Leenane Templeton – Newcastle Business Accountants, Business Advisors & Financial Planners

Tag: tax deductions

  • Last Chance To Apply As COVID-19 Tax Deduction Deadlines Approach

    Last Chance To Apply As COVID-19 Tax Deduction Deadlines Approach

    Tax deductions introduced by the Australian Taxation Office to lessen the impact of COVID-19 are approaching the end of their eligible timeframe.  To ensure that you or your business do not miss out, here are some of the deductions you could claim at the end of this financial year (if eligible).

    Loss-Carry Back Rules

    Eligible businesses with an aggregated turnover of less than $5 billion or corporate tax entities that meet an alternative $5 billion total income test are able to use the temporary fill-expensing measure again this year. This will allow them to deduct the full cost of eligible depreciating assets acquired from 6 October 2020 and first used or installed ready for use by 30 June 2023. The original deadline of 30 June 2022 was extended for an additional year, so make sure to make use of this in your business!

    Shortcut Method

    If you have had to work from home over the last year between 1 July 2021 to 30 June 2022, you can claim a deduction for working from home.

    This is to address expenses that you may have had to make in order to work from home, such as paying for electricity or equipment to work from home. These expenses cannot have been paid by your employer, you need to have paid for them yourself.

    You can claim $0.80 for every hour that you worked from home, but you are not able to claim for anything else if using this method.

    To claim this, you need to:

    • keep a record of how many hours you worked from home
    • work out your deduction amount
    • write the deduction amount in your tax return in the ‘Other work-related expenses’ section
    • write ‘COVID-19 hourly tax rate’ in your tax return.

    If you are consulting with a registered tax agent like Leenane Templeton for your return, they may recommend this as your best course of action.

    For more information please feel free to contact the LT team.

  • Tax Deduction Opportunities with Super in 2021

    Tax Deduction Opportunities with Super in 2021

    When you retire, your superannuation is likely to become an important source of your income. That’s why it’s a good idea to top it up while you are working. 

    But did you know, there are also some excellent tax benefits you can take advantage of right now – just by making your own voluntary superannuation contributions? Generally, money invested in super is taxed at a lower rate than your personal income tax rate.  

    In the lead-up to 30 June 2021, we want you to be aware of opportunities to save tax with super contributions.  

    This email is tax planning advice, not financial advice, so if you are interested in this strategy, please contact our office to speak with one of our licensed financial advisors before you do anything.

    TAX BENEFITS FROM SUPERANNUATION CONTRIBUTIONS 

    There are several ways you can get tax benefits from super contributions: 

    How “Concessional” Super Contributions are Taxed 

    Concessional (before tax) super contributions include employer super contributions made on your behalf, any salary sacrifice contributions you make, or any personal contributions that you claim a tax deduction on in your tax return.

    These contributions are taxed at 15% when they are received by your super fund (up to a limit of $25,000 per year), provided you earn less than $250,000 annually. Personal super contributions are especially useful for people who are on higher marginal tax rates or if their employer refuses to set up a salary sacrifice arrangement. 

    The people who would benefit the most are those who earn above $45,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax rate only 15%. That’s a big tax saving!

    Catch Up Super Contributions  

    From 1 July 2018, people can make “carry-forward” concessional super contributions if they have a total superannuation balance of less than $500,000. People can access their unused concessional contributions caps on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire. 

    HOW LOW-INCOME EARNERS ARE TAXED 

    If you’re a low-income earner (earning up to $37,000 per year), the low-income superannuation tax offset ensures that you don’t pay a higher rate of tax on your super contributions than your income tax rate. The offset will be paid directly to your super account and the payment will be equal to 15% of your concessional contributions for the year, capped at a maximum of $500. 

    Individuals who earn between $39,837 and $54,837 during the 2021 financial year may also be eligible for super co-contributions from the government of 50 cents for each dollar, up to a maximum of $1,000 in non-concessional (after tax) contributions. 

    HOW HIGH-INCOME EARNERS ARE TAXED 

    If you earn more than $250,000 a year (including super), your concessional contributions are taxed at an additional 15%, bringing the total tax on these contributions to 30%. However, this is still less than your marginal income tax rate of 47%. This extra 15% is known as Division 293 tax. Only the concessional contributions which make your total income exceed $250,000 are subject to the additional tax. 

