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The Tricks & Traps Of The Work-Related Expense

Are you up to date and aware of what you can and can’t claim on your tax return this year? Brushing up on the three rules of work-related deductions can make tax time a lot easier.

In order to be able to claim a deduction for a work-related expense on your tax return, you must meet the following golden rules of the Australian Taxation Office (ATO).

  1. The money must have been spent by you and you were not reimbursed by your employer for it.
  2. The expenses must directly relate to earning your income.
  3. There must be a record to prove the expense (such as a receipt)

These need to be claimed in the Work-related expense section of your tax return.

If the expense was for both work and private purposes, you only claim a deduction for what was the work-related use. You cannot claim a deduction if your employer pays for or reimburses you for any of these costs.

These work-related expenses may include:

If the ATO believes that your employer may reimburse you for your expenses they may ask your employer directly.

You may be able to claim other work-related deductions for expenses you incur in the course of earning your income. These are claimable in your tax return as an ‘Other work-related expense’.

Common claims in this section of the tax return include:

When it comes to working from home expenses, you need to be careful of what you claim. To claim your working from home expenses you must:

You can claim a deduction for the additional running expenses you incur as a result of working from home.

Running expenses are expenses that relate to the use of facilities within your home and include:

You can’t claim a deduction for the following expenses if you’re an employee working at home. These include

If your employer pays you an allowance to cover expenses, you can claim a deduction for the expense. However, you must include the allowance as income in your tax return.

You may also be able to claim a deduction for other expenses you incur that don’t relate to your work or income-producing activities. These are claimable in your tax return at the specific expense category (where available) or as an ‘Other deduction’.

Common claims in this section include expenses, such as

If you require assistance with ensuring that your individual income tax return is correctly lodged, a registered tax agent should be consulted (such as us). We’re equipped with the knowledge and tools to help you through this process.

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Deciding Between Corporate Versus Individual Trustees For An SMSF

August 8, 2022

If you have a Self Managed Superannuation Fund (SMSF), the Fund is considered to be a trust and must have a trustee. There are two options as to who this trustee can be.

Barring a few exceptions, it can be individual members, or it alternatively can be a company with the members as the directors and shareholders of the company. The choice, either way, is that the trustee of an SMSF can be either an individual trustee or a company as a trustee.

When choosing the appropriate trustee structure for your SMSF, a closer examination of the advantages and disadvantages will assist you in determining what is right for your needs.

The Cost

When looking specifically at the cost, a company as a trustee could initially cost around $1,000 or more to establish. An annual fee of roughly $50 will also need to be paid to ASIC, and when you are finished with the company, there will be costs associated with deregistering it. Using individual trustees, there is no initial cost associated.

Asset Separation

Most importantly, you have asset separation. The assets are held in the name of a separate entity; if the individuals are ever attacked financially, there is nothing to point toward the super fund.  Even though the fund’s assets should be protected even with individual trustees, if assets are in the individual names, you will need to spend legal fees to prove they are fund assets.

If the fund members are changed, you will need to change the trustees, and if you change the trustees, you need to change the ownership of all the assets. This will be a major administrative burden, as a lawyer will need to be engaged to do the necessary documentation to change the trustees and is required to be engaged if real estate is involved. In most instances, simply changing trustees and ownership of the assets will cost far more in the long run than the initial investment costs of setting up a corporate trustee.

Compliance Concerns

People always make mistakes, but with SMSFs, mistakes can create breaches of the law. If you have all of the assets in a special purpose company name, there is less chance that you will make the mistake of thinking that a particular fund asset (such as a bank account) will be your own asset. If you take money from the super fund account by mistake, thinking it is your own money, the auditor may report a breach. If you deposit money into your SMSF account, which is yours and not the fund’s, you may not be able to take that money back if the mistake isn’t realised in time. While price-wise, individual trustees may seem advantageous at first glance, companies as trustees possess more benefits over individual trustees.

Do you already own a company, and after reading this article, are you asking yourself if you can use that to set up a corporate trustee? It is only recommended that you do so if the company is not operating in any other capacity, but yes, doing so can save on the initial set-up costs.

There is no one size fits all advice we can give you, but we can try to determine what would best suit your needs. We may sit down with you and agree that individual trustees may be appropriate, but if our recommendation is for a corporate trustee, it is for sound financial reasoning.