Tax training — what’s new this year
April 25th, 2007The big news is, of course, the superannuation changes.
Even though the bulk of these changes don’t come in this tax year (2006-07), we still need to know what the changes are and how they will influence our clients’ tax position.
More on the changes as we get further into the training.
Doing the advanced tax course. Is it fate, or carelessness?
March 29th, 2007The letter came last week. It was time to sign up again for tax schooling.
I had planned to repeat the intermediate course, just to be sure I had grasped all the details correctly.
I really wanted to spend time making sure I had all the details sorted out properly before I took the advanced course. The advanced course is shorter, more rushed, just an update on new information. We are supposed to know it all by now.
I raced down to collect my books and sign up. I could not believe there were so few spaces left. An extra class was allocated, but it was on a Wednesday night. So I booked in for Tuesday morning. The books hadn’t arrived yet. We would be given them in class. I can’t believe I was so disappointed at not getting my books. I had been hoping to get started on them before the class.
Back home, I looked at the start date. I had been booked into the advanced class. I rang up to change. Why would you want to do the intermediate? You ran the office last year yourself. You need the advanced.
Cab Sav says it was meant. She had wanted me to do the advanced anyway, so now I was. Looks like I will have a lot of work to do.
Child Care Benefit (CCB) Tax Offset
March 25th, 2007I want to talk a little about the 30% child care tax rebate that was brought in as a new tax offset last financial year. This offset confuses many people, including some tax preparers.
Approved care is formal child care including:
- Long day care
- Family day care
- In-home care
- Outside school hours care
- Vacation care
- Some occasional care services.
You must meet the following criteria when claiming a CCB.
- The care must be approved and registered. Registered, on its own, is not enough to be eligible for a rebate
- This care does not relate to the last financial year but the year before. i.e. If you are doing your tax return for the financial year from 01/07/2006 - 30/06/2007, then your child care rebate will relate to the year 01/07/2005 - 30/06/2006. (Confusing, isn’t it)
- Parents must either be working, performing voluntary work, looking for work, training or studying
- You can claim up to 50 hours of CCB per child per week.
Registered care is informal care provided by relatives, friends, nannies, some pre-schools and kindergartens and other outside school hours care. These are not always approved care by the Australian Government, so will not entitle you to the rebate.
The care provider must be registered with the Family Assistance Office to enable the you to claim the minimum CCB against the care fees charged.
The Family Assistance Office should be able to advise taxpayers if they are using an approved child care service.
The rebate is 30% of the taxpayers out-of-pocket expenses. Your total child care fees for approved care less the actual CCB entitlement.
Tax: if it wasn’t this serious it would be funny
March 17th, 2007An old accounting joke goes something like this:
A business man interviewing applicants for the position of divisional manager devised a simple test to select the most suitable person for the job. He asked each applicant the question, “What is two and two?”
The first interviewee was a journalist. His answer was “Twenty-two.”
The second was a social worker. She said, “I don’t know the answer but I’m glad we had time to discuss this important question.”
The third applicant was an engineer. He pulled out a calculator and showed the answer to be between 3.999 and 4.001.
The next person was a lawyer. He stated that in the case of Sage vs Bliss in 2003, two and two was proven to be four.
The last applicant was an accountant. The business man asked him, “How much is two and two?”
The accountant got up from his chair, went over to the door and closed it, then came back and sat down. He leaned across the desk and said in a low voice, “How much do you want it to be?”
Needless to say, the accountant got the job.
Sometimes, that joke could equally apply to a tax agent as to an accountant.
Tax is a serious business generally, so I thought it time to lighten up a little.
http://users.bigpond.net.au/renton/916.htm
http://www.workjoke.com/projoke43.htm
Spouse Super Tax Offset
March 8th, 2007What is the Spouse Super tax offset?
If you make contributions to a superannuation fund on behalf of your spouse, you may be entitled to a tax offset.
As always, there are certain criteria to meet:
- Your spouse’s assessable income, plus any reportable fringe benefits must be less than $13,800 (current as at 30/06/2006)
- Both the taxpayer and spouse must be Australian residents
- A rental loss will affect this, as it is generally added back into the income for this purpose.
Superannuation rules change all the time, so always check the current tax rules when claiming. Your tax preparer should have all the correct information at the time you complete your tax return.
Currently though, the superannuation tax offsest is calculate at 18% of contributions up to a ceiling of $3,000. The maximum tax offset therefore, is $540. To be able to claim the maximum offset, the spouse’s assessable income should be $10,800 or less, and the contributions need to be a minimum of $3,000.
If you are completing your own tax return, this is claimed at Item T7 on your return.
