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Deductions, Allowances, Tax Returns And More – Here’s What You Might Need To Know As A Retail Worker
In spite of the many challenges that have faced many industries across the country during COVID-19’s persistence and ongoing effects, the retail industry through their continued, adapted operations has continued to progress.
As a result, retail workers across many stores may find that the taxable income from their work may have been affected by the changed situation. This may be a result of additional income, less income, or stagnation of their taxable income as a result of stand-downs, business closures or a forced pause in their operations.
No matter the situation though, retail workers will still need to ensure that all of their taxable income has been accurately reported and lodged in their tax returns.
If you are a retail worker earning your income or have earned your income in the industry over the course of the previous year, you will need to know:
- What income and allowances you may need to report
- What can and cannot be claimed as a work-related deduction
- What the records are that you may need to keep track of
This information may be applicable to income earned in the 2020-21 financial year, or to income earned over the next year.
Income and Allowances That You May Need To Report
On the 30th of June, you should have received an income statement or payment salary that shows what you have earned as a retail worker throughout the year. This should include your salary, wages or allowances for that income year.
You should include all of the income that you received during the year in your tax return, regardless of when you earn it. This may include:
- Any salary or wages that you may have earned as income.
- Any bonuses that may have been earned during the year.
- Any allowances that you may have received to compensate for an aspect of your work or to help to pay for certain expenses when you have travelled for work.
Allowances can also be if an employer pays you based on an estimated amount of what you might spend (e.g. paying cents per kilometre if you use your car for work). It may also be for the actual amount spent on the expense before or after the expense is incurred.
You may receive allowances
- For work that may be unpleasant, special or dangerous
- In recognition of holding special skills, such as a first-aid certificate or
- To compensate for industry peculiarities, such as work on public holidays.
Your employer may not include some allowances on your income statement or payment summary but may include them on your payslips. These can include travel allowances or overtime meal allowances (as paid per industrial law, award or agreement).
If that allowance isn’t on your income statement or payment summary and you spend the entire amount on deductible expenses, it should not be included in the tax return as income or claimed as a deduction. If you spent more than what was your allowance, you include the allowance as income in your tax return and can claim a deduction for your expense.
If your employer pays for the expenses that you occur exactly, that payment is considered a reimbursement. This is not included or considered to be an allowance, and as such, cannot be included as income in your tax return or claimed for a deduction.
Deductions That You May Be Able To Claim
If you are a retail worker looking for claimable deductions that may specifically apply to your profession, you need to:
- Have spent the money, and were not reimbursed for the work-related expense
- Have proof that the expense directly relates to earning your income
- Have a record that proves the expense was incurred (a receipt is usually acceptable).
You can only claim a deduction for the work-related portion of an expense. You can’t claim a deduction for any part of an expense that is not directly related to earning your income or that is private.
Some of the deductions that may be eligible as deductions for retail workers include:
- Car expenses – if you drive between separate jobs on the same day, or drive to and from an alternate workplace for the same employee on the same day.
- Clothing expenses – the cost of buying, hiring, mending or cleaning certain uniforms that are unique and distinctive to your job, or protective clothing that your employer requires you to wear.
- Meal expenses – the cost of overtime meals on the occasions where you worked overtime and took an overtime meal break and your employer paid you an overtime meal allowance.
- Self-education expenses – if your course relates directly to your current job.
- Seminars and conferences
- Technical or professional publications
- Union and professional association fees
- Phone and internet usage if your employer needs you to use your personal devices for work.
Always keep proof of any expenses that you may have incurred for which you want to claim deductions. This is usually a receipt but can be another form of written evidence (such as an invoice). Those records must show what you purchased, when, where, and how much you spent. They must be in English
There are a few exceptions to the rule. These include small expense receipts, hard to get receipts, overtime meal expense receipts and travel and meal expense receipts. These have special rules and conditions that you need to follow if attempting to claim on these.
If you would like further assistance or information on how you can handle your tax return as a retail worker for this current financial year or for last year’s return, you can speak with us. We can assist you in the process, and make sure that your tax return is lodged correctly.
