To Claim the Home Office or Not
Expenditure on a home office where claims can be made for a proportion of interest, rates etc. will normally expose the residence to captial gains tax. Let's assume an architect conducts his business from a home office and the space devoted to this activity is 25% of the total floorspace area. Claims can be made for 25% of interest, rates and proportions of utility costs, insurance, etc.
The Taxation Office considers that on disposal the property will be proportionately subject to capital gains tax. This may be of concern particularly where the property has enjoyed real gains in value. Where such a claim may be optional, consideration should be given to not making the home office claim in the first place. This could ultimately save many thousands of dollars in capital gains tax.
Defer Sale Date
The disposal date for capital gains tax is normally the contract date. Where a sale of an asset is contemplated late in a financial year consider, where possible, deferring the contract until the new financial year. A few weeks deferral in contract signature could delay payment of capital gains tax by a year.
Deferral of the sale to a subsequent financial year will also be advantaged if the prevailing tax rates in the subsequent year are less than the current year.
Minor benefits don't cancel each other out
The latest interpretations of the tax law indicate that fringe benefit exemptions do not cancel each other out.Eligibility for an exempt minor benefit is not affected by other exempt benefits under the fringe benefit tax law.
For example, an employee who receives a portable computer as an exempt benefit under S:58X would still be eligible for a $90 Christmas gift from an employer under S:58P.
Entertainment may be a minor benefit
Entertainment can qualify for exempt minor benefit exclusion from GST.
Entertainment is specifically not income tax deductible, but minor entertainment benefits could qualify for fringe benefit tax exemption.This is an unusual situation where an exempt minor benefit is not income tax deductible.
Normally exempt minor benefits are tax deductible as they constitute an incidental cost of employment.
How to claim meal entertainment
Meals entertainment may be claimed as a minor benefit , or dealt with under a 50/50 method - but not both.
The 50/50 method of dealing with meal fringe benefits allows half the benefit to be income tax deductible, but subject to fringe benefit tax. The other half is simply not tax deductible.
An employer may not claim a minor benefit exemption for meals where the 50/50 method is adopted.If this method has been adopted, the employer must deal with all meal entertainment under the 50/50 method with no exclusions, including exempt minor benefits.
GST - Saving on Deductible FBT Items
A planning opportunity exists that saves GST (where an employer is GST registered). An employee may package items that are FBT exempt or otherwise deductible to an employer into his/her salary package. The advantage here is that the employer can claim an input tax credit on the benefit and no FBT is payable. had the employeee paid for the cost it would have cost the employee 10% more with GST. Examples of these types of costs include: subscriptions, conference costs, etc.
Overtime Meals
A deduction may be able to be claimed for overtime meal expenses incurred where an overtime meal allowance was received from your employer and the allowance was paid under industrial law, an award, or agreement. If the meal allowance received was greater than the actual expense incurred, the deduction is limited to the amount of expenditure incurred. Written evidence will be required if the claim per meal exceeds certain Tax Office thresholds.
Self-Education Expenses
A part-time or full-time student studying at university, college, school, or other place of education may be able to claim the cost of self-education. There must be a direct connection between the study and current work activities. No claim is allowable where study is undertaken to get a new job, or to open up a new business or income earning opportunity.
Non-Commercial Rent
Landlords need to be mindful of the Tax Office's view on non commercial rental arrangements. If you are renting a property at less than normal commercial rates, this can limit the amount of deductions to which you are entitled. The situation often arises in family situations, where one family member may rent a property to another family member at a nominal rental. In these situations, a deduction for rental property expenses can only be claimed up to the amount of the rental income received from the arrangement.
Capital Allowance Write Off
Landlords listen up! You should review all your rental properties to ensure you are receiving your full entitlement to depreciation on the construction costs of income producing buildings on the property. Some landlords may not appreciate the potential of this tax deduction and how it can be turned into cash in the landlord's pocket. Every income producing residential building where construction commenced after 17 July 1985 qualifies for the Division 43 capital works allowance. The amount of the allowance depends on the date construction commenced. Buildings where construction commenced between 18 July 1985 and 15 September 1987 are entitled to the 4% claim per annum. The claim was reduced to 2.5% for buildings that were constructed after 16 September 1987.The claim is allowable on the actual construction costs of the building.
Need A New Computer?
An opportunity exists for employees to cash in on large tax savings by salary sacrificing the purchase of a laptop computer or similar portable electronic device (e.g. mobile phone, calculator, PDA, laptop and portable printer, Blackberries and hand-held PCs).
Section 58X of the FBT Assessment Act 1986 exempts from Fringe Benefits Tax certain work related items. This section exempts from Fringe Benefits certain items such as electronic diaries, mobile phones, calculators, briefcases, tools of trade, computer software used in the employee's employment and notebook, or laptop or similar, portable computers used primarily for use in the employee's employment.
What this means to the employee is that by salary sacrificing the cost of the computer with their employer, the computer is purchased from gross dollars, effectively saving tax on the entire purchase price. The employer incurs no Fringe Benefits Tax cost. Further, the cost of the benefit is normally outright deductible to the employer. A further saving can be made by the employee effectively avoiding GST on the purchase price as, assuming the employer is GST registered, they are able to claim a GST input tax credit for any GST incurred. This means the salary sacrifice amount need only be for the GST exclusive price of the computer.
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