More on the Tax Course
February 20th, 2007Those of you who were thinking about doing the tax course contact your local H&R Block and ITP office as soon as possible. Courses have started. You may squeeze into a class if you are a week or so late, but will have to study hard to catch up if you miss the first couple of classes.
Something that was not mentioned in my earlier post on these courses is that the tax course itself is tax deductible. It goes under Item D10, Managing your tax affairs, on your tax return. Don’t forget to record your travel to and from the course as well.
And of course, keep all your receipts for both the course and your books and your stationery.
A lesson from Shane Warne—don’t forget your overseas income
February 15th, 2007Shane never seems to be out of the news, this time for supposed tax evasion. And not just Shane this time, but many of his Australian team mates as well.
This is a timely reminder that you cannot ignore income earned overseas if you also earn money in Australia. Many people think that because they earned income overseas and were taxed overseas, they do not have to declare it on their Australian tax return. Sadly, this is not true. See Tax implications of working overseas for more information.
Note that I am not talking foreign pensions here. That is a different subject entirely, and goes on a different place on the tax return.
Virtual tax?
February 13th, 2007”Virtual world: tax man cometh”
I liked the heading and thought I should add this article. When does a game or a hobby become a business?
http://www.theage.com.au/news/biztech/virtual-world-tax-man-cometh/2006/10/30/1162056925483.html
What is a tax offset?
February 7th, 2007A tax offset is a reduction in tax allowed to a taxpayer to provide tax relief.
To qualify, a taxpayer is generally in the lower income bracket, but this is not always the case.
The offset reduces the tax owing, not the taxable income, and can only reduce the tax to zero. It will not result in a refund. But there are always exceptions to any rule, and this is no different.
The exceptions are:
- 30% private health insurance rebate. If you don’t claim it when you take out your private health, you can claim it at tax time.
- The franking credit. Any excess imputation credits paid on dividends is refunded.
- Excess baby bonus is refunded
- Landcare and water tax offset can be carried forward to reduce a future tax liability. This is one claim I have never come across in all my tax years.
Tax credits do not reduce the medicare levy or HELP/HECS debt in most cases.
Some tax offsets need to be calculated, others the ATO will calculate bases on the information you have entered on your tax return.
There are four groups of tax offsets.
Dependent tax offsets
- Spouse (no child or student)
- Child-housekeeper
- Housekeeper
- Parent or spouses parent
- Invalid relative
- baby bonus
- 30% child care rebate
Tax offset dependent on source and level of income
- Low income/beneficiary
- Pensioner
- Senior Australian
- Superannuation or annuity pension
- Franking offset
- Mature age worker
- Entrepeneurs tax offset
- Interest from land transport facilities tax offset scheme
Offsets for specifc expenditure
- Superannuation condtributions on behalf of spouse
- 30% private health insurance
- 20% on net medical expenses over $1500
- Landcare and water facility
- Heritage conservation work
Zone or overseas forces tax offset
- Members of armed forces stationed overseas or in remote areas
- If you live in a remote area
may be entitled to a zone offset.
Expenses relating to self education
February 2nd, 2007Over the last couple of blogs we have talked about who can claim self education expenses, and talked about tax tips and tax implications for students.
Suppose you have done your homework, and you know you can claim schooling. What exactly can you claim?
Claimable schooling expenses
This is a list of expenses a student may claim for self education. Your situation may differ, but this list should cover all the basics.
- Student union
- Course fees (eg:TAFE)
- Text books
- Stationery/photocopying
- Home office expenses for a room set aside for work related study purposes. (To cover heating, electricity, etc.)
- Interest on borrowing to purchase a computer or pay fees
- Depreciation on computers, printers, filing cabinets, desks, chairs, lights, etc.
- Ink cartidges & supplies for printers
- Secretarial expenses e.g. paying a professional to type assignments
- Software relating to study
- Accommodation and meal expenses if you are away from home overnight in connection with work related study activities
- Internet access
- Meals can be claimed if the self education is directly connected to you current work and you are away from home for one or more nights
- Travel
- home - school - home
- home - school - but not to work
- work - school - but not to home
- work - school - work
- Parking at the school
If a computer is not used solely for school work, it must be apportioned. This means you divide the amount between private use, self education and work.
Overseas Travel
You can claim a deduction for airfares as part of self education expenses when attending
- overseas study tours
- sabbaticals
- work related conferences or seminars
- an educational institution
If part of your trip is for a holiday, it must be apportioned. Meals are not claimable.
You CANNOT claim:
- HECS-HELP
- Financial Supplement Loan repayments
- Open Learning Agency of Australia basic charges
Only in special circumstances can fee-paying students claim a deduction.
Keep in mind that in many circumstances, the first $250 may not be claimable, depending on the type of expense and the category it falls into.
