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You Need To Consider This Before You Embrace The Travel Lifestyle

Are you interested in completely committing to the travel lifestyle? This is of course, a little different to simply going on holiday on occasion or taking trips. Instead, those who fully embrace the travel lifestyle tend to go away far more often and can head out for months or even years at the time. Here are some things to keep in mind before you make this type of decision for yourself. 

Think About Home Security

First, if you are traveling in the long term, then you do need to make sure that you are taking steps to keep your home secure. Homes that are left for long periods are always going to be more vulnerable and a target for thieves. 

To cope with this, you should think about exploring options such as remote CCTV solutions. This will allow you to keep a check on your home even when you are away and ensure that nothing is out of order. Automated light switches can also make it seem like the house is occupied in the long term. 

Pack The Right Supplies

Next, you need to make sure that you are packing the right supplies for your trip. You might assume that you will be able to buy anything once you get to your destination. However, this isn’t always the case and it’s great if you can make sure that you have everything that you need in your luggage. For instance, you migh want to consider packing some liner pads. These can be very discreet and will ensure that you don’t have an uncomfortable experience on  a long trip away. 

Another necessity would be clothing for different weather conditions. It’s likely that if you go away for longer, you will experience a few different types of weather. It’s important that you can keep cool or stay dry. 

Safety

Next, you should consider the issue of safety requirements. Problems with safety can be a massive concern particularly if you are traveling alone. It’s important that you research destinations that you are interested in visiting carefully as long as places where you are planning to stay. 

You may also want to think about getting a guide for locations that are considered to be more risky for tourists who are flying solo. 

Money

Finally, you should consider how you are going to pay for longer trips that you are planning to take. There are a few ways that you can deal with this. For instance, you might decide to save up all the money that you need. Or, you could think about earning while you’re traveling. If this is the case, then you could look at seasonal jobs or positions that you have the right qualifications for. You can even gather some new qualifications, specifically so you’re more suited for a few different travel jobs. 


We hope this helps you understand some of the key steps that you should take to ensure that you can successfully and fully embrace the travel lifestyle, reaping all the benefits of doing so. 

embrace travel lifestyle

Introduction To Cryptocurrency And The Easiest Crypto CGT Calculator

With explosive growth of Cryptocurrency in recent years, it becomes increasingly important to have a property introduction to Cryptocurrency to help understand the concept and terms.

Of course, there are tax implications to trading and investing in these new digital products. Many people are not sure when to include cryptocurrency transactions in the tax return and how to calculate the profit and loss from those transactions.

Needless to say, when you are using multiple platforms, wallets and many different currencies, calculating the values to be included in the tax return can be very time consuming. In some case, it’s nearly impossible.

Luckily, I found KOINLY, the cryptocurrency tax software that freed me from all the stress. It’s the most helpful Cryptocurrency CGT calculator to produce proper tax reports.

I’ll compile a cryptocurrency tax guide soon, but first of all, let’s try to understand all the terms come with Crypto currency.

Introduction to Cryptocurrency

The term cryptocurrency is generally used to describe a digital asset that use encryption techniques to regulate the generation of additional units and verify transactions on a blockchain.

Bear in mind, Cryptocurrency generally operates independently of a central bank, central authority or government.

As you can see, the creation, trade and use of cryptocurrency is rapidly evolving.

Any taxpayer that is involved in acquiring or disposing of cryptocurrency needs to be aware of the tax consequences. These vary depending on the nature of the individuals circumstances.

Anybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions.

Introduction to Cryptocurrency

Bitcoin is by far the most well known cryptocurrency, but there are more than 4000 others – with some websites putting this figure as high as 9000.

Other common coins include Ethereum, Litecoin and Tether.

Like shares, all coins have their own ticker symbols (example Bitcoin is represented by BTC).

Tether (USDT) is an example of a stable coin – a digital currency whose price is ‘pegged’ or ‘tethered’ to a reserve asset, such as the US dollar, or sometimes to commodities, such as gold. This dramatically reduces volatility compared to other digital currencies.

Introduction to Cryptocurrency

Address

An “address,” or a wallet address, is a string of letters and numbers that works as an account number for crypto transactions. Addresses can be shared publicly. Addresses are network-specific, so you need an address for each type of crypto asset.

For example, all Ethereum-based tokens can be sent to a single Ethereum address you own, but only Bitcoin can be sent to a Bitcoin address. See custodial wallets and private keys below for some important and related terms.

Exchanges

Exchanges are basically just marketplaces where traders can make digital currency transactions. If a person wants to buy bitcoin, going to an exchange is the fastest way to accomplish this objective.

Private Key

A private key is a piece of information—presented as a string of numbers and letters—that an investor can use to access their digital currency.

Public Key

A public key is an address where an investor can receive digital currencies. This public key, like the private key, is a combination of numbers and letters.

Token

A digital token is a unit of a digital currency, such as a bitcoin. It is worth noting that some of these tokens are used for specific ecosystems, and those are frequently referred to as utility tokens. Other digital tokens are essentially securities.

Wallet

In cryptocurrency, a wallet is software that allows you to store “keys” and create cryptocurrency transactions. It is essentially where you store cryptocurrency addresses that can receive cryptocurrency and where you send cryptocurrency from.

Also, sometimes people call cryptocurrency addresses “wallets.”

Common Transaction Types

Coins received through all the methods shown below will also be subject to CGT when disposed of. The market value when derived becomes the cost base for CGT purposes.

Airdrops

An airdrop is where existing coin holders are given new tokens as a way of increasing the supply of tokens and building their use and popularity. They are usually given away for free. Like staking, the value of these additional tokens are ordinary income at the time they are derived.

Blocks

Many digital currencies make use of blocks, which contain transactions that have been confirmed and then combined together.

Blockchain

The blockchain, which is a distributed ledger system, consists of a series of blocks.

These blocks contain verified transactions. The blockchain was designed to be not only decentralised, but also immutable, meaning that entries could not be erased once placed on this distributed ledger.

