New laws have passed that allow small businesses to claim an immediate deduction for assets they start to use – or have installed ready for use – provided each depreciable asset costs less than $20,000. This will temporarily replace the previous instant asset write-off threshold of $1,000.

This measure starts 7.30pm (AEST) 12 May 2015 and will end on 30 June 2017.

The balance of the general small business pool is also immediately deducted if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2017 (including existing general small business pool).

The current ‘lock out’ laws will also be suspended for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out) until the end of 30 June 2017.

Assets excluded from these depreciation rules include horticultural plants and in-house software allocated to a software development pool. In most cases specific depreciation rules apply to these excluded assets.

Assets that cost $20,000 or more (which can’t be immediately deducted under other provisions) are deducted over time using the general small business pool. Under the pooling mechanism a deduction for 15 per cent of the cost is allowed in the first income year with a diminishing value rate of 30 per cent deduction on the opening pool balance allowed for each income year thereafter.

The new laws also include changes to allow primary producers to immediately deduct capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills.

Source: https://www.ato.gov.au/general/new-legislation/in-detail/direct-taxes/income-tax-for-businesses/small-business—expanding-accelerated-depreciation/

If you perform some of your work from a home office, you may be entitled to a deduction for the costs you incur in running it, including:

• for home office equipment (computers, printers and telephones)
• heating, cooling and lighting
• the costs of repairs to your home office furniture and fittings
• cleaning expenses
• work-related phone calls (including mobiles)
• phone rental (work-related use of the line) if you can show you
  • are on call, or
  • have to phone you use regularly while you are away from your workplace

Source: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Home-office-expenses/

Before you complete your tax return for 2015, there are some changes you should be aware of in case they affect you.

Mature age worker tax offset

You can no longer claim the Mature age worker tax offset (MAWTO) in your tax return.

Previously, to be eligible for the offset you needed to be an Australian resident, be born before 1 July 1957, and receive income from working (within certain limits).

This means that the 2013─14 tax return is the last return in which you can claim the offset, so you won’t be able to claim it in your 2015 tax return.

Dependent spouse tax offset

You can no longer claim the Dependent spouse tax offset (DSTO) in your tax return.

In addition, a person who is eligible for the zone, overseas civilian or overseas forces tax offset will, from 1 July 2014, only be entitled to claim for a dependent (including a spouse) who is an invalid or cares for an invalid.

If you have claimed the DSTO by reducing the tax withheld by your employer during the year, this may result in you having an amount to pay when you lodge your tax return. You’ll need to give an updated TFN declaration (or Withholding declaration) to your employer for 2015-16 to increase the tax they deduct from your pay.

Net medical expenses tax offset

The Net medical expenses tax offset is being phased out. In most cases, you will only be eligible to claim the offset this year if you received it in your 2013-14 income tax assessment. This is the final year you can claim the offset.

This does not apply to you if you had medical expenses relating to disability aids, attendant care and aged care. You can continue to claim the offset for these expenses until 30 June 2019.

Temporary budget repair levy

As part of the 2014-15 Federal budget the Government introduced a Temporary Budget Repair Levy. Individual taxpayers with a taxable income of more than $180,000 per year will have had additional tax withheld by their employer, starting from 1 July 2014.

The levy is payable at a rate of 2 per cent of each dollar of a taxpayer’s taxable income over $180,000. It applies to both residents and non-residents from 1 July 2014 and applies to the 2014-15, 2015-16 and 2016-17 income years.

In some cases the levy is payable even if you have a taxable income of $180,000 or less.

If the levy applies to your income, it will generally appear on your Notice of Assessment you receive after you lodge your 2015 tax return.

Source: https://www.ato.gov.au/Individuals/Lodging-your-tax-return/What-s-new-for-individuals/

If you are a Senior Australian, you may be eligible for the seniors and pensioners tax offset.

The seniors and pensioners tax offset (SAPTO) can reduce the amount of tax you are liable to pay. In some cases, this offset may reduce your tax liability to zero and you may not have to lodge a tax return.

To be eligible for this tax offset, you have to meet certain conditions relating to your income and eligibility for an Australian Government pension.

If you are a senior, you must meet the age requirement for the Age pension to be eligible for the offset.

In some cases, you may also be able to transfer your eligible spouse’s unused SAPTO to you. We calculate their transfer amount available and include this amount when calculating your SAPTO.

Source: https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Senior-Australians/

You can claim the costs of washing, drying and ironing eligible work clothes, or having them dry-cleaned.

You must have written evidence, such as diary entries and receipts, for your laundry expenses if both:

• the amount of your claim is greater than $150, and
• your total claim for work-related expenses exceeds $300

If you don’t need to provide written evidence for your laundry expenses, you may use a reasonable basis to work out your claim. For washing, drying and ironing you do yourself, we consider that a reasonable basis for working out your laundry claim is:

• $1 per load – if the load is made up only of work-related clothing, and
• 50 cents per load if other laundry items are included.

If you choose a different basis to work out your claim, we may ask you to explain that basis.

Source: https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/clothing,-laundry-and-dry-cleaning-expenses/

You can claim the cost of premiums you pay for insurance against the loss of your income. You must include any payment you receive under such a policy on your tax return.

