Frequently Asked Tax Questions
Here at MP Tax & Business Solutions, we have a wide and diverse group of clientele. But no matter how unique each of our clients can be, we tend to get asked some of the same questions.
So we thought it would be a great idea to answer some of these queries here.
Q. My boss says that I need to wear a black shirt and black pants to work. Can I claim the purchase of these as a deduction on my tax return?
A. Generally no you can't. A uniform will need to be unique and distinctive to the organisation you work for.
"Clothing is unique if it has been designed and made only for the employer. Clothing is distinctive if it has the employer's logo permanently attached and the clothing is not available to the public." - ato.gov.au 1
Some exceptions do apply for certain jobs were even though a logo is not present on the article of clothing, a deduction can be allowed, such as stockings for a flight attendant.
Suits unfortunately are not an allowable deduction :(
Q. Can I claim gifts to employees/customers as a business deduction?
A. Yes you can, but depends on what the gift is and how often the gift(s) are provided. For the sake of this example, let's say we gift an employee a $100 bottle of whisky.
We need to see if this gift will fall under the minor benefits exemption, which will mean it will be exempt from Fringe Benefits Tax (FBT).
In order for the deduction to be exempt FBT, the whisky must be less than $300 inc GST, and it must be 'unreasonable to treat the benefit as a fringe benefit'.
This basically means, as long as the gift isn't frequently occurring, or consisting of 10 separate bottles of whisky, then it would be unreasonable to say it is a fringe benefit.
So the annual Christmas gifts to the staff are fair game for a deduction. 2
Q. I heard that if I get Private Health Insurance, I won't need to pay for Medicare. Is that true?
A. No its not true. We hear this question a lot and it's partly due to the fact that the Private Health Insurance companies do not explain this clearly.
Every person who files a tax return and earns over $21,655 3 , will have to pay the Medicare Levy of 2% on their income.
However, depending on your income, you may also have to pay the Medicare Levy Surcharge, which ranges from an extra 1% to 1.5% levy on your total income.
If however you take out Private Health Insurance, you will not have to pay the Medicare Levy Surcharge.
The key factor is, that you will only be charged the Medicare Levy Surcharge if your income is over $90,000 for individuals or $180,000 for families.
So there is no tax benefit to having Private Health Insurance if you are a low income earner.
Having Private Health Insurance can be a great idea for many people who want or require the extra cover, but if you are getting it purely as a tax saving measure, you may want to run the numbers first to see if it is going to pay in the long run.
Those massages might not be saving you tax dollars after all.
2. Miscellaneous Taxation Ruling 2042 http://law.ato.gov.au/atolaw/view.htm?locid=%27FOI/1011305P%27&PiT=19990616000001
3. The Medicare Levy Threshold for the 2016-2017 financial year is $21,655. The upper threshold is $27,068, meaning that if your income falls between these limits, then you will pay a reduced medicare levy.