Library

• Allowances paid to Employees
• Claiming Work Related Expenses
• Fringe Benefits Tax
• Fringe Benefits Tax and Christmas parties
• Fuel Tax Credits
• Home-based businesses
• How to determine if Workers are Employees or Independent Contractors
• Imputation System
• Keeping Travel Expense Records
• Meal Entertainment overview
• Superannuation Guarantee - Earnings Base & Ordinary Time Earnings
• Uniforms and Protective Clothing
• Work-related Car Expenses

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Allowances paid to Employees

Allowances and earnings from your payer may include:

• car, travel or transport allowances
• award transport payments
• allowances for tools, clothing or laundry
• dirt, height, site, risk, meal or entertainment allowances
• allowances for qualifications – for example, a first aid certificate
• any reimbursement of car expenses – calculated by reference to the distance travelled by the car (this is an exempt car expense payment benefit for fringe benefits tax purposes).

When must Travel Allowances and Award Overtime Meal Allowances be shown on Employee Payment Summaries (group certificates)? Payers (employers) do not have to show bona fide travel allowances paid for travel away from an employee’s home in the course of your duties as an employee or bona fide overtime meal allowances paid under an industrial law, award or agreement on payment summaries unless the allowances exceed the Commissioner’s reasonable allowance amounts. The reasonable overtime meal allowance for the 2007–08 year is $22.60 per meal. To find out what are the reasonable travel and meal allowance expense amounts for 2007-2008 and 2008-2009, refer to TD 2007/21 and TD 2008/18, respectively or contact WSC Caringbah.

When must Employees declare Allowances in their income tax returns?

Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return.
If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses, the allowance must also be included in the tax return. You cannot automatically claim a deduction just because you received an allowance.

The above advice is intended as a guide only. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules. Claiming Work Related Expenses

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Claiming Work Related Expenses

You can claim deductions for work-related expenses you incurred while performing your job. You incur a work-related expense when:

• you receive a bill or invoice for an expense that you are liable for and must pay
• you do not receive a bill or invoice but you are charged and you pay for it.

Refer to Taxation Ruling TR 97/7 – Income tax: section 8-1 – meaning of ‘incurred’ – timing of deductions for more information.

If your work-related expense includes an amount of goods and services tax (GST), the GST is part of the total expense and is therefore part of any allowable deduction.

Basic rules

• You must have incurred the expense in the tax return year.
• You cannot claim an expense that your employer (or any other person) has or will reimburse you for.
• You must have incurred the expense in the course of earning your assessable income and it must not be private, domestic or capital in nature. For example, the costs of normal travel to and from work or buying lunch each day are private. If you incurred an expense that was both work related and private or domestic, you can only claim a deduction for the work-related portion of the expense.
• If you incurred an expense for services paid in advance, refer to rules re “Advance expenditure” or contact us.
• You must be able to substantiate your claims with written evidence if the total you are claiming for expenses, not including claims for car, meal allowance, award transport payments allowance and travel allowance expenses, is greater than $300 (see Written evidence rule – records you need to keep for claims of more than $300).
• If the total you are claiming is $300 or less, you need to be able to show how you worked out your claims but you do not need written evidence.

Business expenses

If your income comes from carrying on a business you claim your business expenses using the “Business and professional items” publication.

Advance expenditure

You must follow the apportionment rules for advance expenditure if you prepay for a service costing $1,000 or more and the service extends for a period of more than 12 months or beyond 30 June 2009. Under these rules you may be entitled to claim only part of the expenditure this year and the remainder in future years. If you incurred expenditure in a prior income year and apportioned it under the advance expenditure rules and the prepaid service extended into the 2007–08 income year, you may claim the relevant portion of the expenditure on your 2008 tax return.

Allowances

Receiving an allowance from your employer does not automatically entitle you to a deduction. You must still meet the basic rules to make a claim. You can claim only the total amount you incurred even if the allowance is more. For example, if you received a tools allowance of $500 and your tool expenses were $400, you must include the whole amount of the allowance at item 2 on your tax return and the deduction you can claim at item D5 is $400.

Written evidence rule – records you need to keep for claims of more than $300

You must have written evidence to prove your claims if your total claims exceed $300. The records you keep must prove the total amount, not just the amount over $300.

The $300 limit does not apply to claims for car, meal allowance, award transport payments allowance and travel allowance expenses. There are special written evidence rules for these claims which are explained at the relevant questions in TaxPack 2008.