    If your concessional contributions exceed the concessional contributions cap of $25,000 per year, the excess is included in your tax return and taxed at your marginal tax rate (less an allowance for the 15% already withheld by your super fund). You can choose to withdraw some of the excess contributions to pay the additional tax. 

    NEXT STEPS 

    Please contact us ASAP if you would like to discuss saving tax with super contributions. There are many things we need to check for you to ensure you don’t exceed your super caps, you may need to seek the advice of a licenced financial advisor, you have to get the paperwork right plus the timing of your contributions is crucial to get right to entitle you to a tax deduction for them in the 2021 year. 

    Contact us today! The sooner we get started, the sooner we can help you save tax – well before 30 June 2021 for enough time to implement tax saving strategies.

  • Which legal expenses are tax deductible for businesses?

    Which legal expenses are tax deductible for businesses?

    Knowing what type of legal expenses are tax-deductible is valuable information when it comes to budgeting and allocating funds for emergencies.

    Legal expenses that pay for business operations integral to producing an assessable income are tax-deductible. However, if the legal fee is capital, domestic or private in nature, then it will not be tax-deductible unless explicitly stated otherwise in legislation.

    Legal expenses that can be claimed (This is not an exhaustive list):

    • Negotiating contracts with existing employees (including disputes) with respect to employment arrangements

    • Defending wrongful dismissal allegations brought on from employees or directors

    • Defending a defamation action

    • Opposing developments in the neighbourhood that may adversely affect the business (depends on facts of the case)

    • Evicting a rent-defaulting tenant

    • Pursuing claims for workers compensation

    Legal expenses that cannot be claimed (This is not an exhaustive list)

    • Costs of negotiating employment contracts with new employers

    • When defending driving charges (irrespective of whether driving on company business)

    • Defending sexual assault charges or racial vilification that occurred within the workplace

    • For the eviction of a tenant whose lease period has expired

    • Challenging redundancy or seeking increased redundancy amount

    It is wise to have a basic understanding of how tax deductions work when you own a business. Even a rudimentary understanding will allow you to prepare your budget and finances to accommodate for potential legal complications.

    To talk about tax deductions in your business please chat with one of our business accountants and tax advisors. Contact LT today.

  • How to keep your Christmas party tax-free

    How to keep your Christmas party tax-free

    Throwing a Christmas party for your staff can be a great way to show appreciation and have some fun, but tax implications of a party can be surprising and costly.

    Before hosting a staff Christmas party, employers should be aware that the majority of the time, a party would be considered ‘entertainment’ and is therefore not tax deductible. Depending on the nature of the event you may have to pay fringe benefits tax (FBT), which is a tax that applies when an employer provides a benefit other than a regular wage or salary to their employees.

    Luckily, there are some exemptions of FBT that could save your business some money. Minor benefits are provided to employees on infrequent occasions for expenses of $300 or under, so limiting the cost to $300 per head at your party will keep things tax-free.

    For taxation purposes, the party would be considered ‘entertainment’ if it was held at a venue such as a restaurant, cafe, theatre, or nightclub. Tax can be avoided by hosting the party on business premises on a working day.

    Having the party guest list restricted to current employees can keep the event FBT free. If employees bring an associate, they can still be exempt from FBT given that the cost of the employee’s guest does not exceed $300, inclusive of GST. If the cost is more than $300, FBT is applicable on the associate’s portion of food and drink, however, a tax deduction and GST credit can be claimed. FBT does not apply to the cost of clients attending the Christmas party, however, their portion of the cost cannot be claimed as an income tax deduction or GST credit.

    Another option to consider when dealing with FBT paperwork is the 50-50 split method, where the Christmas party would be subject to an FBT liability of 50% of the total cost, making it tax deductible. The other 50% of costs would be non-deductible irrespective of whether it was provided to employees or their associates.

    For advice with your business contact Leenane Templeton Chartered Accountants & Business Advisors.

    This article is for guidance only, and professional advice should be obtained before acting on any information contained herein. Leenane Templeton do not accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.