Contents Finance
TAX TIME
TAX TIME TIPS FOR BUILDING AND CONSTRUCTION WORKERS
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or many Australians, navigating the tax system can be quite overwhelming (especially for those engaging in building and construction which is often project-based, contracted work). To help take the stress out of tax returns and to maximise your return, we have some expert advice from Mark Chapman, director of tax communications at H&R Block.
He said: “As we get towards the end of the financial year, it is essential that everyone gets the paperwork ready. The ATO has a strong focus on the building and construction industry and is not happy with the amount people are claiming for work related clothing for example. “The ATO is also focusing on cash jobs that are not claimed, especially with domestic jobs – so declare it and pay the GST. “If you get your paperwork up to date and take professional advice on whether you are entitled to claim for something or not, you stand a good chance of staying out of trouble with the ATO,” he said. Contractor or employee? It’s common in certain trades for people to be taken on as independent contractors rather than employees. Deciding whether a person is a contractor or an employee can be a minefield, both for the individual and for the business taking them on. Getting it wrong can have a big impact, with consequences both for you and the business that has engaged your services. • A contractor (or consultants as they are sometimes called) is a self-employed person engaged for a specific task, at an agreed price, with a specific goal in mind, often over a set period of time. They set their own hours of work and take care of their own tax obligations. Contractors are paid a fee for completing an assignment. They don’t receive a salary or wage and need to pay their own tax from their gross earnings, whilst also making their own superannuation contributions. • By comparison, an employee has tax
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MBA NSW | Issue Three | June/July 2018
deducted at source from their salary and receives compulsory superannuation payments from their employer.
you have covered the kilometres claimed. A diary of work-related journeys (including the kilometres travelled) will suffice.
Vehicle and travel expenses
• Logbook:
The most important thing to remember when it comes to work-related vehicle and travel expenses is that you must keep records, making everything easier come tax time.
o Your claim is based on the business use percentage of each car expense. This is determined by a log book that must have been kept for a minimum 12 week period, and must be updated every 5 years. Through your logbook you can claim all expenses that relate to the operation of the car, at your percentage of business use.
“You can’t claim tax back unless you have the paperwork to support it… It’s very easy to get to the end of the financial year and to not have kept receipts. Go through all your transactions at the end of the financial year by examining your bank statements and get a copy of the invoice, so you can claim,” Mr Chapman said.
o The logbook must record all business journeys made in the car over the 12 week period that it records, detailing;
If you use your car for work you are entitled to claim the work related travel expenses that relate to the business costs of using your car to do your job.
»» w hen the log book period begins and ends
Travelling to and from work on a daily basis cannot be claimed as this is considered as private travel, even if: you do minor tasks on the way to work, such as picking up mail; you travel back to work for a security call out or parent teacher interviews; you work overtime and no public transport is available to use to get you home. Methods you can use to claim car expenses include:
»» the total kilometres travelled
• Cents per kilometre: o Your claim is based on a set rate for each business kilometre you travel. Under this method you are eligible to claim up to a maximum of 5,000 kilometres per year, per vehicle. If you travel in excess of 5,000 kilometres this method of claim is not appropriate to you. You will need to use the alternate method of a logbook to claim. o The claim value is calculated by multiplying the total business kilometres travelled (limited to 5,000 per vehicle) by the standard rate of 66 cents per kilometre. This figure takes into account all the vehicle running expenses (including depreciation). o You do not need written evidence, however you need to be able to demonstrate that
»» t he car’s odometer readings at the start and end of the period »» t he business percentage for the logbook period o For each journey in the logbook, you must record: »» start and finishing times of the journey »» o dometer readings at the start and end of the journey »» kilometres travelled »» reasons for the journey »» i f you make two or more journeys in a row on the same day, you can record them as a single journey. o You will need to keep all receipts throughout the year to justify your claim, such as insurance, servicing and repairs. Petrol can be estimated using the start and end odometer readings for the year, indicating the total kilometres travelled. o Depreciation is calculated as 25% of the written down value of the car (using the Diminishing Value method). You can claim the cost of work-related car expenses if they are incurred whilst performing your job as an employee, such as:
