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 Tax Tips and Frequently Asked Questions for Individuals
Please read our disclaimer before reading any information in this page. We strongly recommend that you consult with Greg Singh & Co if any of the topics covered below apply to your circumstances or if you require more detailed information.
Tax Agents
1. What are the benefits of using a registered tax agent like Greg Singh & Co?
Tax experts - We are very experienced at preparing tax returns because we do it every day. We have undertaken tertiary and post graduate level education in taxation law and we keep abreast of changes in the law on a daily basis. Accordingly, we are more aware of the tax deductions that can be claimed and those that cannot along with the tax offsets that are available and how they are calculated;
ATO Relationship - We deal with the Australian Tax Office (ATO) on a regular basis and have established working relationships with the department that assist us in ensuring our clients' tax affairs are dealt with appropriately and efficiently. We also have priority access to the ATO via their tax agent services department which enable us who deal with any of our client issues as a priority;
Extended Lodgement Deadlines - We have extended lodgement deadlines beyond 31 October each year, which allow us to lodge tax returns up to as late as 15 May of the following year;
Fast Refunds - We are able to process tax refunds faster through the practice lodgement system (PLS) and we can track refunds through the Tax Agents Portal, a secure ATO internet system available only to tax agents. This allows us to know whether a refund is less than estimated, which in turn enables us to call the ATO before it is issued in order to ask questions as to why it is different than first estimated;
Deductible Fees - The fees for our services can be claimed as a tax deduction in the income year in which they are paid;
Value Added Tax Advice - We can provide valuable assistance in other areas such as negative gearing for rental property and share investments, Capital Gains Tax (CGT), Depreciation etc; and
ATO Audit Assistance - In the event of an audit by the ATO we are able to assist with verification of disclosures in tax returns in order to ensure adjustments are minimised and penalties are mitigated where possible.
Tax Returns
2. Does everyone have to lodge an income tax return every year?
The requirement to lodge a tax return is dependent on individual circumstances. In some circumstances individuals do not have to lodge a tax return. Each person's situation differs depending on their age, income and expenses. Seek expert advice from Greg Singh & Co.
3. What needs to be brought to a consultation with Greg Singh & Co in order for a tax return to be prepared?
Various documentation is required in order to properly prepare a tax return. The documentation is dependent on the types of income derived, deductions claimable and offset entitlements. Our checklist included in left panel of this web site provides a good guide as to the types of documentation required in a consultation with Greg Singh & Co in order for us to prepare an individual tax return.
4. Can a tax return be completed if a PAYG Payment Summary is missing?
Yes, a tax return can be completed using any of the following:
- the details on a letter from an employer with the PAYG Payment Summary information on it; or
- by reviewing a pay slip for the last period of the income year; or
- If you are unable to get a copy of your payment summary from your payer you will need to complete an ATO Statutory declaration (NAT 4135). You will need a separate statutory declaration for each missing payment summary.
Employers are required by law to provide employees with a PAYG Payment Summary within 14 days of the end of the income year (i.e. 14 July). If an employee ceases employment part-way through the year, a PAYG Payment Summary must be supplied within 14 days of receiving a written request from the former employee and the request must not be made any later than 21 days before the end of the income year. If a former employee has been receiving Reportable Fringe Benefits and leaves before the end of March, then the 14 day limit may need to be extended.
5. Does any documentation need to be lodged with a tax return?
No, an electronic tax return is the only document lodged with the ATO. PAYG Payment Summaries, interest and dividend statements, receipts, car log books etc must be held at the time a tax return is prepared, however, they are not lodged with the return.
6. Do both spouses need to attend a consultation with Greg Singh & Co to complete their tax returns?
Yes, each spouses details and taxable income must appear on each other's return, so the returns should be prepared together
7. Can the Greg Singh & Co fee be deducted from a tax refund?
Yes, the Greg Singh & Co fee can be deducted from an ATO refund and the net funds can either be direct credited into a clients bank account or paid to via a cheque. An administrative charge of $15 is payable in these circumstances. However, it should be noted that in some circumstances, with the possibility of reduced refunds by the ATO because of factors such as unpaid child support, outstanding tax debts, over claiming of Family Tax Benefit due to understatement of family income or unpaid HECS or HELP debts together with the Greg Singh & Co costs spent in processing, an additional fee may be payable. This will be advised if it occurs.
8. Can multiple years tax returns be prepared at the same time?
At Greg Singh & Co we can prepare and lodge up to 17 years worth of returns together at the same time. This is something that cannot be done through the Tax Pack or the ATO's e-tax system. The current year's refunds will be returned in the normal period, however, there may be slight delays with refunds coming from the ATO for previous year's returns and they may not arrive at the same time.
