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SALES REPRESENTATIVES

TAX DEDUCTIONS

30 June 2016 & 2017

 

Travel to and from work is usually not a tax deduction.

Some exceptions are:


1. Carrying bulky equipment with no secure lockup at work.

 

(Bulkiness of equipment is determined by size & weight.  For tradesmen it could mean a minimum of a 40 kg tool box plus other items e.g. nail guns, drills, drop saws, materials, etc. Bulkiness is also determined by size e.g. Ladders, bench horses, large oil drums, spare tyres, etc.) If in doubt ask for a private ruling.


2. Travel between two places of work.


3. Travel to attend meetings and then to home or work.


4. Travel from home or work to see clients and then back to home or work.

 

5. Some travel to a place of education.

 

6. When you travel overnight for work.

This only applies to motor vehicles whose carrying capacities are 1 ton or less or fewer than 9 passengers.


Most of my clients use the ‘log book method’ or the set rate per kilometre method’.
 

Method 1

LOG BOOK METHOD

You must keep a log book for 12 weeks for each car once very 5 years.

You must start a new log book when you change cars or the business % changes by more than 10%.

You must have written evidence for registration, insurance, services, repairs, depreciation, interest, lease payments, RACQ, car washes etc.

PLEASE SUMMARIZE THE FOLLOWING:

Motor vehicle - 30 June 2016 and 30 June 2017 odometer readings

Motor vehicle - Log book % and business kilometres travelled

Motor vehicle - Fuel

Motor vehicle - Registration

Motor vehicle - Insurance

Motor vehicle - Interest or leasing expenses (Please provide hire purchase or loan agreement)

Motor vehicle - Repairs

Motor vehicle - Depreciation (Please provide date of purchase) 25% diminishing value method

If purcased between 12th May 2015 and 30 June 2017 and < $20,000 then depreciation is 100%.

Motor vehicle - Breakdown service e.g. RACQ

Motor vehicle - Car washes

Motor vehicle - An extended warranty is deductible spread over the period that the warranty applies. e.g. If you

have a factory warranty for 3 years then you buy an extended warranty for 3 years. You may claim an apportioned

tax deduction over years 4, 5 and 6.

 

You may claim $200 worth of items costing < $10 without receipts.

You do not need receipts for fuel based on a reasonable estimate of the cost per business kilometres travelled.

e.g. 500 kms per tank with an average fill up of 50 litres = 10 kms per litre.

Therefore 15,000 kms / 10 kms = 1,500 litres x $1.25 (average petrol cost per litre in QLD) = $1,875

 

Method 2

SET RATE PER KILOMETRE METHOD

Motor vehicle tax receipt exception: ‘set rate per kilometre method’ 66c per kilometre x up to 5,000 kms.

You must be able to work out your estimate by using a diary or regular pattern of travel.

This means that the maximum claim using this method will be 66c x 5,000 kms = $3,300.


 

Example:

Charlie is a sales representative who visits clients at various locations and cities. Charlie has kept a log book for 12 weeks which shows his work travel is 95%. Charlie purchased a Toyota Hilux which has a 2 litre engine on 01/07/2014 for $25,000 which he financed through a hire purchase chattel mortgage at an interest rate of 6%. His odometer reading on 30 June 2017 was 25,000 kms and his car does 500 kms on a 55 litre tank of petrol. The average cost for petrol in QLD was $1.25 per litre.

 

Method 1 - Log Book

Fuel 25,000 kms/(500kms/50 litre tank) x $1.25 per litre = $3,125

Registration $680

Insurance $650

Interest on loan  $25,000 x 6% = $1,500

Repairs, services & tyres $900

Depreciation $25,000 x 25% = $6,250

Breakdown service RACQ $96

Car washes $120

Total                                       $13,671  x 95% Log book = $12,654.95

E.g. Tax refund x 34.5c (tax rate $37,000 to $80,000) = $   4,365.96

 

Method 2 - Set rate per kilometer

Business kms 25,000 kms x 95% = 23,750 kms

Limited to 5,000 kms x 66c = $3,300

E.g. Tax refund x 34.5c (tax rate $37,000 to $80,000) = $   1,138.50

 

Charlie chooses Method 1 because he will receive the largest tax refund.

