TAX SAVING FOR EMPLOYEES

When completing your personal Tax Return, what deductions and Rebates are you entitled to? What steps can you take throughout the year to minimise your overall tax bill?

DEDUCTIONS

When lodging your Tax Return each year, make sure that you claim all allowable expenses. The expenses that you can claim for include the following.

Protective work-clothes such as a technician's uniform, overalls, boiler suit. Cleaning and maintenance of work-clothes. An amount of $150 is claimable for laundry without written evidence. Protective footwear such as shoes to be worn only with a uniform, rubber-soled shoes for an electrician etc. With regard to uniforms, if the uniform is not compulsory wear, a deduction will not be allowed unless, at the time of purchase, either a) the uniform has been entered on the Register of Approved Occupational clothing or b) the uniform has been approved in writing by the Taxation Office.

Cost of travel on employer's business where it is not reimbursed by your employer. Travel between home and place of work is almost never allowed. In certain cases, to claim the cost of travel expenses, you must have kept a travel diary. These cases are a) travel within Australia where you have been away from home for over five nights and b) overseas travel.

Trade union subscriptions.

Subscriptions to professional associations.

Depreciation of professional library.

Use of phone if used for business e.g. call-outs etc.

Cost of study-courses in obtaining qualifications in work-related areas. The Higher Educational Contribution paid to educational institutions is not deductible. However, amounts paid to a TAFE college or a private institution may be deductible e.g. acting and drama classes, refresher courses etc

Cost of attending conferences. This would include registration fees, air-fares, accommodation, taxis and incidental expenses. Conferences are often held interstate or in holiday locations.

Cost of publications to help you in your work.

Tax agent's fees.

Donations to charities.

If you are self-employed and you contribute to a private superannuation scheme, you can claim the amount paid as a deduction. The amount claimable is usually either a) the amount paid if less than $3,000 or b) $3,000 plus 75% of the excess above $3,000 where the amount paid exceeds $3,000. However, before you can claim the deduction, you must inform your superannuation fund of the amount you intend to claim as a tax deduction.

If you are an employee, the maximum Rebate claimable is $100. Nothing is claimable if your income exceeds $31,000. A sliding scale applies for incomes between $27,000 and $31,000. Do not forget to claim depreciation on any equipment that you use. But any equipment item costing less than $300 or having a life of fewer that three years can now be deducted outright in the year of purchase. For example, if you were to buy a textbook costing $100 and an instrument costing $250, you could deduct the full $350 from your income in the year of purchase. If you use any furniture or equipment at home for work purposes, for example, a desk, chairs, filing cabinet, computer, word-processor, lamp etc, you can claim depreciation on them. The depreciation rate is generally around 20% but, for a computer, it is 40% pa.

The above list of deductions is not exhaustive. The Income-tax Act provides that "all losses and outgoings to the extent that they are incurred in gaining or producing the assessable income ... shall be allowable deductions." If you are in doubt about any item, save the receipt and ask your tax- agent about it when completing your Tax Return.

Remember that if the total of your work expenses exceed $300, then you must have written evidence to support the whole amount. The following are not taken into account when calculating the $300 limit viz 1) vehicle expenses, 2) meal allowance, 3) award transport allowance and 4) travel allowance.

REBATES

When lodging your Tax Return, make sure that you claim all the Rebates that you are entitled to.

The Spouse Rebate is $1241 (no child). If you are married and your spouse does not work, make sure that you claim this Rebate. For tax purposes, a spouse includes a "de facto". Remember that a wife who works can claim for an unemployed husband.

The Spouse Rebate is no longer available to a person who supports a spouse and one or more children unless he has not drawn the full Basic Parenting Allowance from the Social Security department during the year. However, the Spouse Rebate continues to be available to a person who supports a spouse but has no children to support.

The Sole Parent Rebate is $1165. If you are a sole parent looking after a child, make sure you claim this Rebate.

Zone A Rebate is $338. Zone B Rebate is $57. Special Zone A and Special Zone B Rebates are $1173. If you live in the northern half of Australia or a remote part of Tasmania, make sure that you claim the Zone Rebate. If you normally lived in Zone A but spent some days in Special Zone A or Special Zone B, you may be entitled to a higher Zone Rebate. Days spent on holiday in the Special Zones will count.

When claiming the Zone Rebate, be aware that you get a notional Spouse Rebate. This notional Spouse Rebate a) is greater than the normal with child Spouse Rebate and b) the Basic Parenting Allowance is not subtracted from it.

TAX-PLANNING

During the tax-year, you should consider the following tax-planning techniques.

Equalise Income of husband and wife as far as possible. A husband and wife will pay the least tax when their incomes are exactly equal. It is rarely possible to achieve exact equality of incomes. However, it is possible to get some of the benefit. If only one spouse works and the other stays at home, then it is sensible to place all bank accounts, property investments, shareholdings etc. in the name of the spouse who stays at home. As he/she will have a low tax rate, the aggregate tax on joint incomes will be reduced considerably. Even if both spouses work, there can be an advantage in rearranging investments. The investments should be transferred to the spouse with the lower income. This spouse will have a lower rate of tax so a tax advantage accrues.

If you have children, each child can receive $416 in interest. This will be tax-free in the hands of the child. It is important to note that the investment must be absolutely in the name of the child. An investment in the name of the parent as trustee for the child will not suffice. Interest rates are about 4% at present. Therefore, $10,375 invested at 4% will produce $415 in annual interest. Let us suppose that you have three children and you invest $10,375 in each's name. This will be a total investment of $31,125. It will produce $1,245 in interest. This interest will be tax-free. If you had invested it in your own name, you would have paid tax of $459.

If you have savings in a bank deposit account and you also have a mortgage on your house, it nearly always pays to use the savings to pay the mortgage. This is because you are paying mortgage interest rates of around 9% while you are getting an after-tax interest rate of 2% on your savings. It is foolish to borrow money at 9% and lend it out at 2%.

If you intend to borrow money and you are in business or if you rent out property, then there is an important rule you should follow. Always use the borrowed money in the business. Never use the borrowed money for private purposes. Use any money that you have saved for private purposes e.g. buying a residence, a car, a boat etc. The object is to make the interest tax-deductible.

DISCLAIMER: See disclaimer on home page.

Copyright 1996.




home