9. Are there penalties for lodging a tax return late?
Outstanding tax returns should be lodged as soon as possible and before the ATO takes any action to have the returns lodged. Once the ATO begin any action, it can result in a court conviction. Under the tax law the ATO can charge a late lodgement penalty of $210 for every 28 days a return is outstanding from the original due date to a maximum penalty of $1,050, even if a refund is due. In addition, the ATO is entitled to charge a General Interest Charge (GIC), which is levied on any outstanding monies. The GIC for a given period is calculated as the 13-Week Treasury Yield Note rate plus an additional 7%. The GIC compounds daily and is tax deductible.
10. How long does it take to get a refund from the ATO?
Last year the ATO was able to process a majority of returns within 7 working days of lodgement. However, this year it is expected that some delays may be encountered due to data matching between the ATO and Centrelink, which may delay refunds up to 9 working days from lodgement.
11. What do people on a "Working Visa" or "Student Visa" require in order to work in Australia?
A Tax File Number (TFN) is required in order to work and be properly recognised for tax purposes in Australia as well as a work permit from the Department of Immigration and Citizenship (DIMC).
Application forms for TFN's are available from the ATO or you can download from www.ato.gov.au. The completed form must be returned to the ATO together with original proof of identity documents. These can be mailed or taken an ATO shopfront. Applications cannot be over on the internet. When the documents have been examined they are returned by the ATO and a TFN notice is mailed within 28 days. Provided application is made for a TFN, an employee has 28 days to quote their TFN to their employer, after which the employer is required to withhold tax from wages or salary at a rate of 47%.
12. What are the tax implications if a child under the age of 18 receives a trust distribution, do they have to lodge a tax return?
Not if this is their only income. A minor (i.e. someone under the age of 18 years) can earn up to $416 from investment income before any tax is payable on that income.
Income
13. What happens if a dividend statement is received from a company, must the income be declared in a tax return?
Yes, the amount must be declared as income in a tax return, no matter how small it is.
14. What happens if bank interest is received during the income year of only $5; does this amount have to be declared?
Yes, the amount must be declared as income in a tax return. All interest from all bank accounts must be included, even if a bank account has been closed or is in a foreign jurisdiction. The ATO receive reports from all major banks after the end of each income year which detail how much interest has been paid to all accountholders. The ATO then use this information to cross-reference with disclosures in tax returns. If discrepancies are identified taxpayers are notified and either requested to pay tax or provide a response as to why the interest income was not disclosed. This can often occur up to 2 years after a return is lodged.
15. Is money inherited subject to tax?
Not necessarily. An inheritance is not taxable income, unless advised by the executor of an estate that part is taxable. However, income derived from investing money from an inheritance is taxable.
16. Can a spouse declare all the interest from joint accounts in their tax return because their income is much lower than their partners?
No. All income must be apportioned to each recipient on the same basis as the accounts are held.
17. Must money received from the government during the year be included in a tax return?
Some government payments and allowances are included as taxable income and some are not. It's important that any taxable payments such as age pensions, Newstart Allowance, Youth Allowance or Austudy are included in a tax return.
A complete list of payments which do not need to be included in a tax return can be determined when you meet with us at Greg Singh & Co.
Deductions
18. Can any deductions be claimed if no receipts are held?
Under some circumstances receipts are not required, but in order to maximise tax deductions, Greg Singh & Co highly recommends clients retain all work and business related receipts and bring them with them at the time of return preparation.
19. Can the cost of travel to and from work be claimed as a tax deduction?
Home to work and return travel is generally not claimable as a tax deduction except in certain limited circumstances. Travel between jobs on the same day and travel for work (i.e. visiting clients, doing pick-ups or deliveries) may be claimable. If you use public transport then keep all receipts and/or diary records. If a personal car is used for work purposes then a log book must be maintained of all business mileage travelled and all expenses of the car including petrol, repairs, registration, insurance and interest on a car loan.
20. How much can claimed for a computer used for work-related purposes?
If a computer is purchased for work-related use or in a business, a percentage of the depreciation that pertains to the work-related or business use can be claimed as a deduction. We can provide more details of how to calculate the depreciation in your consultation with Greg Singh & Co.
21. How much can be claimed for work-related use of a motor vehicle?
There are different methods for claiming expenses in relation to the business use of a personal motor vehicle. The calculation of the deduction can be quite complex, so to maximise your potential claim you should maintain a daily mileage log book for at least three months of the year and a record of any expenses for the full year. Call us for a brief explanation of how to record and maintain the required records.
22. Can the cost of a work uniform be claimed as a tax deduction?
Deductions for uniforms can only be claimed if the work uniform is specific and identifiable to an employer or occupation (such as chef's checked pants) or protects from injury whilst at work. The cost of a plain uniform or conventional clothing, such as white shirt and black pants or skirt, which is commonly worn by waiters and waitresses, cannot be claimed as a tax deduction, even if an employer requires them to be worn. The cost of dry cleaning a uniform up to a certain limit can also be claimed as a tax deduction.