Bonuses and rewards

Bonuses and rewards are generally one-off payments paid for completing certain actions, such as referring a friend to a particular exchange, completing questionnaires or viewing advertising. These are also ordinary income at the time they are derived.

Chain Splits

A chain split (also called a fork) refers to the situation where there are two or more competing versions of a blockchain. These competing versions share the same history up to the point where their core rules diverged.

  • The result is that the taxpayer receives new cryptocurrency, while still holding the original currency.
  • The taxpayer does not derive income or make a capital gain at the time of the receiving the new cryptocurrency; it will only be taxed on disposal.
  • The cost base of a new cryptocurrency received as a result of a chain split is zero.

Introduction to Cryptocurrency

Working out which cryptocurrency is the new asset received as a result of a chain split requires examination of the rights and relationships existing in each cryptocurrency held following the chain split.

If one of the cryptocurrencies has the same rights and relationships as the original cryptocurrency held, then it will be a continuation of the original asset. The other cryptocurrency held as a result of the chain split will be a new asset.

Where none of the cryptocurrencies held following the chain split has the same rights and relationships as the original cryptocurrency, then the original asset may no longer exist. CGT event C2 will happen for the original asset, generally resulting in a capital loss. Each of the cryptocurrencies now held as a result of the chain split will be acquired at the time of the chain split with a cost base of zero.

Staking

Staking lets a taxpayer earn income with their crypto by participating in the network of a particular asset. It is similar to having an interest bearing bank account – leave the coins in a digital wallet and/or an exchange that supports staking and receive periodic payouts based on the amount of funds staked. The value of those additional tokens is ordinary income at the time they are derived.

Best Money Saving Tips That Really Help

best money saving tips

Over the last couple of years, I’ve slowly learned some best money saving tips that helped me feeling finally being in control.

Growing up, I never learned any money management skills. Perhaps that’s because I never had any money to manage until going to another city for college. My mum was in control of my life and I never had any pocket money being a child. All red pocket money given to me on Chinese New Year day was handled over to my mum. Having an extremely controlling mum made me want to escape so much. As a result, I left home as soon as it became possible.

Living away from home since the age of 18 didn’t really help me to manage money money better. I  simply spent whatever I had and enjoyed the freedom. Over the past decades, I’ve made many splendid money mistakes. Then one day, I woke up from my financial coma and decided to learn.

Here are the best money saving tips I’ve learned that actually work:

Get as specific as possible when it comes to creating your money goals.

Firstly, you need to know why you want to save. Be specific about your goals. Write them down and review your progress review regularly.

Start to track all your expenses and analyse them

Transforming from a non saver to a saver, you need to start to track all your expenses. You must know where did you money go. Analyse what you spending on exactly. How much of your spending is in relation to your fixed costs? Fixed costs are those expenses that you can’t avoid, such as housing, utilities, food and basic clothing.

Now, let’s think about how to cut other expenses and start saving.

Keep your emotion separately from spending

Unfortunately I’m a naturally very emotional person. So I get inspired, sad, motivated very easily. I’d spend $800+ easily to get some new work clothes before a work trip, trying to get a new job. Every Christmas parties, weddings and gatherings I go to would trigger some new clothes spending. When I’m sad, my already big appetite increases dramatically. I’d get all expensive meals to cheer myself up. Being inspired quite often means I’d also rush out to buy new gears and equipment will soon loose my interest the new subjects.

In order to be able to save, it’s a must to keep emotions separately from spending. Do not spend impulsively because you are emotional. Simply put, just don’t buy anything when you are emotional.

Leave things in the shopping cart for at least two days before committing to purchase

It’s ok to buy yourself something nice. But is that something you really want and like it for a long time or is it just something you want for this moment? Will you still want to buy them after the rush of blood over your head cool down? Before buying anything you want, leave them there for a couple of more days. Very often, you’d find you actually no longer want them any more.

I had hundreds of pair of silver earrings. They are all nice and I liked them before I bought them. However, I hardly wear any earrings and can’t name a favorite pair out of all those pairs. The money spent on those forgettable pair of earrings could easily buy a pair of classic Cartier earrings that will last forever and appreciate in value over time.

This leads to another point:

Invest in quality jewelry and accessories

I used to buy pretty looking handbags made in China. Lots of them. Sadly they only looked like handbags but would fall apart after a few usage. Until one day I discovered Louis Vuitton. They cost more to buy one but would last for a life time. The thing is, you don’t need to use them for a life time unless you want to. You could easily sell them after using them a few years without loosing money because Louis Vuitton retain their value really well. I sold this Louis Vuttion Neverfull bag after using it for 4 years for more than what I paid in Louis Vuitton Paris store.

Likewise, my gold jewelry bought 20 years ago has gone up in value.

Check at home if you’ve already had an item before rushing out to buy a new one. 

To use a simple example, I have at least 3 scales. Of course hardly any one is ever being used, but whenever I felt the urge to loose weight, I’d buy a scale. Such examples are countless. Though such things are not that expensive individually, small expenditures do add up. So you can imagine how much money would have been saved if no duplicate purchases were made.

Do your research before buying something you really need

Check product reviews and do property research before buying some you need. If you need a gas heater in winter, buy a good one that will last and make you feel comfortable and happy at home.

Don’t rush out to buy the first one available but regretting the purchase after while.

Sometimes, you can find a cheaper but good alternative

Cheap price should never be your priority of purchase anything. Cheap price and good quality should be. A while ago I arranged the furniture at home and really wanted a floor lamp for the living room. Then I went online straight away and found this antique looking lamp for close to $300. Sure, I liked the look and there’s nothing wrong with it. But by then I’ve learned more from my more practical friends and am less vain. Eventually, this $12 floor lamp was bought for and I couldn’t be happier ! The light bulk was found in one of my cupboards so there was no need to buy new ones to go with the lamp. I could rate this as the best purchase ever and who could have thought I’d ever be so happy with so little money spent.