 

HOME OFFICE

Method 1

You may claim home office electricity based on floor area e.g. 5%. x $400 (electricity bill per quarter) x 4 = $80. This area must be for the sole purpose of home office. It cannot be for multi-use e.g. dining room table.

Furniture, desks, fax machines, filing cabinets, book shelves, pictures, carpets, blinds, etc may be depreciated at usually 20%.

Depreciable Items < $300 may be 100% depreciated.

E.g. desk $250 x 100%, chair $120 x 100%, carpet $1,000 x 20%, blinds $600 x 20% = $690

Method 2

You may use the ATO 45c per hour rate to claim electricity, gas and depreciation of furniture. You must keep a 4 week diary.

E.g. 45c x 20 hours per week x 52 weeks = $468.

 

WORK EXPENSES

iPhone, mobiles & home phone

Computers - iPads, Macs, laptops & desktops

Computer supplies

Stationery - Cartridges, diaries, pens & office sundry

Internet

Self education, conferences and courses.

 

PRIVATE USE APPORTIONMENT

If there is private use (other than incidental use) a 28 day diary is required each financial year.

A diary can be a simple A4 pad with a line in the middle with work & private on opposite sides.

 

RECORDS

You may claim $200 worth of items costing < $10 without receipts.

 

PLACE OF BUSINESS AT HOME

You may claim a percentage of rent, interest, home depreciation, rates, water, insurance, repairs, cleaning, pest control, gardening, etc. based on floor area.

This would apply to the following:

A small business operator whose main office is in their home.

A tradesperson who has their workshop at home.

A doctor or dentist who has their surgery or consulting room at home.

 

CAPITAL GAINS TAX IMPLICATIONS

You will lose a proportion (based on floor area and time operating at home) of your capital gains tax main residence exemption due to your income producing activity.

 

SUN PROTECTION AND SUN GLASSES

Includes sun glasses, sun screens and hats.

You do not need receipts for up to $200 of items that cost less than $10. The $200 is a total for the whole tax return.

 

TOLLS & PARKING

You do not need receipts for up to $200 of items that cost less than $10. The $200 is a total for the whole tax return.

 

LICENSES

The license or renewal expenses must relate to your current income producing activity not income that will be made in the future.

The initial cost of some licenses may not be a tax deduction. e.g. the initial cost of obtaining a truck, earth moving or heavy machinery license as the expense has occurred at a point too soon.

 

COURSES

Courses include fees (but not HECS), books, laptops, internet, stationery, home office expenses, some travel to a place of education.

You do not need receipts for up to $200 of items that cost less than $10. The $200 is a total for the whole tax return.

The course must relate to your current income producing activity, not income that will be made in the future. e.g. Medical School expenses are not a tax deduction for a doctors income in the future.

If your course is run by a university, TAFE or college you must reduce your expenses by the first $250.

 

SECURITY/CRIMINAL CHECKS ATO TR 98/6 PARA 177

Security checks are usually not deductible as the expense happens at a point too soon before the income is earned.

Renewal of criminal checks may be deductible as you are currently earning income e. g school teacher's blue cards.

The ATO allows the preparation of resumes and travel to attend an interview as a tax deduction against Centrelink income.

 

OVERNIGHT TRAVEL & OVERTIME MEAL EXPENSES

REASONABLE OVERNIGHT TRAVEL ALLOWANCE

CONDITIONS - OVERNIGHT TRAVEL ALLOWANCE

1. You must be paid a bone fide travel allowance -

A 'bona fide travel allowance' is an amount that could reasonably be expected to cover accommodation, or meals or expenses incidental to travel. This does not require that the amount paid by the employer must equate dollar for dollar to the employee's actual expenditure. However there must be relativity between the quantum of the travel allowance and the purpose for which it is said to be paid. A token amount, or a general payment, is not a bona fide travel allowance. In this context the words 'cover' and 'covered' refer to the nature of the expenses for which the allowance is provided, that is the subject matter to be dealt with by the allowance paid, namely accommodation and applicable meal expenses. (See Re McIntosh and F.C. of T. [2001] AATA 702; 47 ATR 1242).

