Tax Deductions & Offsets Flashcards
Define deductions
Outgoings and expenditure incurred in relation to deriving income
What is the difference between refundable and non-refundable tax offsets?
Give 2 examples of offsets that can be carried forward and 2 refundable offsets.
Refundable tax offsets are amounts that the ATO will refund if they exceed the amount payable.
Non-refundable means that if the taxpayer owes nothing to the ATO, they will not get a refund from the offset.
Tax offsets are not transferable to the next year except land care and water facility offsets.
Private insurance and franking tax offsets are refundable
When total work related expenses for the year exceed which dollar value must receipts be kept?
What happens if you don’t have evidence? And how long do you have to keep evidence for?
Claims over $300
Can have the claimable deduction reduced to that which can be proved and a penalty tax imposed
Must be kept for 5 years
How do tax deductions differ from tax offsets?
Tax deductions are taken from the total amount taxable. Tax offsets are taken directly from the tax payable so are more valuable.
What is the low income tax offset. How much is the maximum offset and what is the range of income it is provided for?
For tax payers on low incomes. $445 is maximum on incomes of $37,000 or less. It is then reduced by 1.5cents for every dollar over this amount up to $66,666.
What is LMITO?
Low and middle income tax offset. It is $200 up to $37,000 then $200 plus 3c for each dollar between $37k & $48k. Between $48k and $90k it is $530. Then between $90k & $125,333 it is $530 - 1.5c for each dollar over $90k.
Do overseas residents pay the same amount of tax on income from Australia as Australian residents?
No, they pay more
What is the shade in and shade out threshold for Medicare levy
Normally the Medicare Levy is 2%. When taxpayers earn between $21980 -$27,475 they only pay a proportion until they hit $27,475 when they pay the 2%. Up until this point they pay 10% on the difference between what they make and $21,980.
For example if they make $25k they will pay 10% of (25,000 - $21,980) = $302.
When
What is the Medicare Levy surcharge?
Additional surcharge for people over certain incomes that do not have private health insurance.
$90k-$105k - 1%
$105-$140k - 1.25%
$140k + -1.5%
List 3 types of dependants
Spouse
Children under 21
Children 21-24 who are full time students
Is PAYG withheld for Contractors?
No. Unless there is a voluntary agreement or no ABN has been provided.
If someone has an ABN does this automatically make them a contractor or can they still be considered an employee?
What are the consequences for not choosing appropriately?
There are specific conditions relating to when someone is a contractor. If they aren’t met. They are considered an employee.
If they are employed incorrectly as a contractor they may not be complying with legislative requirements related to super, PAYG, payroll tax, workers compensation. In the event of an audit. May need to pay obligations retrospectively.
What are 5 criteria you could use to determine if someone is a contractor or employee?
Are they engaged and paid to produce a result
Do they quote a price for the service provided
They decide what hours to work to complete the job
They provide their own tools and equipment
They advertise to the public at large.