Unsubscribe newsletters from retail stores

I hardly voluntarily sign up on any newsletter. But those stores do not wait for your permission anyway. So you’ll get lots of lots emails everyday. Therefore it’s easy to just browse and buy something. Since they offer free shipping for spending more, why not just get a couple more things. You saved on shipping fees right? Right. The best approach is unsubscribe whenever you receive one of the newsletters. Out of sight, out of mind.

Build a capsule wardrobe and only buy clothes that you will wear over and over again

Have you ever opened your wardrove full of clothes and still felt there was nothing to wear? I bet there’s something in your closet colleting more dust than others. Very often we just keep wearing those old favorite again and again. So much money is wasted on buying something you actually never wear.

Steve Jobs and Mark Zuckerberg buy the same clothes in dozens to avoid decision fatigue. We could build a capsule wardrobe to save money.

I recently heard someone saying if you don’t think you’ll wear something for more than 30 times, don’t buy it. That totally blew off my mind. What a genius way of saving money and why didn’t I hear this advice earlier? Do you really need 30 different pairs of boots? No.

Plan a spending freeze

Like mentioned above, find out what your fixed costs are. Most likely, the list goes like something like below:

  • Housing and utilities
  • Travel costs to work
  • Groceries
  • Phone and internet
  • Private health insurance

If something don’t fall into one of these category, don’t spend money on it.

Review your fixed costs and see if you can find a better deal elsewhere

Are you happy with your current mobile plan, internet service, private health insurance, home mortgage? Probably you are. If you are on a mission to save money, shop around to see if you can find a better deal.

Use credit card to your advantage

Credit cards may have a bad rep. But as long as you don’t have a credit card debt, you can totally use the credit card reward points to your advantage. Because many credit cards offer cash back rewards, so you can save money paying your fixed costs by credit cards instead of using cash. Make sure to check credit card statements frequently to make sure you are charged correctly. Also, it’s very important to pay your credit card on time every month to avoid interest and late payment charges.

If you have items you no longer use, try selling them instead of just letting them collect dust in the corner

With the Covid lockdown going on for months, it’s difficult to go out. Instead, you can stay home and declutter. If you have nice things that no longer in use, why not try to sell them online in your spare time. Online shopping is going hot at the moment. So is online shopping for high quality second hand items. Here are some best venues you can sell your clothes online in Australia.

Set up automatic payment plan every months to avoid late payment charges

I never had money problem paying off my credit card on time. But due to my sloppiness, very often I forget to pay it on time and was charged late payment fees. It took me a few years to finally set up a direct debt plan to let the payment taken out from my bank balance every month. Problem solved. I also set up direct payment payment plans for all my utility bills so late payment fees are rarely happening any more.

Don’t spend your pay rise or tax refund, invest it

If you get a pay rise, use it to bulk up your retirement fund or savings account. The same goes to your tax refund. I used to shout on dinner or lunch on a large group of my “friends” whenever I got a pay rise or bonus because I simple had to find ways to spend. It took me many years to learn that if you don’t like keeping money, money doesn’t want to stay with you either. All my friends earned less than me back then became far more wealthy over the years. I only started to learn to save for retirement. But it’s better late than never right?

Cook your meals at home as often as possible

Covid lockdown’s really helped with this one. From eating out almost everyday during the week to having home cooked meals everyday is big change. It’s shocking to see how much money you could saving by not going out to eat restaurant food.

But wait, you can still save more on grocery shopping!

Never go grocery shopping when you are hungry

Number one rule is never go grocery shopping when hungry. It’s magical to see how much money you can save on grocery shopping with a full stomach.

Plan your meals for the week and only go grocery shopping once a week with shopping list

I know someone could go with beans on rice everyday to save money but it’s a bit too hard to follow. Meal planning every week however, is much more doable. My problem right now is living so close to the shops that it’s easy to pop in on my daily walk and just buy whatever. So it’s crucial to only go grocery shopping once a week with a shopping list. Only buy what’s on the list. No more impulse purchase.

 

 

Rental Expenses: Residential Rental Property Tax Deduction Guide

Property is red hot at the moment. Many people managed to save more money during Covid lockdown by not going out and spend big on property purchase and home renovation instead. First time property owners often ask: what rental expenses can we claim? It can be quite confusing as what rental expenses you can claim or to what extend you can claim.

Rental Expenses: What you can claim

You can claim tax deduction for certain expenses incurred for the period your property is rented or is available for rent. However, if the rental expenses are capital in nature, you won’t be able to claim an immediate tax deduction. If the property is only rented out part year, you need to apportion the rental expenses.

First, let’s have a look what rental expenses you can claim immediately. You can claim a deduction for these expenses only if you actually incur them:

  • Mortgage interest on loans
  • Borrowing costs (different rules apply)
  • Council rate
  • Water charges
  • Body corporate fees
  • Land tax
  • Insurance – building, contents, public liability and landlord insurance
  • Advertising for tenants
  • Property agent management fees
  • Bank charges
  • Cleaning
  • Pest control
  • Utility costs
  • Legal expenses in relation to lease
  • Lease costs – preparation, registration, stamp duty
  • Mortgage discharge expenses
  • Quantity surveyor’s fess to prepare depreciation schedule
  • Servicing costs such as servicing for swimming pools or water heaters
  • Telephone calls, stationery and postage
  • Repairs and maintenance providing they are not initial repairs
  • Book keeping fees

Borrowing costs

Many people incur mortgage insurance while purchasing investment properties. Unfortunately you can’t claim the entire mortgage insurance cost in one go. Instead, you can claim the mortgage insurance expenditure over the period of 5 years.

If you incur any other small borrowing cost for the total of less than $100, you can then claim an immediate deduction.

Repairs

Repairs Vs Improvement.

You can claim deductions on repairs you make to the rental property. However, the repairs must be directly related to wear and damages as a result of renting out the property. Repairs generally involve replacement of a worn out part. For example replacing a damaged part inside of an air conditioning unit is a repair. On the other hand it’ll be different, if the entire air conditioning unit is damaged beyond repair and you bought a new one to replace the whole thing. In this case, you won’t be able to claim the cost of the new air conditioning as immediate deduction. But you can claim the depreciation deduction for a number of years.

