Q & A – WHAT AM I ENTITLED TO CLAIM?

As 30 June is almost here it is time to get your information ready for your tax return. The ATO is constantly improving their systems so it is as important as ever that you are only claiming what you are entitled to. 

What Am I Entitled to Claim? 

To claim a work-related deduction, it needs to meet three criteria: 

1. You must have spent the money yourself 
2. It must be directly related to earning income 
3. You must have a record to prove it 

If your employer reimburses you for expenses incurred, then the expense is not deductible in your own personal return. 

If the expense incurred related to both work and private use, then only the work-related portion of the expense is allowed as a deduction. 

When reporting your deductions, ensure you advise the total expense incurred and the business use portion it relates to, e.g. ‘Mobile phone at $100 a month, 50% business use’. This means only $600 will be an allowed deduction, providing you calculated the business use percentage reasonably. 

Can I Claim Deductions for Working from Home? 

If you work from home then various running costs, such as electricity, gas, internet, decline in value of plant and equipment or furniture and fittings such as computers, chairs, carpets, costs of repairs and maintenance and cleaning are allowed as deductions. Again, you will need to calculate the business use percentage. 

How Do I Calculate the Business Use Percentage on Home Office Claims? 

A common method is calculating based off the floor area. If the room used for the home office is 20% of the total area of your home, then up to 20% of your running costs can be claimed.

If no specific room is used, you can use your own method which must meet two conditions: 

1.  It is considered a reasonable claim 
2. You have shown to exclude the private portion associated with your expenses 

Other Acceptable Methods 

Keeping a diary for a 4-week period each financial year to work out a pattern of use for your home work area. If no pattern is established, you must keep a diary record for every time you use the area and for what purpose. 

Or  

You can claim 45 cents per hour instead of calculating the actual expense incurred. This method allows you to claim for certain running costs including heating, cooling, lighting and furniture depreciation. This means you will need to separately calculate other home office expenses such as phone, internet and decline in value on computer equipment. 

For phone expenses, if a landline is used exclusively for business, then you can claim a deduction for all business calls and part of the rental costs. This does not include the installation costs of the landline. If a phone is used for both business and private calls, you must calculate the usage by: 

Number of business calls made and received / total number of calls made and received. 

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Q & A: How long do I really have to keep my tax records for?

How long do I really have to keep my tax records for?

The ATO relies on a self-assessing system, meaning that you the tax payer (and GeersSullivan your tax agent) are responsible for working out what is and what isn’t to be claimed in your tax return. Unfortunately, it’s against the income assessment act to claim all of your deductions and declare no income, as nice as that would be. The ATO requires you to keep evidence of the items you claim so that they can be double-checked if required. The depth of these records will vary from person to person depending on the items you are claiming. The income you declare and the deductions you can claim you can leave up to us at GS, but holding the records is your responsibility. Year on year this pile of paper work can really begin to pile up, so how long do you really have to keep hold of these records?

Why are these records so important?

Effective record keeping protects you from issues with the ATO and can save you money in the process. These records enable you to claim your full entitlements from the tax office and keep costs down when we are preparing your tax return. The more organized your records, the fewer hours we need to spend and the smaller your bill! These records are also essential to resolving any disputes with the ATO, ensuring you receive your full entitlement and are not subject to any penalties.

Is there a magic number?

In most cases yes there is! The generally accepted time to keep written evidence is 5 years from the date the tax return was lodged. This can however vary based on the item in your tax return, more on this later though.

What does a record need to show?

A receipt or invoice that you keep, to be accepted as substantiation by the ATO needs to show the following items:

• name of supplier/payer
• ABN of the supplier
• amount of the expense/purchase and
• date of the occurrence

What records do I need to keep?

You should keep any records which fall into the following categories:

• payments you receive,
• expenses related to earning your income,
• information pertaining to the purchase or sale of an asset (e.g. shares, rental properties or collectables),
• charitable contributions, and
• any disability, attendant or aged care services.

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