One of the ways that many Australians may be looking to recoup or maximise their tax refund’s potential is in spending money on assets for themselves or their business that can be ‘written off” as a tax deduction. Doing so might help save you on the tax that you have to pay after lodging your return, but the initial spend on the asset may not be a viable option for your finances.
Spending money on assets in a bid to reduce tax might seem like a great strategy. But, if you ask us, it might be better for you not to be spending your money on assets for that purpose if you do not actually have to.
Some of the assets that you might be considering purchasing as a tax ‘write-off’ may not count as eligible assets in the first place. An eligible asset is usually one that is used for work-related purposes. In this case, a BMW that you bought for personal use probably won’t cut it.
Regardless of whether you’re an individual looking to ramp up your wealth creation activities, or a business owner seeking greater profitability, you should always focus your spending on a primary income-generating purpose – any associated tax benefit should be secondary. It might be better for you if you reinvest that money back into the business or purchase assets that will appreciate and generate an income (such as property or shares).
The Australian government has a number of schemes and tax concessions that may be of use to you if you are considering purchasing an asset as a business or business owner. Some of these schemes and concessions may only be available if you meet certain criteria.
And, if you’re looking for an even simpler way to receive a tax deduction for your return, accounting fees are a tax-deductible expense that we’d be happy to help you out with. Come speak with us about what purchasing an asset could do to your tax, and if it’s a viable option for you to consider.
If you have disposed of any assets (which can include the loss, destruction or sale of an asset) which are subject to capital gains tax, you need to let us know as soon as possible. These are known as capital gains events, which can affect the way in which a capital gain or loss is calculated, and when it is included in a net capital gain or loss.
The type of CGT event that applies to your situation may affect the time of the CGT event’s occurrence, and exactly how to calculate your capital gain or loss. As mentioned earlier, a CGT event can involve the loss of an asset, the destruction of an asset or the sale of an asset.
The Sale Of An Asset
If there is a contract of sale, the CGT event happens when you enter into the contract.
A common CGT asset involved with contracts of sale that is often sold is the house. The CGT event, in that case, happens on the date of the contract, not on the date of settlement.
If there is no contract of sale, the CGT event is usually when you stop being the asset’s owner.
Your capital gain or loss for the assets is usually the selling price, less the original cost and certain other costs associated with acquiring, holding and disposing of the asset.
Loss Or Destruction Of An Asset
If a CGT asset that you own is lost, stolen or destroyed, then the CGT event happens when you first receive compensation for the loss, theft or destruction. In this way, the capital gain for such an asset is the amount of compensation less the asset’s original cost. If you do not receive compensation for the asset, the CGT event happens when the loss is discovered or the destruction occurred. Replacing the asset may result in being able to defer (or “roll over”) the capital gain until another CGT event occurs (e.g. selling the replacement asset).
The best way to ensure that you are doing the right thing when it comes to CGT tax is to keep your records up to date. This will assist us in ensuring that you are remaining compliant Any CGT events that have occurred need to be recorded (including asset disposals for at least five years after the event occurred. The best way to ensure this is to keep track of:
- receipts of purchase, transfer or sale
- if money was borrowed and details of interest
- receipts for insurance, rates and land taxes
- receipts for the cost of maintenance, repairs and modifications
- any market valuations
- brokerage on shares and cryptocurrency
- digital wallet records and keys.
Keeping accurate and well-maintained records for CGT events is of utmost importance, as it allows us to ensure that you are accurately reporting your transactions and lodging your return correctly. If they incur any net capital losses, this needs to be reflected in the return as they may be able to offset these against capital gains in a later year. Once a loss has been offset against a capital gain, you need to keep the records about that CGT event for two years (for individuals and small businesses) or four years (for other taxpayers).
If you are in the process of disposing of a capital gains asset, you will want to be certain that you are doing the right thing. Capital gains tax can be a tricky issue, with plenty of rigamarole. Come speak with us to ensure that your returns are lodged with the most accurate and correct information needed for submission.
