TAX AND TACOS Taxation basics for recent graduates The information - - PowerPoint PPT Presentation

TAX AND TACOS

Taxation basics for recent graduates

DISCLAIMER

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 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.

CONTENTS

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

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?

THE BASICS

WHO PAYS INCOME TAX

Australian tax residents

 Taxed on worldwide income  Receive tax-free threshold  May also have to pay Medicare levy

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?

THE BASICS

HOW IS TAX CALCULATED

Don’t forget your HECS/HELP Loan!

These rates are added to the before mentioned tax rates

THE BASICS

EXAMPLE

THE BASICS

APPLYING FOR A TFN

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  Apply by post

Foreign passport holders, permanent migrants and temporary visitors

 Apply online via ATO website

THE BASICS

HOW DO YOU PAY IT?

Annual Income Tax Return is lodged with the ATO 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

EMPLOYMENT

SUPERANNUATION

• 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
• n a quarterly basis
• Employer will give you a super choice form
• 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

EMPLOYMENT

Tip – Keep track of your deductions as you go, this way you ensure you are not paying any more tax than required.

QUESTIONS?

Questions?

STARTING YOUR OWN BUSINESS

QUICK REVIEW OF BUSINESS STRUCTURES

Sole Trader

 Easy to understand and manage  No asset protection  Tax rate as per individual tax rates

Company

 More difficult to understand  More costly to set up and administer  Asset protection  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

STARTING YOUR OWN BUSINESS

APPLYING FOR AN ABN

You are required to have an ABN if your turnover (sales) is over $75,000 If you do not have an ABN purchasers are required to withhold 47% of the sale (and forward on to ATO) An ABN can be applied for on the Australian Business Register (ABR) online at abr.gov.au

STARTING YOUR OWN BUSINESS

GST

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 You are required to be registered for GST if your turnover is over $75,000 You can elect to register for GST if your turnover is 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 OWN BUSINESS

PAYG INSTALMENTS AND INCOME TAX

Remember as a business owner income you receive has not had any tax withheld (in most cases) 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.

STARTING YOUR OWN BUSINESS

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.

QUESTIONS?

Questions?

DEDUCTIONS

EXPLAINED

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

WHAT YOU CAN CLAIM

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

Can only claim the portion that relates to your income earning portion.

DEDUCTIONS

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

 Running Costs  Internet  Computer expenses and consumables

 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)

DEDUCTIONS

WHAT YOU CAN CLAIM

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. You have two options to claim motor vehicle expenses: 1. Cents per kilometre method (maximum 5000km) 2. Logbook method (additional substantiation)

DEDUCTIONS

WHAT YOU CAN CLAIM

Travel Expenses Out of pocket expenses for overnight travel such as accommodation and meals Protective Clothing or Uniform 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.

DEDUCTIONS

WHAT YOU CAN CLAIM

Other expenses Union Fees Home office expenses

• Either 45c per hour
• Actual costs method

Tools and replacements Subscriptions and publications Mobile Telephone costs

 Max $50 without additional record keeping  4 week representative logbook to claim actual costs

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?

APPS AND SOFTWARE

Lodgement of tax return

 myTax – Australian Taxation Office (online)

Taxation management

 MyDeductions – Australian Taxation Office (app)

 Keep track of deductible expenses  Keep track on business income and deductions  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

BRINGING IT ALL TOGETHER

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  Ensure you fill out TFN declaration correctly  Provide Superannuation choice form  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

BRINGING IT ALL TOGETHER

Did you miss some deductions last year?

 You have a 2 year amendment period to amend lodged tax returns  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?