TAX AND TACOS Taxation basics for recent graduates
The information discussed and presented today is provided for general information only and should not be taken as constituting professional advice Vivid Chartered Accountants are not financial advisers DISCLAIMER and cannot provide specific or general financial advice. Vivid Chartered Accountants is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided in this seminar.
The Basics What is income tax? Who pays it? How is it calculated? Applying for a Tax File Number (TFN) How do you pay it? Employment Filling out a TFN declaration Superannuation CONTENTS Starting your own business Business Structures (Very quick overview) Applying for an ABN GST PAYG Instalments and income tax Deductions Explained What you can claim Apps and software Bringing it all together
THE BASICS WHAT IS INCOME TAX?
Australian tax residents Taxed on worldwide income Receive tax-free threshold May also have to pay Medicare levy THE BASICS WHO PAYS INCOME TAX Foreign tax residents Taxed on income earned in Australia Not entitled to the tax-free threshold Don’t pay the Medicare levy
THE BASICS HOW IS IT CALCULATED?
Don’t forget your HECS/HELP Loan! THE BASICS HOW IS TAX CALCULATED These rates are added to the before mentioned tax rates
THE BASICS EXAMPLE
Australian residents Fill out online for, print and take it to Australia post for an interview Apply in person at Centrelink by completing paper form THE BASICS Apply by post APPLYING FOR A TFN Foreign passport holders, permanent migrants and temporary visitors Apply online via ATO website
THE BASICS Annual Income Tax Return is lodged with the ATO HOW DO YOU PAY IT? and taxable income is reported - This can be done online through ‘myTax’ Tax payable is calculated by the ATO The ATO issue you a ‘Notice of Assessment’ for the amount payable less any withholdings or credits you have received. If you have had more tax withheld during the year you receive a refund.
Questions? QUESTIONS?
EMPLOYMENT TAX FILE NUMBER DECLARATION
• Employer must pay 9.50% superannuation if you earn more than $450 per month and aged 18 or over • Employers are legally required to pay your superfund on a quarterly basis EMPLOYMENT • Employer will give you a super choice form SUPERANNUATION • You should check to ensure your employer is actually paying your super. • If your employer is not paying super you can report them to the ATO
Tip – Keep track of your deductions as you go, this way you ensure you are not paying any more tax than required. EMPLOYMENT
Questions? QUESTIONS?
Sole Trader Easy to understand and manage No asset protection Tax rate as per individual tax rates STARTING YOUR Company More difficult to understand OWN BUSINESS More costly to set up and administer Asset protection QUICK REVIEW OF BUSINESS STRUCTURES Flat tax rate of 27.50% or 30% Trust More difficult to understand More costly to set up and administer Can provide asset protection Distribution of income to beneficiaries
You are required to have an ABN if your turnover STARTING YOUR (sales) is over $75,000 If you do not have an ABN purchasers are required to OWN BUSINESS withhold 47% of the sale (and forward on to ATO) APPLYING FOR AN ABN An ABN can be applied for on the Australian Business Register (ABR) online at abr.gov.au
Goods and Service Tax (GST) is a tax that is paid by the end user Businesses collect this tax on behalf of the government and forward on to the ATO You cannot charge GST if you are not registered for GST STARTING YOUR You are required to be registered for GST if your OWN BUSINESS turnover is over $75,000 You can elect to register for GST if your turnover is GST under the $75,000 threshold If you are registered for GST you can claim GST you paid on business expenses back from the ATO Businesses report what GST they have charged and collected and what GST they have paid on expenses to the ATO by way of a Business Activity Statement (BAS)
STARTING YOUR Remember as a business owner income you receive has OWN BUSINESS not had any tax withheld (in most cases) PAYG INSTALMENTS AND INCOME TAX Therefore you will likely have a large tax payable amount for your first year of business Once you lodge your first tax return as a business the ATO will likely enter you for PAYG Instalments PAYG Instalments are a prepayment of the current year tax and act as a credit when working out the remaining tax to be paid on lodgement of your tax return.