Though you may not be expecting a tax bill, having one turn up in your inbox does not have to be an unexplainable mystery. The Australian Tax Office may send you a tax bill after you have lodged your income tax return for a number of reasons.
You may receive a tax bill if:
- Your employer has not withheld enough tax from the payments that they have made to you as an employee (this often occurs where you change jobs during the year).
- You are a sole trader who hasn’t made enough tax payments to the ATO throughout the year (also known as PAYG instalments).
- You receive other income where no tax was withheld (e.g. the money received from an investment property or dividends).
- A change in income affects your single or family income threshold and you need to pay the Medicare levy or Medicare levy surcharge (MLS).
- The amount of private health insurance rebate you receive changes or is too much.
How To Prevent A Tax Bill
If you earn income as an employee, your employer usually makes tax payments on your behalf throughout the year. Through these Pay As You Go withholding amounts, your annual tax obligations can be met and you generally will not have a tax bill waiting for you after lodgement.
However, if you earn income that does not have tax withheld or does not have enough tax withheld, you can prevent a tax bill by increasing tax withheld from payments, voluntary entry into PAYG instalments or tax prepayments.
If you know or can estimate that the annual tax bill you might receive won’t be covered by the amount of tax withheld through PAYG withholding, you can ask one or more of your payers to increase the amount of tax that they withhold. This is what is known as an upwards variation.
If your tax is not withheld when you receive payments from income earned as a sole trader or investments, you can voluntarily enter into PAYG instalments. This method of prepaying tax reduces your chances of having to pay a large amount of tax at the end of the income year. If you are in your first year of sole trading, this is a recommended practice to undertake.
Tax prepayments can be made at any time, and as often as needed to make tax management a bit easier for you. The ATO can hold the prepaid amounts made towards your expected bill unless you (or your agent) request a refund.
If something arises and you cannot pay your tax bill on time, you should speak with us as soon as possible so that we can make arrangements on your behalf.
As a property investor, you might find yourself implementing repairs and renovation work onto a property to ensure that you are maximising its value on the market. However, though both can be claimed on your tax return, it’s of paramount importance that you know how to claim them. Getting it wrong can be both costly, and unlawful.
A rental property improvement is a renovation where something is improved beyond its original state and must be claimed with depreciation. This means that you are claiming a deduction for the decline in the value over the effective life of the renovation. For example, a rental property improvement that could be claimable by a property investor could include a bathroom getting retiled.
Maintenance and repairs however can be claimed differently, with all records kept containing accurate information on that work. This will assist in working out the depreciation of assets of the property.
A depreciation schedule is a report that outlines all available tax depreciation deductions for a residential investment property or commercial building. These depreciations can be claimed in your tax return each financial year and could help you to save thousands.
Investors who renovate and lodge their tax returns prior to ensuring that they have updated their tax depreciation schedule correctly could get caught out in making a mistake between the two types of work. Those who fail to properly record rental property improvements in a tax depreciation schedule risk making inaccurate claims and inviting the scrutiny of the Australian Taxation Office (ATO).
Your tax obligations and entitlements when renovating your property may change depending on how you go about it. Depending on whether you are a personal property investor, engaged in the profit-making activity of property renovations or carrying on a business involved in renovating properties, you will have to abide by certain requirements outside of maintaining the depreciation schedule.
Personal Property Investor
As a personal property investor engaging in renovations to a property:
- The net gain or loss gained from the renovation is treated as a capital gain or capital loss.
- Capital gains tax concessions such as the CGT discount and the main residence exemption may reduce your capital gain.
- You will not be required to register for GST as you are not conducting an enterprise.
Profit-Making Activity of Property Renovations
Consider yourself a ‘flipper’ of properties? You will be required to:
- Report your net profit or loss from the renovation in your income tax return as a result of the profit-making activity.
- Have an Australian business number.
- May be required to register for GST if the renovations are substantial.
In The Business Of Renovating Properties
If you are carrying out the business of renovating or flipping properties:
- They are regarded as trading stock (even if you live in one for a short period of time.
- The costs associated with buying and renovating them form part of the cost of your trading stock until they are sold.