Note

Do not send in your receipts or other records with your tax return unless we request you to do so in writing.

What is written evidence?

Written evidence can be:

• a document from the supplier of the goods or services, showing:
  • the name of the supplier
  • the amount of the expense
  • the nature of the goods or services – if not shown, you may write this on the document before you lodge your tax return
  • the date the expense was incurred
  • the date of the document
• another document or combination of documents containing the information listed above.

If you use a combination of documents, the dates of the documents are not required but they need to contain the date you incurred the expense. These documents can be in written or electronic form. They include:

• bank and other financial institution statements
• credit card statements
• BPAY reference numbers, often also called receipt or transaction numbers
• email receipts
• your PAYG payment summary – individual non business; this may show, for example, your total union fees
• paper or electronic copies of documents – these must be a true and clear reproduction of the original
• evidence you have recorded yourself
• for expenses of $10 each or less, providing the total of these expenses is not more than $200
• if you have been unable to obtain written evidence – for example, for toll or parking fees where you cannot get a receipt.

Your records must show the same details as a document from a supplier as described above.

Your documentation must be in English unless you incurred the expense outside Australia.

Electronic records

We recommend that if you store your records electronically you make a back-up copy to ensure the evidence is easily accessible if the original becomes inaccessible or unreadable (for example, where a compact disk, floppy disk or hard drive is corrupted).

Claims of $300 or less

We may ask you to tell us how you worked out your claim and explain why your claim is reasonable, based on the requirements of your occupation. You do not need written evidence; you can make reasonable estimates.

Don’t leave it too late!

Will your total claims for work-related expenses exceed $300 next year?

If you are unsure, you may want to keep written evidence for your expenses during the year. You will need this evidence if you want to claim more than $300.

How long you need to keep your records

You must keep your written evidence of work related expenses for five years from 31 October 2008 or the date you lodge your tax return, whichever is later. If at the end of this period you are in a dispute with the Tax Office that relates to a work expense, you must keep the relevant records until the dispute is resolved.

For depreciating assets, you must keep records for the entire period over which you claim deductions for the decline in value of those assets. You must keep your records for a further five years from the date of your last claim. For example, if this was your last claim year, the five years start from 31 October 2008 or the date you lodge your 2008 tax return, whichever is later. This period is extended if, when the five years end, you are in a dispute with us that relates to a depreciating asset.

The above advice is intended as a guide only. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules.

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Fringe Benefits Tax

Fringe benefits tax (FBT) is a tax paid on certain benefits employers provide to their employees or their employees’ associates (typically family members). FBT is separate from income tax and is based on the taxable value of the various fringe benefits provided.

The FBT year runs from 1 April to 31 March.

What is a fringe benefit?

A fringe benefit is a benefit provided to an employee (or their associate) because that person is an employee. Benefits can be provided by an employer, an associate of the employer, or by a third party under an arrangement with the employer. An employee can be a current, future or former employee.

Benefits include rights, privileges or services. For example, you provide a fringe benefit when you:

• allow an employee to use a work car for private purposes
• give an employee a cheap loan, or
• provide social functions or leisure activities for your employees.

Who pays fringe benefits tax?

As an employer, you have to pay FBT, even if the benefit is provided by an associate or by a third party under an arrangement with you. For example, you may deal with a supplier who, in turn, provides free goods to your employees.

It makes no difference whether you are a sole trader, partnership, trust, corporation, unincorporated association or government body, or whether you have to pay other taxes such as income tax.

Are you providing yourself with fringe benefits?
If you are a director and are conducting your business through a company or trust structure, then you may be an employee of the company or trustee. This may mean that you are inadvertently providing yourself with fringe benefits.

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Fringe Benefits Tax and Christmas parties

Christmas parties

There is no separate fringe benefits tax (FBT) category for Christmas parties and you may encounter many different circumstances when providing these events to your staff. Fringe benefits provided by you, an associate, or under an arrangement with a third party to any current employees, past and future employees and their associates (spouses and children), may attract FBT.

Implications for taxpaying body

If you are not a tax-exempt organisation and do not use the 50-50 split method for meal entertainment, the following explanations may help you determine whether there are FBT implications arising from a Christmas party.

Exempt property benefits

The costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. A taxable fringe benefit will arise in respect of an associate of an employee who attends the party if not otherwise exempt under the minor benefits exemption.

