 The following tax tips are designed to provide businesses, employees, investors and the self-employed with a headline list of key issues that they should consider in preparing their income tax returns for the year ended 30 June 2010. By Cathy
Lau of Top Figures Accounting Services
Please note that the information supplied below is to be used as a guide only. You should contact us about your specific circumstances.
1. Claim all work related deductions
Where you don't have the necessary receipts on hand you can still claim up to $300 of work-related expenses provided the claims relate to outgoings you necessarily incurred in your job or business.
A deduction for laundry costs is allowable where the relevant clothing is protective clothing, a compulsory uniform, a non-compulsory uniform or certain occupation-specific clothing. Moreover, laundry claims of up to $150 do not have to be substantiated even if your total income tax deduction exceeds $300.
Self-education expenses can be claimed provided the study is directly related to either maintaining or improving your current occupational skills or it is likely to increase your income from your current employment. By contrast if the study is designed to enable you to obtain new qualifications in a different field then the expenses incurred are not allowable.
Self-education expenses may need to be reduced by $250 depending on the type of expenses you claim.
Typical self-education expenses include, amongst others, course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers and printers. However, it should be noted that any Higher Education Contributions Scheme (HECS) or Higher Education Loan Program (HELP) repayments are not deductible. 
2. Identify eligible home office expenses
Where part of your home has been set aside primarily or exclusively for the purpose of doing work when the costs associated with this such as heating, cooling, lighting and the depreciation of your office equipment or professional library may be an allowable deduction. To claim for this purpose, you must have kept a diary for at least 4 weeks of the hours you worked from home. This amount is then used to work out your total hours worked for the year and a deduction claimed at the rate of $0.26 cents per hour.
It is important to note, no deduction is available for occupancy expenses such as mortgage interest, rent, insurance and rates unless you are self-employed and conduct a business from your home.
3. Maximise motor vehicle deductions
Where you have used your motor vehicle for work-related travel, and your claim for kilometres travelled does not exceed 5,000 kilometres, you can claim a deduction for your car expenses on a cents per kilometre basis to the extent you have used your car for work. The allowable rate for such claims changes annually. Please check with us for this year's rate. Any such work-related travel claims must be based on reasonable estimates.
Alternatively, if you have used your car for a significant amount of work related travel then you may be able to claim a deduction for your total car running expenses to the extent you have used it for work. However, such claims are only available where you have the required log book, odometer readings and receipts.
On the other hand, where business travel exceeds 5,000 km, it may be possible to claim one-third of actual car expenses or 12 per cent of the original value of the vehicle without a log book.
You should compare the above four methods and choose the one that gives you the maximum deduction.
Work related travel includes travel between two places of work or employment, or travel to shifting places of employment. It may also be available where you have to carry bulky tools or equipment with you to work. It does not, however, include direct travel between a person's home and a place of work.
Penalties and fines are not allowable.
4.Temporary investment allowance
Small business owners really should also ensure that they claim the temporary investment allowance of 50% of the cost of any new depreciating assets principally used in a business that were purchased for a cost of $1,000 or more before 31 December 2009 and installed ready for used by 30 June 2010. To check your eligibility for this allowance, please contact us.
5. Deduct any eligible depreciation deductions
Where specific tools or equipment are used for work by an employee, but the cost of these assets is not met or reimbursed by the employer, then they may be depreciable under the capital allowance regime. Some items can be claimed in full if they cost $300 or less, or will last less than three years, and are mainly used to gain assessable income other than business income.
These items include tools, calculators, briefcases, computer equipment and technical books purchased by an employee, or minor items of plant purchased by a landlord. Any deduction claimed should be reduced to the extent it is used for private purposes, but it doesn't need to be pro-rated if it was acquired part way through the year and was wholly used in deriving salary and wage income.