If the policy provides for benefits of an income and capital nature, only that part of the premium attributable to the income benefit is deductible.

You can’t claim a deduction for a premium or any part of a premium:

• for a policy that compensates you for such things as physical injury
• where the policy is taken out through your superannuation

For example, you can’t claim a deduction for:

• life insurance premiums
• trauma insurance premiums
• critical care insurance premiums

Source: https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/other-deductions/income-protection-insurance/

Until 30 June 2015, to qualify for the zone tax offset you must have lived or worked in a remote area (not necessarily continuously) for:

• 183 days or more during the current income year; or
• 183 days or more in total during the current and previous income years – but less than 183 days in the current year and less than 183 days in the previous income year – and you did not claim a zone tax offset in your previous year’s tax return.

From 1 July 2015, there is an additional requirement for your usual place of residence to be in the zone.

If you lived in a zone for less than 183 days in the current income year, you may still be able to claim a tax offset as long as you lived in a zone for a continuous period of less than five years and:

• you were unable to claim in the first year because you lived there less than 183 days; and
• the total of the days you lived there in the first year and in the current year is 183 or more.

Source: https://www.ato.gov.au/individuals/income-and-deductions/offsets-and-rebates/zones-and-overseas-forces/

You may be able to claim a deduction for self-education expenses if your study is work-related or if you receive a taxable bonded scholarship. In some circumstances you have to reduce the amount of your claim by $250.

Eligible courses

Self-education expenses are deductible when the course you undertake leads to a formal qualification and meets the following conditions.

The course must have a sufficient connection to your current employment and:

• maintain or improve the specific skills or knowledge you require in your current employment, or
• result in, or is likely to result in, an increase in your income from your current employment.

You cannot claim a deduction for self-education expenses for a course that does not have a sufficient connection to your current employment even though it:

• might be generally related to it, or
• enables you to get new employment.

Expenses you can claim

You can claim the following expenses in relation to your self-education:

• accommodation and meals (if away from home overnight)
• computer consumables
• course fees
• decline in value for depreciating assets (cost exceeds $300)
• purchase of equipment or technical instruments costing $300 or less
• equipment repairs
• fares
• home office running costs
• interest
• internet usage (excluding connection fees)
• parking fees (only for work-related claims)
• phone calls
• postage
• stationery
• student union fees
• student services and amenities fees
• textbooks
• trade, professional, or academic journals
• travel to-and-from place of education (only for work-related claims)

Some travel for journeys cannot be claimed, but you may be able to offset the cost of these journeys against the $250 reduction.

If an expense is partly for your self-education and partly for other purposes, you can only claim the amount that relates to your self-education as a deduction.

Expenses you can’t claim

You cannot claim the following expenses in relation to your self-education:

• repayments of Higher Education Loan Program (HELP) loans (although the fees paid by some HELP loans are)
• Student Financial Supplement Scheme (SFSS) repayments
• home office occupancy expenses
• meals (unless sleeping away from home), where not sleeping away from home

Source: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Self-education-expenses/

Small businesses can immediately deduct assets costing less than $20,000 purchased since 7.30pm 12 May 2015.

The deduction is claimed in the income year in which the asset is first used or installed ready for use.

What’s changed?

The instant asset write-off threshold has increased to $20,000 (up from $1,000). This allows you to immediately deduct the business use portion of a depreciating asset that costs less than $20,000.

The changes apply

• to assets acquired after 7.30pm on 12 May 2015 until 30 June 2017,
• on a per asset basis, so several assets each costing less than $20,000 would qualify,
• to new and second hand assets.

Assets that cost $20,000 or more (which can’t be immediately deducted) will continue to be deducted over time using a small business pool.

The low pool value threshold will also increase to $20,000. This means that an immediate deduction is available if the pool balance is less than $20,000 at the end of an income year.

What’s not included?

There are a small number of assets that aren’t eligible for accelerated depreciation, for example horticultural plants that have specialised depreciation rules.

Record keeping

Just like any other business asset, you’ll need to keep records to support any claims for a deduction. This includes the ongoing business use of an asset and its eventual disposal. The ATO has a risk-based program to identify taxpayers that are not meeting their obligations and will take measured approaches to influence taxpayer behaviour.

Source: https://www.ato.gov.au/newsroom/smallbusiness/lodging-and-paying/instant-asset-threshold-increase-to-$20,000-now-law/

The small business company tax rate has been reduced from 30% to 28.5% for income years commencing on, or after, 1 July 2015. This lower rate also applies to small businesses that are corporate unit trusts and public trading trusts.

The corporate tax rate will remain at 30% for all other companies that are not small business entities.

The maximum franking credit than can be allocated to a frankable distribution is unchanged at 30%, including small businesses eligible for the 28.5% tax rate. As small business companies now have a higher franking credit cap than their tax rate, care needs to be taken not to over-frank (that is, allocate more franking credits than are in the franking account when paying dividends). Doing so can result in you having to pay a franking deficit tax.

Source: https://www.ato.gov.au/Business/Small-business-entity-concessions/Income-tax-concessions/Small-business-company-tax-rate/