Exempt benefits – minor benefits

You should note the change in the ATO view to the application of the minor benefits exemption to Christmas parties and gifts. The minor benefits threshold of less than $300 applies to each benefit provided, not to the total value of all associated benefits.

The provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300. For the FBT year beginning 1 April 2006 and prior years, the minor benefits threshold was less than $100 rather than less than $300.

Gifts provided to employees at a Christmas party

The provision of a gift to an employee at Christmas time may be a minor benefit that is an exempt benefit where the value of the gift is less than $300. Where a Christmas gift is provided to an employee at a Christmas party that is also provided by the employer, the benefits are associated benefits, but each benefit needs to be considered separately to determine if they are less than $300 in value. If both the Christmas party and the gift are less than $300 in value and the other conditions of a minor benefit are met, they will both be exempt benefits.

Tax deductibility of a Christmas party

The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.

The costs of entertaining clients are not subject to FBT and are not income tax deductible.

Christmas party held on the business premises

A Christmas party provided to current employees on your business premises or worksite on a working day may be an exempt benefit. The cost of associates attending the Christmas party is not exempt, unless it is a minor benefit.

The above advice is intended as a guide only. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules.

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Can you claim Fuel Tax Credits?

Fuel tax credits provide businesses with a credit for the fuel tax (excise or customs duty) included in the price of fuel used in:

• business activities,
• machinery, plant and equipment, and
• heavy vehicles

Therefore, most businesses can access fuel tax credits – it is just the rate that varies (18.51c to 38.143c per litre), depending on the business activity.

The only fuels that are not eligible are aviation fuels, alternative fuels, or fuels used in light vehicles (4.5 tonne gross vehicle mass or less) travelling on a public road.

You must be registered for both GST and Fuel Tax Credits before you can make a claim which is made on business activity statements.

From 1 July 2008, the eligibility criteria for fuel tax credits was expanded, meaning most fuels used in business will be eligible for fuel tax credits.

Under the new criteria, fuel tax credits can be claimable for petrol and diesel used in vehicles travelling on public roads with a gross vehicle mass (GVM) greater than 4.5 tonnes. Diesel vehicles acquired before 1 July 2006, with a GVM of 4.5 tonnes are also eligible, as well as companies which use petrol and diesel in generating electricity. However, businesses are required to fulfil at least one of four criteria available to be eligible to claim credits prior to 1 July 2006.

Other areas where tax credit claims for fuel can be made are:

• Diesel used in activities other than road transport that were previously eligible under the energy grants credits scheme, such as rail or marine transport, and some primary production activities including agriculture, mining, fishing and forestry.
• Where fuels (such as diesel, petrol, kerosene, heating oil or toluene) are used in burner applications, such as heating, or for any other non-fuel use, including as a solvent or as an ingredient in the manufacture of other products (for example paint or plastic).
• Specified fuel (including kerosene, mineral turpentine, white spirit and certain fuel blends) that is packaged in containers of 20 litres or less and sold for non-internal combustion engine use.

The above advice is intended as a guide only. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules.

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How to determine if Workers are Employees or Independent Contractors

It is important to determine the status of workers as payers have different tax obligations under the pay as you go (PAYG) system depending on whether they engage a worker as an employee or an independent contractor.

Employee or independent contractor?

There are a number of factors to consider in determining whether a worker is an employee or an independent contractor, with no one factor necessarily conclusive. A payer must examine all the facts in each case, including the terms of their contract with the worker showing the intent of both parties.

A key factor in deciding if a worker is an employee is the degree of control that can be exercised over the worker. If the payer has the right to direct how, when, where and who is to perform the work, the worker is likely to be an employee. These directions may be verbal or in writing, or simply understood between the parties.

Another key factor to consider is whether the worker is being paid for the time they work, or being paid for a result. Workers being paid by the hour are more likely to be employees. Workers being paid for a result are more likely to be independent contractors.

Employee

Generally, a worker is an employee if they:

• are paid for time worked
• receive paid leave (for example, sick, annual or recreation, or long service leave)
• are not responsible for providing the materials or equipment required to do their job
• must perform the duties of their position
• agree to provide their personal services
• work hours set by an agreement or award
• are recognised as part and parcel of the payer’s business, and
• take no commercial risks and cannot make a profit or loss from the work performed.