6. Your rental property deductions
Landlords can claim deductions for a range of expenses such as advertising, bank charges, body corporate fees, cleaning, council rates, electricity and gas, gardening, insurance, loan interest, land tax, lease preparation expense, pest control, postage and stationary, property agent fees and commissions, repairs, secretarial and bookkeeping fees, telephone charges and water rates. You may also be able to write off the cost of certain buildings, depreciating assets and borrowing costs over time.
Care should be taken if you own a rental property in preparing your 2009/10 tax return as the ATO is concerned that rental income is being under-reported and rental deductions over-claimed and this will again be areas of close scrutiny by the ATO.
7. Claim relevant non-work related deductions
The fees you pay registered tax agents to prepare your return or to manage your tax affairs are allowable in the year the fee is paid.
Bank charges and any interest payments on funds used to acquire shares and other income producing assets/investments are generally deductible.
8. Optimise your tax offsets
Tax offsets directly reduce your tax payable and can add up to a sizeable amount, so it pays to know all the offsets you are entitled to. Eligibility to offsets will generally depend on your income level, family circumstances and other relevant conditions associated with particular offsets or rebates.
Common tax offsets/rebates include the dependant spouse rebate, low-income tax offset, mature-aged worker rebate, senior Australian tax offset, medical expenses offset, private health insurance offset and the offset for superannuation contribution made on behalf of a low income spouse.
There is a 25% entrepreneur's tax offset of the income tax payable on your business income if you have an aggregated turnover of $50,000 or less. The rebate reduces for every dollar on business income in excess of $50,000 and phases out completely where income exceeds $75,000.
In addition, the offset is now also means tested and will phase out 20 cents for every $1 of income over specified thresholds of adjusted taxable income being $70,000 for single taxpayers and $120,000 for families. In this context, adjusted taxable income is the total of taxable income, reportable fringe benefits, reportable superannuation contributions and total net investment loss for the 2009/10 tax year.
An education tax offset is available for eligible families (those in receipt of Family Tax Benefit Tax Benefit A) for 50% of the cost of items such as educational software, home computers and associated costs, home internet connections, laptop computers, printers, school texts, stationary and trade tools used in school. The maximum amount of the rebate is $375 for each child in primary school and $750 for each child in secondary school.
9. Consider tax effective superannuation contributions
A self-employed person will be able to claim their contributions to a complying superannuation fun as fully tax deductible up to the age of 75. However, such contributions will not be deductible if 10% or more of a person's assessable income or reportable fringe benefits is a attributable to their employment as an employee Employers can also claim deductions for superannuation contributions made on behalf of their employees provided the employee is under 75.
Any excess contribution made by the self-employed or by an employer in respect of an employee will be taxed in the superannuation fund at a rate of 46.5 per cent rather than 15 per cent. The excess contribution limit for the 2009/10 tax year is $25,000 or $50,000 for those aged 50 or more as at 30 June 2010.
10. Utilising capital losses
Investors should be aware of the rules relating to the utilisation of capital losses such as those arising from the disposal of investments. Any such loss can be offset against any current capital gains you may have made, or be carried forward indefinitely to be applied against any future capital gains. Further, a capital loss on an investment can be applied against any other capital gain other than those disallowed under special rules relating to gains on collectables such as artworks and antiques and certain personal use assets.
11. Private use of company owned assets
Under proposed amendments effective from 1 July 2009, shareholders and associates (e.g. family members) will be deemed to have received a dividend at 30 June 2010 where a related private company has provided a company owned asset for the private use of that shareholder or associate.
These amendments are intended to apply for such things as the private use of real estate, a car or a yacht which is provided at either a free or discounted rate. Liabilities of this type will be triggered from the time the asset is first privately used by that person, and covers all days during the year in which the asset is not available for use by the company. The amount of the dividend is the market value of such use less any consideration paid. However, the deemed dividend will not arise if the annual value of the benefits received was less than $300, the private usage would otherwise have been allowed as a once-only deduction or where certain dwellings are provided for private use by the company.
If you think this applies to you, please call us to discuss the matter.
For more detailed advice, please contact:
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Feature: Tax Tips For The Year Ended 30 June 2010