23. What deductions can be claimed for studying?
Only study directly related to a current job can be claimed as a self-education expense. For example if someone is working as a part-time shop assistant and at the same time are studying a Commerce degree then they are not able to claim the cost of the study as a work related expense - even if they are looking for work as an accountant. If technical books, trade books or journals are necessary to fulfil a job function efficiently, then the cost of their acquisition is deductible.
24. I have to buy tools/equipment for my job. What can I claim and how much?
Expenditure incurred in replacing, insuring and repairing tools of trade is deductible.
25. Can the cost of sun protection items be claimed as a deduction?
A deduction is available for outdoor workers who buy sunscreen lotion, sunglasses and hats for use at work. The claim must be substantiated and adjusted for private use.
26. What can be claimed in respect of medical expenses?
No tax deduction is available for medical expenses.
27. How does the private health insurance offset work?
The private health insurance offset (sometimes called a private health insurance rebate) is worked out as a percentage of the premium paid to a registered health insurer for a complying private health insurance policy. The percentage of offset you may be entitled to claim is determined by the age of the oldest person covered by the policy.
The private health insurance rebate is income tested against three new income tier thresholds.
The amount of income subject to the levy is a taxpayers adjusted taxable income (being income after all tax deductions) plus the following if they apply:
- reportable fringe benefits;
- reportable superannuation contributions (including salary-sacrificed amounts);
- the amount of deductions from a rental property that exceed the rent income received;
- the amount of deductions from financial investments that exceed the income derived;
- certain employment income derived from foreign jurisdictions that is exempt from tax; and
- the net amount on which family trust distribution tax has been paid.
Medicare Levy Surcharge
28. What is it and when is it payable?
The Medicare Levy Surcharge is an additional between 1% to 1.5% levy imposed on certain income.
It is payable when an individual or their family do not have hospital level private health insurance cover and the income thresholds in question 27 above apply.
Tax Tips
29. How can I reduce my tax bill?
Set out below is a sample of the strategies available. You should seek expert advice from Greg Singh & Co if you are interested in pursuing any of these strategies or if you are interested in any other strategies that we know about.
Prepayment of expenses
Prepayment of certain deductible expenses towards the end of the income year can be treated as deductible in that income year, notwithstanding they may be attributable to the next income year. This can reduce taxable income, therefore creating a refund of tax paid.
Gearing
Using tax-effective investments or gearing strategies to increase tax deductions.
Gearing is simply borrowing money for an investment in a tax effective manner to create long-term wealth. The interest on such borrowings is tax deductible.
There are a number of gearing strategies that can reduce tax and can be customised to suit your personal circumstances. For example, you can borrow either a lump sum to invest or can borrow progressively each month. The investment may be capital guaranteed and can be secured against the investment portfolio. Prepaying twelve months of interest before 30 June is a popular and effective tax strategy. The purchase of a negatively geared investment property is also an effective long-term strategy to reduce tax. If you already have one you could consider repaying interest on your loan.
Concessionally treated fringe benefits
One of the best ways an employee can reduce their tax payable is by salary sacrificing in return for employment related "fringe benefits". A fringe benefit is any kind of benefit provided to an employee by their employer that does not otherwise require the employer to withhold income tax before it is given to an employee. These include such things as cars, car parks, expense payments, physical property etc. Superannuation contributions and employee share scheme amounts are excluded from the definition. Most fringe benefits are subject to Fringe Benefits Tax ("FBT"), which is a tax payable by an employer rather than employee. If a benefit is subject to FBT it is an employers commercial decision as to whether the cost is passed onto an employee.
The advantage of salary sacrificing is that a fringe benefit can be purchased by an employee using pre-tax dollars. There are many things that can be salary sacrificed that do not attract FBT to employers. These include additional contributions to superannuation, benefits that cost less than $300 (minor benefits) and any benefits that if they were paid by an employee would be tax deductible in their own hands (ie memberships, education costs etc).
The private use of a leased car that is salary sacrificed (i.e. through a novation agreement) is subject to FBT, however, the FBT liability of an employer can be calculated by reference to a statutory calculation derived from the original cost of the car multiplied by a statutory rate of 20%. The FBT is paid by the employer at the top marginal rate of tax, including Medicare (47%), on the "grossed-up" value of the benefit. Grossing-up is designed to equate the value of the benefit to a pre-tax cash equivalent. Most employers require their employees to reimburse the FBT amount from their pre tax deducted salary. The benefit of salary sacrificing a car is that the more kilometres travelled (be they private or work-related) in an FBT year the less FBT there is calculated and accordingly a greater benefit is derived by an employee. The FBT liability can be reduced by way of an after tax payment by an employee. This is generally effective when an employee's salary is less than the income level required to pay the top marginal rate of tax (that is, salary of $180,000 or less).
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Helpful Resources
Tax Tips & FAQs for individuals