If a worker is an employee, the payer must withhold an amount from any salary, wages, commissions, bonuses or allowances they pay to the employee. The payer determines the amount to withhold using the tax tables published by the Tax Office and information provided by the employee on a Tax file number declaration (and Withholding declaration if applicable).

Independent contractor

An independent contractor is an entity (such as an individual, partnership, trust or company) that agrees to produce a designated result for an agreed price. In most cases an independent contractor:

• is paid for results achieved
• provides all or most of the necessary materials and equipment to complete the work
• is free to delegate work to other entities
• has freedom in the way the work is done
• provides services to the general public and other businesses
• is free to accept or refuse work, and
• is in a position to make a profit or loss.

If a worker is an independent contractor, a payer is required to withhold an amount from payments to them only where the contractor:

• has entered into a voluntary agreement with the payer to have amounts withheld
• provides their work or services for a client of the payer under a labour hire arrangement, or
• has not quoted their Australian business number (ABN) to the payer.

In some cases the superannuation guarantee laws may apply to payments for work or services by an independent contractor.

The above advice is intended as a guide only. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules.

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Home-based businesses

A home-based business is one where you operate the business:

• At home, that is, you carry out most of the business’ work at your home. For example, a dressmaker who does all their work at home, with clients coming to their home for fittings, or
• From home, that is, the business does not own or rent any premises other than your home. For example, a tiler who does most of their work on clients’ premises but does not have any other business premises.

Claiming your business expenses

Running a business at or from your home is similar to running any other business. That is, if you operate a home-based business, you can generally claim similar expenses to a business that is not home-based.

However, two types of expenses that are specific to carrying on a home-based business are:

• Expenses related to the area of your home you use for business, and
• Motor vehicle expenses between your home and other business locations.

Expenses for your home business area

If you operate a business at or from your home, you may be able to claim a deduction for some of the expenses relating to the area you use for business purposes.

These expenses are either:

• occupancy expenses, or
• running expenses.

Occupancy expenses

Occupancy expenses are those expenses you pay to own, rent or use your home even if you are not carrying on a home-based business. Occupancy expenses include rent or mortgage interest, council rates, and house insurance premiums.

You must pass the interest deductibility test before you can claim occupancy expenses. This means you must have an area of your home set aside exclusively for your business activities (for example, an office or workshop).

Interest deductibility test

You use the interest deductibility test to work out if you are entitled to claim occupancy expenses (including mortgage interest) as a deduction.

To claim a deduction for part of the interest you pay on money you borrowed to buy your home, the area you have set aside must have the character of a place of business; for example, a hairdresser’s home salon, a caterer’s home kitchen or a photographer’s home studio. While this will depend on your particular circumstances, an area of your home is likely to have the character of a place of business if it is:

• clearly identifiable as a place of business (for example, you have a sign identifying your business at the front of your house)
• unsuitable for private or domestic purposes
• used exclusively or almost exclusively for carrying on your business, or
• used regularly by your clients.

If you satisfy the interest deductibility test, you must account for any capital gain you make when you sell your home. You may satisfy the interest deductibility test even if you did not:

• borrow money to buy your home – you must apply the test on the assumption that you did borrow money to buy the home, or
• claim mortgage interest as a deduction.

How much you can claim

You can claim the percentage of occupancy expenses that relate to the area of your home you use as a place of business.

A common method of working out how much to claim is to use the floor area you use for your business (as a proportion of the floor area of your whole home). For example, if the floor area of your home office is 10% of the total area of your home, you could claim 10% of your rent or mortgage interest, council rates and insurance.

In some circumstances, using the floor area of your home as the basis of your claim may not be the best method of working out how much to claim. For example, the value of a large workshop near the house may be a small proportion of the overall value of the property. In these circumstances, we will accept an alternative method of working out how much of your home you use for business purposes, as long as the method you use is reasonable and based on accurate information.

Running expenses

Running expenses are the increased costs of using facilities within your home because of your business activities.

Running expenses include:

• the cost of using a room (such as electricity and gas costs for heating, cooling and lighting)
• business phone costs
• the decline in value of plant and equipment (for example, chairs, bookcases, computers, grinders)
• the decline in value of furniture and furnishings (for example, curtains, carpets, light fittings)
• the cost of repairs to furniture and furnishings, and
• cleaning costs.

If you work at or from your home, you can claim a deduction for additional expenses you incur in running your business. This means you must often work out the portion of the expense that relates to business and private use to work out how much you can claim.