Hot tip – if you are starting your own business, have a separate bank account for your business transactions and a separate bank account to save for your tax. This will make tax compliance and management of your business easier. STARTING YOUR OWN BUSINESS
Questions? QUESTIONS?
Deductions reduce your taxable income and therefore reduce your tax payable or increase your tax refund. Remember a tax deduction does not equal money back in your pocket. The tax benefit depends on the tax bracket you are in Example: DEDUCTIONS EXPLAINED
In order to claim a tax deduction: • You must have spent the money yourself and not been reimbursed • Must directly relate to your income • Must have a record to prove it DEDUCTIONS Can only claim the portion that relates to your income earning portion. WHAT YOU CAN CLAIM
Self Education Expenses In general, the ATO will allow you to claim deductions for education costs if you are studying a course that will maintain or improve your skills in your current occupation: Motor Vehicle Costs Home office costs DEDUCTIONS Running Costs Internet Computer expenses and consumables WHAT YOU CAN CLAIM Course fees (not the loan repayments) Cannot claim if under a commonwealth supported placement (most bachelor courses) Ok to claim if not on a commonwealth supported placement Ok to claim if you put these course fees on a loan arrangement such as FEE-HELP If your loan is HECS-HELP then your placement was commonwealth supported Textbooks Stationery Travel costs Depreciation (on laptops/computers or other assets required)
Motor Vehicles If you use your vehicle for work purposes (generally does not include travelling to and from your workplace) then you are entitled to a tax deduction for that travel. DEDUCTIONS You have two options to claim motor vehicle expenses: 1. Cents per kilometre method (maximum 5000km) WHAT YOU CAN CLAIM 2. Logbook method (additional substantiation)
Travel Expenses Out of pocket expenses for overnight travel such as accommodation and meals DEDUCTIONS Protective Clothing or Uniform WHAT YOU CAN CLAIM Costs to purchase uniform or protective clothing required to do your work are deductible Laundry of protective clothing or uniform is also deductible. $1 per wash or 50c per wash if mixed with personal clothes.
Other expenses Union Fees Home office expenses • Either 45c per hour • Actual costs method Tools and replacements Subscriptions and publications DEDUCTIONS Mobile Telephone costs Max $50 without additional record keeping 4 week representative logbook to claim actual costs WHAT YOU CAN CLAIM Home Internet Computer consumables Work related assets (May have to depreciate) Donations to DGRs Cost of managing your tax affairs Personal superannuation contributions Income Protection
Questions? QUESTIONS?
Lodgement of tax return myTax – Australian Taxation Office (online) Taxation management MyDeductions – Australian Taxation Office (app) APPS AND Keep track of deductible expenses Keep track on business income and deductions SOFTWARE Prefills in to myTax or you can send directly to your tax agent Vehicle Logger (app) Helps with keeping 12 week logbook Uses GPS Xero/Quickbooks/MYOB Bookkeeping software for businesses Downloads bank transactions directly accounting platform Payroll and superannuation features
2019 tax returns can start being filed with ATO from 1 July Put together your deductions – Don’t forget study expenses Put together your income Download myTax software – prefill your information Confirm prefilled information and add any missing income and deductions myTax will give you a tax estimate If you are starting employment for the first time Apply for TFN now BRINGING IT Ensure you fill out TFN declaration correctly Provide Superannuation choice form ALL TOGETHER Review superannuation fund regularly Keep track of your deductions via myDeductions app If you are starting a business Determine business structure Apply for ABN on abr.gov.au Determine if you need to register for GST Keep separate bank account for business and tax Remember to save for your tax Keep track of your deductions via myDeductions app or via accounting software – such as Xero
Did you miss some deductions last year? BRINGING IT You have a 2 year amendment period to amend lodged tax returns ALL TOGETHER Can do this via a paper amendment or through a tax agent You will receive the tax benefit of those deductions back from the ATO
Questions? QUESTIONS?
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