For accommodation, meal and incidental expenses to be considered under the exception from substantiation, the meal allowance must be a bona fide travel allowance (refer to TR 2004/6) paid or payable under a law of the Commonwealth or of a State or Territory, or an award, order, determination or industrial agreement in force under such a law (section 900-60 of the ITAA 1997).

Historically in some Enterprise Barganing Agreements negotiated between Employer's Human Resources Departments and Unions there are no Bone Fide Travel Allowances for overnight meals. Instead there may be references to sleepover, inconvience or accommodation allowances. 

e.g. Disability and aged carers where only a sleepover allowance is mentioned (this is not a meal allowance even though their employers must provide storage and cooking facilities for the carers food). The ATO auditors are only accepting actual receipts as tax deductions.

Overnight truck drivers where only accommodation allowances are refered to (this legislation is 30 years out of date as most drivers sleep in their cabs). Fortunately the ATO auditors are currently treating the truck driver's accommodation allowance as a meal allowance.

These EBAs have not kept up with the times as it is too onerous to expect  employees to keep records for 900 meals. The Fair Work Australia legislation needs to be changed to reflect modern times.

Read your EBAs carefully and specifically review the definitions of all allowances that you receive. It must state that the allowance is for overnight meals, accommodation and incidentals. 

2. You must be an employee (not a sole trader or partnership).

3. You must be away from your ordinary residence. You must sleep away from your home.

4. You must not stay in one town for more than 21 consecutive days (Roads and Traffic Authority of NSW case; MT 2030).

5. You must be able to prove a regular pattern of expenditure and have receipts for 28 days. Try to keep as many receipts as possible. Take photos of your receipts using your mobile.

If you travel internationally then 28 days of receipts for each country that you visit.

6. You will need a letter from your employer stating that the payment is a bona fide travel allowance paid for meals, incidentals and/or accommodation, the amount of the allowance, the number of allowances paid and the year in which it is paid.

7. Your claims have to be consistent with the employees occupation and type of expense.

 

You must be able to explain to the ATO how you spent your meal & incidentals allowances and keep diary notes and receipts for 28 days.

If you travel internationally then 28 days of receipts for each country that you visit.

Many clients use their mobiles to photograph their receipts then email them to their laptops / iPads / Desktop Computers.

E.G. 

Breakfast - hot breakfast $15, coffee $4 = $19

Lunch - counter lunch $15, coffee $4 = $19

Dinner - steak $25, schooners $15 = $40

Snacks - chips & bars $10, red bulls $18, water $5 = $15

Incidentals - toiletries $6, newspaper $2, magazines $8, in-house DVD $6, paperback book $20 = $42

Total = $135

 

ATO reasonable overnight travel allowances for meals & incidentals

As per Tax Determination 2016/13 for the year ended 30 June 2017.

 

Salaries                            < $117,450                  < $209,001

 

Australia                          $125.95 or $116.45        $153.85 or $133.45

                                           

Truck Drivers                   $  97.40                           $ 97.40

 

International

 

Cost Group 1                   $ 85.00                            $100.00

Iraq, Nauru

 

Cost Group 2                   $125.00                            $145.00

Nepal

 

Cost Group 3                   $165.00                             $190.00

Thailand, Indonesia, Fiji

 

Cost Group 4                   $185.00                             $215.00

New Zealand, Papua New Guinea,

Manus Island

 

Cost Group 5                   $240.00                             $290.00

Singapore, UK, Hong Kong, China,

USA, Italy, France, Germany

 

Cost Group 6                   $285.00                             $345.00

Japan, Monaco, Bermuda,

 

 

 

REASONABLE OVERTIME MEAL ALLOWANCE - $29.40

e.g.
Some employees are paid $15 overtime meal allowance per meal. They may claim the difference between $29.40 (ATO rate) - $15.00 = $14.40 if they satisfy the above conditions and include the allowance as assessable income in the tax return.

