Individual Tax Returns
Dealing with personal tax can be really time-consuming and plus, with the constant-changing of rules and guidelines about personal taxes, it can be a misery to keep track with the current requirements and how you can avoid paying unnecessary taxes.
There are 3 major questions that individual client would normally ask:
What is the tax rate
The current tax-free threshold is $18,200 and the highest marginal rate for individuals is 45%.
| Range of taxable income | Tax on this income | Effective tax rate |
|---|---|---|
| 0 – $18,200 | Nil | 0% |
| $18,201 – $37,000 | 19c for each $1 over $18,200 | 0-9.7 |
| $37,001 – $80,000 | $3,572 plus 32.5c for each $1 over $37,000 | 9.7 – 21.9% |
| $80,001 – $180,000 | $17,547 plus 37c for each $1 over $80,000 | 21.9 – 30.3% |
| $180,001 and over | $54,547 plus 45c for each $1 over $180,000 | 30.3 – 44.9% |
The rates in the table above are not inclusive of the Medicare levy, of which the standard is 2% of taxable income.
What is PAYG withholding
PAYG which stands for pay-as-you-go (PAYG) withholding, is a system where employees and some businesses pay small tax payments throughout the year so that it is easier for them to meet their overall tax liabilities at the end of the year. By having PAYG, employees or those businesses will not leave either large credit or liability.
You will have the obligation of withholding if:
- You have employees working with you
- You have other workers, such as contractors, and you enter into voluntary agreements to withhold amounts from your payments to them
- You make payments to businesses that don’t quote their Australian Business Number (ABN)
Tax Deductions for work-related expenses?
A tax deduction may be available for those expenses that you have incurred in order to carry out your work. In some cases, employees are required to incur costs (for example, costs of membership of a professional association for an accountant or engineer and costs to maintain skills and knowledge) and those costs are usually tax-deductible, but even if you voluntarily incur expenses to enable you to perform your work better or improve your work skills, those costs may also be tax-deductible.
To claim a work-related deduction:
- You must have personally paid an expense and you must not have been reimbursed for that expense by your employer
The expenses incurred must relate to your job
You make payments to businesses that don’t quote their Australian Business Number (ABN)
If you are claiming work expenses up to $300 you do not have to substantiate your claims (although you should still be able to show the ATO how you worked out your claims if required)
If you claim more than $300 of work expenses (excluding car or travel expenses), you must have records to show how much you spent and what you have purchased (for example, receipts, invoices, credit card statements). You do not have to substantiate expenses where your total claim is no more than $300.
You can record up to $200 of small expenses (i.e., no more than $10 per item) in a diary and do not have to substantiate those expenses.
There are special rules for claiming work-related car and travel costs, especially in relation to the documentation you may be required to keep, noting that if you are paid allowances by your employer, those allowances are usually treated as income for tax purposes.
The following are examples of work expenses you may be able to claim:
- Self-education expenses; being the costs of formal education courses associated with your employment or undertaken as a condition of your employment, with the expectation you will increase your (employment) income or your chances of gaining promotion in your field (courses to obtain entry to a professional association are normally deductible)
Attendance at work related seminars, conferences or education workshops, including travelling costs
Purchase of journals, magazines and/or books related to your employment
Professional Association & Union fees
Meals purchased while working overtime if you have been paid an overtime meal allowance or meals purchased when you are travelling away from home
Home office expenses, including a portion of home electricity and internet charges if you do some of your work from home
Costs of tools of trade (e.g., laptops, chef knives, carpenter tools, mechanic’s tools, stationery supplies) and equipment used in the course of your employment
Premiums for income protection insurance
Costs of purchasing and maintaining specific work clothing (e.g., special or mandatory work uniforms or protective clothing)
Examples of expenses that are generally NOT claimable include:
Cost of attaining a standard driver’s license, even if you require it for your work, although the costs of special endorsements, for example to drive heavy vehicles, may be deductible
Child care expenses
Grooming costs and the costs of conventional clothing (but in special circumstances, these costs might be allowable deductions – for example if you are a TV personality or celebrity and are required to have a much larger wardrobe than normal, some clothing costs could be deductible)
Cost of commuting to and from work (but if you are what is called an “itinerant worker”, for example an auditor who travels directly from your home to clients; you have to carry heavy items or tools to and from your workplace, home to work travel might be deductible)
Entertainment expenses, for example where you take a client to lunch (although in very limited situations a deduction might be available)
If you are not sure that you are claiming all work deductions you are entitled to claim, why not let our taxation team review your circumstances with you to maximise your allowable deductions within the taxation laws. It is also important to understand the rules around keeping documents (including electronic records) to support claims for work-related expenses, including the length of time you have to keep those documents and other supporting evidence.
If you have any questions, why not send an email to us or make an appointment to talk with us so that we can offer you personalised service and understandable tax advice.