Improvement involves replacement of an entire structure or unit of the rental property. Generally speaking most major renovations such as replacing the whole kitchen cupboards or bathroom shower suite are improvements. As a result of conducting rental improvements, you’ll only be able to claim those costs over the 40 year period. This will be discussed further more later.

Initial repairs

According to ATO, the price you pay for the property takes into account any repairs required immediately to get the property to earn an income. This means that you can’t claim deductions costs of repairs carried out to rectify defects that existed when you purchased the property. It is also the case if you weren’t aware of the defects at the time of purchase. You can however, include all the initial repair costs as part of your cost base of the property upon disposal of the property.

Repairs when property is no longer available for rent

You may still claim rental deductions on some of the repairs if the property is no longer available for rent. For instance, if the repair is related to the period in which the property was used to produce income. You must carry out the repairs by 30 June during the income year that the property was producing an income.

Interest on loans

Many home owners want to claim interest on their home loans as tax deductions. But, you can’t claim that as your work related expenses in your tax return. If you take out a loan to purchase a rental property, you can claim the interest charged on that loan. Sometime, you need to apportion the interest as a tax deduction. However, the property must be rented or available for rental. You can’t claim any interest expenses if you use the property for private purposes.

If you take out a loan to purchase land on which to build a rental property you intend to rent out, you can claim the loan interest as a tax deduction. On some other occasions, you might take out a loan to renovation a property that you intend to rent out. Like wise, you can claim the loan interest in this case.

Also, while the property is available for rent, you may claim interest on loans for:

  • Purchasing depreciating assets (assets over $300)
  • Renovations
  • Repairs

You won’t be able to claim the total costs of depreciation assets as immediate deductions but we’re going to discuss that in details the next.

Claim deductions over a period of time

When you purchase items that each cost more than $300 for your rental property, you can’t claim immediate deductions. However, you can claim the costs over a period of time during the life expectancy of the items. In other words, you can claim depreciation ductions on those items over $300. According to ATO, you’ll be able to claim a percentage of the cost each year until the cost is all written off.

There are two parts of depreciation costs you can claim. Once is deprecation on plant and equipment. The other one is Capital Works deduction.

Depreciation on plant and equipment

Be aware, there have been some changes to depreciation deductions on plant and equipment in recent years. From 1 July 2017, depreciation deductions on plant and equipment are only available on expenditure incurred on brand new assets. In simple terms, property plant and equipment items are those fixtures and items you can easily remove from the property. Dishwashers, ceiling fans are all common examples for plant and equipment. If you bought a fully renovated order property, you can’t claim any deprecation deductions on those new fixtures and fittings installed by the seller. 7:30pm (Australian Eastern Standard Time) on 9th May 2017 is the cut off time. If you purchase a property previously owned by someone else, rules are different on whether or not you can claim depreciation deductions on plant and equipment which was already in the property.

If you purchased or entered into a contract to purchase a rental property before that time, you can claim deductions for depreciation on assets purchased with the property. After that time, you can’t claim those deductions any more. However, you can still claim depreciation deductions on new plant and equipment you buy after purchasing the property.

Capital works deduction

Whether you by a new property or not, you can always claim building depreciation on the actual cost of the building. Note, the cost of the building is not your full purchase price. The depreciation rate on cost of the building is usually 2.5% per year. As a general rule, any residential building where construction commenced after the 15th of September 1987 will entitle their owner to capital works deductions at a rate of 2.5 per cent per year for up to forty years. Property investors can claim deductions for the periods that the property was rented or available for rent.

As mentioned above, costs of rental improvements are not available for immediate deduction. They are added to the capital costs of the properties and maybe claimed under capital works deduction. Other common examples of improvements include extensions, building a new fence, replacing the whole roof etc. Plumbing works can be tricky as most rental report from real estate agent will simply state them all as plumbing. In those cases, you’ll need to delve into more details. For example, if the whole toilet bowl was replaced, it’ll be capital works and you’ll only be able to claim the costs over 40 years. If it’s a job of replacing the whole hot water system, you’ll be able to claim the whole costs over the effective life of the hot water system, usually 10 – 20 years. You can claim immediate deductions if the whole plumbing bill only contains labor costs in fixing blockage issues or replacing  a section of pipes.

Prepayment of rental expenses

You can claim an immediate deduction on prepayment of some rental expenses such as insurance and mortgage interest. Conditions are that your prepayment covers a period of 12 months or less and the periods ends on or before 30 June of any income year.

What you can’t claim as rental deductions

  • Cost of buying and selling your rental property, such as:
  • Stamp duty on purchase
  • Legal costs for property purchase
  • Real estate agent’s fees on sale
  • Buying agent fees
  • Survey fees for purchase
  • Interest paid on property while it’s not available for rent
  • Initial repairs as we mentioned above
  • Travel expenses for purchasing and inspecting rental properties after 1 July 2017, unless you are carrying on a business as a rental property investor.

Record keeping requirement

Of course, record keeping is very important to substantiate your rental expenses deductions. You need to keep the records in relation to rental expenses for 5 years from the tax year they are claimed in. If you are claiming depreciation, you need to keep the receipts for 5 years from the last year of claim.

 

 

What you can’t claim as working from home tax deductions

What you can't claim as working from home tax deductions

Since Covid hit, more and more employees started to work from home. As a result, working from home tax deductions have become hot topics.

It’s widely broadcasted that ATO’s introduced the 80cents per hour shortcut method to claim your working from home running costs. However there’s a catch to the 80 cents short cut method. Because that method is all inclusive, once you claim 80cents per hours, you can’t claim anything else as your working from home tax deductions. In most cases, you’d be better off to claim 52 cents per hour plus any other expenses you incurred for working from home.

There are countless articles online talking about what you can claim as working from home tax deductions in general. But today I really want to touch upon another maybe not so popular topic on what you can’t claim as working from home tax deductions. Because there are so many examples of inappropriate and sometimes funny claims, I think it’s important to know what we can and what we can’t claim.

