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Claiming clothing this tax time?

The Australian Tax Office (ATO) is cracking down on claims for work-related clothing and laundry expenses this tax time.

Last year total claims for work-related clothing and laundry expenses totalled nearly $1.8 billion. The ATO has acknowledged that many of these claims are legitimate. However, it is unlikely that half of all taxpayers would have been required to wear uniforms, occupation-specific clothing or protective clothing.

The Tax Office is in the view that many taxpayers are either making mistakes or deliberately over-claiming. Common mistakes that are observed include:
– Claiming for something without having spent the money
– Not being able to explain the basis for how the claim was calculated
– Claiming ineligible clothing (eligible clothing is occupation-specific, protective or uniform)

Another concern facing the ATO is the number of claims which totalled exactly $150. This amount is the threshold that requires taxpayers to keep detailed records. The ATO is reminding taxpayers the $150 limit is not an automatic entitlement for everyone; it is in place to reduce recordkeeping burden.

Normal clothing is another deduction under scrutiny. Claiming for normal clothing such as a suit or black pants is not legitimate, even if you only wear it to work, or your employer requires you to wear a particular colour and so on.

The ATO uses sophisticated technology to analyse claims and compare them to other taxpayers in similar occupations and earning similar income.

If a taxpayer cannot substantiate their claim, they should prepare to be refused and potentially face a penalty for failing to take reasonable care when submitting their return.

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Investing in shares vs property in SMSFs

March 19, 2020

Shares and property are two popular investment options for those with a self-managed super fund (SMSF). However, they both have very different attributes and choosing the one that will achieve the best outcome for an SMSF depends on your personal goals and situation.

While the price of shares can vary drastically, property is a relatively stable asset, making it appealing to those who want more security and predictability. Property prices are also negotiable unlike shares, and you can generally borrow money at a lower rate for property purchases.

It may seem hard to find the perfect investment property, but older and undercapitalised properties can be renovated for profit. However, returns from property rentals can be dented due to factors such as land tax, utilities and rates, maintenance and tenancy vacancies.

Shares are more dynamic and volatile than property. One advantage is the accessibility of investing in shares, as you can enter the share market with a few thousand dollars – much less than what you need to invest in a property.

Maintaining a portfolio of quality shares that pay tax-effective dividends may be a good way to fund retirement. With the right portfolio allocation, shares also have the potential to provide a better, stronger income than property rentals, as long as that income is sustainable and increasing.

Property can generally be used as a wealth-creation tool, while shares can create a reliable retirement income. For those who can afford to put more money into investments, it may be a good idea to consider investing and diversifying in both. If you’re unsure about which investment option is right for you, seeking financial advice may be the best option.