If you are eligible to claim your running expenses only, you will not incur CGT if you sell your home.

How much you can claim

You can claim the additional expenses you incur because you carry on a home-based business, for example, additional electricity, heating or cooling costs (utilities), additional cleaning costs or additional phone expenses.

Using your floor area may also be an appropriate way of calculating some running expenses. For example, if the floor area of your home office is 10% of the total area of your home, you can claim 10% of heating costs.

Where you do not have an area of your home set aside exclusively for business, you cannot claim on a floor area basis as this area is also used for non-business purposes. In this case, you must show how you arrived at the amount you are claiming. Some other basis may be appropriate, for example, you can compare utility accounts from before and after you commenced business to assess increased costs.

How you work out these additional costs is up to you, but you should be able to provide enough information to show:

• your claim is reasonable, and
• you have excluded the private (domestic) proportion of expenses associated with normal living costs.

The ATO also accept the following methods for working out how much of your expenses are for business purposes.

Keeping a diary

You can keep a diary that shows how you use your home work area for a representative four-week period each financial year to work out a pattern of use for your home work area for the entire year. You must allow for periods such as holidays or illnesses.

If there is no regular pattern to how you use your home work area, you must keep records of each time you use the area during the year, and the purpose for which it is used.

You must keep a diary for each financial year.

Claim 26 cents an hour

Instead of recording actual expenses for heating, cooling, lighting and furniture depreciation (such as desks and shelves), you can claim deduction of 26 cents an hour based on actual use or an established pattern of use. You need to base the rate of 26 cents an hour on average energy costs and the value of common furniture items used in home work areas.

You must separately work out all other home work area expenses, such as phone expenses and depreciation on computers or other equipment.

Where you can claim a GST credit for a depreciating asset, you must deduct the amount of the GST credit you can claim before you work out the depreciation deduction.

Utilities (gas, electricity)

These expenses must usually be apportioned. If the business percentage is based on anything other than the floor area (for example, on actual electricity use) you must document your claim to show how you arrived at the amount.

You can only claim a deduction for expenses you incur as additional running costs because of your business activities. For example, if you work in a room where other family members are watching television, it’s unlikely you will have additional heating costs as a result of that work activity.

Your business use of the home work area must also be substantial and not merely incidental. For example, you can not claim 24 hours per day running costs simply because your fax machine is on all the time to receive business faxes.

Phone

If you use a phone exclusively for business, you can claim a deduction for the phone rental and calls, but not the cost of installing the phone. The installation cost is a capital expense.

If you use a phone for both business and private calls, you can claim a deduction for business calls and part of the rental costs. Use the following formula to work out the percentage of phone rental expenses you can claim:

Number of business calls you made and received
Number of total calls made and received X 100

You can identify business calls from an itemised phone account. If you do not have an itemised account, you can keep a record for a representative four-week period to work out a pattern of business calls for the entire year, provided you have a regular pattern of use throughout the year.

Business plant and equipment

You can claim a deduction over a number of years for the decline in value (depreciation) of assets you use for business purposes.

If you use plant and equipment solely for business purposes, you can claim the full amount of depreciation. But if you also use equipment (such as a computer, photocopier or circular saw) for non-business purposes, you must reduce the depreciation deduction by an amount that reflects this non-business use.

You work out the amount of depreciation to claim as a deduction based on an estimate of the percentage of business use. You can base this estimate on a diary record of your business and non-business equipment use for a representative four-week period. Your diary record must show:

• what the equipment was used for
• whether the equipment was used for business or non-business purposes, and
• the period the equipment was used for.

Most businesses work out the deductions they can claim for depreciation of assets under the uniform capital allowance system. However, if you have less than $2 million turnover you can use a simpler and more generous system. By using the simplified depreciation rules, you can:

• immediately write off most depreciating assets that cost less than $1,000 each, and
• pool most other depreciating assets and deduct them at a rate of 30% (if their effective life is less than 25 years) or 5% (if their effective life is 25 years or more).

The above advice is intended as a guide only. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules.

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Imputation System – What is it?

The simplified imputation system allows Australian and New Zealand corporate tax entities, which pay Australian tax, to pass on to their Australian members (shareholders) a credit for income tax paid on profits, when distributing those profits.

Although shareholders are taxed on the full amount of the profit represented by their dividend distribution, they are allowed credit for the tax already paid by the corporate entity.