- You calculate the business’s annual profit or loss in the same way as any business with trading stock
- You’re entitled to an Australian business number (ABN)
- You may be required to register for GST if the renovations are substantial.
In this instance, CGT does not apply to assets held as trading stock. Similarly, the CGT concessions (such as the CGT discount, small business concessions and main residence exemption) will not be applicable to the income gained from the sale of the properties.
If you are concerned about any of the topics discussed above, or want to know more about claiming property improvements on your tax return, you can come and speak with us for further information and advice.
Did you know that salary packaging could reduce the amount of income tax you may have to pay as an individual?
If you agree to salary packaging, you and your employer can “package” your salary into an arrangement of less income received after-tax, in return for your employer paying for benefits out of your pre-tax salary (which could include things such as a car or a phone).
If you, for example, received a yearly salary of $100,000, you and your employer could come to an arrangement of packaging the salary into $80,000 per year as income, and $20,000 as a car benefit. What this arrangement does is reduce the actual taxable income to $80,000, which may benefit you in that you may end up paying less income tax.
Benefits that you may be able to receive in a salary packaging arrangement can include fringe benefits, exempt benefits and super. In the case of fringe benefits, your employer will pay Fringe Benefit Tax on those benefits, whereas exempt benefits will not require them to do so.
If you elect instead to put some of your pre-tax income into your super, your fund will tax those contributions at 15%, which is the same as what your employer contributions are taxed at. This may end up being taxed less than your actual marginal tax rate.
Salary packaging is generally more effective for those who earn a salary in the middle to higher income brackets. If you want to find out whether or not salary packaging may be a viable option for you, you should seek out professional tax advice. You can come and speak with us to discuss this as an option for you.
Small businesses are facing a set of challenges once again that can make fulfilling tax obligations seem like a daunting task. However, as a small business, capital gains tax concessions on assets used to conduct your business may be of interest to you. These assets are known as “active assets” and can, for example, be a tangible asset (such as commercial property), or an intangible asset (such as goodwill).
The turnover threshold for such CGT concessions is $2 million, according to the ATO. If your turnover is more than $2 million, then you need to satisfy an assets test.
There are stringent eligibility requirements and conditions that you must meet in order to access these concessions.
If you have owned an active business asset, you may only be required to pay tax on 25% of the capital gain when the asset is disposed of.
If you are 55 years of age or older, and are retiring or are permanently incapacitated (and have owned an active business asset for at least 15 years), you may not have to pay any CGT when disposing of an asset by sale, gift or transfer. You might also be able to contribute the amount that you make from this exemption to your super fund without affecting your non-concessional contributions limits (you can speak with us about this if you are unsure about this process).
If you are under 55, the taxable 25% of the disposal of an asset can be paid into a complying fund or a retirement savings account. There is then a full CGT exemption on the sale of an active business asset of up to $500,000 (the lifetime limit). Any amounts earned from this exemption to CGT may be able to be paid into your super fund without affecting the non-concessional contributions limit).
Disposing of an active asset, but are going to buy a replacement asset or improve on an existing one? You can defer your capital gain in this instance until a later year. The replacement asset can be acquired one year before or up to two years after the last CGT event in the income year that you choose the roll-over for.
If the asset is a share in a company or an interest in a trust, there will be additional conditions that you will be required to meet as well. If you are a small business, there are other CGT exemptions, rollovers and concessions specific to small businesses that you may be able to access, if you meet the eligibility criteria. These small business CGT concessions will reduce the taxable capital gain and in some cases result in no tax being paid at all on the gain.
Speak with us to find out what you may be entitled to when it comes to CGT and your business to ensure that you are doing the right thing with your tax obligations after selling an asset.
Did you know that making a charitable donation isn’t just contributing towards a better outcome, it could also be tax-deductible?
Every $2 donated under the right set of circumstances counts against your taxable income, and though many charitable donations and gifts can be tax-deductible, not every donation will count.
If you are planning on claiming a tax deduction on any donations that you have made this year, it’s best to bear in mind these tips from the Australian Taxation Office (ATO).