Before we start, I’d like to quickly mention two common misunderstandings about the relationship between tax deductions and tax refund.

Common misunderstandings about the relationship between tax deductions and tax refund

First of all,  we need to be clear that to claim tax deductions doesn’t mean that we’ll get 100% of the money spent from your tax return.

I did have people come to me for tax advise on the returns they’ve lodged themselves. They’ve claimed $3000+ tax deductions but only got $1000 something as tax return. Therefore, they believe the tax assessment was wrong. They claimed $3000 tax deductions, so they should get $3000 back as a tax refund right?

Unfortunately, whatever you spend and claim as a tax deduction, you’ll only get a percentage back. That percentage is your marginal tax rate. For example, if your marginal tax rate is 37%, you’ll only get 37% of your spending back as a tax refund. So be mindful for what you want to buy and claim as a tax deduction. Ask yourself, is it really necessary to buy it? If it’s something that you really need and helpful, by all means go ahead and buy it. If you want to buy it just for the purpose to reduce your tax, think twice. Because whatever you spend, you’ll only get a percentage back, not the full amount.

Another misunderstanding I’ve often encountered is that sometimes people think the more tax deductions they claim, the more refund they’ll get.

It can be true in most cases. However, for low income tax payers, excessive spending on tax deductions can be somewhat wasteful. I’ve seen many people only need a few hundreds of dollars worth of deductions to go below the tax free threshold. Instead, they’ve spent way more than what they need in hope of getting more tax refund. Sadly, a lot of expenditure incurred were not necessary because once you touch down the tax free threshold and you get all your tax paid back, there isn’t going to be anything more money coming to your tax return.

Now that I’ve got that bit out of the way, let’s get back to today’s topic.

What you can't claim as working from home tax deductions

What you can’t claim as working from home tax deductions

Rent for your home

Many people got very excited about working from home tax deductions. Because they’ve spent so much time working from home, instead of in the office, surely the rent paid on housing should be deductible, right? At lease part of it?

Unfortunate for PAYG (pay as you go) and PSI (personal service income) income earners, you can’t claim rent for you home as tax deductions. Even when you have to work from home due to lock downs.

Mortgage interest, rates and strata levy

Same concept as rent mentioned above, home owners can’t claim mortgage interest, rates and strata levies for their home because they’ve been working from home.

Toilet paper, tea and coffee

Toilet paper became hot property a few times due to Covid. And I’ve had a couple of clients who wanted to claim toilet paper as one of their tax deductions. Although those supplies are generally available when in the office, employees can’t claim costs for toilet paper together with tea and coffee while working from home.

Most household electronic appliances

Just yesterday, someone wanted to claim cost of buying their washing machine as a tax deduction. I’ve also had clients who sent me the invoices of their fridge, air conditioning and sofa etc to be included in their tax deduction. It’s understandable people want to minimize their taxes and get as much as refund as possible. But everything has to be done according to tax regulations. According to ATO tax payers can claim anything deemed to be personal. There are some cases personal items can be used for work purpose as well and only the work related percentage can be claimed as tax deduction. The work related percentage has be justifiable and substantiated by documentation and reasonable calculations.

Unreasonable high percentage of utility costs without substantiation

Just because we work from home a lot, it doesn’t mean that we can just 70-100% of electricity bills without any detailed calculation. You’ll need have backup calculation to support the percentage you used to claim utility costs deductions. Bear it in mind, if you’ve claimed 52cents or 80cents per hour running cost, you can’t claim utility costs as tax deductions on top of it. Like wise, if you claim the actual utility costs in your tax return, you can’t also use the cents per hour method to claim working from home tax deductions.

Pure personal expenditures

Taxpayers can’t claim pure personal expenditures such as massages as tax deductions. The fact you have to get massage because sitting on uncomfortable dining chair working from home caused you backpain doesn’t provide enough ground to claim the cost of massage sessions as a tax deduction. By the way, this example is based on a true story.

Expenses have been reimbursed by employers

Consider this, you bought something for work purpose and subsequently your employer reimbursed you the full amount. Can you still claim this expenditure as your tax deduction in your tax return. Common sense told me no. Not surprisingly the answers is also NO by ATO. But in reality a number of people do claim expenses reimbursed by employers. Some are innocently not knowing, some knew but claim it nevertheless.

Full amount of work equipment costs over $300

For anything under $300 we bought out of our own pocket for work purpose, we can claim immediate deduction. Some examples are printers, keyboards and monitors under $300. For all work equipment costs over $300, we have to put them in the depreciation schedule. And claim the work related depreciation costs for the relevant period. For example, you bought a laptop on 20 June for $2000. You bought this one especially for work from home purpose. It happens that you hear from the radio ad, now is a good time to buy it because you can claim this as your tax deduction. Therefore, you can claim the whole $2000 in your tax return right? Wrong.

I’m so surprised to see so many people buying expensive computer gears for work right by the end of each financial year. The truth is, you can only claim the depreciation cost from the date of purchase. As a result, your tax deduction in that financial year is very minimal. Far less than the few thousand dollars you spent.

Working from home also prompt a lot people go out buying expensive custom made desks that costs thousands. Similarly, you can only claim the deprecation cost from the date it’s fully installed for working from home purpose. Even worse, if you claim the desk depreciation, you can’t claim the cents per hour running cost any more. In most cases, people end up getting less tax deductions claiming the desk depreciation.

In conclusion

Tax time can be exciting or daunting for us. One thing to remember is that working from home doesn’t guarantee that you can get a lot more tax deductions.

There are however, wise ways to save tax for everyone or as property investors specifically. Whatever you do, it’s better to try to understand tax regulations and avoid getting tax penalties because of some innocent mistakes.

Last Minute Steps To Claim More Investment Property Tax Deductions

“What else I can claim as investment property tax deductions?” I hear this question all the time.

The end of financial year is upon us. In a few weeks time, you can pull out all your records and prepare your tax return again. Hopefully you’ll get a tax refund, because I’m yet to meet someone who’s happy to pay more tax on top of what’s been paid during the year. Understandably, there are more people than usual in June, seeking tax advise on what to do to minimise tax.

