Q & A: Claiming Everyday Bank Fees

Question: If my pay is made directly by my employer into an everday bank account, can I claim the bank fees and charges associated with that account?

Answer: In most cases, the answer will be no. Banks rarely charge for deposits into everday accounts and this would be the only portion you may have a claim for in regards to work.

Q & A: Can I claim my TAFE fees?

I was asked earlier today a question I often hear: Can I claim my TAFE fees as a tax deduction? The answer really depends on your individual situation.

You can claim self-education expenses only if they are directly related to your CURRENT employment (such as a secretary taking a Business Administration certificate).

Typically, the person asking is attending TAFE in order to change careers or get back into the workforce. Unfortunately both of these circumstances would not allow them to claim a deduction for their TAFE fees.

Beware: Common errors in rental property claims

The ATO has stated it will continue to closely scrutinise rental property expense claims for the 2007 income year.

Some of the areas of concern identified by the ATO in recent compliance activities include:

- Claiming deductions during a period where the property is not genuinely available for rent;

- Claiming full deductions when the property was available for rent only part of the year.

- Claiming initial repair and or renovation costs as repair and maintenance costs (these should be attributed to the base cost of the property under the CGT rules);

- Incorrectly allocating deductions related to private borrowings or travel; and

- Incorrectly claiming deductions for legal expenses for things such as costs associated with buying and selling a property or defending title.

I'll be detailing some of these issues in more detail in future posts.

SOURCE: National Tax and Accountants' Association Tax Schools Seminar 2007

Forgotten Tax Deduction: Income Protection

While life insurance is not tax deductible, income protection insurance is.

Payments are typically made monthly on these policies but can usually be paid up to a year in advance.

June is a great time to maximise your tax deductions. If you pay your annual premium now as a lump sum, you can then claim a tax deduction for the full amount in this years tax return.

Neglected Tax Deduction #2

Okay, so most of us know what we can claim on our tax returns (or at least what we usually claim) but there are still a lot of deductions that go neglected by people year after year. Continuing a series on Neglected Tax Deductions, today I mention another oft-forgotten area.

Do you work outdoors?

If the nature of your work causes you to work all or part of the day in the sun, you can claim a tax deduction for your sun protection expenses.

Sun protection includes sunhats, sunglasses and sunscreen lotion.

This ruling is most likely to apply to buiders, labourers, tradespeople, plant operators and others in the building or construction industry.

How Do They Work? "Tax Deductions"

A common misconception I hear people say regarding certain expenses or giving is, "it's okay, I'll get it all back at tax time." Well, that's not exactly true and, strictly speaking you do not "get it back" at all. So what does a deduction do...

How do deductions work?

A tax deduction reduces the amount of income you have to pay tax on. The Tax Office does not reimburse you for your expenses nor can you deduct these from your tax amount. Tax deductions are taken off your total income to get your 'taxable income' - the amount your tax is calculated on.

Income - Deductions = Taxable Income

Example:

Sally has income of $25,000. The tax payable on this amount is $2,850. Now suppose that Sally also has $400 in deductions. This reduces her taxable income to just $24,600. Tax payable on $24,600 is $2,790.

In this example, deductions of $400 have saved Sally $60 in tax (Sally is taxed at the 15% tax rate).

Please note this is a simplistic example given as a guide to understand how the deductions work and does not take into account other factors such as offsets previous losses, the Medicare levy, etc.

How much of a saving?

The individual tax saving as a result of deductions will vary depending upon what tax bracket a person is in. If your taxable income is less than $6,000 you would not receive any benefit from a deduction as your income is below a taxable level.

As the average Australian is in the 30% tax bracket, the best most of us can hope to recoop of our allowable deductions is just 30 cents in the dollar; better than nothing but a long way from "getting it all back at tax time."

Neglected Tax Deduction #1

Okay, so most of us know what we can claim on our tax returns (or at least what we usually claim) but there are still a lot of deductions that go neglected by people year after year.

Did you know?

Most taxpayers are aware they can claim a deduction of their accountant's fee for preparing their return. We call that a "cost of managing tax affairs."

What a lot of people fail to factor in is the cost of travel to and from the accountant. Yep, you can claim that too.