You must be able to prove to the ATO a reasonable pattern of expenditure using actually receipts or other.


Google ATO reasonable travel & overtime meal allowance

 

NEW ATO GUIDELINES CONSULTAION PROCESS UNDER WAY

[201529] Domestic travel allowance expenses – reasonable rates and safe harbours for meals, incidentals and accommodation

David,

Thanks for your email.

The ATO is aware of the current dilemma that many taxpayers are confronted with when claiming for meals and incidentals associated with travelling on work.

A person can only claim what they incurred. But they don’t need to keep receipts if not claiming more than the Commissioner’s published rate. So how do they work out what they incurred? And how do they satisfy the Commissioner that they have only claimed what they incurred?

My advice to people in this situation is to summarise a daily or weekly meal cost and use that as a guide. They may be able to use bank account withdrawals or credit card statements to refresh the memory. It would be rare for the amount to come anywhere near the Commissioner’s rate unless such travel is infrequent and they live it up when they travel.

The ATO has publicly noted that it is consulting on the issue and I am the contact. I am awaiting an internal report based on data analysis before I actually have any external conversations. I have been advised that the report is almost ready.

What we are hoping to achieve through the consultation is a safe harbour amount that requires no records and some rules for records to keep when substantiation is not required and you are claiming between the safe harbour amount and the Commissioner’s rate.

Please call me if you wish to discuss.

Michael Majoor 
Director, New Measures & Priority Issues, Small Business/Individual Taxpayers

Australian Taxation Office
Phone: 02 9354 3158 | Facsimile: 02 9685 8666

I am very interested in Michael Majoor's reference to safe harbour amounts where no receipts are required. You will notice that Michael thinks that this amount will be less than the Commissioner's rate.


Google ATO reasonable travel & overtime meal allowance

 

ATO Issues

The Australian Taxation Office have informed me that you may claim up to the maximum Australian Bureau of Statistics Public Service Rates (TD 2014/19), if the allowance does not appear on the payment summary as long as the allowance is shown as assessable income in the tax return without having to substantiate expenses as per Tax Ruling 2004/6 paragraph 11, 15, 25, 31, 37 & 39. 'Where the allowance is not required to be shown as assessable income in the employee's tax return, and is not shown, a deduction for the expense cannot be claimed in the tax return.'

I  include the allowances not appearing on the payment summary as income at Item 1 Salary & wages - allowances on the tax return and claim the ATO rate at D2.

'The object of this ruling is so you can decide between either maintaining fewer records and claiming up to the reasonable amount for those deductible expenses actually incurred that are covered by the allowance or keeping written evidence to substantiate your claim. It is acceptable for a reasonable estimate to be the basis for claims having taken into account the taxpayer’s occupation and type of expenses that would usually be incurred. This is a significantly lesser requirement than the need to keep written evidence.'

Example:
Some employees are paid $60 overnight travel allowance per overnight. This may or may not be on their payment summaries. If not on their payment summary. They must include the allowance as income $60 then claim the $121.25(ATO rate) as a deduction = $61.25 net if they satisfy the above conditions.

Some truck drivers are paid $40 overnight travel allowance per overnight. This may or may not be on their payment summaries. If not on their payment summary. They must include the allowance as income $40 then claim the $93.40 (ATO rate) as a deduction = $53.40 net if they satisfy the above conditions.

 

ATO Website Example 4:

Michelle is a sales manager who travels from Brisbane to Melbourne to participate in a corporate planning seminar. She is away from home for two nights. Her employer pays her a travel allowance of $110 per night for accommodation, meals and incidentals and includes this on her payment summary. This amount is less than the reasonable allowance amount. Michelle's overnight travel expenses exceed her allowance. Michelle must include her travel allowance in her assessable income on her tax return as it is shown on her payment summary. She can claim a deduction for the overnight travel expenses she incurred without providing receipts or other written evidence, as long as her claim does not exceed the reasonable allowance amount.