We talked about how to contribute to your Super fund to claim tax deduction before. In this post, I’m going to focus on what can be done to claim more investment property tax deductions. You might think it’s too late in June but there are still a few last minutes steps you can take to boost your tax refund or minimise your tax payable.

First of all, get a check list of what you can claim as investment property tax deductions.

Expenses for immediate tax deduction

Advertising fees to look for tenants

If you are engaging a real estate agent to manage your property, this cost will be listed on your yearly income and expense report. If you are managing the property yourself and found your tenants through newspaper or online ads, make sure to keep a record of advertisement fees.

Rates

This includes Council rates and water rates. Though it sounded basic, but trust me, plenty property investors don’t know those are part of investment property tax deductions. So make sure to keep all the records of your rate payments during the financial year.

Strata levies

Also know as body corporate fees, are getting higher and higher each year. Remember, you can claim immediate deduction on payments to body corporate administration funds and general purpose sinking funds. They form a big part of investment property tax deductions, so don’t miss this category. However please be mindful, payments to a special purpose fund to pay for particular capital expenditure are not deductible.

Utility costs

Tenants usually pay their own electricity, gas and water usage costs. However in some cases, landlords agree to paid all of it or a percentage of these costs. As a property investor, make sure to claim the utility costs you paid as part of your investment property tax deductions.

Gardening and yard work

This includes dump fess, labor costs you paid for tree lopping and lawn mowing. You can also claim costs of replacement of garden tools, fertiliser, sprays and replacement of plants.

Cleaning

This category of expenses include internal, for example, carpet cleaning and external cleaning, for example, house cleaning. Therefore, you can claim payment to cleaners and cost of cleaning materials for your rental property as investment property tax deductions.

Insurance

There are many types of insurance you can get for your rental property. As a result, you can claim building insurance, contents insurance, public liability insurance and landlord’s insurance 9covers rental defaults) as investment property tax deductions.

However, please be mindful that you can’t claim mortgage insurance as your rean tax deduction as it forms part of your borrowing cost.

Interest

You can claim tax deduction for interest paid on loan to purchase, build, repair and improve your investment properties. For example, interest on your investment property mortgage is tax deductible. Like wise, you can claim interest on loan taken out to build your investment property, providing the property is rented or available for rental during the year you are claiming a tax deduction.

On top of the above, you may also claim interest charged on loans taken out:

  • to purchase depreciating assets,
  • for renovations, or
  • for repairs to the property.

Note, from 1 July 2019, you can’t claim tax deduction on interest or other holding cost of vacant land with no permanent structure on it in general.

Land tax

A big percentage of property investors miss claiming land tax deductions because very often, land tax incorporate their main residence as well. But you can certainly claim the land tax paid in proportion to your rental property as a tax deduction.

Agent management and admin fees

Most property investors engage real estate agents to manage their investment properties. Of course, this serve doesn’t come free of charge. Typical agent fees includes, property manage fees, admin fees, sundry fees such as postage etc, annual report fees.

Legal expenses

As a property investor, you can’t claim legal expenses are capital in nature, such as costs of:

  • purchasing or selling the property
  • resisting land resumption
  • defending the title to the property

However, you can claim legal costs in order to evict non-paying tenants.

Office supplies

Property investors can claim stationery, rent books, postage and business use percentage of a computer etc in relation to managing their rental property. As a result, those costs are tax deductible

Telephone

As a property investor, you can certainly calls made to a tenant, agent or tradesman to arrange repairs etc.  Bear it in mind, in case of a tax audit, you’ll need to provide a diary detailing this expense.

Repairs and maintenance

This is a more complicated area. In general, you can claim repairs and maintenance costs while your rental property is rented.

Repairs generally involve a replacement or renewal of a worn out or broken part. For example, replacing some guttering damaged in a storm. Similarly, replacing part of a fence is a repair job. If you replace the entire fence, the cost will become capital in nature. As a result, you can’t claim the total cost immediately as a repair cost. You can however, claim the cost of replacing the entire fence over a number of years as part of deprecation.

According to ATO, initial repairs include costs you incur to remedy defects, damage or deterioration that existed at the time you acquired the property. Therefore, those costs are considered to be
capital in nature, not immediate tax deductions.

Depreciating assets costing $300 or less

You can claim immediate tax deduction for your rental property depreciating assets costing $300 or less. For example, if you bought a microwave for your rental property for $299 last month, you can claim the entire amount in this financial year.

Even better, you can claim immediate tax deduction if you hold an asset jointly with others and the cost of your interest in the asset is $300 or less. This is the case even though the total cost was more than $300.

Expenses as tax deduction over a number of years

Borrowing costs

You might incur certain costs when borrow from a bank. Typical borrowing costs are as below:

  • procurement and establishment fees
  • legal expenses for mortgage
  • stamp duty on mortgage (Many states have abolished mortgage stamp duty)
  • valuation for loan approval
  • survey and search fees
  • mortgage broker’s commission
  • lenders’ mortgage protection insurance

You can claim those expenses as tax deductions over the period of your loan or 5 years, whichever is shorter. If the total cost is less than $100, you can claim the whole amount in the relevant financial year.

Depreciation on assets

You can claim tax deductions on depreciation of assets such as air conditioners, stoves etc costing over $300 (your share) over their effective lives.

Tax Ruling Taxation Ruling TR 2020/03 – Income tax: depreciation effective life is very helpful guide in this regards. If you decide to make an estimate of effective life, you need to use a similar methodology the Tax Commissioner used.

Capital works/building write off

You can claim investment property deductions on certain kinds of construction expenditure. In the case of residential rental properties, you can generally claim the cost over 25 -40 years.

These are referred to as capital works (special building write-off) deductions. The deduction is limited to 100 per cent of the construction expenditure.

Deductions based on construction expenditure apply to capital works such as:

  • a building or an extension (for example, adding a room or garage),
  • alterations such as removing or adding an internal wall, or
  • improvements to the property – for example, erecting a pergola, patio or carport.