This prevents double taxation, that is, the taxation of company profits when earned by a company, and again when a shareholder receives a dividend.

Example: How imputation works
Where the shareholder is an individual taxpayer on the top personal tax rate:

Without imputation With imputation

Company

Income earned $100.00 $100.00 Company tax (30%) $30.00 $30.00 Net profit after tax $70.00 $70.00

Individual shareholder

Dividend paid $70.00 $70.00 Franking credit $30.00 Taxable income $70.00 $100.00 Tax on taxable income (46.5%*) $32.55 $46.50 Credit for company tax $30.00 Tax payable $32.55 $16.50

Net distribution to shareholder $37.45 $53.50 Total tax paid by company and shareholder $62.55 $46.50

*Includes Medicare levy

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Meal Entertainment

The entertainment rules are extremely complicated. The simplest method of accounting Entertainment is the “50/50 method”. However, this may not be the most tax effective. The other two methods are the “Actual method” and “12 week register method”.

To give you an example of how the 50/50 method applies, if you incurred $1,100 (including GST) on customer lunches or dinners for the year and applied the 50/50 method, the possible outcomes would be as follows:

• $550 would be non-deductible for income tax and not subject to FBT (this represents the portion relating to customers);
• The company would be entitled to a $50 GST input tax credit (it can claim back on its BAS)
• $550 being the GST-inclusive amount relating to employees (including directors and associates of employees) is subject to FBT. $500 of this is deductible to the company for income tax purposes.
• FBT is generally calculated as follows: $550 x 2.0647 x 46.5% = $528
• FBT is tax-deductible. Therefore, the overall income tax deduction is $500 + $528 = $1,028. At 30% tax rate, the company receives a $308 tax benefit.
• Therefore, the net after-tax cost to the company from incurring $1,100 in entertainment = $1,100 + $528 - $308 - $50 = $1,270
• Therefore, in this example, there is an additional cost of $170 or 15.5%.
• If a shareholder on the top marginal tax rate (46.5%) was to pay $1,100 in entertainment out of their after-tax income, this would require them to draw a dividend of $1,485 which is even greater than the company paying the expense.
• However, if the shareholder was only in the 31.5% tax bracket the cost would be closer to $1,125 (less than if the company paid it).

Important: If it is deductible for income tax, the GST included in that amount is generally allowed as a input tax credit (claimable on the BAS).

Refer to the following two publications for a more detailed overview of the meal entertainment rules.

"Fringe benefits tax (FBT) - A guide for employers"

http://www.ato.gov.au/businesses/content.asp?doc=/content/fbt_guide.htm

"Fringe benefits tax for small business"

http://www.ato.gov.au/businesses/content.asp?doc=/content/33353.htm

The above advice is intended as a guide only. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules.

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Superannuation Guarantee - Earnings Base & Ordinary Time Earnings

As of 1 July 2008, employers must include bonuses, commissions and allowances (see table below for exclusions) in a worker’s income for the purpose of calculating the 9% superannuation contribution to make on their behalf, generally it does not include overtime. An employer must use ordinary time earnings as defined in the super guarantee law to calculate super guarantee contributions for employees.

Checklist for Salary or Wages and Ordinary Time Earnings

Payment type	Salary or wages	Ordinary time earnings
Expense allowance that is paid with the expectation that it will be fully expended in producing income (for example, car allowance paid to real estate agents)	No	No
Allowances paid (other than a reimbursement of expenses or expense allowance)	Yes	Yes
Reimbursement of expenses (for example travel costs)	No	No
Bonuses that don’t relate to specific performance criteria (for example Christmas bonuses)	Yes	No
Other bonuses	Yes	Yes
Commission	Yes	Yes
Over-award payments	Yes	Yes
Shift loading	Yes	Yes
Overtime	Yes	No
Casual loading	Yes	Yes
Benefits subject to fringe benefits tax (FBT)	No	No
Workers compensation payments, including top-up payments where no work is performed	No	No
Workers compensation payments, including top-up payments, paid by the employer, where work is performed	Yes	Yes
Top-up payments (for example when serving on jury duty or with reserve forces)	Yes	No
Payments when on maternity or paternity leave	Yes	No
Pay for annual holiday leave taken	Yes	Yes
Government wage subsidies (for example Wage Subsidy Scheme allowance)	Yes	Yes
Annual leave loading	Yes	No
Pay for sick leave taken	Yes	Yes
Pay for long service leave taken	Yes	Yes
Accrued annual leave, long service leave and sick leave paid as a lump sum on termination	Yes	No
Payments in lieu of notice	Yes	No
Redundancy payments	Yes	No
Other payments paid by an employer on termination of employment	Yes	No
Director’s fees	Yes	Yes
Payments for performance in, or provision of services relating to entertainment, sport, promotions, films, discs, tapes, TV, or radio	Yes	Yes
The labour portion of payments to contractors who are employees for super guarantee purposes	Yes	Yes