A common misconception made by Australians is that every charitable donation or gift is tax-deductible. You need to ensure that the donation that you are attempting to claim is endorsed by the ATO as a deductible gift recipient (DGR). This is an organisation or fund that is endorsed by the ATO to receive tax-deductible gifts or donations – not all charities and not-for-profits are classed as DGRs.
You must also be able to prove that you made the donation – having evidence in the form of a receipt directly from the organisation, or third-party receipts (if the receipt identifies the DGR and states the fact that the amount is a donation to the DGR).
One exception to this rule, generally, is that of bucket collections. If you made a contribution or donation of $2 or more to “bucket collections” conducted by an approved organisation for natural disasters, you can make a claim for a tax deduction of up to $10 for the total of those contributions without a receipt.
Not sure if a claim you’d like to make in your tax return is tax-deductible, or want a little extra help determining the eligibility of a donation for a tax deduction? We are here to advise and assist you.
Have you, over the course of the past financial year, received a government assistance payment, support payment or disaster relief supplement?
There have been a number of cases where people who received financial assistance from the government were hit with additional owed tax to the ATO, due to their payments increasing their income threshold.
When lodging your individual income tax return this year, you will need to declare certain Australian Government payments, pensions and allowances in your tax return. If you did not elect to pay tax on those payments, this could affect the payment received from your return (or mean that you actually owe money to the ATO).
Some of the taxable payments that you may need to include in your tax return include:
- the age pension
- carer payment
- Austudy payment
- JobSeeker payment
- Youth allowance
- Defence Force income support allowance (DFISA) where the pension, payment or allowance to which it relates is taxable
- veteran payment
- invalidity service pension, if you have reached age-pension age
- disability support pension, if you have reached age-pension age
- income support supplement
- sickness allowance
- parenting payment (partnered)
- disaster recovery allowance (but not in relation to 2019–20 bushfires)
Most of these pensions, payments and allowances will pre-fill in your tax return if you lodge online. You will need to make sure that all information submitted is correct though. Verify the pre-filled information with your own records to ensure that you are lodging the right information, and not missing anything.
Do you have concerns about your tax return this year? Uncertain about deductions, or if certain taxes will apply to you? Want a little more help or information about your government payments?
Be prepared for your individual income tax return with a consult with us. We can advise you on your tax returns, and potentially help you minimise the tax you will end up paying.
The ATO is looking to make tax season a little bit easier this year, particularly in light of the unique but significant challenges that Australians have been facing over the last year, and are continuing to face. If you received a financial assistance payment, grant or scheme package during the 2020 financial year, you need to be aware of your taxable requirements. There are different tax treatments for different payments that you may have received.
Payments that were received from Jobkeeper as an employee will be automatically included in your income statement as either salary and wages, or as an allowance. Sole traders who have received a Jobkeeper payment on behalf of their business will need to include the payment as assessable income for the business.
All information will be included in your tax return (in the Government Payments & Allowances question) when ready. Lodging your return prior to the information being available will require you to add it yourself. Leaving out income will slow your return, so it is important to ensure that you have all of the information when lodging.
Stand Down Payments
If you were the recipient of a one-off or regular payment from your employer after being temporarily stood down due to COVID-19, these payments will be automatically included in your return as they are taxable.
COVID-19 Disaster Payment For People Affected By Restrictions
The Australian Government (through Services Australia) COVID-19 disaster payment for those who were affected by restrictions is a taxable payment. This must be included when lodging your tax return.
Tax Treatment Of Other Assistance Payments
The tax treatment of other assistance payments may vary according to what is required and how the income is assessed as. It is best to double-check on the ATO’s website directly to determine how different disaster payments may impact your return.
Early Access To Superannuation
If you received early access to your superannuation under the special arrangements resulting from COVID-19, you do not need to declare that amount in your tax return. Any eligible amounts withdrawn under this program are tax-free.
If you require assistance with determining what is taxable income and what is not, or you’re not sure what payments that you received may be applicable to the ATO’s different tax treatments, come speak with us. We’re here to help.