Deductions can be claimed only for the period the property is rented or is available for rent.

What you can do now in June to claim more deductions as a landlord?

We’ve covered a long list of expenditures that you could claim as tax deductions for your incoming tax return. Now, you might ask what you can do now in June to get more tax benefit. Is it too late?

Of course not. Here are a few last minutes steps you can take to boost your tax return:

Seek tax advise if you need help

Always ask for professional advise if you need help to improve your tax position. The fees you paid to professionals for tax advise is tax deductible. So don’t forget to ask for a tax invoice to include it your tax return.

Carry on minor repairs

Does your investment property need some minor repairs and maintenance? It’s time to get it done now. Need a new lick of paint? A few new light bulbs?  Another set of keys and swipe card? Why not get them organised now. Any R&M expenditure paid in June for your existing rental property will be 100% tax deductible.

Conduct a pest control

There has been a lot of rain in the past year. Consequently there have been a lot of spiders and other pests around. June is the perfect time to conduct a pest control to protect your investment property. Your tenants will thank you for that and potentially stay longer.

Prepay some expenses

Have some bills in relation to your rental property floating around but not yet due? You can pay them now to claim an immediate tax deduction and boost your tax refund.

You can claim immediate deduction if you prepay expenses such as insurance or interest on mortgage if  either:

  • the amount if less than $1000,

    OR

    • the payment covers a period of 12 months or less and the period ends on or before 30 June of the next income year.

    Replace/Purchase assets for under $300 (your share)

    As mentioned before, you can claim immediate tax deductions on assets costing less than $300. So think hard, what do you need for your rental property that will cost $300 or less before the financial year ends.

    If you own a property jointly with others, as long as your share of the asses is $300 or less, you can still claim an immediate tax deduction.

    For instance, you own a rental property jointly as a couple. Your rental property in great need of a new air-conditioning costing $600. By all means, go and get it now. You can claim the whole amount this year instead of claiming the depreciation costs over a number of years.

    Get a depreciation schedule

    If your rental property is a lot less than 40 years old and you don’t have a depreciation schedule, get one done. Now.

    Depreciation schedule is especially important for brand new rental properties because the tax benefit will be thousands of dollars. The cost of getting depreciation schedule is usually a few hundreds of dollars and it’s totally worthwhile. Besides, the cost of depreciation schedule is tax deductible too.

    In conclusion, there’s still plenty time to be prepared and claim more tax deductions come July. It’s all about research and planning.

     

     

     

    Government Super Co Contribution – Are you eligible and how to get it?

    Government Super Co Contribution

    The Government Super co contribution applies to personal contributions made by low-income earners from 1 July 2003 onwards. Back then it was $1,000 co contribution for $1,000 eligible contributions. Just so you know, back then I wasn’t even slightly interested in it because my employment income was high. As mentioned in the previous post about personal Super contributions to save tax and build wealth, I quit my corporate job in 2009 and started being self employed.

    If you’ve ever been self employed, you know your income can vary from year to year. Some years, your income could fall within the “low income” threshold. I always knew about the government Super co contribution but thought the amount was too little to be bothered. But small amounts do accumulate and they could grew to a much bigger amount staying in your super fund.

    For Australian tax payers whose income was less than $53, 564 ($54,837 for the 2021 year), the government will make co- contribution into a tax payer’s superannuation account where eligible non-concessional contributions up to $1,000 have been made by qualifying low income earners. Fifty cents in every dollar of contributions, up to a maximum superannuation co – contribution of $500 a year will be paid into the taxpayer’s superannuation account for the income year.

    You may be eligible the Government Super co contribution if you:

    • made personal contributions to obtain superannuation benefits for themselves (or a dependent in the event of their death) to a complying superannuation fund or Retirement Savings Account (RSA) on or after 1 July 2005 (provided the contributions were not salary sacrifice contributions and they will not claim a tax deduction for the contributions)

    • have lodged an income tax return for the relevant financial year

    • total income was less than $53,564 (for the 2020 financial year, $54,837 for the 2021 year). 

    • have not been the holder of a temporary resident visa at any time during the year unless they are a New Zealand citizen or the holder of a prescribed visa

    • are less than 71 years old at the end of the financial year during which the contribution was made

    • have at least 10% of their total income for the income year attributable to carrying on a business (i.e.  self-employed) or to activities that result in the person being treated as an ‘employee’ for superannuation guarantee purposes. Those who earn less than $450 per month or are part-time workers under 18 (i.e. not covered by the superannuation guarantee regime) will still qualify for the government co-contribution as they are still regarded as ‘employees’ for SGAA purposes

    • have a Total Superannuation Balance of less than $1.6m on 30 June of the previous financial year

    • have not exceeded their non-concessional contribution cap in the relevant financial year

    Total income for the purposes of the Super co contribution includes:
    • assessable income
    • reportable fringe benefits amounts
    • reportable superannuation contributions

    less

    • any assessable First home super saver released amount, and
    • any allowable business deductions

    Also, there are two income tests applied in determining the government Super co contribution.

    10% Total income test

    In order to satisfy this test, 10% or more of the taxpayer’s total income must come from either:

    • employment related activities
    • carrying on a business, or
    • a combination of both

    Amounts from these sources are referred to as eligible income amounts.

    The total income amount is not reduced by allowable business deduction amounts for this test.

    Examples of eligible income:

    • salary and wages
    • business earned as a sole trader (the assessable income: turnover – allowable business deductions is used)
    • business earned in partnership (the partnership distribution is not reduced by deductions claimed on the individual tax return in earning the income)
    • directors fees

    Note if you are carrying on a business, you may have a high turnover but still be eligible for the super co-contribution due to your allowable business deductions.

    The following amounts are not eligible income

    • non-business partnership distributions

    • distributions from a trust

    • income from individually or jointly held assets, such as interest, rent and dividends

    • income related to another year of employment, such as employment termination payments and lump sum payments

    Be aware, where you have a partnership distribution, the ATO will treat it as ineligible income. If you have business partnership income, make sure that you complete Item A3.