Payment type	Salary or wages	Ordinary time earnings
Dividends	No	No
Partnership and trust distributions	No	No
Payments for entering into a restraint of trade agreement	No	No
Payments for domestic or private work under 30 hours per week	No	No

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Travel Expense Records

What records should I keep?

The following tables explain what records you need if you are claiming domestic or overseas travel expenses for accommodation, food, drink or incidentals.

If you are claiming travel expenses and you received a travel allowance from your employer, you must show the allowance on your tax return.

We set the reasonable allowance amount for your circumstances in an annual taxation determination which explains when you do not need evidence of your expenses and the in which you can claim them.

If your travel allowance was not shown on your payment summary and was not more than the reasonable allowance amount for your circumstances, you do not have to include the allowance providing you have fully expended the allowance on deductible travel expenses and you do not claim a deduction for these expenses.

If you did not receive a travel allowance:

	Domestic travel		Overseas travel
	Written evidence	Travel diary(1)	Written evidence	Travel diary(1)
Travel less than 6 nights in a row	Yes	No	Yes	No
Travel 6 or more nights in a row	Yes	Yes	Yes	Yes

If you received a travel allowance and your claim does not exceed the reasonable allowance amount:

	Domestic travel		Overseas travel
	Written evidence	Travel diary(1)	Written evidence	Travel diary(1)
Travel less than 6 nights in a row	No	No	No(2)	No
Travel 6 or more nights in a row	No	No	No(2	Yes(3)

If you received a travel allowance and your claim exceeds the reasonable allowance amount:

	Domestic travel		Overseas travel
	Written evidence	Travel diary(1)	Written evidence	Travel diary(1)
Travel less than 6 nights in a row	Yes	No	Yes	No
Travel 6 or more nights in a row	Yes	Yes	Yes	Yes(3)

1. A travel diary is a document in which you record the dates, places, times and duration of your activities and travel.

2. Written evidence is required for overseas accommodation expenses regardless of the length of the trip.

3. Members of international aircrews do not have to keep a travel diary if they limit their claim to the amount of the allowance received.

Reasonable allowance amounts

Contact the ATO or WSC Caringbah for what are the reasonable travel and meal allowance expense amounts for the current year.

Written evidence

You must have written evidence for the whole of your claim, not just the excess over the reasonable amount.

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Uniforms and Protective Clothing

You can claim the cost of buying, renting, repairing and cleaning occupation-specific clothing, protective clothing and certain work uniforms.

You cannot claim the cost of purchasing or cleaning a plain uniform or clothes you bought to wear for work that are not protective or specific to your occupation, even if your employer tells you to wear them. For example, a bartender’s black trousers and white shirt or a manager’s suit or stockings.

You cannot automatically claim a deduction simply because you received a uniform, clothing, laundry or dry-cleaning allowance from your employer.

What you may need

• Written evidence from your goods or services supplier;
• Diary records of your laundry costs (if you need written evidence – refer below).

Work uniform

Work uniform is a uniform, either compulsory or non-compulsory, that is unique and distinctive to the organisation that you work for. Clothing is unique if it has been designed and made only for the employer. Clothing is distinctive if it has the employer’s logo permanently attached and the clothing with the logo is not available to the public.

Compulsory work uniform

This is a set of clothing that identifies you as an employee of an organisation which has a strictly enforced policy that makes it compulsory for you to wear the uniform while you are at work. You may be able to claim a deduction for shoes, socks and stockings where they are an essential part of a distinctive compulsory uniform, the characteristics of which (colour, style, and type) are specified in your employer’s uniform policy. You may be able to claim for a single item of distinctive clothing, such as a jumper, if it is compulsory for you to wear it at work.

Non-compulsory work uniform

You cannot claim expenses incurred for non-compulsory work uniforms unless your employer has registered the design with AusIndustry – check with your employer. Shoes, socks and stockings can never form part of a non-compulsory work uniform, and neither can a single item such as a jumper.

