This month’s column is an addendum to my May article “Be Warned and be Prepared” which you should refer back to before you either prepare your own tax return or engage the services of a Registered Tax Agent. The article may be accessed via warrandytediary.com.au/editions/May 2018/page 32 or via our website www. ptasaccountants.com.au and click on Tax Tips.
In the May article reference was made to increased ATO audits on work related expenses, particularly claims for work related travel expenses reported at items D1 Work related car expenses and D2 Work related travel expenses. As these claims were not discussed in detail in the May column, this month we will explain what you need to know in order to avoid the risk of a tax audit on work related travel claims.
D1 Work Related Car Expenses
Travel between home and your workplace is generally not claimable as a deduction as it is deemed to be a private expense but there are exceptions to this rule including the following:
- if you have more than one employment location other than your home then travel between different work locations on the same day will be deductible e.g. your day
- job and then part time evening work
- from your primary place of employment to visit clients/customers at different locations whilst still on duty and back to your workplace or directly home
- if you have shifting places of employment and regularly work at different sites before returning home such as tradespersons working on different building sites on the same day
- if you need to carry bulky tools or equipment you use for work which can’t be safely locked away at your workplace you can claim travel from home to work and return e.g. tradespersons, musicians, “Jims” franchisees.
- Where travel is a fundamental part of your work and your employer expects you to work from home or have an office at home and you occasionally visit your employer’s office to file reports, attend meetings etc.
Examples of travel you can’t claim include:
- picking up the mail on the way to work
- you are on call and you are contacted to come to work or on duty
- you work outside normal hours such as shiftwork or overtime
- you do some employer work at home or also run a business from home and you travel to and from employment where you are working for someone else
What vehicles are claimable at D1 on your tax return?
- Cars are defined as vehicles including utilities and panel vans with a carrying capacity of less than one tonne and seating capacity for less than nine passengers.
- Motor cycles are not included in the definition of cars.
- If the vehicle is owned or leased by someone else including your employer or another member of your family you cannot claim any expenses at D1 unless under a private or family arrangement you are treated as the owner even although the car is not registered in your name but you have paid all expenses.
The two methods of claiming work related car expenses, the cents per km and log book methods were explained in the May 2018 column. Please note that the cpkm method restricts your claim to a maximum of 5000km. If you are able to claim travel in excess of 5000km you must have kept a log book record.
D2 Work Related Travel Expenses
At item D2 in your tax return you should claim travel expenses you have incurred in performing your work as an employee which include:
- all vehicles excluded from claiming under D1
- actual expenses such as fuel, repairs and maintenance costs that you incur to travel in a car that is owned or leased by someone else
- public transport, air travel and taxi/Uber fares
- bridge and road tolls, parking fees and short- term car hire
- meal, accommodation and incidental expenses you incur while away overnight for work
If your employer has paid you a travel allowance that is not shown on your payment summary and the allowance was equal to or less than the reasonable allowance amount for the circumstances of your travel, then you do not have to include the allowance as assessable income at Item 2 in your tax return provided you have fully spent it on deductible work-related travel expenses and you do not claim a deduction for these expenses.
Claiming meal, accommodation and incidental expenses when travelling away overnight for work
- You must have undertaken the travel in order to perform your work duties
- You must only be working away from home for a relatively short period of time. However the former set time frame of 21 days no longer applies to distinguish between a travel allowance and a living away from home allowance.
- You must not have incurred the expenses because of a choice you made about where to stay.
- You must have a permanent home at a location away from the work location to which you are travelling.
- You must have paid the expenses yourself and not been reimbursed for them.
Lodgement Advice from the ATO
a) Self Lodgment
If you have not already opted to lodge yourself and you want to lodge online using myTax you will first need to set up a myGov account. If you get into the ATO website and google Lodging Your First Tax Return just follow the steps and see if it is for you. The ATO has advised however that you should wait until the end of July and preferably until mid- August before lodging your return as pre-filling information you may require to complete your return may not be available until then and could result in you lodging an incomplete return. You must lodge your return no later than 31st October 2018
b) Use a Registered Tax Agent
You will still need to get the same paperwork together to present to your tax agent but your agent will have access to your prefilled data via the Tax Agent’s Portal (TAP) and will also probably be reluctant to lodge your return until they are confident all the relevant information has been extracted from the TAP.
If you have previously lodged your 2017 tax return by 31st October 2017, your tax agent may have until 15th May 2019 to lodge your 2018 return which may be to your advantage if you do not expect a refund.
If you have overdue returns it is advisable to use a tax agent who has access to prior year’s information and may be able to negotiate a remission from late lodgment and interest penalties. Tax agent’s fees and travel to visit your agent are deductible expenses so if your tax affairs are complex you are advised to use the services of a tax agent as you will be in good company because over 70% of individual tax returns are lodged through registered tax agents.
The content of this article is not intended to be relied upon as professional advice and should not be used as such. If you have any questions you should consult a registered tax agent.
Brian Spurrell FCPA, CTA, Registered Tax Agent.
Director, Personalised Taxation & Accounting Services Pty Ltd
PO Box 143 Warrandyte 3113. Ph: 0412 011 946
Web: www.ptasaccountants .com.au