    Total income threshold

    To determine your assessable income for calculating the amount of the co-contribution:

    • Total income is reduced by amounts which the taxpayer is entitled to a deduction for carrying on a business. That is, it is net income rather than assessable income for business income.

    • Net partnership income is included. Partnership income includes joint rental and investment income. If the net partnership or joint income is a loss, the amount is 0. This means that, where a person has a rental property in their own name, assessable income is included for the total income threshold test. However, where you have a rental property in joint names, you only need to inclue the net rental income (or 0 if it is a loss).

    The ATO will treat joint rental and investment income as solely earned income unless you complete Item A3 correctly.

    Government co contribution calculation

    The taxpayer’s co-contribution is reduced by 3.333 cents for each $1 of total income over the lower threshold.  The lower threshold for the 2020 year is $38,564. And the government Super co contribution phases out completed where the total assessable income, reportable employer superannuation contribution and reportable fringe benefit amount reaches the upper threshold of $53,564.  

    For the 2021 year, the lower threshold is $39,837 and the upper threshold is $54,837.

    Provided the taxpayer is entitled to receive the co-contribution, the minimum amount payable is $20. The co-contribution will be paid directly into the taxpayer’s superannuation account or RSA (Retirement Savings Account).

    The formula for calculating the maximum co-contribution amount is:

    =  $500 – {[(total assessable income – allowable deductions from running a business + RFB + RESC) – lower threshold amount] x 3.333%}

    The ATO has a SUPER CO-CONTRIBUTION CALCULATOR on their website

    The co-contribution payable is the lesser of:

    • the maximum co-contribution amount; or
    • 50 cents for every dollar of personal superannuation contributions.

    The ATO will automatically calculate the amount of co-contribution, based on the information on the tax return, including the adjustment amounts included at Labels F, G and H at Item A3.

    Also for your reference, the ATO has a worksheet available to calculate the amounts.

    GOVERNMENT SUPER CONTRIBUTIONS WORKBOOK

    How to make personal super contributions for government super co contribution purpose

    Firstly, you do not need to make your personal contributions as a single lump sum. You can make payments throughout the financial year. The ATO uses the total amount you have contributed for the year to calculate the co-contribution.

    Your super fund can tell you how to make personal contributions. Most funds offer you a number of options including:

    • BPAY®
    • direct debit
    • through your bank account.

    In some cases, you can make regular super contributions into your super account directly from your after-tax pay. If the contributions come from your before-tax pay, they are generally referred to as salary-sacrificed contributions and will not qualify for the super co-contribution.

    Your super fund needs your TFN before it can accept your personal contributions.

    Above all, your personal contributions must reach your super fund by 30 June each year for you to receive a government co-contribution for that financial year.

    Completing Item A3 On Individual Tax Return

    In some circumstances, the ATO may be able to calculate the correct co-contribution without Item A3 being completed. The ATO will match the information on the tax return with information from superannuation funds and pay you the co-contribution automatically. However, often the completion of this item is crucial or the taxpayer may not get the correct amount of co-contribution, or may miss out altogether on the benefit.

    LABEL F – Income from Investment, Partnership and Other Sources

    You should complete the box if you

    • showed income from a partnership at Item 13 of the tax return or
    • were in a joint income group and they have deductions for the following joint income:
      • interest and dividends (Items 10 and 11)
      • trust distributions (Item 13 labels L, U or C)
      • foreign entities income (Item 19 labels K and B)
      • foreign income (Item 20 labels E and F)
      • rental income (Item 21 label P)
      • bonuses from life insurance companies and friendly societies (Item 22 label W)

    The amount = the assessable income from each of the above income types in the taxpayer’s name only, plus the net amount (or 0 if that amount is a loss) of each of the above income types in joint names

    If this amount is NIL then enter code C in the box.

    LABEL G – Income from Employment and Business

    The ATO will automatically treat certain amounts as employment or business income. Label G includes the amount of any adjustments to this automatic calculation. For example, assessable income from foreign employment income and partnership distributions where the partnership is carrying on a business will need to be added. Deduct some amounts from employment or business income on the tax return. For example, if you received parental leave pay or Dad and Partner pay after employment ceased, deduct this amount. Other examples are employment or business income that relates to an earlier income year, such as back payments of wages or a lump sum paid on termination. To clarify, Label  G includes the below:

    • total employment income NOT SHOWN at Items 1, 2, 3, 4 (excluding death benefits), Item 12B, IT1 or IT2 plus
    • business income NOT SHOWN on the Business and professional items schedule of the tax return

    less

    • Items 1, 2, 3, 4 (excluding death benefits), Item 12B, IT1 or IT2 – total income that was not from employment
    • any parental leave pay that has been received AFTER the taxpayer CEASED employment (not the amount received during the time the taxpayer is on leave from their job)
    • non-business income on the Business and professional items schedule of the tax return

    If this amount is NEGATIVE then enter code L in the box.

    LABEL H – Other Deductions from Business Income

    Business deductions that are not at Item P8 on the Business and professional items schedule for individuals of the tax return. This may include, for example

    • the business portion of a distributed partnership loss included in calculating the amount at N or O at item 13 (as long as the partnership carries on a business)
    • deductions at X or Y at item 13 which relate to the business income portion of a partnership distribution
    • personal service income deductions at item P1 on the Business and professional item schedule for individuals which relate to carrying on the business
    • deductions shown at D10 for costs involved in managing the business tax affairs as a sole trader or partnership business

    Government Co-Contribution for Superannuation Contributions – Temporary Residents

    Finally, temporary residents are not eligible for the government co-contribution for any personal superannuation contributions that they may have made during the year. It is not available to anyone who has been the holder of a temporary visa at any time during the year. As a result, any temporary resident who becomes a permanent resident during the income year will not be eligible for this benefit either.

    From 1 July 2009, New Zealand residents who are living temporarily in Australia have been eligible to receive this payment, irrespective of whether or not they are classed as temporary residents.