 

OVERNIGHT TRAVEL EXPENSES WITH NO TRAVEL ALLOWANCE PAID

CONDITIONS

1. You must be stay overnight away from your usual place of work.

2. You must not stay in one town for more than 21 days (Roads and Traffic Authority of NSW case; MT 2030).

3. You must keep written evidence.

PLEASE SUMMARIZE THE FOLLOWING:

Air fares

Taxis or car hire

Accommodation

Meals

Water

Alcohol - e.g. wine & beer

Snacks

Toiletries

Reading materials - e.g. newspapers, magazines, books, etc.

Movies - e.g. DVDs, in-house, cinema, etc.

 

EMPLOYERS

Most employers usually pay for only accommodation and meals for their employees but there are many other incidental expenses that are not reimbursed, these are usually a tax deduction. e.g. alcohol, snacks, toiletries, movies, etc.

 

RECORD KEEPING

ATO Practice Statement LA 2005/7

In some circumstances BPAY and internet banking statements may include sufficient details to support the correctness of your claims. Suppliers may not issue a receipt containing all the information required by the substantiation legislation. However you may use a combination of other documents to support your claims.

In some cases if a credit card statement has the date of the transaction, the name of the supplier and the amount paid and you make a note on the credit card statement detailing the items purchased with their respective prices, the Tax Office may accept this as sufficient evidence. See examples below.

The above does not apply for EFTPOS transactions because bank statements do not show cash withdrawals separately.

Practice Statement LA 2005/7

Example 2 - use of a bank or credit card statement combined with other evidence

22. Kylie, having just started her first full time job as a clerical worker, purchased a pen for use at work costing $50 from a jeweller's shop. She also bought a pair of earrings for $100 and paid for both items on her credit card. Having never completed a tax return before, she was not aware that the pen would be a deductible expense. She did not request or receive a receipt.

23. When it was time to prepare her return, Kylie realised that she could claim her pen as a work expense. She had also incurred union fees of $478, which were recorded on her payment summary.

24. Kylie checked her credit card statement and found that it showed an amount of $150 and the name of the jeweller's shop. Initially, she decided it would be safest not to claim for the pen because she had no specific receipt and she was not sure of the exact amount. However, she had kept the box the pen had been packaged in, and upon checking the box for further information noted the $50 price sticker on the outside. Before lodging her income tax return, Kylie made a note on the credit card statement detailing the two items and their respective prices and kept the pen packaging along with her bank statement.

25. By keeping the pen packaging and the credit card statement including her notation, Kylie has ensured she has sufficient information to substantiate her expense. The ATO will accept the combination of the pen packaging and the credit card statement as sufficient evidence to substantiate her claim.

26. Had Kylie not kept the box that her pen came in with the price sticker on it, but was able to obtain from the jewellery store a written breakdown of how much she spent on each of the items, she would also have been able to make a note on her credit card statement detailing the two items and their respective prices, and would have had sufficient evidence to substantiate her claim. The ATO would accept the combination of the credit card statement containing Kylie's notation and the written price breakdown from the jewellery store as sufficient substantiation.

 

 


DISCLAIMER
The information provided in the above documents is not intended to be, nor should it be construed as tax advice. Any specific recommendation for a client can only be done after their individual circumstances have been determined by David Douglas Accountants.

We have clients from the following locations:

Brisbane, Gold Coast, Sydney, Newcastle, Cairns, Canberra, Melbourne, Adelaide, Perth, Darwin.

Other:

Brisbane, Albion, New Farm, Teneriffe, Newstead, Windsor, Wilston, Bowen Hills, Wooloowin, Herston, Lutwyche, Hamilton, Eagle Farm, Gordon Park, Fortitude Valley, Clayfield, Ascot, Hendra, Nundah.

Morayfield, Burpengary, Caboolture, Bellmere, Wamuran, Narangba, North Lakes, Mango Hill, Kallangur, Dakabin, Deception Bay, Bribie Island, Elimbah, Kippa-Ring.

We do tax returns for individuals, trusts, companies, partnerships, contractors, ABNs and sole traders.

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