Occupation-specific clothing

This is clothing that is specific to your occupation, is not everyday in nature and would allow the public to easily recognise your occupation - for example, the checked pants a chef wears.

Protective clothing

This is clothing and footwear that you wear to protect yourself from the risk of illness or injury posed by your income-earning activities or the environment in which you are required to carry them out. To be considered protective, the items must provide a sufficient degree of protection against that risk.

Examples of protective clothing include:

• fire-resistant and sun-protection clothing
• safety-coloured vests
• non-slip nurse’s shoes
• rubber boots for concreters
• steel-capped boots, gloves, overalls, and heavy duty shirts and trousers.

The ATO also consider that overalls, smocks and aprons you wear to avoid damage or soiling to your ordinary clothes during the course of your income-earning activities are protective clothing. Ordinary clothes, such as jeans, drill shirts and shorts, trousers and socks that lack protective qualities designed for the risks of your work are not protective clothing.

Working out your claim for Laundry expenses

For washing, drying and ironing you did yourself, the ATO considers that a reasonable basis for working out your laundry claim would be $1 per load – this includes washing, drying and ironing (if the load was made up only of the clothes described above), and 50 cents per load if other laundry items were included. If you choose a different basis to work out your claim, the ATO may ask you to explain that basis.

Written evidence

You must have written evidence - for example, diary entries and receipts - for your laundry expenses if:

• the amount of your claim is greater than $150, and
• your total claim for work expenses exceeds $300 (not including car, meal allowance, award transport payments allowance and travel allowance expenses).

If you do not need to provide written evidence for your laundry expenses, you may use a reasonable basis to work out your claim.

Dry-cleaning expenses

You can claim the cost of dry-cleaning eligible work clothes. You must have written evidence to substantiate your claim if your total claim for work expenses exceeds $300 (not including car, meal allowance, award transport payments allowance and travel allowance expenses).

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Work-related Car Expenses

Work-related travel

You can claim a deduction for the cost of using your car for work-related travel if:

• you travel directly between two separate workplaces because you have two different employers – for example, you have a second job
• you travel for work-related purposes from your normal workplace to an alternative workplace and back to your normal workplace or directly home, or
• you travel between two workplaces or between a workplace and a place of business – for example, between two of your employer’s stores.

You cannot claim a deduction for the cost of travelling to another workplace for a social function.

Travel between home and work

You can claim a deduction for the cost of using your car to travel between home and work if:

• you have to carry bulky tools or equipment that you use for work and there is no secure area for storing your tools or equipment at work
• your home is a base of employment – you start your work at home and travel to a workplace to continue the work,
• you travel from your home to an alternative workplace for work activities and then to your normal workplace or directly home, or
• you had shifting places of employment – you regularly worked at more than one site each day before returning home.

You cannot claim a deduction for the cost of using your car to travel between your home and work if:

• you did minor tasks – for example, picking up the mail on the way to work or home
• you had to travel between your home and your workplace more than once a day
• you were on call – for example, you were on standby duty and your employer contacted you at home to come into work
• there was no public transport near where you worked
• you worked outside normal business hours – for example, shift work or overtime
• your home was a place of business and you travelled directly to a place of employment.

Home-based businesses

If you are carrying on a home-based business, you can claim the cost of trips between your home and other places if the travel is for business purposes. For example, you could claim the cost of travel to:

• a client’s premises if you are working there or delivering some documents,
• purchase equipment or supplies,
• do your banking,
• the post office to mail out invoices, or
• see your tax adviser about a matter related to your business.

Work-related Travel expenses

• You can claim the work-related cost of using vehicles other than cars (i.e. Utility trucks, panel vans, large passenger-carrying vehicles and motorcycles) as well as parking fees and tolls.
• You can also claim work-related costs associated with taxis or short-term car hire.
• You cannot claim costs met by your employer or costs that are reimbursed
• You can claim the costs you actually incurred on these vehicles (eg. fuel, repairs, insurance, etc). However, you cannot use one of the four methods applicable to claiming car expenses (i.e. ‘cents per kilometre method’, ‘log book method’, ‘12% of cost method’, or ‘one-third of operating costs method’).

The above advice is intended as a guide only. Many of these rules will only apply to individuals, sole traders and partnerships. Please contact WSC Caringbah if you require additional information or clarification on any issues or rules.