years. If the business becomes profitable and that business meets commercial guidelines as outlined by the ATO, then all quarantined losses accumulated to date, can be offset against employment or other assessable income.
So keep track of the income and expenses each year for all business activities that may become viable commercial businesses.
There are rules, so check with your accountant where necessary.
Election Expenses
Contributions to political parties or independants, irrespective of whether they were elected or not, are deductible
Rental properties
For those who have rental properties or intend to aquire a rental property, then here are some of the rules. (please also see previous ‘Taxme’ posts on this subject. The following was provided to me by the Tax Institute in Australia.
Initial Repairs
Cost of repairs to investment properties are generally deductible. However costs incurred to remedy defects, damage or deterioration that existed at the time the property was acquired are considered to be capital in nature and are denied as an immediate deduction. They can however form part of the cost base of the property for CGT purposes.
Travel costs
Generally, travel costs incurred from 1 July 2017 in association with a residential rental property cannot be claimed as a tax deduction. Certain exclusions apply
Vacant land
Generally, the costs of holding vacant land incurred from 1 July 2019 cannot be claimed. Certain exclusions apply.
Assets ≥ $300
Depreciating assets acquired for $300 or more for a rental property are unable to be fully written off in the income year in which they were purchased. Depreciating assets that cost $300 or more are eligible for a deduction for the decline in value for that year.
This means that any item of expense that is $300 or more, must be depreciated over its useful working life, and cannot be totally expensed in the year of purchase.
Capital Gains Tax
Digital assets
Digital assets are subject to the same taxation rules as other traditional investments. Digital assets include cryptocurrency and non-fungible tokens (NFTs). Consider whether:
⚫ the gain on the sale of the digital asset is on revenue or capital account. (The Taxinstitute)
If you have invested in Cryptocurrency, then those investments will be treated for tax purposes like any other investment. If you are considered a trader then a sale would be treated as revenue and assessable income by adjusting opening and closing values to calculate revenue, and adjusted against the costs of operation of a trader business.
Otherwise in the event of the sale of the investment, you will be assessed on the capital gain.
N.B. In most cases an investment in Cryptocurrency is an investment in a personal use asset. i.e. You are not considered a trader. Any gain on sale is a capital gain and assessable. Any realised loss is disregarded. i.e. If you sell at a loss, the loss cannot be claimed in the tax year, but capital losses can be carried forward and offset against capital gains in future years.
You should speak with your accountant regarding the tax nature of crypto investment.
Well thats all for this update.
Good luck with your refunds!
Peter